Document:

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                                 Exhibit 10.46

                            ASSETS PURCHASE AGREEMENT

          The parties to this Assets Purchase Agreement, dated January 2, 2007,
are THE KEMPER COMPANY, an Oregon corporation ("Purchaser"), and PYRAMID
BREWERIES INC., a Washington corporation ("Seller")

                                    RECITALS:

          A. Seller owns the Thomas Kemper trademarks identified on Exhibit A
(the "Marks") which it has used to develop carbonated soft drinks for sale to
wholesale customers under the Thomas Kemper Soda brand names (the "Branded
Products"). Seller wishes to sell the Marks and all related intangible rights
related to the Branded Products to Purchaser, together with the related assets
referenced in Section 1 below.

          B. Purchaser wishes to purchase all such assets as more particularly
identified in Section 1 below upon the terms and conditions stated in this
Agreement.

          In consideration of the premises and the representations, warranties
and covenants contained herein, the parties agree as follows:

     1. Sale of Assets.

          1.1 Sale of Assets. On the Closing Date (as defined in Section 3.1)
Seller shall sell, convey, transfer and deliver to Purchaser, free of all liens
and encumbrances except those accepted by Purchaser pursuant to the express
terms of this Agreement, and Purchaser shall purchase and accept from Seller,
the following tangible and intangible properties and assets:

               (a) the Marks, which include all trademarks for Thomas Kemper
including marks for that name for malt beverage products (other than WEIZEN
BERRY), all related designs and logos, all formulas and recipes related to
Thomas Kemper sodas, and all intangible assets and rights held by the Seller
with respect to the Branded Products and the business conducted with such assets
by Seller prior to the date hereof, including without limitation all rights to
all domain names, and related design and coding for the Thomas Kemper sodas
website;.

               (b) all finished goods inventories of the Branded Products to be
listed on the inventory schedule prepared pursuant to Section 2.3 below (the
"Inventories") including the pallets on which the Inventories are stored in the
warehouse;

               (c) the vehicles described on Schedule 1.1(c) together with the
quantities of soda kegs (including related deposits and liabilities to be
itemized as provided herein) and coolers identified on such Schedule.

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               (d) all point of sale and other sales materials owned by Seller
related to the business conducted with the Branded Products, plus all supplies
in the form of cups, apparel, and merchandising items owned by Seller or located
on Seller's premises or warehouses on the Closing Date and used in the Branded
Products business;

               (e) all of Seller's contract rights with respect to the
distribution contracts listed on Schedule 2 as referenced in Section 3.2 below
(the "Assumed Contracts"), subject to any rights of or restrictions on
assignment contained therein;

               (f) all customer lists, files, books and records, or copies
thereof, including computerized data of Seller, related exclusively to the Marks
or the sale of Branded Products; and

               (g) Seller's common law rights to the name Thomas Kemper.

The rights and assets, tangible and intangible, to be transferred to Purchaser
as detailed above are sometimes referred to in this Agreement as the "Assets."
The Assets do not include Seller's cash, accounts receivable, production
equipment or claims against any third party relating to the Branded Products
business prior to the Closing, and such assets are referred to herein as the
Excluded Assets.

          1.2 No Assumption of Liabilities. Purchaser shall not assume any
payables or liabilities whatsoever of the Seller related to the Marks or the
Branded Products or the business previously conducted with such assets, except
for the liabilities which have been itemized and listed on Schedule 1.2, such
deposit liability being referred to herein as the Assumed Liabilities. Seller
expressly retains and agrees to satisfy all other Seller liabilities and
obligations related to the Assets being sold hereunder or the business
previously conducted with the Assets by Seller prior to Closing other than the
Assumed Liabilities.

          1.3 Instruments of Conveyance and Transfer. On the Closing Date,
Seller shall deliver to Purchaser such trademarks assignments, bills of sale,
and other good and sufficient instruments of conveyance and assignment,
including satisfactions, releases and terminations of prior financing
statements, which shall be reasonably satisfactory in form and substance to
Purchaser and its counsel, as shall be effective to vest in Purchaser all of
Seller's right, title and interest in and to the Assets. Simultaneously with and
after such delivery, Seller will take all additional steps as may be necessary
to put Purchaser in possession and operating control of the Assets. The Assets
shall be transferred to Purchaser free and clear of any and all liens,
encumbrances, conditions and restrictions, except as expressly otherwise
provided herein.

          1.4 Further Assurances and Cooperation. Subsequent to the Closing
Date, Seller will make available to Purchaser upon reasonable written request
and at Purchaser's expense any records, documents or data not included in the
records sold to Purchaser hereunder but which are retained by it and relate to
the Assets, or copies of such items, and will execute and deliver from time to
time at the reasonable request of Purchaser all such further instruments of
conveyance, assignments and other documents and assurances as may be required in
order to more effectively vest in and confirm to Purchaser full and complete
title to, and the right to use and enjoy, the Assets. Purchaser shall make
available to Seller all records of Seller acquired by Purchaser, or

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copies of such records, as may be reasonably requested to permit Seller to make
all necessary post-Closing regulatory filings and final determinations of tax
liability.

          1.5 Consents of Third Parties. Nothing in this Agreement shall be
construed as an attempt to assign any contract, license, claim or other right,
or any benefit arising thereunder, if an attempted assignment thereof, without
the consent of a third party, would constitute a breach thereof or would impair
the rights of Seller or Purchaser with respect thereto so that Purchaser would
not in fact receive all such rights. Seller covenants not to take any action
designed to impair Purchaser's ability to do business with any such third
parties.

     2. Consideration for Transfer of Seller's Assets.

          2.1 Purchase Price. The base purchase price ("Base Purchase Price") to
be paid by Purchaser for the Assets to be transferred hereunder, excluding the
Inventories, shall be the sum of $3.1 million. The Base Purchase Price shall be
allocated among the Assets in the manner set forth on Schedule 2.1 to be
attached to this Agreement at Closing.

          2.2 Payment of Base Purchase Price. The Base Purchase Price shall be
paid 90% by Purchaser in immediately available funds at Closing and 10% into the
escrow account referenced in Section 7.10 below.

          2.3 Inventories. Seller and Purchaser will conduct a joint inventory
of the Inventories as of the close of business the date immediately preceding
the Closing Date. The joint inventory will be jointly prepared, priced (based on
Seller's raw materials costs and Tolling Fee charges as described in the
Production and Supply Agreement referred to in Section 7.9 below minus 1.5%
which Seller represents is the average rate of product returns from the trade),
signed by Purchaser and Seller and attached to this Agreement at Closing as
Schedule 2.3. The price for the Inventories as so calculated (the "Inventory
Purchase Price") will be paid in full at Closing. Nonsalable inventories (which
will include any inventories aged more than 120 days from the production date,
discontinued items and any inventories which are damaged or for any reason are
either not fit for consumption or salable in the ordinary course of business)
will be excluded from the Inventory purchased hereunder. With respect to product
delivered to the trade by Seller prior to Closing, product in excess of $10,000
in credit return value which is returned by the trade at any time after the
Closing will be accepted for credit by Purchaser for the account of such
customers and the amount so credited will be netted against amounts payable
under the Production and Supply Agreement.

     3. Closing and Schedules.

          3.1 Closing. The closing of the transactions provided for in this
Agreement (the "Closing") shall, unless an earlier date or another place is
agreed upon in writing by the parties hereto, take place at such location as the
parties may agree on January 2, 2007 or such other date as the parties may
mutually agree upon (the "Closing Date"). Unless otherwise agreed by the parties
at Closing, the Closing and the transfer of the Assets sold hereunder, and the
business related thereto, will be deemed to have been effective as of the close
of the business day of January 1, 2007.

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          3.2 Schedules. Simultaneous with the execution hereof, Seller shall
deliver to Purchaser the following Schedules which shall set forth the following
information:

               (a) As Schedule 1.1(c), a list of all assets listed in Section
1.1(c) above.

               (b) As Schedule 2, a list of all distribution contracts and other
agreements to which the Assets are subject or which are material to the Branded
Products business conducted by Seller.

               (c) As Schedule 3, a list of all licenses and permits and other
governmental approvals material to the production and sale of the Branded
Products.

               (d) As Schedule 4, a list of any pending litigation applicable to
the Assets.

The above Schedules and the other Schedules elsewhere referenced in this
Agreement, including the Disclosure Schedules referenced in Section 4 below,
shall be attached to this Agreement and made a part hereof.

     4. Representations and Warranties of Seller.

          Except as otherwise disclosed in any Disclosure Schedule to be
delivered prior to execution of and attached to this Agreement and numbered to
correspond to the following sections, Seller represents and warrants to
Purchaser as follows:

          4.1 Organization and Good Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Washington and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.

          4.2 Authority Relative to Agreement. Seller has requisite corporate
power to execute and deliver this Agreement and to convey, transfer and assign
the Assets described herein and perform its obligations hereunder. Seller's
Board of Directors has taken all actions required by law, its Articles of
Incorporation and Bylaws or otherwise to authorize the execution, delivery and
performance of this Agreement. This Agreement is the valid and legally binding
obligation of Seller enforceable in accordance with its terms, subject to laws
of general application relating to creditors' rights and remedies and to general
principles of equity.

          4.3 Effect of Agreement. Except as set forth in Disclosure Schedule
4.3 no consents or approvals are required from any third party in connection
with the execution and consummation of this Agreement by Seller. The execution
and delivery of this Agreement and consummation of the transactions contemplated
hereby will not result in the breach of any term or provision of, or constitute
a default under, any provision or restriction of any note, mortgage, indenture,
agreement, license or other instrument, or of any judgment, order or decree,
rule or regulation of any court or administrative agency to which Seller is a
party or by which it or any of the Assets is bound, nor will it conflict with
the provisions of the Articles of Incorporation or

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Bylaws of Seller, or to the best of Seller's knowledge violate any statute,
license or regulation of any governmental authority.

          4.4 Financial Information. Attached hereto as Disclosure Schedule 4.4
is a true, complete and accurate record of all sales by customer of the Branded
Products for each of the calendar years 2004 and 2005, which includes revenue
and units by sku, and comparable information for the nine months ended September
30, 2006, and gross profit reports (including revenue discounts) for such
periods for all Branded Product sales. All such information is true and complete
in all material respects, and fairly presents in all material respects the
information presented for the periods indicated. Seller has also provided
financial information to Purchaser in the form of Exhibits C-1 and D to the
Supply Agreement referenced in Section 7.9 below. The costs reflected in
Exhibits C-1 and D are based on Seller's actual costs incurred in 2006,
suppliers' quoted prices for certain raw material supplies in 2007, and
good-faith estimates as to other costs. To the best of Seller's knowledge, such
costs fairly reflect Purchaser's anticipated costs of products under the Supply
Agreement.

          4.5 Closing Date Inventories. The Inventories as priced by Seller will
reflect Seller's actual raw material costs of all Inventories listed thereon and
the tolling fee as specified in the Production and Supply Agreement referenced
in Section 7.9 below. All finished goods in the final joint inventory referred
to in Section 2.3 above will be salable in the ordinary course of business, and
all items included in the final joint inventory will be fit for human
consumption.

          4.6 Absence of Material Changes. Except (i) for the transactions
contemplated by this Agreement, (ii) as set forth in the Disclosure Schedules,
(iii) as specifically disclosed on Schedule 4.6, since September 30, 2006 there
has not been:

               (a) any Material Adverse Change (as hereinafter defined);

               (b) any mortgage, pledge, lien (other than those arising by
operation of law) or other encumbrance or security interest created on any of
the Assets, or assumed by Seller with respect to any of the Assets;

               (c) any sale, transfer, license, or other disposition of any
intangible rights related to the Assets or any transfer of any tangible assets
included within the Assets except for sales of finished products in the ordinary
course of business;

               (d) any action taken by Seller to amend, terminate or waive any
material right relating to the Assets other than in the ordinary course of
business;

               (e) any transfer or grant of any material rights under any
licenses, agreements, trademarks or trade names used in the production or sale
of the Branded Products;

               (f) any transaction, contract or commitment relating to the
Assets made or entered into other than in the ordinary course of business;

               (g) any special promotions or discounts or extended terms for
payment or other sales activities not in the ordinary course of business; or

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               (h) any other event materially and adversely affecting the
results of operations for the Branded Products business.

          For purposes of this Agreement, the terms "Material Adverse Change"
means any effect, change, or circumstance that could reasonably be expected to
be materially adverse to the earnings prospects of the Branded Products
business, or the ability of Seller to consummate timely the transactions
contemplated by this Agreement, but excludes any adverse circumstance, event,
development, effect or change arising from or relating to (i) general business
or economic conditions, (ii) national or international political or social
conditions, including the engagement of the United States in hostilities, the
occurrence of any military or terrorist attack on the United States or any of
its territories, possessions or diplomatic, military or consular offices,
installations or personnel, or (iii) financial, banking or securities markets
(including any disruption thereof).

          4.7 Litigation. Except as disclosed on the Disclosure Schedules, there
is no action, proceeding or investigation pending or, to the Knowledge of Seller
(as defined at the end of this Section 4), threatened, nor, to the Knowledge of
Seller, is there any basis therefore, which might result in any Material Adverse
Change after the Closing Date, or which may materially impair Purchaser's right
or ability to carry on and conduct after the Closing the Branded Products
business formerly conducted by Seller or to continue sales in any state where
Seller has previously sold Branded Products.

          4.8 Title. Seller has and will have on the Closing Date good and
marketable title to all of the Assets, free and clear of all liens, pledges,
charges or encumbrances of any nature whatsoever except as otherwise provided in
the Agreement including the Disclosure Schedules.

          4.9 Contracts; Assignment. All distribution or brokerage contracts
listed on Schedule 2, which will be assigned to Purchaser at Closing, are valid
and effective; and, except for the provisions thereof that may restrict or
prevent the assignment thereof by Seller, there is no existing default
thereunder or any event which, with notice or lapse of time, or both, would
constitute a default by Seller or by another party thereto.

          4.10 Claims. No liability, whether direct or contingent, has been
asserted against Seller or the Assets that might have a material adverse effect
on the Assets or business to be conducted by Purchaser with the Assets, except
for the liabilities if any specifically identified in the Disclosure Schedules.

          4.11 Licenses and Regulations. All material governmental or agency or
commission licenses, approvals, registrations and permits required in order for
Seller to sell the Branded Products in the states identified pursuant to Section
4.14 below are listed in Disclosure Schedule 4.11. Seller has complied in all
material respects with all rules, laws, regulations and orders which relate to
the production or sale of the Branded Products, and knows of no notice or claim
of violation by Seller of any applicable federal, state or local law, ordinance
or regulation or judgment, order, decree or citation of any individual or
administrative authority, including but not limited to safety laws or
regulations, or laws or regulations relating to illegal payments, kickbacks or
commercial bribery that could affect future production by Seller of the Branded
Products under the Production and Supply Agreement.

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          4.12 Intellectual Property. A list of all trademarks, copyrights,
service marks, trade names and registrations and applications for the foregoing
owned and used by the Seller in connection with the sale of Thomas Kemper Sodas
(collectively referred to as the "Owned Intellectual Property") is set forth in
Exhibit A. Specifically excluded from the Owned Property is the mark for WEIZEN
BERRY and any rights in the mark, which has been used on Thomas Kemper labels in
the past, but which is a registered trademark of Seller, which Seller intends to
continue using on its own products. Except as set forth in Disclosure Schedule
4.12, the Owned Intellectual Property is owned solely by the Seller and not
subject to any license, royalty arrangement or to any liens or encumbrances. To
the Knowledge of Seller, no other party has a right to use the name Thomas
Kemper in connection with the sale of any other beverage product. No proceedings
are pending or, to the Knowledge of Seller, threatened against Seller and no
claims have been asserted against Seller in writing which challenge the validity
of the ownership of any of the Owned Intellectual Property. All trademarks,
copyrights, service marks and trade names which are or have been licensed from
third parties and used by the Company in connection with the Branded Products
business (the "Licensed Intellectual Property"), if any, are set forth on
Disclosure Schedule 4.12. Except as set forth on the Disclosure Schedule, no
shareholder or affiliate of Seller has any ownership interest in, or any right
to receive payment for the Company's use of, any of the Owned Intellectual
Property or Licensed Intellectual Property. To the Knowledge of Seller, there is
no infringement of any of the Owned Intellectual Property by any other person
and Seller has not received notice that there is any infringement of any of the
Licensed Intellectual Property. Seller has not received notice, no, to the
Knowledge of Seller, is there any reasonable basis to believe, that its
production or sale of the Branded Products (a) is infringing or has infringed on
any federal, state or foreign patents, trademarks or copyrights or other
intellectual property rights of any other person, or (b) is misappropriating, or
has misappropriated, any trade secrets of any other person.

          4.13 Liabilities. There are no liabilities or claims of any kind
relating to Seller's business for which Purchaser will be responsible after the
Closing except for the obligations accruing after the Closing Date under the
contracts listed on Schedule 2.

          4.14 Sales by State. A complete listing of all states in which Seller
has sold, directly or through one or more brokers or distributors, Branded
Products during the period since January 1, 2005 is set forth on Disclosure
Schedule 4.14.

          4.15 Supply Arrangements. The list of suppliers who have supplied 90%
or more of the Seller's raw materials for the Branded Products during the
current year and the prior year are listed on Disclosure Schedule 4.15. Except
as disclosed on such schedule, to the Knowledge of Seller, none of such supplies
has indicated that they do not intend to continue the existing supplier
relationship with the Seller and Seller has no reason to believe that there will
be any interruption of purchased goods from any such supplier.

          4.16 Customers. The list of customers who purchased 90% or more of the
Branded Products in 2005 and 2006 and the sales volume to each customer in such
period are as set forth in Disclosure Schedule 4.16. Except as disclosed on such
schedule, to the Knowledge of Seller, none of such customers has indicated that
they do not intend to continue purchasing the Branded Products in the future.

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          For purposes of this Agreement, the term "Knowledge of Seller" means
the knowledge that the executive officers of Seller, or persons employed by
Seller with specific responsibility for the matter referenced in any specific
warranty herein, possess or should have acquired following reasonable inquiry in
the ordinary course of fulfilling their respective assigned duties and
responsibilities.

     5. Representations and Warranties of Purchaser.

          Purchaser represents and warrants to Seller as follows:

          5.1 Organization and Good Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Oregon, and has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.

          5.2 Authority Relative to Agreement. Purchaser has requisite power to
execute and deliver this Agreement and to perform its obligations hereunder and
thereunder. Purchaser has taken all action required by law or otherwise to
authorize the execution, delivery and performance of this Agreement. This
Agreement is the valid and legally binding obligation of Purchaser, enforceable
in accordance with its terms, subject to laws of general application relating to
creditors' rights and remedies and to general principles of equity.

          5.3 Effect of Agreement. No consents or approvals are required to be
obtained from any third party, except those which have been obtained, in
connection with the execution and consummation of this Agreement by Purchaser.
The execution and delivery of this Agreement and consummation of the
transactions contemplated hereby and thereby, will not result in the breach of
any term or provision of, or constitute a default under, any provision or
restriction of any note, mortgage, indenture, agreement, license or other
instrument, or of any judgment, order or decree, rule or regulation of any court
or administrative agency to which Purchaser is a party or by which it is bound,
nor will it conflict with the provisions of the charter documents of Purchaser,
nor to the best of Purchaser's knowledge, violate any statute, license or
regulation of any governmental authority.

          5.4 Financing. Purchaser has sufficient financial means to fulfill its
obligations under this Agreement, including its obligation to pay the Base
Purchase Price under Section 2.1 and the Inventory Purchase Price under Section
2.3 if the transactions contemplated hereby are consummated.

     6. Covenants of Seller.

          6.1 Access to Information. During the period after the date hereof and
until the Closing Date, Seller shall provide Purchaser and its authorized
representatives full access, at reasonable times and upon reasonable notice, to
all properties, books, records, contracts, documents, and leases of Seller
relating to the Branded Products business, and has furnished or caused to be
furnished to Purchaser and its authorized representatives all information with
respect to its affairs and business as Purchaser or its authorized
representative has reasonably requested.

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          6.2 Preservation of Business. During the period from the date hereof
and until the Closing Date, Seller shall (unless Purchaser otherwise agrees in
advance in writing):

               (a) pay its payables with respect to the Branded Products
business in a manner consistent with past practice;

               (b) not incur any debt related to the Assets other than trade
debt in the ordinary course of business;

               (c) use its best efforts to conduct its Branded Products business
in a reasonable and prudent manner in accordance with past practices;

               (d) engage in no transaction related to the Assets out of the
ordinary course of business, including without limitation undertaking any
special sales promotion activities that would have the effect of increasing
Seller's sales of Branded Products above normal seasonal sales and lowering
Purchaser's sales of those products after the Closing; ;

               (e) except for the purchasing of raw materials, packaging
materials and other supplies in the ordinary course of business, enter into no
agreement or transaction related to the Assets which extends beyond the Closing
Date;

               (f) use commercially reasonable efforts to preserve its existing
business organization and relations with all of its customers (including
retention of all current shelf space allocations), suppliers and others with
whom it has a business relationship related to the Branded Products business;

               (g) not sell, dispose of or otherwise cause to be removed from
the premises any of the Assets, except for finished goods which are sold in the
ordinary course of business;

               (h) conduct its business in compliance with all applicable laws
and regulations; and

               (i) undertake no action which would affect the normal level of
its inventories prior to the Closing Date.

     7. Conditions Precedent to Purchaser's Obligations.

          Each and every obligation of Purchaser to be performed on the Closing
Date shall be subject to the satisfaction prior thereto of the following
conditions precedent, any of which may be waived in writing by Purchaser:

          7.1 Closing Date Schedules. Purchaser and Seller shall have jointly
prepared and delivered at the Closing Date the schedule of Inventories, and
Purchaser shall have prepared and delivered any updates to the other schedules
to be presented at or prior to the Closing, and all of such schedules shall be
acceptable to Purchaser.

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          7.2 Inventory Value. The volume of Inventories will not exceed 120% of
the case volume of inventories of Branded Products existing at month end
preceding the date of execution hereof without Purchaser's express written
approval.

          7.3 No Material Adverse Change. There shall have been no material
adverse change in Seller's business conducted with the Assets.

          7.4 Certified Resolutions. Seller shall have supplied Purchaser with a
certified copy of resolutions duly adopted by the Board of Directors of Seller
approving the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby.

          7.5 Assignment of Contracts. The contracts referenced in Section 4.9
above to be assigned to Purchaser hereunder shall have been so assigned.

          7.6 Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, undertaken by Seller in connection with the transactions
contemplated by this Agreement, and all documents incidental thereto, shall be
reasonably satisfactory in form and substance to Purchaser and its counsel, and
Seller shall have made available to Purchaser for examination the originals or
true and correct copies of all records and documents relating to the Branded
Products business which Purchaser may reasonably request in connection with such
transactions.

          7.7 No Litigation. No investigation, suit, action or other proceeding
shall be threatened or pending before any court or governmental agency or other
agency or authority which seeks or is likely to result in the restraint or
prohibition of, or the obtaining of material damages or other material relief in
connection with, this Agreement or the consummation of the transactions
contemplated hereby.

          7.8 Regulatory Approval. Purchaser shall have obtained all regulatory
approvals deemed necessary by it to conduct business with the Assets after
Closing.

          7.9 Production and Supply Agreement. Seller and Purchaser shall have
entered into the Exclusive Soda Production and Supply Agreement in the form
attached as Exhibit B (the "Supply Agreement").

          7.10 Escrow. Purchaser and Seller shall have entered into an Escrow
Agreement in the form of Exhibit C.

     8. Conditions Precedent to Seller's Obligations.

          Each and every obligation of Seller hereunder to be performed on the
Closing Date shall be subject to the satisfaction prior thereto of the following
conditions, any of which may be waived in writing by Seller, precedent:

          8.1 Payment of Purchase Price. Purchaser shall have paid to Seller 90%
of the Base Purchase Price, shall have paid into the Escrow Account 10% of the
Base Purchase Price, and shall have paid to Seller the Inventories Purchase
Price in full.

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          8.2 Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, undertaken by Purchaser in connection with the transactions
contemplated by this Agreement, and all documents incident thereto, shall be
reasonably satisfactory in form and substance to Seller and its counsel.

          8.3 No Litigation. No investigation, suit, action or other proceeding
shall be threatened or pending before any court or governmental agency or other
agency or authority which seeks or is likely to result in the restraint or
prohibition of, or the obtaining of material damages or other material relief in
connection with, this Agreement or the consummation of the transactions
contemplated hereby.

          8.4 Inventory and Other Schedules. Purchaser and Seller shall have
jointly completed and agreed upon the Inventories and related pricing and
Purchaser shall have been presented and approved of the other schedules to be
presented by Seller at or prior to the Closing.

          8.5 Production and Supply Agreement. Seller and Purchaser shall have
entered into a Production and Supply Agreement in the form attached as Exhibit
B.

     9. Termination of Agreement.

          9.1 Termination. This Agreement may be terminated after execution and
before the Closing Date only on one of the following grounds:

               (a) By mutual written consent of Purchaser and Seller.

               (b) After written notice by either party, which notice must
provide the other party reasonable opportunity to cure within 30 days of the
notice, if there has in fact been a material breach of the warranties or
representations given by the other party under this Agreement or a failure of
any condition to a party's obligation to close.

In the event of termination by any party as above provided, prompt written
notice shall be given to the other party.

          9.2 Effect of Termination; Right to Proceed. In the event that this
Agreement shall be terminated pursuant to Section 9.1, all further obligations
of the parties under this Agreement shall terminate without further liability of
any party to any other party. Nevertheless, if any of the conditions specified
in Section 7 have not been satisfied, Purchaser, in addition to any other rights
which may be available to it, shall have the right to waive any of such
conditions and proceed with the transactions contemplated hereby, and if any of
the conditions specified in Section 8 have not been satisfied, Seller, in
addition to any other rights which may be available to it, shall have the right
to waive any of such conditions and proceed with the transactions contemplated
hereby.

          9.3 Return of Seller's Documents in Event of Termination. In the event
of the termination of this Agreement for any reason, Purchaser shall certify to
Seller destruction of all documents, work papers, and other material obtained
from Seller relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof.

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     10. Brokerage; Publicity.

          10.1 Brokerage. Seller agrees to indemnify Purchaser for and hold it
harmless from any claim for brokers' or finders' fees or compensation in
connection with the transactions herein provided for by any person, firm or
corporation claiming such a right because engaged by Seller. Purchaser
represents and warrants to Seller that it has not engaged the services of any
broker or finder in connection with this Agreement or the transactions
contemplated herein and agrees to indemnify Seller for and hold it harmless from
any claims for brokers' or finders' fees or compensation in connection with the
transactions herein provided for by any person, firm or corporation claiming
such a right because engaged by Purchaser.

          10.2 Publicity. The parties agree to cooperate with each other in
preparing and distributing any announcements to the trade and any other
publicity regarding this Agreement. No party will release information (except as
may be required by law), including any filings required under the rules and
regulations of the Securities and Exchange Commission) or publicity to the media
regarding this transaction without first obtaining the consent of the other
party.

     11. Indemnification.

          11.1 Seller's Indemnification Liability. Seller shall indemnify
Purchaser for and hold it harmless from any of the following (all hereinafter
referred to as "Damages"):

               (a) all obligations and/or liabilities of Seller arising out of
or in connection with the operation of the Branded Products business prior to
the Closing Date, whether accrued, absolute, fixed, contingent or otherwise
other than the Assumed Liabilities and obligations under the Assumed Contracts
arising after the Closing Date;

               (b) any and all costs, expenses, damages or deficiencies
resulting from any misrepresentation, breach of warranty or nonfulfillment of
any covenant or obligation on the part of Seller under this Agreement;

               (c) any losses or damages resulting from warranty or product
liability, tort or similar liability or claims which relate to any products sold
by Seller on or before the Closing Date, or from any Inventory purchased
hereunder and sold by Purchaser in the ordinary course of business after the
Closing Date; and

               (d) all reasonable costs and expenses (including reasonable
attorney fees) incurred in connection with any action, suit, proceeding, demand,
assessment or judgment incident to any matters indemnified against in this
Section 11.1 and in any appeal therefrom.

          Seller shall have no liability under this Section 11.1 unless and
until the aggregate amount of Damages for which indemnification claims are made
by Purchaser exceed $30,000 and then only for the amount of Damages in excess
thereof, or (ii) in excess of the Base Purchase Price plus the Inventory
Purchase Price. Any payments by Seller pursuant to this Section 11.1 shall be
deemed to be an adjustment to the aggregate purchase price for tax purposes.

                                       12

<PAGE>

Notwithstanding the foregoing, this paragraph shall not apply to Seller's
indemnity obligations under subpart (c) above.

          11.2 Purchaser's Indemnification Liability. Purchaser shall indemnify
Seller for and hold it harmless from any of the following (all hereinafter
referred to as "Damages"):

               (a) all obligations and/or liabilities of Purchaser arising out
of or in connection with the operation of the business conducted by Purchaser
with the purchased assets after the Closing Date;

               (b) any and all costs, expenses, damages or deficiencies
resulting from any misrepresentation, breach of warranty or nonfulfillment of
any covenant or obligation on the part of Purchaser under this Agreement;

               (c) the Assumed Liabilities and any liabilities or claims under
the Assumed Contracts, except to the extent that such liabilities relate to
Seller's conduct of the Branded Products business prior to the Closing Date;

               (d) all reasonable costs and expenses (including reasonable
attorney fees) incurred in connection with any action, suit, proceeding, demand,
assessment or judgment incident to any matters indemnified against in this
Section 11.2 and in any appeal therefrom; and

               (e) any liability or cost (excluding all liabilities related to
product charges and credits for all periods prior to the Closing Date) under
that certain Distributor Agreement dated August 31, 1995 between the Thomas
Kemper Soda Company and Columbia Distributing Company (including, without
limitation, Section 12.3(b) thereunder) arising after the date of this
Agreement.

          11.3 Claims Procedure. Indemnification hereunder shall be subject to
the condition that the indemnified party shall give prompt written notice to any
party or person potentially liable as an indemnifying party (referred to in this
Section 11.3 as an Indemnitor) of any claim for Damages which has arisen or been
asserted.

          If the indemnified party shall incur any Damages or determine that as
a result of any claim it is likely to incur any Damages and shall consider that
it is entitled to be indemnified against such Damages, the indemnified party
shall promptly deliver to the Indemnitor a notice which shall specify in
reasonable detail each individual item of Damage, the date such item was paid or
properly accrued, the basis for any anticipated liability, the nature of the
misrepresentation, breach of warranty or breach of covenant to which such item
is related (if applicable) and, if then determinable, the computation of the
amount of the indemnification claim hereunder. The failure to give prompt notice
will not discharge the indemnification obligation of the Indemnitor except to
the extent of actual prejudice suffered as a direct result of any delay in
notice.

          If the notice states that a claim has been made by a third party, the
Indemnitor may, at its option (and at its expense), assume the defense of such
claim. If the Indemnitor does

                                       13

<PAGE>

not assume the defense of such claim, the Indemnitor shall nevertheless promptly
pay the indemnified party's reasonable attorney' fees and other legal costs for
any valid indemnification claim as such costs are incurred, upon presentation of
invoices or bills therefor. The Indemnitor shall not be liable to indemnify for
any settlement of any such claim the defense of which has been formally accepted
by the Indemnitor if the settlement is effected by the indemnified party without
its consent, but if settled with such written consent, or if there be a final
judgment for the plaintiff in any such action, the Indemnitor shall indemnify
the indemnified party from and against any loss or liability by reason of such
settlement or judgment. Any defense of a claim accepted by the Indemnitor shall
be conducted by counsel of good standing reasonably satisfactory to the
indemnified party, and at the expense of the Indemnitor, except that if any
proceeding involves both claims against which indemnity is granted hereunder and
other claims for which indemnification is not granted hereunder, the expenses of
defending against such claims shall be borne in proportion to the respective
dollar amounts of such claims, excluding any punitive damages in determining
such proportion. The indemnified party shall make available to the Indemnitor
and its attorneys and accountants all books and records of the indemnified party
relating to any claim, and the parties agree to render to each other such
assistance as may reasonably be requested to insure the proper and adequate
defense of any such claim. The indemnified party may be a participant in the
defense of any claim at its own expense.

          In case the Indemnitor shall object to the indemnification in respect
of any claim or claims specified in the notice from the indemnified party, the
Indemnitor shall, within 30 days after receipt, deliver to the indemnified party
a written notice to such effect, which notice will specify with respect to each
individual item of Damage claimed hereunder the amount, if any, that the
Indemnitor admits the indemnified party is entitled to indemnification. The
indemnified party and Indemnitor shall, within such 30-day period beginning on
the date of receipt of such written objection, attempt in good faith to agree
upon the rights of the respective parties with respect to each of such claims to
which the Indemnitor shall have so objected. If agreement can be reached on
their respective rights with respect to such claims, they shall promptly prepare
and sign a memorandum setting forth such agreement.

          Claims for indemnity to which the Indemnitor does not object in
writing within 30 days after receipt of the indemnified party's notice, those
parts of a claim which are not disputed by the Indemnitor, and claims covered by
a memorandum of agreement of the nature described in this Section 11 shall
constitute Agreed Claims. No waiver of an indemnified party's right to pursue a
claim for indemnification hereunder shall be inferred by reason of the failure
of the parties to agree that the claim constitutes an Agreed Claim.

          At Seller's option, Seller may offset any amounts owed by Seller under
Section 4.9 of the Supply Agreement against any costs incurred for which it is
entitled to indemnification under Section 11.2(e) hereof.

     12. Other Provisions.

          12.1 Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, Purchaser and Seller shall each pay their own
expenses in

                                       14

<PAGE>

connection with the transactions contemplated by this Agreement, including the
fees and expenses of their respective counsel and accountants.

          12.2 Litigation Expenses. In the event of any litigation to enforce or
declare any of the provisions of this Agreement, the substantially prevailing
party will be entitled to collect all costs and expenses incurred in the
litigation, including reasonable attorney fees whether incurred at the pretrial,
trial or appellate stage of the proceeding, from the other party. No litigation
may be initiated by either party in connection with any claim or dispute arising
hereunder until the matter shall first have been submitted to mediation in which
both parties personally appear and participate in the mediation process. If the
parties cannot mutually otherwise agree on the procedures for the mediation and
the mediator, the mediation shall be conducted by a mediator selected from among
persons who are qualified as mediators with the alternative dispute resolution
entity JAMS, to be selected by the parties pursuant to the selection procedures
of such service, and the mediation shall be conducted in such fashion as the
mediator may determine. Each party shall bear its own costs in the mediation,
and shall share equally in payment of the mediator's fee.

          12.3 Assumption of Liabilities. The parties hereto agree that
Purchaser is assuming absolutely no liabilities of Seller except as specifically
set forth in this Agreement, nor is Purchaser assuming any liability under any
contract with regard to the Assets being purchased hereunder except those agreed
to in writing by Purchaser. Specifically, Purchaser assumes no liability with
respect to any outstanding warranties of Seller, express or implied, or product
liability for all prior sales.

          12.4 Representation and Warranties. No representation, covenant or
warranty made by Seller or Purchaser in this Agreement or in any exhibit hereto
or agreement contemplated hereby contains or will contain on the execution date
or the Closing Date any untrue statement of a material fact or omit or will fail
to state material facts necessary to make any statement made not misleading.

          12.5 Nature and Survival of Representations. All statements by the
parties hereto contained in this Agreement and in any Disclosure Schedule,
certificate, instrument or document delivered by or on behalf of any of the
parties pursuant to this Agreement, shall be deemed representations and
warranties. Representations and warranties made by the parties, each to the
other in this Agreement or pursuant hereto, shall generally survive for a period
of one year subsequent to the Closing Date, with the exception of Seller's
representation set forth in Section 4.12 which shall survive for the statute of
limitations period with respect to contracts.

          12.6 Entire Agreement. This Agreement, together with the Exhibits and
Disclosure Schedules delivered pursuant to this Agreement, sets forth the entire
agreement and understanding between the parties as to the subject matter hereof,
and supersedes all prior discussions, agreements and understandings of every
kind and nature between them, and each party releases the other from all claims
associated with all such prior understandings, discussions or agreements. No
party shall be bound by any condition, definition, warranty, or representation,
other than as expressly set forth or provided for in this Agreement (including
the Exhibits and Disclosure Schedules), or as may be, on or subsequent to the
date hereof, set forth in writing and

                                       15

<PAGE>

signed by the party to be bound thereby. This Agreement may not be changed or
modified, except by agreement in writing, signed by all of the parties hereto.

          12.7 Parties in Interest. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the successors in interest of the respective parties hereto. Nothing
contained herein, express or implied, is intended nor shall be construed to
confer or give any person, firm or corporation other than the parties hereto,
any rights or remedies under or by reason of this Agreement.

          12.8 Notices. All notices or other communications which are required
or permitted hereunder shall be sufficient if delivered personally or by
registered or certified mail, postage prepaid, as follows:

          If to Purchaser:   The Kemper Company
                             Attn: William J. Germano
                             P.O. Box 820114
                             Portland, OR 97282

          With a copy to:    Ronald L. Greenman
                             Tonkon Torp LLP
                             1600 Pioneer Tower
                             888 SW Fifth Avenue
                             Portland, OR 97204

          If to Seller:      Pyramid Breweries Inc.
                             Attn: President
                             91 South Royal Brougham Way
                             Seattle, WA 98134

          With a copy to:    Eric DeJong
                             Perkins Coie LLP
                             1201 Third Avenue, Suite 4800
                             Seattle, WA 98101

Any party may, by written notice to the other, change its address for purposes
of this Agreement.

          12.9 Waiver. Waiver by any party of the strict performance of any of
the provisions of this Agreement shall not be construed as a waiver of or
prejudice that party's right to subsequently require strict performance of the
same or any other provision of this Agreement.

          12.10 Section Headings. The headings of the sections of this Agreement
are for the convenience of the parties only and shall not be construed as
affecting the terms of this Agreement or be used in the interpretation of the
terms of this Agreement.

          12.11 Counterparts. This Agreement may be executed in counterparts;
when each party has signed at least one counterpart, the Agreement shall be
fully binding. Each

                                       16

<PAGE>

counterpart shall be considered an original, and all of them, taken together,
shall constitute a single Agreement.

          IN WITNESS WHEREOF, the parties hereto have caused this Assets
Purchase Agreement to be executed as of the date set forth above.

                                        Seller: PYRAMID BREWERIES INC.

                                        By /s/ Scott Barnum
                                           -------------------------------------
                                           Scott Barnum, Chief Executive
                                           Officer and President

                                        Purchaser: THE KEMPER COMPANY

                                        By /s/ William J. Germano
                                           -------------------------------------
                                           William J. Germano
                                           President

                                       17
<PAGE>

                                                                       Exhibit A

                                                                           Marks

A copy of the exhibit shall be furnished to the Securities and Exchange
Commission upon request.
<PAGE>

                                                                       Exhibit B

                                  Exclusive Soda Production and Supply Agreement

A copy of the exhibit shall be furnished to the Securities and Exchange
Commission upon request.

<PAGE>

                                                                       Exhibit C

                                                                Escrow Agreement

A copy of the exhibit shall be furnished to the Securities and Exchange
Commission upon request.exv10w1

 

EXHIBIT 10.1

December 27, 2006

Kevin Thimjon

11551 Ridge Valley Court

Zionsville, IN 46077

Dear Kevin:

Bell Industries Inc. (“Bell” or the “Company”) is pleased to make you the following offer of
employment for the salaried, exempt position of Chief Financial Officer of Bell. This offer letter
shall become effective on the Starting Date indicated below and will continue until the second
anniversary of the Starting Date, unless terminated earlier as described in the “Termination of
Employment” and “Resignation of Employment” paragraphs below (the “Initial Term”). The Initial
Term will be automatically extended for successive one-year periods from the second anniversary of
the Starting Date (each an “Extended Term”) unless either you or Bell gives the other written
notice of non-renewal at least ninety (90) days prior to the end of the Initial Term or any
Extended Term.

	 	 	 
	Position:

	 	Chief Financial Officer.
	 
	 	 
	Duties:

	 	Such duties as the Board of Directors of Bell shall
from time to time assign to you. You shall report
directly to the Chief Executive Officer of Bell. At
Bell’s request, you shall serve Bell and/or its
subsidiaries and affiliates in other offices and
capacities in addition to the foregoing. In the event
that you serve in any one or more of such additional
capacities, your compensation shall not be increased
beyond that specified below.
	 
	 	 
	Exclusivity:

	 	During the Initial Term, and the Extended Term, if
any, you agree to devote substantially all of your
business time, energy, skill and best efforts to the
performance of your duties hereunder in a manner that
will faithfully and diligently further the business
and interests of Bell. Without limiting the
foregoing, it is specifically agreed that you may
devote up to (5) hours per week as a paid consultant
performing Liquidating Agent duties for USOP
Liquidating, LLC, provided, however, that such work
shall not interfere with your duties to Bell, that
your duties and obligations to Bell shall take
precedence over such work and that the majority of
such work shall be performed during non-business
hours. You may serve on boards of directors of
companies or organizations not affiliated or in
competition with Bell only to the extent you receive
the prior written approval of Bell’s Board of
Directors.
	 
	 	 
	Base Annual Salary:

	 	$210,000. Paid bi-weekly in the amount of $8,076.92
gross, subject to applicable withholdings. Bell
issues paychecks bi-weekly.
	 
	 	 
	Starting Date:

	 	January 8, 2007

Incentive Compensation: In addition to your Base Annual Salary, you shall be eligible for an annual
bonus of up to 50% of your Base Annual Salary.

 

 

Stock Options: Bell will recommend that the Compensation Committee of the Board of Directors grant
you non-qualified stock options for 125,000 shares of Bell common stock. Such stock options shall
be granted at a per share exercise price as follows: (i) options to purchase 50,000 shares shall
be granted at a per share exercise price equal to the fair market value of the shares on the date
of grant, (ii) options to purchase 25,000 shares shall be granted at a per share exercise price of
$4.00, (iii) options to purchase 25,000 shares shall be granted at a per share exercise price of
$6.00, and (iv) options to purchase 25,000 shares shall be granted at a per share exercise price of
$8.00. Vesting will occur on the following schedule: 20% of options shall vest immediately, and
an additional 20% of options shall vest on each of the first, second, third and fourth
anniversaries of the date of grant until 100% of options are vested. You may be eligible for
future grants of options from time to time as recommended by the CEO and approved by the
Compensation Committee of Bell’s Board of Directors.

Termination of Employment: Bell may terminate your employment for Cause or without Cause. The
effective date of your termination will be the date specified by Bell in its written notice to you
of its decision to terminate your employment. For purposes of this employment agreement, “Cause”
shall mean the occurrence of any one or more of the following events : (i) your willful failure to
perform or gross negligence in performing the duties owed to Bell ; (ii) your commission of an act
of fraud or dishonesty in the performance of your duties ; (iii) your conviction of, or entry by
you of a guilty or no contest plea to, any felony or any misdemeanor involving moral turpitude,
dishonesty, breach of trust or unethical business conduct, or any crime involving Bell; (iv) any
breach of the non-disclosure, non-competition or non-solicitation provisions set forth below or the
unauthorized dissemination of Confidential Information, as defined below; (v) any failure or
refusal to perform any lawful directive of Bell’s Chief Executive Officer or the Board of Directors
; (vi) any breach of your fiduciary duty or duty of loyalty to Bell ; or (vii) your failure or
inability to perform your obligations to Bell for 60 consecutive days or for a total of 120 days in
any 12-month period as a result of disability or as a result of any other reason.

You may terminate your employment under this agreement and resign for Good Reason by notifying
Bell, in writing, of your resignation decision and specifying in detail as to the reasons that you
believe you may terminate this for Good Reason, including the specific provision below that is
applicable to your resignation. Your resignation notice will become effective fifteen (15) days
following the receipt of the notice by Bell.. “Good Reason” for this purpose means the occurrence
of any one or more of the following events, without your prior written consent (unless Bell cures
the circumstances constituting Good Reason prior to the termination or resignation date): (i) a
material reduction in your titles, duties, authority and responsibilities; (ii) Bell reduces your
annual Base Salary; (iii) Bell relocates your principal work location from Indianapolis, Indiana by
more than 50 miles.

If Bell terminates your employment or if you resign for Good Reason, you will be entitled to
Severance Compensation and benefits as follows:

          (1) Termination By Bell Without Cause or Resignation By You For Good Reason and Without Change
In Control. You will receive:

	 	•	 	A severance amount equal to six months of Base Annual Salary
payable in one lump-sum payment within thirty (30) days of the
termination date.
	 
	 	•	 	An additional 20% of any unvested stock option grant shall vest
and shall remain exercisable with respect to the vested portion for
a period of forty-five (45) days.
	 
	 	•	 	For the period of six months following the date of termination,
group health insurance coverage at least equal to that which would
have been provided to you if your employment had not been
terminated or, at Bell’s election, payments for the applicable
COBRA premium for such

 

 

	 	 	 	coverage, provided however, that if you obtain other employment
during this six month period, and if you are eligible to receive
group health coverage under another employer’s plan, this benefit
shall immediately cease.

You are not required to mitigate amounts payable to you under this paragraph by seeking other
employment or otherwise,

          (2) Termination By Bell Without Cause or Resignation By You For Good Reason Within 12 Months
Of A Change In Control. You will receive:

	 	•	 	A severance amount equal to one year of Base Annual Salary plus
full annual bonus, payable in one lump-sum payment within thirty
(30) days of the termination date.
	 
	 	•	 	All unvested stock options grants shall vest and shall remain
exercisable with respect to the vested portion for a period of
forty-five (45) days.
	 
	 	•	 	For the period of one year following the date of termination,
group health insurance coverage at least equal to that which would
have been provided to you if your employment had not been terminated
or, at Bell’s election, payments for the applicable COBRA premium
for such coverage, provided however, that if you obtain other
employment during this one year period, and if you are eligible to
receive group health coverage under another employer’s plan, this
benefit shall immediately cease.
	 
	 	•	 	You are not required to mitigate amounts payable to you under
this paragraph by seeking other employment or otherwise.

          For purposes of this employment agreement, a “Change In Control” shall be defined as set forth
on the last page of this letter.

          (3) Termination For Cause With or Without A Change In Control. You will not be entitled to
any severance compensation or other benefits.

Voluntary Resignation of Employment: You may voluntarily and without Good Reason resign your
employment with Bell by notifying Bell, in writing, of your resignation decision. Your resignation
notice will become effective sixty (60) days following the receipt of the notice by Bell, provided
however that Bell reserves the right, in its sole discretion, to accelerate your resignation date.
If Bell accelerates your resignation date, the date to which the resignation is accelerated shall
be the effective date of your resignation. On the effective date of your resignation, you shall be
entitled to all accrued salary and benefits, but shall not be entitled to any severance
compensation or other benefits, except as required by law. Upon such resignation by you any and
all equity interests that have been granted to you and that have not vested shall terminate and be
of no further force or effect.

Employee Benefits: During the Initial Term and any Extended Term while you are employed by Bell,
you will be entitled to receive the same benefits as Bell makes generally available from time to
time to Bell’s senior executives, as those benefits may be modified, reduced or eliminated from
time to time. Vacation, medical and dental insurance, profit sharing, and other rights
and benefit plans will be available to you as set forth in Bell’s Employee Handbook. Such rights,
programs and benefit plans may be revised from time to time at Bell’s sole discretion. Your
eligibility for medical and dental benefits is effective the first day of your employment. You
will be eligible for four (4) weeks of vacation, on accrual basis, during your first full year of
employment. With the exception of any contrary provision in this letter, or in any other document
or agreement between you and Bell, the terms of your employment are at all times subject
to the provisions of Bell’s Employee Handbook, as said Handbook may be changed from time to time by
Bell in its sole discretion.

 

 

Non-Disclosure of Confidential Information: You acknowledge that in your employment with Bell, you
will occupy a position of trust and confidence. You agree that during your employment with Bell
and at any time thereafter, except as may be required to perform your job duties for the benefit of
Bell or as required by applicable law, disclose to others or use, whether directly or indirectly,
any Confidential Information regarding Bell. “Confidential Information” shall mean any non-public
or proprietary information regarding Bell, its business and customers, in whatever form, tangible
or intangible, that is not disclosed publicly by Bell, including (without limitation) any
proprietary knowledge, trade secrets, designs, products, inventions, business practices, programs,
processes, techniques, know-how, management programs, methodology, financial information, pricing
and fee information, agreements and arrangements with affiliated companies, employee files,
personnel records, internal corporate records, corporate and business contacts and relationships,
corporate and business opportunities, telephone logs and messages, client, consultant and customer
lists and any and all other materials and information pertaining to Bell or its business to which
you have been exposed or have access to as a consequence of your employment with Bell. You
acknowledge that such Confidential Information is specialized, unique in nature and of great value
to Bell, and that such information gives Bell a competitive advantage. You agree to deliver or
return to Bell, at Bell’s request at any time or upon termination of your employment all
Confidential Information (and all copies thereof) furnished by Bell or prepared by you during your
employment with Bell.

Ownership of Rights: You acknowledge and confirm that Bell shall own, in perpetuity, throughout
the universe, all right, title and interest in and to the results and proceeds of your services to
Bell and all material produced and/or furnished by you, of any kind and nature whatsoever, it being
understood and agreed that Bell hereby acquires the maximum rights permitted to be obtained by Bell
in all proprietary rights and information. Any such materials and/or ideas submitted to Bell
hereunder automatically shall become the property of Company, and you hereby transfer and agree to
transfer and assign to Company all of said rights and materials (including, without limitation, all
copyrights and similar protections, renewals and extensions of copyright, and any and all causes of
action that may have accrued in your favor for infringement of copyright), it being understood that
you, for purposes of your employment with Bell, are acting entirely as Company’s executive for
hire. You agree that you will, at Company’s request, execute and deliver to Company or procure the
execution and delivery to Company of such documents or other instruments which Company may from
time to time deem reasonably necessary or desirable to evidence, maintain and protect its rights
hereunder and to carry out the intent and purposes of this Agreement and to convey to Company all
rights in and to the material supplied to Company by you in this employment agreement.

Non-Competition: You agree that you shall not, either alone or jointly, with or on behalf of
others, directly or indirectly, whether as principal, partner, agent, shareholder, director,
employee, consultant or otherwise, at any time during your employment with Bell, during which you
are providing any services to Bell, or during which you are receiving severance pay or other
compensation or benefits from Bell you shall not, directly or indirectly, without the prior written
consent of Bell, provide consultative services or otherwise provide services to, own, manage,
operate, join, control, participate in, or be connected with (as a stockholder, partner, or
otherwise), any business, individual, partner, firm, corporation, or other entity that is engaged
in any business that is a competitor to any of Bell’s businesses or the businesses of any
subsidiary or affiliate of Bell; provided, however, that the “beneficial ownership” by Executive,
either individually or as a member of a “group,” as such terms are used in Rule 13d of the General
Rules and Regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
of not more than five percent (5%) of the voting stock of any publicly traded corporation not shall
alone constitute a violation of this Agreement.

 

 

Non-Solicitation: You agree that you shall not, either alone or jointly, with or on behalf of
others, directly or indirectly, whether as principal, partner, agent, shareholder, director,
employee, consultant or otherwise, at any time during your employment and for a period of one (1)
year after end of your employment with Bell: (a) directly or indirectly solicit the employment or
engagement of, or otherwise induce or entice away from the employment or engagement of Bell or any
affiliated entity, either for your own benefit or for any other person or entity, any employee or
consultant who was employed or engaged by Bell or any such affiliated entity during the term of
your employment, whether or not such employee or consultant would commit any breach of his/her
contract of employment or consulting arrangement by reason of his/her leaving the service of Bell
or any affiliated entity; or (b) directly or indirectly solicit, induce or entice any client,
customer, contractor, licensor, agent, partner or other business relationship of Bell to terminate,
discontinue, renegotiate or otherwise cease or modify its or their relationship with Bell or any
affiliated entity. You expressly acknowledge and agree that the restrictions contained in this
paragraph are reasonably tailored to protect Bell’s Confidential Information and are reasonable in
all circumstances in scope, duration and all other respects. It is expressly agreed by the parties
that if for any reason whatsoever, any one or more of the restrictions in this paragraph shall
(either taken by itself or themselves together) be adjudged to go beyond what is reasonable in all
circumstances for the protection of the legitimate interests of Bell, the parties agree that the
prohibitions shall be in effect and upheld to the fullest extent permissible under applicable laws.

Acceptance: This offer is effective immediately and may be accepted by your signing and dating a
copy of this document and returning it to me on or before close of business on December 29, 2006.
If not so accepted by that time, this offer will be deemed withdrawn and will be no further in
force or effect. Any representations that may have been made to you concerning the terms or
conditions of employment, whether orally or in writing, are cancelled and superseded by this
letter. Any modifications to the terms of your employment must be confirmed to you in writing to
be valid and enforceable and your election to continue in Bell’s employ after such confirmation
will be deemed to be your agreement to such modifications. You will also be asked to bring to your
first day of work documents outlined on the attached “Employment Eligibility Verification”
document. This is necessary in order to complete your employment eligibility paperwork as required
by Federal law.

Governing Law: Your principal work location will be Indianapolis, Indiana, with travel as required
to perform the duties of your job. This Agreement will be governed by and construed in accordance
with the laws of the State of Indiana applicable to contracts made and performed in such State
without giving effect to the choice of law principles of such State that would require or permit
the application of the laws of another jurisdiction.

Arbitration: Any dispute or controversy arising out of or relating to any interpretation,
construction, performance, termination or breach of this Agreement, will be settled by final and
binding arbitration by a single arbitrator to be held in Indianapolis, Indiana, in accordance with
the American Arbitration Association national rules for resolution of employment disputes then in
effect, except as provided herein. The arbitrator selected shall have the authority to grant any
party all remedies otherwise available by law, including injunctions, but shall not have the power
to grant any remedy that would not be available in a state or federal court. The arbitrator shall
have the authority to hear and rule on dispositive motions (such as motions for summary
adjudication or summary judgment). The arbitrator shall have the powers granted by Indiana law and
the rules of the American Arbitration Association which conducts the arbitration, except as
modified or limited herein. Notwithstanding anything to the contrary in the rules of the American
Arbitration Association, the arbitration shall provide (i) for written discovery and depositions as
necessary to prosecute or defend the matter in the discretion of the arbitrator and (ii) for a
written decision by the arbitrator that includes the essential findings and conclusions upon which
the decision is based which shall be issued no later than thirty (30) days after a dispositive
motion is heard

 

 

and/or an arbitration hearing has completed. To the maximum extent allowed by law, each party to
the arbitration shall split equally the fees and administrative costs charged by the arbitrator and
American Arbitration Association. You and Bell shall have the same amount of time to file any
claim against the other as we would have if the claim had been filed in state or federal court.
In conducting the arbitration, the arbitrator will follow the rules of evidence of the State of
Indiana (including but not limited to all applicable privileges), and the award of the arbitrator
must follow Indiana and/or federal law, as applicable. The arbitrator will be selected by the
mutual agreement of the parties. If the parties cannot agree on an arbitrator, the parties shall
alternately strike names from a list provided by the American Arbitration Association until only
one name remains. The decision of the arbitrator will be final, conclusive and binding on the
parties to the arbitration. The prevailing party in the arbitration, as determined by the
arbitrator, shall be entitled to recover his or its reasonable attorneys’ fees and costs, including
the costs or fees charged by the arbitrator and the American Arbitration Association, to the extent
allowed by law. Judgment may be entered on the arbitrator’s decision in any court having
jurisdiction.

Kevin, we appreciate your interest in this opportunity at Bell Industries and we look forward to a
mutually rewarding relationship.

Employer:

Bell Industries, Inc.

	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ John Fellows 	 	 	 	Date: January 5, 2007	 	 
	 

	 	 

John Fellows, CEO
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Employee:

	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	/s/ Kevin Thimjon	 	 	 	Date: December 28, 2006	 	 
	 	 	 	 	 	 	 
	Kevin Thimjon	 	 	 	 	 	 

 

 

Employment Eligibility Verification

Employee offers One (1) of the following documents:

	•	 	U.S. Passport (expired or unexpired)

	•	 	Certificate of U.S. Citizenship

	•	 	Certificate of Naturalization

	•	 	Unexpired foreign passport with I-551 stamp or attached I-94

	•	 	Alien Registration Receipt Card with photograph

	•	 	Unexpired Temporary Resident Card

	•	 	Unexpired Employment Authorization Card

	•	 	Unexpired Reentry Permit

	•	 	Unexpired Refugee Travel Document

	•	 	Unexpired Employment Authorization Document issued by the INS with photograph

OR

Employee offers One (1) of the following documents:

	•	 	Driver’s license or ID card issued by a state with photograph

	•	 	ID card issued by federal, state or local government agencies with photograph

	•	 	School ID card with photograph

	•	 	Voter’s registration card

	•	 	U.S. Military Card or draft record

	•	 	Military dependent’s ID card

	•	 	U.S. Coast Guard Merchant Mariner Card

	•	 	Native American tribal document Driver’s license issued by a Canadian government

(Under 18 Only)

	•	 	School record or report card

	•	 	Clinic, doctor or hospital record

	•	 	Day-care or nursery school record

AND

Employee offers One (1) of the following documents:

	•	 	U.S. Social Security Card

	•	 	Certification of Birth Abroad

	•	 	Original or certified copy of a birth certificate

	•	 	Native American tribal document

	•	 	U.S. Citizen ID Card

	•	 	ID Card for use of Resident Citizen in the United States

	•	 	Unexpired Employment Authorization Document (other than I-688B)

 

 

CHANGE IN CONTROL

      (a) Any transaction or event resulting in the beneficial ownership of voting securities,
directly or indirectly, by any “person” or “group” (as those terms are defined in Sections
3(a)(9), 13(d), and 14(d) of the Exchange Act and the rules there under) having “beneficial
ownership” (as determined pursuant to Rule 13d-3 under the Exchange Act) of securities entitled to
vote generally in the election of directors (“voting securities”) of Bell that represent greater
than 35% of the combined voting power of Bell’s then outstanding voting securities, other than any
transaction or event resulting in the beneficial ownership of securities:

     (i) By a trustee or other fiduciary holding securities under any employee benefit plan
(or related trust) sponsored or maintained by Bell or any person controlled by Bell or by
any employee benefit plan (or related trust) sponsored or maintained by Bell or any person
controlled by Bell , or

     (ii) By Bell or a corporation owned, directly or indirectly, by the stockholders of
Bell in substantially the same proportions as their ownership of the stock of Bell, or

     (iii) Pursuant to a transaction described in clause (b) below that would not be a
Change in Control under clause (b), or

     (iv) The beneficial ownership of voting securities by Newcastle Capital Management,
L.P., or any Affiliate thereof, as defined in Rule 12b-2 of the Exchange Act; or

      (b) The consummation by Bell of (i) a merger, consolidation, reorganization, or business
combination or (ii) a sale or other disposition of all or substantially all of Bell’s assets (in a
single transaction to a single acquirer and not as a result of the sale, lease or other disposition
of one or more divisions or subsidiaries of Bell in separate transactions or a series of related
transactions) or (iii) the acquisition of assets or stock of another entity, in each case, other
than a transaction:

     (A) which results in Bell’s voting securities outstanding immediately before the
transaction continuing to represent (either by remaining outstanding or by being converted
into voting securities of Bell or the person that, as a result of the transaction, controls,
directly or indirectly, Bell or owns, directly or indirectly, all or substantially all of
Bell’s assets or otherwise succeeds to the business of Bell (Bell or such person, the
“Successor Entity”)) directly or indirectly, greater than 50% of the combined voting power
of the Successor Entity’s outstanding voting securities immediately after the transaction,
or

     (B) after which no person or group beneficially owns voting securities representing
greater than 50% of the combined voting power of the Successor Entity; provided, however,
that no person or group shall be treated for purposes of this clause (B) as beneficially
owning greater than 50% of the combined voting power of the Successor Entity solely as a
result of the voting power held in Bell prior to the consummation of the transaction.

For purposes of clause (a) above, the calculation of voting power shall be made as if the date of
the acquisition were a record date for a vote of Bell’s stockholders, and for purposes of clause
(b) above, the calculation of voting power shall be made as if the date of the consummation of the
transaction were a record date for a vote of Bell’s stockholders.

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