Document:

exv10w2

 

Exhibit 10.2

AGREEMENT AND MUTUAL RELEASE

     This Agreement and Mutual Release (the “Agreement”) is made as of the date last set forth
below by and between Chicago Bridge & Iron Company (Delaware), a Delaware corporation (“CB&I
Delaware”), Chicago Bridge & Iron Company N.V., a Netherlands corporation (“CBINV”), Chicago Bridge
& Iron Company B.V., a Netherlands corporation (“CBIBV”) (hereinafter referred to collectively,
together with all of their respective affiliates and subsidiaries, as the “Company”) and Gerald M.
Glenn (the “Executive”) (together, the “Parties”).

     WHEREAS, the Executive was employed by CB&I Delaware as President and Chief Executive Officer
from May 27, 1996 until his employment ended on February 3, 2006, was Chairman of the Supervisory
Board of CBINV (the “Supervisory Board”) from April 2, 1997 to February 3, 2006, and has been a
member of the Supervisory Board and a director of CBIBV since March 24, 1997;

     WHEREAS, CBIBV resigned as sole managing director of CBINV on February 8, 2006; and

     WHEREAS, the Parties wish to resolve amicably disputes between the Executive and the Company,
and establish the Executive’s resignation from the Supervisory Board and as a director of CBIBV, as
well as his resignation from any and all other positions, if any, that he may hold or have held at
the Company, and establish the terms of the arrangement with respect thereto;

     NOW, THEREFORE, in consideration of the promises and conditions set forth herein, the receipt
and sufficiency of which is hereby acknowledged, the Parties agree as follows:

 

 

     1. Resignation from Positions. The Executive hereby resigns, effective as of the
Executive’s execution of this Agreement, from his positions as a member of the Supervisory Board
and as a director of CBIBV, as well as from any and all other positions, if any, that he may hold
at the Company.

     2. Consideration. In return for the timely execution and nonrevocation of this
Agreement, and provided that the Executive has complied with all conditions set forth in this
Agreement, including, but not limited to, the noncompetition and nonsolicitation provisions of
Section 8 and the standstill provision of Section 10, CB&I Delaware agrees to provide the Executive
with the following consideration (the “Consideration”):

          (a) Cash Payment. CB&I Delaware agrees to pay the Executive seven hundred thirty-five
thousand dollars ($735,000.00), less an amount as set forth in the Company’s letter dated May 2,
2006 regarding payments made under this Agreement, and less all applicable taxes and withholdings
(the “Cash Payment”). This Cash Payment shall be made in one lump-sum payment on the eighth (8th)
day after the Executive’s execution of this Agreement.

          (b) LTIP Distributions.

          With respect solely to the Executive’s rights pursuant to stock option award agreements issued
to the Executive under the Chicago Bridge & Iron 1999 Long-Term Incentive Plan (the “1999 Plan”)
and currently outstanding (the “Award Agreements”), the Executive is eligible for exercise and
vesting pursuant to Section 2.34 of the 1999 Plan and the applicable Award Agreements.

     3. Execution of this Agreement. The Company hereby advises the Executive to consult
with an attorney of his own choosing before signing this Agreement and he may take twenty-one (21)
calendar days to do so (although the Executive may voluntarily sign this

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Agreement prior to the end of the twenty-one (21) day period). The Executive must execute and
return this Agreement to Mr. Walter G. Browning, c/o CB&I, 2103 Research Forest Drive, The
Woodlands, Texas 77380, no later than 5:00 p.m. CST on May 23, 2006.

     4. The Executive’s Release. In exchange for the Consideration, which the Executive
acknowledges he would not otherwise be entitled to receive, the Executive and his heirs, executors
and assigns hereby fully, forever, irrevocably and unconditionally release, remise and discharge
the Company and any and all entities that are, have been or may become associated with the Company
in the future in any manner whatsoever, and any of its or their respective past, present and future
officers, directors, stockholders, attorneys, accountants, consultants, advisors, representatives,
agents, employees, corporate affiliates, subsidiaries and parent companies (each in their
individual and corporate capacities) (hereinafter, the “Released Parties”) from any and all claims,
charges, complaints, demands, actions, causes of action, suits, rights, debts, sums of money,
loans, judgments, liens, costs, accounts, reckonings, covenants, contracts, agreements, promises,
doings, omissions, damages (including compensatory, punitive or liquidated damages), executions,
obligations, liabilities and expenses (including attorneys’ fees and costs), of every kind and
nature that they ever had or now have against any or all of the Released Parties, known or unknown,
at law or equity or otherwise, including, but not limited to, all claims arising out of the
Executive’s employment with and/or separation from CB&I Delaware, his service on the Supervisory
Board, his service as an officer or director of the Company, his termination as Chairman of the
Supervisory Board or the resignation of CBIBV as sole managing director of CBINV, including, but
not limited to, all employment discrimination claims under Title VII of the Civil Rights Act of
1964, 42 U.S.C. § 2000e et seq., the Age Discrimination in Employment Act, 29 U.S.C.
§ 621 et seq., the Americans with Disabilities Act of 1990, 42 U.S.C. § 12101
et

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seq., the Family and Medical Leave Act, 29 U.S.C. § 2601 et seq. and Tex.
Lab. Code Ann. § 21.001 et seq. (Texas civil rights law), all as amended, and all
claims arising out of the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq., the
Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq.
and the Corporate and Criminal Fraud Accountability Act of 2002, 18 U.S.C. § 1514A (Sarbanes-Oxley
whistleblower provision), all as amended, all claims arising under the Chicago Bridge & Iron
Salaried Employee Severance Pay Plan, all claims arising under the Chicago Bridge & Iron Company
Change of Control Severance Agreement or any other change of control or similar agreement, all
claims under federal or state securities laws, and all common law claims or claims based on Dutch
law, including, but not limited to, actions in tort, defamation, breach of contract or violation of
public policy, all claims to any unvested ownership interest in CBINV or any of its affiliates or
subsidiaries, contractual or otherwise, including, but not limited to, claims to stock or
derivative claims, all whistleblower actions, claims for personal or business injury, fringe
benefit claims, claims arising out of the lawsuit the Executive filed on February 13, 2006 against
CBINV in the Netherlands, Case Number KG 06/261 (the “Dutch Action”), and any claim or damage
arising out of the Executive’s employment with and/or separation from CB&I Delaware (including any
claim for retaliation), his service on the Supervisory Board, his service as an officer or director
of the Company, his termination as Chairman of the Supervisory Board or the resignation of CBIBV as
sole managing director of CBINV under any common law or Dutch law theory or any federal, state,
local or Dutch statute or ordinance not expressly referenced above, and the Executive specifically
waives the benefit of any statute or rule of law which, if applied to this Agreement, would
otherwise exclude from its binding effect any claims not now known by the Executive to exist;
provided, however, that nothing in this Agreement shall: (a) prevent the Executive
from

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filing, cooperating with or participating in any proceeding before the EEOC or any state Fair
Employment Practices Agency (except that the Executive acknowledges that he may not be able to
recover any monetary benefits in connection with any such claim, charge or proceeding); (b) affect
the Executive’s rights or obligations: (i) under Section 5 of the Agreement between CBINV and the
Executive dated as of September 1, 1999; or (ii) with respect to any stock options or performance
shares (to the extent those options and performance shares are outstanding and vested as of the
date hereof, will vest pursuant to this Agreement or, as to performance shares, may vest as a
result of the Executive’s having been employed through February 3, 2006); (c) prevent the Executive
from making claims for indemnification and/or advancement of fees pursuant to Section 11 hereof; or
(d) prevent the Executive from defending against any and all claims for repayment under Section 304
(as defined in Section 12 hereof) pursuant to Section 12 hereof filed by the Company and/or any of
its past or present officers, directors, stockholders, attorneys, accountants, consultants,
advisors, representatives, agents, employees, corporate affiliates, subsidiaries and parent
companies or any other entity against the Executive. The Executive represents that he has reviewed
the letter from the Company dated May 2, 2006 setting forth the options and performance shares
provided to him and agrees that such letter contains an accurate and complete list of all options
and performance shares to which he is or has been entitled (other than options and shares
previously exercised or received) and the timing with respect to their expiration and neither has
asserted nor will assert any claims with respect to any equity compensation other than that
discussed in the letter.

     5. The Company’s Release. In consideration of the exchange of the promises contained
herein and for such other good consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company hereby fully, forever, irrevocably and unconditionally

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releases, remises and discharges the Executive and his heirs, executors and assigns from any
and all claims, charges, complaints, demands, actions, causes of action, suits, rights, debts, sums
of money, loans, judgments, liens, costs, accounts, reckonings, covenants, contracts, agreements,
promises, doings, omissions, damages (including compensatory, punitive or liquidated damages),
executions, obligations, liabilities and expenses (including attorneys’ fees and costs), of every
kind and nature that it ever had or now has against the Executive and his heirs, executors and
assigns, known or unknown, at law or equity or otherwise, including, but not limited to, all claims
arising out of his employment with and/or separation from CB&I Delaware, his service on the
Supervisory Board, his service as an officer or director of the Company, his termination as
Chairman of the Supervisory Board or the resignation of CBIBV as sole managing director of CBINV,
all claims under federal or state securities laws, all common law claims or claims based on Dutch
law, including, but not limited to, actions in tort, defamation, breach of contract or violation of
public policy, claims for personal or business injury, fringe benefit claims, claims arising out of
the Dutch Action, and any claims under any common law or Dutch law theory or any federal, state,
local or Dutch statute or ordinance not expressly referenced above, and the Company specifically
waives the benefit of any statute or rule of law which, if applied to this Agreement, would
otherwise exclude from its binding effect any claims not now known by the Company to exist;
provided, however, that nothing in this Agreement prevents the Company from bringing
a claim: (a) that arises from any intentional misconduct engaged in by the Executive as an
employee, officer, director or member of the Supervisory Board or the Company, including, but not
limited to, misappropriation, theft or fraud; (b) for breach of fiduciary duty as an employee,
officer, director or member of the Supervisory Board or the Company; (c) in defense of or in
response to any claim by the Executive for indemnification and/or advancement of fees; or (d) that
arises for

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repayment under Section 304 pursuant to Section 12 hereof.

     6. Withdrawal of Complaint and Covenant Not to Sue. The Executive acknowledges that
the Dutch Action has been dismissed and agrees not to refile the Dutch Action or any other action
seeking the same or substantially the same relief. The Executive represents that, except for the
Dutch Action, he has not filed any complaints or charges against any of the Released Parties with
any foreign or United States federal, state or local court, agency or tribunal. The Executive
agrees that he shall not file, commence, prosecute or intervene in any other lawsuit, arbitration,
judicial action, administrative or other proceeding in any jurisdiction or before any foreign or
United States federal, state or local court, agency or tribunal based on or relating to any claims
or causes of action arising from or related to the claims released in Section 4 above, except as
provided therein. He also agrees to waive any and all rights to recover monetary damages in any
lawsuit, arbitration, judicial action, administrative or other proceeding relating to any of the
Released Parties that may be brought on his behalf in any foreign or United States federal, state
or local court, agency or tribunal by any entity or individual; provided, however,
that the Executive does not waive rights to indemnification and/or advancement of fees pursuant to
Section 11 hereof.

     7. Cooperation. The Executive agrees to fully cooperate with the Company in the
investigation, defense or prosecution of any government investigation, claims or actions now in
existence or which may be brought in the future against or on behalf of the Company or any of its
owners, shareholders, predecessors, successors, assigns, agents, directors, officers, employees,
representatives, attorneys, subsidiaries, affiliates or parents (and agents, directors, officers,
employees, representatives and attorneys of such subsidiary, affiliate or parent) and all persons
acting by, through, under or in concert with any of them. Such cooperation shall include, but not

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be limited to, meeting with representatives of the Company upon reasonable notice at
reasonable times and locations to prepare for discovery or any mediation, arbitration, trial,
administrative hearing or other proceeding or to act as a witness. In furtherance of the
cooperation to be provided under this Section, the Executive agrees that he will provide accurate
and complete information and testimony. Moreover, unless otherwise prohibited by law, the
Executive shall notify the General Counsel of the Company if the Executive is asked by any person,
entity or agency other than the Company to assist, testify or provide information in any such
proceeding or investigation. Such notice shall be in writing and sent by overnight mail within two
(2) business days of the time the request for assistance, testimony or information is made to the
Executive. If the Executive is not legally permitted to provide such notice, he agrees that he
shall request that the person, entity or agency seeking assistance or information provide notice
consistent with this Section.

     8. Noncompetition and Nonsolicitation. The Parties recognize that during the
Executive’s employment with CB&I Delaware, he had access to and was provided with confidential and
proprietary information of a special and unique value relating to the Company, and that the
Executive will continue to have access to and be provided with certain of such information in
connection with, at a minimum, his duties of cooperation as set forth in Section 7 hereof.
Accordingly, in exchange for the Consideration set forth in Section 2 hereof and as a further
material inducement to the Company to enter into this Agreement, and to protect the information
that has been and will be provided to the Executive and further enforce the Executive’s promises
regarding the protection of confidential and proprietary information as set forth with specificity
in Exhibit A hereto, the Executive agrees that:

          (a) Noncompetition and Nonsolicitation. For a period of eighteen (18)

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months from the date this Agreement becomes binding and enforceable, the Executive shall not:

               (i) in the geographical areas that the Company does business or has done business at the time
of the Executive’s departure, directly or indirectly engage in any business or enterprise (whether
as owner, partner, officer, director, employee, consultant, investor, lender or otherwise, except
as the holder of not more than three percent (3%) of the outstanding stock of a publicly-held
company) that is competitive with the business of the Company, including, but not limited to, any
business or enterprise that develops, manufactures, markets or sells any product or service that
competes with any product or service developed, manufactured, marketed or sold, or planned to be
developed, manufactured, marketed or sold, by the Company while the Executive was employed by CB&I
Delaware;

               (ii) either alone or in association with others, directly or indirectly: (A) solicit,
recruit, induce or attempt to solicit, recruit or induce, or permit any organization directly or
indirectly controlled by the Executive to solicit, recruit, induce or attempt to solicit, recruit
or induce, any employee of the Company to leave the employ of his or her employer; or (B) solicit,
recruit, induce or attempt to solicit, recruit or induce for employment or hire or engage as an
independent contractor, or permit any organization directly or indirectly controlled by the
Executive to solicit, recruit, induce or attempt to solicit, recruit or induce for employment or
hire or engage as an independent contractor, any person who was employed by the Company at any time
during the term of the Executive’s employment with CB&I Delaware; provided, however,
that this clause (B) shall not apply to any individual’s employment with the Company that has been
terminated for a period of six (6) months or longer; or

               (iii) either alone or in association with others, directly or indirectly, solicit, divert or
take away or attempt to solicit, divert or take away, or permit any organization

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directly or indirectly controlled by the Executive to solicit, divert or take away or attempt to
solicit, divert or take away, the business or patronage of any of the clients, customers or
accounts or prospective clients, customers or accounts of the Company that were contacted,
solicited or served by the Company at any time during the term of the Executive’s employment with
CB&I Delaware.

          (b) Interpretation. If the Executive violates any of the provisions of Section 8(a) of
this Agreement, the Executive shall continue to be bound by the restrictions set forth in such
Section until a period of eighteen (18) months has expired without any violation of all such
provisions. If any restriction set forth in this Section 8 is found by any court of competent
jurisdiction to be unenforceable because it extends for too long a period of time or over too great
a range of activities or in too broad a geographic area, it shall be interpreted to extend only
over the maximum period of time, range of activities or geographic area as to which it may be
enforceable. The Executive acknowledges that the obligations and restrictions contained in this
Section 8 are necessary for the protection of the business and goodwill of the Company and
considers the restrictions to be reasonable for such purpose.

     9. Assignment of Inventions and Confidential Information. The Executive agrees that he
will execute an Employee Invention and Confidential Information Agreement, a copy of which is
attached hereto as Exhibit A, contemporaneous with his execution of this Agreement.

     10. Standstill. The Executive hereby withdraws all proposals he has made with respect
to matters to be addressed at the 2006 CBINV General Shareholders’ Meeting, including, but not
limited to, those discussed in the letter from the Executive to Mr. Browning dated March 11, 2006.
The Executive further agrees that he will take any and all actions and execute any and all
documentation necessary to effectuate such withdrawal as required by the Company. Until

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the fifth (5th) anniversary of the date this Agreement becomes binding and enforceable, the
Executive hereby agrees that neither he nor any of his affiliates (as such term is defined in Rule
405 under the Securities Act of 1933, as amended) nor his representatives will in any manner,
directly or indirectly: (a) effect or seek, offer or propose (whether publicly or otherwise) to
effect, or cause or participate in or in any way advise, assist or encourage any other person to
effect or seek, offer or propose (whether publicly or otherwise) to effect, or cause or participate
in (i) any acquisition of any securities (or beneficial ownership thereof) or assets of the
Company; (ii) any tender or exchange offer, merger or other business combination involving the
Company; (iii) any recapitalization, restructuring, liquidation, dissolution or other extraordinary
transaction with respect to the Company; or (iv) any “solicitation” of “proxies” (as such terms are
used in the proxy rules of the Securities and Exchange Commission) or consents to vote any voting
securities of the Company; (b) form, join or in any way participate in a “group” (as defined under
Section 13d-5 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) with respect
to any securities of the Company; (c) otherwise act, alone or in concert with others, to seek to
control or influence the management, board of directors, Supervisory Board or policies of the
Company; (d) take any action that might force the Company to make a public announcement regarding
any of the types of matters set forth in item (a) above; (e) exercise any rights under Article 114a
of Book 2 of the Dutch Civil Code or any right to request that a shareholder meeting of CBINV be
held; or (f) enter into any discussions or arrangements with any third party with respect to any of
the foregoing. The Executive also agrees that the Company shall be entitled to equitable relief,
including injunctive relief, in the event of any breach of this Section 10 and that he shall not
oppose the granting of such relief. Notwithstanding anything herein to the contrary, the Parties
agree that nothing in this Agreement shall affect in any way the

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Executive’s rights as a shareholder to: (x) sell any shares of the Company’s capital stock
owned by the Executive; (y) receive dividends, if any, in respect of any shares of the Company’s
capital stock owned by the Executive; or (z) receive notices and other communications from the
Company. The Parties agree further that, notwithstanding anything herein to the contrary, the
Executive may, as long as he is a shareholder of CBINV, in person or represented by proxy, attend
and vote at shareholders meetings of CBINV and exercise rights under Dutch law to address the
meeting and to ask questions; provided, however, that neither the Executive nor any
of his affiliates or representatives may at any shareholders meeting introduce any resolution not
included in the agenda for such meeting or propose any amendment to any resolution, unless such
amendment is supported by the management of the Company.

     11. Indemnification and Advancement of Fees. The Company shall indemnify the Executive
and hold him harmless from any cost, expense or liability arising out of or relating to any acts or
omissions made by him as an employee, officer or director of the Company and advance expenses
therefor to the fullest extent required by CBINV’s Directors’ and Officers’ Liability Insurance
Policy, CBINV’s Articles of Association, CB&I Delaware’s Certificate of Incorporation and Bylaws,
the Indemnification Agreement dated April 9, 1997 between CBIBV and the Executive and the
Indemnification Agreement dated April 9, 1997 between Chicago Bridge & Iron Company and the
Executive (together, the “Indemnification Documents”) and not prohibited by applicable law;
provided, however, that the Company shall not indemnify the Executive for any cost,
expense or liability arising out of or relating to the Dutch Action or any other matter released
pursuant to Section 4 hereof. The Executive agrees to repay any amounts provided to the Executive
for such indemnification or for any advancement of expenses under the Indemnification Documents, or
any agreements pertaining thereto, if it is ultimately

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determined under the terms of this Agreement that the Executive is not entitled to
indemnification pursuant to any or all of the Indemnification Documents, was not entitled to
advancement of expenses thereunder, or is required otherwise to repay such amounts. The
Executive’s counsel will send to counsel for the Company a courtesy copy of invoices relating to
legal fees or expenses incurred by the Executive concurrently with the transmittal to the Company.
Counsel for the Company will contact counsel for the Executive within fifteen (15) business days of
the Company’s receipt of any such invoice in order to notify such counsel of the Company’s position
with respect to its obligation to pay such invoice pursuant to the Indemnification Documents. The
Company and the Executive agree to address certain outstanding claims of the Executive for
advancement of fees as set forth in the letter from the Company dated May 2, 2006.

     12. Repayment under Section 304. The Executive agrees that he shall, in the event of
occurrences under and then consistent with and to the extent required by Section 304 of the
Corporate and Criminal Fraud Accountability Act (as codified at 15 U.S.C. § 7243) (“Section 304”),
repay or pay to CB&I Delaware any bonus or other incentive-based or equity-based compensation or
profit described within Section 304 received by the Executive.

     13. Filing of Forms 4 and 5. After this Agreement becomes binding and enforceable,
CB&I Delaware shall, within two (2) business days after the Executive provides the information
referred to below, file on the Executive’s behalf all previously unfiled Forms 4 and 5 required by
Section 16(a) of the Exchange Act with respect to the Executive’s employment or directorship for
periods before the date of this Agreement. In doing so, CB&I Delaware shall rely exclusively on
the information that the Executive provides with respect to matters to be so reported, which
information the Executive acknowledges shall be truthful and accurate and

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provided by him in a timely manner, and the Executive shall hold harmless the Company for any
fines, penalties, liabilities, or legal fees that may relate to such filings and to its reliance on
such information.

     14. Return of Company Property. The Executive confirms that he has returned to CB&I
Delaware in good working order all property of the Company in the Executive’s possession or
control, including, but not limited to, all keys, files, records (and copies thereof), proprietary
and/or confidential information, equipment (including, but not limited to, computer hardware,
software and printers, wireless handheld devices, cellular phones and pagers), identification and
vehicles, and has left intact all electronic documents, including, but not limited to, those that
he developed or helped to develop during his employment. The Executive further confirms that he
has cancelled all accounts for his benefit, if any, in the name of the Company, including, but not
limited to, credit cards, telephone charge cards, cellular phone and/or pager accounts and computer
accounts.

     15. Business Expenses and Final Compensation. The Executive acknowledges that he has
been reimbursed by the Company for all business expenses incurred in conjunction with the
performance of his employment and his service to the Company in all capacities and that no other
reimbursements are owed to him. The Executive further acknowledges that he has received payment in
full for all services rendered to the Company and that no other wages, benefits, bonuses, incentive
compensation, severance pay or other compensation is owed to him, except as provided herein.

     16. Nondisparagement. To the extent permitted by law, the Executive understands and
agrees that as further consideration for this Agreement, he will not make any false, defamatory,
disparaging or derogatory statements to any media outlet, industry group, financial

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institution or current or former employee, consultant, client or customer of the Company or to
any other entity or person regarding any of the Released Parties or any of the Company’s customers
or suppliers or about the Company’s business affairs or financial condition; provided,
however, that this shall not apply to truthful communications the Executive is required by
law to make to the Supervisory Board, the Audit Committee of the Supervisory Board, any
governmental entity, or in any litigation or arbitration. The Company also understands and agrees
that, to the extent permitted by law, and as further consideration for this Agreement, its
executive officers and directors will not make any false, defamatory, disparaging or derogatory
statements to any media outlet, industry group, financial institution or current or former
employee, consultant, client or customer of the Company or to any other entity or person regarding
the Executive; provided, however, that this shall not apply to truthful
communications such officers and directors make to the Supervisory Board or the Audit Committee of
the Supervisory Board, or that they are required by law to make to any governmental entity or in
any litigation or arbitration.

     17. Confidentiality. To the extent permitted by law, the Executive understands and
agrees that, as further consideration for this Agreement, the contents of the negotiations and
discussions resulting in this Agreement shall be maintained as confidential by the Executive, his
agents and representatives and shall not be disclosed except to the extent required by federal or
state law. The Company agrees that, as further consideration for this Agreement, it shall not
disclose to any third parties, other than any governmental or regulatory authorities as it deems
appropriate, the contents of the negotiations and discussions resulting in this Agreement, except
as required by law. The Executive acknowledges that the Company is free to disclose this Agreement
as required by applicable law, rule or regulation or to any governmental or regulatory

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authorities as it deems appropriate, in its sole discretion. If the Company files a form 8-K
regarding this Agreement, it shall provide to the Executive within twenty-four (24) hours prior to
such filing a courtesy copy of the language it intends to use regarding this Agreement (and shall
also use its best efforts to provide within such time period a courtesy copy of the language it
intends to use in any press release it may issue associated with this Agreement), and the Company
agrees to consider, but need not include, any comments the Executive may have with respect thereto.

     18. Tax Advice. The Executive represents that he has not sought from the Company or
any of its officers, directors, agents or attorneys any tax advice relating to this Agreement.

     19. No Admission of Wrongdoing. Nothing contained herein shall be deemed to be an
admission of liability or wrongdoing by either of the Parties.

     20. Amendment. This Agreement shall be binding upon the Parties and may not be
modified in any manner except by an instrument in writing of concurrent or subsequent date signed
by a duly authorized representative of the Parties hereto.

     21. Successors and Assigns. This Agreement is binding upon and shall inure to the
benefit of the Parties and their respective agents, permitted assigns, heirs, executors, successors
and administrators, and except as provided herein, is not intended to confer any benefits upon or
create any rights in favor of any person or entity other than the Parties. The Executive may not
assign this Agreement.

     22. Waiver of Rights. No delay or omission by the Parties in exercising any rights
under this Agreement shall operate as a waiver of that or any other right. A waiver or consent
given on any one occasion shall be effective only in that instance and shall not be construed as a
bar to or waiver of any right on any other occasion.

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     23. Validity. Should any provision of this Agreement be declared or be determined by
any court of competent jurisdiction to be illegal or invalid, the validity of the remaining parts,
terms or provisions shall not be affected thereby and said illegal or invalid part, term or
provision shall be deemed not to be a part of this Agreement.

     24. Injunctive Relief. The Company and the Executive agree that any breach of Section
10 of this Agreement by a Party is likely to cause the other Party substantial and irrevocable
damage and that therefore, in the event of any such breach, the non-breaching Party shall be
entitled to specific performance and other injunctive relief without posting a bond, in addition to
such other remedies that may be available.

     25. Applicable Law. This Agreement shall be governed by the laws of the State of Texas
without regard to conflict of laws provisions. Except as set forth in Section 26, the Executive
hereby irrevocably submits to the jurisdiction of the courts of the State of Texas, or if
appropriate, a federal court located in the State of Texas (which courts, for purposes of this
Agreement, are the only courts of competent jurisdiction), over any suit, action or other
proceeding arising out of, under or in connection with this Agreement or the subject matter hereof,
and further agrees that he shall not bring any such suit, action or other proceeding in any other
forum, including, without limitation, any Dutch court. The Parties hereby acknowledge and agree
that to the extent that the Indemnification Documents are designated as being governed by the laws
of the State of Delaware and/or the laws of any other jurisdiction, such laws shall continue to
govern the Indemnification Documents and the Parties’ rights and obligations pursuant thereto,
provided that all claims arising out of the Indemnification Documents shall be arbitrated as set
forth in Section 26 hereof and shall not be brought in any other forum.

     26. Arbitration. Except as set forth in Sections 24 and 25, the Company and the

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Executive agree that they shall arbitrate under the auspices of the American Arbitration
Association (“AAA”) any and all disputes arising out of, relating to or in connection with this
Agreement, including, but not limited to, any current or future dispute(s) between the Parties
concerning indemnification and/or advancement of fees pursuant to any or all of the Indemnification
Documents. Any arbitration shall be convened in Washington, D.C. and shall be conducted in
accordance with the AAA’s then-current Commercial Arbitration Rules and Procedures (the “Rules”),
before a single arbitrator who shall be selected in accordance with the Rules, unless the Company
and the Executive mutually agree to designate or select an arbitrator in some other manner. Each
Party shall pay for its own costs and attorneys’ fees in connection with any arbitration, and the
Parties shall share equally the fees of the arbitrator. The Party demanding arbitration shall give
written notice of any claim to the other Party no later than the expiration of the statute of
limitations that the law prescribes for the claim. Otherwise, the claim shall be void and deemed
waived. The written notice shall identify and describe the nature of the claim(s) asserted, the
facts upon which such claims are based and the relief or remedy sought. The notice shall be sent
to the other Party by certified or registered mail, return receipt requested. The Company and the
Executive understand and agree that the existence, proceedings and outcome of any arbitration,
including, but not limited to, any material filed with the arbitrator, the contents of any
depositions and testimony, any negotiations and discussions between the Parties, any documents
produced during the course of the arbitration and any remedy imposed or damages awarded by the
arbitrator, shall remain confidential and shall not be disclosed to any third party, except as
required by federal or state law or as otherwise agreed to in writing by both the Company and the
Executive. Failure to maintain such confidentiality shall entitle the non-breaching Party to
liquidated damages to be determined by the arbitrator. The Company and the

-18-

 

Executive further agree that, except as set forth in Sections 24 and 25, arbitration in
accordance herewith shall be the sole forum for disputes hereunder, including, but not limited to,
any disputes under Section 11 or the Indemnification Documents, notwithstanding anything in the
Indemnification Documents to the contrary.

     27.  Acknowledgments. The Executive acknowledges that he has been given at least
twenty-one (21) days to consider this Agreement, and that the Company advised him in writing to
consult with an attorney of his own choosing prior to signing this Agreement. The Executive also
acknowledges that the Consideration described herein is adequate and sufficient consideration for
entering into this Agreement, including Sections 8 and 10 hereof. The Executive understands that
he may revoke this Agreement for a period of seven (7) days after he signs it, and that the
Agreement shall not be binding or enforceable until the expiration of this seven (7) day revocation
period.

     28. Voluntary Assent. The Executive affirms that no other promises or agreements of
any kind have been made to or with him by any person or entity whatsoever to cause him to sign this
Agreement, and that he fully understands the meaning and intent of this Agreement. The Executive
states and represents that he has fully discussed and reviewed the terms of this Agreement with an
attorney. The Executive further states and represents that he has carefully read this Agreement,
understands the contents hereof, freely, voluntarily and without duress assents to all of the terms
and conditions hereof, and signs his name of his own free act.

     29. Entire Agreement. This Agreement contains and constitutes the entire understanding
and agreement between the Parties hereto with respect to the subject matter hereof and the
settlement of claims against the Released Parties, and terminates and supersedes all previous oral
and written negotiations, agreements and commitments in connection therewith.

-19-

 

     30. Authority to Execute. The person executing this Agreement on behalf of each Party
hereto represents that he or she has been and is authorized to agree to the terms of this Agreement
by the respective Party on whose behalf he or she is acting to execute this Agreement.

     31. Counterparts. This Agreement may be executed in signed counterparts, each of which
shall constitute an original, but all of which taken together shall constitute one and the same
instrument. Facsimile signatures shall have the same force and effect as original signatures.

     32. Recital Paragraphs. The recital paragraphs at the beginning of this Agreement are
incorporated by reference as if fully set forth herein.

     IN WITNESS WHEREOF, all Parties have set their hand and seal to this Agreement as of
the date(s) set forth below.

	 	 	 
	CHICAGO BRIDGE & IRON COMPANY

(DELAWARE)

	 
	 	 
	By:
	 	/s/ Walter G. Browning
	 

	 	 
	 

	 	Walter G. Browning

General Counsel
	 
	 	 
	Dated:
	 	May 2, 2006
	 

	 	 
	 
	 	 
	CHICAGO BRIDGE & IRON COMPANY N.V.
	 	 

	 
	 	 
	By:
	 	/s/ Walter G. Browning
	 

	 	 
	 

	 	Walter G. Browning

General Counsel
	 
	 	 
	Dated:
	 	May 2, 2006
	 	 	 

-20-

 

	 	 	 
	CHICAGO BRIDGE & IRON COMPANY B.V.
	 	 

	 
	 	 
	By:
	 	Walter G. Browning
	 

	 	 
	 

	 	Walter G. Browning

General Counsel
	 
	 	 
	Dated:
	 	May 2, 2006
	 

	 	 
	 
	 	 
	GERALD M. GLENN
	 	 

	 
	 	 
	Gerald
M. Glenn

	 
	 	 

	 
	 	 
	Dated:
	 	May 2, 2006
	 

	 	 

-21-

 

EXHIBIT A

EMPLOYEE INVENTION AND CONFIDENTIAL

INFORMATION AGREEMENT

I. PREAMBLE

WHEREAS, Chicago Bridge & Iron Company N.V. and its subsidiaries and affiliates (collectively the
“Company”) hired Gerald Glenn (the “Executive”), and in connection with his employment with the
Company, the Executive may have developed inventions, ideas and/or improvements of value to the
Company, and the Executive had access to certain proprietary, confidential and trade secret
information concerning the Company and its business and will continue to have access to
and be provided with certain of such information in connection with, at a minimum, his duties to
cooperate with the Company in the investigation, defense or prosecution of any government
investigation, claims or actions which now exist or which may be brought in the future against or
on behalf of the Company.

NOW THEREFORE, for valuable consideration, receipt of which is hereby acknowledged, and intending
to be legally bound hereby, the parties hereto agree as follows:

II. COPYRIGHT, INVENTIONS AND PATENTS

(a) The Executive agrees to make prompt full written disclosure to the Company and to hold in trust
for the sole right, benefit, and use of the Company, any inventions, discoveries, trade secrets,
developments and improvements (“Inventions”), whether or not patentable, and works of authorship,
whether or not copyrightable, which were conceived, developed or reduced to practice, or caused to
be conceived, developed or reduced to practice, during the term of the Executive’s employment and
for a period of three years thereafter if such Inventions relate to the actual or anticipated
business or activities of the Company, result from or are suggested by work performed by the
Executive for the Company, or result, in whole or in part, from use of the Company’s property or
premises.

(b) The Executive agrees to assign and does hereby assign to the Company all right, title, and
interest in and to all such Inventions and works of authorship, and further agrees, at the
Company’s request and expense, to review, execute, acknowledge and deliver any and all papers, not
necessarily limited to applications for patents and copyrights, and to execute any oath or
declaration and verify any document in connection with carrying out the terms of this Employee
Invention and Confidential Information Agreement (the “Confidential Information Agreement”), except
that the Executive shall not be obligated to assign an Invention for which no equipment, supplies,
facilities, or trade secret information of the Company was used, and which was developed entirely
on the Executive’s own time, unless:

	 	(i)	 	the Invention relates to:

	 	(1)	 	the business of the Company; or
	 
	 	(2)	 	the Company’s actual or demonstrably anticipated research or
development; or

	 	(ii)	 	the Invention results from any work performed by the Executive for the Company.

(c) In the event the Company is unable for any reason whatsoever to secure the signature of the
Executive to any lawful and necessary documents required, including those necessary for the
assignment of, application for, or prosecution of any United States or foreign applications for
letters patent or copyright, the Executive hereby irrevocably designates and appoints the Company
and its duly authorized officers and agents as agent and attorney in fact, to act for and in the
Executive’s behalf and stead to execute and file any such documents, and to do all other lawfully
permitted acts to further the assignment, prosecution and issuance of letters patent or copyright
thereof, with the same legal force and effect as if

 

 

executed by the Executive. The Executive hereby waives and quitclaims to the Company any and all
claims of any nature whatsoever which the Executive may now have or may hereafter have for
infringement of any patent or copyright resulting from any such application.

(d) The Executive agrees that any copyrights in work produced by the Executive within the
scope and during the term of the Executive’s employment by the Company which relates to past,
present or foreseeable business, products, developments, technology or activities of the Company
shall be considered as a “work for hire.”

III. FURTHER ASSURANCES

The Executive agrees to assist the Company, or any party designated by the Company, promptly on the
Company’s request, in perfecting, registering, maintaining, and enforcing, in any jurisdiction, the
Company’s rights in the Inventions by performing all acts and executing all documents and
instruments deemed necessary or convenient by the Company including, but not limited to:

1. Executing assignments, applications, and other documents and instruments in connection with (a)
obtaining patents, copyrights, trademarks, or other proprietary protections for the Inventions and
(b) confirming the assignment to the Company of all right, title, and interest in the Inventions or
otherwise establishing the Company’s exclusive ownership rights therein; and

2. Cooperating in the prosecution of patent, copyright and trademark applications, as well as in
the enforcement of the Company’s rights in the Inventions, including, but not limited to,
testifying in court or other administrative body, or before any patent, copyright, trademark or
registry office. The Executive will be reimbursed for all out-of-pocket costs incurred in
connection with the foregoing, if requested by the Company.

IV. POWER OF ATTORNEY

The Executive irrevocably appoints the Company to be the Executive’s Attorney-in-Fact in the
Executive’s name and on the Executive’s behalf to execute any document and to take any action and
to generally use the Executive’s name for the purpose of giving to and preserving for the Company
the full benefit of the assignment provisions set forth above.

V. CONFIDENTIALITY

     The Executive shall not at any time directly or indirectly use or disclose for his own
purposes or those of any other person, company, business entity or other organization whatsoever
any trade secrets or confidential information, knowledge or data of the Company, including without
limitation, financial information, client lists, lists of prospective clients, sales records,
programs and techniques, Company manuals and policies, computer programs, software and disks,
financial statements and projections, business plans, budgets, supplier information, employee
compensation schedules, pricing information, or any information which the Executive has been told
is “Confidential” or which the Executive might reasonably expect the Company to regard as
“Confidential.” Even if information has not been designated or marked “Confidential,” the Executive
shall treat information as “Confidential” information if the Executive has been told or otherwise
knows or reasonably should know the information is “Confidential.” The restrictions in this
paragraph do not apply to information which is (1) readily available to the public or within the
Company’s industry, or (2) was acquired by the Executive through independent means or unrelated to
the employment relationship with the Company.

VI. EXCLUDED INVENTIONS

All Inventions, if any, which the Executive made or conceived prior to employment by the Company
are excluded from the scope of this Confidential Information Agreement. As a matter of record, the
Executive has set forth on Exhibit A attached hereto (if any) a complete list of all Inventions
relating to the Company’s business which have been made or conceived by the Executive prior to
employment with the Company. The Executive represents and warrants that such list is complete and
accurate in all respects.

-2-

 

The Executive will make full and prompt disclosure to an authorized representative of the Company
of all Inventions subject to assignment to the Company, and all information relating thereto in the
Executive’s possession or under his control as to possible applications and use thereof.

VII. NO VIOLATION OF THIRD-PARTY RIGHTS

The Executive represents, warrants and covenants that the Executive:

	(a)	 	did not, in the course of employment with the Company, infringe upon or violate any
proprietary rights of any third party (including, but not limited to, any third party
confidential relationships, patents, copyrights, trade secrets, or other proprietary rights);
	 
	(b)	 	is not a party to any conflicting agreements with third parties which will prevent the
Executive from fulfilling the obligations of this Confidential Information Agreement;
	 
	(c)	 	does not have in the Executive’s possession any confidential or proprietary information or
documents belonging to others and has not disclosed to the Company, used or induced the
Company to use, any confidential or proprietary information or documents of others, and will
not do so; and
	 
	(d)	 	has respected any and all valid obligations which the Executive may have had to prior
employers or to others relating to confidential information, inventions, or discoveries which
are the property of those prior employers or others, as the case may be.

The Executive agrees to indemnify, defend and hold harmless the Company from any loss, liability,
claim, damage, costs or expenses of any kind (including, but not limited to, reasonable attorneys’
fees) to which the Company may be subjected by virtue of a breach by the Executive of the foregoing
representations, warranties and covenants.

VIII. OBLIGATIONS UPON TERMINATION

The Executive affirms that he has delivered to the Company all physical property including, but not
limited to, disks, documents, notes, print-outs, drawings, blueprints, manuals, letters, notes,
notebooks, reports, sketches, formulae, computer programs and similar items, memoranda, customer’s
lists and all other materials and all copies thereof relating in any way to the Company’s business
and in any way obtained during the period of his employment with the Company which was in the
Executive’s possession or control prior to the date of this Confidential Information Agreement.

IX. MISCELLANEOUS

The Executive acknowledges that the Executive has had the opportunity to seek legal advice before
signing this Confidential Information Agreement and has done so.

The Company may notify anyone who employs the Executive or who evidences an intention to employ the
Executive of the existence and provisions of this Confidential Information Agreement.

The invalidity or unenforceability of any provision of this Confidential Information Agreement as
applied to a particular occurrence or circumstance or otherwise shall not affect the validity and
enforceability or applicability of any other provision of this Confidential Information Agreement.

This Confidential Information Agreement shall inure to the benefit of and may be enforced by the
Company, its successors or assigns, and shall be binding upon the Executive’s executors,
administrators, legatees, distributees, and other successors in interest and may not be changed in
whole or in part except in a writing signed by a duly authorized officer of the Company and the
Executive.

Governing Law — Notwithstanding principles of conflicts of law to the contrary, all terms and
conditions of this Confidential Information Agreement are to be construed and governed by the laws
of the State of

-3-

 

Texas.

Severability — Whenever possible, each provision of this Confidential Information Agreement shall
be interpreted in such a manner as to be effective and valid under applicable law, but if any
provision of this Confidential Information Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule, such invalidity, illegality or
unenforceability shall not effect any other provision of this Confidential Information Agreement,
and this Confidential Information Agreement shall be reformed, construed, and enforced as if such
invalid, illegal or unenforceable provision had never been contained therein.

This Confidential Information Agreement contains all of the agreements, representations and
understandings of the parties and supercedes all prior agreements, representations and
understandings, oral or written, related to the subject matter of this Confidential Information
Agreement.

I,
Gerald M. Glenn (the Executive’s Signature), do hereby attest and certify that I have read the above
Confidential Information Agreement and that I have been advised that, due to the nature of
the above Confidential Information Agreement, I should seek legal counsel prior to executing
such Confidential Information Agreement. I have sought such legal counsel and understand
that the above Confidential Information Agreement restricts my rights and activities with
regard to my future work and/or employment possibilities and that the Confidential
Information Agreement contains various duties and obligations of mine to the Company.

	 	 	 
	Signed:
	 	Gerald M. Glenn
	 

	 	 
	 
	 	 
	Date:
	 	May 2, 2006
	 

	 	 
	 
	 	 
	Chicago Bridge & Iron Company N.V.

	 
	 	 
	By:
	 	Walter G. Browning
	 

	 	 
	 
	 	 
	Date:
	 	May 2, 2006
	 

	 	 

-4-exv10w1

 

EXHIBIT 10.1

EXECUTION COPY

 

 

 

 

 

ASSET PURCHASE AGREEMENT

by and between

BELL INDUSTRIES, INC.

and

BOURNS, INC.

DATED AS OF APRIL 28, 2006

 

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 	 	 	 	 
	ARTICLE I

	 	     DEFINITIONS
	 	 	2	 
	 
	 	 	 	 	 	 
	ARTICLE II

	 	     PURCHASE AND SALE OF ASSETS
	 	 	10	 
	 
	 	 	 	 	 	 
	2.1

	 	Sale and Transfer of Assets by the Seller
	 	 	10	 
	 
	 	 	 	 	 	 
	2.2

	 	Retained Assets
	 	 	12	 
	 
	 	 	 	 	 	 
	2.3

	 	Non-Assignable Contracts
	 	 	13	 
	 
	 	 	 	 	 	 
	ARTICLE III

	 	     LIABILITIES
	 	 	14	 
	 
	 	 	 	 	 	 
	3.1

	 	Lien Free; Assumption of Liabilities
	 	 	14	 
	 
	 	 	 	 	 	 
	3.2

	 	Buyer to Pay but not Assume Certain Liabilities of the Seller
	 	 	15	 
	 
	 	 	 	 	 	 
	3.3

	 	Retained Liabilities
	 	 	15	 
	 
	 	 	 	 	 	 
	3.4

	 	Group Health Benefits
	 	 	18	 
	 
	 	 	 	 	 	 
	ARTICLE IV

	 	     PURCHASE PRICE
	 	 	18	 
	 
	 	 	 	 	 	 
	4.1

	 	Purchase Price and Closing Payment
	 	 	18	 
	 
	 	 	 	 	 	 
	4.2

	 	Additional Cash Consideration Amount
	 	 	19	 
	 
	 	 	 	 	 	 
	4.3

	 	Purchase Price Allocation and Sales Tax
	 	 	19	 
	 
	 	 	 	 	 	 
	4.4

	 	Purchase Price Adjustment
	 	 	19	 
	 
	 	 	 	 	 	 
	ARTICLE V

	 	     CLOSING AND DELIVERIES
	 	 	21	 
	 
	 	 	 	 	 	 
	5.1

	 	Closing
	 	 	21	 
	 
	 	 	 	 	 	 
	5.2

	 	To be Delivered by the Seller
	 	 	22	 
	 
	 	 	 	 	 	 
	5.3

	 	To be Delivered by Buyer
	 	 	23	 
	 
	 	 	 	 	 	 
	ARTICLE VI

	 	     REPRESENTATIONS AND WARRANTIES OF THE SELLER
	 	 	24	 
	 
	 	 	 	 	 	 
	6.1

	 	Organization and Standing
	 	 	24	 
	 
	 	 	 	 	 	 
	6.2

	 	Articles of Incorporation and Bylaws; Organizational Documents
	 	 	24	 
	 
	 	 	 	 	 	 
	6.3

	 	Authorization, Validity and Effect
	 	 	24	 
	 
	 	 	 	 	 	 
	6.4

	 	No Conflict; Required Filings and Consents
	 	 	24	 
	 
	 	 	 	 	 	 
	6.5

	 	Financial Statements; Books of Account
	 	 	25	 
	 
	 	 	 	 	 	 
	6.6

	 	Taxes
	 	 	26	 
	 
	 	 	 	 	 	 
	6.7

	 	Title
	 	 	27	 
	 
	 	 	 	 	 	 
	6.8

	 	Customer-Owned Property
	 	 	27	 
	 
	 	 	 	 	 	 
	6.9

	 	Gardena Facility
	 	 	27	 

-i-

 

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 	 	 	 	 
	6.10

	 	Compliance with Laws
	 	 	28	 
	 
	 	 	 	 	 	 
	6.11

	 	Permits
	 	 	28	 
	 
	 	 	 	 	 	 
	6.12

	 	Material Contracts
	 	 	28	 
	 
	 	 	 	 	 	 
	6.13

	 	Legal Proceedings
	 	 	29	 
	 
	 	 	 	 	 	 
	6.14

	 	Product Warranty; Product Defects; Product Liability
	 	 	29	 
	 
	 	 	 	 	 	 
	6.15

	 	Intellectual Property
	 	 	30	 
	 
	 	 	 	 	 	 
	6.16

	 	Insurance
	 	 	31	 
	 
	 	 	 	 	 	 
	6.17

	 	Personnel
	 	 	31	 
	 
	 	 	 	 	 	 
	6.18

	 	Environmental Matters
	 	 	32	 
	 
	 	 	 	 	 	 
	6.19

	 	Conduct of Business in Ordinary Course
	 	 	32	 
	 
	 	 	 	 	 	 
	6.20

	 	Customers and Suppliers
	 	 	33	 
	 
	 	 	 	 	 	 
	6.21

	 	No Brokers
	 	 	34	 
	 
	 	 	 	 	 	 
	6.22

	 	Bulk Sales
	 	 	34	 
	 
	 	 	 	 	 	 
	6.23

	 	Affiliates; Sufficiency of the Acquired Assets
	 	 	34	 
	 
	 	 	 	 	 	 
	6.24

	 	Accounts Receivable
	 	 	34	 
	 
	 	 	 	 	 	 
	6.25

	 	PP&E
	 	 	34	 
	 
	 	 	 	 	 	 
	6.26

	 	Inventory
	 	 	34	 
	 
	 	 	 	 	 	 
	6.27

	 	Power of Attorney
	 	 	34	 
	 
	 	 	 	 	 	 
	6.28

	 	Guaranties
	 	 	35	 
	 
	 	 	 	 	 	 
	6.29

	 	Disclosure
	 	 	35	 
	 
	 	 	 	 	 	 
	6.30

	 	Foreign Corrupt Practices Act and Export Restrictions
	 	 	35	 
	 
	 	 	 	 	 	 
	6.31

	 	No Undisclosed Liabilities
	 	 	35	 
	 
	 	 	 	 	 	 
	6.32

	 	2005 Annual Employee Incentive Plan
	 	 	35	 
	 
	 	 	 	 	 	 
	ARTICLE VII

	 	     REPRESENTATIONS AND WARRANTIES OF BUYER
	 	 	35	 
	 
	 	 	 	 	 	 
	7.1

	 	Organization and Standing
	 	 	35	 
	 
	 	 	 	 	 	 
	7.2

	 	Authorization, Validity and Effect
	 	 	35	 
	 
	 	 	 	 	 	 
	7.3

	 	No Conflict; Required Filings and Consents
	 	 	36	 
	 
	 	 	 	 	 	 
	7.4

	 	Financing
	 	 	36	 
	 
	 	 	 	 	 	 
	7.5

	 	No Brokers
	 	 	36	 
	 
	 	 	 	 	 	 
	7.6

	 	Litigation
	 	 	36	 

-ii-

 

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 	 	 	 	 
	7.7

	 	No Implied Warranties
	 	 	36	 
	 
	 	 	 	 	 	 
	ARTICLE VIII

	 	     COVENANTS AND AGREEMENTS
	 	 	37	 
	 
	 	 	 	 	 	 
	8.1

	 	Notice and Consents
	 	 	37	 
	 
	 	 	 	 	 	 
	8.2

	 	Confidentiality
	 	 	37	 
	 
	 	 	 	 	 	 
	8.3

	 	Transfer Taxes
	 	 	37	 
	 
	 	 	 	 	 	 
	8.4

	 	Publicity
	 	 	37	 
	 
	 	 	 	 	 	 
	8.5

	 	Records; Retention Policy and Access
	 	 	37	 
	 
	 	 	 	 	 	 
	8.6

	 	Employee Matters
	 	 	38	 
	 
	 	 	 	 	 	 
	8.7

	 	Disposition of Certain Acquired Assets
	 	 	38	 
	 
	 	 	 	 	 	 
	8.8

	 	Update of Section 2.1 and Section 3.1 Schedules
	 	 	38	 
	 
	 	 	 	 	 	 
	8.9

	 	J.W. Miller Company
	 	 	39	 
	 
	 	 	 	 	 	 
	ARTICLE IX

	 	     CONDITIONS TO CLOSING
	 	 	39	 
	 
	 	 	 	 	 	 
	9.1

	 	Conditions to Obligations of the Parties
	 	 	39	 
	 
	 	 	 	 	 	 
	9.2

	 	Conditions to Obligations of the Seller
	 	 	39	 
	 
	 	 	 	 	 	 
	9.3

	 	Conditions to Obligations of Buyer
	 	 	39	 
	 
	 	 	 	 	 	 
	ARTICLE X

	 	     REMEDIES
	 	 	40	 
	 
	 	 	 	 	 	 
	10.1

	 	Survival
	 	 	40	 
	 
	 	 	 	 	 	 
	10.2

	 	Indemnification by Buyer
	 	 	41	 
	 
	 	 	 	 	 	 
	10.3

	 	Indemnification by the Seller
	 	 	41	 
	 
	 	 	 	 	 	 
	10.4

	 	Additional Remedy
	 	 	42	 
	 
	 	 	 	 	 	 
	10.5

	 	Indemnification Payments
	 	 	42	 
	 
	 	 	 	 	 	 
	10.6

	 	Procedures
	 	 	43	 
	 
	 	 	 	 	 	 
	10.7

	 	Specific Performance
	 	 	45	 
	 
	 	 	 	 	 	 
	10.8

	 	Subrogation
	 	 	45	 
	 
	 	 	 	 	 	 
	10.9

	 	Adjustment to Purchase Price
	 	 	45	 
	 
	 	 	 	 	 	 
	ARTICLE XI

	 	     TAX MATTERS
	 	 	45	 
	 
	 	 	 	 	 	 
	11.1

	 	Cooperation; Audits
	 	 	45	 
	 
	 	 	 	 	 	 
	ARTICLE XII

	 	     MISCELLANEOUS AND GENERAL
	 	 	46	 
	 
	 	 	 	 	 	 
	12.1

	 	Risk of Loss
	 	 	46	 
	 
	 	 	 	 	 	 
	12.2

	 	Expenses
	 	 	46	 

-iii-

 

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 	 	 	 	 
	12.3

	 	Successors and Assigns
	 	 	46	 
	 
	 	 	 	 	 	 
	12.4

	 	Third Party Beneficiaries
	 	 	47	 
	 
	 	 	 	 	 	 
	12.5

	 	Notices
	 	 	47	 
	 
	 	 	 	 	 	 
	12.6

	 	Complete Agreement
	 	 	48	 
	 
	 	 	 	 	 	 
	12.7

	 	Incorporation of Exhibits and Schedules
	 	 	48	 
	 
	 	 	 	 	 	 
	12.8

	 	Captions
	 	 	48	 
	 
	 	 	 	 	 	 
	12.9

	 	Amendment
	 	 	48	 
	 
	 	 	 	 	 	 
	12.10

	 	Governing Law; Submission to Jurisdiction
	 	 	48	 
	 
	 	 	 	 	 	 
	12.11

	 	Severability
	 	 	48	 
	 
	 	 	 	 	 	 
	12.12

	 	Counterparts
	 	 	48	 

Exhibit A-1 — Form of Fixed Term Employment Offer

Exhibit A-2 — Form of At-Will Employment Offer

Exhibit B — Form of Seller Non-Competition Agreement

Exhibit C — Form of Transitional Services Agreement

Exhibit D — Form of Bill of Sale

Exhibit E — Form of Notice of Sale

Exhibit F — Form of Assignment and Assumption

Exhibit G — Form of Trademark Assignment

-iv-

 

ASSET PURCHASE AGREEMENT

     This ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of April 28, 2006, is by and
between Bell Industries, Inc. a California corporation (the “Seller”) and Bourns, Inc., a
California corporation (the “Buyer”).

RECITALS

     A. The Seller engages through its J.W. Miller Magnetics division in the Business (as defined
below) and also engages in the Excluded Business (as defined below).

     B. Subject to the terms and conditions set forth herein, the Seller desires to sell
substantially all of its assets, properties, rights and interests relating to the Business to Buyer
and Buyer desires to purchase and acquire such assets, properties, rights and interests for the
consideration and the assumption by Buyer of certain specified liabilities relating to the Business
set forth in this Agreement.

     C. As a condition and an inducement to the willingness of the Seller to enter into this
Agreement, Buyer will offer temporary employment to all existing employees of the Seller employed
in the Business (except for Chuck Troy) for a fixed term of up to ninety (90) days, such written
offers substantially in the form attached hereto as Exhibit A-1 (each, the “Fixed Term
Temporary Employment Offer”) and Buyer may offer regular at-will employment to certain key
employees of the Seller, such written offers substantially in the form attached hereto as
Exhibit A-2 (each, the “At-Will Employment Offer”).

     D. As a condition and an inducement to the willingness of Buyer to enter into this Agreement,
the Seller and the Buyer will enter into a non-competition agreement substantially in the form
attached hereto as Exhibit B (the “Seller Non-Competition Agreement”).

     E. As a condition and an inducement to the willingness of Buyer to enter into this Agreement,
the Seller and the Buyer will enter into a transitional services agreement substantially in the
form attached hereto as Exhibit C, pursuant to which the Seller will provide to the Buyer,
for the amount of consideration set forth therein, certain transitional services in respect of the
Business, including, without limitation, temporary use of the Gardena Facility (as defined below)
(the “Transitional Services Agreement”).

     NOW, THEREFORE, in consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth herein, and subject to the terms and conditions set
forth herein, the Seller and the Buyer hereby agree as follows:

ARTICLE I

DEFINITIONS

For purposes of this Agreement:

     “2005 Annual Employee Incentive Plan” means 2005 annual employee incentive plan of the Seller.

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     “2005 Financial Statements” has the meaning set forth in Section 6.5(a).

     “Accounts Receivable” has the meaning set forth in Section 2.1(b).

     “Acquired Assets” has the meaning set forth in the preamble to Section 2.1.

     “Actions” means any suit, claim, audit, charge, complaint, legal proceeding, administrative
enforcement proceeding or arbitration proceeding before any Governmental Authority.

     “Adjusted Working Capital” means, with respect to the Business, (a) total current assets, less
cash and cash equivalents minus (b) total current liabilities. The Adjusted Working
Capital will be computed in accordance with GAAP consistently applied. For purposes of the
Adjusted Working Capital adjustment to the Purchase Price, “current liabilities” shall not include
(i) any amount payable to Imperial Capital, LLC or other providers of transaction related services
to the Seller and (ii) the 2005 Annual Employee Incentive Plan payments and related payroll Taxes
and other Taxes and withholding related to or arising out of the 2005 Annual Employee Incentive
Plan.

     “Additional Cash Consideration Amount” has the meaning set forth in Section 3.2.

     “Affiliate” means with respect to any Person, any person or entity (or any relative of any
person) that directly or indirectly owns or controls, is owned or controlled by, or is under common
control with, such person or entity, or any person (or any relative of such person) who is an
officer or director of such entity, or any entity that is owned or controlled by, or under common
control with any entity owned or controlled by, any officer or director of such entity (or any
relative of such person).

     “Agreement” has the meaning set forth in the preamble.

     “Assignment and Assumption Agreement” has the meaning set forth in Section 5.2(h).

     “Assumed Contracts” has the meaning set forth in Section 2.1(h).

     “Assumed Liabilities” has the meaning set forth in the preamble to Section 3.1.

     “At-Will Employment Offer” has the meaning set forth in Recital C.

     “Balance Sheet” has the meaning set forth in Section 6.5(a).

     “Balance Sheet Date” has the meaning set forth in Section 6.5(a).

     “Bill of Sale” has the meaning set forth in preamble to Section 2.1.

     “Business” means business historically and as of the date of this Agreement conducted by the
J.W. Miller Magnetics division of the Seller, including, without limitation, design,

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manufacturing and distribution of custom and magnetic components such as high-quality coils,
chokes, inductors and transformers in both surface and through-hole configurations.

    “Business Day” means any day other than a Saturday, Sunday or a day on which banks in Los
Angeles, California are authorized or obligated by Law or executive order to close.

    “Buyer” has the meaning set forth in the preamble.

     “Buyer Indemnitees” has the meaning set forth in Section 10.3.

     “CA-WARN Act” has the meaning set forth in Section 3.3(h).

    “Claim” has the meaning set forth in Section 10.6(a).

    “Claim Response” has the meaning set forth in Section 10.6(a).

    “Claims Notice” has the meaning set forth in Section 10.6(a).

    “Closing” has the meaning set forth in Section 5.1.

    “Closing Date” has the meaning set forth in Section 5.1.

     “COBRA” has the meaning set forth in Section 3.3(h).

    “Code” means the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder.

    “Confidentiality Agreement” has the meaning set forth in Section 8.2(a).

    “Consent” means any consent, approval, authorization, qualification, waiver, registration or
notification required to be obtained from, filed with or delivered to a Governmental Authority or
any other Person in connection with the consummation of the transactions provided for herein.

    “Contracts” means all written contracts and agreements and other arrangements, including, but
not limited to, open sales orders, open purchase orders, distribution and sales representative
agreements, leases, licenses, and other agreements (including any amendments and other
modifications thereto), to which the Seller is a party or by which the Acquired Assets are bound.

    “Copyrights” means United States and foreign copyrights, copyrightable works, and mask works,
whether registered or unregistered, and registrations and pending applications to register the same
and any renewals or extensions thereof.

    “Customer-Owned Property” has the meaning set forth in Section 6.8.

     “Dispute Auditor” means Gumbiner Savett or such certified public accounting firm as may be
mutually agreed upon by the Seller and Buyer.

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     “Employee Plans” means, collectively, all “employee benefit plans” as defined in Section 3(3)
of ERISA, all other severance pay, salary continuation, bonus, incentive, stock option, retirement,
pension, profit sharing or deferred compensation plans, contracts, programs, funds or arrangements
of any kind and all other employee benefit plans, contacts, programs, funds, or arrangements in
respect of any employees of the Seller that are sponsored by the Seller.

    “Environment” means soil, surface waters, groundwater, land, stream, sediments, surface or
subsurface strata or media, ambient air, indoor air or indoor air quality, including, without
limitation, any material or substance used or contained in the physical structure of any building
or improvement.

     “Environmental Condition” means any condition of the Environment with respect to the Gardena
Facility arising from activities on or near the Gardena Facility, or with respect to any other real
property at which any Hazardous Material generated by the operation of the Business prior to the
date of this Agreement has been treated, stored or disposed of, which violates any Environmental
Law, or even though not violative of any Environmental Law, nevertheless results in any Release, or
Threat of Release, loss, liability or Order imposed by any Person (including, without limitation,
any Governmental Authority).

    “Environmental Law” means any Law relating to the protection of human health, protection of
the Environment, or Hazardous Materials, as well as common law theories of liability related
thereto (including without limitation, nuisance, trespass and negligence).

    “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the rules
and regulations promulgated thereunder.

    “Excluded Business” means the businesses conducted as of the date of this Agreement solely by
divisions of the Seller other than the J.W. Miller Magnetics division.

     “Final Adjusted Working Capital” has the meaning set forth in Section 4.4(b).

     “Final Adjusted Working Capital Statement” has the meaning set forth in Section
4.4(b).

     “Final Balance Sheet” has the meaning set forth in Section 4.4(b).

     “Fixed Term Temporary Employment Offer” has the meaning set forth in Recital C.

    “GAAP” means United States generally accepted accounting principles as in effect from time to
time, applied on a consistent basis.

     “Gardena Facility” has the meaning set forth in Section 2.2(e).

    “General Enforceability Exceptions” means, collectively, applicable bankruptcy,
reorganization, insolvency, moratorium or other similar Laws affecting the enforcement of
creditors’ rights generally from time to time in effect and the availability of equitable remedies
(regardless of whether enforceability is considered in a proceeding at law or in equity) .

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    “Governmental Authority” means (i) any government or political subdivision, whether federal,
state, local or foreign, or (ii) any agency or instrumentality of any such government or political
subdivision, or (iii) any federal, state, local or foreign court or (iv) any arbitration tribunal,
panel or body.

    “Hazardous Material” means any substance, material, contaminant or waste, including, but not
limited to, any pollutant, toxic substance, asbestos and asbestos-containing materials, hazardous
waste, hazardous material, hazardous substance, petroleum, or petroleum-containing materials,
radiation and radioactive materials and polychlorinated biphyenyls as defined in, or which could
give rise to liability under, any Environmental Law, or which are regulated pursuant to CERCLA, the
Clean Air Act, the Clean Water Act, the Toxic Substances Control Act, the Resource Conservation and
Recovery Act, and all state and local counterparts thereto, and such other substances, materials,
pollutants, contaminants and wastes as are or become regulated or subject to cleanup authority
under any Environmental Law.

     “Indemnification Threshold” has the meaning set forth in Section 10.5(a).

    “Indemnifying Party” has the meaning set forth in Section 10.6(b).

     “Indemnitees” has the meaning set forth in Section 10.3.

    “Intellectual Property” means any of the following types of intellectual property of the
Business and has been reduced to writing, including, without limitation, in electronic form and any
other form, in any jurisdiction throughout the world: (a) Patent Rights; (b) Trademarks, Internet
domain names and rights in telephone numbers; (c) Copyrights; (d) trade secrets and confidential
business information (including ideas, processes, formulae, designs, models, industrial designs,
know-how, proprietary information and research and development, manufacturing and production
processes and techniques, technical data, drawings, specifications, customer and supplier lists,
pricing and cost information, business and marketing plans and proposals and documentation relating
to quality); (e) Software (including, but not limited to, source code, executable code, data,
databases, and related documentation), website content and computer software; (f) advertisings and
promotional materials; (g) other proprietary information, and (h) copies and tangible embodiments
thereof (in whatever form or medium).

    “Interdivision Loans” means all amounts owed by various divisions of the Seller to each other.

    “Interim Financial Statements” has the meaning set forth in Section 6.5(a).

    “IRS” means the Internal Revenue Service.

     “Inventory” has the meaning set forth in Section 2.1(c).

    “Labor Law” means all labor and employment laws, including without limitation federal, state,
local, municipal, foreign and other applicable laws, rules, regulations, ordinances, orders and
decrees concerning collective bargaining, unfair labor practices, payments of employment taxes,
occupational safety and health, worker’s compensation, the payment of wages and overtime, and equal
employment opportunity.

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    “Law” means any law, statute, code, ordinance, regulation or rule of any Governmental
Authority.

    “Lien” means any mortgage, lien, deeds of trust, security interest, pledges, restrictions,
prior assignments, charges, claims, defects in title and encumbrances of any kind or type
whatsoever.

    “Lien Discharge Payment Amount” has the meaning set forth in Section 4.1(c).

    “Losses” has the meaning set forth in Section 10.2.

    “Material Adverse Effect” means any material adverse effect or material adverse change, either
individually or in the aggregate with other material adverse effects or material adverse changes,
in the general affairs, condition (financial or otherwise), business, properties, results of
operations, assets, liabilities, net worth or operations of the Business or, in the case of Seller,
on the ability of Seller to consummate the transactions contemplated hereby, whether or not Buyer
has knowledge of such effect or change on the date hereof). Notwithstanding the foregoing, none of
the following shall be deemed (either alone or in combination) to constitute, and none of the
following shall be taken into account in determining whether there has been or will be a Material
Adverse Effect with respect to the Business or Seller: any adverse change or effect (including any
loss of employees, reductions in revenues or income or disruption of business relationships)
arising from or attributable or relating to the announcement or pendency of the transactions
contemplated by this Agreement, or conditions affecting the industry or industry sector in which
Seller participates, or the U.S. economy as a whole.

    “Material Contracts” has the meaning set forth in Section 6.12.

    “Material Customers” has the meaning set forth in Section 6.20(a).

    “Material Suppliers” has the meaning set forth in Section 6.20(b).

     “Non-Assignable Contracts” has the meaning set forth in Section 2.3.

    “Non-Assigned Contracts” has the meaning set forth in Section 2.2(b).

     “Notice of Sale” has the meaning set forth in Section 5.2(g).

    “Order” means any order, judgment, ruling, injunction, assessment, award, decree or writ of
any Governmental Authority.

    “Ordinary Course of Business” means the ordinary course of business consistent with past
custom and practice (including with respect to quantity and frequency)

     “Organizational Documents” has the meaning set forth in Section 6.2.

     “Patent Rights” means United States and foreign patents, patent applications, continuations,
continuations-in-part, divisions, extensions, re-examinations, equivalents,

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counterparts, reissues, patent disclosures, inventions (whether or not patentable or reduced
to practice) and improvements thereto.

    “Permits” means any license, permit, authorization, certificate of authority, qualification or
similar document or authority that has been issued or granted by any Governmental Authority.

    “Person” means any individual, sole proprietorship, partnership, corporation, limited
liability company, joint venture, unincorporated society or association, trust or other legal
entity or Governmental Authority.

     “PP&E” has the meaning set forth in Section 2.1(e).

    “Preliminary Adjusted Working Capital” has the meaning set forth in Section 4.4(a).

    “Preliminary Adjusted Working Capital Statement” has the meaning set forth in Section
4.4(a).

     “Prepaids” has the meaning set forth in Section 2.1(d).

    “Purchase Price” means eight million five hundred thousand dollars and no/cents
($8,500,000.00).

    “Purchased Intellectual Property” has the meaning set forth in Section 2.1(f).

     “Purchased Permits” has the meaning set forth in Section 2.1(i).

    “Release” means any releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, disposing or dumping of a Hazardous Material into the
Environment.

    “Response Period” has the meaning set forth in Section 10.6(a).

    “Responsible Party” has the meaning set forth in Section 10.6(b).

    “Retained Assets” has the meaning set forth in the preamble to Section 2.2.

    “Retained Liabilities” has the meaning set forth in the preamble to Section 3.3.

    “Seller” has the meaning set forth in the preamble.

     “Seller Disclosure Schedules” has the meaning set forth in preamble to Article VI.

    “Seller Financial Statements” has the meaning set forth in Section 6.5(a).

    “Seller Indemnitees” has the meaning set forth in Section 10.2.

     “Seller Non-Competition Agreement” has the meaning set forth in Recital D.

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     “Seller’s Knowledge” means the actual knowledge after reasonable investigation of Chuck Troy,
Michell I. Rosen, Andy Chow and Laura L. Palmer.

     “Software” means a collection of program code, data and instructions in source code or object
code and or any other media, including without limitation, system software, application software,
firmware or software embedded in the industrial process or equipment, products and/or technology,
excluding the non-transferable general commercial non-customized shrink-wrap software licensed by
Seller in connection with the Business and the Excluded Business under a master corporate license.

     “Tax” means any net income, alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, value added, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property, environmental or windfall
profit tax, social security, business license, customs fee, duty or other tax, governmental fee or
other like assessment or charge of any kind whatsoever, together with any interest, penalties,
additions to tax or additional amounts imposed by any Taxing Authority, whether disputed or not and
including any obligation to indemnify or otherwise assume or succeed to the Tax liability of any
other Person.

     “Tax Returns” means any return, declaration, report, manifest, claim for refund, or
information return or statement relating to Taxes, including any schedule or attachment thereto,
and including any amendment thereof.

     “Taxing Authority” means any Governmental Authority responsible for the administration or
imposition of any Tax.

     “Total Consideration” has the meaning set forth in Section 4.1(a).

     “Threat of Release” means a likelihood of a Release that requires action to prevent or
mitigate damage to the Environment that might result from such Release.

     “Trademark Assignment” has the meaning set forth in Section 5.2(i).

     “Trademarks” means United States, state and foreign trademarks, service marks, logos, trade
dress, Internet domain names, corporate names, slogans, brand names, trade dress, and trade names
(including all assumed or fictitious names under which any Person is conducting business or has
within the previous five (5) years conducted business), whether registered or unregistered, and
translations, adoptions, derivations and combinations thereof, registrations and pending
applications to register the foregoing and equivalents, renewals and counterparts for any of the
foregoing, and the goodwill of the Business associated with each of the foregoing.

     “Transactional Documents” means this Agreement, the Seller Disclosure Schedules, Bill of Sale,
Assignment and Assumption Agreement, Fixed Term Temporary Employment Offer, At-Will Employment
Offer, Seller Non-Competition Agreement and Transitional Services Agreement.

     “Transitional Services Agreement” has the meaning set forth in Recital E.

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     “Transfer Taxes” has the meaning set forth in Section 8.3.

     “Unwanted Assets” has the meaning set forth in Section 8.7.

     “WARN Act” has the meaning set forth in Section 3.3(h)

     “Warranty” has the meaning set forth in Section 6.14(e).

As used in this Agreement, the meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms. The words “hereof”, “herein” and “hereunder”
and words of similar import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement.

ARTICLE II

PURCHASE AND SALE OF ASSETS

     2.1 Sale and Transfer of Assets by the Seller. On the terms and subject to the
conditions set forth in this Agreement, at the Closing, the Buyer shall purchase and acquire
from the Seller, and the Seller shall sell, transfer, convey, assign and deliver to Buyer by
bill of sale, in the form attached hereto as Exhibit D (“Bill of Sale”), all of the
assets, properties, rights and interests of any nature whatsoever owned or held by the Seller as
of the Closing and used directly or indirectly in the operation of the Business other than the
Retained Assets (collectively, the “Acquired Assets”), including, but not limited to, the
following (without duplication):

     (a) Balance Sheet. All assets, properties, rights and interests of the
Business set forth or which properly ought to be set forth on the Final Balance Sheet
(except the Retained Assets);

     (b) Accounts Receivable. All accounts receivable and any evidence thereof
relating to or arising out of the Business and operation thereof and any payments received
with respect thereto after the Closing Date (including cash or check payments in transit on
the Closing Date) (collectively, “Accounts Receivable”). An itemized list of the Accounts
Receivable as of March 31, 2006, identifying such Accounts Receivable by customer’s name,
aging and amount, is set forth in Schedule 2.1(b);

     (c) Inventory. The inventories of raw materials, supplies, work-in-progress
and finished goods relating to the Business (collectively, “Inventory”). An itemized list
of the Inventory as of March 31, 2006, identifying such Inventory by type and location, is
set forth in Schedule 2.1(c);

     (d) Prepaids. Except as otherwise set forth herein, all prepaid expenses,
advance payments, deposits, surety accounts and other similar assets, including prepaid
deposits with suppliers and utilities (“Prepaids”). An itemized list of the Prepaids as of
March 31, 2006, identifying such Prepaids by type and amount, is set forth in Schedule
2.1(d);

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     (e) Property, Plant and Equipment. All equipment, assets in construction,
office furniture and fixtures, computer equipment, office equipment, other furnishings,
trucks, automobiles and other vehicles, and other tangible personal property of every kind
and description, including tooling, wherever located (collectively, “PP&E”). An itemized
list of PP&E as of March 31, 2006, identifying such items by type and location, is set forth
in Schedule 2.1(e);

     (f) Intellectual Property Rights. All Intellectual Property related to the
Business, including, without limitation, (i) the names set forth on Schedule 2.1(f)
and all related Trademarks, (ii) trade secrets and confidential business information,
whether or not reduced to practice and whether patentable or nonpatentable that have been
reduced to writing, (iii) know-how, manufacturing and product processes and techniques,
research and development information that have been reduced to writing, (iv) customer and
supplier lists, and (v) the Intellectual Property required to be described on Schedule
6.15(a) and Section 6.15(b) (collectively, the “Purchased Intellectual
Property”);

     (g) Business Records. Subject to Section 2.2(f), all original books
and records, including, but not limited to, all files, invoices, forms, accounts,
correspondence, production records, engineering documentation, customs documentation, bills
of operation, bills of material and all documentation related to quality, customer lists,
accounting, manuals, studies, reports or summaries, and other books and records, whether
reduced to writing, contained on the electronic media or otherwise, relating, directly or
indirectly, to the ownership or use of any of the Acquired Assets or other assets or
properties associated with the Business, and any confidential information which has been
reduced to writing or other tangible medium relating to or arising out of the operation of
the Business;

     (h) Contracts. Subject to Section 2.3, all rights, benefits and
interests (but not any liability or obligation of the Seller identified in Section
3.3) of the Seller in and to all of the following Contracts relating to the Business, to
the extent assignable: (i) distributor agreements as of the date of this Agreement and
associated therewith sale orders open as of a date within five (5) calendar days of the date
of this Agreement, listed on Schedule 2.1(h-1), (ii) sales representative agreements
listed on Schedule 2.1(h-2), (iii) agreements with other customers of the Business
including but not limited to contract manufacturers as of the date of this Agreement
together with the associated therewith sales orders open as of a date five (5) calendar days
of the date of this Agreement, listed on Schedule 2.1(h-3), and (iv) private label
manufacturing agreements with suppliers of finished goods to the Business of the date of
this Agreement and associated therewith purchase orders open as of a date five (5) calendar
days of the date of this Agreement, listed on Schedule 2.1(h-4) (collectively, the
“Assumed Contracts”);

     (i) Permits. All Permits to the extent transferable to Buyer and issued in
connection with the Business or operation thereof (the “Purchased Permits”) (Schedule
2.1(i) identifies all such Permits);

     (j) Claims. Except as provided in Section 2.2(h), any and all claims,
causes of action and choses in action and rights against third parties or Governmental

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Authorities if and to the extent that they related to the Business, the Acquired Assets
or Assumed Liabilities, including without limitation, all rights under manufacturer’s and
vendor’s warranties;

     (k) Goodwill. The goodwill in, and going concern value of, the Business and
operation thereof.

     2.2 Retained Assets. The Seller shall retain all, and the Buyer shall not purchase
or acquire from the Seller any, of the assets relating solely or principally to the operation of
the Excluded Business. In addition, the Acquired Assets shall not include the following assets,
properties, rights and interests owned, used, occupied or held by or for the benefit of the
Business (the “Retained Assets”):

     (a) Designated Assets. Those assets, properties, rights and/or interests,
directly or indirectly, owned, used, occupied or held by or for the benefit of the Seller in
connection with the Business, each as set forth on Schedule 2.2(a) (which schedule
may be amended in accordance with Section 8.7 hereof);

     (b) Non-Assigned Contracts. All of the rights and interests of the Seller in,
under or pursuant to any Contract entered into in connection with the Business, each set
forth on Schedule 2.2(b) (collectively, the “Non-Assigned Contracts”);

     (c) Non-Assignable Contracts. Without limiting the effect of Section
2.3, any Non-Assignable Contracts for which, but only so long as, the required Consent
of a third Person necessary for the transfer thereof has not been obtained prior to the
Closing, each as set forth on Schedule 2.2(c) (listing contract parties);

     (d) Cash and Cash Equivalents. All cash, cash equivalents and marketable
securities, including, but not limited to, cash on hand maintained at the facilities of the
Seller, and cash, cash-equivalents and marketable securities in lock boxes or on deposit
with or held by any financial institution and all bank accounts of the Seller;

     (e) Gardena Facility. Without limiting the effect of the use permitted
pursuant to the terms of the Transitional Services Agreement, all of the rights and
interests of the Seller in the real property located at 306 E. Alondra Blvd, Gardena,
California, 90247, leasehold improvements thereto and the storage cage (the “Gardena
Facility”);

     (f) Corporate Books. All of the original stock record books and minute books
of the Seller, original employment records and original tax exemption (e.g., resale)
certificates previously provided to Seller by its customers and similar corporate records
required by Law to be retained by the Seller and one copy of the business records acquired
by the Buyer pursuant to Section 2.2(g); and

     (g) Tax Refunds. All refunds, claims for refunds or credits of Taxes of the
Seller for periods ending on or prior to the Closing Date and the benefit of net operating
loss carry-forwards or other credits of Seller, whether or not attributable to the Acquired
Assets;

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     (h) Accounts Receivable from Employees. All rights to any accounts receivable
from any employee of Seller (i.e., employee advances);

     (i) Permits. All Permits relating to the Business to the extent they are not
assignable or transferable to Buyer on the Closing Date;

     (j) Insurance Policies. Except as expressly provided herein, all insurance
policies and surety bonds and rights thereunder;

     (k) Pension Assets. Pension or other funded Employee Plan assets of the
Seller;

     (l) Assets used in Excluded Business. All assets used exclusively by Seller in
the Excluded Business; and

     (m) Seller’s Rights under Transactional Documents. Seller’s rights under the
Transactional Documents.

     2.3 Non-Assignable Contracts. To the extent that any of the contracts, purchase
orders or sales orders relating to the Business and identified on Schedule 2.1(h) are
not assignable to the Buyer by reason of their terms, but would otherwise constitute Assumed
Contracts, for one hundred twenty (120) days after the Closing Date the Seller shall use its
best efforts to obtain the consents that may be necessary to permit their assignment to the
Buyer as Assumed Contracts. If any such contracts, purchase orders or sales orders are not
Assumed Contracts by reason of lack of consent to an assignment to the Buyer (the
“Non-Assignable Contracts”), the Buyer, to the maximum extent permitted by Law, shall act during
one hundred twenty (120) days after the Closing Date as the Seller’s agent and shall fulfill all
of the obligations of the Seller under the Non-Assignable Contracts. The Buyer shall also
exercise all of the Seller’s rights under the Non-Assignable Contracts, including invoicing and
collection. The Buyer shall be entitled to all sums collected by the Buyer or the Seller under
the Non-Assignable Contracts. For one hundred twenty (120) days after the Closing Date, the
Seller shall, consistent with instructions given by the Buyer, prepare or issue invoices or
other documents, receive payments, and otherwise intervene with other parties to the
Non-Assignable Contracts to enable the Buyer to receive the economic benefit of such
Non-Assignable Contracts to the maximum extent permitted by Law. The allocation of rights and
obligations between the Seller and the Buyer under Non-Assignable Contracts shall be the same as
if the Non-Assignable Contracts were in fact Assumed Contracts. This Section 2.3 shall
not apply to any Material Contract, unless Buyer waives the condition of Consent to the
assignment of any such Material Contract in connection with the Closing. All obligations of the
Seller to Buyer and all obligations of the Buyer to the Seller shall terminate on the one
hundred twenty-first (121st) day after the Closing Date with respect to Non-Assignable Contracts
that have not been assumed by the Buyer within one hundred twenty (120) days after the Closing
Date due to lack of consent to an assignment to the Buyer.

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ARTICLE III

LIABILITIES

     3.1 Lien Free; Assumption of Liabilities. The Acquired Assets shall be transferred
to Buyer by the Seller on the Closing Date free and clear of all Liens. On the terms and
subject to the conditions set forth in this Agreement, Buyer shall assume, effective as of the
Closing, and shall thereafter pay, perform and discharge as and when due only the following
liabilities and obligations of the Seller relating to the Business and no others (collectively,
the “Assumed Liabilities”):

     (a) Trade Accounts Payable. All liabilities and obligations under the Seller’s
trade accounts payable to suppliers of goods and services to the Business, incurred by the
Seller in Ordinary Course of Business and due and payable in accordance with its terms in
the amount set forth on the Final Balance Sheet. An itemized list of the trade accounts
payable is set forth on Schedule 3.1(a) (identifying as of March 31, 2006 the
obligee, the invoice number, the amount, terms and aging);

     (b) Items Received but not Invoiced. All liabilities and obligations of Seller
in respect of the goods received by the Seller but not yet invoiced by Seller’s suppliers in
the amount set forth on the Final Balance Sheet. An itemized list of items received but not
invoiced is set forth on Schedule 3.1(b) (identifying as of March 31, 2006 the
supplier, the purchase order number, description of the item received, the amount due and
date when each item was received by the Seller);

     (c) Ship and Debit Reserve to Distributors. All liabilities and obligations of
the Seller shown on the Final Balance Sheet for committed rebates to distributors arising
from approved distributor price concessions to customers. An itemized list of ship and
debit reserve to distributors is set forth on Schedule 3.1(c) (identifying as of
March 31, 2006 each distributor, authorization number, the distributor’s customer, product,
the original purchase cost and the approved cost, the validity period, and amount of
allowance);

     (d) Customer Rebate to Arrow. Rebates and discounts in the amount set forth in
the Final Balance Sheet for Seller’s products previously shipped and invoiced to Arrow
Electronics. An itemized list of customer rebates and discounts to Arrow Electronics is set
forth on Schedule 3.1(d) (identifying as of March 31, 2006 the amount of rebate
and/or discount due and the calculations thereof);

     (e) Customer Scrap Allowance to Arrow. An allowance for scrap in the amount
set forth on the Final Balance Sheet in respect of the Seller’s products previously shipped
and invoiced to Arrow Electronics. A customer scrap allowance to Arrow Electronics is set
forth on Schedule 3.1(e) (identifying as of March 31, 2006 the amount and the
calculations thereof and date shipped);

     (f) Accrued Advertising Expense. All liabilities and obligations of Seller for
accrued advertising expense reflected on the Final Balance Sheet in the amount not to

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exceed $34,826.00. An itemized list of accrued advertising expense is set forth on
Schedule 3.1(f) (identifying as of March 31, 2006 such amount);

     (g) Liabilities Identified as “Unrecorded Liabilities” on the Balance Sheet.
All liabilities and obligations of Seller reflected on and in the amount set forth on the
Final Balance Sheet under the line item entitled the “Unrecorded Liabilities.” An itemized
list of “Unrecorded Liabilities” is set forth on Schedule 3.1(g) (identifying as of
March 31, 2006 the obligee, the nature of the charge and the amount);

     (h) Accrued Commissions under Sales Representative Agreements. All liabilities
and obligations of the Seller to sales representatives under and in accordance with the
terms of the sales representative agreements in the amount set forth on the Final Balance
Sheet. An itemized list of accrued commissions under sales representative agreements is set
forth on Schedule 3.1(h) (identifying as of March 31, 2006 the sales representative,
the applicable commissions structure, the amount due and the calculations thereof); and

     (i) Post-Closing Date Liabilities relating to Acquired Assets. All liabilities
and obligations relating to or associated with Buyer’s ownership, use or operation of the
Acquired Assets following the Closing Date.

     3.2 Buyer to Pay but not Assume Certain Liabilities of the Seller. In lieu of
assuming certain employee-related liabilities and miscellaneous liabilities of the Business set
forth on Schedule 3.2, the Buyer shall pay to the Seller in cash an additional amount
(such amount, the “Additional Cash Consideration Amount”) equal to the sum of, in each case, the
amount accrued and reflected on the Final Balance Sheet for: (i) vacation and sick pay, (ii)
salaries and wages, (iii) payroll Taxes, (iv) miscellaneous liabilities and sales and use taxes
and (v) accrued inside sales representatives commissions not relating to the itemized list of
accrued commissions as set forth in Schedule 3.1(h); provided that the
Additional Cash Consideration Amount shall exclude all amounts owed by the Seller under any of
its employee incentive plan for the employees of the Business.

     3.3 Retained Liabilities. The Seller shall retain and remain liable for and shall
perform and discharge as and when due, and Buyer shall not assume, or be responsible or liable
with respect to, any liabilities or obligations of the Seller (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, whether accrued or unaccrued,
whether due or to become due, and whether claims with respect thereto are asserted before or
after the Closing) which are not Assumed Liabilities, whether or not relating to the Acquired
Assets (collectively the “Retained Liabilities”). The Retained Liabilities shall include,
without limitation, the following:

     (a) all liabilities and obligations of and/or on behalf the Seller for costs and
expenses incurred in connection with this Agreement or the negotiation and consummation of
the transactions contemplated by this Agreement;

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     (b) all liabilities and obligations of the Seller under any Non-Assigned Contract or
any other agreements, contracts, leases or licenses which are not Assumed Contracts;

     (c) except for liabilities and obligations expressly assumed by the Buyer pursuant to
Section 3.1, all liabilities and obligations of the Seller arising prior to or on
the Closing Date under the Assumed Contracts

     (d) all liabilities for any breach, act or omission by the Seller prior to or on the
Closing Date under any Assumed Contract;

     (e) all liabilities and obligations related to the employees of the Seller engaged in
the Business and retained by the Seller after the Closing Date;

     (f) all employee-related liabilities of the Seller accrued or arising out of actions,
omissions or event occurring prior to or on the Closing Date, including, without limitation:
(i) accrued salaries and wages, (ii) accrued vacation and sick pay, (iii) accrued payroll
Taxes, (iv) withholdings, (v) charges of unfair labor practices, or (vi) discrimination
complaints;

     (g) all liability and obligation of Seller for the provision of health plan
continuation coverage in accordance with the requirements of COBRA and Sections 601 through
608 of ERISA to employees of the Seller, including employees who accept temporary employment
with the Buyer pursuant to Section 8.6;

     (h) all liabilities and obligations of the Seller pursuant to the Worker Adjustment and
Retraining Notification Act (“WARN Act”), the California Worker Adjustment and Retraining
Notification Act (Cal. Lab. Code § 1400) (“CA-WARN
Act”), the Consolidated Omnibus Budget
Reconciliation Act (“COBRA”) and all other liabilities and obligations to pay severance,
termination pay, redundancy pay, pay in lieu of notice, accrued vacation pay, incentive
bonus pay related to the transactions contemplated by this Agreement or other benefits to
any current or former employee of Seller whose employment is terminated upon the
consummation of the transactions contemplated by this Agreement;

     (i) all liabilities and obligations in respect to all discretionary bonuses or
incentive payments (other than any incentive payments offered by the Buyer as part of the
temporary employment offered to former employees of the Seller pursuant to Section
8.6), including without limitation the 2005 Annual Employee Incentive Plan and all
related payroll Taxes and withholdings related to or arising under such 2005 Annual Employee
Incentive Plan;

     (j) all liabilities and obligations of the Seller in respect of the its Employee Plans,
including, without limitation, the deferred compensation plans and arrangements (including,
the establishment, operation or termination thereof and the notification and provision of
COBRA coverage extension), whether to active employees of the Seller, former employees of
the Seller, their beneficiaries or to any other Person;

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     (k) all liabilities and obligations of the Seller or its Affiliates or the Business for
work-related injuries or accidents that occurred prior to or on the Closing Date, whether a
claim for such injuries or accidents is brought before, on or after the Closing Date;

     (l) all liabilities and obligations of Seller under Seller’s checks outstanding on the
Closing Date;

     (m) all liabilities and obligations of Seller for accrued advertising expense in the
amount in excess of $34,826.00;

     (n) all liabilities and obligations arising out or relating to products sold by the
Seller prior to and on the Closing Date, including without limitation, damage to persons or
property, regardless of whether such claim is brought before, on or after the Closing Date
and regardless of whether such claim or demand is based on or arises under tort, negligence,
contract, warranty, strict liability or any other legal theories;

     (o) all liabilities and obligations under any Warranty related to the operation of the
Business prior to and on the Closing Date;

     (p) all liabilities and obligations arising out of or relating to the operation of the
Business or the Seller’s leasing, ownership or operation of any real property prior to the
Closing, including without limitation, liabilities (including without limitation costs of
cleanup and remediation) resulting from (i) any Release of, or exposure to, any Hazardous
Materials in connection with the operation of Business and any Releases of, or any exposure
to, any Hazardous Materials at any site to which any such Hazardous Materials migrated or
were transported, whether before or after the Closing Date, (ii) the existence of any
Hazardous Materials at or emanating from, any site on which the Business of the Seller was
or is conducted or the existence of any Hazardous Materials at, or emanating from, any site
or to which any such Hazardous Materials migrated or were transported; (iii) any violation
of any Environmental Law or Release of, exposure to or existence of Hazardous Material
associated with the Retained Assets; and (iv) or arising out of the Environmental Condition.

     (q) except to the extent Buyer expressly agreed to pay certain Taxes as set forth in
other provisions of this Agreement, all liabilities and obligations of the Seller for
income, sales, use, payroll or other Taxes arising in connection with the consummation of
the transactions contemplated by this Agreement;

     (r) all liabilities and obligations for Taxes now or hereafter imposed on the Business
(including with respect to the employees engaged in Business) or the Acquired Assets or the
Seller relating to any Tax period, or any portion of any Tax period ending on or before the
Closing Date;

     (s) all liabilities and obligations owed to, or claims of, the Seller’s creditors,
whether arising before or after the Closing Date, which may be asserted against Buyer or any
of the Acquired Assets pursuant to any applicable bulk sales, bulk transfer or similar laws;

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     (t) all liabilities or obligations associated with the Retained Assets and/or Excluded
Business;

     (u) all liabilities and obligations under the Interdivision Loans, all inter-company
and intra-company accounts or Contracts between the Business, on the one hand, and Seller
and its Affiliates, on the other hand;

     (v) except to the extent assumed by the Buyer pursuant to the Transitional Services
Agreement, all liabilities and obligations associated with the Gardena Facility; and

     (w) liabilities relating to litigation involving the Business, the Acquired Assets, the
Assumed Liabilities or the Seller arising out of actions, omissions or events occurring
prior to or on the Closing Date.

     3.4 Group Health Benefits. Seller agrees to offer to its former employees, hired
by the Buyer on or about the Closing Date in accordance with Section 8.6, health plan
insurance continuation coverage in accordance with the requirements of COBRA and Sections 601
through 608 of ERISA.

ARTICLE IV

PURCHASE PRICE

     4.1 Purchase Price and Closing Payment.

     (a) Subject to adjustment as provided herein, the aggregate consideration payable by
the Buyer to Seller for the Acquired Assets shall consist of the Purchase Price plus
the assumption of the Assumed Liabilities plus the Additional Cash Consideration
(the “Total Consideration”).

     (b) At the Closing, Buyer shall pay to the Seller an amount of cash equal to the
Purchase Price minus the Lien Discharge Payment Amount, if any. The cash payment by
the Buyer to the Seller pursuant to this Section 4.1(b) shall be made by wire
transfer of immediately available funds to such accounts of the Seller to be designated by
the Seller by written notice to the Buyer at least two (2) Business Days prior to the
Closing Date.

     (c) Prior to the Closing, the Seller shall make arrangements satisfactory to the Buyer
for the termination of all Liens on, and security interests in, the Acquired Assets existing
in favor of any third-party prior to the Closing and the Buyer shall pay amounts directly to
such third-parties, if any, necessary to discharge such Liens and security interests (such
amount, the “Lien Discharge Payment Amount”). The cash payment by the Buyer of the Lien
Discharge Payment Amount, if any, shall be made by wire transfer of immediately available
funds to accounts designated by the Seller with consent of the third-party beneficiaries of
the lien discharge payments by written notice to the Buyer at least two (2) Business Days
prior to the Closing Date.

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     4.2 Additional Cash Consideration Amount. The Buyer shall pay to the Seller the
Additional Cash Consideration Amount five (5) Business Days after the Final Balance Sheet
becomes binding on the parties hereto pursuant to Section 4.4(e). If not already paid
in full by the Closing Date, the Seller shall pay in full and discharge its obligations under
the 2005 Annual Employee Incentive Plan promptly after the Closing.

     4.3 Purchase Price Allocation and Sales Tax.

     (a) The Total Consideration shall be allocated among the Acquired Assets in accordance
with the appraisal of the fair market value of the Acquired Assets and in accordance with
the requirements of Section 1060 of the Code. Each of the parties hereto agrees to file its
federal income Tax Returns and its other Tax Returns and to determine all Taxes in
accordance with the foregoing allocation and none shall take any position which is
inconsistent with such allocation of the Total Consideration unless required to do so by
applicable Law. The balance of the Total Consideration in excess of the appraised value of
the Acquired Assets shall be allocated to goodwill.

     (b) The appraisal of the fair market value of the Acquired Assets will be conducted by
Buyer, at its sole expense, within sixty (60) days after the Closing Date. The Seller shall
have up to twenty (20) days after delivery of the allocation of the Total Consideration by
the Buyer to analyze Buyer’s allocations and, at Seller’s sole expense, cause an accounting
firm to review such allocations on the Seller’s behalf. If the Seller believes that any
material aspect of the allocations of the Total Consideration by Buyer has not been prepared
appropriately, the Seller shall not later than the end of such twenty (20) day period,
contact the Buyer in writing to attempt to resolve the matter. If the parties hereto are
unable to resolve the matter within twenty (20) days from the date Buyer is first contacted
with respect to such matter, the Buyer and the Seller shall request Dispute Auditor to
determine the matter subject to disagreement, the determination to be made within thirty
(30) days, and the determination so made shall be final and binding on all parties. Buyer
and the Seller shall provide reasonable assistance to the Dispute Auditor, including, but
not limited to, providing such Dispute Auditor with reasonable access to working papers and
the books and records of the Seller as of the Closing Date. The fees of the Dispute Auditor
shall be borne equally by the Seller and Buyer. The parties hereto acknowledge and agree
that the appraisal shall have no effect on the Purchase Price or any adjustments thereto.

     (c) The Buyer agrees to pay Transfer Taxes, if any, related to the sale and purchase of
the Acquired Assets as set forth in Section 8.3 hereof.

     4.4 Purchase Price Adjustment. The Purchase Price shall be adjusted after Closing
as set forth in Section 4.4(f), which may be either an increase or decrease to the
Purchase Price, and shall be made on the following terms and conditions:

     (a) No later than three (3) days prior to the Closing Date, the Seller shall cause to
be prepared and delivered to the Buyer a statement certified by the chief financial officer
of the Seller setting forth in reasonable detail the Seller’s calculation of Adjusted
Working Capital prepared based on the balance sheet dated as of December 31,

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2005 and attached hereto as Schedule 6.5(a) (such statement as set forth on
Schedule 4.4(a), the “Preliminary
Adjusted Working Capital Statement”, and the
Adjusted Working Capital set forth thereon, the “Preliminary Adjusted Working Capital”).

     (b) As promptly as possible after the Closing Date, the Seller shall cause to be
prepared (i) a balance sheet of the Business as of the Closing Date (the “Final Balance
Sheet”), which shall be prepared in a manner consistent with the balance sheet dated as of
December 31, 2005 and attached hereto as Schedule 6.5(a) and which shall reflect by
footnote or otherwise the adjustments necessary to conform to the definition of Adjusted
Working Capital set forth herein and which shall otherwise be prepared in a manner
consistent with GAAP applied on a consistent basis in accordance with the past procedures of
Seller. As promptly as possible, but no later than thirty (30) days after the Closing Date,
the Seller shall deliver to the Buyer the Final Balance Sheet and a statement certified by
the chief financial officer of the Seller setting forth in reasonable detail the Seller’s
calculation of the Adjusted Working Capital of the Business as of the Closing Date (such
statement to be attached hereto as Schedule 4.4(b), the “Final Adjusted Working
Capital Statement”, and the Adjusted Working Capital set forth thereon, the “Final Adjusted
Working Capital”). The Seller shall, and shall cause its independent accountants to,
cooperate and assist, to the extent requested by the Buyer and/or its independent
accountants, in the preparation of the Final Balance Sheet and the calculation of Final
Adjusted Working Capital, including, without limitation, by making available to the extent
necessary books, records, work papers and personnel.

     (c) The Buyer and its independent certified public accountants may review the Final
Balance Sheet, the Final Adjusted Working Capital Statement, the Final Adjusted Working
Capital, the Preliminary Adjusted Working Capital Statement and the Preliminary Adjusted
Working Capital and may make inquiry of the representatives of the Seller’s accountants and
the Seller. If the Buyer disagrees with any material aspect of the Preliminary Adjusted
Working Capital and/or Final Adjusted Working Capital calculations, the Buyer shall contact
the Seller in writing to attempt to resolve the matter. The Seller agrees to diligently
address Buyer’s concerns regarding the calculations of the Preliminary Adjusted Working
Capital and/or Final Adjusted Working Capital. The determination of the Preliminary
Adjusted Working Capital and Final Adjusted Working Capital shall be binding and conclusive
upon, and deemed accepted by, the Buyer unless the Buyer shall have notified the Seller in
writing no later than forty (40) days after receipt of the Final Adjusted Working Capital
Statement of any objection to the Final Adjusted Working Capital or to Preliminary Adjusted
Working Capital or both. A notice under this Section 4.4(c) shall specify, in
reasonable detail, the items in the calculation that are being disputed, and the Buyer shall
be deemed to have agreed with all other items and amounts contained in the Preliminary
Adjusted Working Capital Statement and Final Adjusted Working Capital Statement, as
applicable, delivered by the Seller.

     (d) At the request of either party, any dispute between the parties relating to the
calculation of the Preliminary Adjusted Working Capital and/or the Final Adjusted Working
Capital that cannot be resolved by them within thirty (30) days after receipt of notice of
any objections to such calculation pursuant to Section 4.4(c) shall be referred to
the Dispute Auditor for decision, which decision shall be final and binding on both

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parties. In making such decision, the Dispute Auditor shall consider only those items
or amounts on the Preliminary Adjusted Working Capital Statement and/or the Final Adjusted
Working Capital Statement as to which the Buyer has disagreed. The parties agree that they
will request that the Dispute Auditor render its decision within thirty (30) days after
referral of the dispute to the Dispute Auditor for decision pursuant hereto. The fee of the
Dispute Auditor for, and relating to, the making of any such decision shall be borne by the
parties equally.

     (e) The Final Balance Sheet, the Preliminary Adjusted Working Capital and the Final
Adjusted Working Capital shall become binding on both parties hereto upon the earliest of
(i) the expiration of the period within which the Seller may notify the Buyer of any
objections thereto pursuant to Section 4.4(c) if no notice of objection has been
given, (ii) agreement by the Seller and the Buyer that the Preliminary Adjusted Working
Capital and the Final Adjusted Working Capital, together with any modifications thereto
agreed by the Seller and the Buyer, shall be final and binding, or (iii) the date on which
the Dispute Auditor shall issue its decision with respect to any dispute relating to such
calculation.

     (f) Within five (5) days after the determination of the Preliminary Adjusted Working
Capital and the Final Adjusted Working Capital becomes binding on the parties hereto
pursuant to Section 4.4(e), if the Final Adjusted Working Capital is greater than
the Preliminary Adjusted Working Capital, the Buyer shall pay to the Seller the difference
between the Final Adjusted Working Capital and the Preliminary Adjusted Working Capital and
if the Final Adjusted Working Capital is less than the Preliminary Adjusted Working Capital,
the Seller shall pay to the Buyer the difference between the Final Adjusted Working Capital
and the Preliminary Adjusted Working Capital; provided, however, that neither the
Buyer nor the Seller shall have any obligation to make a payment pursuant to this
Section 4.4(f) if the difference between the Preliminary Adjusted Working Capital
and the Final Adjusted Working Capital is less than or equal to fifty thousand dollars and
no/cents ($50,000.00) (it being understood that if the difference between the Preliminary
Adjusted Working Capital and the Final Adjusted Working Capital exceeds fifty thousand
dollars and no/cents ($50,000.00), then the Buyer or the Seller, as the case may be, shall
be obligated to make a payment equal only to the amount of the excess over fifty thousand
dollars and no/cents ($50,000.00)). All payments under this Section 4.4(f) shall be
by wire transfer of immediately available funds to an account designated by the party
receiving payment.

ARTICLE V

CLOSING AND DELIVERIES

     5.1 Closing. The closing of the transactions contemplated hereby (the “Closing”)
will take place at the offices of Irell & Manella LLP at 1800 Avenue of the Stars, Suite 900,
Los Angeles, CA 90067 following the satisfaction or waiver of each of the conditions set forth
in Article IX (other than those conditions that are to be satisfied at the Closing), or
on such other date or at such other time and place as the parties mutually agree in writing.
The date on which the Closing actually occurs is hereafter referred to as the “Closing Date”.
All proceedings to be taken and all documents to be executed and delivered by all parties at the

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Closing will be deemed to have been taken and executed simultaneously and no proceedings
will be deemed to have been taken nor documents executed or delivered until all have been taken,
executed and delivered.

     5.2 To be Delivered by the Seller. Prior to or at the Closing, the Seller shall
deliver or cause to be delivered to the Buyer:

     (a) this Agreement, the Seller Non-Competition Agreement and the Transitional Services
Agreement, each duly executed by the Seller;

     (b) at least three (3) days prior to the Closing, the Seller Disclosure Schedules;

     (c) a certificate executed by an executive officer of the Seller, to the effect that
(i) representations and warranties of the Seller set forth in Article VI are true
and correct as of the Closing Date, (ii) the Seller has performed and complied with all
agreements and covenants hereunder to be performed or complied with by the Seller at or
prior to the Closing, and (iii) to Seller’s Knowledge, no Governmental Authority of
competent jurisdiction shall have enacted, issued, promulgated or enforced any statute,
rule, regulation, executive order, decree, judgment, preliminary or permanent injunction or
other order which is in effect and which prohibits, enjoins or otherwise restrains the
consummation of the transactions contemplated by this Agreement;

     (d) a certificate executed by the corporate Secretary or Assistant Secretary of the
Seller, dated as of the Closing Date, in form and substance reasonably satisfactory to
Buyer, confirming the incumbency of the Seller’s officers executing this Agreement and any
related documents and attaching copies of the resolutions of the Board of Directors of the
Seller authorizing and approving this Agreement, the other agreements contemplated hereby to
which the Seller is a party and the transactions contemplated hereby or thereby;

     (e) all material approvals, consents and waivers that are required to effect the
transactions contemplated hereby shall have been received, and executed counterparts thereof
shall have been delivered to the Buyer;

     (f) the Bill of Sale transferring the Acquired Assets to the Buyer, free and clear of
any and all Liens, in form reasonably satisfactory to the Buyer and appropriately completed.
Simultaneously with the consummation of the transactions contemplated hereby, the Seller,
though its officers, agents and employees, will put the Buyer into possession of all
tangible Acquired Assets at the Gardena Facility or other facilities where they are located
as of the Closing Date;

     (g) a copy of each letter substantially in the form attached hereto as Exhibit
E pursuant to which Seller shall notify each holder of the Acquired Assets located at
any location other than the Gardena Facility of the sale of such Acquired Assets to Buyer
together with the acknowledgment by such holders of Buyer’s rights in the Acquired Assets
(“Notices of Sale”);

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     (h) an instrument or instruments of assignment to the Buyer of the Assumed Contracts
and Assumed Liabilities, duly executed by the Seller, substantially in the form attached
hereto as Exhibit F (the “Assignment
and Assumption Agreement”);

     (i) instruments of assignment to the Buyer, executed by the Seller, assigning the
entire right, title and interest of the Seller in, to and under the Purchased Intellectual
Property, substantially in the form of Exhibit G (“Trademark Assignment”);

     (j) (i) a good standing certificate for the Seller from the State of California issued
no earlier than ten (10) calendar days before the Closing Date and (ii) an “oral”
confirmation of good standing for the Seller in the State of California and each
jurisdiction in which the Seller is qualified to do business in respect of the Business
received as of the end of the Business Day before the Closing Date; and

     (k) releases, including termination statements under the Uniform Commercial Code of any
financing statements filed against any Acquired Assets, evidencing discharge, removal and
termination of all Liens to which the Acquired Assets are subject, which releases shall be
effective at or prior to the Closing.

     5.3 To be Delivered by Buyer. At the Closing, the Buyer shall deliver or cause to
be delivered to the Seller:

     (a) this Agreement, the Seller Non-Competition Agreement, the Transitional Services
Agreement, the Assignment and Assumption Agreement and Trademark Assignment, each duly
executed by the Buyer;

     (b) the Buyer shall pay to Seller the Purchase Price less the Lien Discharge
Payment Amount, if any, as indicated in Section 4.1(b);

     (c) the Buyer shall pay the Lien Discharge Payment Amount, if any, to the applicable
parties, as indicated in Section 4.1(c);

     (d) to the extent applicable, a valid exemption certificate relieving the Seller of the
obligation (in whole or in part) to collect sales Taxes with respect to the transactions
contemplated hereby;

     (e) copies of the resolutions of the Buyer, authorizing and approving this Agreement,
the other agreements contemplated hereby to which the Buyer is a party and the transactions
contemplated hereby or thereby; and

     (f) a certificate of an executive officer of the Buyer, to the effect that (i)
representations and warranties of the Buyer set forth in Article VII are true and
correct as of the Closing Date and (ii) the Buyer has performed or complied with all
agreements and covenants hereunder to be performed or complied with by the Buyer at or prior
to the Closing.

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ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF THE SELLER

     Except as set forth in the disclosure schedules delivered by the Seller to the Buyer at least
three (3) days prior to the Closing (as amended and supplemented prior to the Closing, the “Seller
Disclosure Schedules”), which shall identify each exception by reference to the specific section to
which such exception applies, the Seller hereby represents and warrants as set forth below.
Matters disclosed by Seller in any Seller Disclosure Schedules in reference to any particular
section may be incorporated by referenced to another Seller Disclosure Schedule by clear
cross-reference.

     6.1 Organization and Standing. The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of California. Schedule 6.1
contains a complete and correct list of jurisdictions in which the Seller is duly qualified to
do business in connection with the operation of the Business. The Seller is in good standing in
all jurisdictions in which the character of the properties owned or leased by it in connection
with the Business or in which the conduct of the Business requires it to be so qualified.

     6.2 Articles of Incorporation and Bylaws; Organizational Documents. The Seller has
heretofore furnished to the Buyer complete and correct copies of the applicable Articles of
Incorporation and Bylaws (the “Organizational Documents”), in each case as amended or restated,
which are in full force and effect on the date hereof. The Seller is not in violation of any of
the provisions of any of the Seller Organizational Documents.

     6.3 Authorization, Validity and Effect. Seller has the requisite corporate power
and authority to execute and deliver this Agreement and all agreements and documents
contemplated hereby to be executed and delivered by it, and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement and such other
agreements and documents and the consummation of the transactions contemplated herein and
therein, have been duly and validly authorized by all necessary corporate action on the part of
the Seller and no other corporate proceedings on the part of the Seller are necessary to
authorize this Agreement and such other agreements and documents or to consummate the
transactions contemplated hereby and thereby. This Agreement and other documents listed in
Section 5.2 hereof have been duly and validly executed and delivered by the Seller and,
assuming the due authorization, execution and delivery of this Agreement and other documents
listed in Section 5.2 (as applicable) by the other parties thereto, constitute the
legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance
with their respective terms, except as limited by the General Enforceability Exceptions.

     6.4 No Conflict; Required Filings and Consents.

     (a) The execution, delivery and performance of this Agreement and each of the
Transactional Documents by the Seller does not and will not (with notice, passage of time or
otherwise) (i) conflict with, or result in a violation or breach of any provisions of the
Organizational Documents, (ii) except as set forth on Schedule 6.4(a), constitute or
result in the violation or a breach of any term, condition or provision of, or constitute a

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default under, or give rise to any right of termination, cancellation or acceleration
with respect to, or result in the creation or imposition of a Lien upon any of the Acquired
Assets, pursuant to any note, bond, mortgage, indenture, license, agreement, lease or other
instrument or obligation to which it is a party or by which the Seller or the Acquired
Assets may be subject, (iii) subject to receipt of the requisite approvals referred to on
Schedule 6.4(a), violate any Order or Law, to the Seller’s Knowledge, applicable to
the Seller or the Acquired Assets, (iv) require Buyer to obtain any consent, approval or
action of, make any filing with or give any notice to, any third party as a result or under
the terms of any Acquired Asset, or (v) result in or give to any third party any additional
rights or entitlement to increased, additional, accelerated or guaranteed payments or
performance under any Acquired Asset.

     (b) Other than as set forth on Schedule 6.4(b), no Consent is required to be
obtained by the Seller for the consummation by the Seller of the transactions contemplated
by this Agreement.

     6.5 Financial Statements; Books of Account.

     (a) True and correct copies of the following financial statements have been delivered
to Buyer and are attached hereto as Schedule 6.5(a): (i) the unaudited balance sheet
and statements of income of the Business as of and for the fiscal year ended December 31,
2005 (“2005 Financial Statements”), and (ii) the unaudited balance sheet of the Business as
of March 31, 2006 (the “Balance Sheet” and such date of the Balance Sheet, the “Balance
Sheet Date”), and the related unaudited statement of income for the three- month period then
ended (the “Interim Financial Statements” and together with the 2005 Financial Statements,
the “Seller Financial Statements”). The Seller Financial Statements have been prepared by
management in accordance with GAAP applied on a consistent basis in accordance with the past
practices of Seller and fairly present, in all material respects, the financial position,
results of operation of the Business as of the date and for the period indicated, except for
customary adjustments of the normal recurring type which would not be material to the
Business in the aggregate and the absence of footnote disclosures. The Seller Financial
Statements were derived from the books and records of the Seller and are true and correct
and present fairly and accurately the financial condition and operating results of the
Seller relating to the Business in all material respects. There has been no change since
January 1, 2003 in the accounting methods, principles, practices and policies for
preparation of the financial statements of the Seller with respect to the Business,
including, without limitation, the accounting policies for establishing and maintaining
reserves. The Seller is not aware of any loss contingency that is required in accordance
with GAAP to be recorded or disclosed in the Seller Financial Statements, but has not be so
recorded or disclosed.

     (b) Except as set forth on Schedule 6.5(b), the books, records and accounts of
the Seller accurately and fairly reflect, in reasonable detail, the transactions and the
assets and liabilities of the Seller relating to the Business. The Seller maintains a
system of internal accounting control sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit preparation of

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financial statements in conformity with GAAP on a consistent basis in accordance with
the past practices of Seller, (iii) access to assets, properties, books, records and
accounts is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accounting for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect to any
differences.

     6.6 Taxes. Except as set forth on Schedule 6.6:

     (a) The Seller has duly and timely filed all federal, state, local and foreign Tax
Returns and other Tax reports (or a valid extension has been granted with respect thereto)
relating to the Business and/or the Acquired Assets that it was required to file and has
timely paid all Taxes relating to the Business and/or the Acquired Assets which have become
due and payable, whether or not so shown on any such return or report, the failure of which
to be filed or paid could adversely affect or result in the imposition of a Lien upon the
Acquired Assets or create any transferee or other liability upon Buyer, except such amounts
as are being contested diligently and in good faith and identified on Schedule
6.5(a);

     (b) all Tax Returns filed by the Seller reporting items relating to the Business are
true, complete and correct in all material respects and correctly and completely reflect Tax
liability and all other information reported thereon;

     (c) Since January 1, 2003, the Seller has completed and filed all declarations of
customs and supporting documentation, import manifests, commercial invoices and certificates
of origin in compliance with applicable Law, such documents correctly reflect the operation
of the Business and the Seller has timely paid all amounts which have became due and payable
as a result of the importation of goods relating to the Business;

     (d) There are no Liens for unpaid Taxes on the Acquired Assets;

     (e) The Acquired Assets are not subject to any joint venture, partnership or other
arrangement or contract that is treated as a partnership for federal, state, local or
foreign Tax purposes;

     (f) as of the date of this Agreement with respect to the Business, there is no Action
pending or, to the Seller’s Knowledge, threatened with respect to the Business in respect of
any Tax nor have the Seller received any notice of audit, notice of proposed adjustment,
notice of any deficiency or proposed deficiency from any Governmental Authority. Moreover,
to Seller’s Knowledge there are no facts on the basis of which any Governmental Authority
reasonably could assess deficiencies against the Buyer;

     (g) (i) the Seller has withheld and paid all Taxes required to have been withheld and
paid in connection with any amounts paid or owing to any employee, independent contractor,
creditor or other third party, and (ii) for all periods up to and including December 31,
2005, all Forms W-2 and 1099 required with respect thereto have been properly completed and
timely filed;

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     (h) To the Seller’s Knowledge, the Seller does not have nor has had, with respect to
the Business, a permanent establishment or other presence subjecting it to taxation in any
country other than country of its formation, as defined under any applicable Law, Tax treaty
or convention; and

     (i) except as stated on Schedule 6.6(i) and except for federal and state income
and payroll Tax, none of the payments made by Seller in connection with the Business is
subject to U.S. withholding tax and no U.S. or foreign Tax has been withheld from the
payments made to Seller in connection with the Business.

     6.7 Title.

     (a) At the Closing and immediately upon payment of the Lien Discharge Payment Amount,
if any, the Buyer will acquire good, valid and marketable title to all of the Acquired
Assets free and clear of all Liens; with understanding that “marketable” as used herein does
not imply that there is or will be a willing purchaser for any of the Acquired Assets. The
Acquired Assets, together with rights and interests to be afforded under the Transitional
Services Agreement, constitute all of the assets and properties used or held for use in the
Business as currently conducted.

     (b) The Seller is not a party and the Acquired Assets are not bound by any Contract
relating to or entered in connection with the Business or operation thereof, other than
Contracts set forth on Schedule 2.1(h), Schedule 2.2(b) and Schedule
2.2(c).

     6.8 Customer-Owned Property. Schedule 6.8 sets forth a complete and
correct list of all customer-owned tooling, customer-owned equipment, parts and other
customer-owned property in the possession, custody or control of the Seller (the “Customer-Owned
Property”). Except as set forth on Schedule 6.8, all of the Customer-Owned Property is
in good condition and repair. Except for the Customer-Owned Property, the Seller has no
obligation to any present or former customer of the Seller with respect to the Customer-Owned
Property.

     6.9 Gardena Facility.

     (a) There are no disputes with respect to the Gardena Facility and no event has
occurred or circumstances exists that, with the delivery of notice, the passage of time or
both, would reasonably likely interfere with the Buyer’s use of the Gardena Facility
pursuant to the Transitional Services Agreement.

     (b) The Gardena Facility includes access to the operating facilities used in the
Business without need to obtain any other access rights. To the Seller’s Knowledge, the
Gardena Facility is in an operating condition and state of repair satisfactory for the
conduct of the Business as presently conducted and has no structural deficiencies or
material latent defects affecting any of the improvements thereon; and

     (c) All water, oil, gas, electrical, steam, compressed air, telecommunications, sewer,
storm and waste water systems and other utility services or systems for Gardena

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Facility have been installed and are operational and sufficient for the operation of
the Business as presently conducted thereon.

     6.10 Compliance with Laws. Except as set forth on Schedule 6.10, the
Seller:

     (a) is in material compliance with all Laws and Orders applicable to the Business,
including (i) the employees conducting the Business, (ii) the Intellectual Property used by
the Business and (iii) import and export Laws applicable to the Business;

     (b) as of the date of this Agreement, has received no written notification or
communication from any Governmental Authority (i) asserting that the Seller is not in
compliance with any Law or (ii) threatening to revoke any material Permit owned or held by
the Seller;

     (c) has paid all monies and obtained all material Permits needed or required for the
operation of the Business, including the operation and use of Gardena Facility; and

     (d) has properly filed all material reports and other material documents required to be
filed with any federal, state, local or foreign government or subdivision or agency thereof
with respect to the Seller, the Acquired Assets and the Business.

     6.11 Permits. Schedule 6.11 contains a complete list, as of the date of
this Agreement, of all Permits issued to the Seller that are currently used by the Seller in
connection with the Business. To the Seller’s Knowledge, the Seller is in compliance in all
material respects with all such Permits, all of which Permits are in full force and effect. The
transactions contemplated by this Agreement do not require the Consent of the party issuing any
of the Permits (except for those Permits for which Consents are obtained prior to the Closing
Date), will not result in a breach of or default under such Permits, and no issuing party has
repudiated any such Permit. There is no Action pending or, to the Seller’s Knowledge,
threatened regarding impairment, suspension, limitation, revocation, termination or cancellation
of any of the Permits.

     6.12 Material Contracts. Set forth on Schedule 6.12 is a list of each of
the following Contracts relating to the Business and to which either the Seller is a party or by
which any of the Acquired Assets are bound (collectively, the “Material Contracts”):

     (a) Each Contract (or group of related Contracts) for the purchase or sale of raw
materials, supplies, or other personal property, or for the furnishing or receipt of
services and which Contract is not cancelable by the Seller upon thirty (30) days prior
written notice without payment of any penalty;

     (b) Each Contract for the purchase of raw materials where the quantity is in excess of
six-months’ requirements, determined based on present usage or contract requirements;

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     (c) Each Contract concerning non-competition in any business or in any geographical
area, including each contract or agreement containing exclusivity provisions restricting the
geographical area in which the Seller may solicit any customer or client;

     (d) Each management or consulting Contract;

     (e) Each Contract under which the Seller has advanced or loaned any amount to any of
its employees engaged in the Business;

     (f) Each Contract under which the consequences of a default or termination could have a
Material Adverse Effect;

     (g) Each Contract (including any settlement, conciliation or similar agreement), the
performance of which will involve payment after the Closing Date of consideration in excess
of fifty thousand dollars and no/cents ($50,000.00);

     (h) Each Contract with a labor union or guild (including any collective bargaining
agreement);

     (i) Each sales representative agreement and distributor agreement which does not
reflect the actual course of conduct of the parties thereto in respect of the key terms such
as payment terms, description of product or territory; and

     (j) Each Contract (or group of related Contracts) under which the Seller has created,
incurred, assumed, or guaranteed any obligation or under which the Seller has imposed a Lien
on any of its assets, tangible or intangible.

The Seller has delivered to Buyer a correct and complete copy of each written Material Contract (as
amended to date) and a written summary setting forth the terms and conditions of each oral Material
Contract. With respect to each Material Contract: (i) the agreement is in full force and effect
and is a legal, valid and binding agreement of the Seller, (ii) the agreement will continue to be
legal, valid, binding, enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby (including the assignments and assumptions
referred to herein), and (iii) no party is in breach or default, and no event has occurred that
with notice or lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the Material Contract; and (iv) no party has repudiated any
provision of the Material Contract.

     6.13 Legal Proceedings. As of the date of this Agreement, except as set forth on
Schedule 6.13, there are no Actions pending, nor, to the Seller’s Knowledge, threatened,
against the Seller and relating to the Business, nor, to the Seller’s Knowledge, is there any
basis for any such Action. As of the date of this Agreement, the Seller is not subject to any
continuing Order relating to the Business.

     6.14 Product Warranty; Product Defects; Product Liability.

     (a) To Seller’s Knowledge, each product manufactured, sold, leased, or delivered by the
Seller in connection with the Business during the five years prior to the

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date hereof has been in conformity with all applicable contractual commitments and all
express and implied warranties, including, without limitation, any implied warranty of
merchantability, fitness for particular purpose and non-infringement, and the Seller has no
liability (and there is no basis for any present or future Action against the Seller giving
rise to any liability) for replacement or repair thereof or other damages in connection
therewith.

     (b) To the Seller’s Knowledge, none of the Seller’s products or materials supplied to
the third-parties in connection with the Business contains any defects (patent or latent) or
may create any dangerous condition through intended use.

     (c) Seller has no liability (and there is no basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against any of
them giving rise to any liability) arising out of any injury to individuals or property as a
result of the ownership, possession, or use of any product manufactured, sold, leased, or
delivered by the Seller in connection with the Business.

     (d) Since December 31, 2004, the amount of warranty costs incurred by the Seller in
respect of the Business was not material to the Business.

     (e) Attached hereto as Schedule 6.14(e) is a general form of written product
warranty provided by the Seller pursuant to which any of its products or services relating
to the Business have been sold or provided from time to time since January 1, 2003 (a
“Warranty”). The Seller has not deviated in any material respect from the terms of its
Warranty in connection with the Business.

     6.15 Intellectual Property.

     (a) Schedule 6.15(a) contains a list and description of all registered
Copyrights, Patent Rights, Trademarks and Internet domain names owned by, licensed to or
used by the Business, identifies each license, sublicense, agreement, or other permission
that the Seller has granted to any third party with respect to any of its Intellectual
Property used by or in the Business (together with any exceptions). Schedule
6.15(a) also identifies each material unregistered trademark, service mark, trade name,
corporate name or Internet domain name and each material unregistered copyright used by the
Seller in connection with the Business.

     (b) Schedule 6.15(b) contains a list and description of all Software owned by,
licensed to or used in the operation of the Business.

     (c) each item of Intellectual Property required to be identified in Schedule
6.15(a) and Schedule 6.15(b) is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge and the Seller has not agreed to indemnify any
Person for or against any interference, infringement, misappropriation, or other conflict
with respect to the item.

     (d) To Seller’s Knowledge, except as disclosed on Schedule 6.15(d), the Seller
has all rights, title and interest in and to all Intellectual Property used in connection

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with, or necessary to, the conduct of the Business sufficient to permit its use without
payment or the incurrence of any obligation to any Person. The Seller has not granted any
license or other right that does or that will, subsequent to the Closing Date, permit or
enable any Person other than Buyer to use any of the Purchased Intellectual Property; and

     (e) as of the date of this Agreement, there are no Actions pending or, to the Seller’s
Knowledge, threatened against the Seller asserting that any of the Intellectual Property
used in Business or operation thereof infringes or violated the rights of any Person (and,
to the Seller’s Knowledge, there is no basis for any such claim of conflict).

     6.16 Insurance. The Seller maintains with Chubb Group of Insurance Companies
general liability insurance and property insurance on all its material property used in the
Business in at least such amounts and against at least such risks (but including in any event
public liability and, if required under any Contract, product liability) as are usually insured
against in the same general geographic area by companies engaged in the same or a similar
business.

     6.17 Personnel.

     (a) Except as set forth on Schedule 6.17(a) (along with all documents setting
out or otherwise related to such collective bargaining agreements), the Seller is not a
party to or subject to any collective bargaining agreements and there are no collective
bargaining agreements, or written or oral agreements relating to the terms and conditions of
employment or termination of employment, covering any employees, consultants or agents of
the Seller. Except as set forth on Schedule 6.17(a), as of the date hereof, to the
Seller’s Knowledge, (i) no labor union or other collective bargaining unit represents or
claims to represent any of the Seller’s employees, (ii) there is no union campaign being
conducted to solicit cards from employees to authorize a union to request a National Labor
Relations Board certifications election with respect to the Seller’s employees, (iii) the
Seller is not engaged in any unfair labor practice or other unlawful employment practice
with respect to the Business, and (iv) there are no unfair labor practice charges or other
employee-related complaints, grievances or arbitrations against the Seller pending before
the National Labor Relations Board, the Equal Employment Opportunity Commission, the
Occupational Safety and Health Administration, the Department of Labor, any arbitration
tribunal or other federal , state, local or other Governmental Authority by or concerning
the Seller’s employees.

     (b) The Seller is in material compliance with all Labor Laws. The Seller is not liable
for any arrears or wages, benefits, taxes, damages or penalties for failing to comply with
any Labor Laws.

     (c) Schedule 6.17(c) sets forth the names of all present employees of the
Business (except for Ta-Yieh Liu, who is an independent contractor), their dates of hire,
their positions and their total annual compensation (split between the base and incentive
compensation).

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     (d) There are no Liens against the Acquired Assets under Section 412(n) of the Code or
Section 302(f) or 4068 of ERISA.

     6.18 Environmental Matters. Except as set forth on Schedule 6.18:

     (a) all activities of the Business, including repairs or construction of any
improvements, manufacturing, processing and/or handling of any materials, and discharges to
the air, soil, soil vapors, surface water or groundwater, are in material compliance with
all Environmental Laws;

     (b) to the Seller’s Knowledge, the Seller has not generated, manufactured, refined,
transported, treated, stored, handled, disposed, transferred, produced or processed any
Hazardous Materials in operation of the Business, except in material compliance with all
applicable Environmental Laws, and, as of the date of this Agreement, to the Seller’s
Knowledge, there has been no Release or Threat of Release of any Hazardous Material by the
Seller at or in the vicinity of the Gardena Facility that requires reporting, investigation,
assessment, cleanup, remediation or any other type of response action by the Seller pursuant
to any Environmental Law;

     (c) the Seller has not been subject to or, to the Seller’s Knowledge, threatened with
any governmental or citizen enforcement action with respect to any Environmental Law in
connection with the operation of the Business;

     (d) as of the date of this Agreement, there are effective all Permits required under
any Environmental Law that are necessary for the Seller’s activities and operations at
Gardena Facility;

     (e) neither the Seller nor, to the Seller’s Knowledge, its predecessors or Affiliates,
has designed, manufactured, sold, marketed, installed, or distributed products or other
items containing asbestos, silica or lead-based paint in connection with the Business and
none of such entities is or will become subject to any asbestos, silicosis, or lead-based
paint liabilities;

     (f) to the Seller’s Knowledge, there are no above ground or underground storage tanks
at the Gardena Facility; and

     (g) the Seller has no indemnification obligation regarding any Hazardous Materials to
any party that will impose any obligation, loss, cost or expense on Buyer.

     6.19 Conduct of Business in Ordinary Course. Except for the transactions
contemplated hereby or as set forth on Schedule 6.19, since December 31, 2005 (i) the
Seller has conducted the Business in the Ordinary Course of Business, (ii) there has not been,
and to the Seller’s Knowledge, there has not been threatened any change in the financial
condition, business, operations, prospects or affairs of the Acquired Assets, the Assumed
Liabilities, or the Business which has had, or with the passage of time is likely to have, a
Material Adverse Effect, and (iii) the Seller has not taken any action that if taken after the
date hereof would cause a default of its representations and warranties set forth in this
Article VI. Since December 31, 2005, there has not been, in each case as it relates to
the Business:

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     (a) except for damage caused by fire on January 9, 2006, any material damage,
destruction or loss (whether or not covered by insurance) with respect to any material asset
of the Business;

     (b) any change by the Seller in its accounting methods, principles or practices, or any
changes in depreciation or amortization policies or rates adopted by it;

     (c) any termination or failure to renew, or any threat (that was not subsequently
withdrawn) to terminate or fail to renew, any Material Contract;

     (d) any material change to any of the operations or policies of the Business,
including, without limitation, advertising, investment, marketing, pricing, purchasing,
production, personnel, sales, returns, budget or other product acquisition policies;

     (e) except for inventory, tooling or equipment in the Ordinary Course of Business, any
sale, abandonment, transfer, lease, license or any other disposition of any properties or
assets of the Seller or acquisition of any capital stock or business of any other person (or
any reaching of an agreement, arrangement or understanding to do the same);

     (f) (i) any incurrence of indebtedness or assumption, guarantee or other responsibility
for the debts of any other Person (other than check-clearing endorsements made in the
Ordinary Course of Business), (ii) any loans, advances or capital contributions to or
investments in any other Person (other than advances against commissions and advances of
expenses to sales personnel in the normal course of business), or (iii) any grant of any
security interest or creation or modification of any Liens on any of the Acquired Asset; and

     (g) any modification, amendment, termination, transfer or waiver of any material right
under any Contract of the type required to be set forth on any Seller Disclosure Schedule,
or any agreement, arrangement or other understanding to do any of the foregoing, or any
permitted lapse of any rights to the use of any Purchased Intellectual Property or any sale,
assignment, license, transfer or other disposition of any rights thereto, in each case
except in the Ordinary Course of Business.

     6.20 Customers and Suppliers. In each case with respect to the Business:

     (a) Schedule 6.20(a) sets forth each of the Seller’s ten (10) largest customers
as a percentage of the Seller’s revenue along with actual revenue generated by each customer
for the year ended December 31, 2005 (“Material Customers”). None of the Material
Customers, to the Seller’s Knowledge, has informed the Seller that they will or intend to
materially reduce their overall purchases from the Seller over the next 24 month period; and

     (b) Schedule 6.20(b) sets forth each of the Seller’s ten (10) largest suppliers
as a percentage of the Seller’s purchases along with the actual amount of purchases from
each supplier for the year ended December 31, 2005 (“Material Suppliers”). Seller has

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not received any written statement from any Material Supplier that such supplier will
not continue to be supplier of the Business after the Closing Date.

     6.21 No Brokers. Except for Imperial Capital, LLC, no broker, finder or similar
agent has been employed by or on behalf of the Seller, and no Person with which the Seller has
had any dealings or communications of any kind is entitled to any brokerage commission, finder’s
fee or any similar compensation in connection with this Agreement or the transactions
contemplated hereby. The Seller hereby agrees to indemnify and hold harmless Buyer, the
directors, officers, and employees of Buyer from and against and in respect of all costs,
expenses and any liability related to any broker, finder or similar agent employed or alleged to
be employed by or on behalf of the Seller.

     6.22 Bulk Sales. Neither the transfer of the Acquired Assets nor Buyer’s
possession and use thereof from and after the Closing Date because of such transfer, will be
subject to any Law pertaining to bulk sales or transfers or imposing liability upon Buyer for
appraisal or liability owing to the Seller.

     6.23 Affiliates; Sufficiency of the Acquired Assets. Neither the Seller nor any
Affiliate of the Seller has any financial interest in any supplier, advertiser or customer of
the Seller with respect to the Acquired Assets or the Business. No Affiliate of the Seller has
an interest in any of the Acquired Assets or any property, tangible or intangible, used in the
operation of the Business. The Seller owns or leases all machinery, equipment, and other
tangible assets necessary for the conduct of its Business as presently conducted and as
presently proposed to be conducted and the Acquired Assets constitute all of the assets,
properties, rights and interests necessary to conduct the Business in substantially the same
manner as presently conducted by the Seller and as presently proposed to be conducted.

     6.24 Accounts Receivable. The Accounts Receivable (i) have been accrued from bona
fide sales transactions in the Ordinary Course of Business, (ii) are legal, valid and binding
obligations of the respective debtors, net of any allowance for doubtful account reflected on
the balance sheets included in the Seller Financial Statements (iii) are not subject to any
valid set-off or counterclaim and (iv) except as set forth on Schedule 6.24, do not
represent obligations for goods sold on consignment, on approval or on a sale-or-return basis or
subject to any other repurchase or return arrangement. Accounts Receivable reflect sales in
accordance with GAAP applied on a consistent basis in accordance with past procedures of Seller,
properly taking into account terms of the Contracts pursuant to which such sales are made.

     6.25 PP&E. Each item of the PP&E is in operable condition as presently used in the
Business.

     6.26 Inventory. All of the Inventory shown on the balance sheets included in the
Seller Financial Statements, exists, is owned by the Seller, is stated at the lower of cost or
net realizable value.

     6.27 Power of Attorney. There are no outstanding powers of attorney executed on
behalf of the Seller with respect to the Business.

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     6.28 Guaranties. The Seller is not a guarantor or is not otherwise liable for any
liability (including indebtedness) of any other Person with respect to the Business.

     6.29 Disclosure. No provision of this Agreement relating to the Seller, the
Acquired Assets or the Business or any other document, schedule, exhibit or other information
furnished by the Seller to Buyer in connection with the execution (including, without
limitation, information set forth on schedules to Article II and Article III of
this Agreement delivered prior to, at, or after the Closing pursuant to Section 8.8),
delivery and performance of this Agreement, or the consummation of the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact or omits or will omit
to state a material fact required to be stated in order to make the statement, in light of the
circumstances in which it is made, not misleading.

     6.30 Foreign Corrupt Practices Act and Export Restrictions. Seller is in material
compliance with the Foreign Corrupt Practices Act of 1977, as amended, in respect of its
operation of the Business. The Seller does not provide or make available any of its products or
services in Cuba, Iran, Iraq, Libya, North Korea, Rwanda, Sudan, Syria or any other country
subject to U.S. trade restrictions, embargo or executive order or to any Person on the U.S.
Treasury Department’s list of Specially Designated Nationals and Blocked Persons or the U.S.
Commerce Department’s Table of Denial Orders.

     6.31 No Undisclosed Liabilities. The Seller does not have any liability or
obligations of any nature, actual, absolute, accrued, contingent or otherwise in respect of the
Business or the Acquired Assets, other than the following:

     (a) Liabilities provided for or disclosed in the Interim Financial Statements;

     (b) Trade accounts payable and other expense accruals arising in the Ordinary Course of
Business since the date of the Interim Financial Statements and prior to the Closing Date;
and

     (c) Liabilities set forth on the Seller Disclosure Schedules.

     6.32 2005 Annual Employee Incentive Plan. All amounts owed by the Seller in
respect of or related to its 2005 Annual Employee Incentive Plan have been paid in full by the
Seller prior to the Closing Date.

ARTICLE VII

REPRESENTATIONS AND WARRANTIES OF BUYER

     Buyer represents and warrants to the Seller as follows:

     7.1 Organization and Standing. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of California.

     7.2 Authorization, Validity and Effect. The Buyer has the requisite corporate
power and authority to execute and deliver this Agreement and all agreements and documents
contemplated hereby to be executed and delivered by it, and to consummate the

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transactions contemplated hereby and thereby. The execution and delivery of this Agreement
and such other agreements and documents and the consummation of the transactions contemplated
herein and therein, have been duly and validly authorized by all necessary corporate action on
the part of Buyer. This Agreement has been duly and validly executed and delivered by Buyer and
constitutes the legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, except as limited by the General Enforceability Exceptions.

     7.3 No Conflict; Required Filings and Consents.

     (a) Neither the execution and delivery of this Agreement by Buyer, nor the consummation
by Buyer of the transactions contemplated herein, nor compliance by Buyer with any of the
provisions hereof, will (i) conflict with or result in a breach of any provisions of the
certificate of incorporation or by-laws or equivalent organizational documents of Buyer,
(ii) have a Material Adverse Effect on the Buyer, or (iii) subject to receipt of the
requisite approvals referred to on Schedule 7.3(b), violate any Order or Law
applicable to Buyer or any of its properties or assets.

     (b) Other than as set forth in Schedule 7.3(b), no Consent is necessary for the
consummation by Buyer of the transactions contemplated in this Agreement.

     7.4 Financing. Buyer has sufficient financial resources presently available to
deliver the Purchase Price and to consummate the transactions contemplated by this Agreement.

     7.5 No Brokers. No broker, finder or similar agent has been employed by or on
behalf of Buyer, and no Person with which Buyer has had any dealings or communications of any
kind is entitled to any brokerage commission, finder’s fee or any similar compensation in
connection with this Agreement or the transactions contemplated hereby. Buyer hereby agrees to
indemnify and hold harmless the Seller and the directors, officers, and employees of the Seller
from and against and in respect of all costs, expenses and any liability related to any broker,
finder or similar agent employed or alleged to be employed by or on behalf of Buyer.

     7.6 Litigation. There are no legal proceedings pending or, to the actual knowledge
of Buyer’s general counsel, threatened against, relating to or binding upon Buyer that could
prohibit Buyer from entering into this Agreement or consummate the transactions contemplated
hereby.

     7.7 No Implied Warranties. Buyer acknowledges that it is the express intention and
agreement of the parties that the sale of the Acquired Assets and the assumption of the Assumed
Liabilities hereunder shall be without representation or warranty of any kind (express or
implied), except as set forth in this Agreement, the Transactional Documents, and exhibits and
schedules thereto, including the Seller Disclosure Schedules.

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ARTICLE VIII

COVENANTS AND AGREEMENTS

     8.1 Notice and Consents. Seller will give any notices to third parties, and the
Seller will use its best efforts to obtain any third-party consents required to effectuate
transfer of the Acquired Assets to the Buyer. The Seller will give any notices to, make any
filings with, and use its best reasonable efforts to obtain any authorizations, consents, and
approvals of Governmental Authorities required in connection with the transactions contemplated
by this Agreement.

     8.2 Confidentiality.

     (a) Any information provided to or obtained by Buyer in connection with Buyer’s due
diligence of the Business and the Acquired Assets is subject to the Confidentiality
Agreement, dated October 17, 2005, between the Seller and the Buyer (the “Confidentiality
Agreement”), and must be held by Buyer in accordance with and be subject to the terms of the
Confidentiality Agreement.

     (b) Buyer agrees to be bound by and comply with the provisions set forth in the
Confidentiality Agreement as if such provisions were set forth herein, and such provisions
are hereby incorporated herein by reference.

     8.3  Transfer Taxes. All sales, use, stamp, transfer, recordation and documentary
Taxes and all conveyance fees, recording charges and other fees and charges (collectively,
“Transfer Taxes”) which may be payable in connection with the transactions contemplated by this
Agreement, whether imposed on the Seller or the Buyer, shall be paid by the Buyer. The party
responsible under applicable Law for filing any Tax Return or other documentation relating to
Transfer Taxes shall file such Tax Return or other documentation at its own expense, and the
non-filing party shall be afforded a reasonable opportunity to review such Tax Returns and
documentation prior to the filing thereof.

     8.4 Publicity. Except as may be required to comply with the requirements of any
applicable Law, no party will issue any press release or other public announcement on or after
the Closing Date relating to the subject matter of this Agreement or the transactions
contemplated hereby without the prior written approval (which approval will not be unreasonably
withheld or delayed) of the other parties hereto.

     8.5 Records; Retention Policy and Access. With respect to the financial books and
records and minute books of the Seller relating to Business or conduct thereof on or prior to
the Closing Date: (i) for a period of five (5) years after the Closing Date, Buyer and the
Seller shall not cause or permit the destruction or disposal of the financial books and records
and minutes books relating to the Business without first offering to surrender them to the other
party, and (ii) where there is legitimate purpose, including, without limitation, an audit of
the Seller or Buyer by the IRS or any other Governmental Authority, Buyer shall allow the Seller
and their respective representatives and the Seller shall allow Buyer and Buyer’s
representatives access to such books and records during regular business hours.

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     8.6 Employee Matters.

     (a) Immediately prior to the Closing, the Buyer shall be permitted to make offers of
temporary employment to all employees of the Seller engaged in the Business listed on
Schedule 6.17(c) for a period of up to ninety (90) days from the Closing Date on the
terms specified in the Fixed Term Employment Offers; provided that such Fixed Term
Temporary Employment Offers shall provide for (i) a retention bonus equal to two (2) weeks
base pay (before applicable deductions) to such employees who remain with the Buyer during
the entire ninety (90) day period or such shorter period as they are needed by the Buyer and
(ii) a wage supplement determined by the Buyer toward the cost of the COBRA coverage
provided by the Seller for the first ninety-day period of such coverage or the period during
which the employee is employed by the Buyer, whichever is shorter; provided
further, however, that nothing in this Agreement shall obligate Buyer to employ any
such employee for any period of time or continue any term or condition of employment or any
employment benefits or policies for any period of time.

     (b) The Seller shall fulfill all obligations, if any, it has to the employees hired by
the Buyer pursuant to Section 8.6(a) under the WARN Act, the CA-WARN Act and COBRA.
Parties hereto acknowledge and agree that Buyer makes no representations or warranties with
regard to eligibility for or participation in any of Buyer’s Employee Plans with respect to
any individual who is or may be hired by Buyer pursuant to the At-Will Employment Offer.

     (c) All employees of the Seller offered employment by the Buyer shall be permitted to
disclose to the Buyer all information in their possession or otherwise known by them which
is directly related to the Business and not related to confidential information of the
Seller relating solely to the Excluded Business.

     8.7 Disposition of Certain Acquired Assets. The Buyer shall have the right to
leave behind at the Gardena Facility any of the tangible assets of the Business upon completion
of Buyer’s use of such facility (such property, the
“Unwanted Assets”). The Buyer shall deliver
to the Seller at least five (5) days prior to Buyer’s final departure from the Gardena Facility
an amended Schedule 2.2(a), which shall list, in addition to the items listed thereon on
the Closing Date, each Unwanted Asset. Upon delivery of the amended Schedule 2.2(a),
such schedule shall be binding upon parties hereto and shall replace Schedule 2.2(a)
attached hereto at the Closing. The designation of the Unwanted Assets shall have no effect on
the Purchase Price or any adjustments thereto.

     8.8 Update of Section 2.1 and Section 3.1 Schedules. Within five (5) Business Days
after the determination of the Final Balance Sheet becomes binding on the parties hereto
pursuant to Section 4.4(e), the Seller agrees to deliver to the Buyer the Schedule
2.1(a) through 2.1(e) and the Schedule 3.1(a) through 3.1(h), each
amended to reflect the information set forth on the Final Balance Sheet. The amended schedules
delivered pursuant to this Section 8.8 shall be attached hereto and shall be in addition
to and shall not replace the corresponding schedules attached hereto at the Closing.

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     8.9 J.W. Miller Company. The Seller shall change the name of its subsidiary, J.W.
Miller Company, a California corporation, to a name that does not use “J.W. Miller” or any
variation thereof within 14 days of the Closing.

ARTICLE IX

CONDITIONS TO CLOSING

     9.1 Conditions to Obligations of the Parties. The respective obligations of the
Seller and Buyer to consummate the transactions contemplated by this Agreement are subject to
the satisfaction or waiver (if permitted by applicable Law) at or prior to the Closing of the
following condition:

     (a) None of the parties hereto will be subject to any Order of a court of competent
jurisdiction that prohibits the consummation of the transactions contemplated by this
Agreement. In the event any such Order has been issued, each party shall use its reasonable
best efforts to have any such Order overturned or lifted.

     9.2 Conditions to Obligations of the Seller. The obligations of the Seller to
consummate the transactions contemplated by this Agreement are subject to the satisfaction or
waiver (if permitted by applicable Law) at or prior to the Closing of each of the following
additional conditions, none of which shall be deemed waived by Seller unless so waived in
writing:

     (a) The representations and warranties of Buyer set forth in this Agreement must be
true and correct in all respects as of the Closing Date as though made on and as of the
Closing Date (except to the extent expressly made as of an earlier date, in which case as of
such date);

     (b) Buyer must have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date; and

     (c) Buyer must have delivered to the Seller the items required by Section 5.3
of this Agreement.

     9.3 Conditions to Obligations of Buyer. The obligations of Buyer to consummate the
transactions contemplated by this Agreement are subject to the satisfaction or waiver (if
permitted by applicable Law) at or prior to the Closing of each of the following conditions,
none of which shall be deemed waived by Buyer unless so waived in writing:

     (a) The representations and warranties of the Seller set forth in this Agreement must
be true and correct in all respects at and as of the Closing Date as though made on and as
of the Closing Date (except to the extent expressly made as of an earlier date, in which
case as of such date);

     (b) The Seller must have performed and complied with all of its covenants hereunder in
all respects through the Closing;

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     (c) The Seller must have delivered or caused to be delivered to Buyer the items
required by Section 5.2 of this Agreement;

     (d) No action, suit, or proceeding shall be pending or threatened before any court or
quasi-judicial or administrative agency of any Governmental Authority wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (i) prevent consummation of any
of the transactions contemplated by this Agreement, (ii) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation, or (iii) adversely
affect the right of Buyer to own the Acquired Assets or operate the Business;

     (e) The Seller shall have procured all of the third-party Consents identified on
Schedule 6.4(b);

     (f) since December 31, 2005, there shall not have occurred any change in the business,
operations, prospects or condition (financial or otherwise) of the Seller with respect to
the Business or the Acquired Assets which could reasonably be expected to result in a
Material Adverse Effect; and

     (g) No damage or destruction or other change has occurred with respect to Gardena
Facility or any portion thereof that, individually or in the aggregate, would materially
impair the use or occupancy of such Gardena Facility or the operation of Business as
presently conducted thereat.

ARTICLE X

REMEDIES

     10.1 Survival. The representations, warranties, covenants and agreements of the
Seller and the Buyer contained in this Agreement (including the schedules and exhibits attached
hereto and the certificates delivered pursuant hereto at the Closing or after the Closing
pursuant to Section 8.8) will survive the Closing Date but only to the extent specified
below:

     (a) all covenants and agreements (including without limitation Seller’s indemnification
obligations respecting Retained Liabilities, Environmental Laws and Hazardous Materials)
contained in this Agreement (including the schedules and exhibits attached hereto and the
certificates delivered pursuant hereto) that contemplate performance thereof following the
Closing Date will survive the Closing Date until performed.

     (b) the representations and warranties (including any indemnification rights arising
solely from a misrepresentation or breach of warranty with respect thereto) contained in
this Agreement (including the schedules and exhibits attached hereto and the certificates
delivered pursuant hereto) will survive the Closing Date until the eighteenth (18th) month
anniversary of the Closing Date, at which point such representations and warranties and any
claim for indemnification on account thereof will terminate, except for (i) Claims
made prior to or pending as of the eighteenth (18th) month anniversary of the
Closing Date, (ii) the representations and warranties relating to the Intellectual

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Property shall expire on the second (2nd) anniversary of the Closing Date; (iii)
representations and warranties relating to product warranty, product defects and/or product
liability shall expire on the third (3rd) anniversary of the Closing Date, (iv) the
representations and warranties relating to the Title to Acquired Assets shall expire on the
second (2nd) anniversary of the Closing Date, (v) the representations and warranties of the
Seller relating to the Inventory shall expire on the third (3rd) anniversary of the Closing
Date, (vi) the representations and warranties of the Seller relating to Hazardous Materials,
Environmental Laws or Environmental Condition shall survive until the fourth (4th)
anniversary of the Closing Date, and (vii) representations and warranties relating to Taxes
shall expire ninety (90) days after the expiration of the applicable statute of limitations.

     10.2 Indemnification by Buyer. Buyer will indemnify and hold harmless the Seller
and its respective successors and permitted assigns, and the officers, employees, directors,
managers, members, partners, and stockholders of Seller and consultants, agents and
representatives of Seller (collectively, the “Seller Indemnitees”) from and against, and will
pay to the Seller Indemnitees the amount of, any and all out-of-pocket losses, liabilities,
claims, damages, penalties, fines, judgments, awards, settlements, taxes, costs, fees, expenses
(including, but not limited to, reasonable investigation fees) and disbursements (collectively,
“Losses”) actually incurred by any of the Seller Indemnitees following the Closing Date based
upon (i) any breach of or inaccuracy in the representations and warranties of the Buyer
contained in this Agreement (including the schedules and exhibits attached hereto and the
certificates delivered pursuant hereto) or in any of the Transactional Documents delivered at
the Closing by the Buyer pursuant hereto; (ii) any breach of the covenants or agreements of the
Buyer contained in this Agreement (including the schedules and exhibits attached hereto and the
certificates delivered pursuant hereto); (iii) the failure of the Buyer to pay, perform or
discharge when due the Assumed Liabilities; (iv) any imposition, whether or not by a third party
(including any business broker or finder), upon Seller of any Assumed Liabilities; and (v) any
and all costs and expenses (including reasonable and documented legal and accounting fees)
related to any of the foregoing.

     10.3 Indemnification by the Seller. The Seller will indemnify and hold harmless
Buyer and its respective successors and permitted assigns, and the officers, employees,
directors, managers, members, partners and stockholders of Buyer and its heirs and personal
representatives, consultants, agents or representatives of Buyer (collectively, the “Buyer
Indemnitees” and together with Seller Indemnitees, the “Indemnitees”) from and against, and will
pay to the Buyer Indemnitees the amount of, any and all out-of-pocket Losses actually incurred
by any of the Buyer Indemnitees following the Closing Date based upon (i) any breach of or
inaccuracy in the representations and warranties of the Seller contained in this Agreement
(including the schedules and exhibits attached hereto and the certificates delivered pursuant
hereto) or in any of the Transactional Documents delivered at the Closing by the Seller pursuant
hereto; (ii) any breach of the covenants or agreements of the Seller contained in this Agreement
(including the schedules and exhibits attached hereto and the certificates delivered pursuant
hereto); (iii) the failure of the Seller to pay, perform and discharge when due the Retained
Liabilities; (iv) any imposition, whether or not by a third party, upon Buyer of any Retained
Liabilities, and (v) any and all costs and expenses

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(including reasonable and documented legal and accounting fees) related to any of the
foregoing.

     10.4 Additional Remedy. The foregoing indemnification provisions are in addition
to, and not in derogation of, any statutory, equitable, or common law remedy (including without
limitation any such remedy arising under Environmental Law) that any party may have against each
other in connection with the transactions contemplated under this Agreement. Each party hereto
agrees that it will not seek punitive damages as to any mater under, relating to or arising out
of the transactions contemplated by this Agreement or any other agreement executed in connection
herewith.

     10.5 Indemnification Payments. The Seller and Buyer hereby each agrees to pay the
amount of established Loss within fifteen (15) days after the establishment thereof, in cash by
the Seller and the Buyer, as the case may be. Notwithstanding anything herein to the contrary,
the right of the Indemnitees to indemnification is limited as follows:

     (a) The Indemnitees will be entitled to indemnification pursuant to this Article
X to the extent (but only to the extent) that the aggregate amount of all Losses
(whether arising out of a single incident, occurrence or claim or more than one incident,
occurrence or claim) suffered by the Indemnitees exceeds eighty five thousand dollars and
no/cents ($85,000.00) (the “Indemnification Threshold”), in which event the Indemnitees
seeking indemnification hereunder may recover only the amount of Loss in excess of the
Indemnification Threshold. The Indemnification Threshold shall not apply to the
indemnification sought in respect of the Retained Liabilities, Assumed Liabilities and
Losses resulting from fraud.

     (b) The aggregate amount of liability for indemnification shall not exceed, in the case
of either the Seller’s liability or the Buyer’s liability, one million three hundred
eighty-seven thousand five hundred dollars and no/cents ($1,387,500.00), provided,
however, that there shall be no cap on the liability of the parties with respect to the
Retained Liabilities, Assumed Liabilities and Losses resulting from fraud.

     (c) The Indemnitees will not be entitled to indemnification pursuant to this
Article X for Losses to the extent that any Indemnitee has been compensated therefor
pursuant to Section 4.4.

     (d) Claims for indemnification pursuant to this Section 10.5 resulting from
breaches of representations and warranties may only be asserted during the period of
survival (if any) of such representations and warranties under Section 10.1.

     (e) No claim for indemnification shall be made with respect to any matter to the extent
that insurance proceeds from third-party insurer have been actually collected with respect
to that matter by any of the Indemnitees or any of their Affiliates. In the event the
indemnitor has paid indemnification for any loss which the Indemnitee or any of its
Affiliates actually receives any insurance proceeds from the third-party insurer with
respect thereto, the Indemnitee shall promptly pay the amount of such insurance proceeds
to the indemnitor at the time such proceeds are received up to the amount of the loss for

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which the indemnitor has paid to the Indemnitee. The parties hereto acknowledge and
agree that the indemnitor is required to pay to the Indemnitee the amount of loss that is
not reimbursed by the insurance company due to applicable deductible and that the Indemnitee
is not required to pay to the indemnitor the amount of insurance proceeds the Indemnitee
could have received were it not for applicable deductible.

     10.6 Procedures.

     (a) Notice of Losses. As soon as reasonably practicable after a Seller
Indemnitee or a Buyer Indemnitee, as applicable, has actual knowledge of any claim that it
has under this Article X that may result in a Loss (a “Claim”), the Seller or the
Buyer, as applicable, shall give written notice thereof (a “Claims Notice”) to the other
party. A Claims Notice must describe the Claim in reasonable detail, and indicate the
amount (estimated, as necessary and to the extent feasible) of the Loss that has been or may
be suffered by the applicable Indemnitee. No delay in or failure to give a Claims Notice by
the Seller or the Buyer, as applicable, pursuant to this Section 10.6(a) will
adversely affect any of the other rights or remedies that the Seller or Buyer, as
applicable, has under this Agreement, or alter or relieve Buyer or the Seller, as
applicable, of its obligation to indemnify the applicable Indemnitee except to the extent
that they are materially prejudiced thereby. The Buyer or the Seller, as applicable, shall
respond to the Claims Notice (a “Claim
Response”) within thirty (30) days (the “Response
Period”) after the date that the Claims Notice is sent by the other party. Any Claim
Response must specify whether or not Buyer or the Seller, as applicable, disputes the Claim
described in the Claims Notice. If Buyer or the Seller, as applicable, fails to give a
Claim Response within the Response Period, they will be deemed not to dispute the Claim
described in the related Claims Notice. If Buyer or the Seller, as applicable, elects not
to dispute a Claim described in a Claims Notice, whether by failing to give a timely Claim
Response or otherwise, then the amount of Losses alleged in such Claims Notice will be
conclusively deemed to be an obligation of the party against whom they are asserted, and
such party shall pay in cash to the other within fifteen (15) days after the last day of the
applicable Response Period the amount specified in the Claims Notice. If the Buyer or the
Seller, as applicable, delivers a Claim Response within the Response Period indicating that
it disputes one or more of the matters identified in the Claims Notice, the Buyer and the
Seller shall promptly meet and use their reasonable efforts to settle the dispute. If Buyer
and the Seller are unable to reach agreement within thirty (30) days after the conclusion of
the Response Period, then the Claim shall be settled by arbitration to be held in Orange
County, California in accordance with the Commercial Rules of the American Arbitration
Association then existing, including without limitation rules permitting discovery and the
taking of depositions. The determination of the arbitrator shall be delivered in writing to
the Buyer and the Seller and shall be final, binding and conclusive upon all of the parties
hereto, and the amount of the Loss, if any, determined to exist, shall be deemed
established. Judgment upon any award rendered by the arbitrator may be entered in any court
having competent jurisdiction.

     (b) Opportunity to Defend Third Party Claims. In the event of any claim by a
third party against a Buyer Indemnitee or Seller Indemnitee for which indemnification is
available hereunder, the Buyer, if indemnification is sought against it,

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or the Seller, if indemnification is sought against it, (each an “Indemnifying Party”)
has the right, exercisable by written notice to Buyer or the Seller, as applicable, within
sixty (60) days of receipt of a Notice from Buyer or the Seller, as applicable, to assume
and conduct the defense of such claim with counsel selected by the Indemnifying Party. If
the Indemnifying Party has assumed such defense as provided in this Section 10.6(b),
the Indemnifying Party will not be liable for any legal expenses subsequently incurred by
any Indemnitee in connection with the defense of such Claim. If the Indemnifying Party does
not assume the defense of any third party claim in accordance with this Section
10.6(b), the Indemnitee may continue to defend such claim at the sole cost of the
Indemnifying Party (subject to the limitations set forth in this Article X) and the
Indemnifying Party may still participate in, but not control, the defense of such third
party claim at the Indemnifying Party’s sole cost and expense. The Indemnitee will not
consent to a settlement of, or the entry of any judgment arising from, any such claim,
without the prior written consent of the Indemnifying Party (such consent not to be
unreasonably withheld or delayed). Except with the prior written consent of the Indemnitee
(such consent not to be unreasonably withheld or delayed), no Indemnifying Party, in the
defense of any such claim, will consent to the entry of any judgment or enter into any
settlement that (i) provides for injunctive or other nonmonetary relief affecting the
Indemnitee or (ii) does not include as an unconditional term thereof the giving by each
claimant or plaintiff to such Indemnitee of a release from all liability with respect to
such claim or litigation. In any such third party claim, the party responsible for the
defense of such claim (the “Responsible Party”) shall, to the extent reasonably requested by
the other party, keep such other party informed as to the status of such claim, including,
without limitation, all settlement negotiations and offers.

     (c) Settlement. The Responsible Party shall promptly notify the other party of
each settlement offer with respect to a third party claim. Such other party shall promptly
notify the Responsible Party whether or not such party is willing to accept the proposed
settlement offer. If the Responsible Party is willing to accept the proposed settlement
offer but the other party refuses to accept such settlement offer, then if (i) such
settlement offer requires only the payment of money damages and provides a complete release
of all Indemnitees that are a party to such third party claim with respect to the subject
matter thereof, and (ii) the Responsible Party agrees in writing that the entire amount of
such proposed settlement constitutes Losses that are indemnifiable (subject to the
limitations set forth in this Article X), then the amount payable to the Indemnitees
with respect to such third party claim will be limited to the amount of such settlement
offer subject to the limitations contained in this Article X. The Responsible Party
may nevertheless propose in writing a good faith, reasonable settlement offer that requires
only the payment of money damages and provides a complete release of all Indemnitees who are
parties to such third party claim with respect to the subject matter thereof;
provided, however, that the Responsible Party agrees in writing that the
entire amount of such proposed settlement constitutes Losses that are indemnifiable (subject
to the limitations set forth in this Article X). If the other party refuses to
agree to or make the proposed settlement offer to the claimant in the third party claim, any
amount payable to the Indemnitee with respect to such third party claim will be limited to
the amount of such proposed settlement offer. If any such settlement offer is made to any
claimant and rejected by such claimant, the amount payable to an Indemnitee with respect to
such

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claim will not be limited to the amount of such settlement offer but will remain
subject to all other limitations set forth in this Agreement

     10.7 Specific Performance. Each party’s obligation under this Agreement is unique.
If any party should breach its covenants under this Agreement, the parties each acknowledge
that it would be extremely impracticable to measure the resulting damages; accordingly, the
nonbreaching party or parties, in addition to any other available rights or remedies they may
have under the terms of this Agreement, may sue in equity for specific performance, and each
party expressly waives the defense that a remedy in damages will be adequate.

     10.8 Subrogation. Upon making any indemnity payment pursuant to this Article
X, the Indemnifying Party shall be subrogated to all rights of the indemnified party against
any third party in respect of the Losses to which the payment related. The parties hereto will
execute upon request all instruments reasonably necessary to evidence and perfect the above
described subrogation rights.

     10.9 Adjustment to Purchase Price. All indemnification payments made pursuant to
this Article X will be treated as an adjustment to the Total Consideration unless
otherwise required by Law.

ARTICLE XI

TAX MATTERS

     11.1 Cooperation; Audits.

     (a) Buyer and its Affiliates, on the one hand, and the Seller and its Affiliates, on
the other hand, shall cooperate and (at the expense of the requesting party) provide to each
other such information and assistance as may reasonably be requested in connection with (i)
the preparation of any Tax Return relating to the Business, (ii) the conduct of any audit or
other examination by any Taxing Authority relating to any liability for Taxes relating to
the Business, and (iii) the prosecution or defense of any claim, suit or proceeding relating
to any Tax Return relating to the Business.

     (b) The Buyer and the Seller each shall, upon request, use its commercially reasonable
efforts to obtain any certificate or other document from any Governmental Authority or any
other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be
imposed on the Business, the Acquired Assets or in connection with transactions contemplated
hereby.

     (c) The Seller shall, upon request, promptly provide Buyer with a copy of the
employment records retained by the Seller pursuant to Section 2.2(f) relating to its
former employees hired by the Buyer pursuant to Section 8.6 hereof.

     (d) The Seller shall, upon request, promptly provide Buyer with a copy of the tax
exemption (e.g., resale) certificates previously provided to Seller by its customers and
retained by the Seller pursuant to Section 2.2(f).

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     (e) To the extent that the Buyer receives any invoices for accounts payable or
statements evidencing amounts owed by the Seller to another party, the Buyer will promptly
deliver such documents to the Seller. To the extent that the Seller receives any invoices
for accounts payable or statements evidencing amounts owed by the Buyer to another party,
the Seller will promptly deliver such documents to the Buyer.

     (f) If the Seller or any of its Affiliates receive any refund or other amount that is
an Acquired Asset or is otherwise properly due and owing to the Buyer in accordance with the
terms of this Agreement, the Seller promptly shall remit, or shall cause to be remitted,
such amount to the Buyer and if the Buyer or any of its Affiliates receive any refund or
other amount that is a Retained Asset or is otherwise properly due and owing to the Seller
or any of its Affiliates in accordance with the terms of this Agreement, the Buyer promptly
shall remit, or shall cause to be remitted, such amount to the Seller.

ARTICLE XII

MISCELLANEOUS AND GENERAL

     12.1 Risk of Loss.

     (a) All risk of loss, whether total loss, constructive total loss or less than total
loss or constructive total loss, on or before the Closing Date to the Acquired Assets shall
be borne by Seller and any insurance proceeds for events occurring on the Closing shall be
for Seller’s account, regardless of when received. The Buyer shall have no obligation to
purchase the Acquired Assets if the Acquired Assets suffer any material damage on or before
the Closing Date which is not remedied by the Seller to the Buyer’s reasonable satisfaction.
In the event that the Acquired Assets suffer damage which does not constitute a total loss
or constructive total loss, the Buyer may, at its sole option, elect to purchase the
Acquired Assets, in which case the Seller shall assign to the Buyer at the Closing all of
its rights to any insurance proceeds payable with respect to such loss and pay to the Buyer
the amount of any applicable deductible.

     (b) All risk of loss, whether total loss, constructive total loss or less than total
loss or constructive total loss, to the Acquired Assets shall be borne by the Buyer
subsequent to the Closing Date and any insurance proceeds for events occurring subsequent to
the Closing Date shall be for the Buyer’s account.

     12.2 Expenses. Except as set forth in this Agreement, all costs and expenses
(including all legal, accounting, broker, finder or investment banker fees) incurred in
connection with this Agreement and the transactions contemplated hereby are to be paid in the
case of the Seller, by the Seller, and in the case of Buyer, by the Buyer.

     12.3 Successors and Assigns. This Agreement is binding upon and inures to the
benefit of the parties hereto and their respective successors and assigns, but is not assignable
by any party without the prior written consent of the other parties hereto; provided, however,
that Buyer may (i) assign either this Agreement or any of its rights, interests, or obligations
hereunder to one or more of its Affiliates and (ii) designate one or more of its Affiliates to

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perform its obligations hereunder (in any or all of which cases, Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).

     12.4 Third Party Beneficiaries. Each party hereto intends that this Agreement does
not benefit or create any right or cause of action in or on behalf of any Person other than the
parties hereto.

     12.5 Notices. Any notice or other communication provided for herein or given
hereunder to a party hereto must be in writing, and sent by facsimile transmission
(electronically confirmed), delivered in person, mailed by first class registered or certified
mail, postage prepaid, or sent by Federal Express or other overnight courier of national
reputation, addressed as follows:

	 	 	 
	 

	 	If to Buyer:
	 
	 	 
	 

	 	Bourns, Inc.
	 

	 	1200 Columbia Avenue
	 

	 	Riverside, California 92507
	 

	 	Attention: Gregg Gibbons — Vice President and General Counsel
	 

	 	Fax: 951-781-5038
	 

	 	E-mail: gregg.gibbons@bourns.com
	 
	 	 
	 

	 	with a copy to:
	 
	 	 
	 

	 	Irell & Manella LLP
	 

	 	1800 Avenue of the Stars, Suite 900
	 

	 	Los Angeles, CA 90067
	 

	 	Attention: Louis M. Castruccio
	 

	 	Fax: (310) 203-7199
	 

	 	E-mail: lcastruccio@irell.com
	 
	 	 
	 

	 	If to the Seller:
	 
	 	 
	 

	 	Bell Industries, Inc.
	 

	 	1960 East Grand Avenue, Suite 560
	 

	 	El Segundo, CA 90245
	 

	 	Attention: Mitchell I. Rosen
	 

	 	Fax: (310) 648-7280
	 

	 	E-mail: mrosen@bellind.com

-47-

 

	 	 	 
	 

	 	with a copy to:
	 
	 	 
	 

	 	Manatt, Phelps & Phillips, LLP
	 

	 	11355 W. Olympic Boulevard
	 

	 	Los Angeles, CA 90064
	 

	 	Attention: Mark J. Kelson
	 

	 	Fax: (310) 312-4224
	 

	 	E-mail: mkelson@manatt.com

or to such other address with respect to a party as such party notifies the other in writing as
above provided.

     12.6 Complete Agreement. This Agreement and the schedules and exhibits hereto and
the other documents delivered by the parties in connection herewith, together with the
Confidentiality Agreement, contain the complete agreement between the parties hereto with
respect to the transactions contemplated hereby and thereby and supersede all prior agreements
and understandings between the parties hereto with respect thereto.

     12.7 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a part hereof.

     12.8 Captions. The captions contained in this Agreement are for convenience of
reference only and do not form a part of this Agreement.

     12.9 Amendment. This Agreement may be amended or modified only by an instrument in
writing duly executed by the parties hereto.

     12.10 Governing Law; Submission to Jurisdiction. This Agreement is to be governed
by, and construed and enforced in accordance with, the laws of the State of California, without
regard to its rules of conflict of laws. Each of the parties submits to the jurisdiction of any
state or federal court sitting in Orange County, California, in any action or proceeding arising
out of or relating to this Agreement and agrees that all claims in respect of the action or
proceeding may be heard and determined in any such court.

     12.11 Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any jurisdiction will, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or enforceability of any of the
terms or provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision will be interpreted to be only so
broad as is enforceable.

     12.12 Counterparts. This Agreement may be executed in two or more counterparts
(including by facsimile), each of which will be deemed an original but all of which will
constitute but one instrument.

-48-

 

     IN WITNESS WHEREOF, the Buyer and the Seller have each caused this Asset Purchase Agreement to
be executed as of the day and year first above written.

	 	 	 
	 

	 	BOURNS, INC.
	 
	 	 
	 

	 	By: /s/ John J. Halenda                    
	 

	 	Name: John J. Halenda                    
	 

	 	Title: Executive Vice President                    
	 
	 	 
	 

	 	By: /s/ Gerald T. Young                    
	 

	 	Name: Gerald T. Young                    
	 

	 	Title: Assistant Secretary                    
	 
	 	 
	 

	 	BELL INDUSTRIES, INC.
	 
	 	 
	 

	 	By: /s/ John A. Fellows                    
	 

	 	Name: John A. Fellows                    
	 

	 	Title: President and Chief Executive Officer                    

-49-

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