Exhibit 10.1

SECOND AMENDMENT AND JOINDER TO CREDIT AGREEMENT AND TO SECURITY AGREEMENT

This Second Amendment and Joinder to Credit Agreement and to Security Agreement
(the “Amendment”) is made as of this 20th day of June, 2013, by and among SL
INDUSTRIES, INC., a New Jersey corporation (“SL Industries NJ”), and each of the
entities listed as a Borrower on the signature pages hereto (together with SL
Industries NJ, “Existing Borrowers” and each is individually referred to as an
“Existing Borrower”), each of the entities listed as a GUARANTOR on the
signature pages hereto (collectively “Guarantors” and each is individually
referred to as a “Guarantor”, and SL INDUSTRIES, INC., a Delaware corporation
(the “Joining Borrower” and collectively with the Existing Borrowers, the
“Borrowers” and collectively with the Guarantors, the “Loan Parties”) the
financial institutions which are now or which hereafter become a party hereto as
lenders (collectively, the “Lenders” and each is individually referred to as a
“Lender”), and PNC BANK, NATIONAL ASSOCIATION, in its capacity as administrative
agent for the Lenders (hereinafter referred to in such capacity as the
“Administrative Agent”) and in its capacity as a Lender.
 
 
BACKGROUND
 
A.            On August 9, 2012, Existing Borrowers, Guarantors, Lenders and
Administrative Agent entered into a Credit Agreement to reflect certain
financing arrangements between the parties thereto (as amended, modified,
renewed, extended, replaced or substituted from time to time, the “Credit
Agreement”) and executed a Security Agreement in connection therewith (as
amended, modified, renewed, extended, replaced or substituted from time to time,
the “Security Agreement”).  The Credit Agreement, Security Agreement, and all
other documents executed in connection therewith are collectively referred to
herein as the “Existing Financing Agreements.”  All capitalized terms used
herein but not otherwise defined herein shall have the meaning given to them in
the Credit Agreement.
 
B.            The Existing Borrowers have informed Administrative Agent and
Lenders that the board of directors and shareholders of SL Industries NJ have
approved a transaction, the purpose of which is to change SL Industries NJ’s
state of incorporation from New Jersey to Delaware, through a migratory merger
with a wholly owned subsidiary of SL Industries NJ incorporated in Delaware
(collectively, the “Migratory Merger”).  The Migratory Merger was effected on
the date hereof pursuant to an agreement and plan of merger between SL
Industries NJ and its wholly owned subsidiary, Joining Borrower.  Upon the
effectiveness of the Migratory Merger (i) the separate existence of SL
Industries NJ ceased and Joining Borrower was the surviving entity, (ii) the
title to all real estate and other property owned by SL Industries NJ was vested
in Joining Borrower as the surviving entity, (iii) Joining Borrower as the
surviving entity, has all of the liabilities of SL Industries NJ, and (iv) SL
Industries NJ is deemed incorporated under the Delaware General Corporation Law
and will be governed by the Delaware certificate of incorporation and Delaware
by-laws attached to the agreement and plan of merger.
 
C.            The Existing Borrowers have informed Administrative Agent and
Lenders that the Migratory Merger has effected a change in the legal domicile of
SL Industries NJ and other changes of a legal nature; however, the Migratory
Merger did not result in any change in SL Industries NJ’s business, management,
location of its principal executive offices, assets, liabilities or net worth.  
 
 
 

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D.            The Loan Parties have requested, and the Administrative Agent and
the Lenders have agreed, to (i) consent to the Migratory Merger, (ii) join
Joining Borrower as a “Borrower” under the Credit Agreement and as a “Debtor”
under the Security Agreement and (iii) amend certain terms and provisions
contained in the Credit Agreement and Security Agreement, in each case subject
to the terms and conditions set forth in this Amendment.
 
NOW THEREFORE, with the foregoing background hereinafter deemed incorporated by
reference herein and made part hereof, the parties hereto, intending to be
legally bound, promise and agree as follows:
 
1.            Joinder.
 
(a)           Upon the effectiveness of this Amendment, Joining Borrower joins
in as, assumes the obligations and liabilities of, adopts the obligations,
liabilities and role of, and becomes, a Borrower and a Debtor (as defined in the
Security Agreement) under the Existing Financing Agreements.  All references to
Borrower or Borrowers and to Debtor or Debtors contained in the Existing
Financing Documents are hereby deemed for all purposes to also refer to and
include Joining Borrower as a Borrower or Debtor, as applicable, and Joining
Borrower hereby agrees to comply with all terms and conditions of the Existing
Financing Agreements (as may be modified in connection herewith) as if Joining
Borrower were an original signatory thereto.
 
(b)           Without limiting the generality of the provisions of paragraph (a)
above, Joining Borrower hereby becomes liable on a joint and several basis,
along with all other Borrowers, for all Loans made by Lenders under the Existing
Financing Agreements and all Obligations under the Existing Financing
Agreements.
 
2.            Consent.
 
(a)           In reliance upon the documentation and information provided to
Administrative Agent in connection with the Migratory Merger, and
notwithstanding anything to the contrary contained in the Credit Agreement or
any of the Existing Financing Agreements, upon satisfaction of the conditions
set forth below, Administrative Agent and Lenders hereby consent to the
Migratory Merger.
 
(b)           This consent shall be effective only as to the Migratory
Merger.  Loan Parties agree that the consent set forth herein shall be limited
to the precise meaning of the words as written and shall not be deemed (i) to be
a consent to or any waiver or modification of any other term or condition of any
Existing Financing Agreement, or (ii) to prejudice any right or remedy that
Administrative Agent or Lenders may now have or may in the future have under or
in connection with any Existing Financing Agreement other than with respect to
the matters for which the consent in the preceding paragraph has been
provided.  Other than as described in this Amendment, the consent described
herein shall not alter, affect, release or prejudice in any way any Obligations
under the Existing Financing Agreements.  This consent shall not be construed as
establishing a course of conduct on the part of Administrative Agent or Lenders
upon which the Loan Parties may rely at any time in the future. Loan Parties
expressly waive any right to assert any claim to such effect at any time.
 
 
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2.            Amendments to Credit Agreement.  Upon the effectiveness of this
Amendment, all references to SL Industries, Inc., a New Jersey corporation
contained in the Existing Financing Agreements (to the extent not otherwise
modified in connection herewith) are hereby deemed for all purposes to be
replaced with SL Industries, Inc., a Delaware corporation.
 
3.            Schedules.  Upon the effectiveness of this Amendment, the
Schedules to the Credit Agreement shall be amended and restated in their
entirety and replaced with the updated Schedules attached hereto as Exhibit A
and the Schedules to the Security Agreement shall be amended and restated in
their entirety and replaced with the updated Schedules attached hereto as
Exhibit B.
 
4.            Representations and Warranties.  Each Loan Party hereby:
 
(a)            reaffirms all representations and warranties made to
Administrative Agent and Lenders under the Credit Agreement, Security Agreement
and all of the other Existing Financing Agreements (as modified in connection
herewith) and confirms that all are true and correct in all material respects as
of the date hereof, in each case other than representations and warranties that
relate to a specific date;
 
(b)            reaffirms all of the covenants contained in the Credit Agreement
and Security Agreement, and covenants to abide thereby until all Loans,
Obligations and other liabilities of Loan Parties to Administrative Agent and
Lenders, of whatever nature and whenever incurred, are satisfied and/or released
by Administrative Agent and Lenders;
 
(c)            represents and warrants that no Potential Default or Event of
Default has occurred and is continuing under any of the Existing Financing
Agreements;
 
(d)            represents and warrants that since August 9, 2012, no event or
development has occurred which has had or is reasonably likely to have a
Material Adverse Change;
 
(e)            represents and warrants that it has the authority and legal right
to execute, deliver and carry out the terms of this Amendment and all related
agreements, instruments, and documents to which such Loan Party is a party, that
such actions were duly authorized by all necessary corporate or company action
and that the officers executing this Amendment and any related agreements,
instruments or documents on its behalf were similarly authorized and empowered,
and that neither this Amendment or any related agreements, instruments, or
documents contravenes any provisions of its Articles of Incorporation or
Certificate of Formation, as applicable and Bylaws or Operating Agreement, as
applicable, or of any contract or agreement to which it is a party or by which
any of its properties are bound; and
 
(f)            represents and warrants that this Amendment and all assignments,
instruments, documents, and agreements executed and delivered by such Loan Party
in connection herewith, are valid, binding and enforceable in accordance with
their respective terms.
 
 
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5.            Security Interest.  As security for the payment and performance of
the Obligations, and satisfaction by the Loan Parties of all covenants and
undertakings contained in the Credit Agreement, the Loan Documents and the
Existing Financing Agreements (as modified in connection herewith), each of the
Loan Parties reconfirms the prior grant of the security interest in and first
priority, perfected lien in favor of Administrative Agent, for its benefit and
the ratable benefit of each Lender, upon and to, all of its right, title and
interest in and to the Collateral, whether now owned or hereafter acquired,
created or arising and wherever located.  Joining Borrower hereby agrees that
the Administrative Agent and the Lenders and any IRH Provider shall have, and
Joining Borrower hereby grants to and creates in favor of PNC Bank, National
Association, in its capacity as Administrative Agent, for its benefit and the
ratable benefit of each Lender and IRH Provider (as defined in the Security
Agreement), a continuing first priority, perfected lien and security interest in
and upon the Collateral (as defined in the Security Agreement) of Joining
Borrower, whether now owned or hereafter acquired or arising and wherever
located.
 
6.            Confirmation of Indebtedness.  Loan Parties confirm and
acknowledge that as of the close of business on June 19, 2013, Borrowers were
indebted to Administrative Agent and Lenders under the Credit Agreement in the
aggregate principal amount of (i) $3,224,319.00, comprised of $2,740,000.00 of
outstanding Revolving Credit Loans and $484,319.00 for issued and outstanding
Letters of Credit and (ii) $8,563,666.00 under the DOJ/EPA Letter of Credit, in
each case without any deduction, defense, setoff, claim or counterclaim, plus
all fees, costs and expenses incurred to date in connection with the Credit
Agreement and the other Loan Documents.
 
7.            Acknowledgment of Guarantors. Each Guarantor hereby covenants and
agrees that the Continuing Agreement of Guaranty and Suretyship dated August 9,
2012, as amended, restated, supplemented and otherwise modified from time to
time, shall remain in full force and effect and shall continue to cover the
existing and future Obligations of Borrowers and each other Guarantor to
Administrative Agent and Lenders under the Credit Agreement and the other Loan
Documents.
 
8.            Conditions Precedent/Effectiveness Conditions.  This Amendment
shall be effective upon the satisfaction of each of the following conditions
(all documents to be in form and substance reasonably satisfactory to
Administrative Agent and Administrative Agent’s counsel):
 
(a)           Administrative Agent shall have received this Amendment duly
executed by Lenders and all Loan Parties;
 
(b)           Loan Parties shall have paid or reimbursed Administrative Agent
for its reasonable attorneys’ fees and expenses as required under the Credit
Agreement, including those in connection with the preparation, negotiation and
execution of this Amendment and the documents provided for herein or related
hereto;
 
(c)           Administrative Agent shall have received each of the agreements,
instruments, certificates and documents listed on Exhibit C attached hereto; and
 
 
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(d)           Execution and/or delivery of all other agreements, instruments and
documents requested by Administrative Agent to effectuate and implement the
terms hereof.
 
9.            Reaffirmation of Existing Financing Agreements.  Except as
expressly modified by the terms hereof, all of the terms and conditions of the
Credit Agreement, as amended, the Security Agreement, as amended, and all other
of the Existing Financing Agreements (except as otherwise modified in connection
herewith), are hereby reaffirmed and shall continue in full force and effect as
therein written.
 
10.          Release.  As further consideration for Administrative Agent’s and
Lenders’ agreement to grant the accommodations set forth herein, each Borrower
and each Guarantor hereby waives and releases and forever discharges
Administrative Agent and Lenders and their respective officers, directors,
attorneys, agents and employees (the “Released Parties”) from any liability,
damage, claim, loss or expense of any kind that Borrowers, Guarantors, or any of
them, may have against Released Parties, or any of them, arising out of or
relating to the Obligations, this Amendment or the Loan Documents.
 
11.          Miscellaneous.
 
(a)           No rights are intended to be created hereunder for the benefit of
any third party donee, creditor, or incidental beneficiary.
 
(b)           The headings of any paragraph of this Amendment are for
convenience only and shall not be used to interpret any provision hereof.
 
(c)           No modification hereof or any agreement referred to herein shall
be binding or enforceable unless in writing and signed on behalf of the party
against whom enforcement is sought.
 
(d)           The terms and conditions of this Amendment shall be governed by
the laws of the State of New York.
 
(e)           This Amendment may be executed in any number of counterparts and
by facsimile, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same
agreement.  Delivery by facsimile or electronic transmission shall bind the
parties hereto.
 
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
 
 
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IN WITNESS WHEREOF, the parties have caused this Amendment to be executed and
delivered by their duly authorized officers as of the date first above written.

BORROWERS:
SL INDUSTRIES, INC.
     
By:
/s/ Louis J. Belardi
 
Name:
Louis J. Belardi
 
Title:
CFO, Secretary & Treasurer

 
SL DELAWARE, INC.
SL DELAWARE HOLDINGS, INC.
TEAL ELECTRONICS CORPORATION
RFL ELECTRONICS INC.
SL MONTEVIDEO TECHNOLOGY, INC.
SL SURFACE TECHNOLOGIES, INC.
CEDAR CORPORATION
MTE CORPORATION
MEX HOLDINGS LLC
SL POWER ELECTRONICS CORPORATION
SLGC HOLDINGS, INC.
     
By:
/s/ Louis J. Belardi
 
Name:
Louis J. Belardi
 
Title:
Authorized Officer

GUARANTORS:
SL POWER ELECTRONICS LTD.
INDUSTRIAS SL, S.A. DE C.V.
CONDOR POWER SUPPLIES DE MEXICO, S.A. DE C.V.
SL XIANGHE POWER ELECTRONICS CORP.
SL SHANGHAI POWER ELECTRONICS CORP.
SL SHANGHAI INTERNATIONAL TRADING CORP.
CEDRO DE MEXICO, S.A. DE C.V.
TPE DE MEXICO, S. DE R.L. DE C.V.
     
By:
/s/ Louis J. Belardi
 
Name:
Louis J. Belardi
 
Title:
Authorized Officer

[SIGNATURE PAGE TO SECOND AMENDMENT TO AND JOINDER TO
CREDIT AGREEMENT AND SECURITY AGREEMENT]
 
 
S-1

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AGENT AND LENDER:
PNC BANK, NATIONAL ASSOCIATION, as a Lender and as Administrative Agent
         
By:
/s/ John T. Wilden
 
Name:
John T. Wilden
 
Title:
Senior Vice President

[SIGNATURE PAGE TO SECOND AMENDMENT TO AND JOINDER TO
CREDIT AGREEMENT AND SECURITY AGREEMENT]

 
S-2

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Exhibit A

Amended and Restated Schedules to the Credit Agreement
 
 
 

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SCHEDULE 1.1(A)
 
PRICING GRID --
VARIABLE PRICING AND FEES BASED ON LEVERAGE RATIO
 

Level
Leverage Ratio
Commitment
Fee
Letter of Credit Fee
Revolving Credit Base Rate Spread
Revolving Credit LIBOR Rate Spread
 
I
 
Less than or equal to 1.75 to 1.0
 
0.125%
 
1.25%
 
0.25%
 
1.25%
 
II
 
Greater than 1.75 to 1.0 but less than or equal to 2.25 to 1.0
 
0.15%
 
1.50%
 
0.50%
 
1.50%
 
III
 
Greater than 2.25 to 1.0 but less than or equal to 2.75 to 1.0
 
0.20%
 
1.75%
 
0.75%
 
1.75%
 
IV
 
Greater than 2.75 to 1.0 but less than or equal to3.25 to 1.0
 
0.25%
 
2.00%
 
1.00%
 
2.00%

 
For purposes of determining the Applicable Margin, the Applicable Commitment Fee
Rate and the Applicable Letter of Credit Fee Rate:
 
(a)           The Applicable Margin, the Applicable Commitment Fee Rate and the
Applicable Letter of Credit Fee Rate shall be determined on the Closing Date
based on the Leverage Ratio computed on such date pursuant to a Compliance
Certificate to be delivered on the Closing Date.
 
(b)           The Applicable Margin, the Applicable Commitment Fee Rate and the
Applicable Letter of Credit Fee Rate shall be recomputed as of the end of each
fiscal quarter ending after the Closing Date based on the Leverage Ratio as of
such quarter end.  Any increase or decrease in the Applicable Margin, the
Applicable Commitment Fee Rate or the Applicable Letter of Credit Fee Rate
computed as of a quarter end shall be effective on the date on which the
Compliance Certificate evidencing such computation is due to be delivered under
Section 8.3.3 [Certificate of Borrower].  If a Compliance Certificate is not
delivered when due in accordance with such Section 8.3.3, then the rates in
Level IV shall apply as of the first Business Day after the date on which such
Compliance Certificate was required to have been delivered and shall remain in
effect until the date on which such Compliance Certificate is delivered.
 
(c)           If, as a result of any restatement of or other adjustment to the
financial statements of the Borrower or for any other reason, the Borrower or
the Lenders determine that (i) the Leverage Ratio as calculated by the Borrower
as of any applicable date was inaccurate and (ii) a proper calculation of the
Leverage Ratio would have resulted in higher pricing for such period, the
Borrower shall immediately and retroactively be obligated to pay to the
Administrative Agent for the account of the applicable Lenders, promptly on
demand by the Administrative Agent (or, after the occurrence of an actual or
deemed entry of an order for relief with respect to the Borrower under the
Bankruptcy Code of the United States, automatically and without further action
by the Administrative Agent, any Lender or the Issuing Lender), an amount equal
to the excess of the amount of interest and fees that should have been paid for
such period over the amount of interest and fees actually paid for such
period.  This paragraph shall not limit the rights of the Administrative Agent,
any Lender or the Issuing Lender, as the case may be, under Section 2.9 [Letter
of Credit Subfacility] or 4.3 [Interest After Default] or 9 [Default].  The
Borrower's obligations under this paragraph shall survive the termination of the
Commitments and the repayment of all other Obligations hereunder.
 
 
 
 
SCHEDULE 1.1(A) - 1
 
 
 

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SCHEDULE 1.1(B)
 
COMMITMENTS OF LENDERS AND ADDRESSES FOR NOTICES
 
Page 1 of 2
 
Part 1 - Commitments of Lenders and Addresses for Notices to Lenders
 
 
 
 
Lender
Amount of
Commitment
for Revolving
Credit Loans
Amount of
Commitment
for DOJ/EPA
Loans
 
 
 
Commitment
 
 
 
Ratable Share
Name: PNC Bank, National Association
Address: 1600 Market Street,
22nd Floor, F2-F070-22-2
Philadelphia, PA 19103
Attention: Kirk Mader,
Senior Vice President
Telephone:        215.585.1385
Telecopy:          215.585.4144
 
 
 
 
 
 
 
$40,000,000
 
 
 
 
 
$10,700,000
 
 
 
 
 
$50,700,000
 
 
 
 
 
100%

 
 
 
SCHEDULE 1.1(B) - 1
 
 
 

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SCHEDULE 1.1(B)
 
COMMITMENTS OF LENDERS AND ADDRESSES FOR NOTICES
 
Page 2 of 2
 
Part 2 - Addresses for Notices to Borrower and Guarantors:
 
ADMINISTRATIVE AGENT
 
Name: PNC Bank, National Association
Address: 1600 Market Street, 22nd Floor, F2-F070-22-2
Philadelphia, PA 19103
Attention: Kirk Mader, Senior Vice President
Telephone:         215.585.1385
Telecopy:           215.585.4144

With a Copy To:
 
PNC Bank, National Association
Loan Administrator -- Team Lead
Commercial Loan Administration
PNC Harborside
One East Pratt Street
4th Floor W, Mail Stop C3-C411-04-1
Baltimore, Maryland 21202
Attention:          Nancy Norris
Telephone:         410.237.5283
Telecopy:           410.237.5256

BORROWER:
 
Name: SL Industries, Inc.
SL Delaware, Inc.
SL Delaware Holdings, Inc.
Teal Electronics Corporation
RFL Electronics, Inc.
SL Montevideo Technology, Inc.
SL Surface Technologies, Inc.
MTE Corporation
Cedar Corporation
MEX Holdings LLC
SL Power Electronics Corporation
SLGC Holdings, Inc.
Address: 520 Fellowship Road, Suite A-114
Mount Laurel, NJ 08054
Attention:          Louis J. Belardi
Telephone:         (856) 222-5525
Telecopy:           (856) 727-1683
 
 
SCHEDULE 1.1(B) - 2
 
 
 

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GUARANTORS:
 
Name: SL Power Electronics Ltd.
Industrias SL, S.A. de C.V.
Condor Power Supplies de Mexico, S.A. de C.V.
SL Xianghe Power Electronics Corp.
SL Shanghai Power Electronics Corp.
SL Shanghai International Trading Corp.
Cedro de Mexico, S.A. de C.V.
TPE de Mexico, S. de R.L. De C.V.
Address: 520 Fellowship Road, Suite A-114
Mount Laurel, NJ 08054
Attention:          Louis J. Belardi
Telephone:         (856) 222-5525
Telecopy:           (856) 727-1683
 
 
SCHEDULE 1.1(B) - 3
 
 
 

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SCHEDULE 1.1(P)
 
PERMITTED LIENS

Debtor
Secured Party
Type/Filing Date
File Number
State
Collateral Description
 
RFL Electronics Inc.
Oce Financial Services Inc.
Original
4/7/2010
25593105
NJ
Equipment under PO# 49315 and all accessions, attachments, replacements,
substitutions, modifications and additions thereto, now or hereafter acquired,
and all proceeds thereof (including insurance proceeds) Model serial#  with all
peripherals TDS720FA, 0772006341, 4904942, 0073205780, TC54, 0451014275. This is
a precautionary filing in connection with a true lease transaction and is not to
be construed as indicating the transaction is other than a true lease.

 
 
 

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SCHEDULE 6.1.1
 
QUALIFICATIONS TO DO BUSINESS

 
Loan Party
Jurisdiction of Organization
Other States in which Loan Party is Qualified to do Business
 
SL Industries, Inc.
Delaware
New Jersey
 
SL Delaware, Inc.
Delaware
None
 
SL Delaware Holdings, Inc.
Delaware
None
 
MTE Corporation
Wisconsin
None
 
RFL Electronics Inc.
Delaware
New Jersey, Ohio
 
SL Montevideo Technology, Inc.
Minnesota
Pennsylvania
 
Cedar Corporation
Nevada
None
 
Teal Electronics Corporation
California
None
 
Mex Holdings LLC
Delaware
None
 
SL Power Electronics Corporation
Delaware
California, Massachusetts, Minnesota,   
New York, Pennsylvania, Washington
 
SLGC Holdings, Inc.
Delaware
None
 
SL Surface Technologies, Inc.
New Jersey
None
 
SL Power Electronics Ltd.
 
 
United Kingdom
 
None
 
Industrias SL, S.A. de C.V.
Mexico
None
 
Condor Power Supplies de Mexico, S.A. de C.V.
Mexico
None
 
SL Xianghe Power Electronics Corp.
China
None
 
SL Shanghai Power Electronics Corp.
China
None
 
SL Shanghai International Trading Corp.
China
None
 
Cedro de Mexico, S.A. de C.V.
Mexico
None
 
TPE de Mexico, S. de R.L. De C.V.
Mexico
None

 
 
 

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SCHEDULE 6.1.2
 
SUBSIDIARIES
 
Company
 
Authorized Shares
 
Shares Issued and Outstanding
Holder and % of Equity Interest
 
SL Delaware, Inc.
1,000
1,000
 
SL Industries, Inc.
100%
SL Delaware Holdings, Inc.
1,000
1,000
 
SL Industries, Inc.
100%
MTE Corporation
50,000
1,746
 2/3
SL Delaware Holdings, Inc.
100%
RFL Electronics Inc.
1,000
1,000
 
SL Delaware Holdings, Inc.
100%
SL Montevideo Technology, Inc.
100
1
 
SL Delaware Holdings, Inc.
100%
Cedar Corporation
25,000
25,000
 
SL Montevideo Technology, Inc.
100%
Teal Electronics Corporation
1,000
100
 
SL Delaware Holdings, Inc.
100%
Mex Holdings LLC
N/A
N/A
 
Teal Electronics Corporation
100%
SL Power Electronics Corporation
3,000
1,000
 
SL Delaware Holdings, Inc.
100%
SLGC Holdings, Inc.
3,000
1,000
 
SL Delaware Holdings, Inc.
100%
SL Surface Technologies, Inc.
2,500
2,500
 
SLGC Holdings, Inc.
100%
SL Power Electronics Ltd.
50,000
1,000
 
SL Power Electronics Corporation
100%
Industrias SL, S.A. de C.V.
100
100
 
SL Power Electronics Corporation
99%.
SL Delaware Holdings, Inc.
1%
Condor Power Supplies de Mexico, S.A. de C.V.
5,000
5,000
 
SL Power Electronics Corporation
99%.
SL Industries, Inc.
1%
SL Xianghe Power Electronics Corp.
386,065
386,065
 
SL Power Electronics Corporation
100%
SL Shanghai Power Electronics Corp.
39,656
39,656
 
SL Power Electronics Corporation
100%
SL Shanghai International Trading Corp.
39,648
39,648
 
SL Power Electronics Corporation
100%
Cedro de Mexico, S.A. de C.V.
5,000
5,000
 
Cedar Corporation
99.98%
SL Delaware Holdings, Inc.
.02%
TPE de Mexico, S. de R.L. de C.V.
3,000
3,000
 
Teal Electronics Corporation
99%
MEX Holdings LLC
1%

 
 
 
 

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SCHEDULE 6.1.4
 
REQUIRED CONSENTS AND FILINGS
 
Filing of the UCC financing statements, and filings relating to the perfection
of security interests in intellectual property including tradenames, copyrights
and patents.
 
 
 

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SCHEDULE 6.1.5
 
LITIGATION
 
China

During 2012, the Company conducted an investigation to determine whether certain
employees of SL Xianghe Power Electronics Corporation, SL Shanghai Power
Electronics Corporation and SL Shanghai International Trading Corporation, three
of the Company’s indirect wholly-owned subsidiaries incorporated and operating
exclusively in China, may have improperly provided gifts and entertainment to
government officials (the “China Investigation”). Based upon the China
Investigation, which we believe is substantially complete, the estimated amounts
of such gifts and entertainment were not material to the Company’s financial
statements. Such estimate does not take into account the costs to the Company of
the China Investigation itself, or any other additional costs.
 
The China Investigation included determining whether there were any violations
of laws, including the U.S. Foreign Corrupt Practices Act (“FCPA”). The
Company’s outside counsel has contacted the DOJ and the Securities and Exchange
Commission (the “SEC”) voluntarily to disclose that the Company was conducting
an internal investigation, and agreed to cooperate fully and update the DOJ and
SEC periodically on further developments. The Company’s counsel has done so, and
the Company has continued to cooperate fully with the DOJ and the SEC on the
results of the China Investigation and various remediation actions undertaken by
the Company.
 
The Company had retained outside counsel and forensic accountants to assist in
the China Investigation. Additionally, the Company hired outside consultants to
provide assistance in implementing a mandatory FCPA compliance program for all
of its employees which was completed in December 2012. Also, during the first
and second quarters of 2013 the Company engaged outside consultants to perform
FCPA compliance tests at its operations in China and Mexico. The Company cannot
predict at this time whether any regulatory action may be taken or any other
adverse consequences may result from this matter.

 
Environmental
 
On December 3, 2012, the Company received a demand letter from the State of New
Jersey. The demand is for $1,300,000 for past and future cleanup costs and
$500,000 for natural resource damages (“NRD”) for a total of $1,800,000 (the
“New Jersey Claim”). Although the Company and its counsel believe that it has
meritorious defenses to any claim for reimbursement, on February 13, 2013 the
Company offered to pay $250,000 to fully resolve the claim  presented by the
State of New Jersey for past costs, future costs and NRD at the Puchack Well
Field Superfund site. The State of New Jersey is currently evaluating the
Company’s counter-offer.
 
 
The matters set forth on Schedule 6.1.14 are incorporated herein by reference. 
 
 
 

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SCHEDULE 6.1.6
 
MATERIAL ADVERSE CHANGE
 
The matters set forth on Schedule 6.1.14 are incorporated herein by reference.
 
 
 

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SCHEDULE 6.1.10
 
INTELLECTUAL PROPERTY
 
None
 
 
 

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SCHEDULE 6.1.14
 
ENVIRONMENTAL MATTERS

 
There are three sites on which the Company may incur material environmental
costs in the future as a result of past activities of its former subsidiary,
SurfTech. There are two Company owned sites related to its former subsidiary,
SurfTech. These sites are located in Pennsauken, New Jersey (the “Pennsauken
Site”) and in Camden, New Jersey (the “Camden Site”). There is also a third
site, which is not owned by the Company, referred to as the “Puchack Well Field
Site.” The Puchack Well Field Site and the Pennsauken Site are part of the
Puchack Well Field Superfund Site.
 
The Company has been and is the subject of administrative actions that arise
from its ownership of SL Surface Technologies, Inc. (“SurfTech”), a wholly-owned
subsidiary, the assets of which were sold in November 2003. SurfTech formerly
operated chrome-plating facilities in Pennsauken Township, New Jersey (the
“Pennsauken Site”) and Camden, New Jersey (the “Camden Site”).
 
In 2006 the United States Environmental Protection Agency (the “EPA”) named the
Company as a potential responsible party (a “PRP”) in connection with the
remediation of the Puchack Well Field, which has been designated as a Superfund
Site. The EPA has alleged that hazardous substances generated at the Company’s
Pennsauken Site contaminated the Puchack Well Field. As a PRP, the Company is
potentially liable, jointly and severally, for the investigation and remediation
of the Puchack Well Field Superfund Site under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (“CERCLA”).
 
The EPA is remediating the Puchack Well Field Superfund Site in two separate
operable units. The first operable unit (“OU-1”) consists of an area of chromium
groundwater contamination in three aquifers that exceeds the selected cleanup
standard. The second operable unit (“OU-2”) pertains to sites that are allegedly
the sources of contamination for the first operable unit. The EPA advised the
Company in October 2010 that OU-2 includes soil contamination in the immediate
vicinity of the Company’s Pennsauken Site.
 
In June 2011, the EPA announced a proposed plan for “cleaning up the soil” at
OU-2. The remedy proposed by the EPA is “Geochemical Fixation.” This remedy
involves applying a chemical reductant to the contaminated soil to reduce
hexavalent chromium by converting it to immobilized trivalent chromium. The
EPA’s estimated cost for this remedy is $20,700,000 over seven years. The public
comment period for the proposed plan expired on July 27, 2011. On September 26,
2011 the EPA issued a Record of Decision (“ROD”) selecting the Geochemical
Fixation remedy. This remedy involves mixing a reducing agent to treat soils
containing concentrations of hexavalent chromium greater than 20 parts per
million. The remedy also requires post-remediation sampling, site restoration
and implementing a groundwater sampling and analysis program.
 
The Company has reached an agreement with both the United States Department of
Justice (“DOJ”) and EPA related to its liability for both OU-1 and OU-2 and has
entered into a Consent Decree which governs the agreement, the terms of which
are described below. The Company has agreed to perform the remediation for OU-2.
The Company intends to have its environmental consultants, who are expected to
perform the requirements of the OU-2 remediation, perform an active role in the
remediation design. Also, the Company has agreed to pay a fixed sum for the
EPA’s past cost for OU-2 and a portion of the EPA’s past cost for OU-1. The
payments are to be made in five equal payments of $2,141,000 for a total
$10,705,000, plus interest. The first payment plus interest is to be made ten
days after the effective date of the Consent Decree (day the judge signs and
files the decree). The next four payments will be made on the anniversary of the
first payment plus ten days in the same amount of $2,141,000 plus interest. The
Company has also agreed to pay the EPA’s costs for oversight of the OU-2
remediation. The Consent Decree was subject to a 30 day public comment period
which expired on April 25, 2013.The United States District Court judge signed
the Consent Decree effective April 30, 2013, thereby triggering the Company’s
obligation under the Consent Decree. On May 10, 2013 the Company made the first
payment related to its obligation under the Consent Decree in the amount of
$2,185,000 which included interest. On May 28, 2013 a letter of credit in the
amount of $8,564,000 was issued in favor of the EPA to provide financial
assurance related to the Company’s remaining obligation to pay for EPA’s past
cost as mentioned above.
 
 
 

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With respect to the Camden Site, the Company has reported soil contamination and
a groundwater contamination plume emanating from the site. The New Jersey
Department of Environmental Protection (“NJDEP”) approved, and the Company
implemented in 2010, an interim remedial action pilot study to inject
neutralizing chemicals into the unsaturated soil. Based on an assessment of
post-injection data, our consultants believe the pilot study can be implemented
as a full scale soil remedy to treat unsaturated contaminated soil. A Remedial
Action Workplan for soils (“RAWP”) is being developed. The RAWP will select the
injection remedy as the site wide remedy for unsaturated soils, along with
demolition and proper disposal of the former concrete building slab and targeted
excavation and disposal of impacted soil immediately underlying the slab.
Additionally, the RAWP will address a small area of impacted soil off the
property. The RAWP will be submitted to the NJDEP, by the Licensed Site
Remediation Professional (“LSRP”) for the site. The RAWP is scheduled to be
implemented in 2014. Also, the Company’s environmental consultants finalized an
interim remedial action pilot study to treat on-site contaminated groundwater,
consisting of injecting food-grade product, into the groundwater at the down
gradient property boundary, to create a “bio-barrier.” The pilot study includes
post-injection monitoring to assess the bio-barrier’s ability to treat
contaminated groundwater. Implementation of the groundwater pilot study will
occur in 2013 with post-injection effectiveness monitoring to occur in 2014.
 
As previously reported, the Company is currently participating in environmental
assessments and cleanups at a number of sites. One of these sites is a
commercial facility, located in Wayne, New Jersey. Contaminated soil and
groundwater has undergone remediation with NJDEP oversight, but contaminants of
concern (“COCs”) in groundwater and surface water, which extend off-site, still
remain above applicable NJDEP remediation standards. Certain COCs have also been
detected in the indoor air of two commercial buildings, located on the property.
One of the buildings (the “Main Building”) was outfitted with a sub-slab
depressurization system as a mitigation measure. The source investigations under
the Main Building were completed in June 2012. Soil and groundwater samples
collected from underneath the Main Building identified COCs in excess of the
NJDEP’s applicable remediation standards. Consequently, a soil contaminant
source remains under the Main Building that is feeding the groundwater
contamination. The remedial investigation conducted in the second quarter of
2012 identified a new soil source of COCs. A soil remedial action plan will be
required in order to remove the new soil source contamination by a second
building that continues to impact groundwater. Our consultants have reviewed
data to determine what supplemental remedial action is necessary for soils, and
whether to modify or expand the groundwater remedy that will likely consist of
additional in-situ injections of food grade product into the groundwater.
Estimates have been developed by the Company’s consultants, which includes costs
to enhance the existing vapor intrusion system, remedial injections, soil
excavation and additional tests and remedial activities. Costs related to this
site are recorded as part of discontinued operations, net of tax.
 
 
 

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Westville, NJ
 
The Former SL Waber Facility is located in Westville, New Jersey. The property
was previously owned by SL Industries, and operated by SL Waber, a subsidiary of
SL Industries.  SL Waber ceased operations; SL Industries subdivided the
property, and sold a portion of the property to a knitting company in 1998. SL
Industries remains the owner of a small undeveloped portion of the property. SL
Industries is under an Administrative Consent Order/Remediation Agreement with
the New Jersey Department of Environmental Protection (“NJDEP”) to remediate the
property.  Under NJDEP guidelines, the contaminates of concern (“COC’s”)
exceeded certain screening levels.  Annual groundwater sampling was completed in
May, 2011 on the property. Analytical results confirmed that COC’s for the
property remain above applicable NJDEP standards. Vapor sampling was completed
and a “Vapor Intrusion Update Report” was sent to the NJDEP. In the report the
Company’s consultants indicated that there are two areas of elevated vapors of
concern (“VOC”) concentrations beneath one of the building’s floor located on
the property.  Soil samples collected from underneath the building confirmed
that a soil source is present and that another one may be present. The remedial
investigation of the property had been completed by May 2012 per statutory
mandate.  The Company’s consultants are assessing soil and groundwater remedial
options.  This assessment will be important to determine if supplemental
injections into the groundwater are necessary to “kick start” the biodegradation
process which was performed several years ago. Additional sampling will be
conducted during 2013 in known areas of concern (“AOC’s”) to meet the remedial
investigation deadline of May 7, 2014
 
Swope Superfund Site
 
The Company has a minor liability for this site, approximately 0.49% for
liabilities related to remediation and other administrative costs.  Expenses for
the past several years have been minor. The Company has accrued $45,000 relating
to the Swope site.
 
The Company has reported soil and groundwater contamination at the facility of
SL-MTI located on its property in Montevideo, Minnesota. An analysis of the
contamination has been completed and a remediation plan has been implemented at
the site pursuant to the remedial action plan approved by the Minnesota
Pollution Control Agency. The remaining steps under this plan are the monitoring
of samples. Costs related to this site are recorded as a component of continuing
operations.
 
 
 

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SCHEDULE 8.1.3
 
INSURANCE REQUIREMENTS RELATING TO THE COLLATERAL
 
COVENANTS:
 
At the request of the Administrative Agent, the Loan Parties shall deliver to
the Administrative Agent and each of the Lenders (x) on the Closing Date and
annually thereafter an original certificate of insurance signed by the Loan
Parties' independent insurance broker describing and certifying as to the
existence of the insurance on the Collateral required to be maintained by this
Agreement and the other Loan Documents, together with a copy of the endorsement
described in the next sentence attached to such certificate, and (y) from time
to time a summary schedule indicating all insurance then in force with respect
to each of the Loan Parties.  Such policies of insurance shall contain special
endorsements which include the provisions set forth below or are otherwise in
form acceptable to the Administrative Agent in its discretion.  The applicable
Loan Parties shall notify the Administrative Agent promptly of any occurrence
causing a material loss or decline in value of the Collateral and the estimated
(or actual, if available) amount of such loss or decline.  Any monies received
by the Administrative Agent constituting insurance proceeds may, at the option
of the Administrative Agent, (i) in the case of property insurance proceeds
received during the existence of an Event of Default, be applied by the
Administrative Agent to the payment of the Obligations in accordance with the
terms of the Credit Agreement, (ii) for losses of less than $500,000 received at
such time as no Event of Default or Potential Default exists, be disbursed by
the Administrative Agent to the applicable Loan Parties, and (iii) for losses
equal to or greater than $500,000 received at such time as no Event of Default
or Potential Default exists, be disbursed by the Administrative Agent to the
applicable Loan Parties on such terms as are deemed appropriate by the
Administrative Agent for the repair, restoration and/or replacement of
Collateral and other property in respect of which such proceeds were received.
 
ENDORSEMENT:
 
(i) specify the Administrative Agent as an additional insured, mortgagee and
lender loss payee as its interests may appear,
 
(ii) with respect to all property insurance policies, provide that the interest
of the Lenders shall be insured regardless of any breach or violation by the
applicable Loan Parties of any warranties, declarations or conditions contained
in such policies or any action or inaction of the applicable Loan Parties or
others insured under such policies, except that the insurer shall not be
obligated to maintain the insurance if the breach consists of non-payment of
premiums which continues for 30 days after written notice to Administrative
Agent,
 
(iii) provide a waiver of any right of the insurers to set off or counterclaim
or any other deduction, whether by attachment or otherwise,
 
(iv) provide that any and all rights of subrogation which the insurers may have
or acquire against the Loan Parties shall be, at all times and in all respects,
junior and subordinate to the prior Payment In Full of the Indebtedness
hereunder and that no insurer shall exercise or assert any right of subrogation
until such time as the Indebtedness hereunder has been paid in full and the
Commitments have terminated,
 
 
 

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(v) provide that no cancellation of such policies for any reason (including
non-payment of premium) nor any change therein shall be effective until at least
thirty (30) days after receipt by the Administrative Agent of written notice of
such cancellation or change,
 
(vi) be primary without right of contribution of any other insurance carried by
or on behalf of any additional insureds with respect to their respective
interests in the Collateral, and
 
(vii) provide that inasmuch as the policy covers more than one insured, all
terms, conditions, insuring agreements and endorsements (except limits of
liability) shall operate as if there were a separate policy covering each
insured.
 
 
 

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SCHEDULE 8.2.1
 
PERMITTED INDEBTEDNESS

 
 
1.
Indebtedness related to foreign currency forward contracts used to hedge foreign
currency risk.*

 
 
2.
Indebtedness related to Copper Purchase Agreements.  As of June 20, 2013,
inventory purchase agreements for copper totaled $1,660,088.*

 
 
3.
Operating leases as and to the extent permitted under Section 8.2.14.*

 
 
4.
Letter of Credit issued by PNC Bank National Association., held by Royal
Bank of Canada on behalf of SL Industries, Inc. in the amount of $474,179
(amount changes annually).

 
 
5.
Letter of Credit issued by PNC Bank National Association., held by Daniel
Bawabe, Trustee of E2S Trust, on behalf of SL Power Electronics Corporation.

 
 
6.
Indebtedness primarily related to EPA payment using Libor Rate on the Credit
Line with PNC Bank as of June 20, 2013 totaled $2,740,000.

 
 
7.
Letter of Credit issued by PNC Bank National Association, held by The United
States Environmental Protection Agency on behalf of SL Industries, Inc. and SL
Surface Technologies, Inc. in the amount of $8,563,666.

* Amounts related to these arrangements fluctuate.
 
 
 

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SCHEDULE 9.1.6
 
FINAL JUDGMENTS/ORDERS

 
Any final judgments or orders arising out of or related to the matters set forth
on Schedule 6.1.5 are incorporated herein by reference.