SC 13D/A

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                 --------------

                                  SCHEDULE 13D
                                 (RULE 13d-101)

             INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
            TO RULE 13d-1(A) AND AMENDMENTS THERETO FILED PURSUANT TO
                                  RULE 13d-2(A)

                              (Amendment No. 1)(1)

                                Ault Incorporated
                                -----------------
                                (Name of Issuer)

                           Common Stock, No Par Value
                           --------------------------
                         (Title of Class of Securities)

                                    051503100
                                    ---------
                                 (CUSIP Number)

                              STEVEN WOLOSKY, ESQ.
                 OLSHAN GRUNDMAN FROME ROSENZWEIG amp; WOLOSKY LLP
                                Park Avenue Tower
                               65 East 55th Street
                            New York, New York 10022
                                 (212) 451-2300
                                 --------------
                  (Name, Address and Telephone Number of Person
                Authorized to Receive Notices and Communications)

                                December 16, 2005
                                -----------------
             (Date of Event Which Requires Filing of This Statement)

         If the filing person has previously filed a statement on Schedule 13G
to report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box / /.

         NOTE. Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. SEE Rule 13d-7 for
other parties to whom copies are to be sent.

                         (Continued on following pages)

                               (Page 1 of 7 Pages)


- --------
(1)      The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.

         The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, SEE the
NOTES).



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CUSIP No. 051503100                   13D                            Page 2 of 7
- -------------------------                              -------------------------


================================================================================
     1         NAME OF REPORTING PERSONS:
               I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)

                                      SL Industries, Inc. (21-0682685)
- --------------------------------------------------------------------------------
     2         CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*         (a) / /
                                                                         (b) / /
- --------------------------------------------------------------------------------
     3         SEC USE ONLY
- --------------------------------------------------------------------------------
     4         SOURCE OF FUNDS*

                    OO, AF
- --------------------------------------------------------------------------------
     5         CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
               PURSUANT TO ITEM 2(d) OR 2(e)                                 / /
- --------------------------------------------------------------------------------
     6         CITIZENSHIP OR PLACE OR ORGANIZATION

                    New Jersey
- --------------------------------------------------------------------------------
 NUMBER OF         7     SOLE VOTING POWER
   SHARES
BENEFICIALLY                  0
  OWNED BY     -----------------------------------------------------------------
    EACH           8      SHARED VOTING POWER
 REPORTING
PERSON WITH                   1,084,794*
               -----------------------------------------------------------------
                   9     SOLE DISPOSITIVE POWER

                              0
               -----------------------------------------------------------------
                  10     SHARED DISPOSITIVE POWER

                              1,084,794*
- --------------------------------------------------------------------------------
    11         AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
               PERSON

                    1,084,794*
- --------------------------------------------------------------------------------
    12         CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
               SHARES*                                                       / /
- --------------------------------------------------------------------------------
    13         PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

                    22.3%**
- --------------------------------------------------------------------------------
    14         TYPE OF REPORTING PERSON*

                    CO
================================================================================

   *  Represents (1) the aggregate number of shares of the common stock, no par
      value per share ("Company Common Stock"), of Ault Incorporated, a
      Minnesota corporation (the "Company"), held by the directors and executive
      officers of the Company (the "Shareholders") who have entered into a
      Shareholders Agreement, dated as of December 16, 2005, with SL Industries,
      Inc., a New Jersey corporation ("Parent"), and Lakers Acquisition Corp., a
      Minnesota corporation and a wholly owned subsidiary of Parent
      ("Purchaser"), as described herein (the "Shares") and an aggregate of
      234,169 shares of Company Common Stock held by SL Delaware Holdings, Inc.
      ("Holdings"). Parent and Purchaser expressly disclaim beneficial ownership
      of the Shares subject to the Shareholders Agreement.
  **  Based on 4,861,192 shares of Company Common Stock outstanding as set forth
      in the Company's Schedule 14D-9 filed with the Securities and Exchange
      Commission on December 23, 2005.




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CUSIP No. 051503100                   13D                            Page 3 of 7
- -------------------------                              -------------------------


================================================================================
     1         NAME OF REPORTING PERSONS
               I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)

                                      Lakers Acquisition Corp.
- --------------------------------------------------------------------------------
     2         CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*         (a) / /
                                                                         (b) / /
- --------------------------------------------------------------------------------
     3         SEC USE ONLY
- --------------------------------------------------------------------------------
     4         SOURCE OF FUNDS*

                    OO
- --------------------------------------------------------------------------------
     5         CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
               PURSUANT TO ITEM 2(d) OR 2(e)                                 / /
- --------------------------------------------------------------------------------
     6         CITIZENSHIP OR PLACE OR ORGANIZATION

                    Minnesota
- --------------------------------------------------------------------------------
 NUMBER OF         7     SOLE VOTING POWER
   SHARES
BENEFICIALLY                  0
  OWNED BY     -----------------------------------------------------------------
    EACH           8     SHARED VOTING POWER
 REPORTING
PERSON WITH                   850,625*
               -----------------------------------------------------------------
                   9     SOLE DISPOSITIVE POWER

                              0
               -----------------------------------------------------------------
                  10     SHARED DISPOSITIVE POWER

                              850,625*
- --------------------------------------------------------------------------------
    11         AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

                    850,625*
- --------------------------------------------------------------------------------
    12         CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
               SHARES*                                                       / /
- --------------------------------------------------------------------------------
    13         PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

                    17.5%**
- --------------------------------------------------------------------------------
    14         TYPE OF REPORTING PERSON*

                    CO
================================================================================

  *     Represents the aggregate number of shares of the common stock, no par
        value per share ("Company Common Stock"), of Ault Incorporated, a
        Minnesota corporation (the "Company"), held by the directors and
        executive officers of the Company (the "Shareholders") who have entered
        into a Shareholders Agreement, dated as of December 16, 2005, with SL
        Industries, Inc., a New Jersey corporation ("Parent"), and Lakers
        Acquisition Corp., a Minnesota corporation and a wholly owned subsidiary
        of Parent ("Purchaser"), as described herein (the "Shares"). Parent and
        Purchaser expressly disclaim beneficial ownership of the Acquisition
        Shares.
 **     Based on 4,861,192 shares of Company Common Stock outstanding as set
        forth in the Company's Schedule 14D-9 filed with the Securities and
        Exchange Commission on December 23, 2005.




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CUSIP No. 051503100                   13D                            Page 4 of 7
- -------------------------                              -------------------------


================================================================================
     1         NAME OF REPORTING PERSONS
               I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)

                                      SL Delaware Holdings, Inc. (51-0413904)
- --------------------------------------------------------------------------------
     2         CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*         (a) / /
                                                                         (b) / /
- --------------------------------------------------------------------------------
     3         SEC USE ONLY
- --------------------------------------------------------------------------------
     4         SOURCE OF FUNDS*

                    WC
- --------------------------------------------------------------------------------
     5         CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
               PURSUANT TO ITEM 2(d) OR 2(e)                                 / /
- --------------------------------------------------------------------------------
     6         CITIZENSHIP OR PLACE OR ORGANIZATION

                    Minnesota
- --------------------------------------------------------------------------------
 NUMBER OF         7     SOLE VOTING POWER
   SHARES
BENEFICIALLY                  234,169
  OWNED BY     -----------------------------------------------------------------
    EACH           8     SHARED VOTING POWER
 REPORTING
PERSON WITH                   0
               -----------------------------------------------------------------
                   9     SOLE DISPOSITIVE POWER

                              234,169
               -----------------------------------------------------------------
                  10      SHARED DISPOSITIVE POWER

                              0
- --------------------------------------------------------------------------------
    11         AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

                    234,169
- --------------------------------------------------------------------------------
    12         CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
               SHARES*                                                       / /
- --------------------------------------------------------------------------------
    13         PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

                    4.8%*
- --------------------------------------------------------------------------------
    14         TYPE OF REPORTING PERSON*

                    CO
================================================================================

    *  Based on 4,861,192 shares of Company Common Stock outstanding as set
       forth in the Company's Schedule 14D-9 filed with the Securities and
       Exchange Commission on December 23, 2005.




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CUSIP No. 051503100                   13D                            Page 5 of 7
- -------------------------                              -------------------------


         Explanatory Note: This Amendment No. 1 to Schedule 13D is being filed
solely to include Exhibits 1 and 5, which were not filed with the initial
Schedule 13D on December 28, 2005.

ITEM 7.      MATERIAL TO BE FILED AS EXHIBITS.

Exhibit 1:   Offer to Purchase dated December 23, 2005.

Exhibit 2:   Agreement and Plan of Merger, dated as of December 16, 2005, by and
             among SL Industries, Inc., Lakers Acquisition Corp. and Ault
             Incorporated

Exhibit 3:   Shareholders Agreement, dated as of December 16, 2005, by and among
             SL Industries, Inc., Lakers Acquisition Corp. and the directors and
             certain officers of Ault Incorporated and certain affiliates
             thereof

Exhibit 4:   Stock Option Agreement, dated as of December 16, 2005, by and among
             SL Industries, Inc., Lakers Acquisition Corp. and Ault Incorporated

Exhibit 5:   Revolving Credit Agreement dated as of August 3, 2005 among Bank of
             America, N.A., as Agent and a Lender, SL Industries, Inc., as
             Parent Borrower and certain Subsidiary Borrowers.

Exhibit 6:   Joint Filing Agreement, dated as of December 27, 2005, by and
             between SL Industries, Inc., SL Delaware Holdings, Inc. and Lakers
             Acquisition Corp.




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CUSIP No. 051503100                   13D                            Page 6 of 7
- -------------------------                              -------------------------


         After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.

Dated: December 30, 2005

                                          SL INDUSTRIES, INC.

                                          By: /s/ David R. Nuzzo
                                              ----------------------------------
                                              David R. Nuzzo
                                              Vice President and Chief Financial
                                              Officer


                                          SL DELAWARE HOLDINGS, INC.

                                          By: /s/ David R. Nuzzo
                                              ----------------------------------
                                              David R. Nuzzo
                                              Vice President

                                          LAKERS ACQUISITION CORP.

                                          By: /s/ David R. Nuzzo
                                              ----------------------------------
                                              David R. Nuzzo
                                              Vice President and Secretary






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CUSIP No. 051503100                   13D                            Page 7 of 7
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                                  EXHIBIT INDEX

Exhibit 1:   Offer to Purchase dated December 23, 2005.

Exhibit 2:   Agreement and Plan of Merger, dated as of December 16, 2005, by and
             among SL Industries, Inc., Lakers Acquisition Corp. and Ault
             Incorporated

Exhibit 3:   Shareholders Agreement, dated as of December 16, 2005, by and among
             SL Industries, Inc., Lakers Acquisition Corp. and the directors and
             certain officers of Ault Incorporated and certain affiliates
             thereof

Exhibit 4:   Stock Option Agreement, dated as of December 16, 2005, by and among
             SL Industries, Inc., Lakers Acquisition Corp. and Ault Incorporated

Exhibit 5:   Revolving Credit Agreement dated as of August 3, 2005 among Bank of
             America, N.A., as Agent and a Lender, SL Industries, Inc., as
             Parent Borrower and certain Subsidiary Borrowers.

Exhibit 6:   Joint Filing Agreement, dated as of December 27, 2005, by and
             between SL Industries, Inc., SL Delaware Holdings, Inc. and Lakers
             Acquisition Corp.

EX-99.1

Exhibit 99.1

OFFER TO PURCHASE FOR CASH

ALL OUTSTANDING SHARES OF COMMON STOCK

(Including Associated Preferred Stock Rights)

OF

AULT INCORPORATED

BY

LAKERS ACQUISITION CORP.,

A WHOLLY OWNED SUBSIDIARY

OF

SL INDUSTRIES, INC.,

AT

$2.90 NET PER SHARE OF COMMON STOCK

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00

MIDNIGHT, NEW YORK CITY TIME, ON JANUARY 25, 2006,

UNLESS THE OFFER IS EXTENDED.

The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of December 16 , 2005 (the “Merger Agreement”), by and among SL Industries, Inc., a New Jersey corporation (“SL Industries” or “Parent”), Lakers Acquisition Corp., a Minnesota corporation and a wholly-owned subsidiary of SL Industries (the “Purchaser”) and Ault Incorporated, a Minnesota corporation (“Ault” or the “Company”).

The Offer is conditioned upon, among other things, (i) there being validly tendered, and not withdrawn prior to the expiration of the Offer, that number of shares of common stock, no par value, of Ault (the “Common Stock”), that represents a majority of all outstanding shares of Common Stock that are not beneficially owned by Parent, the Purchaser or their affiliates (for purposes of the Merger Agreement shares that are subject to the rights of Parent and Purchaser pursuant to the Shareholders Agreement described below are not considered beneficially owned by them), and (ii) the satisfaction of other conditions as set forth in this Offer to Purchase. See Section 14 — “Certain Conditions of the Offer.”

The Board of Directors of Ault has unanimously approved and adopted the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Offer and the Merger, and it has also unanimously: (i) determined that the terms of the Offer, the Merger and the Merger Agreement are fair to and in to the best interests of the Company and its shareholders, (ii) approved and adopted the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, in accordance with the requirements

of the Minnesota Business Corporation Act, (iii) recommended that holders of all issued and outstanding shares of the Company’s Common Stock accept the Offer and tender their Shares pursuant to the Offer and adopt and approve the Merger Agreement and the Merger, (iv) approved the Shareholders Agreement and the transactions contemplated thereby and (v) approved the Stock Option Agreement and the transactions contemplated thereby. A special committee of Ault’s Board of Directors has unanimously approved the Offer, the Merger, the Merger Agreement, the Shareholders Agreement and the Stock Option Agreement and the transactions contemplated thereby in order to render inapplicable certain sections of the Minnesota Business Corporation Act relating to takeovers.

Unless the context otherwise requires, the terms “we,” “us,” and “our” refer to SL Industries, Inc. and its subsidiary, Lakers Acquisition Corp. The term “Share” or “Shares” shall refer to the outstanding shares of Ault Common Stock together with the associated preferred stock rights issued pursuant to the Rights Agreement, dated as of February 13, 1996, between Ault and Norwest Bank Minnesota, N.A., as amended from time to time (the “Rights Agreement”).

Questions and requests for assistance may be directed to the Information Agent at the addresses and telephone number set forth on the back cover of this Offer to Purchase. Requests for additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 may be directed to the Information Agent. A shareholder also may contact brokers, dealers, commercial banks, trust companies or other nominees for assistance concerning the Offer.

December 23, 2005

IMPORTANT

Any Ault shareholder desiring to tender all or a portion of such shareholder’s Shares must:

1.	for Shares that are registered in such shareholder’s name and held as physical certificates:
	•	complete and sign the Letter of Transmittal (or a manually signed facsimile) in accordance with the instructions in the Letter of Transmittal;
	•	have such shareholder’s signature on the Letter of Transmittal guaranteed if required by Instruction 1 to the Letter of Transmittal; and
	•	mail or deliver the Letter of Transmittal (or a manually signed facsimile), the certificates for such Shares and any other required documents to American Stock Transfer & Trust Company, the Depositary, at its address on the back of this Offer to Purchase.
2.	for Shares that are registered in such shareholder’s name and held in book-entry form:
	•	complete and sign the Letter of Transmittal (or a manually signed facsimile) in accordance with the instructions in the Letter of Transmittal or prepare an Agent’s Message (as defined in Section 3 - “Procedure for Tendering Shares”);
	•	if using the Letter of Transmittal, have such shareholder’s signature on the Letter of Transmittal guaranteed if required by Instruction I of the Letter of Transmittal;
	•	deliver an Agent’s Message or the Letter of Transmittal (or a manually signed facsimile) and any other required documents to the Depositary; and
	•	transfer the Shares through book-entry transfer into the Depositary’s account.
3.	for Shares that are registered in the name of a broker, dealer, bank, trust company or other nominee:
	•	contact the broker, bank, trust company or other nominee and request that the broker, dealer, bank, trust company or other nominee tender the Shares to the Purchaser before the expiration of the Offer.

The Letter of Transmittal, the certificates for the Shares and any other required documents must be received by the Depositary before the expiration of the Offer, unless the procedures for guaranteed delivery described in Section 3 - “Procedure for Tendering Shares” of this Offer to Purchase are followed.

TABLE OF CONTENTS

			Page
SUMMARY TERM SHEET				1
INTRODUCTION				7
THE TENDER OFFER			12
	1.	Terms of the Offer	12
	2.	Acceptance for Payment and Payment for Shares	15
	3.	Procedure for Tendering Shares	16
	4.	Withdrawal Rights	20
	5.	Certain United States Federal Income Tax Consequences	21
	6.	Price Range of the Shares; Dividends on the Shares	22
	7.	Effect of the Offer on the Market for the Shares; Stock Listing; Exchange Act Registration; Margin Regulations	23
	8.	Certain Information Concerning Ault	25
	9.	Certain Information Concerning SL Industries and the Purchaser	25
	10.	Source and Amount of Funds	27
	11.	Background of the Offer	28
	12.	Purpose of the Offer; Interest in Securities of Ault; Other Matters	34
	13.	The Merger Agreement and Other Agreements	37
	14.	Certain Conditions of the Offer	53
	15.	Certain Legal Matters	55
	16.	Fees and Expenses	57
	17.	Miscellaneous	58
SCHEDULE I			59
ANNEX I		Minnesota Anti-Takeover Approval	63
ANNEX II		Minnesota Business Corporation Act Dissenters’ Rights Provisions	64

SUMMARY TERM SHEET

Securities Sought:	All outstanding shares of Common Stock, including any associated preferred stock rights, of Ault Incorporated.
Price Offered Per Share of Common Stock:	$2.90 net to you, without interest (subject to applicable withholding taxes).
Scheduled Expiration of Offer:	12:00 midnight, New York City time, on January 25, 2006, unless extended.
Purchaser:	Lakers Acquisition Corp., a wholly-owned subsidiary of SL Industries, Inc.
Ault Board Recommendation	Ault’s board of directors unanimously recommends that you accept the Offer and tender your shares.
Minimum Condition	There being validly tendered and not withdrawn prior to the expiration of the Offer that number of shares of Ault Common Stock, that represents a majority of all outstanding shares of Common Stock that are not beneficially owned by Parent, Purchaser or their affiliates (for purposes of the Merger Agreement shares that are subject to the rights of Parent and Purchaser pursuant to the Shareholders Agreement described below are not considered beneficially owned by them). There are also other conditions that apply to the Offer, detailed in Section14— “Certain Conditions of the Offer.”
Shareholders Agreement	The directors and executive officers of Ault and certain of their affiliates have agreed to tender their Ault shares pursuant to a Shareholders Agreement. At December 16, 2005, these individuals beneficially owned 850,625 Ault shares, representing approximately 17% of the issued and outstanding Ault shares as of such date. See Section13— “The Merger Agreement and Other Agreements.”
Stock Option Agreement	Subject to certain conditions, including the acquisition, in the Offer, of shares resulting in Purchaser, SL Industries and their affiliates owing at least 75% of the outstanding shares, Ault has granted to Purchaser an irrevocable option to purchase that certain number of Ault shares as is necessary for Purchaser to obtain ownership of in excess of 90% of the outstanding Ault shares. See Section13— “The Merger Agreement and Other Agreements.”

The following are some of the questions you, as a shareholder of Ault, may have and our answers to those questions. We urge you to carefully read the remainder of this Offer to Purchase and the Letter of Transmittal because the information in this summary is not complete. Additional important information is contained in the remainder of this Offer to Purchase and the Letter of Transmittal.

Who is offering to buy my shares?

Our name is Lakers Acquisition Corp. We are a Minnesota corporation formed by SL Industries, Inc. as its direct, wholly-owned subsidiary for the purpose of acquiring all of the outstanding capital stock of Ault. See the “Introduction” to this Offer to Purchase and Section 9 - “Certain Information Concerning SL Industries and the Purchaser.”

What are the classes and amounts of securities being sought in the Offer?

We are offering to purchase all issued and outstanding shares of Common Stock of Ault, including any associated preferred stock rights. See “Introduction” to this Offer to Purchase and Section 1 - “Terms of the Offer.”

How much are you offering to pay and in what form of payment?

We are offering to pay $2.90, net to you in cash without interest thereon (and subject to applicable withholding taxes), for each share of Common Stock (including any associated preferred stock rights).

Will I have to pay any fees or commissions?

If you are the record owner of your shares and you tender your shares to us in the Offer, you will not have to pay brokerage fees or similar expenses. If you own your shares through a broker or other nominee, and your broker tenders your shares on your behalf, your broker or nominee may charge you a fee for doing so. You should consult your broker or nominee to determine whether any charges will apply. See the “Introduction” to this Offer to Purchase.

Do you have the financial resources to make payment?

Yes. To finance the purchase, SL Industries will provide us with the funds required to pay for the shares and related fees and expenses from its working capital and borrowings available under our revolving credit facility. Our Offer is not contingent on obtaining new sources of financing. See Section 10 - “Source and Amount of Funds.”

Is your financial condition relevant to my decision to tender in the Offer?

Our Offer is not subject to any financing condition. Because the form of payment consists solely of cash and all of the funding that will be needed will come from SL Industries’ working capital and revolving credit facility, we do not think our financial condition is relevant to your decision as to whether to tender your shares into our Offer. Pursuant to the Merger Agreement, SL Industries has agreed to provide us with funds necessary to consummate our Offer and to pay for any outstanding capital stock of Ault not owned by SL Industries or us pursuant to any Merger of us into Ault. See Section 10 - “Source and Amount of Funds.”

2

How long do I have to decide whether to tender in the Offer?

You will have at least until 12:00 midnight, New York City time, on January 25, 2006, to decide whether to tender your shares in the Offer. If you cannot deliver everything that is required in order to make a valid tender by that time, you may be able to use a guaranteed delivery procedure, which is described later in this Offer to Purchase. See Section 1 - “Terms of the Offer” and Section 3 - “Procedure for Tendering Shares.”

Can the Offer be extended and under what circumstances?

Subject to the terms of the Merger Agreement, we may extend the Offer with Ault’s prior written consent, authorized by Ault’s board of directors or a duly authorized committee of Ault’s board of directors.

Subject to the terms of the Merger Agreement, we may extend the Offer without Ault’s consent as follows:

• if, at any scheduled expiration of the Offer any of the conditions to our obligation to accept shares for payment has not been satisfied or waived, we may extend the Offer for a time period reasonably necessary to permit the condition to be satisfied;

• if required by any rule, regulation or interpretation of the United States Securities and Exchange Commission (the “SEC”) or the staff thereof applicable to the Offer, we may extend (or re-extend) the Offer as so required;

• if, at any scheduled expiration of the Offer, the number of shares of Common Stock that shall have been validly tendered and not withdrawn pursuant to the Offer satisfies the Minimum Condition but represents less than 90% of the shares of Common Stock outstanding, extend (or re-extend) the Offer (one or more times) for an aggregate additional period of not more than 20 business days; and

• if we increase the offer price, the Offer may be extended as required by law in connection therewith.

If the Minimum Condition has been satisfied, we may also elect to provide a “subsequent offering period” without Ault’s consent in accordance with Rule 14d-11 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would be an additional period of three to twenty business days beginning after the Offer expires. During this subsequent offering period, you would be permitted to tender, but not withdraw, your shares and receive, for each share of Common Stock, $2.90 per share, net to you in cash, without interest (subject to applicable withholding taxes). See Section 1 - “Terms of the Offer.”

How will I be notified if the Offer is extended or a subsequent offering period is provided?

If we extend the Offer or provide for a subsequent offering period, we will inform American Stock Transfer & Trust Company, the depositary for the Offer, and will make a public

3

announcement of the extension, not later than 9:00 a.m., Eastern time, on the business day after the day on which the Offer was scheduled to expire. See Section 1 - “Terms of the Offer.”

What are the most significant conditions to the Offer?

Purchaser’s obligation to accept for payment and to pay for any Ault shares is subject to satisfaction of the Minimum Condition (as previously described and as defined below) and other conditions, more fully described in Section 14 — “Certain Conditions of the Offer.”

The Offer is subject to a number of other conditions. We can waive all conditions to the Offer, except the Minimum Condition, without Ault’s consent. See Section 14 - “Certain Conditions of the Offer.”

How do I tender my shares?

To tender shares, you must deliver the certificates representing your shares, together with a completed Letter of Transmittal, to American Stock Transfer & Trust Company, the depositary for the Offer, not later than the time the tender offer expires. If your shares are held in street name, the shares can be tendered by your nominee through American Stock Transfer & Trust Company. If you cannot deliver a required item to the depositary by the expiration of the tender offer, you may be able to obtain extra time to do so by having a broker, a bank or other fiduciary which is a member of the Security Transfer Agent Medallion Signature Program guarantee that the missing items will be received by the depositary within three business days. However, the depositary must receive the missing items within that three trading day period or your shares will not be validly tendered. See Section 3 - “Procedure for Tendering Shares.”

How do I withdraw previously tendered shares?

To withdraw shares, you must deliver a written notice of withdrawal, or a facsimile of one, with the required information to American Stock Transfer & Trust Company, the depositary for the Offer, while you still have the right to withdraw the shares. See Section 4 - “Withdrawal Rights.”

Until what time may I withdraw shares that I have tendered?

You may withdraw shares at any time until the Offer has expired. In addition, if we have not agreed to accept your shares for payment by February 21, 2006, you may withdraw them at any time after such time until we accept them for payment. This right to withdraw will not apply to any subsequent offering period. See Section 1 - “Terms of the Offer” and Section 4 - “Withdrawal Rights.”

What does the board of directors of Ault think of the Offer?

Ault’s board of directors unanimously determined that $2.90, net to the seller in cash, for each share of Ault Common Stock (including any associated preferred stock rights) is fair to, and in the best interests of, you and Ault. Ault’s board of directors unanimously recommends that you accept the Offer and tender your shares to us in the Offer. See “Introduction” to this Offer to Purchase and Section 11 - “Background of the Offer.”

4

Have any Ault shareholders agreed to tender their shares?

Yes. The directors of Ault and Ault officers Xiaodong Wang and Gregory L. Harris and certain affiliates thereof have each agreed to tender all shares of Common Stock held by them into the Offer pursuant to the terms of a Shareholders Agreement, dated December 16, 2005, which they entered into with SL Industries and us. The Shares subject to that agreement represent approximately 17% of the number of Shares outstanding. See the “Introduction” to this Offer to Purchase and Section 13 - “The Merger Agreement and Other Agreements.”

If shares are tendered and accepted for payment, will Ault continue as a public company?

If we merge with and into Ault, SL Industries will own all of the outstanding capital stock of Ault and Ault no longer will be publicly owned. Even if the Merger does not take place, if we purchase all of the tendered shares, there may be so few remaining shareholders and publicly held shares of Ault that there may not be a public trading market for Ault stock and Ault may cease making filings with the SEC or otherwise being required to comply with the SEC rules relating to publicly held companies. See Section 7 - “Effect of the Offer on the Market for the Shares; Stock Listing; Exchange Act Registration; Margin Regulations.”

Will the tender offer be followed by a merger if all Ault shares are not tendered in the Offer?

If we accept for payment and pay for shares of Ault, we intend to merge Purchaser with and into Ault subject to the terms and conditions of the Merger Agreement and upon the vote of Ault’s shareholders, if such vote is required. Ault will be the surviving corporation in the merger and will become a wholly-owned subsidiary of SL Industries. In the merger, Ault shareholders who did not tender their shares will receive $2.90 per share (or any higher price per share which is paid in our Offer) of Common Stock, in cash, without any interest thereon (subject to applicable withholding taxes). If shares tendered in the Offer together with other shares held by Purchaser or Parent constitute more than 90% of the outstanding shares of Ault’s Common Stock, we will be able to effect the Merger without convening a meeting of shareholders. Subject to certain conditions, including the acquisition, in the Offer, of shares sufficient to result in our holding at least 75% of the outstanding shares, Ault has granted Purchaser the right to acquire shares from Ault in order to acquire 90% of the outstanding Ault shares.There are no dissenters’ rights available in connection with our Offer, but shareholders who have not sold their shares in the Offer would have dissenters’ rights available in connection with the Merger under Minnesota law if those rights are perfected. See the “Introduction” to this Offer to Purchase.

If I decide not to tender, how will the Offer affect my shares?

If you do not tender your shares in the Offer and the Merger described above takes place, your shares will be cancelled. Unless you exercise dissenters’ rights under Minnesota law (see Section 12 - “Purpose of the Offer; Interest in Securities of Ault; Other Matters”), you will receive the same amount of cash per share that you would have received had you tendered your shares in the Offer. Therefore, if the Merger takes place, the only difference to you between tendering your shares and not tendering your shares is that you will be paid earlier if you tender your shares and that, in connection with the Merger, you will have dissenters’ rights under Minnesota law if you take appropriate action to perfect those rights. If the Merger does not take

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place after the Offer closes, however, the number of shareholders and number of shares of Ault stock which are still in the hands of the public may be so small that there no longer may be an active public trading market (or, possibly, any public trading market) for Ault common stock. Also, as described above, Ault may cease making filings with the SEC or otherwise being required to comply with the SEC rules relating to publicly held companies. See the “Introduction” to this Offer to Purchase and Section 7 - “Effect of the Offer on the Market for the Shares; Stock Listing; Exchange Act Registration; Margin Regulations.”

What is the market value of my shares as of a recent date?

On December 16, 2005, the last trading day before we announced the tender offer and the possible subsequent merger, the last sale price of Ault Common Stock reported on Nasdaq CM was $1.73 per share. On December 22, 2005, the closest practicable date prior to commencement of the Offer, the last reported sales price of Ault Common Stock on Nasdaq CM was $2.86 per share. We advise you to obtain a recent quotation for shares of Ault Common Stock in deciding whether to tender your shares. See Section 6 - “Price Range of the Shares; Dividends on the Shares.”

Who can I talk to if I have questions about the tender offer?

You may call Morrow & Co., Inc. the information agent for the Offer, at (800) 607-0088. See the back cover of this Offer to Purchase for additional information on how to contact our information agent.

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To the Holders of Common Stock of Ault, Inc.:

INTRODUCTION

Lakers Acquisition Corp., a Minnesota corporation (the “Purchaser”) and a wholly-owned subsidiary of SL Industries, Inc., a New Jersey corporation (“SL Industries”), hereby offers to purchase all issued and outstanding shares (together with the Rights (as defined below), the “Shares”) of common stock, no par value (the “Common Stock”), of Ault Incorporated, a Minnesota corporation (“Ault” or the “Company”), including any associated preferred stock rights issued pursuant to the Rights Agreement (the “Rights”), dated as of February 13, 1996, between Ault and Norwest Bank Minnesota, N.A., as amended from time to time (the “Rights Agreement”), at a price of $2.90 per Share, net to the seller in cash and without interest thereon (and subject to applicable withholding taxes) upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the “Offer” ).

The Purchaser is a corporation newly formed by SL Industries to effect the Offer and other transactions contemplated by the Merger Agreement (as defined below). SL Industries, through its subsidiaries, designs, manufactures and markets power electronics, power motion and power protection equipment that is used in a variety of aerospace, computer, datacom, industrial, medical, telecom, transportation and utility equipment applications. SL Industries’ products are largely sold to original equipment manufacturers, and to a lesser extent, to commercial distributors. SL Industries’ common stock is traded on the American Stock Exchange and the Philadelphia Stock Exchange under the symbol “SLI.” For additional information concerning SL Industries and the Purchaser, see Section 9 - “Certain Information Concerning SL Industries and the Purchaser.”

The Offer is being made pursuant to an Agreement and Plan of Merger, dated December 16, 2005 (the “Merger Agreement”), by and among SL Industries, the Purchaser and Ault. Pursuant to the Merger Agreement, as soon as practicable after the completion of the Offer and the satisfaction or waiver of all conditions to the Merger (as defined below), the Purchaser will be merged with and into Ault with Ault surviving the Merger as a wholly-owned subsidiary of SL Industries (the “Merger”). At the Effective Time of the Merger, each Share then outstanding (other than Shares owned by SL Industries, the Purchaser, or by shareholders, if any, who are entitled to and properly exercise dissenters’ rights under Minnesota law) will be converted into the right to receive $2.90 per Share of Common Stock net to the seller in cash, or any higher price per Share paid in the Offer (such price being referred to herein as the “Offer Price”), without interest thereon (and subject to applicable withholding taxes). Shareholders who exercise dissenters’ rights under Minnesota law will receive a judicially determined fair value for their Shares, which value could be more or less than the price per Share to be paid in the Merger. (See Section 12 - “Purpose of the Offer; Interest in Securities of Ault; Other Matters.”)

The Merger Agreement is more fully described in Section 13 - “The Merger Agreement and Other Agreements.”

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Ault has informed the Purchaser that, as of December 16, 2005, (a) 4,861,926 shares of Common Stock were issued and outstanding, (b) 2,074 shares of Series B Convertible Preferred Stock were issued and outstanding, (c) 50,000 shares of preferred stock, no par value, designated as Series A Junior Participating Preferred Stock (the “Series A Preferred Stock”) were reserved for issuance in connection with the Rights Agreement, and (d) 1,175,826 shares were reserved for issuance pursuant to outstanding Ault options and that all of the outstanding Shares of capital stock are, and all shares of capital stock which may be issued pursuant to the exercise of outstanding company options and company warrants will be, when issued in accordance with the respective terms thereof, duly authorized, validly issued, fully paid and non-assessable. SL Industries owns 234,169 Shares of Ault Common Stock. Based on the foregoing, and assuming that no shares of Common Stock were issued after December 16, 2005, the Minimum Condition (as defined below) will be satisfied if at least 2,313,879 shares are validly tendered and not withdrawn prior to the expiration of the Offer. If the Minimum Condition is satisfied and the Purchaser accepts for payment the shares tendered pursuant to the Offer, the Purchaser will be able to elect a majority of the members of Ault’s board of directors and to effect the Merger without the affirmative vote of any other shareholder of Ault. See Section 12 - “Purpose of the Offer; Interest in Securities of Ault;” “Other Matters” and Section 13 - “The Merger Agreement and Other Agreements.”

Each director and officers Xiaodong Wang and Gregory L. Harris of Ault as of December 16, 2005 and certain of their affiliates (the “Shareholders” and each, a “Shareholder”) has agreed to tender the Shares beneficially owned by each of them into the Offer pursuant to the terms of a Shareholders Agreement, dated as of December 16, 2005, which they entered into with Purchaser and SL Industries (the “Shareholders Agreement”). At December 16, 2005, the Shareholders beneficially owned 850,625 shares of Common Stock, representing approximately 17% of the issued and outstanding shares as of such date. The Shareholders Agreement is more fully described in Section 13 — “The Merger Agreement and Other Agreements.”

Tendering shareholders whose Shares are registered in their own names and who tender directly to the Depositary (as defined below) will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the sale of Shares pursuant to the Offer. The Purchaser will pay all fees and expenses incurred in connection with the Offer by American Stock Transfer & Trust Company, which is acting as the Depositary (the “Depositary”), and Morrow & Co., Inc. which is acting as the Information Agent (the “Information Agent”). See Section 16 - “Fees and Expenses.”

The board of directors of Ault unanimously determined that the consideration to be paid for each Share in the Offer and the Merger is fair to and in the best interests of Ault and that the holders of the Shares should accept the Offer and tender their Shares to the Purchaser pursuant to the Offer. The board of directors of Ault, by a unanimous vote, further determined that the Merger Agreement is advisable and that, following the Offer, Ault’s shareholders should approve and adopt the Merger Agreement and each of the transactions contemplated thereby. The Offer is conditioned upon, among other things, (1) there being validly tendered and not withdrawn prior to the expiration of the Offer that number of Shares that represents a majority of all outstanding shares of Common Stock that are not beneficially owned by SL Industries, the Purchaser or their affiliates (for purposes of the Merger Agreement shares that are subject to the rights of Parent and Purchaser pursuant to the Shareholders Agreement described below are not considered beneficially owned by them) (the “Minimum Condition”); (2) there shall not have been entered,

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enforced, instituted, pending, threatened, or issued by any governmental authority, any judgment, order, temporary restraining order, temporary or permanent injunction, ruling, proceeding, action, suit, charge or decree: (i) which could reasonably be expected to make illegal, prevent, restrain or prohibit or make materially more costly the making of the Offer, the acceptance for payment of, or payment for, any Shares by SL Industries, Purchaser or any other affiliate of Purchaser, or the consummation of the Merger or any of the other transactions contemplated by the Merger Agreement; (ii) which could reasonably be expected to prohibit or limit the ownership or operation by Ault, SL Industries or any of their subsidiaries of all or any material portion of the business or assets of Ault, SL Industries or any of their subsidiaries, or which could reasonably be expected to compel the Ault, SL Industries or any of their subsidiaries to dispose of or hold separate all or any material portion of the business or assets of Ault, SL Industries or any of their subsidiaries; (iii) which would reasonably be expected to impose or confirm limitations on the ability of SL Industries, Purchaser or any other affiliate of SL Industries to exercise full rights of ownership of any Shares, including, without limitation, the right to vote any Shares acquired by SL Industries pursuant to the Offer or otherwise on all matters presented to Ault shareholders, including, without limitation, the approval and adoption of the Merger Agreement and the Merger; (iv) which would reasonably be expected to require divestiture by SL Industries, Purchaser or any other affiliate of SL Industries of any Shares; or (v) which otherwise would reasonably be expected to have a material adverse effect on Ault; (3) there shall not have been any law, statute, rule, regulation, judgment, order, legislation or interpretation of any nature pending, proposed, enacted, enforced, promulgated, amended or issued by any governmental authority or deemed by any governmental authority applicable to (i) SL Industries, Ault or any subsidiary or affiliate of SL Industries or Ault or (ii) any transaction contemplated by the Merger Agreement, which is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clause (3) of this paragraph above; (4) there being no changes, conditions, events or developments that would reasonably be expected to have a material adverse effect on Ault; (5) there being no termination of the Merger Agreement in accordance with its terms; (6) the representations and warranties of Ault in the Merger Agreement being true and correct in all material respects as of December 16, 2005 and being true and correct in all material respects as of the expiration of the Offer; (7) Ault not having breached or failed to perform or to comply with any of its material agreements, obligations or covenants in the Merger Agreement; (8) Ault not having breached certain specified representations and warranties in the Merger Agreement, which in the good faith judgment of Purchaser in any such case and regardless of the circumstances, makes it inadvisable for Purchaser to proceed with such acceptance for payment or payment; (9) no non-competition or similar obligations of Ault being reasonably expected to prohibit or restrict SL Industries or any of SL Industries’ subsidiaries from developing, manufacturing, marketing or selling any of the current products of SL Industries or its subsidiaries or any products of SL Industries or its subsidiaries currently in design or development; (10) it shall not have been publicly disclosed or the Purchaser shall not have otherwise learned that any person, other than Purchaser or SL Industries, shall have acquired or entered into a definitive agreement or agreement in principle to acquire beneficial ownership (determined for the purposes of this paragraph as set forth in Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) of 50% or more of the then outstanding Shares, or shall have been granted any option, right or warrant, conditional or otherwise, to acquire beneficial ownership of 50% or more of any of the then outstanding Shares, or the Board of Directors of the Company, the special committee of the Company’s Board of Directors appointed to consider the Offer and the Merger (the “Special Committee”); or

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any other committee thereof shall have (A) withdrawn, modified or changed, in a manner adverse to Purchaser or SL Industries, the recommendation by such Board of Directors or approval by such committee of the Offer, the Merger or this Agreement, including, without limitation, the Minnesota Anti-Takeover Approval (or defined in the Merger Agreement) of the Special Committee, (B) approved or recommended, or proposed publicly to approve or recommend, a Company Takeover Proposal (as defined below), (C) caused the Company to enter into any agreement relating to any Company Takeover Proposal, or (D) resolved to do any of the foregoing; (11) Ault and the Purchaser not having agreed that the Purchaser shall terminate the Offer or postpone the acceptance for payments of or payment for Shares thereunder; (12) there not having been instituted or pending any shareholder derivative litigation or shareholder class action litigation against Ault, its subsidiaries or its executive officers or directors; or (13) there not having occurred (i) any general suspension of, or limitation on prices for trading in securities on the New York Stock Exchange or Nasdaq, (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (iii) any limitation on the extension of credit by banks in the United States or a disruption in the syndication market for credit facilities, (iv) the commencement of a war, armed hostilities or any other international or national calamity involving the United States or (v) a material acceleration or worsening of any of the foregoing existing at the time of the commencement of the Offer.

Stephens Inc., Ault’s financial advisor, has delivered to Ault’s board of directors its written opinion, dated December 16, 2005, to the effect that, as of such date, based upon and subject to the considerations and assumptions set forth therein, the $2.90 per Share of Common Stock in cash to be received by the holders of shares of Common Stock in the Offer (or, as the case may be, the Merger) is fair from a financial point of view to such holders. The full text of the opinion of Stephens Inc. is set forth as Annex A to the Company’s Solicitation/ Recommendation Statement on Schedule 14D-9 (the “Schedule 14D-9”) under the Exchange Act, which is being mailed to shareholders of Ault with this Offer to Purchase. Ault shareholders are urged to read each of the Schedule 14D-9 and such opinion carefully in its entirety. The opinion of Stephens Inc. is not a recommendation as to whether any holder of Shares should tender such Shares in connection with the Offer or, if necessary, how any holder of such Shares should vote with respect to the Merger.

Consummation of the Merger is subject to a number of conditions, including the approval and adoption of the Merger Agreement by the affirmative vote of the holders of a majority of the outstanding Shares, if required by applicable law in order to consummate the Merger. See Section 15 - “Certain Legal Matters.” If the Purchaser acquires at least 90% of the outstanding Shares of the Common Stock, then the Purchaser will be able to merge with and into Ault pursuant to the “short-form” merger provisions of the Minnesota Business Corporations Act (the “MBCA”) without prior notice to, or any action by, any other shareholder of Ault (See Section 12 - “Purpose of the Offer; Interest in Securities of Ault; Other Matters”). In order to facilitate a short-form merger following completion of the Offer, the Purchaser and SL Industries entered into an agreement, dated December 16, 2005, with Ault (the “Stock Option Agreement”), pursuant to which Ault granted the Purchaser an irrevocable option (the “Purchaser Option”) to purchase for the Offer Price, Shares of Common Stock, in such relative amounts as determined by the Purchaser in its discretion up to such number of shares which, upon exercise, would result in Purchaser owning in excess of ninety percent (90%) of the then-outstanding shares of Common Stock (the “Optioned Shares”). The exercise of the Purchaser Option is conditioned

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upon the Purchaser and SL Industries owning in the aggregate, immediately following such exercise, at least 90% of the outstanding shares of Common Stock. See Section 13 - “The Merger Agreement and Other Agreements.” SL Industries, the Purchaser and Ault have agreed in the Merger Agreement to make reasonable best efforts to cause the Merger to become effective as soon as practicable after the acceptance and payment for Shares by the Purchaser pursuant to the Offer. See Section 13 - “The Merger Agreement and Other Agreements.”

Certain U.S. federal tax consequences of the sale of Shares pursuant to the Offer and the conversion of Shares pursuant to the Merger are described in Section 5 - “Certain United States Federal Income Tax Consequences.”

THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER.

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THE TENDER OFFER

1. Terms of the Offer

Upon the terms and subject to the conditions of the Offer, the Purchaser will accept for payment and pay $2.90 per Share of Common Stock, net to the seller in cash, without interest thereon (subject to applicable withholding taxes), for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn in accordance with Section 4 - “Withdrawal Rights.” The term “Expiration Date” means 12:00 midnight, New York City time, on Tuesday, January 25, 2006 (such date and time, the “Initial Expiration Date”), unless and until, in accordance with the terms of the Merger Agreement, the Purchaser extends the period of time for which the Offer is open, in which event the term “Expiration Date” means the latest time and date at which the Offer, as so extended by the Purchaser, expires.

The Purchaser may, without the consent of Ault, extend the Offer, and thereby delay acceptance for payment of, and the payment for, any Shares, by giving oral or written notice of such extension to the Depositary if:

• any of the conditions to the Purchaser’s obligation to purchase Shares in the Offer are not satisfied or waived, in which case the extension must be limited to a time period reasonably necessary to permit such condition or conditions to be satisfied;

• any rule, regulation or interpretation of the United States Securities and Exchange Commission (“SEC”) or the staff thereof applicable to the Offer requires that the Offer be extended;

• Purchaser increases the Offer Price, in which case the Offer may be extended to the extent required by law in connection with such increase.

• at any scheduled expiration of the Offer, the number of Shares that shall have been validly tendered and not withdrawn pursuant to the Offer (including Shares subject to the Shareholders Agreement) satisfies the Minimum Condition but represents less than 90% of the Shares outstanding, extend the Offer (one or more times) for an aggregate additional period of not more than 20 business days.

Subject to the terms of the Merger Agreement, the Purchaser may also extend the Offer with Ault’s prior written consent, authorized by Ault’s board of directors or a duly authorized committee of Ault’s board of directors.

If at the Expiration Date all of the conditions to the Offer have been satisfied or waived, including the Minimum Condition, the Purchaser may elect to provide a subsequent offering period of three to twenty business days (a “Subsequent Offering Period”) in accordance with Rule 14d-11 under the Exchange Act. A Subsequent Offering Period would be an additional period of time following the expiration of the Offer during which shareholders may tender Shares not tendered in the Offer and receive the same per share amount paid in the Offer. During a Subsequent Offering Period, the Purchaser will immediately accept and promptly pay for

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Shares as they are tendered and tendering shareholders will not have withdrawal rights. The Purchaser cannot elect to provide a Subsequent Offering Period unless the Purchaser announces the results of the Offer no later than 9:00 a.m. New York City time, on the next business day after the Expiration Date and immediately begins the Subsequent Offering Period. The Purchaser does not currently intend to provide a Subsequent Offering Period, although it reserves the right to do so in its own discretion.

Under no circumstances will interest be paid on the Offer Price for tendered Shares, regardless of any extension of or amendment to the Offer or any delay in paying for such Shares.

The Purchaser may, at any time and from time to time prior to the expiration of the Offer, waive any condition to the Offer, or modify the terms of the Offer, by giving oral or written notice of such waiver or modification to the Depositary, except that, without the consent of Ault, the Purchaser may not:

• reduce the price per Share to be paid in the Offer;

• change the form of consideration payable in the Offer;

• decrease the number of Shares sought in the Offer;

• impose additional conditions to the Offer or amend any existing conditions of the Offer in any manner adverse to the holders of the Shares;

• extend the Offer other than described in this Section 1 of this Offer to Purchase; or

• purchase any Shares pursuant to the Offer or otherwise unless the Shares purchased equal or exceed that number of Shares that satisfy the Minimum Condition.

The Offer is conditioned upon, among other things, the satisfaction of the Minimum Condition and the other conditions set forth in Section 14 - “Certain Conditions of the Offer.” If by 12:00 midnight, New York City time, on Tuesday, January 25, 2006 (or any date or time then set as the Expiration Date) any or all of the conditions to the Offer have not been satisfied or waived (where permitted), the Purchaser, subject to the terms of the Merger Agreement and the applicable rules and regulations of the SEC, may:

• terminate the Offer and not accept for payment or pay for any Shares and return all tendered Shares to tendering shareholders;

• waive any of the unsatisfied conditions, to the extent permitted by applicable law, and subject to complying with applicable rules and regulations of the SEC and its

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staff applicable to the Offer, accept for payment and pay for all Shares validly tendered and not withdrawn prior to the Expiration Date;

• except as set forth above, extend the Offer and, subject to the right of shareholders to withdraw Shares until the Expiration Date, retain the Shares that have been tendered during the period or periods for which the Offer is open or extended;

• extend the Offer for an amount of time as is reasonably necessary to cause such conditions to the Offer to be satisfied;

• extend the Offer, one or more times, for any period required by any SEC rule, regulation, interpretation or position; or

• except as set forth above, amend the Offer. 

If the Purchaser extends the Offer, or if the Purchaser (whether before or after its acceptance for payment of Shares) is delayed in its purchase of or payment for Shares or is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser’s rights under the Offer, the Depositary may retain tendered Shares on behalf of the Purchaser, and such Shares may not be withdrawn except to the extent tendering shareholders are entitled to withdrawal rights as described in Section 4 - “Withdrawal Rights.” However, the ability of the Purchaser to delay the payment for Shares which the Purchaser has accepted for payment is limited by Rule 14e-1 (c) under the Exchange Act, which requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of holders of securities promptly after the termination or withdrawal of the Offer. Any extension, amendment or termination of the Offer will be followed as promptly as practicable by public announcement thereof, the announcement in the case of an extension to be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date subject to applicable law (including Rules 14d-4(d) and 14d-6(c) under the Exchange Act, which require that material changes be promptly disseminated to holders of the Shares). Without limiting the obligation of the Purchaser under such Rule or the manner in which the Purchaser may choose to make any public announcement, the Purchaser currently intends to make announcements by issuing a press release.

If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer or waives a material condition of the Offer, the Purchaser will disseminate additional tender offer materials and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which the Offer must remain open following material changes in the terms of the Offer or information concerning the Offer, other than a change in price or a change in percentage of securities sought, will depend upon the facts and circumstances then existing, including the relative materiality of the changed terms or information. In the SEC’s view, an offer should remain open for a minimum of five business days from the date a material change is first published, sent or given to security holders and that, if material changes are made, a minimum of ten business days may be required to allow adequate dissemination and investor response. The requirement to extend an offer will not apply to the extent that the number of business days remaining between the occurrence of the change and the then-scheduled expiration date equals or exceeds the minimum extension period that

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would be required because of such amendment. As used in this Offer to Purchase, “business day” has the meaning set forth in Rule 14d-1 under the Exchange Act.

As described above, the Purchaser may, subject to certain conditions, elect to provide a Subsequent Offering Period. In a public release, the SEC has expressed the view that the inclusion of a Subsequent Offering Period would constitute a material change to the terms of the Offer requiring the Purchaser to disseminate new information to shareholders in a manner reasonably calculated to inform them of such change sufficiently in advance of the Expiration Date (generally five business days). The SEC, however, has recently stated that such advance notice may not be required under certain circumstances. In the event the Purchaser elects to include a Subsequent Offering Period, it will notify shareholders of Ault consistent with the requirements of the SEC.

This Offer to Purchase and the related Letter of Transmittal will be mailed by the Purchaser to record holders of Shares and will be furnished by the Purchaser to brokers, dealers, banks and similar persons whose names, or the names of whose nominees, appear on the shareholder lists or, if applicable, who are listed as participants in a clearing agency’s security position listing, for subsequent transmittal to beneficial owners of Shares.

2. Acceptance for Payment and Payment for Shares

Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment) and provided that the Offer has not been terminated as described in Section 1 of this Offer to Purchase, the Purchaser will accept for payment and will pay for all Shares validly tendered prior to the Expiration Date and not properly withdrawn in accordance with Section 4 - “Withdrawal Rights” promptly after the Expiration Date. If the Purchaser includes a Subsequent Offering Period, the Purchaser will immediately accept and promptly pay for Shares as they are tendered during the Subsequent Offering Period. If the Purchaser is delayed in its acceptance for payment of or payment for Shares or is unable to accept for payment or pay for Shares pursuant to the Offer, then, without prejudice to the Purchaser’s rights under the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange Act) the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent tendering shareholders are entitled to do so as described in Section 4 - “Withdrawal Rights.” See Section 15 - “Certain Legal Matters.”

In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of:

• the certificates for such Shares, together with a Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees; or

• in the case of a transfer effected pursuant to the book-entry transfer procedures described in Section 3 - “Procedure for Tendering Shares,” a BookEntry Confirmation and either a Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature

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guarantees, or an Agent’s Message as described in Section 3 - “Procedure for Tendering Shares;” and

• any other required documents. 

For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares properly tendered to the Purchaser and not withdrawn as, if and when the Purchaser gives notice to the Depositary of the Purchaser’s acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the Offer Price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payment from the Purchaser and transmitting payment to tendering shareholders. Under no circumstances will interest be paid on the Offer Price to be paid by the Purchaser for the Shares, regardless of any extension of the Offer or any delay in making such payment.

If any tendered Shares are not accepted for payment pursuant to the terms and conditions of the Offer for any reason, certificates representing such unpurchased Shares will be returned, without expense to the tendering shareholder (or, in the case of Shares delivered by book-entry transfer of such Shares into the Depositary’s account at the Book-Entry Transfer Facility pursuant to the procedures set forth in Section 3 - “Procedure for Tendering Shares,” the Depositary will notify the Book-Entry Transfer Facility of the Purchaser’s decision not to accept the Shares and such Shares will be credited to an account maintained at the Book-Entry Transfer Facility), as promptly as practicable after the expiration or termination of the Offer.

The Purchaser reserves the right to transfer or assign, in whole or in part, to SL Industries or to any affiliate of SL Industries, the right to purchase Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve the Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering shareholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer.

3. Procedure for Tendering Shares

Valid Tender. A shareholder must follow one of the following procedures to validly tender Shares pursuant to the Offer:

• for Shares held as physical certificates (“Share Certificates”), the certificates for tendered Shares, a Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees and any other documents required by the Letter of Transmittal must be received by the Depositary at its address set forth on the back cover of this Offer to Purchase prior to the Expiration Date (unless such tender is made during a Subsequent Offering Period, if one was provided);

• for Shares held in book-entry form, either a Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent’s Message (as defined below), and any

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other required documents, must be received by the Depositary at its address set forth on the back cover of this Offer to Purchase, and such Shares must be delivered pursuant to the book-entry transfer procedures described below under “Book-Entry Transfer” and a Book-Entry Confirmation (as defined below) must be received by the Depositary, in each case prior to the Expiration Date (unless such tender is made during a Subsequent Offering Period, if one was provided); or

• the tendering shareholder must comply with the guaranteed delivery procedures described below under “Guaranteed Delivery” prior to the Expiration Date.

The valid tender of Shares pursuant to one of the procedures described above will constitute a binding agreement between the tendering shareholder and the Purchaser upon the terms and subject to the conditions of the Offer.

Book-Entry Transfer. The Depositary will establish an account or accounts with respect to the Shares at The Depository Trust Company (the “Book-Entry Transfer Facility”) for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the Book-Entry Transfer Facility’s systems may make book-entry delivery of Shares by causing the Book-Entry Transfer Facility to transfer such Shares into the Depositary’s account in accordance with the Book-Entry Transfer Facility’s procedure for such transfer. However, although delivery of Shares may be effected through book-entry transfer into the Depositary’s account at the Book-Entry Transfer Facility, the properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), with any required signature guarantees, or an Agent’s Message in lieu of the Letter of Transmittal, and any other required documents must, in any case, be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date (except with respect to a Subsequent Offering Period, if one is provided), or the tendering shareholder must comply with the guaranteed delivery procedures described below for a valid tender of Shares by book-entry. The confirmation of a book-entry transfer of Shares into a Depositary’s account at the Book-Entry Transfer Facility as described above is referred to in this Offer to Purchase as a “Book-Entry Confirmation.”

The term “Agent’s Message” means a message, transmitted through electronic means by a Book-Entry Transfer Facility, in accordance with the normal procedures of the Book-Entry Transfer Facility and the Depositary, to and received by the Depositary and forming a part of a Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering the Shares which are the subject of Book-Entry Confirmation that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Purchaser may enforce such agreement against the participant. The term “Agent’s Message” shall also include any hard copy printout evidencing such message generated by a computer terminal maintained at the Depositary’s office. For Shares to be validly tendered during any Subsequent Offering Period, the tendering shareholder must comply with the foregoing procedures except that the required documents and certificates must be received during the Subsequent Offering Period.

The method of delivery of Shares, the Letter of Transmittal and all other required documents, including delivery through the Book-Entry Transfer Facility, is at the election and risk of the tendering shareholder. Delivery of documents to the Book-Entry Transfer

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Facility in accordance with the Book-Entry Transfer Facility’s procedures does not constitute delivery to the Depositary. Shares will be deemed delivered only when actually received by the Depositary (including, in the case of a Book-Entry Transfer, by Book-Entry Confirmation). If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery.

Signature Guarantees. No signature guarantee is required on the Letter of Transmittal (1) if the Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this Section 3 includes any participant in the Book-Entry Transfer Facility’s systems whose name appears on a security position listing as the owner of the Shares) of Shares tendered therewith and such registered holder has not completed either the box entitled “Special Delivery Instructions” or the box entitled “Special Payment Instructions” on the Letter of Transmittal or (2) if such Shares are tendered for the account of a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a participant in the Security Transfer Agent Medallion Signature Program, (each, an “Eligible Institution” and, collectively, “Eligible Institutions”). In all other cases, all signatures on Letters of Transmittal must be guaranteed by an Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal. If a Share certificate is registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made, or a Share certificate not tendered or not accepted for payment are to be returned, to a person other than the registered holder of the certificates surrendered, then the tendered Share certificate must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered holders or owners appear on the Share certificate, with the signature(s) on the certificates or stock powers guaranteed by an Eligible Institution as provided in the Letter of Transmittal. See Instructions 1 and 5 to the Letter of Transmittal.

Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to the Offer and the Share certificates are not immediately available or the procedures for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such shareholder’s tender may be effected if all the following conditions are met:

• such tender is made by or through an Eligible Institution; 

• a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Purchaser, is received by the Depositary, as provided below, prior to the Expiration Date; and

• the Share certificates (or a Book-Entry Confirmation), in proper form for transfer, together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), with any required signature guarantees (or, in the case of a book-entry transfer, an Agent’s Message in lieu of a Letter of Transmittal), and any other documents required by the Letter of Transmittal are received by the Depositary within three trading days after the date of execution of such Notice of Guaranteed Delivery. A “trading day” is any day on which the

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National Association of Security Dealers Automated Quotation System, Inc. (“Nasdaq”) is open for business.

The Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, facsimile transmission or mail (or if sent by a Book-Entry Transfer Facility, a message transmitted through electronic means in accordance with the usual procedures of the Book-Entry Transfer Facility and the Depositary; provided, however, that if such notice is sent by a Book-Entry Transfer Facility through electronic means, it must state that the Book-Entry Transfer Facility has received an express acknowledgment from the participant on whose behalf such notice is given that such participant has received and agrees to become bound by the form of such notice) to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery made available by the Purchaser.

Other Requirements. Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (1) Share certificates (or a timely Book-Entry Confirmation), (2) a properly completed and duly executed Letter of Transmittal (or a facsimile thereof), with any required signature guarantees (or, in the case of a book-entry transfer, an Agent’s Message in lieu of a Letter of Transmittal) and (3) any other documents required by the Letter of Transmittal. Accordingly, tendering shareholders may be paid at different times depending upon when Share certificates or Book-Entry Confirmations with respect to Shares are actually received by the Depositary. Under no circumstances will Interest be paid on the Offer Price to be paid by the Purchaser for the Shares, regardless of any extension of the Offer or any delay in making such payment.

Appointment as Proxy. By executing the Letter of Transmittal (or a facsimile thereof) (or, in the case of a book-entry transfer, an Agent’s Message in lieu of a Letter of Transmittal), the tendering shareholder will irrevocably appoint designees of the Purchaser as such shareholder’s agents and attorneys-in-fact and proxies in the manner set forth in the Letter of Transmittal, each with full power of substitution, to the full extent of such shareholder’s rights with respect to the Shares tendered by such shareholder and accepted for payment by the Purchaser and with respect to any and all other Shares or other securities or rights issued or issuable in respect of such Shares on or after the date of this Offer to Purchase. All such proxies will be considered coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, the Purchaser accepts for payment Shares tendered by such shareholder as provided herein. Upon the effectiveness of such appointment, all prior powers of attorney, proxies and consents given by such shareholder with respect to such Shares or other securities or rights will, without further action, be revoked and no subsequent powers of attorney, proxies, consents or revocations may be given by such shareholder (and, if given, will not be deemed effective). The designees of the Purchaser will thereby be empowered to exercise all voting and other rights with respect to such Shares and other securities or rights, including, without limitation, in respect of any regular, special or adjourned meeting of Ault’s shareholders, actions by written consent in lieu of any such meeting or otherwise, as they in their sole discretion deem proper. The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser’s acceptance for payment of such Shares, the Purchaser must be able to exercise full voting, consent and other rights with respect to such Shares and other related securities or rights, including voting at any meeting of shareholders. The Offer does not

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constitute a solicitation of proxies, absent a purchase of Shares for any meeting of Ault shareholders.

Determination of Validity. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of any tender of Shares, including questions as to the proper completion or execution of any Letter of Transmittal (or facsimile thereof), Notice of Guaranteed Delivery or other required documents and as to the proper form for transfer of any certificate of Shares, shall be resolved by the Purchaser, in its sole discretion, whose determination shall be final and binding. The Purchaser shall have the absolute right to determine whether to reject any or all tenders not in proper or complete form or to waive any irregularities or conditions, and the Purchaser’s interpretation of the Offer to Purchase, the Letter of Transmittal and the instructions thereto and the Notice of Guaranteed Delivery (including without limitation the determination of whether any tender is complete and proper) shall be final and binding. No tender of Shares will be deemed to have been validly made until all defects or irregularities relating thereto have been cured or waived. None of the Purchaser, SL Industries, the Depositary, the Information Agent, Ault or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification.

Backup Withholding. In order to avoid “backup withholding” of U.S. federal income tax on payments of cash pursuant to the Offer, a shareholder surrendering Shares in the Offer must, unless an exemption applies, provide the Depositary with such shareholder’s correct taxpayer identification number (“TIN”) on a Substitute Form W-9, certify under penalties of perjury that such TIN is correct and provide certain other certifications. If a shareholder does not provide such shareholder’s correct TIN or fails to provide the required certifications, the Internal Revenue Service (the “IRS”) may impose a penalty on such shareholder and payment of cash to such shareholder pursuant to the Offer may be subject to backup withholding of 28%. All Ault shareholders surrendering Shares pursuant to the Offer should complete and sign the main signature form and the Substitute Form W-9 included as part of the Letter of Transmittal to provide the information and certification necessary to avoid backup withholding (unless an applicable exemption exists and is proved in a manner satisfactory to the Purchaser and the Depositary). Certain shareholders (including, among others, all corporations) are not subject to backup withholding. Noncorporate foreign shareholders should complete and sign the main signature form included as part of the Letter of Transmittal and an appropriate Form W-8 (instead of a Form W-9) a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See Instruction 8 to the Letter of Transmittal.

4. Withdrawal Rights

Except as provided in this Section 4, or as provided by applicable laws, tenders of Shares are irrevocable.

Shares tendered pursuant to the Offer may be withdrawn pursuant to the procedures set forth below at any time prior to the Expiration Date and, unless theretofore accepted for payment and paid for by the Purchaser pursuant to the Offer, may also be withdrawn at any time after February 21, 2006.

For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at its address set forth on the back cover

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of this Offer to Purchase and must specify the name of the person who tendered the Shares to be withdrawn, the number and type of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates representing Shares have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the tendering shareholder must also submit the serial numbers shown on the particular certificates evidencing such Shares and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been tendered pursuant to the procedures for book-entry transfer as set forth in Section 3 - “Procedure for Tendering Shares,” any notice of withdrawal must also specify the name and number of the account at the appropriate Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility’s procedures. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will no longer be considered properly tendered for purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 3 - “Procedure for Tendering Shares” any time prior to the Expiration Date.

No withdrawal rights will apply to Shares tendered into a Subsequent Offering Period under Rule 14d-11 of the Exchange Act.

All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchaser, in its sole discretion, which determination will be final and binding. None of the Purchaser, SL Industries, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification.

The method for delivery of any documents related to a withdrawal is at the risk of the withdrawing shareholder. Any documents related to a withdrawal will be deemed delivered only when actually received by the Depositary. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery.

5. Certain United States Federal Income Tax Consequences

The following is a summary of the material United States federal income tax consequences of the Offer and the Merger to holders of Shares whose Shares are, respectively, sold pursuant to the Offer or converted into the right to receive cash in the Merger. This discussion is for general information purposes only and does not address all aspects of United States federal income taxation that may be relevant to particular holders of Shares in light of their specific investment or tax circumstances. The tax consequences to any particular shareholder may differ depending on that shareholder’s own circumstances and tax position. The discussion is based on current provisions of the Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations issued thereunder, and administrative and judicial interpretations thereof, all as in effect as of the date hereof and all of which are subject to change, possibly with retroactive effect. This discussion applies only to holders who hold Shares as “capital assets” within the meaning of section 1221 of the Code, and does not apply to holders who acquired their Shares pursuant to the exercise of employee stock options or otherwise as compensation. In addition, this discussion does not apply to certain types of holders subject to

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special tax rules including, but not limited to, non-U.S. persons, insurance companies, tax-exempt organizations, financial institutions, brokers or dealers, holders who perfect their Dissenters’ rights, if any, or persons who held their Shares as a part of a straddle, hedge, conversion, or other integrated investment. The tax consequences of the Offer and the Merger to holders who hold their shares through a partnership or other pass-through entity generally will depend upon such holder’s status for United States federal income tax purposes.

It is recommended that each holder consult such holder’s tax advisor regarding the specific United States federal, state, local and foreign Income and other tax consequences of the Offer and the Merger in light of such holder’s specific tax situation.

The receipt of cash for Shares pursuant to the Offer or the Merger will be a taxable transaction for United States federal income tax purposes and may also be a taxable transaction under state, local, or foreign tax laws. In general, a holder who receives cash in exchange for Shares pursuant to the Offer or the Merger will recognize gain or loss for United States federal income tax purposes equal to the difference, if any, between the amount of cash received and the holder’s tax basis in the Shares exchanged. Gain or loss will be determined separately for each block of Shares (i.e., Shares acquired at the same time and price) exchanged pursuant to the Offer or the Merger. Such gain or loss will generally be capital gain or loss and generally will be long-term capital gain or loss if such Shares have been held for more than one year at the time of disposition. Tendering noncorporate shareholders generally will be eligible for a maximum U.S. federal income tax rate of 15% of any long-term gains. Any claim of a deduction in respect of a capital loss is subject to limitations.

A shareholder (other than certain exempt shareholders including, among others, all corporations and certain foreign individuals) that tenders Shares may be subject to backup withholding at a rate equal to the fourth lowest rate applicable to ordinary income of unmarried individuals (under current law, the backup withholding rate is 28%) unless the shareholder provides its TIN and certifies under penalties of perjury that such TIN is correct (or properly certifies that it is awaiting a TIN) and certifies as to no loss of exemption from backup withholding and otherwise complies with the applicable requirements of the backup withholding rules. Backup withholding is not an additional tax. Rather, the amount of any backup withholding can be credited against the U.S. federal income tax liability of the person subject to the backup withholding, provided that the required information is given to the IRS. If backup withholding results in an overpayment of tax, a shareholder can claim a refund by filing a U.S. federal income tax return. A shareholder that does not furnish a required TIN or that does not otherwise establish a basis for an exemption from backup withholding may be subject to a penalty imposed by the IRS. See “Backup Withholding” under Section 3 - “Procedure for Tendering Shares.” Each shareholder is required to complete and sign the Substitute Form W-9 included as part of the Letter of Transmittal so as to provide the information and certification necessary to avoid backup withholding.

6. Price Range of the Shares; Dividends on the Shares

The Common Stock was traded through the Nasdaq National Market under the symbol “AULT” until November 1, 2005. Since November 2, 2005, the Common Stock has traded on Nasdaq CM. The following table sets forth, for each of the periods indicated, the high and low

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reported sales price per share of Common Stock on the Nasdaq National Market based on published financial sources.

	High	Low
Fiscal 2003
First Quarter	$4.84	$3.00
Second Quarter	$3.01	$1.61
Third Quarter	$2.55	$1.70
Fourth Quarter	$2.08	$1.66
Fiscal 2004
First Quarter	$2.31	$1.86
Second Quarter	$2.99	$2.00
Third Quarter	$3.76	$2.30
Fourth Quarter	$3.77	$2.88
Fiscal 2005
First Quarter	$3.10	$2.35
Second Quarter	$3.58	$2.57
Third Quarter	$3.57	$2.41
Fourth Quarter	$2.58	$1.89

On December 16, 2005, the last full trading day prior to the public announcement of the execution of the Merger Agreement, the last reported sales price of the Common Stock on Nasdaq CM was $1.73 per share. On December 22, 2005, the most recent practicable trading day prior to the commencement of the Offer, the last reported sales price of the Common Stock on the Nasdaq CM was $2.86 per share. Shareholders are urged to obtain a current market quotation for the Common Stock.

No established trading market exists or has existed for the Series B Convertible Preferred Stock, which is not registered under the Exchange Act.

The Purchaser has been advised by Ault that Ault has not declared or paid any cash dividends on the Common Stock during any of the periods indicated in the above table and that it does not intend to declare or pay any cash dividends on the Common Stock in the foreseeable future.

Further, the Merger Agreement provides that, without the prior written consent of SL Industries, from the date of the Merger Agreement until the earlier to occur of the termination of the Merger Agreement or the Effective Time, Ault may not declare, pay, or set aside, any dividends on or make any other distributions in respect of any of its capital stock other than with respect to its Series B Convertible Preferred Stock in accordance with the terms thereof.

7. Effect of the Offer on the Market for the Shares; Stock Listing; Exchange Act Registration; Margin Regulations

Market for the Shares. The Purchaser’s purchase of Shares pursuant to the Offer will reduce the number of holders of Common Stock. Purchaser’s purchase of Shares in the Offer will also reduce the number of shares of Common Stock that might otherwise trade publicly and

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could adversely affect the liquidity and market value of the remaining shares of Common Stock held by the public. Shares of Ault’s Series B Convertible Preferred Stock are held by only Nidec America Corporation and are not registered under the Exchange Act. No established trading market exists or has existed for shares of Series B Convertible Preferred Stock.

Nasdaq Listing. Purchaser intends to cause the Shares to be delisted from Nasdaq promptly upon completion of the Merger. Even if the Merger is not completed, depending upon the number of Shares tendered to and purchased by Purchaser in the Offer, the Shares may no longer meet the requirements of the National Association of Securities Dealers for continued inclusion on Nasdaq, which requires that an issuer have at least 500,000 publicly held shares, held by at least 300 round lot shareholders, with a market value of at least $1,000,000, have a minimum bid price of $1, have at least two market makers and have any of (1) a market capitalization of at least $35,000,000, (2) shareholders’ equity of at least $2,500,000 or (3) at least $500,000 in net income from continuing operations (in the latest fiscal year or 2 of the last 3 fiscal years).

If Nasdaq ceased publishing quotations for the Shares, it is possible that the Shares would continue to trade in the over-the-counter market and that price or other quotations would be reported by other sources. The extent of the public market for the Shares and the availability of such quotations would depend, however, upon such factors as the number of shareholders and the aggregate market value of the Shares available in the public market at such time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration under the Exchange Act as described below, and other factors. Purchaser cannot predict whether the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for, or marketability of, the Shares, or whether it would cause future market prices to be greater or lesser than the price Purchaser is currently offering.

Exchange Act Registration. The Common Stock is currently registered under the Exchange Act. Such registration may be terminated upon application of Ault to the SEC if the Common Stock is neither listed on a national securities exchange nor held by 300 or more holders of record. Termination of registration of the Common Stock under the Exchange Act, assuming there are no other securities of Ault subject to registration, would substantially reduce the information required to be furnished by Ault to its shareholders and to the SEC and would make certain provisions of the Exchange Act no longer applicable to Ault, such as the short-swing profit recovery provisions of Section 16(b), the requirement of furnishing a proxy statement pursuant to Section 14(a) or 14(c) in connection with shareholders’ meetings and the related requirement of furnishing an annual report to shareholders. Furthermore, the ability of “affiliates” of Ault and persons holding “restricted securities” of Ault to dispose of such securities pursuant to Rule 144 or Rule 144A promulgated under the Securities Act of 1933, as amended (the “Securities Act”), may be impaired or eliminated. The Purchaser intends to seek to cause Ault to apply for termination of registration of the Common Stock under the Exchange Act as soon after the completion of the Offer as the requirements for such termination are met.

Margin Regulations. The shares of Common Stock currently are “margin securities” under the regulations of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), which status has the effect, among other things, of allowing brokers to extend credit on the collateral of shares of Common Stock. Depending upon factors similar to those

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described above regarding listing and market quotations, it is possible that, following the Offer, shares of Common Stock would no longer constitute “margin securities” for the purposes of the margin regulations of the Federal Reserve Board and therefore could no longer be used as collateral for loans made by brokers.

8. Certain Information Concerning Ault

Ault is a Minnesota corporation with its principal executive office at 7105 Northland Terrace, Minneapolis, Minnesota 55428-1028. The telephone number of Ault at such office is (763) 592-1028. Ault designs, manufactures, and markets power conversion products and is a leading domestic supplier of such products to original equipment manufacturers of data communications equipment, telecommunications equipment, portable medical devices and equipment as well as scanning and printing equipment and industrial equipment.

Selected Financial Information. Consolidated financial information with respect to Ault, can be found in Ault’s Annual Report on Form 10-K for the fiscal year ended May 29, 2005, its Quarterly Report on Form 10-Q for the three-month period ended August 28, 2005, and its Report on Form 8-K filed December 19, 2005 describing a restatement of Ault’s financial results for the first fiscal quarter of 2006 and the fiscal years 2005 and 2004, each as filed with the SEC pursuant to the Exchange Act. Ault has publicly announced that amendments of the Form 10-K and Form 10-Q referred to above will be filed with the SEC on or about January 11, 2006. More comprehensive financial information is included in such reports and in other documents filed by Ault with the SEC. These filings are available at the SEC as provided below.

Available Information. Ault is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is obligated to file reports, proxy statements and other information with the SEC relating to its business, financial condition and other matters. Information as of particular dates concerning Ault’s directors and officers, their remuneration, options granted to them, the principal holders of Ault’s securities and any material interests of such persons in transactions with Ault is required to be disclosed in proxy statements distributed to Ault’s shareholders and filed with the SEC. Such reports, proxy statements and other information are available for inspection at the public reference facilities of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such information are obtainable by mail, upon payment of the SEC’s customary charges, by writing to the SEC’s principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The SEC also maintains a website at http://www.sec.gov that contains reports, proxy statements and other information relating to Ault that have been filed via the EDGAR System.

9. Certain Information Concerning SL Industries and the Purchaser

SL Industries and the Purchaser. SL Industries is a New Jersey corporation. SL Industries, through its subsidiaries, designs, manufactures and markets power electronics, power motion, power protection, teleprotection and specialized communication equipment that is used in a variety of medical, aerospace, computer, datacom, industrial, telecom, transportation and electric power utility equipment applications. Its products are generally incorporated into larger systems to increase operating safety, reliability and efficiency. The Company’s products are largely sold to original equipment manufacturers, the electric power utility industry, and to a lesser extent, to commercial distributors. SL Industries’ principal executive offices are located at

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520 Fellowship Road, Suite A114, Mt. Laurel, New Jersey 08054, and its telephone number at that address is (856) 727-1500.

The Purchaser is a Minnesota corporation which was recently formed at the direction of SL Industries for the purpose of effecting the Offer and the Merger. SL Industries owns all of the outstanding capital stock of the Purchaser. Until immediately prior to the time the Purchaser purchases Shares pursuant to the Offer, it is not anticipated that the Purchaser will have any significant assets or liabilities or engage in any activities other than those incident to the Offer and the Merger. The Purchaser’s principal executive offices are located at 520 Fellowship Road, Suite A114, Mt. Laurel, New Jersey 08054, and its telephone number at that address is (856) 727-1500.

The name, citizenship, business address, present principal occupation or employment and five-year employment history of each of the directors and executive officers of the Purchaser and SL Industries are set forth in Schedule I hereto.

None of the persons listed in Schedule I has, during the past five years, been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. None of the persons listed in Schedule I has, during the past five years, been convicted in a criminal proceeding.

Except as set forth elsewhere in this Offer to Purchase: (a) neither SL Industries nor, to SL Industries’ knowledge, any of the persons listed in Schedule I to this Offer to Purchase or any associate or majority owned subsidiary of SL Industries or of any of the persons so listed, beneficially owns or has a right to acquire any Shares or any other equity securities of Ault, (b) neither SL Industries nor, to SL Industries’ knowledge, any of the persons or entities referred to in clause (a) above or any of their executive officers, directors or subsidiaries has effected any transaction in the Shares or any other equity securities of Ault during the past 60 days, (c) since December 23, 2003, there have been no transactions that would require reporting under the rules and regulations of the SEC between SL Industries or any its subsidiaries, or, to SL Industries’ knowledge, any of the persons listed in Schedule I to this Offer to Purchase, on the one hand, and Ault or any of its executive officers, directors or affiliates, on the other hand, and (d) since December 23, 2003, there have been no contacts, negotiations or transactions between SL Industries or any of its subsidiaries, or, to SL Industries’ knowledge, any of the persons listed in Schedule I to this Offer to Purchase, on the one hand, and Ault or any of its subsidiaries or affiliates, on the other hand, concerning a merger, consolidation or acquisition, a tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets.

SL Industries owns 234,169 (approximately 4.8%) of the outstanding shares of Common Stock. In addition, pursuant to the Shareholders Agreement, SL Industries and the Purchaser may be deemed to beneficially own an additional approximately 17% of the outstanding shares of Common Stock. See Section 13 - “The Merger Agreement and Other Agreements.”

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Available Information. Pursuant to Rule 14d-3 under the Exchange Act, SL Industries and the Purchaser filed with the SEC a Tender Offer Statement on Schedule TO (the “Schedule TO”), of which this Offer to Purchase forms a part, and exhibits to the Schedule TO.

Additionally, SL Industries is subject to the information and reporting requirements of the Exchange Act and is required to file periodic reports, proxy statements and other information with the SEC relating to its business, financial condition and other matters. Certain information, as of particular dates, concerning SL Industries’ business, principal physical properties, capital structure, material pending legal proceedings, operating results, financial condition, directors and officers (including their remuneration and stock options granted to them), the principal holders of SL Industries’ securities, any material interests of such persons in transactions with SL Industries and certain other matters is required to be disclosed in proxy statements and annual reports distributed to SL Industries’ shareholders and filed with the SEC. The Schedule TO and the exhibits thereto, as well as these other reports, proxy statements and other information, may be inspected at the SEC’s public reference library at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such information are obtainable by mail, upon payment of the SEC’s customary charges, by writing to the SEC’s principal office at 450 Fifth Street, N.W., Washington D.C. 20549. The SEC also maintains a website at http://www.sec.gov that contains reports, proxy statements and other information relating to SL Industries that have been filed via the EDGAR System.

10. Source and Amount of Funds

The Offer is not conditioned upon any financing arrangements. SL Industries and the Purchaser estimate that the total amount of funds required to consummate the Offer and the Merger will be approximately $15.6 million, plus any related fees and expenses. The Purchaser will acquire all such funds from SL Industries, which currently intends to use cash on hand and borrowing availability under its existing Revolving Credit Facility (as defined below) for that purpose. The Purchaser and SL Industries have no alternate financing plan, nor do they contemplate that one will be needed.

SL Industries currently has a revolving credit facility with Bank of America, N.A. (the “Revolving Credit Facility”) which provides for borrowings of up to $25,000,000 (and in certain circumstances up to $30,000,000). The Revolving Credit Facility expires, and any loans outstanding thereunder mature, on June 30, 2008. Borrowings under the Revolving Credit Facility bear interest, at SL Industries’ option, at the London interbank offered rate (“LIBOR”) plus 0.90% to 1.9%, or a base rate, plus a margin rate ranging from 0% to 0.5%, which is the higher of (i) the Federal Funds rate plus 0.5% or (ii) Bank of America, N.A.’s publicly announced prime rate. The margin rates are based on certain leverage ratios, as provided in the Revolving Credit Agreement governing the Revolving Credit Facility. SL Industries is subject to compliance with certain covenants set forth in the Revolving Credit Agreement, including a maximum ratio of total funded debt to EBITDA, minimum levels of interest coverage and net worth and limitation on capital expenditures, as defined. The Revolving Credit Facility specifically contemplates the ability to borrow funds to effect the acquisition of Ault. SL Industries intends to repay borrowings under the Revolving Credit Facility from operating cash flows. The foregoing summary of certain provisions of the Revolving Credit Facility is qualified in its entirety by reference to the Revolving Credit Agreement, which is incorporated herein by reference and a copy of which has been filed with the SEC as Exhibit (b) to the Schedule TO.

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Because the only consideration in the Offer and Merger is cash and the Offer is to purchase all outstanding Shares, and in view of the absence of a financing condition and the fact that all of the funding will come from SL Industries’ cash on hand and existing Revolving Credit Facility, the Purchaser believes the financial condition of SL Industries and its affiliates is not material to a decision by a holder of Shares whether to sell, tender or hold Shares pursuant to the Offer.

11. Background of the Offer

SL Industries continually explores and conducts internal discussions with regard to acquisitions and other strategic corporate transactions that are consistent with its corporate strategies.

On February 25, 2004, Warren Lichtenstein, Chairman and then Chief Executive Officer of SL Industries, and James Taylor, then Executive Vice President and Chief Operating Officer of SL Industries, met with Fredrick Green, Chairman and Chief Executive Officer of Ault, and Donald Henry, then Vice President and Chief Financial Officer of Ault, at Ault’s offices in Minneapolis, Minnesota to discuss Ault’s products and capabilities and possible business synergies that might exist between Ault and SL Industries.

On March 4, 2004, Mr. Lichtenstein sent a letter to Mr. Green expressing SL Industries’ willingness to offer to acquire all of the outstanding stock of Ault for $3.00 per share, either all cash or a combination of cash and SL Industries common stock, conditioned on satisfactory completion of due diligence, obtaining all necessary consents and approvals, certain other customary conditions and SL Industries’ receipt of necessary financing.

On March 8, 2004, the Ault Board met by conference call to discuss the February 25, 2004 visit of Messrs. Lichtenstein and Taylor and the March 4, 2004 written offer of SL Industries.

Following the March 8, 2004 meeting of Ault’s Board of Directors, Mr. Green spoke several times with Mr. Lichtenstein and Mr. Taylor. Mr. Green invited Mr. Taylor to visit Ault’s facilities in Korea and China in conjunction with an upcoming trip by Mr. Green subject to obtaining a satisfactory written confidentiality agreement prior to the beginning of the visits.

On March 22, 2004, Ault and SL signed a confidentiality agreement dated March 19, 2004, which is described in Section 13 – “The Merger Agreement and Other Agreements.”

On March 23, 2004, Mr. Taylor visited the Ault Korea facility in metropolitan Seoul, Republic of Korea with Mr. Green and Xioadong Wang, Ault’s then Vice President Asia Pacific. On March 24, 2004, Messrs. Taylor and Lichtenstein visited the Ault facility in Xianghe, China and the Ault facility in Shanghai, China, with Messrs. Green and Wang.

On April 6, 2004, Mr. Taylor and David Nuzzo, Vice President and Chief Financial Officer of SL Industries, met at Ault’s headquarters in Minneapolis with Mr. Green, Mr. Wang, Mr. Henry, Gregory Harris, the Vice President of Sales and Marketing of Ault, Tim Cassidy, the Director of Engineering of Ault, and Brian Chang and John Colwell, Jr., directors of Ault, to conduct an overview of Ault’s business and programs

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From April through November 2004, representatives of SL Industries and Ault remained in contact regarding a possible transaction.

In August 2004, Messrs. Taylor and Nuzzo engaged in several telephone calls with Messrs. Green and Henry during which the Ault executives furnished new financial forecasts of Ault’s anticipated activities and projected results of operations for the first quarter of Ault’s 2005 fiscal year.

Following receipt of such new forecasts, Messrs. Taylor and Green continued to engage in discussions regarding the valuation of Ault and a possible business combination.

On October 11, 2004, Mr. Taylor met with Eric Zheng, Ault’s plant manager at the Ault facility in Xianghe, China.

On November 5, 2004, SL Industries received a letter from Ault granting SL Industries permission to approach Nidec America Corporation, the holder of Ault’s outstanding Series B Convertible Preferred Stock, to try to buy the Series B Preferred Stock at a discount. SL Industries did not reach an agreement with Nidec America Corporation.

On December 10, 2004, Mr. Lichtenstein sent a letter to Mr. Green indicating SL Industries’ continued interest in acquiring Ault. SL Industries proposed a stock and cash transaction in which SL Industries would issue 0.111 shares of SL Industries common stock plus $2.00 in cash for each share of Ault common stock. For purposes of this proposal, SL Industries suggested valuing Ault’s common stock at $4 per share and SL Industries common stock at $18 per share. SL Industries would also retire the Series B Preferred Stock at par plus accrued interest. The letter proposed that Ault agree to a 90 day exclusivity period and confirmed that the March 19, 2004 confidentiality agreement remained in full force and effect.

On January 13, 2005, Ault engaged Stephens Inc. of Little Rock, Arkansas, a firm with significant investment banking experience in the power supply industry, as its financial advisor.

On February 23, 2005, Stephens Inc. sent a written presentation to Mr. Lichtenstein setting forth a combination analysis and transaction rationale for a potential business combination of SL Industries and Ault and Mr. Lichtenstein and Jim Johnson, a Vice President of Stephens Inc., engaged in a telephone call regarding the written presentation.

On April 14, 2005, Mr. Lichtenstein received a telephone call from Mr. Johnson in which Mr. Johnson stated that Ault’s Board of Directors was officially declining the offer proposed in the December 10, 2004 letter and that Ault would likely begin pursuing other strategic alternatives in the near future.

On April 28, 2005, Mr. Lichtenstein, Mr. Taylor, Mr. Nuzzo and Glen Kassan, then President of SL Industries, met in New York City with Messrs. Green, Henry and Johnson. At the meeting, the participants reviewed a written presentation dated April 28, 2005 prepared by Stephens Inc. setting forth an analysis of Ault and the merits of a possible combination of Ault and SL Industries and explored the potential synergies of such a combination and an outline of a possible transaction.

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On April 29, 2005, Mr. Taylor sent a letter to Mr. Green offering $3.70 per share, in cash, conditioned on satisfactory completion of due diligence, obtaining all necessary consents and approvals, and certain other conditions. The offer was not subject to financing.

On May 6, 2005, Mr. Lichtenstein received a telephone call from Mr. Johnson in which Mr. Johnson stated that the Ault Board of Directors would be willing to recommend to Ault’s shareholders $4.00 per share as opposed to SL Industries’ offer of $3.70 per share.

On May 10, 2005, Mr. Lichtenstein received a telephone call from Mr. Johnson in which Mr. Lichtenstein was advised that Ault agreed to a price of $3.75 per share of Ault common stock, in cash, conditioned on satisfactory completion of due diligence, obtaining all necessary consents and approvals, and certain other conditions, but not subject to financing.

Thereafter, Ault and SL Industries executed a letter dated May 13, 2005 expressing SL Industries’ willingness to conduct due diligence and negotiate a definitive purchase agreement to acquire all of the outstanding capital stock of Ault for a consideration of $3.75 per share of common stock in cash with no financing contingency. The letter provided for a 30 day exclusivity period and extended to June 30, 2006 a provision of the March 19, 2004 confidentiality agreement (the “Non-Diversion Provision”) in which SL Industries agreed not to divert or attempt to divert any business or customer of Ault or its affiliates or employ or attempt to employ or divert an employee of Ault or any of its affiliates (other than unsolicited applicants or applicants responding to a general solicitation not targeted to employees of the Company or its affiliates). The letter permits Ault’s Board of Directors, subject to its fiduciary duties, to respond to unsolicited offers. If Ault accepts an alternative proposal during the exclusivity period, SL Industries would be entitled to reimbursement for its out-of-pocket expenses, including fees and disbursements of counsel and other advisors, not to exceed $300,000.

Representatives of SL Industries commenced due diligence activities with respect to Ault and counsel for SL Industries and Ault commenced preparation and negotiation of transaction documentation.

On May 24, 2005, Mr. Taylor received a telephone call from Mr. Johnson in which they discussed various issues with respect to a proposed merger between the parties.

In late May 2005, SL Industries, in the course of certain of its due diligence activities, uncovered what it considered to be significant accounting discrepancies in Ault’s financial records.

On June 2, 2005, Mr. Kassan, Mr. Taylor, Mr. Nuzzo, Louis Belardi, SL Industries’ Corporate Controller, and Sharon Bromberg of the accounting firm of JH Cohn LLP, accounting advisors to SL Industries, advised Messrs. Green and Henry of these discrepancies in a conference telephone call. Ault advised SL Industries that its auditors in China were beginning their field work in connection with the audit of the financial statements of Ault’s China operations and that Ault’s representatives and Ault’s auditors would begin an investigation of the issues raised by JH Cohn.

On June 20, 2005, Mr. Taylor received a telephone call from Mr. Green in which he confirmed that there were certain accounting discrepancies and indicated that Ault would need

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further time to review and investigate these discrepancies. Mr. Green was advised that SL Industries wanted to defer completion of negotiations to acquire Ault pending the completion of the investigation by Ault management and its auditors of the accounting discrepancies and that SL Industries would need to review audited financial information for fiscal 2005, information regarding any adjustments applicable to earlier periods and a revised projection of fiscal 2006 results before resuming negotiations.

SL Industries then suspended activities with respect to a transaction with Ault while Ault management and it auditors continued to investigate the accounting discrepancies in the China operations.

By letter dated June 30, 2005, SL Industries and Ault agreed to extend the exclusivity period set forth in the May 13, 2005 letter to end on August 1, 2005.

On July 25, 2005, SL Industries received a new written presentation from Stephens Inc. setting forth a combination analysis and transaction rationale for a potential business combination of SL Industries and Ault.

On or about July 25, 2005, a conference telephone call was held among Messrs. Taylor, Kassan and Nuzzo and Messrs. Green, Henry and Johnson to discuss the status of Ault’s investigation of accounting discrepancies in its China operations and a new forecast for Ault for 2006.

By letter dated July 28, 2005, SL Industries and Ault agreed to extend the exclusivity period set forth in the letter of May 13, 2005 to end on August 19, 2005.

On August 5, 2005, Ault issued a press release announcing its full year fiscal 2005 financial results and that it would be restating its financial results for the fiscal year ended May 30, 2004 and for the first three quarters of fiscal 2005.

On August 18, 2005, Messrs. Taylor, Kassan and Nuzzo met with Mr. Green, Mr. Cassidy, Mr. Harris, Mr. Wang, William Birmingham, Ault’s then newly appointed interim Chief Financial Officer, Randy Smith, Ault’s Accounting Coordinator, and Jeremy Welsand, a partner at Grant Thornton LLP, Ault’s independent auditors, at Ault’s headquarters in Minneapolis to review Ault’s financial results for fiscal 2005, the restatement of Ault’s financial results for its fiscal year ended May 30, 2004 and for the first three quarters of fiscal 2005, as well as management’s updated forecast for fiscal 2006.

By letter dated August 22, 2005, SL Industries and Ault agreed to extend the exclusivity period set forth in the May 13, 2005 letter to end on September 2, 2005.

On August 31, 2005, Mr. Taylor communicated by telephone to Mr. Johnson a proposal to purchase all outstanding shares of Ault common stock for $3.00 per share in cash, conditioned on satisfactory completion of due diligence, obtaining all necessary consents and approvals, and certain other conditions, but not subject to financing.

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On September 7, 2005, Mr. Taylor received a telephone call from Mr. Johnson in which Mr. Johnson advised that Ault’s Board of Directors had met and determined that the minimum price they would recommend to shareholders was $3.50 per share.

On September 12, 2005, Mr. Taylor and Mr. Lichtenstein held a telephone call with Mr. Johnson to discuss the separation between the SL “bid” of $3.00 per share and the Ault “ask” of $3.50 per share.

From September 14, 2005 until September 19, 2005, Mr. Taylor and Mr. Johnson had several conversations by telephone as a result of which they ultimately agreed, on September 19, 2005, that Mr. Johnson would present an offer to the Ault Board providing for a price of $3.30 per share in cash conditioned on satisfactory completion of due diligence, obtaining all necessary consents and approvals, and certain other conditions, but not subject to financing. This offer was communicated to Ault by a letter dated September 19, 2005 from Mr. Taylor. On September 27, 2005, SL Industries sent another letter to Ault clarifying certain aspects of its offer of $3.30 per share in cash.

Representatives of SL Industries resumed their due diligence activities with respect to Ault.

On October 9, 2005, Mr. Lyron Bentovim, a Managing Director of Skiritai Capital, the beneficial owner of approximately 14.8% of all outstanding Ault shares, became a member of Ault’s Board. Mr. Bentovim was also added to the special committee of disinterested directors established pursuant to Minnesota law to separately consider and act on any proposal submitted by SL Industries.

On October 11, 2005 Mr. Taylor sent a letter to Ault providing further clarification of certain terms of the offer contained in his September 19, 2005 letter, as clarified by his September 27, 2005 letter, relating to negotiation of the proposed break-up fee and expense reimbursement and the minimum condition with respect to shares to be tendered in the offer.

Ault and SL Industries executed a letter dated October 12, 2005, similar to the May 13, 2005 letter, expressing SL Industries’ willingness to conduct further due diligence and negotiate a definitive purchase agreement to acquire all of the outstanding capital stock of Ault for a consideration of $3.30 per share of common stock in cash with no financing contingency. The letter provided for a 30 day exclusivity period and extended to October 14, 2006 the Non-Diversion Provision of the March 19, 2004 confidentiality agreement.

On October 17, 2005, Mr. Taylor, Eugene Ruddy, President of Condor D.C. Power Supplies, Inc., a subsidiary of SL Industries, and J.D. Anderson, Vice President - Operations of Condor, met with Mr. Wang, Eric Zheng, the plant manager for Ault’s facility in Xianghe, China, and Mr. Shu, assistant plant manager at the Ault Xianghe facility, at the Ault Xianghe facility to review Ault’s China operations.

On October 21, 2005, Mr. Taylor and Mr. Ruddy met with Mr. Wang, Mickey Huang, the Ault Shanghai engineering manager, and Lucy Hu, an Ault Shanghai sales executive, at the Ault Shanghai facility in Shanghai, China to review Ault’s engineering and sales programs in China.

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On November 1, 2005, Messrs. Taylor and Ruddy met with Messrs. Green, Cassidy and Harris to review Ault’s sales and engineering programs.

In November 2005, counsel for Ault and SL Industries resumed negotiation and preparation of transaction documentation and largely resolved non-price issues that were unresolved in early June 2005 when SL Industries suspended its activities regarding a transaction.

By letter signed by the parties on November 10, 2005, SL Industries and Ault agreed to extend the exclusivity period set forth in the October 12, 2005 letter to end on November 23, 2005.

On or about November 16, 2005, Ault disclosed to SL Industries a new accounting issue affecting its financial statements and indicated that Ault would need further time to review and investigate this issue. SL Industries then suspended its activities with respect to a transaction with Ault while Ault dealt with the effect of this new issue on its financial statements.

In late November 2005, Mr. Taylor and Mr. Johnson had several conversations by telephone in which they discussed Ault’s most recent accounting issues and the potential impact on Ault’s historical and projected financial statements.

On December 1, 2005, Mr. Taylor phoned Mr. Johnson and proposed a cash offer price of $2.00 per share. The Ault Board of Directors discussed this proposal in a meeting held at Ault’s headquarters on December 6, 2005, and authorized Mr. Johnson to submit a counter offer of $3.10 per share in cash, which he did later that day by telephone.

On December 9, 2005, Mr. Taylor and Mr. Johnson had multiple discussions by telephone in which they discussed the offer price. That afternoon, with authorization from a designated sub-committee of the Ault Board of Directors, Mr. Johnson proposed a cash offer price of $2.90 per share.

On December 11, 2005, Mr. Taylor phoned Mr. Johnson and agreed to the cash price of $2.90 per share of common stock conditioned on satisfactory completion of due diligence, obtaining all necessary consents and approvals, and certain other conditions, but not subject to financing.

From December 12, 2005 until December 15, 2005 attorneys and other representatives of SL Industries and Ault negotiated final terms of transaction documentation.

On December 16, 2005, Ault’s Board of Directors met in Minnepolis, Minnesota to take formal action on the proposed offer of SL Industries to acquire all outstanding shares of Ault common stock for $2.90 per share in cash, as reflected in transaction documents in substantially final form provided to the directors in advance of the meeting. The Board received and discussed Stephens Inc.’s report and opinion regarding the fairness of the proposed transaction from a financial point of view, as well as advice of counsel regarding the terms of the transaction contained in the draft definitive documents. Following the Stephens Inc. presentation and discussion, the Special Committee of Ault’s Board of Directors appointed to consider the Offer and the Merger met separately, held further discussions with Stephens and counsel and

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unanimously approved the proposed transaction and recommended that the Board of Directors of Ault approve the Offer and the Merger. Thereafter, Ault’s entire Board met, discussed the proposed transaction and unanimously approved the Offer and the Merger. On December 16, 2005, SL Industries’ Board of Directors met and unanimously approved the Offer and the Merger.

After the close of the financial markets on the afternoon of Friday, December 16, 2005, the parties finalized, executed and delivered the Merger Agreement, the Shareholders Agreement and the Stock Option Agreement.

Before the opening of the financial markets on the morning of Monday, December 19, 2005, SL Industries and Ault issued separate press releases relating to the proposed Offer and Merger. The press release issued by Ault also described a restatement of the financial statements of Ault for certain periods.

On December 23, 2005, in accordance with the Merger Agreement, SL Industries commenced the Offer.

12. Purpose of the Offer; Interest in Securities of Ault; Other Matters

Purpose of the Offer. The purpose of the Offer is to enable SL Industries to acquire control of, and the entire equity interest in, Ault. The Offer is being made pursuant to the Merger Agreement and is intended to increase the likelihood that the Merger will be effected. The purpose of the Merger is to acquire all outstanding Shares not purchased pursuant to the Offer. The transaction structure includes the Merger in order to ensure the acquisition by SL Industries of all the outstanding Shares.

If the Merger is consummated, SL Industries’ common equity interest in Ault would increase to 100% and SL Industries would be entitled to all the benefits resulting from that interest. These benefits include complete management control with regard to the future conduct of Ault’s business and the opportunity to benefit from any increase in its value. Similarly, SL Industries will also bear the risk of any losses incurred in the operation of Ault and any decrease in the value of Ault.

Ault shareholders who sell their Shares in the Offer will cease to have any equity interest in Ault and to participate in any future growth. If the Merger is consummated, the shareholders of Ault will no longer have an equity interest in Ault and instead will have only the right to receive cash consideration pursuant to the Merger Agreement. See Section 13 - “The Merger Agreement and Other Agreements.” Similarly, the shareholders of Ault will not bear the risk of any decrease in the value of Ault after selling their Shares in the Offer or the subsequent Merger.

Plans for Ault. Except as disclosed in this Offer to Purchase, neither SL Industries nor the Purchaser has any present plan or proposal (1) to effect an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving Ault, (2) for the sale or transfer of a material amount of assets of Ault, (3) to make any material change in the present dividend policy, or indebtedness or capitalization of Ault, (4) to change the present board of directors or management of Ault, (5) to make any other material change in Ault’s corporate structure or business; or (6) for any person to acquire additional securities of Ault, or to dispose of securities

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of the Ault. After the purchase of the Shares by the Purchaser pursuant to the Offer, SL Industries may appoint its representatives to the board of directors of Ault in proportion to its ownership of the outstanding Shares, as described below under the caption “Ault’s Board of Directors” in Section 13 - “The Merger Agreement and Other Agreements.” Following completion of the Offer and the Merger, SL Industries intends to operate Ault as a subsidiary of SL Industries under the direction of SL Industries’ management. SL Industries will continue to evaluate and review Ault and its business, assets, corporate structure, capitalization, operations, properties, policies, management and personnel with a view toward determining how optimally to realize any potential benefits which arise from the rationalization of the operations of Ault with those of the other business units and subsidiaries of SL Industries. Such evaluation and review is ongoing and is not expected to be completed until after the consummation of the Offer and Merger. Upon SL Industries acquiring control of Ault, SL Industries will complete such evaluation and review of Ault and will determine what, if any, changes would be desirable in light of the circumstances and the strategic business portfolio which then exist. Such changes could include, among other things, restructuring Ault through changes in Ault’s business, corporate structure, certificate of incorporation, by-laws, capitalization or management or could involve consolidating and streamlining certain operations and reorganizing other businesses and operations. Accordingly, SL Industries and the Purchaser reserve the right to change their plans and intentions at any time, as they deem appropriate.

SL Industries, Purchaser or an affiliate of SL Industries may, following the consummation or termination of the Offer, seek to acquire additional shares of Common Stock through open market purchases, privately negotiated transactions, a tender offer or exchange offer or otherwise, upon such terms and at such prices as they will determine, which may be more of less than the price paid in the Offer.

Shareholder Approval. Generally, under the MBCA, the approval of an affirmative vote of the holders of a majority of the outstanding shares of common stock is required to adopt and approve a merger agreement and subsequent merger of a company. Ault has represented in the Merger Agreement that the execution and delivery of the Merger Agreement by Ault and the consummation by Ault of the transactions contemplated thereby, including the Offer and the Merger, have been duly and validly authorized by the Ault’s Board of Directors. Ault has also represented that no other corporate action is necessary by the Company or any of its subsidiaries to authorize the execution or delivery of the Merger Agreement and to consummate any transactions contemplated by the Merger Agreement, other than a vote of the Company’s shareholders to adopt the Merger Agreement in accordance with the MBCA.

In addition, Ault has represented that, if required under applicable law, the affirmative vote of the holders of a majority of the shares of Common Stock outstanding on the record date for the shareholders’ meeting (called for the purpose of adopting the Merger Agreement) (the “Company Shareholder Meeting”) and entitled to vote (the “Required Company Shareholder Vote”), is the only vote of the holders of any class or series of the Company’s capital stock necessary to adopt the Merger Agreement, approve the Merger or consummate any of the other transactions contemplated by the Merger Agreement. Therefore, unless the Merger is consummated pursuant to the Short Form Merger (as defined below) provisions under the MBCA described below (in which case no further corporate action by the Ault shareholders will be required to complete the Merger), the only remaining required corporate action of Ault would be the approval of the Merger Agreement and the transactions contemplated thereby by the

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affirmative vote of the holders of a majority of the shares of Common Stock outstanding on the record date for Company Shareholder Meeting, for which Ault has agreed to take all action necessary under all applicable law to call, give notice of and hold, as promptly as practicable following the Offer Closing Date (as defined below).

Each of SL Industries and Ault have agreed to use their respective reasonable best efforts to take, or cause to be taken, all actions necessary to consummate the Offer and the Merger and make effective the other transactions contemplated by the Merger Agreement, the Shareholders Agreement and the Stock Option Agreement.

Short FormMerger. Section 302A.621 of the MBCA provides that, if a corporation owns at least 90% of the outstanding shares of each class of another corporation, the corporation holding such stock may merge the subsidiary corporation into itself without any action or vote on the part of the shareholders of such other corporation (such merger, a “Short Form Merger”). In the event that SL Industries, Purchaser and any other subsidiaries of SL Industries acquire in the aggregate at least 90% of the outstanding Shares pursuant to the Offer or otherwise, then, a Short Form Merger could be effected, subject to compliance with the provisions of Section 302A.621 of the MBCA. If Purchaser owns at least 75% of the outstanding Shares following consummation of the Offer, Purchaser could exercise the Option described in Section 13 — “The Merger Agreement and Other Agreements” or seek to purchase additional Shares (in the open market or otherwise) in order to reach the 90% threshold and employ a Short Form Merger. The parties have agreed that the per share consideration paid for any Shares acquired under the Option would be the same as the Offer Price. SL Industries presently intends to effect a Short Form Merger if permitted to do so under the MBCA.

Going Private Transactions. The SEC has adopted Rule 13e-3 under the Exchange Act which is applicable to certain “going private” transactions and which may under certain circumstances be applicable to the Merger or another business combination following the purchase of Shares pursuant to the Offer in which the Purchaser seeks to acquire the remaining Shares not held by it. The Purchaser believes that Rule 13e-3 will not be applicable to the Merger because it is anticipated that the Merger will be effected within one year following the consummation of the Offer and, in the Merger, shareholders will receive the same price per Share as paid in the Offer. Rule 13e-3 requires, among other things, that certain financial information concerning Ault and certain information relating to the fairness of the proposed transaction and the consideration offered to minority shareholders be filed with the SEC and disclosed to shareholders prior to consummation of the transaction.

Dissenters’ Rights. Holders of the Shares do not have dissenters’ rights in connection with the Offer. However, if the Merger (including a Short-Form Merger) is consummated, holders of the Shares at the Effective Time will have certain rights pursuant to the provisions of Section 302A.471 and 302A.473 of the MBCA, including the right to dissent and to receive payment in cash of the fair value of their Shares. Dissenting Ault shareholders who comply with the applicable statutory procedures will be entitled to receive a judicial determination of the fair value of their Shares and to receive payment of such statutory value in cash, together with a fair rate of interest thereon. Any such judicial determination of the fair value of the Shares could be based upon factors other than, or in addition to, the price per Share to be paid in the Merger or the market value of the Shares. The value so determined could be more or less than the price per Share to be paid in the Merger.

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THE FOREGOING SUMMARY OF THE DISSENTERS’ RIGHTS UNDER THE MBCA DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY SHAREHOLDERS DESIRING TO EXERCISE ANY DISSENTERS’ RIGHTS AVAILABLE UNDER THE MBCA. THE PRESERVATION AND EXERCISE OF DISSENTERS’ RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE MBCA. IF A SHAREHOLDER WITHDRAWS OR LOSES HIS RIGHT TO DISSENTERS’ RIGHTS, SUCH HOLDER’S SHARES WILL BE AUTOMATICALLY CONVERTED INTO, AND REPRESENT ONLY THE RIGHT TO RECEIVE, THE MERGER CONSIDERATION, WITHOUT INTEREST. SEE ANNEX II FOR THE COMPLETE TEXT OF THE MBCA’S DISSENTERS’ RIGHTS PROVISIONS.

13. The Merger Agreement and Other Agreements

Merger Agreement

The following summary of certain provisions of the Merger Agreement is qualified in its entirety by reference to the Merger Agreement itself, which is incorporated herein by reference. A copy of the Merger Agreement has been filed with the SEC by SL Industries and the Purchaser, pursuant to Rule 14d-3 under the Exchange Act, as Exhibit (d)(1) to the Tender Offer Statement on Schedule TO (together with any amendments, supplements, schedules, annexes and exhibits thereto, the “Schedule TO”). Shareholders and other interested parties should read the Merger Agreement in its entirety for a more complete description of the provisions summarized below. Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Merger Agreement.

The Offer. The Merger Agreement provides for the making of the Offer. The terms of the Offer are described in Section 1 - “Terms of the Offer.” The obligation of the Purchaser to accept for payment and pay for Shares tendered pursuant to the Offer is subject to the satisfaction of the Minimum Condition and certain other conditions described in Section 14 – “Certain Conditions of the Offer.”

The Merger. The Merger Agreement provides that, following the consummation of the Offer, subject to the terms and conditions thereof, at the Effective Time of the Merger:

• the Purchaser will be merged with and into Ault and, as a result of the Merger, the separate corporate existence of the Purchaser will cease;

• Ault will be the successor or surviving corporation (sometimes referred to as the “Surviving Corporation”) in the Merger and will continue to be governed by the laws of the State of Minnesota;

• the separate corporate existence of Ault, with all its rights, privileges, immunities, powers and franchises, will continue unaffected by the Merger; and

• Ault will succeed to and assume all the rights and obligations of the Purchaser.

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The respective obligations of SL Industries and the Purchaser, on the one hand, and Ault, on the other hand, to effect the Merger are subject to the satisfaction on or prior to the closing of the Merger of each of the following conditions:

• if applicable, the Merger Agreement will have been approved and adopted by the requisite vote of the holders of the Shares, to the extent required by Ault’s articles of incorporation and the MBCA, in order to consummate the Merger;

• no order, statute, rule, regulation, executive order, stay, suspension, decree, judgment or injunction shall have been enacted, entered, promulgated or enforced by any court or other governmental authority which prohibits or prevents the consummation of the Merger (after the parties have used their reasonable best efforts to prevent the same); and

• the Purchaser will have purchased, or caused to be purchased, Shares pursuant to the Offer, unless its failure to purchase the Shares is a result of a breach of its obligation to accept for payment or pay for Shares validly tendered pursuant to the Offer in violation of the terms of the Offer or the Merger Agreement.

At the Effective Time of the Merger each issued and outstanding share of Purchaser common stock will be converted into one fully paid and nonassessable share of common stock of the Surviving Corporation. Each Share that is owned by Ault, SL Industries, the Purchaser or any other subsidiary of SL Industries will be automatically cancelled and no consideration will be delivered in exchange therefor, and each other issued and outstanding Share will be converted into the right to receive the Offer Price in cash (the “Merger Consideration”), without interest (and subject to applicable withholding taxes). From and after the Effective Time of the Merger, the Shares will no longer be outstanding and will automatically be cancelled, and each holder of a certificate representing any Shares will cease to have any rights with respect thereto, except the right to receive the Merger Consideration therefor, without interest thereon (and subject to applicable withholding taxes) upon the surrender of such certificate.

Treatment of Ault Stock Options. With respect to all outstanding options to purchase Shares (collectively, “Company Options”) granted under the Ault’s 1986 Employee Stock Option Plan and 1996 Stock Plan (collectively, the “Company Option Plans”) or otherwise, at the Effective Time, each holder of a Company Option will be entitled to receive from Ault, and shall receive, subject to other terms and conditions in the Merger Agreement, an amount from Ault equal to the net amount of: (A) the product of (i) the excess, if any, of the Merger Consideration over the exercise price per share of such Company Option at the Effective Time, multiplied by (ii) the number of shares subject to such Company Option, less (B) any applicable withholdings for any tax (the “Cash Amount”). The Cash Amount shall be zero if the exercise price for any Company Option equals or exceeds the Merger Consideration at the Effective Time. A Cash Amount will be paid to the holder of a Company Option upon written acknowledgement to the Surviving Corporation that no further payment is due to such holder on account of any Company Option and that all of such holder’s rights with respect thereto have been terminated. If such holder is subject to Section 16(a) of the Exchange Act, then Cash Amounts will be paid as soon as practicable after the time when the payment can be made without liability to such person under Section 16(b) of the Exchange Act.

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As of the Effective Time, except as otherwise provided in the Merger Agreement, all rights under any Company Option and any provision of the Company Option Plans and any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of Ault shall be cancelled. Ault shall take all action necessary to ensure that, as of and after the Effective Time, except as otherwise provided in the Merger Agreement, no person shall have any right under the Company Option Plans or any other plan, program or arrangement with respect to equity securities of the Company, the Surviving Corporation or any subsidiary thereof.

Series B Convertible Preferred Stock. Immediately prior to the Effective Time of the Merger, Ault will redeem all of the then outstanding shares of its Series B Convertible Preferred Stock for the face value thereof plus accrued and unpaid dividends thereon, in accordance with the terms of the Series B Convertible Preferred Stock.

Ault’s Board of Directors. The Merger Agreement provides that immediately upon the purchase of and payment for any Shares by Purchaser or any of its affiliates pursuant to the Offer following satisfaction of the Minimum Condition, SL Industries will be entitled to elect or designate that number of directors, rounded up to the next whole number, on Ault’s board of directors as is equal to the product of the total number of directors on Ault’s board of directors multiplied by the percentage that the number of Shares so purchased and paid for bears to the total number of Shares then outstanding. Ault must cause SL Industries’ designees to be elected or appointed to the Company’s Board of Directors, including increasing the number of directors, and seeking and accepting resignations of incumbent directors. At such time, Ault will also, as SL Industries requests, cause persons designated by SL Industries to constitute the number of members (rounded up to the next whole number) as is on each committee of Ault’s Board of Directors that represents the same percentage as the individuals designated by SL Industries represent on the Board of Directors of the Company.

Notwithstanding the foregoing, SL Industries and the Company shall use best efforts to cause the Company’s Board of Directors, until the Effective Time, to have at least two directors who were directors (and not officers or employees of the Company or any subsidiary thereof) on December 16, 2005, and who each satisfy the requirements to be “disinterested” as defined in Section 302A.673, Subd. l(d), of the MBCA (the “Continuing Directors”); provided, however, that if only one of the Continuing Directors remains in office, for any reason, the remaining Continuing Director will be entitled to designate another person (who is not an officer or employee of the Company or any subsidiary thereof) to fill such vacancy, and such person will be deemed to be a Continuing Director. If no Continuing Director remains on the Company’s Board of Directors at any time prior to the Effective Time, then the other directors shall use their reasonable best efforts to designate two persons, who are not officers, employees or affiliates of the Company, Purchaser or Parent or any of their respective subsidiaries, and who meet the requirements for being considered “disinterested” under Section 302A.673 of the MBCA, to fill such vacancies and such persons will be deemed to be Continuing Directors. The Company’s obligations to appoint SL Industries’ designees to the Company’s Board of Directors are subject to Section 14(f) of the Exchange Act and Rule 14f-1. The Company shall promptly take all actions to fulfill its obligations related thereto, including providing the required information relating to the Company and its officers and directors in its Schedule 14D-9, so long as SL Industries has furnished to the Company on a timely basis all information necessary to satisfy

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Section 14(f) of the Exchange Act and Rule 14f-1 relating to SL Industries and its officers and directors.

Until the Effective Time, if any SL Industries designees serve on the Company’s Board of Directors, then the approval of a majority of the Continuing Directors, or if only one exists, then the vote of such Continuing Director, shall be required to authorize, and shall be the only vote(s) required to authorize, on behalf of the Company’s Board of Directors, either of the following:

• amendment or termination of the Merger Agreement by Ault; or

• any extension or waiver by the Company of the time for the performance of any of the obligations or other acts of SL Industries or the Purchaser under the Merger Agreement.

Any waiver of any of the Company’s rights under the Merger Agreement, in any such case, requires the concurrence of a majority of the directors of the Company then in office who neither were designated by SL Industries nor are employees of the Company.

Shareholders’ Meeting; Merger Without a Meeting of Shareholders. Pursuant to the Merger Agreement, if required by applicable law in order to consummate the Merger, Ault will:

• take all action necessary under applicable law to call, give notice of and hold a special meeting to vote on the adoption of the Merger Agreement;

• declare advisable and recommend to its shareholders that they approve the Merger and adopt the Merger Agreement; and

• prepare and file with the SEC a proxy statement to be sent to the Company’s shareholders in connection with the Merger and Merger Agreement and obtain and furnish the information required to be included by the SEC in the proxy statement and shall promptly respond to any comments to the proxy statement by the SEC or its staff, and to cause the Proxy Statement to be mailed to Company shareholders as promptly as practicable.

Interim Operations; Covenants. Until the earlier of the termination of the Merger Agreement pursuant to its terms or the Effective Time of the Merger, Ault has agreed to, except to the extent that SL Industries otherwise consents in writing, carry on its business in the usual, regular and ordinary course, in substantially the same manner as previously conducted and in compliance in all material respects with all applicable laws and regulations, pay its debts and taxes when due subject to good faith disputes over such debts, pay or perform other material obligations when due, and use its commercially reasonable efforts consistent with past practices and policies to preserve intact its present business organization, keep available the services of its present officers, employees and contractors and preserve its relationships with customers, suppliers, licensors, licensees, and others with which it has business dealings.

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Pursuant to the Merger Agreement, without the prior written consent of SL Industries, during the period from the date of the Merger Agreement and continuing until the earlier of its termination or the Effective Time of the Merger, Ault has agreed not to do any of the following:

• amend or propose to amend its Articles of Incorporation or Bylaws (or comparable governing instruments);

• except pursuant to rights under the Company options or the Convertible Preferred Stock, authorize for issuance, issue, grant, sell, pledge, dispose of or propose to issue, grant, sell, pledge or dispose of any shares of, or any options, warrants, commitments, subscriptions or rights of any kind to acquire or sell any shares of, its capital stock or other securities or any Voting Debt including, but not limited to, any securities convertible into or exchangeable for shares of stock of any class, except for the issuance of Shares pursuant to the exercise of stock options outstanding on the date of the Merger Agreement in accordance with their present terms. The term “Voting Debt” shall mean indebtedness having general voting rights and debt convertible into securities having such rights;

• split, combine or reclassify any shares of its capital stock or declare, pay or set aside any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock, or directly or indirectly redeem, purchase or otherwise acquire or offer to acquire any shares of its capital stock or other securities and other than pursuant to commitments outstanding on the date of the Merger Agreement in accordance with their present terms as disclosed by Ault in the disclosure schedule to the Merger Agreement (the “Disclosure Schedule”);

• (a) create, incur, assume, forgive or make any changes to the terms or collateral of any debt, receivables or employee or officer loans or advances, except incurrences that constitute refinancing of existing obligations on terms that are no less favorable to Ault than the existing terms; (b) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, indirectly, contingently or otherwise) for the obligations of any person; (c) make any capital expenditures or incur any preopening expenses; (d) make any loans, advances or capital contributions to, or investments in, any other person (other than customary travel, relocation or business advances to employees); (e) acquire the stock or assets of, or merge or consolidate with, any other person; (f) voluntarily incur any material liability or obligation (absolute, accrued, contingent or otherwise) other than in the ordinary course of business consistent with past practice; or (g) sell, transfer, mortgage, pledge, or otherwise dispose of, or encumber, or agree to sell, transfer, mortgage, pledge or otherwise dispose of or encumber, any assets or properties (real, personal or mixed) material to Ault other than to secure debt permitted under subclause (a) above or other than in the ordinary course of business consistent with past practice;

• increase in any manner the wages, salaries, bonus, compensation or other benefits of any of its officers or employees or enter into, establish, amend or terminate any

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employment, consulting, retention, change in control, collective bargaining, bonus or other incentive compensation, profit sharing, health or other welfare, stock option or other equity, pension, retirement, vacation, severance, termination, deferred compensation or other compensation or benefit plan, policy, agreement, trust, fund or arrangement with, for or in respect of, any share holder, officer, director, other employee, agent, consultant affiliate other than as required pursuant to the terms of agreements in effect on the date of the Merger Agreement, or enter into or engage in any agreement, arrangement or transaction with any of its directors, officers, employees or affiliates except current compensation and benefits in the ordinary course of business, consistent with past practice;

• commence or settle any litigation or other proceedings with any governmental authority or other person, or make or rescind any election relating to taxes, settle any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to taxes, file any amended tax return or claim for refund, change any method of accounting or make any other material change in its accounting or tax policies or procedures;

• adopt or amend any resolution or agreement concerning indemnification of its directors, officers, employees or agents;

• transfer or license to any person or entity or otherwise extend, amend, modify, permit to lapse or fail to preserve any intellectual property rights material to Ault’s business as presently conducted or proposed to be conducted, other than nonexclusive licenses in the ordinary course of business consistent with past practice, or disclose to any person who has not entered into a confidentiality agreement any trade secrets;

• modify, amend or terminate any material contract, or waive, release or assign any material rights or claims thereunder, other than any such modification, amendment or termination of any such material contract or any such waiver, release or arrangement thereunder in the ordinary course of business consistent with past practice;

• modify, amend or terminate, or waive, release or assign any material rights or claims with respect to any confidentiality agreement or non-competition agreement to which Ault is a party;

• commit or omit to do any act which act or omission would cause a breach of any covenant contained in the Merger Agreement or would cause any representation or warranty contained in the Merger Agreement to become untrue, as if each such representation and warranty were continuously made from and after the date hereof;

• fail to maintain its books, accounts and records in the usual manner on a basis consistent with that heretofore employed;

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• establish any subsidiary or enter into any new line of business;

• enter into any lease, contract or agreement pursuant to which Ault is obligated to pay or incur obligations of more than $25,000 per year, other than the purchase of inventory in the ordinary course of business consistent with past practice;

• make any changes to its current investment strategy, policy or practices;

• permit any insurance policy naming Ault as a beneficiary or a loss payee to be cancelled or terminated without notice to and consent by SL Industries;

• revalue any of its assets or make any change in accounting methods, principles or practices, except as required by generally accepted accounted principles after notice to SL Industries;

• fail to make in a timely manner any filings with the SEC required under the Securities Act or the Exchange Act or the rules and regulations promulgated thereunder;

• discharge any obligations (including accounts payable) other than on a timely basis in the ordinary course of business consistent with past practice, or delay the making of any capital expenditures from Ault’s current capital expenditure schedule;

• close or materially reduce Ault’s or any subsidiary’s activities, or effect any layoff or other personnel reduction or change at any of Ault’s or any subsidiary’s facilities; or

• authorize any of, or agree to commit to do any of, the foregoing actions.

No Solicitation by Ault. Ault shall not, and shall not authorize or permit any officer or director of Ault, or authorize or permit any other employee, agent or consultant of Ault to:

• solicit, encourage, initiate or seek the making, submission or announcement of any Company Takeover Proposal (as defined in the Merger Agreement);

• furnish any non-public information regarding the Company to any person (other than SL Industries or Purchaser or their representatives) in connection with or in response to a Company Takeover Proposal or an inquiry that the Company believes in good faith could be expected to lead to a Company Takeover Proposal;

• engage in discussions or negotiations with any person with respect to any Company Takeover Proposal, except as to the existence of these provisions;

• withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to SL Industries, the approval or recommendation by the Company’s Board of Directors of the Offer, the Merger Agreement or the Merger;

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• approve or recommend, or propose publicly to approve or recommend, any Company Takeover Proposal; or

• cause the Company to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement related to any Company Takeover Proposal.

Notwithstanding these restrictions, nothing shall prohibit:

(A) Ault, or the board of directors of Ault, prior to the time of the first acceptance of Shares for payment pursuant to the Offer, from furnishing nonpublic information regarding Ault to, or entering into discussions or negotiations with, any person in response to an unsolicited, bona fide written Company Takeover Proposal that the board of directors of Ault concludes in good faith could reasonably be expected to result in a Company Superior Offer (as defined in the Merger Agreement) that is submitted to Ault by such person (and not withdrawn) if:

• neither Ault nor any representative of Ault shall have violated any of the restrictions set forth in the Merger Agreement in connection with the receipt of such Company Takeover Proposal;

• the board of directors of Ault concludes in good faith, after consultation with its outside legal counsel, that such action with respect to such Company Takeover Proposal is required to comply with the fiduciary duties of the board of directors of Ault to Ault’s shareholders under applicable law;

• Ault gives SL Industries prompt written notice of Ault’s intention to furnish nonpublic information to, or enter into discussions with, such person, and Ault receives from such person an executed confidentiality agreement with provisions substantially equivalent to those contained in the confidentiality agreement by and between Ault and SL Industries; and

• Ault furnishes such nonpublic information to such person and to SL Industries at substantially the same time (to the extent such nonpublic information has not been previously furnished by Ault to SL Industries); or

(B) Ault from complying with Rules 14d-9 and 14e-2 promulgated under the Exchange Act wit regard to any Company Takeover Proposal.

Ault agrees that it will promptly, and in any event within 24 hours following receipt of a Company Takeover Proposal, notify SL Industries orally and in writing of such Company Takeover Proposal, which notice shall disclose the identity of the other party and the material terms of the Company Takeover Proposal. Ault will keep SL Industries informed in all material respects on a prompt basis with respect to the status of any such Company Takeover Proposal or request and any material modification or proposed material modification thereto.

Ault also agreed not to release any person (other than SL Industries) from or waive any provision of any confidentiality, “standstill” or similar agreement to which Ault is a party and

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which relates to a Company Takeover Proposal, and will use its commercially reasonable efforts to enforce each such agreement at the request of SL Industries.

Notwithstanding the foregoing, prior to the time of acceptance for payment of Shares in the Offer, Ault’s board of directors may (subject to Ault’s compliance with the non-solicitation provisions of the Merger Agreement) withdraw or modify its approval or recommendation in favor of the Offer, the Merger Agreement or the Merger, or approve or recommend a Company Superior Offer if:

• an unsolicited, bona fide written offer is made to Ault by a third party for a Company Takeover Proposal, and such offer is not withdrawn;

• Ault’s board of directors determines in good faith, after consultation with its financial advisor, that such offer constitutes a Company Superior Offer;

• following consultation with outside legal counsel, Ault’s board of directors determines that the withdrawal or modification of its approval or recommendation of the Offer, the Merger Agreement or the Merger is required to comply with the fiduciary duties of the board of directors of Company to the shareholders of Ault under applicable law;

• such approval or recommendation is not withdrawn or modified in a manner adverse to SL Industries at any time prior to two business days after SL Industries receives written notice from Ault confirming that Ault’s board of directors has determined that such offer is a Company Superior Offer; and

• at the end of such two business day period, after taking into account any adjustment or modification of the terms of the Merger Agreement proposed by SL Industries (and any adjustment or modification of the terms of such Company Takeover Proposal), the board of directors of Ault again makes the determination in good faith that the withdrawal or modification of such approval or recommendation of the Offer, the Merger Agreement or the Merger is required to comply with the fiduciary duties of the board of directors of Ault to the shareholders of Ault under applicable law.

Purchaser Termination Fee. In the event that (a) prior to or concurrent with termination of the Merger Agreement, Ault’s board of directors shall withdraw or modify in a manner adverse to SL Industries its approval and recommendation of the Offer, the Merger or the Merger Agreement or Ault shall enter into a definitive agreement with a third party that would constitute a Company Superior Offer or (b) prior to termination of the Merger Agreement a bona fide Company Takeover Proposal is made known to Ault or has been made directly to its shareholders generally or any person shall have publicly announced an intention to make a bona fide Company Takeover Proposal, and thereafter the Merger Agreement is terminated (for reasons specified in the Merger Agreement), then Ault shall promptly, but in no event later than, in the case of termination by Ault or an event described in clause (a) above, immediately prior to such termination or event, or in the case of termination by the Purchaser, two days after such termination, pay Purchaser Seven Hundred Fifty Thousand Dollars ($750,000), plus the

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reimbursement of any and all expenses (as defined in the Merger Agreement) incurred by Purchaser and SL Industries up to Five Hundred Thousand Dollars ($500,000).

Indemnification and Insurance. The articles of incorporation and bylaws of the Surviving Corporation will contain provisions with respect to exculpation and indemnification that are at least as favorable to the directors, officers, agents or employees of Ault or otherwise entitled to indemnification (“Indemnified Parties”) as those contained in the articles of incorporation and bylaws of Ault as in effect immediately prior to the closing of the Merger, which provisions will not be amended, repealed or otherwise modified for a period of six years from the Effective Time of the Merger in any manner that would adversely affect the rights thereunder of the Indemnified Parties.

Confidentiality; Access to Information. Ault and the Purchaser agree to hold any information which is non-public in confidence, subject to customary limitations, and, in the event the Merger Agreement is terminated for any reason, Ault or the Purchaser shall promptly return such information,

Ault will afford SL Industries and its officers, directors, employees and agents reasonable access to the contracts, agreements, commitments, books, records, offices and other facilities of Ault during the period prior to the Effective Time of the Merger to obtain all information concerning the business and use all reasonable efforts to make available at all reasonable times during normal business hours to SL Industries the appropriate individuals (including management personnel, attorneys, accountants and other professionals) for discussion of Ault’s business, properties, prospects and personnel as SL Industries may reasonably request.

Public Disclosure. Ault will not disseminate any press release or other public announcement concerning the Merger, the Offer or the Merger Agreement or the other transactions contemplated by the Merger Agreement without the prior written consent of each of the other parties to the Merger Agreement, except where required to do so by law. If so required, Ault will consult with SL Industries prior to such release or announcement.

• Reasonable Best Efforts; Notification. Subject to the express provisions of the no solicitation covenant and upon the terms and subject to the conditions set forth in the Merger Agreement, each of the parties agrees to use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, the Offer and the Merger and the other transactions contemplated by the Merger Agreement, including complying in all material respects with all applicable laws and with all rules and regulations of any governmental entity, and to satisfy the conditions to the consummation of the Offer and the Merger.

Ault is obligated to give prompt notice to SL Industries of:

• any representation or warranty made by Ault in the Merger Agreement that is untrue or inaccurate in any material respect at any time from the date hereof to the Effective Time of the Merger;

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• receipt of any notice or other communication in writing from any third party alleging that the consent of such third party is or may be required in connection with the transactions contemplated by the Merger Agreement, provided that such consent would have been required to have been disclosed in the Merger Agreement;

• receipt of any material notice or other communication from any governmental authority (as defined in the Merger Agreement) in connection with the transactions contemplated by the Merger Agreement;

• any material failure of Ault or any of its representatives to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under the Merger Agreement;

• the occurrence of an event which would reasonably be expected to have a material adverse effect on Ault; and

• the commencement or threat of any litigation involving or affecting Ault or any of its subsidiaries, or any of their respective properties or assets, or, to its knowledge, any employee, agent, director or officer, in his or her capacity as such, of Ault or any of its subsidiaries which, if pending on the date of the Merger Agreement, would have been required to have been disclosed in the Merger Agreement or which relates to the consummation of the Offer or the Merger.

Employee Benefits. SL Industries will to the extent practicable either maintain and provide to Ault’s employees, the employee benefits and programs of Ault as substantially in effect as of the date of the Merger Agreement or cause the Surviving Corporation to provide employee benefits and programs to Ault’s employees that, in the aggregate, are substantially comparable to those of SL Industries. However, the Surviving Corporation or SL Industries may amend, suspend or terminate any of its employee benefit plans or programs at any time.

From and after the Effective Time of the Merger, the Surviving Corporation shall honor, in accordance with their terms, all employment and severance agreements in effect immediately prior to the Merger that are applicable to any current or former employees or directors of Ault.

Representations and Warranties. Pursuant to the Merger Agreement, Ault has made customary representations and warranties to SL Industries and the Purchaser with respect to, among other things, its due incorporation and good standing, its capitalization, its subsidiaries, its authority to consummate the transactions and the binding nature of the Merger Agreement, required government approvals, compliance with its charter, bylaws and contracts, its filings with the SEC and its financial statements, the absence of changes in its business, the absence of undisclosed liabilities, its compliance with laws, its obtaining of any required permits, its involvement in litigation, any restrictions on its business activities, its contracts, any government contracts, its technology and intellectual property, its employee benefit plans, its taxes and tax returns, any finders and investment bankers used by it, its obtaining a fairness opinion, its insurance coverage, requisite votes and statutes applicable to the transactions, title to its properties, its employee matters, its customers and suppliers, its orders, commitments, and returns, its inventory, its accounts receivable, environmental matters, its rights plan, its Schedule

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14D-9, documents related to the Offer and any proxy statement, the absence of questionable payments, the consummation of certain business sales and the completeness of each of the foregoing representations and warranties.

Certain representations and warranties in the Merger Agreement made by Ault are qualified as to “materiality” or “Company Material Adverse Effect.” For purposes of the Merger Agreement and this Offer to Purchase, the term “Company Material Adverse Effect” means a material adverse effect on the business, assets, condition (financial or otherwise), liabilities or the results of operations of Ault, except in each case for any such effects resulting from, arising out of, or relating to (i) general business or economic conditions, (ii) conditions generally affecting the industry in which Ault competes, or (iii) the taking of any action contemplated by the Merger Agreement.

Pursuant to the Merger Agreement, SL Industries has made customary representations and warranties to Ault with respect to, among other things, incorporation and good standing, its authority to consummate the transactions and the binding nature of the Merger Agreement, required government approvals, compliance with its charter, bylaws and contracts, any finders or investment bankers used by it, and its ability to finance the Merger.

None of the representations and warranties contained in the Merger Agreement or in any schedule, instrument or other document delivered pursuant to the Merger Agreement shall survive the Effective Time of the Merger. Only the covenants and exhibits in the Merger Agreement may survive that by their terms survive the Effective Time of the Merger.

Termination; Fees. The Merger Agreement may be terminated and the transactions contemplated by the Merger Agreement may be abandoned at any time before the Effective Time of the Merger, whether before or after shareholder approval thereof:

• by mutual written consent of SL Industries and Ault; or

• by either SL Industries or Ault 

• if the Merger shall not have been consummated prior to August 31, 2006 (the “Termination Date”), provided that the party responsible for the failure of this condition to occur may not invoke it as the basis for termination; or

• if required under the MBCA, the vote of Ault’s shareholders shall have been taken at a meeting duly convened therefor which is insufficient to approve the Merger and the Merger Agreement; or

• if any governmental entity issued an order, decree or ruling or taken any other action (including the failure to have taken an action), in each case having the effect of permanently restraining, enjoining or otherwise prohibiting the consummation of the Offer or the Merger; or

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• by SL Industries 

• if there has been a material breach by Ault of any representation, warranty, covenant or agreement set forth in the Merger Agreement, which breach has not been cured within 20 days after the giving of written notice thereof to Ault; or

• if Ault has breached in any material respect its covenant against solicitation described in Section 13 - “The Merger Agreement and other Agreements” or Ault’s board of directors (or special committee thereof) shall have withdrawn or modified in a manner adverse to SL Industries its approval or recommendation of the Offer, the Merger or the Merger Agreement, or approved or recommended any Company Superior Offer (or Ault’s board of directors (or special committee) shall have resolved to take any of the foregoing actions); or

• other than as a result of a breach by the Purchaser or SL Industries of its obligations under the Merger Agreement, if as a result of any condition to the Offer set forth in the Merger Agreement failing to be satisfied, SL Industries have (i) failed to commence the Offer within 30 days following the date the Merger Agreement, or (ii) terminated the Offer without having accepted any Shares for payment thereunder; or

• by Ault 

• if there has been a material breach by SL Industries or the Purchaser of any representation, warranty, covenant or agreement contained in the Merger Agreement which breach has not been cured within 20 days after the receipt of notice thereof to SL Industries; or

• upon approval of its Board of Directors, if the Purchaser shall have terminated the Offer without having accepted any Shares for payment thereunder, other than as a result of a breach by Ault of its obligations hereunder; or

• upon approval of its Board of Directors, if Ault enters into a definitive written agreement with a third party that would constitute a Company Superior Offer; or

• on or after April 1, 2006, if other than as a result of a breach by Ault of any of its representations, warranties or covenants hereunder, SL Industries shall have failed to purchase pursuant to the Offer at least that number of Shares of Common Stock that is equal to the number that satisfies the Minimum Condition, provided that Ault may not terminate under this provision if Ault’s Board of Directors has received and is

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considering a Company Takeover Proposal in accordance with the Merger Agreement.

Effect of Termination

In the event of the termination of the Merger Agreement, written notice thereof shall forthwith be given to the other party or parties and the Merger Agreement shall forthwith become null and void and there shall be no liability on the part of SL Industries, the Purchaser or Ault (or any of their affiliates); provided, however, that no such termination shall relieve any party hereto from any liability for any breach of the Merger Agreement prior to termination. If the Merger Agreement is terminated, each party shall use its reasonable best efforts to redeliver all documents, work papers and other material (including any copies thereof) of any other party relating to the transactions contemplated hereby, whether obtained before or after the execution hereof, to the party furnishing the same.

Shareholders Agreement

The following summary of certain provisions of the Shareholders Agreement is qualified in its entirety by reference to the Shareholders Agreement itself, which is incorporated herein by reference and a copy of which has been filed with the SEC as Exhibit (d)(2) to the Schedule TO. Shareholders and other interested parties should read the Shareholders Agreement in its entirety for a more complete description of the provisions summarized below.

Tender of Shares. Each Shareholder has agreed to validly tender (or cause the record owner of such Shares to validly tender) and not to withdraw his or its Shares into the Offer as promptly as practicable, and in any event no later than five business days following the commencement of this Offer and receipt of the applicable tender offer documentation.

Option. Pursuant to the Shareholders Agreement, each Shareholder has granted to each of SL Industries and the Purchaser an irrevocable option to purchase the Shares owned by such Shareholder to the extent such Shares are not tendered in the Offer (each, a “Shareholder Option”) at a purchase price per Share equal to the Offer Price. The Shareholder Options may be exercised after Purchaser shall purchase and pay for Shares pursuant to this Offer following satisfaction of the Minimum Condition and until the earlier of (a) immediately preceding the Effective Time or (b) the termination of the Merger Agreement in accordance with its terms. SL Industries or the Purchaser, as the case may be, may exercise an Option in whole, but not in part.

Voting Agreement. Each Shareholder has agreed, at any meeting of the shareholders of the Company, however called, or in connection with any consent of the shareholders of the Company, and regardless of the recommendation of the Company’s Board of Directors, to vote all Shares, (a) in favor of adopting the Merger Agreement and any transactions contemplated thereby, including the Merger, (b) against any Company Takeover Proposal and (c) against any action that would delay, prevent or frustrate this Offer and the Merger and the related transactions contemplated by the Merger Agreement.

Irrevocable Proxy. Each Shareholder has irrevocably granted SL Industries and certain designees of SL Industries the Shareholder’s irrevocable proxy to vote or cause to be voted all of the Shareholder’s Shares, in respect of such Shares, as described above.

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Maximum Restricted Amount.

Notwithstanding the foregoing, at no time and in no event shall the number of shares of the Company’s capital stock subject to the foregoing restrictions exceed 19.9% of the outstanding Shares (the “Maximum Restricted Amount”) (which Purchaser in its sole discretion shall determine is met). If the number of Shareholders’ Shares exceeds the Maximum Restricted Amount, Purchaser, in its sole discretion, shall determine which Shareholders’ Shares are restricted.

Restriction on the Transfer of Owned Shares.

Prior to the termination of the Shareholders Agreement and except as otherwise provided therein, each of the Shareholders has agreed that it will not (i) transfer, assign, sell, gift-over, pledge, hypothecate, encumber or otherwise dispose of, or consent to any of the foregoing (“Transfer”), any or all of the Shares, Company Options or other rights to acquire Common Stock or any right or interest therein; (ii) enter into any contract, option or other agreement, arrangement or understanding with respect to any Transfer; (iii) grant any proxy, power-of-attorney or other authorization or consent with respect to any of the Shares; (iv) deposit any of the Shares into a voting trust, or enter into a voting agreement or arrangement with respect to any of the Shares or (v) take any other action that would in any way restrict, limit or interfere with the performance of such Shareholder’s obligations hereunder or the transactions contemplated hereby or make any representation or warranty of such Shareholder untrue or incorrect.

A Shareholder must provide Purchaser with 48 hours’ notice prior to any proposed Transfer of its Shares (which includes the details of such Transfer). If the number of Shares subject to the restrictions on Transfer does not exceed the Maximum Restricted Amount, Purchaser may restrict such Transfer. If the number of Shares equals or exceeds the Maximum Restricted Amount, then Purchaser may not enforce the restrictions on Transfer.

Termination. The Shareholders Agreement and all rights and obligations of the parties thereunder, will terminate immediately upon the termination of the Merger Agreement in accordance with its terms.

The Stock Option Agreement

The following summary of certain provisions of the Stock Option Agreement is qualified in its entirety by reference to the Stock Option Agreement itself, which is incorporated herein by reference and a copy of which has been filed with the SEC as Exhibit (d)(3) to the Schedule TO. Shareholders and other invested parties should read the Stock Option Agreement in its entirety for a more complete description of the provisions summarized below.

As a condition and inducement to SL Industries’ and Purchaser’s willingness to enter into the Merger Agreement, Ault entered into a Stock Option Agreement, dated December 16, 2005 (the “Stock Option Agreement”), by and between SL Industries, Purchaser and Ault, pursuant to which Ault granted Purchaser an irrevocable option (the “Purchaser Option”) to purchase for the Offer Price, shares of Common Stock in such amounts as shall be determined by Purchaser in its discretion up to such number of shares which, upon exercise, would result in Purchaser owning

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in excess of 90% of the then-outstanding shares of Common Stock (collectively, the “Optioned Shares”).

Purchaser may exercise the Purchase Officer at any time after the Purchaser has purchased Shares pursuant to the Offer which, together with Shares otherwise held or acquired by the Purchaser, SL Industries and their affiliates, results in the Purchaser, SL Industries and their affiliates owning in the aggregate at least 75% of the then-outstanding shares of Common Stock and until the Closing Date of the Merger or termination of the Merger Agreement in accordance with its terms. Purchaser’s exercise of the Purchaser Option is conditioned upon Purchaser and SL Industries owning in the aggregate, immediately following such exercise, at least 90% of the outstanding shares of Common Stock. The Purchaser Option provides that Purchaser will pay for the Optioned Shares upon exercise of the Purchaser Option by delivering to Ault a promissory note of Purchaser substantially in the form attached to the Stock Option Agreement for the aggregate price of the Optioned Shares.

Nondisclosure Agreement

The following summary of certain provisions of the Nondisclosure Agreement (as defined below) is qualified in its entirety by reference to the Nondisclosure Agreement itself, which is incorporated herein by reference and a copy of which has been filed with the SEC as Exhibit (d)(4) to the Schedule TO. Shareholders and other interested parties should read the Nondisclosure Agreement in its entirety for a more complete description of the provisions summarized below.

SL Industries and Ault entered into a confidentiality letter dated March 19, 2004 (the “Nondisclosure Agreement”). The Nondisclosure Agreement contains customary provisions pursuant to which, among other matters, SL Industries agreed, subject to certain exceptions, to keep confidential all nonpublic information regarding Ault which is furnished to SL Industries (the “Confidential Information”), and to use the Confidential Information, solely for the purpose of evaluating a possible transaction involving Ault and SL Industries. Upon termination of negotiations before the execution of a contract, SL Industries must return all Confidential Information disclosed under the Nondisclosure Agreement. The confidentiality obligations set forth in the Nondisclosure Agreement remain in effect for three years. The Nondisclosure Agreement also provides that SL Industries will not for one year from the date of the Nondisclosure Agreement, subsequently extended to October 14, 2006 by agreement of the parties, divert or attempt to divert any business or customer of Ault or its affiliates or employ or attempt to employ or divert an employee of Ault or any of its affiliates (other than unsolicited applicants or applicants responding to a general solicitation not targeted to employees of the Company or its affiliates).

14. Certain Conditions of the Offer

Conditions of the Offer. Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Merger Agreement. Notwithstanding any other provisions of the Offer, and in addition to (and not in limitation of) Purchaser’s rights to extend and amend the Offer at any time in its sole discretion (subject to the provisions of the Merger Agreement), Purchaser is not required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to Purchaser’s obligation

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to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for, and may delay the acceptance for payment of or, subject to the restriction referred to above, the payment for, any validly tendered Shares unless the Minimum Condition has been satisfied. Furthermore, notwithstanding any other provisions of the Offer, Purchaser shall not be required to accept for payment or pay for any validly tendered Shares if, at the scheduled expiration date any of the following conditions shall exist:

• there shall have been entered, enforced, instituted, pending, threatened, or issued by any Governmental Authority, any judgment, order, temporary restraining order, temporary or permanent injunction, ruling, proceeding, action, suit, charge or decree: (i) which could reasonably be expected to make illegal, prevent, restrain or prohibit or make materially more costly the making of the Offer, the acceptance for payment of, or payment for, any Shares by SL Industries, Purchaser or any other affiliate of Purchaser, or the consummation of the Merger or any of the other transactions contemplated by the Merger Agreement; (ii) which could reasonably be expected to prohibit or limit the ownership or operation by Ault, SL Industries or any of their subsidiaries of all or any material portion of the business or assets of Ault, SL Industries or any of their subsidiaries, or which could reasonably be expected to compel the Ault, SL Industries or any of their subsidiaries to dispose of or hold separate all or any material portion of the business or assets of Ault, SL Industries or any of their subsidiaries; (iii) which would reasonably be expected to impose or confirm limitations on the ability of SL Industries, Purchaser or any other affiliate of SL Industries to exercise full rights of ownership of any Shares, including, without limitation, the right to vote any Shares acquired by SL Industries pursuant to the Offer or otherwise on all matters presented to Ault shareholders, including, without limitation, the approval and adoption of the Merger Agreement and the Merger; (iv) which would reasonably be expected to require divestiture by SL Industries, Purchaser or any other affiliate of SL Industries of any Shares; or (v) which otherwise would reasonably be expected to have a Company Material Adverse Effect or a material adverse effect on SL Industries;

• there shall have been any law, statute, rule, regulation, judgment, order, legislation or interpretation of any nature pending, proposed, enacted, enforced, promulgated, amended or issued by any governmental authority or deemed by any governmental authority applicable to (i) SL Industries, Ault or any subsidiary or affiliate of SL Industries or Ault or (ii) any transaction contemplated by the Merger Agreement, which is reasonably likely to result, directly or indirectly, in any of the consequences referred to in the paragraph above;

• there shall have occurred any changes, conditions, events or developments that would have, or be reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect;

• there shall have occurred (i) any general suspension of, or limitation on prices for, trading in securities on the New York Stock Exchange or NASDAQ, (ii) a declaration of a banking moratorium or any suspension of payments in respect of

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banks in the United States, (iii) any limitation on the extension of credit by banks in the United States, (iv) the commencement of a war, armed hostilities or any other international or national calamity involving the United States or (v) in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof;

• it shall have been publicly disclosed or SL Industries shall have otherwise learned that any person, other than Purchaser or SL Industries, shall have acquired or entered into a definitive agreement or agreement in principle to acquire beneficial ownership of 50% or more of the then outstanding Shares, or (ii) the board of directors of Ault, the Special Committee or any other committee thereof shall have (A) withdrawn, modified or changed, in a manner adverse to Purchaser or SL Industries, the recommendation by such board of directors or approval by such committee of the Offer, the Merger or the Merger Agreement, including, without limitation, the Minnesota Anti-Takeover Approval of the Special Committee, (B) approved or recommended, or proposed publicly to approve or recommend, a Company Takeover Proposal, (C) caused Ault to enter into any agreement relating to any Company Takeover Proposal, or (D) resolved to do any of the foregoing;

• the representations and warranties of Ault set forth in the Merger Agreement shall not be true and correct in all material respects (except that where any statement in a representation or warranty expressly includes a “material adverse effect”, “material” or other materiality qualifier, such representation or warranty shall not be true and correct in all respects) as of the date of the Merger Agreement and as of such time on or after the date of the Merger Agreement, except those representations and warranties that speak of an earlier date, which shall not be true and correct as of such earlier date (it being understood that, for purposes of determining the accuracy of such representations and warranties, any update of or modification to the Company Disclosure Schedule made or purported to have been made after the date of the Merger Agreement shall be disregarded);

• Ault shall have failed to perform in any material respect any obligation or to comply in any material respect with any agreement or covenant of Ault to be performed or complied with by it under the Merger Agreement;

• the Merger Agreement shall have been terminated in accordance with its terms;

• Purchaser and SL Industries shall have agreed that Purchaser shall terminate the Offer or postpone the acceptance for payment of or payment for Shares thereunder;

• if any one or more of certain specified representations and warranties in the Merger Agreement shall have been breached in any respect or are inaccurate in any respect, which in the good faith judgment of Purchaser, and regardless of any circumstances, makes it inadvisable to proceed with such acceptance for payment or payment;

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• any non-competition or similar obligations of Ault could reasonably be expected to prohibit or restrict SL Industries or any of SL Industries’ subsidiaries from developing, manufacturing, marketing or selling any of the current products of SL Industries or its subsidiaries or any products of SL Industries or its subsidiaries currently in design or development; or

• there shall have been instituted or pending any shareholder derivative litigation or shareholder class action litigation against Ault, its subsidiaries or its executive officers or directors.

The foregoing conditions are for the benefit of SL Industries and Purchaser and may be asserted by SL Industries or Purchaser regardless of the circumstances giving rise to any such condition or may be waived by SL Industries or Purchaser in whole or in part at any time and from time to time in their reasonable discretion. The failure by SL Industries or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right; the waiver of any such right with respect to particular facts and other circumstances shall not be deemed a waiver with respect to any other facts and circumstances; and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time.

15. Certain Legal Matters

Except as described in this Section 15 - “Certain Legal Matters,” based on information provided by Ault, none of Ault, the Purchaser or SL Industries is aware of any license or regulatory permit that appears to be material to the business of Ault that might be adversely affected by the Purchaser’s acquisition of Shares as contemplated herein or of any approval or other action by a domestic or foreign governmental, administrative or regulatory agency or authority that would be required for the acquisition and ownership of the shares by the Purchaser as contemplated herein. Should any such approval or other action be required, the Purchaser and SL Industries presently contemplate that such approval or other action will be sought, except as described below under “State Takeover Statutes.” While, except as otherwise described in this Offer to Purchase, the Purchaser does not presently intend to delay the acceptance for payment of or payment for shares tendered pursuant to the Offer pending the outcome of any such matter, there can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that failure to obtain any such approval or other action might not result in consequences adverse to Ault’s business or that certain parts of Ault’s business might not have to be disposed of or other substantial conditions complied with in the event that such approvals were not obtained or such other actions were not taken or in order to obtain any such approval or other action. If certain types of adverse action are taken with respect to the matters discussed below, the Purchaser could decline to accept for payment or pay for any Shares tendered. See Section 14 - “Certain Conditions of the Offer” for certain conditions to the Offer, including conditions with respect to governmental actions.

Anti-Takeover Statutes

State Takeover Statutes. A number of states have adopted laws and regulations that purport to apply to attempts to acquire corporations that are incorporated in such states, or whose business operations have substantial economic effects in such states, or which have substantial assets, security holders, employees, principal executive offices or principal places of business in

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such states. In Edgar v. MITE Corp., the Supreme Court of the United States (the “Supreme Court”) invalidated on constitutional grounds the Illinois Business Takeover statute, which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult. However, in 1987, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of Indiana may, as a matter of corporate law and, in particular, with respect to those aspects of corporate law concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without the prior approval of the remaining shareholders. The state law before the Supreme Court was by its terms applicable only to corporations that had a substantial number of shareholders in the state and were incorporated there.

Certain provisions of Minnesota law described below could have an anti-takeover effect.

Section 302A.671 of the MBCA applies, with certain exceptions, to any acquisition of a corporation’s voting stock from a person, other than the corporation and other than in connection with certain mergers and exchanges to which the corporation is a party, that results in the acquiring person owning 20% or more of the corporation’s voting stock then outstanding. Similar triggering events occur at the one-third and majority ownership levels. Section 302A.671 requires approval of any such acquisition by a majority vote of the corporation’s disinterested shareholders and a majority vote of all the corporation’s shareholders. In general, shares acquired in excess of the applicable percentage threshold in the absence of such approval are denied voting rights and are redeemable at their then fair market value by the corporation during a specified time period. Because a committee of disinterested directors of Ault approved the Offer, the shares acquired in the Offer will not be subject to Section 302A.671.

Section 302A.673 of the MBCA generally prohibits a corporation or any of its subsidiaries from entering into any business combination transaction with a shareholder for a period of four years after the shareholder acquires 10% or more of the corporation’s voting stock then outstanding. An exception is provided for circumstances in which, before the 10% share-ownership threshold is reached, either the transaction or the share acquisition is approved by a committee of the corporation’s board of directors composed of one or more disinterested directors. The Offer received the necessary approval to exempt the Purchaser, SL Industries, and their affiliates and associates from the four-year moratorium under Section 302A.673.

The MBCA contains a “fair price” provision in Section 302A.675. This provision provides that no person may acquire any shares of a corporation within two years following the person’s last purchase of the corporation’s shares in a takeover offer unless all shareholders are given the opportunity to dispose of their shares to the person on terms that are substantially equivalent to those in the earlier takeover offer. This provision does not apply if the acquisition is approved by a committee of disinterested directors before any shares are acquired in the takeover offer. Because the requisite approval was obtained, Section 302A.675 does not apply to the Merger.

Section 302A.553, subdivision 3, of the MBCA prohibits a corporation from purchasing any voting shares owned for less than two years from a holder of more than 5% of the corporation’s outstanding voting stock for more than the market value of the shares. Exceptions to this provision are provided if the share purchase is approved by a majority of the corporation’s

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shareholders or if the corporation makes a repurchase offer of equal or greater value to all shareholders.

Antitrust. Neither the Offer nor the Merger are subject to the Hart-Scott-Rodino Antitrust Improvements Act, which provides that certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the Department of Justice and the Federal Trade Commission and a waiting period has elapsed.

Federal Reserve Board Regulations. Regulations G, U and X (the “Margin Regulations”) of the Federal Reserve Board restrict the extension or maintenance of credit for the purpose of buying or carrying margin stock, including the Shares, if the credit is secured directly or indirectly by margin stock. Such secured credit may not be extended or maintained in an amount that exceeds the maximum loan value of all the direct and indirect collateral securing the credit, including margin stock and other collateral. All financing for the Offer has been structured so as to be in full compliance with the Margin Regulations.

16. Fees and Expenses

Except as set forth below, neither SL Industries nor the Purchaser will pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Shares pursuant to the Offer.

The Purchaser has retained Morrow & Co., Inc. to act as the Information Agent and American Stock Transfer & Trust Company to act as the Depositary in connection with the Offer. Such firms each will receive reasonable and customary compensation for their services. The Purchaser has also agreed to reimburse each such firm for certain reasonable out-of-pocket expenses and to indemnify each such firm against certain liabilities in connection with their services, including certain liabilities under federal securities laws.

The Purchaser will not pay any fees or commissions to any broker or dealer or other person (other than the Information Agent) for making solicitations or recommendations in connection with the Offer. Brokers, dealers, banks and trust companies will be reimbursed by the Purchaser for customary mailing and handling expenses incurred by them in forwarding material to their customers.

17. Miscellaneous

The Offer is being made to all holders of Shares. The Purchaser is not aware of any jurisdiction in which the making of the Offer or the tender of shares in connection therewith would not be in compliance with the laws of such jurisdiction. If the Purchaser becomes aware of any jurisdiction in which the making of the Offer would not be in compliance with applicable law, the Purchaser will make a good faith effort to comply with any such law. If, after such good faith effort, the Purchaser cannot comply with any such law, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares residing in such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer will be deemed to be made on behalf of the Purchaser by one or more registered brokers or dealers licensed under the laws of such jurisdiction.

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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION ON BEHALF OF SL INDUSTRIES OR THE PURCHASER NOT CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.

SL Industries and the Purchaser have filed with the SEC the Tender Offer Statement on Schedule TO pursuant to Rule 14d-3 under the Exchange Act, together with the exhibits thereto, furnishing certain additional information with respect to the Offer, and may file amendments thereto. In addition, Ault has filed the Schedule 14D-9 pursuant to Rule 14d-9 under the Exchange Act, together with exhibits thereto, setting forth its recommendation and furnishing certain additional related information. Such Schedule and any amendments thereto, including exhibits, may be examined and copies may be obtained in the manner set forth in Section 8 - “Certain Information Concerning Ault.”

Lakers Acquisition Corp.,

a wholly-owned subsidiary of SL Industries, Inc.

December 23, 2005

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SCHEDULE I

DIRECTORS AND EXECUTIVE OFFICERS OF SL INDUSTRIES AND THE PURCHASER

The names of the directors and executive officers of SL Industries, Inc. and Lakers Acquisition Corp. and their present principal occupations or employment and material employment history for the past five years are set forth below. Unless otherwise indicated, each director and executive officer has been so employed for a period in excess of five years. Unless otherwise indicated, each individual is a citizen of the United States; his or her business address is 520 Fellowship Road, Suite A114, Mt. Laurel, New Jersey 08054.

SL Industries, Inc.

Name	Age	Office and Principal Occupation	Director Since
Warren G. Lichtenstein	39	Chairman of the Board	2002
Glen Kassan	61	Vice Chairman of the Board	2002
J. Dwane Baumgardner	64	Director	1990
James Henderson	47	Director	2002
Mark E. Schwarz	44	Director	2002
Avrum Gray	69	Director	2002
James A. Risher	62	Director	2003
James C. Taylor	40	President and Chief Executive Officer
David R. Nuzzo	48	Vice President, Chief Financial Officer, Secretary and Treasurer

Warren G. Lichtenstein was elected Chairman of the Board of SL Industries on January 24, 2002. Mr. Lichtenstein served as Chief Executive Officer of the Company from February 2002 until August 12, 2005 and had previously served as a director of the Company from 1993 to 1997. Mr. Lichtenstein has been the Chairman of the Board, Secretary and the Managing Member of Steel Partners, L.L.C., the general partner of Steel Partners II, L.P. (“Steel”), a private investment partnership, since January 1, 1996 and the President, Chief Executive Officer and a director of Steel Partners, Ltd (“SPL”), a management and advisory company that provides management services to Steel and its affiliates, since June 1999. Mr. Lichtenstein has been a director (currently Chairman of the Board) of United Industrial Corporation (“UIC”), a company principally focused on the design, production and support of defense systems and a manufacturer of combustion equipment for biomass and refuse fuels, since May 2001. Mr. Lichtenstein served as a director of WebFinancial Corporation (“WebFinancial”), a consumer and commercial lender, from 1996 to 2005 and served as Chairman and Chief Executive Officer of WebFinancial from December 1997 to June 2005. He also served as President of WebFinancial from December 1997 through December 2003. Mr. Lichtenstein has been a director of Layne Christensen Company, a provider of products and services for the water, mineral, construction and energy markets, since January 2004 and has been a director of BKF Capital Group, Inc., a publicly-traded investment firm, since June 2005.

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Glen Kassan was elected as a director on January 24, 2002 and as Vice Chairman of the Board on August 12, 2005. Mr. Kassan served and as President of the Company from February 2002 until August 12, 2005. He has served as Executive Vice President of SPL and its predecessor since June 2001 and as Vice President of its predecessor from October 1999 through May 2001. Mr. Kassan has served as Vice President, Chief Financial Officer and Secretary of WebFinancial since June 2000. Mr. Kassan has served as Vice Chairman of the Board of Directors of Caribbean Fertilizer Group Ltd., a private company engaged in the production and distribution of agricultural products in Puerto Rico and Jamaica, since June 2000. Mr. Kassan also currently serves as Vice Chairman of the Board of Directors, Chief Executive Officer and Secretary of WHX Corporation, a NYSE listed holding company. Mr. Kassan is currently a director of UIC.

J. Dwane Baumgardner has been a director of SL Industries since 1990. From January 2003 to May 2004, Mr. Baumgardner served as Vice Chairman and President of Magna Donnelly Corporation, an automotive supplier of exterior and interior mirror, lighting and engineered glass systems. Prior to January 2003, he had been the Chief Executive Officer and President of Magna Donnelly Corporation since October 2002. Magna Donnelly Corporation is a wholly owned subsidiary of Magna International Inc. that was established in October 2002 by the merger of Donnelly Corporation and Magna Mirror Systems. Prior to October 2002, Mr. Baumgardner had been the Chairman and Chief Executive Officer of Donnelly Corporation, an automotive supplier, since 1986. Mr. Baumgardner is currently a director of Wescast Industries and Scanlon Leadership Network, where he served as President from 1983 to 1985.

James R. Henderson was elected as a director of SL Industries on January 24, 2002. Mr. Henderson has served as a director of BNS Co., a real estate management company, since June 2004 and as a director and Chairman of Del Global Technologies Corp., a designer and manufacturer of medical imaging and diagnostic systems, since November 2003 and May 2005, respectively. Mr. Henderson has served as a Vice President of SPL and its predecessor since August 1999. He has also served as President of Gateway since December 2001. Mr. Henderson served as a director of ECC International Corp., a manufacturer and marketer of computer-controlled simulators for training personnel to perform maintenance and operator procedures on military weapons, from December 1999 to September 2003 and as acting Chief Executive Officer from July 2002 to March 2003. From January 2001 to August 2001, Mr. Henderson served as President of MDM Technologies, Inc., a direct mail and marketing company that was principally controlled by the Company’s former Chief Executive Officer and Chairman. From 1996 to July 1999, Mr. Henderson was employed in various positions with Aydin Corporation (“Aydin”), a defense electronics manufacturer, which included a tenure as President and Chief Operating Officer from October 1998 to June 1999. Prior to his employment with Aydin, Mr. Henderson was employed as an executive with UNISYS Corporation, an e-business solutions provider.

Mark E. Schwarz was elected as a director of SL Industries on January 24, 2002. He has served as the general partner, directly or through entities which he controls, of Newcastle Partners, L.P., a private investment firm, since 1993. Mr. Schwarz was Vice President and Manager of Sandera Capital, L.L.C., a private investment firm affiliated with Hunt Financial Group, L.L.C., a Dallas-based investment firm associated with the Lamar Hunt family (“Hunt”), from 1995 to September 1999 and a securities analyst and portfolio Manager for SCM Advisors, L.L.C., formerly a Hunt-affiliated registered investment advisor, from May 1993 to 1996.

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Mr. Schwarz currently serves as a director of the following companies: WebFinancial, Nashua Corporation, a specialty paper, label, and printing supplies manufacturer; Bell Industries, Inc., a provider of computer systems and services; New Century Equity Holdings Corp., a company formerly engaged in investing in high-growth companies; and Pizza Inn, Inc., a franchisor and operator of pizza restaurants. Mr. Schwarz has served as a director and Chief Executive Officer and President of Geoworks Corporation, an entity with no significant business operations, since May 2003. Mr. Schwarz has also served as Chairman of the Board of Directors of Hallmark Financial Services, Inc., a property and casualty insurance holding company, since October 2001, and as its Chief Executive Officer since January 2003. From October 1998 through April 1999, Mr. Schwarz served as a director of Aydin.

Avrum Gray was elected as a director of SL Industries on May 23, 2002. Mr. Gray is the Chairman of G-Bar Limited Partnership, one of the nation’s largest independent options trading firms and a leading specialist in computer-based arbitrage activities in the derivative markets, and has held this position since 1981. Mr. Gray is the former Chairman of the Board of Lynch Systems, Inc., a glass press supplier to the television and computer industry, and a former Chief Executive Officer of a privately held manufacturer of components and devices for the automotive aftermarket. Mr. Gray is also a director of Nashua Corporation, a specialty paper, label and printing supplies manufacturer; Lynch Corporation, a holding company with subsidiaries engaged in manufacturing and distributing frequency control devices and glass forming and other equipment; and Material Sciences Corporation, a materials solution provider. Additionally, Mr. Gray has been Chairman of the Board of Spertus College, as well as a board member of the Illinois Institute of Technology, the Stuart School, and a number of philanthropic organizations, including the Jewish Federation of Chicago.

James A. Risher was elected as a director of SL Industries on May 29, 2003. Mr. Risher has been the Managing Partner of Lumina Group, LLC, a private company engaged in the business of consulting and investing in small and mid-size companies, since 1998. From February 2001 to May 2002, Mr. Risher served as Chairman and Chief Executive Officer of BlueStar Battery Systems International, Inc. (“BlueStar”), a Canadian public company that is an e-commerce distributor of electrical and electronic products to selected automotive aftermarket segments and targeted industrial markets. BlueStar filed CCAA (a petition for reorganization under Canadian bankruptcy laws) in August 2001, and a plan of reorganization was approved in November 2001. From 1986 to 1998, Mr. Risher served as a director, Chief Executive Officer and President of Exide Electronics Group, Inc. (“Exide”), a global leader in the uninterruptible power supply industry. He also served as Chairman of Exide from December 1997 to July 1998.

James C. Taylor has served as President and Chief Executive Officer of SL Industries since August 12, 2005. Mr. Taylor served as Executive Vice President and Chief Operating Officer of SL Industries from January 2004 until August 12, 2005 and has served as President of SL Industries’ Electronics Group since August 2002 and as President of SL Industries’ subsidiary, Teal Electronics Corp., since January 2000. From September 1997 to December 1999, Mr. Taylor was President of Transicoil, a division of Horizon Aerospace, LLC, a privately held company specializing in military, aerospace and medical motors.

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David R. Nuzzo has served as Vice President and Chief Financial Officer and Secretary of SL Industries since December 1997. Mr. Nuzzo has served as Treasurer since January 2001.

Lakers Acquisition Corp.

Name	Age	Office and Principal Occupation	Director Since
James C. Taylor	40	Director; President	December 2005
David R. Nuzzo	48	Director; Vice President and Secretary	December 2005

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AnnexI

Minnesota Anti-Takeover Approval

The Minnesota anti-takeover statutes impose various restrictions, prohibitions, and other potentially delaying effects on acquisitions of Minnesota corporations. These statutory provisions do not apply in certain circumstances:

•  Section 302A.671 of the MBCA does not apply to a tender offer for all voting shares of a corporation if two conditions are met. First, the offer must have been approved by a committee of disinterested directors of the corporation. Second, at the completion of the offer, the acquiring person must have become the owner of a majority of the outstanding voting shares of the corporation.

•  Section 302A.673 of the MBCA does not apply if before a person acquires 10% or more of the corporation’s outstanding voting shares, either the share acquisition or the subsequent business combination is approved by a committee of disinterested directors of the corporation.

•  Similarly, Section 302A.675 of the MBCA does not apply if the share acquisition is approved by a committee of disinterested directors of the corporation.

Under the MBCA, “disinterested directors” are those who are not then employees of the corporation and who were not employees of the corporation within the preceding five years.

In order to cause these statutes to be inapplicable to the Offer, the Merger, or the transactions contemplated thereby, Ault’s board of directors appointed a special committee, which was composed of Ms. Barnett, Ms. Pearson Walker and Messrs. Bentovim, Chang, Colwell, and Larkin, all of whom are disinterested directors under the Minnesota Business Corporation Act. The special committee approved each of those transactions.

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AnnexII

Minnesota Business Corporation Act

Dissenters’ Rights Provisions

302A.471 Rights of dissenting shareholders.

Subdivision1. Actions creating rights. A shareholder of a corporation may dissent from, and obtain payment for the fair value of the shareholder’s shares in the event of, any of the following corporate actions:

(a) unless otherwise provided in the articles, an amendment of the articles that materially and adversely affects the rights or preferences of the shares of the dissenting shareholder in that it:

(1) alters or abolishes a preferential right of the shares;

(2) creates, alters, or abolishes a right in respect of the redemption of the shares, including a provision respecting a sinking fund for the redemption or repurchase of the shares;

(3) alters or abolishes a preemptive right of the holder of the shares to acquire shares, securities other than shares, or rights to purchase shares or securities other than shares;

(4) excludes or limits the right of a shareholder to vote on a matter, or to cumulate votes, except as the right may be excluded or limited through the authorization or issuance of securities of an existing or new class or series with similar or different voting rights; except that an amendment to the articles of an issuing public corporation that provides that section 302A.671 does not apply to a control share acquisition does not give rise to the right to obtain payment under this section; or

(5) eliminates the right to obtain payment under this subdivision;

(b) a sale, lease, transfer, or other disposition of property and assets of the corporation, that requires shareholder approval under section 302A.661, subdivision 2, but not including a disposition in dissolution described in section 302A.725, subdivision 2, or a disposition pursuant to an order of a court, or a disposition for cash on terms requiring that all or substantially all of the net proceeds of disposition be distributed to the shareholders in accordance with their respective interests within one year after the date of disposition;

(c) a plan of merger, whether under this chapter or under chapter 322B, to which the corporation is a constituent organization, except as provided in subdivision 3, and except for a plan of merger adopted under section 302A.626;

(d) a plan of exchange, whether under this chapter or under chapter 322B, to which the corporation is a party as the corporation whose Shares will be acquired by the acquiring corporation, except as provided in subdivision 3;

(e) a plan of conversion adopted by the corporation; or

64

(f) any other corporate action taken pursuant to a shareholder vote with respect to which the articles, the bylaws, or a resolution approved by the board directs that dissenting shareholders may obtain payment for their shares.

Subdivision2. Beneficial owners.

(a) A shareholder shall not assert dissenters’ rights as to less than all of the shares registered in the name of the shareholder, unless file shareholder dissents with respect to all the shares that are beneficially owned by another person but registered in the name of the shareholder and discloses the name and address of each beneficial owner on whose behalf the shareholder dissents. In that event, the rights of the dissenter shall be determined as if the shares as to which the shareholder has dissented and the other shares were registered in the names of different shareholders.

(b) A beneficial owner of shares who is not the shareholder may assert dissenters’ rights with respect to shares held on behalf of the beneficial owner, and shall be treated as a dissenting shareholder under the terms of this section and section 302A.473, if the beneficial owner submits to the corporation at the time of or before the assertion of the rights a written consent of the shareholder.

Subdivision3. Rights not to apply.

(a) Unless the articles, the bylaws, or a resolution approved by the board otherwise provide, the right to obtain payment under this section does net apply to a shareholder of (1) the surviving corporation in a merger with respect to shares of the shareholder that are not entitled to be voted on the merger and are not canceled or exchanged in the merger or (2) the corporation whose shares will be acquired by the acquiring corporation in a plan of exchange with respect to shares of the shareholder that are not entitled to be voted on the plan of exchange and are not exchanged in the plan of exchange.

(b) If a date is fixed according to section 302A.445, subdivision 1, for the determination of shareholders entitled to receive notice of and to vote on an action described in subdivision 1, only shareholders as of the date fixed, and beneficial owners as of the date fixed who hold through shareholders, as provided in subdivision 2, may exercise dissenters’ rights.

(c) Notwithstanding subdivision 1, the right to obtain payment under the section, other than in connection with a plan of merger adopted under section 302A.621, is limited in accordance with the following provisions:

(1) The right to obtain payment under this section is not available for the holders of shares of any class or series of shares that is listed on the New York Stock Exchange or the American Stock Exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc.

(2) The applicability of clause (1) is determined as of:

65

(i) the record date fixed to determine the shareholders entitled to receive notice of, and to vote at, the meeting of shareholders to act upon the corporate action described in subdivision 1; or

(ii) the day before the effective date of corporate action described in subdivision 1 if there is no meeting of shareholders.

(3) Clause (1) is not applicable, and the right to obtain payment under this section is available pursuant to subdivision 1, for the holders of any class or series of shares who are required by the terms of the corporate action described in subdivision 1 to accept for such shares anything other than shares, or cash in lieu of fractional shares, of any class or any series of shares of the corporation, or any other proprietary interest of any other entity, that satisfies the standards set forth in clause (1) at the time the corporate action becomes effective.

Subdivision4. Other rights. The shareholders of a corporation who have a right under this section to obtain payment for their shares do not have a right at law or in equity to have a corporate action described in subdivision 1 set aside or rescinded, except when the corporate action is fraudulent with regard to the complaining shareholder or the corporation.

302A.473 Procedures for asserting dissenters’ rights.

Subdivision1. Definitions.

(a) For purposes of this section, the terms defined in this subdivision have the meanings given them.

(b) ”Corporation” means the issuer of the shares bold by a dissenter before the corporate action referenced to in section 302A.471, subdivision 1 or the successor by merger of that issuer.

(c) ”Fair value of the slates” means the value of the shares of a corporation immediately before the effective date of the corporate action referred to in section 302A.471, subdivision 1.

(d) ”Interest” means interest commencing five days after the effective date of the corporate action referred to in section 302A.471, subdivision 1, up to and including the date of payment, calculated at the rate provided in section 549.09 for interest on verdicts and judgments.

Subdivision2. Notice of action. If a corporation calls a shareholder meeting at which any action described in section 302A.471, subdivision 1 is to be voted upon, the notice of the meeting shall inform each shareholder of the right to dissent and shall include a copy of section 302A.471 and this section and a brief description of the procedure to be followed under these sections.

Subdivision3. Notice of dissent. If the proposed action must be approved by the shareholders and the corporation holds a shareholder meeting, a shareholder who is entitled to dissent under section 302A.471 and who wishes to exercise dissenters’ rights must file with the corporation before the vote on the proposed action a written notice of intent to demand the fair value of the shares owned by the shareholder and must not vote the shares in favor of the proposed action.

66

Subdivision4. Notice of procedure; deposit of shares.

(a) After the proposed action has been approved by the board and, if necessary, the shareholders, the corporation shall send to (i) all shareholders who have complied with subdivision 3, (ii) all shareholders who did not sign or consent to a written action that gave effect to the action creating the right to obtain payment under section 302A.471, and (iii) all shareholders entitled to dissent if no shareholder vote was required, a notice that contains:

(1) the address to which a demand for payment and certificates of certificated shares must be sent in order to obtain payment and the date by which they must be received;

(2) any restrictions on transfer of uncertificated shares that will apply after the demand for payment is received;

(3) a form to be used to certify the date on which the shareholder, or the beneficial owner on whose behalf the shareholder dissents, acquired the shares or an interest in them and to demand payment; and

(4) a copy of section 302A.471 and this section and a brief description of the procedures to be followed under these sections.

(b) In order to receive the fair value of the shares, a dissenting shareholder must demand payment and deposit certificated shares or comply with any restrictions on transfer of uncertificated shares within 30 days after the notice required by paragraph (a) was given, but the dissenter retains all other rights of a shareholder until the proposed action takes effect.

Subdivision5. Payment; return of shares.

(a) After the corporate action takes effect, or after the corporation receives a valid demand for payment, whichever is later, the corporation shall remit to each dissenting shareholder who has complied with subdivisions 3 and 4 the amount the corporation estimates to be the fair value of the shares, plus interest, accompanied by:

(1) the corporation’s closing balance sheet and statement of income for a fiscal year ending not more than 16 months before the effective date of the corporate action, together with the latest available interim financial statements;

(2) an estimate by the corporation of the fair value of the shares and a brief description of the method used to reach the estimate; and

(3) a copy of section 302A.471 and this section, and a brief description of the procedure to be followed in demanding supplemental payment.

(b) The corporation may withhold the remittance described in paragraph (a) from a person who was not a shareholder on the date the action dissented from was first announced to the public or who is dissenting on behalf of a person who was not a beneficial owner on that date. If the dissenter has complied with subdivisions 3 and 4, the corporation shall forward to the dissenter the materials described in paragraph (a), a statement of the reason for withholding the remittance, and an Offer to pay to the dissenter the amount listed in the materials if the dissenter

67

agrees to accept that amount in full satisfaction. The dissenter may decline the offer and demand payment under subdivision 6. Failure to do so entitles the dissenter only to the amount offered. If the dissenter makes demand, subdivisions 7 and 8 apply.

(c) If the corporation fails to remit payment within 60 days of the deposit of certificates or the imposition of transfer restrictions on uncertificated shares, it shall return all deposited certificates and cancel all transfer restrictions. However, the corporation may again give notice under subdivision 4 and require deposit or restrict transfer at a later time.

Subdivision6. Supplemental payment; demand. If a dissenter believes that the amount remitted under subdivision 5 is less than the fair value of the shares plus interest, the dissenter may give written notice to the corporation of the dissenter’s own estimate of the fair value of the shares, plus interest, within 30 days after the corporation mails the remittance under subdivision 5, and demand payment of the difference. Otherwise, a dissenter is entitled only to the amount remitted by the corporation.

Subdivision7. Petition; determination. If the corporation receives a demand under subdivision 6, it shall, within 60 days after receiving the demand, either pay to the dissenter the amount demanded or agreed to by the dissenter after discussion with the corporation or file in court a petition requesting that the court determine the fair value of the Shares, plus interest. The petition shall be filed in the county in which the registered office of the corporation is located, except that a surviving foreign corporation that receives a demand relating to the shares of a constituent domestic corporation shall file the petition in the county in this state in which the last registered office of the constituent corporation was located. The petition shall name as parties all dissenters who have demanded payment under subdivision 6 and who have not reached agreement with the corporation. The corporation shall after filing the petition, serve all parties with a summons and copy of the petition under the rules of civil procedure.

Nonresidents of this state may be served by registered or certified mail or by publication as provided by law. Except as otherwise provided, the rides of civil procedure apply to this proceeding. The jurisdiction of the court is plenary and exclusive. The court may appoint appraisers, with powers and authorities the court deems proper, to receive evidence on and recommend the amount of the fair value of the shares. The court shall determine whether the shareholder or shareholders in question have fully complied with the requirements of this section, and shall determine the fair value of the shares, taking into account any and all factors file court finds relevant, computed by any method or combination of methods that the court, in its discretion, sees fit to use, whether or not used by the corporation or by a dissenter. The fair value of the shares as determined by the court is binding on all shareholders, wherever located. A dissenter is entitled to judgment in cash for the amount by which the fair value of the shares as determined by the court, plus interest, exceeds the amount, if any, remitted under subdivision 5, but shall not be liable to the corporation for the amount, if any, by which the amount, if any, remitted to the dissenter under subdivision 5 exceeds the fair value of the shares as determined by the court, plus interest.

Subdivision8. Costs; fees; expenses.

(a) The court shall determine the costs and expenses of a proceeding under subdivision 7, including the reasonable expenses and compensation of any appraisers appointed by the court, and shall assess those costs and expenses against the corporation, except that the court may

68

assess part or all of those costs and expenses against a dissenter whose action in demanding payment under subdivision 6 is found to be arbitrary, vexatious, or not in good faith.

(b) If the court finds that the corporation bas failed to comply substantially with this section, the court may assess all fees and expenses of any experts or attorneys as the court deems equitable. These fees and expenses may also be assessed against a person who bas acted arbitrarily, vexatious, or not in good faith in bringing the proceeding, and may be awarded to a party injured by those actions.

(c) The court may award, in its discretion, fees and expenses to an attorney for the dissenters out of an amount awarded to the dissenters, if any.

69

Facsimile copies of the Letter of Transmittal, properly completed and duly signed, will be accepted. The Letter of Transmittal, certificates for shares and any other required documents should be sent or delivered by each shareholder of Ault or his broker, dealer, commercial bank, trust company or other nominee to the Depositary, at one of the addresses set forth below.

	The Depositary for the Offer is:
By Mail or Overnight Courier: American Stock Transfer & Trust Company Operations Center Attn: Reorganization Department 6201 15th Avenue Brooklyn, NY 11219		By Hand: American Stock Transfer & Trust Company Attn: Reorganization Department 59 Maiden Lane Concourse Level New York, NY 10038
By Facsimile (718) 234-5001 Confirm Facsimile Transmission (By Telephone Only) Toll Free (877) 248-6417

Questions and requests for assistance or additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification on Substitute Form W-9 may be directed to the Information Agent at the location and telephone number set forth below. Shareholders may also contact their broker, dealer, commercial bank or trust company for assistance concerning the Offer.

The Information Agent for the Offer is:

Morrow & Co., Inc.

470 West Avenue

Stamford, CT 06902

(203) 658-9400

70

EX-99.5

Exhibit 99.5

Execution Version

REVOLVING CREDIT AGREEMENT

Among

BANK OF AMERICA, N.A., as Agent and a Lender

Certain Lenders

SL INDUSTRIES, INC., as Parent Borrower

And

CEDAR CORPORATION

CONDOR D.C. POWER SUPPLIES, INC.

CONDOR HOLDINGS, INC.

RFL ELECTRONICS, INC.

SL AUBURN, INC.

SL DELAWARE, INC.

SL DELAWARE HOLDINGS, INC.

SL SURFACE TECHNOLOGIES, INC.

SL MONTEVIDEO TECHNOLOGY, INC.

SLW HOLDINGS, INC.

TEAL ELECTRONICS CORPORATION

WABER POWER LTD.

Collectively, as Subsidiary Borrowers

Dated

August 3, 2005

TABLE OF CONTENTS

						Page
ARTICLE 1			THE REVOLVING LOAN FACILITY				2
	Section 1.01				Commitment to Lend		2
	Section 1.02				Manner of Borrowing		2
	Section 1.03				Disbursements		2
	Section 1.04				Letters of Credit and Letter of Credit Fees		3
ARTICLE 2			PAYMENTS AND PREPAYMENTS				5
	Section 2.01				Reductions In Commitment		5
	Section 2.02				Optional Prepayments of Loans		5
	Section 2.03				Repayment of Loans In Connection with Reductions of Commitment		6
ARTICLE 3			INTEREST AND FEES				6
	Section 3.01				Interest		6
	Section 3.02				Election of Interest Rate		7
	Section 3.03				Interest Upon Default		7
	Section 3.04				Fees		8
	Section 3.05				Computation of Interest and Related Fees		8
ARTICLE 4			GENERAL MATTERS CONCERNING LOANS				8
	Section 4.01				Manner of Tendering Payments by Borrowers		8
	Section 4.02				The Notes		9
	Section 4.03				Loan Account	10
	Section 4.04				Additional Provisions Concerning Certain Loans	10
	Section 4.05				Taxes	12
	Section 4.06				Lenders’ Obligations Several	14
	Section 4.07				Permitted Assumptions by Agent as to Lender Payments	14
ARTICLE 5			CONDITIONS PRECEDENT			14
	Section 5.01				Conditions Precedent to Initial Loan	14
		5.01.1		Loan Documents		14
		5.01.2		UCC Collateral Documents		15
		5.01.3		Real Estate Collateral Documents		15
		5.01.4		Financial Documents		15
		5.01.5		Consents, Certificates and Opinions		16

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TABLE OF CONTENTS

(continued)

						Page
		5.01.6		Third Party Agreements		16
		5.01.7		Merger Documents		17
	Section 5.02				Payment of Fees and Costs	17
	Section 5.03				Conditions Precedent to Each Loan	17
	Section 5.04				Method of Satisfying Certain Conditions	18
ARTICLE 6			REPRESENTATIONS AND WARRANTIES OF BORROWERS			18
	Section 6.01				Organization and Qualification	18
	Section 6.02				Capitalization and Ownership of Subsidiary Borrowers	18
	Section 6.03				Authorization and Execution	18
	Section 6.04				Enforceability; Consents	19
	Section 6.05				Security Interests in Collateral	19
	Section 6.06				Real Property of Borrowers	19
	Section 6.07				Absence of Conflict with other Agreements, Etc.	19
	Section 6.08				Business	20
	Section 6.09				Condition of Assets	20
	Section 6.10				Use of Proceeds	20
	Section 6.11				Litigation	20
	Section 6.12				Indebtedness	20
	Section 6.13				Financial Statements	20
	Section 6.14				Fiscal Year	21
	Section 6.15				Title to Assets	21
	Section 6.16				Patents, Trademarks, Licenses and Franchises	21
	Section 6.17				Compliance with Law	21
	Section 6.18				Compliance with ERISA	22
	Section 6.19				Compliance with Regulations U and X	23
	Section 6.20				Investment Company Act	23
	Section 6.21				Public Utility Holding Company Act	23
	Section 6.22				Absence of Default	23
	Section 6.23				Agreements with Affiliates and Management Agreements	23
	Section 6.24				No Burdensome Agreements; Material Agreements	23
	Section 6.25				Solvency	24
	Section 6.26				Taxes	24

- ii -

TABLE OF CONTENTS

(continued)

				Page
	Section 6.27		Environmental Compliance	24
	Section 6.28		Labor Disputes and Acts of God	25
ARTICLE 7		FINANCIAL COVENANTS		25
	Section 7.01		Financial Covenants	25
	Section 7.02		Calculations	26
ARTICLE 8		COVENANTS CONCERNING REPORTING REQUIREMENTS		26
	Section 8.01		Financial Statements	26
	Section 8.02		Officer’s Compliance Certificates	27
	Section 8.03		Auditors’ Reports	28
	Section 8.04		Notice of Default	28
	Section 8.05		Notice Concerning Representations and Warranties	28
	Section 8.06		Notice of Litigation	28
	Section 8.07		SEC Disclosure	28
	Section 8.08		Conditions Affecting Collateral	28
	Section 8.09		ERISA Notices	29
	Section 8.10		Miscellaneous	29
	Section 8.11		Authorization of Third Parties to Deliver Information	29
ARTICLE 9		BUSINESS COVENANTS		30
	Section 9.01		Indebtedness	30
	Section 9.02		Liens	30
	Section 9.03		Investments and Acquisitions	32
	Section 9.04		Restricted Payments	34
	Section 9.05		Affiliate Transactions	34
	Section 9.06		Disposition of Assets	35
	Section 9.07		Liquidation or Merger	35
	Section 9.08		Change in Organizational Documents	35
	Section 9.09		Issuance of Equity	36
	Section 9.10		Environmental Violations	36
	Section 9.11		Preservation of Existence, Etc.	36
	Section 9.12		Permitted Businesses	36
	Section 9.13		Compliance with Law	36
	Section 9.14		Payment of Taxes and Claims	37

- iii -

TABLE OF CONTENTS

(continued)

				Page
	Section 9.15		Tax Consolidation	37
	Section 9.16		Maintenance of Properties	37
	Section 9.17		Insurance	37
	Section 9.18		Compliance with ERISA	38
	Section 9.19		Maintenance of Records; Fiscal Year	39
	Section 9.20		Inspections and Field Examinations	39
	Section 9.21		Exchange of Notes	40
	Section 9.22		Compliance with Federal Reserve Regulations	40
	Section 9.23		Limitations on Certain Restrictive Provisions	40
	Section 9.24		Corporate Separateness	40
	Section 9.25		Deposit Accounts	41
	Section 9.26		Collateral; Lockbox	41
	Section 9.27		Joinder of Subsidiaries	41
	Section 9.28		Further Assurances	43
ARTICLE 10		DEFAULT		43
	Section 10.01		Events of Default	43
	Section 10.02		Remedies	45
	Section 10.03		Cash Collateral	46
ARTICLE 11		DEFINITIONS		46
	Section 11.01		Defined Terms	46
	Section 11.02		Accounting Terms	65
	Section 11.03		Other Definitional Provisions	66
ARTICLE 12		AGENT		66
	Section 12.01		Authority.	66
	Section 12.02		Expenses.	66
	Section 12.03		Action by Agent.	66
	Section 12.04		Exculpatory Provisions	67
	Section 12.05		Investigation by Lenders	67
	Section 12.06		Notice of Events of Default	67
	Section 12.07		Resignation; Termination.	68
	Section 12.08		Sharing.	68
	Section 12.09		Other Relationships	68

- iv -

TABLE OF CONTENTS

(continued)

				Page
ARTICLE 13		MISCELLANEOUS		68
	Section 13.01		Notices	68
	Section 13.02		Duration; Survival	69
	Section 13.03		Borrower Representative	69
	Section 13.04		No Implied Waiver; Rights Cumulative	69
	Section 13.05		Entire Agreement and Amendments	70
	Section 13.06		Successors and Assigns	70
	Section 13.07		Descriptive Headings	72
	Section 13.08		Governing Law	72
	Section 13.09		Payments Due on Non-Business Days	72
	Section 13.10		Counterparts	72
	Section 13.11		Maximum Lawful Interest Rate	73
	Section 13.12		Set-off of Bank Accounts	73
	Section 13.13		Severability	74
	Section 13.14		Payment and Reimbursement of Costs and Expenses; Indemnification	74
	Section 13.15		Consent to Jurisdiction	75
	Section 13.16		Termination	75
	Section 13.17		Waiver of Right to Jury Trial	75
	Section 13.18		Confidentiality	76
	Section 13.19		USA Patriot Act	76

- v -

EXHIBITS

EXHIBIT A	Form of Revolving Loan Note
EXHIBIT B	Form of Request for Advance
EXHIBIT C	Form of Notice of Conversion
EXHIBIT D	Form of Compliance Certificate
EXHIBIT E	Form of Assignment and Acceptance Agreement
EXHIBIT F	Form of Joinder Agreement

SCHEDULES

Schedule A	Commitments
Schedule 6.01	Jurisdictions Where each Borrower and Each of Foreign Subsidiary is Incorporated/Organized and Qualified
Schedule 6.02	Capital Stock of (or Other Equity or Ownership Interests in) the Borrowers and Foreign Subsidiaries
Schedule 6.05	Filing Locations for Financing Statements and Mortgages
Schedule 6.06	Real Property Owned or Leased by Borrowers and Subsidiaries
Schedule 6.11	Litigation
Schedule 6.12	Indebtedness of Borrowers and Subsidiaries
Schedule 6.16	List of Patents, Trademarks and Other Intangible Rights
Schedule 6.18	ERISA Disclosure
Schedule 6.23	Agreements With Affiliates
Schedule 6.24	Material Agreements
Schedule 9.01	Existing Indebtedness
Schedule 9.02	Existing Liens
Schedule 9.03	XYZ Acquisition

- vi -

REVOLVING CREDIT AGREEMENT

REVOLVING CREDIT AGREEMENT (this “Agreement”) made as of August 3, 2005, by and among SL INDUSTRIES, INC., a New Jersey corporation (“ParentBorrower”), CEDAR CORPORATION, a Nevada corporation, CONDOR D.C. POWER SUPPLIES, INC., a California corporation, CONDOR HOLDINGS, INC., a Delaware corporation, RFL ELECTRONICS, INC., a Delaware corporation, SL AUBURN, INC., a New York corporation, SL DELAWARE, INC., a Delaware corporation, SL DELAWARE HOLDINGS, INC., a Delaware corporation, SL SURFACE TECHNOLOGIES, INC., a New Jersey corporation, SL MONTEVIDEO TECHNOLOGY, INC., a Minnesota corporation, SLW HOLDINGS, INC., a New Jersey corporation, TEAL ELECTRONICS CORPORATION, a California corporation, WABER POWER LTD., a Connecticut corporation (each a “Subsidiary Borrower”, and collectively, “Subsidiary Borrowers”, and together with Parent Borrower, each a “Borrower” and collectively, the “Borrowers”), BANK OF AMERICA, N.A. (“Bank”), individually, as Administrative Agent, Issuer and a Lender, and the OTHER FINANCIAL INSTITUTIONS listed on the signature pages to this agreement. Bank, the financial institutions listed on the signature pages to this Agreement and any other financial institutions which may become parties to this Agreement from time to time, are sometimes collectively referred to as the “Lenders” and individually as a “Lender”. Bank, when acting in its capacity as agent for the Lenders and Issuer, or any successor or assign that assumes that position pursuant to the terms of this Agreement, is hereinafter sometimes referred to as the “Agent”.

RECITALS:

WHEREAS, Borrowers desire that the Lenders extend a revolving loan facility (with a standby and commercial letter of credit sublimit), to provide funds to pay off and terminate that certain Loan and Security Agreement dated effective January 6, 2003 among LaSalle Business Credit LLC, Standard Federal National Association, Parent Borrower and SL Delaware, Inc. as borrowers, and certain subsidiary guarantors party thereto (the “Prior Facility”), and to provide credit for the possible acquisition of XYZ, Inc., working capital purposes and general business purposes of the Borrowers; and

WHEREAS, the Borrowers desire to borrow, and the Lenders are willing to extend credit from time to time on a revolving credit basis until the Revolving Credit Termination Date (as defined below), an aggregate principal amount not to exceed Thirty Million Dollars ($30,000,000) outstanding at any time. The loans and credit are to be secured by the assets of the Parent Borrower and the assets and stock of the Subsidiary Borrowers. Certain terms used herein are defined in Article 13 below.

NOW THEREFORE, the Borrowers, jointly and severally, and Agent and the Lenders, severally but not jointly, intending to be legally bound, agree as follows:

ARTICLE 1

THE REVOLVING LOAN FACILITY

- 1 -

Section 1.01Commitment to Lend. The Lenders severally agree, upon the terms and conditions set forth below, from time to time until the Revolving Credit Termination Date, to make Revolving Credit Loans to the Borrowers in such amounts as the Borrowers may request, subject to the limitation that: (a) at no time shall Revolving Credit Outstandings exceed the amount of the Commitment; and (b) the amount and percentage of the Commitment which each Lender is obligated to lend shall not exceed at any time the amount or percentages set forth opposite the name of such Lender on Schedule A hereto (as supplemented and amended by giving effect to the assignment contemplated in this Agreement). The amount of any single Base Rate Loan shall be fifty thousand dollars ($50,000) or an integral multiple of ten thousand dollars ($10,000) in excess thereof, and the amount of any single LIBOR Loan shall be one hundred thousand dollars ($100,000) or an integral multiple of ten thousand dollars ($10,000) in excess thereof. Within such limitations and subject to the terms and conditions set forth below, the Borrowers may borrow, prepay and reborrow, from time to time, on a revolving basis. The Lenders shall have no obligation to make any Revolving Credit Loans at any time that a Default exists.

Section 1.02 Manner of Borrowing.

(a)To request a Revolving Credit Loan, the Borrowers shall, prior to 12:00 noon on the desired date of a Base Rate Loan or at least two (2) Business Days prior to the desired date for a LIBOR Loan, (a) deliver to the Agent a Request for Advance or (b) give the Agent telephonic notice of the information specified in a Request for Advance followed immediately by delivery of such a Request for Advance, provided, however, that the Borrowers’ failure to confirm any telephonic notice with a Request for Advance shall not invalidate any notice so given if acted upon by the Agent. Any notice given to the Agent pursuant to this Section shall be given prior to 11:00 a.m. (Philadelphia time) on the requisite Business Day and shall be irrevocable once given.

(b)The Agent in turn shall give prompt written or telephonic (promptly confirmed in writing) notice to each Lender of its pro rata share of the borrowing, the interest rate option selected and the scheduled date of the funding. After receipt of such notice, each Lender shall make such arrangements as are necessary to assure that its share of the funding shall be immediately available (in Dollars) to the Agent no later than 1:30 p.m. (Philadelphia, PA time), on the date on which the funding is to occur.

Section 1.03Disbursements. Prior to 2:00 p.m. (Philadelphia time) on the date of a Revolving Credit Loan, the Agent shall, subject to the satisfaction of the conditions set forth in Article 7 below, disburse the funds to the Borrowers (a) by wire transfer pursuant to the Borrowers’ instructions, or (b) in the absence of such instructions, by crediting the account of the Parent Borrower maintained with the Agent.

Section 1.04 Letters of Credit and Letter of Credit Fees.

(a)Letter of Credit. On the terms and subject to the conditions set forth herein, Issuer will prior to the Revolving Credit Termination Date issue standby or documentary Letters of Credit so long as:

- 2 -

(i)Issuer shall have received a Notice of LC Credit Event at least two (2) Business Days before the relevant date of issuance; and

(ii)After giving effect to such issuance (A) the aggregate Letter of Credit Liabilities under all Letters of Credit do not exceed $5,000,000 and (B) the Revolving Credit Outstandings do not exceed the amount of the Commitment.

(b)Letter of Credit Fee. Borrowers shall pay to the Agent for the account of the Lenders a letter of credit fee with respect to the Letter of Credit Liabilities for each Letter of Credit, computed for each day from the date of issuance of such Letter of Credit to the date that is the last day a drawing is available under such Letter of Credit, at a rate per annum equal to the Applicable Margin then applicable to LIBOR Loans. Such fee shall be payable in arrears on the first Business Day of each fiscal quarter prior to the Revolving Credit Termination Date and on such date. In addition, the Issuer shall receive a fronting fee equal to 0.125% of the face amount of each outstanding Letter of Credit (“Fronting Fee”), payable upon issuance. The Borrowers shall also pay to the Issuer all of the Issuer’s standard fees and charges for the opening, amendment, modification, presentation or cancellation of a Letter of Credit and otherwise in respect of a Letter of Credit and shall execute all of the Issuer’s standard agreements in connection with the issuance of the Letter of Credit.

(c)Reimbursement Obligations of Borrowers. If Issuer shall make a payment pursuant to a Letter of Credit, the Borrowers shall promptly reimburse Issuer, following notice from Issuer to Borrowers of the amount of such payment, for the amount of such payment and, to the extent that so doing would not cause the Revolving Credit Outstandings to exceed the amount of the Commitment, and there is no outstanding Default, Borrowers shall be deemed to have requested a Revolving Credit Loan, the proceeds of which will be used to satisfy such Reimbursement Obligations. To the extent that such Reimbursement Obligations are not so satisfied the Borrowers shall pay interest, on demand, on all amounts so paid by Issuer for each day until Borrowers reimburse Issuer therefor at a rate per annum equal to the sum of two percent (2%) plus the interest rate applicable to Revolving Credit Loans (which are Prime Rate Loans) for such day. The obligations of the Borrowers to the Issuer, the Agent and the Lenders in respect of Letters of Credit shall be guaranteed pursuant to the Loan Documents and shall be secured by the Collateral.

(d)Objections Absolute. The obligations of Borrowers under this Section 1.04 shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, under all circumstances whatsoever, including the following:

(i)any lack of validity or enforceability of, or any amendment or waiver of or any consent to departure from, any Letter of Credit or any related document;

(ii)the existence of any claim, set-off, defense or other right which Borrowers may have at any time against the beneficiary of any Letter of Credit, the Issuer, the Agent or any Lender (including any claim for improper payment), or any other Person, whether in connection with any Loan Document or any unrelated transaction, provided, that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim;

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(iii)any statement or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever; or

(iv)to the extent permitted under applicable law, any other circumstance or happening whatsoever, whether or not similar to any of the foregoing.

(e)Deposit Obligations of Borrowers. In the event any Letters of Credit are outstanding at the time that Borrowers prepay, or are required to repay, the Obligations or the Commitment is terminated, Borrowers shall (i) deposit with Issuer either cash or an irrevocable letter of credit in form and substance satisfactory to Issuer from a bank satisfactory to Issuer, in either case, in an amount equal to one hundred and two percent (102%) of the aggregate outstanding Letter of Credit Liability, to be available to Issuer to reimburse payments of drafts drawn under such Letters of Credit and pay any fees and expenses related thereto, and (ii) prepay the fee payable under Section 1.04(b) with respect to such Letters of Credit for the full remaining terms of such Letters of Credit. Upon termination of any such Letter of Credit, the unearned portion of such prepaid fee attributable to such Letter of Credit shall be refunded to Borrowers, together with the deposit described in the preceding clause (i) to the extent not previously applied by Issuer in the manner described herein.

(f) Participation by Lenders.

(i)Effective immediately upon the issuance of each Letter of Credit and without further action on the part of the Issuer, the Issuer shall be deemed to have granted to each Lender, and each Lender shall be deemed to have irrevocably purchased and received from the Issuer, without recourse or warranty, an undivided interest and participation in such Letter of Credit to the extent of each Lender’s percentage of the Revolving Credit Limit. Further, each Lender acknowledges and agrees that it shall be absolutely liable, to the extent of its percentage of the Revolving Credit Limit, to fund on demand or reimburse the Issuer on demand for the amount of each draft paid by the Issuer under each Letter of Credit to the extent that such amount is not immediately reimbursed by the Borrowers.

(ii)In furtherance of the provisions of the preceding paragraph (a), the Issuer shall notify the Agent promptly upon receipt of notice of an intended draw under a Letter of Credit. The Agent shall give written, telecopied or telegraphic notice to each of the other Lenders of its pro rata share of such draw and the scheduled date thereof. After receipt of such notice, and whether or not an Event of Default or Default then exists, each Lender shall make available to the Agent such Lender’s share of such draw in immediately available (in Dollars) to the Agent no later than noon (Philadelphia, PA time), on the date specified in the Agent’s notice. The failure of the Issuer or the Agent to give timely notice pursuant to this Subsection 1.04(f) shall not affect the right of the Issuer to reimbursement from the Lenders. Any amount paid by Agent and Lenders pursuant to a draw made under a Letter of Credit shall constitute a Revolving Credit Loan and shall be repaid pursuant to the provisions respecting Revolving Credit Loans, provided that if an Event of Default or Default exists at the time of a draw, the Borrowers shall immediately reimburse the amount of such draw to the Agent for the benefit of the Lenders.

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(g)Standard of Conduct. The Issuer shall be entitled to administer each Letter of Credit in the ordinary course of business and in accordance with its usual practices, modified from time to time as it deems appropriate under the circumstances, and shall be entitled to use its discretion in taking or refraining from taking any action in connection herewith as if it were the sole party involved. Any action taken or omitted to be taken by the Issuer under or in connection with any Letter of Credit shall not create for the Issuer any resulting liability to any other Lender. The Issuer shall be entitled to rely, and shall be fully protected in relying upon, any Letter of Credit, draft, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document believed by it to be genuine and correct and believed by it to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel, independent accountants and other experts selected by the Issuer and the Agent.

ARTICLE 2

PAYMENTS AND PREPAYMENTS

Section 2.01Reductions In Commitment. The Borrowers may, at any time and from time to time upon one (1) Business Day’s prior irrevocable written notice to the Agent, reduce (on a pro rata basis among the Lenders) or terminate the Commitment without premium or penalty, provided, however, that each partial reduction shall be in an amount equal to One Million Dollars ($1,000,000) or an integral multiple of One Hundred Thousand Dollars ($100,000) in excess thereof and providedfurther, that the Commitment shall not be reduced or terminated at any time that would require the prepayment of a LIBOR Loan on a day other than the last day of the relevant Interest Period, unless the reduction notice is accompanied by the breakage payments referred to in Section 4.04 (Additional Provisions Concerning Certain Loans) below. Once so reduced, the Commitment shall not be increased and once so terminated, the Commitment shall not be reinstated.

Section 2.02 Optional Prepayments of Loans.

(a)Subject to the provisions of paragraph (c) below, the Borrowers may, at any time and from time to time, without penalty, prepay any or all Base Rate Loans.

(b)Subject to the provisions of paragraph (c) below, the Borrowers may, at any time and from time to time, prepay any or all LIBOR Loans upon giving three (3) Business Days irrevocable notice to the Agent, but if any such payment shall be made on a day other than the last day of the applicable Interest Period, such payment shall be accompanied by the breakage payments referred to in Section 4.04 (Additional Provisions Concerning Certain Loans) below.

(c)The foregoing prepayment rights are subject to the following: (i) any prepayment of less than all the outstanding Loans shall be in an amount equal to Fifty Thousand Dollars ($50,000) or an integral multiple of ten thousand dollars ($10,000) in excess thereof, (ii) no prepayment may be made in an amount that would cause the amount of any outstanding LIBOR Loan to be less than One Hundred Thousand Dollars ($100,000); and (iii)

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any prepayment in full of all outstanding Loans shall be accompanied by the payment of all Obligations accrued or payable as of the date of such prepayment.

Section 2.03Repayment of Loans In Connection with Reductions of Commitment. On or before the effective date of any reduction in the Commitment (whether scheduled, mandatory, voluntary or otherwise), the Borrowers shall repay such of the outstanding Loans, together with accrued interest thereon, and/or pay to the Agent for the benefit of the Lenders as cash collateral an amount equal to all Letter of Credit Liabilities, so as to reduce the Revolving Credit Outstandings to the Revolving Credit Limit, giving effect to the amount of the Commitment as so reduced, provided, however, any prepayment of a LIBOR Loan on a day that is not the last day of the relevant Interest Period shall be accompanied by the amounts provided for in Section 4.04 (Additional Provisions Concerning Certain Loans) below.

ARTICLE 3

INTEREST AND FEES

Section 3.01Interest. Subject to the provisions of Sections 3.02 (Election of Interest Rate) and 4.04 (Additional Provisions Concerning Certain Loans) below and to the conditions set forth in this Section, the Loans shall bear interest at the Borrowers’ option, as follows:

(a)Base Rate Loans. The interest rate on each Base Rate Loan shall equal the sum of the Base Rate plus the Applicable Margin for Base Rate Loans, as in effect from time to time. Changes in the rate of interest resulting from changes in the Base Rate shall take place immediately without notice or demand of any kind. Interest on Base Rate Loans is payable in arrears on the first day of each month and on the maturity of such Loans, whether by acceleration or otherwise.

(b)LIBOR Loans. During any period that a Loan is a LIBOR Loan, Borrowers shall pay interest on such Loan at a rate equal to the LIBOR Rate for the applicable Interest Period plus the Applicable Margin for LIBOR Loans, as in effect from time to time. Interest on LIBOR Loans shall be payable in arrears on the last day of the applicable Interest Period relating to such Loan, provided that if the Interest Period is longer than 30 days, interest shall be payable 30 days after the relevant Loan is made and on each 30-day anniversary thereof, if applicable, and on the last day of the Interest Period. All payments are due on or prior to the Revolving Credit Termination Date.

Section 3.02Election of Interest Rate. Subject to the provisions of Section 4.04 (Additional Provisions Concerning Certain Loans) below, the Borrowers may elect the interest rate applicable to each Revolving Credit Loan as follows:

(a)Rate in Absence of Election. Unless otherwise elected by the Borrowers, each Revolving Credit Loan shall bear interest at the Base Rate plus the Applicable Margin.

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(b)Election of LIBOR Loans. The Borrowers may elect to request an advance hereunder as a LIBOR Loan by so specifying the amount and the desired Interest Period on the Request for Advance delivered pursuant to Section 1.02 (Manner of Borrowing) above.

(c)Conversion to Different Type of Loan. All or any part of the principal amount of Revolving Credit Loans of any Type may, on any Business Day, be converted into any other Type or Types of Revolving Credit Loans, except that (i) a LIBOR Loan may be converted only on the last day of the applicable Interest Period therefor and (ii) a Base Rate Loan may be converted into a LIBOR Loan only on a Business Day for LIBOR Loans.

(d)Notice of Election to Convert. The Borrowers shall give the Agent notice (which shall be irrevocable) of each conversion of a Base Rate Loan into a LIBOR Loan or each conversion of a LIBOR Loan at the end of the relevant Interest Period into another LIBOR Loan, no later than 11:00 a.m. (Philadelphia time) three (3) Business Days prior to the requested date of such conversion. Each notice of conversion shall be (i) in writing in substantially the form of Exhibit C attached hereto or (ii) by telephone specifying the information set forth in Exhibit C attached hereto, followed immediately by delivery of such notice, provided, however, that the Borrowers’ failure to confirm any telephonic notice in writing shall not invalidate any telephonic notice if acted upon by the Agent.

(e)Presumption In Absence of Election to Convert. Base Rate Loans shall continue as Base Rate Loans unless and until such Revolving Credit Loans are converted into Revolving Credit Loans of another Type pursuant to the preceding paragraph (d). LIBOR Loans of any Type shall continue as Revolving Credit Loans of such Type until the end of the then current Interest Period therefor, at which time they shall be automatically converted into Base Rate Loans unless the Borrowers shall have given the Agent notice in accordance with the preceding paragraph (d).

(f)Limitations on Election of LIBOR Loans. The Borrowers may not elect to borrow, continue or convert a Revolving Credit Loan to a LIBOR Loan if such election would (i) require the Agent to administer concurrently more than six (6) Types of Revolving Credit Loans or (ii) require the Borrowers to make any scheduled or required payment of principal prior to the last day to the Interest Period or Interest Periods selected as a result of a reduction of the Available Commitment, a mandatory repayment or otherwise hereunder.

Section 3.03Interest Upon Default. Anything in this Agreement to the contrary notwithstanding, upon the occurrence of an Event of Default (whether or not the Lenders have accelerated payment of the Notes), or after maturity or judgment has been rendered on the Notes, the Borrowers’ right to select interest rate options shall cease and the unpaid principal of the Loans shall, at the option of the Agent, bear interest at the Base Rate plus the Applicable Margin plus two percent (2%) (the “Default Rate”). Such interest shall be payable on the earlier of (i) demand or (ii) the next Payment Date. Interest at the Default Rate shall continue to accrue (both before and after judgment) until the earlier of (i) the waiver or cure of the applicable Event of Default or (ii) the payment in full of the Obligations. Furthermore, at the election of Agent or Majority Lenders during any period in which any Event of Default is continuing (x) as the Interest Periods for LIBOR Loans then in effect expire, such Loans shall be converted into Base Rate Loans and (y) the LIBOR election shall not be available to Borrowers.

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Section 3.04 Fees.

(a)Commitment Fee. The Borrowers shall pay to the Agent for the account of the Lenders a commitment fee, such fee to be payable in arrears on every third Payment Date and on the Revolving Credit Termination Date and equal to the product of the Commitment Fee Margin times the average daily unused portion of the Commitment during the period commencing on the date following the preceding commitment fee payment date (or, if none, on the date hereof) and ending on such commitment fee payment date.

(b)Other Fees. The Borrowers shall pay the Agent, the Issuer and/or the Lenders such other fees as the Borrowers have otherwise agreed to pay in writing.

(c)Letter of Credit and Fronting Fees. The Borrowers shall pay to the Agent for the account of the Issuer and/or the Lenders, as applicable, such letter of credit fees as are described in Section 1.04.

Section 3.05Computation of Interest and Related Fees. All interest and fees under each Loan Document shall be calculated on the basis of a 360-day year for the actual number of days elapsed. The date of funding of a Base Rate Loan and the first day of an Interest Period with respect to a LIBOR Loan shall be included in the calculation of interest. The date of payment of a Base Rate Loan and the last day of an Interest Period with respect to a LIBOR Loan shall be excluded from the calculation of interest. If a Loan is repaid on the same day that it is made, one (1) day’s interest shall be charged.

ARTICLE 4

GENERAL MATTERS CONCERNING LOANS

Section 4.01 Manner of Tendering Payments by Borrowers.

(a)Time of Payments. Each payment (including any prepayment) by the Borrowers on account of the principal of, or interest on, the Loans, commitment fees and any other amount owed to the Agent on behalf of the Lenders under any Loan Document shall be made not later than 1:00 p.m. (Philadelphia time) on the date specified for payment under such Loan Document in lawful money of the United States of America in immediately available funds. Any payment received after 1:00 p.m. (Philadelphia time) shall be deemed received on the next Business Day. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.

(b)Location of Payments. All payments shall be made by the Borrowers to the Agent at Bank of America, N.A., P.O. Box 660576, Dallas, TX 75266-0576 or such other place as the Agent may from time to time specify in writing, except that all payments with respect to Letters of Credit shall be made by the Borrowers to such other place as the Agent and, respectively, the Issuer, may from time to time specify in writing. Any such payment shall

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be made in United States dollars in immediately available funds, without counterclaim or setoff and free and clear of, and without any deduction or withholding for, any taxes or other payments.

(c)Agent and Lenders Authorized to Take Action for Borrowers. If any payment is not made when due, the Borrowers authorize the Agent and any Lender to (i) deduct the amount of such payment from any deposit account maintained by any Borrower, and/or (ii) whether or not there is then any unused Commitment, cause the aforesaid payments to be made by drawing under the loan facility provided under this Agreement, any such Loan being subject to interest at the Default Rate; provided, however, that notwithstanding the making by the Agent and any Lender of any of the aforesaid payments as set forth in this sentence, the failure of the Borrowers to make any of the aforesaid payments when due shall constitute a Default or Event of Default, as the case may be, and, provided, further, the failure of the Agent and any Lender to take any of the aforesaid action shall not affect any of its rights hereunder or under any other Loan Document or under law.

(d)No Set-Off. The Borrowers agree to pay principal, interest, fees, expenses, indemnities, reimbursements and all other amounts due under any Loan Document, without set-off or counterclaim or any deduction whatsoever.

(e)Presumptions. Except as expressly set forth to the contrary in this Agreement or by the Borrowers with respect to any payment, all payments shall be applied first to the payment of all fees, expenses and other amounts due to the Agent or the Lenders (excluding principal and interest), then to accrued interest, and the balance on account of outstanding principal of Base Rate Loans and then to principal of LIBOR Loans (and among such LIBOR Loans, first to those with the earliest expiring Interest Periods); provided, however, that after an Event of Default which is continuing, payments will be applied to the Obligations of Borrowers as Agent determines in its sole discretion.

(f)Disbursements from Agent to Lenders. The Agent shall promptly remit to each Lender its pro rata share of payments received pursuant to Section 4.01 in immediately available funds, except that all reimbursement payments in respect of losses, out-of-pocket expenses, funding losses or like matters shall be retained by the Agent or remitted to the Lenders according to their respective appropriate entitlement to such reimbursement.

Section 4.02The Notes. The aggregate principal amount of each Lender’s share of the Commitment and Loans shall be evidenced by a note to be issued by the Borrowers to each Lender in substantially the form attached hereto as Exhibit A (with appropriate completion of the name of the applicable Lender).

Section 4.03Loan Account. The Agent may open and maintain on its books in the name of the Borrowers a loan account with respect to the Loans and interest thereon. If the Agent opens such an account, it shall debit such loan account for the principal amount of each Loan made by it and accrued interest thereon, and, subject to Section 1.03 (Disbursements) above, shall credit such loan account for each payment on account of principal or interest. The records of the Agent with respect to the loan account maintained by it shall be prima facie evidence of the Loans and accrued interest thereon, but the failure of the Agent to make any such notations or any error or mistake in such notations shall not affect the Borrowers’ repayment obligations with respect to such Loans.

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Section 4.04 Additional Provisions Concerning Certain Loans.

(a)Mandatory Suspension and Conversion of LIBOR Loans. The Lenders’ obligation to make, continue or convert into LIBOR Loans of any Type shall be suspended, all Lenders’ outstanding Loans of such Type shall be converted into Base Rate Loans on the last day of their applicable Interest Periods (or, if earlier, in the case of clause (iii) below, on the last day the Lenders may lawfully continue to maintain Loans of such Type or, in the case of clause (iv) below, on the day determined by the Agent to be the last Business Day before the effective date of the applicable restriction) into, and all pending requests for the making or continuation of or conversion into Loans of such Type by the Agent shall be deemed requests for Base Rate Loans, if:

(i)on or prior to the determination of an interest rate for a LIBOR Loan for any Interest Period, the Agent reasonably determines that for any reason appropriate information is not available to it for purposes of determining the LIBOR Rate for such Interest Period;

(ii)on or prior to the first day of any Interest Period for a LIBOR Loan of such Type, any of the Lenders reasonably determines that the LIBOR Rate as determined by such Lender for such Interest Period would not accurately reflect the cost to such Lender of making, continuing or converting into a LIBOR Loan of such Type for such Interest Period;

(iii)at any time any of the Lenders determines that any Regulatory Change makes it unlawful or impracticable for such Lender or its applicable lending office to make, continue or convert into a LIBOR Loan of such Type, or to comply with its obligations hereunder in respect thereof; or

(iv)any of the Lenders determines that, by reason of any Regulatory Change, such Lender or its applicable lending office is restricted, directly or indirectly, in the amount that it may hold of (A) a category of liabilities that includes deposits by reference to which, or on the basis of which, the interest rate applicable to LIBOR Loans of such Type is directly or indirectly determined or (B) the category of assets that includes LIBOR Loans of such Type.

(b) Regulatory Changes. If in the determination of any of the Lenders:

(i)any Regulatory Change shall directly or indirectly (A) reduce the amount of any sum received or receivable by such Lender with respect to the Revolving Credit Facility, (B) impose a cost on such Lender or any Affiliate of such Lender that is attributable to the making available or maintaining of, or such Lender’s commitment to make available, the Revolving Credit Facility, (C) require such Lender or any Affiliate of such Lender to make any payment on, or calculated by reference to, the gross amount of any amount received by such Lender under any Loan Document or (D) reduce, or have the effect of reducing, the rate of return on any capital of such Lender or any Affiliate of such Lender that such Lender or such Affiliate is required to maintain on account of the Revolving Credit Facility, or such Lender’s Commitment and

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(ii)such reduction, increased cost or payment shall not be fully compensated for by an adjustment in the applicable rates of interest payable under the Loan Documents;

then the Borrowers shall pay to such Lender such additional amounts as such Lender reasonably determines will, together with any adjustment in the applicable rates of interest payable hereunder, fully compensate it for such reduction, increased cost or payment. Such additional amounts shall be payable, in the case of those applicable to prior periods, within 15 Business Days after request by such Lender for such payment and, in the case of those applicable to future periods, on the date specified, or determined in accordance with a method specified, by such Lender. Such Lender will promptly notify the Agent and the Borrowers of any determination made by it referred to in clauses (i) and (ii) above and provide to Agent and Borrowers a reasonably detailed calculation of all amounts required to be paid by the Borrowers, but the failure to give such notice shall not affect such Lender’s right to such compensation.

(c)Capital Requirements. If, in the determination of any Lender, such Lender or any Affiliate of such Lender is required, as a result of a Regulatory Change, to maintain capital on account of the Revolving Credit Facility or such Lender’s Commitment, then, upon request by such Lender, the Borrowers shall from time to time thereafter pay to such Lender such additional amounts as such Lender reasonably determines will fully compensate it for any reduction in the rate of return on the capital that such Lender or such Affiliate is so required to maintain on account of the Revolving Credit Facility or Commitment suffered as a result of such capital requirement. Such additional amounts shall be payable, in the case of those applicable to prior periods, within 15 Business Days after request by such Lender to the Borrowers and in the case of those relating to future periods, on the date specified, or determined in accordance with a method specified by such Lender. Such Lender will promptly notify the Agent and the Borrowers of any determination made by it referred to in this paragraph (c), but the failure to give such notice shall not affect such Lender’s right to such compensation.

(d)Funding Losses. The Borrowers shall pay to the Agent on behalf of the Lenders, from time to time, upon request, such amount as the Agent reasonably determines is necessary to compensate the Lenders for any loss, cost or expense, including, without limitation, loss of the Applicable Margin incurred by it as a result of (a) any payment, prepayment or conversion of a LIBOR Loan on a date other than the last day of an Interest Period for such LIBOR Loan or (b) a LIBOR Loan for any reason not being made or converted, or any payment of principal thereof or interest thereof not being made, on the date therefor determined in accordance with the applicable provisions of this Agreement. At the election of the Agent, and without limiting the generality of the foregoing, but without duplication, such compensation on account of losses may include an amount equal to the excess of (i) the interest that would have been received from the Borrowers under this Agreement including the Applicable Margin on any amounts to be reemployed during an Interest Period or its remaining portion over (ii) the interest component of the return that the Agent determines the Lenders could have obtained had they placed such amount on deposit in the London Interbank Eurodollar Market selected by it for a period equal to such Interest Period or remaining portion.

(e)Determinations. In making the determinations contemplated by this Section, the Agent or the applicable Lender may make such estimates, assumptions, allocations and the like that the Agent or such Lender in good faith determines to be appropriate, and the

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Agent or specified Lender selection thereof in accordance with this Section, and the determinations made by such Lender on the basis thereof, shall be final, binding and conclusive upon the Borrowers. Notwithstanding any other provision of this Section, such Lender shall not apply the provisions of subsections (b) or (c) of this Section with respect to the Borrowers if it shall not at the time be the general policy or practice of the Agent or such Lender to apply provisions of subsections (b) or (c) of this Section to other borrowers in substantially similar circumstances under substantially comparable provisions of other credit agreements.

(f)Rate Quotations. The Borrowers may call the Agent on or before the date on which a Request for Advance or notice of conversion is to be delivered to receive an indication of the rates then in effect, but it is acknowledged that such projection shall not be binding on the Agent nor affect the rate of interest which thereafter is actually in effect when the election is made.

Section 4.05	Taxes.
	(a)	Payments Free and Clear.

(i)Any and all payments by the Borrowers hereunder or under the Notes shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholding, and all liabilities with respect thereto excluding, in the case of each Lender and the Agent, (A) income and franchise taxes imposed by the jurisdiction under the laws of which such Lender or the Agent (as the case may be) is organized or is or should be qualified to do business or any political subdivision thereof, and (B) income and franchise taxes imposed by the jurisdiction of each Lender’s lending office or any political subdivision thereof, and (C) United States federal income taxes imposed by reason of failure or the inability of a Lender to comply with Section 4.05(e) (unless such compliance is precluded as a result of a change in any law, rule, regulation or treaty or in the administrative interpretation or application thereof after the date hereof (or, in the case of a Participant or Assignee, the date on which such Participant or Assignee receives its interest in the Loans) (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as “Taxes”).

(ii)If the Borrowers shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note, (A) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) each Lender or the Agent (as the case may be) receives an amount equal to the amount such party would have received had no such deductions been made, (B) the Borrowers shall make such deductions, (C) the Borrowers shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with applicable law, and (D) the Borrowers shall deliver to the Agent evidence of such payment to the relevant taxing authority or other authority in the manner provided in Section 4.05(d).

(b)Stamp and Other Taxes. In addition, the Borrowers shall pay any present or future stamp, registration, recordation or documentary taxes or any other similar fees or charges or excise or property taxes, levies of the United States or any state or political subdivision thereof or any applicable foreign jurisdiction which arise from any payment made

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hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement, the Loans, the other Loan Documents, or the perfection of any rights or security interest in respect thereto (hereinafter referred to as “Other Taxes”).

(c)Indemnity. The Borrowers shall indemnify each Lender and the Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this Section) paid by such Lender or the Agent and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Such indemnification shall be made within thirty (30) days from the date such Lender or the Agent makes written demand therefor.

(d)Evidence of Payment. Within thirty (30) days after the date of any payment of Taxes or Other Taxes, the Borrowers shall furnish to the Agent, at its address referred to in Section 12.01, the original or a certified copy of a receipt evidencing payment thereof or other evidence of payment satisfactory to the Agent.

(e)Non-U.S. Lender. On or prior to the date on which any Participant or Assignee that is not a United States person as defined in Section 7701(a)(30) of the Code (each a “Non-U.S. Lender”) receives its interest in the Loans, each Non-U.S. Lender that is entitled at such time to an exemption from United States of America withholding tax, or that is subject to such tax at a reduced rate under an applicable tax treaty, shall provide Agent and the Borrowers with two duly completed copies of the appropriate United States Internal Revenue Service Form W-8, or other applicable successor form prescribed by the Internal Revenue Service of the United States, certifying that such Non-U.S. Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes. The Borrowers shall have no obligation to pay any taxes with respect to Loans made to a Non-U.S. Lender pursuant to Section 4.05(a) or indemnify any Non-U.S. Lender under Section 4.05(c) if such Non-U.S. Lender is eligible to comply with the provisions of this Section 4.05(e) and has not done so. Notwithstanding any other provision of this Section 4.05(e), no Non-U.S. Lender shall be required to deliver any form pursuant to this Section 4.05(e) that such Non-U.S. Lender is not legally able or obligated to deliver and, for purposes of this Section 4.05, such non-delivery of a form shall not be decreed to be non-compliant with this Section 4.05(e).

(f)Survival. Without prejudice to the survival of any other agreement of the Borrowers hereunder, the agreements and obligations contained in this Section shall survive the payment in full of the Obligations and the termination of the Commitment.

Section 4.06Lenders’ Obligations Several. Each Lender is severally bound by this Agreement, but there shall be no joint obligation of the Lenders under this Agreement. The failure of any Lender to make any share of the Loans or obligations respecting Letters of Credit to be made by it on the date specified for the Loans or such obligations shall not relieve any other Lender of its obligation to make its share of the Loans or other obligations on such date, but neither any Lender nor the Agent shall be responsible for the failure of any other Lender to make a share of the Loans or other obligations to be made by such other Lender.

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Section 4.07Permitted Assumptions by Agent as to Lender Payments. Unless the Agent shall have been notified by a Lender prior to noon on the date on which it is scheduled to fund to the Agent any amount payable by a Lender under this Agreement (such payment being the “Lender Required Payment”) that it does not intend to make the Lender Required Payment to the Agent, the Agent may assume that the Lender Required Payment has been made and may, in reliance upon such assumption (but shall not be required to), make the amount thereof available to the Borrowers (or other appropriate party) on such date. If such Lender has not in fact made the Lender Required Payment to the Agent, the Borrowers (or other recipient) shall, on demand, repay to the Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Agent until the date the Agent recovers such amount at a rate equal to the Base Rate. The foregoing does not limit the obligation of any Lender to make a Lender Required Payment. Any Lender Required Payment made by the Agent in reliance on the assumption that the applicable Lender was funding the same, if not returned by the Borrowers (or other recipient), shall be paid, on demand, to the Agent by the applicable Lender, together with interest thereon accruing at the Base Rate. In addition, any Lender that fails to make a Lender Required Payment upon receipt of notice therefor, shall not be entitled to vote on any matters that it otherwise would be entitled to vote on under this Agreement until it makes such payment.

ARTICLE 5

CONDITIONS PRECEDENT

Section 5.01Conditions Precedent to Initial Loan. The obligation of the Lenders to make the initial Loan is subject to the condition that each of the Lenders, or the Agent, as applicable, shall have received each of the following, in form and substance satisfactory to it:

5.01.1	Loan Documents.
	(a)	a duly executed Revolving Loan Note; and
	(b)	a duly executed Foreign Subsidiary Guaranty.
5.01.2	UCC Collateral Documents.

(a)(i)          a Security Agreement (also constituting a pledge agreement), duly executed by each Borrower and each Foreign Subsidiary, which owns equity interests in another Foreign Subsidiary together with such Uniform Commercial Code financing statements as are necessary or, in the opinion of the Agent, desirable to perfect the security interests created by such Security Agreement, (ii) a landlord waiver to each leased facility of any Borrower, and (iii) the certificates, if any, representing the equity or other ownership interests of each Subsidiary Borrower and 66% of the equity or other ownership interests of each Foreign Subsidiary, together with duly executed, undated stock powers or similar assignments respecting such equity or other ownership interests;

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(b)A perfection questionnaire duly completed by Borrowers, such questionnaire to be delivered to the Agent at least fifteen (15) days prior to the closing of the Initial Loan;

(c)insurance policies or certificates designating the Agent as lender loss payee or mortgagee as its interests may appear, as appropriate, as required by Section 9.17 of this Agreement or as required by any other Loan Document;

(d)an IP Collateral Agreement executed by each Borrower, as appropriate, as to all registered or pending patents, trademarks and copyrights, in appropriate form to file of record; and

(e)the results of tax, judgments and other lien searches in form and substance satisfactory to the Agent, and from such jurisdictions as may be satisfactory to the Agent, together with U.S. Patent and Trademark Office and Copyright Office searches of a recent date, in each case, with respect to the Parent Borrower and each Subsidiary Borrower, showing no Liens except Permitted Liens.

5.01.3	Real Estate Collateral Documents.
	(a)	Mortgages on all real property owned by each Borrower; and

(b)title insurance insuring the priority of the Mortgage covering the property located in Boonton, New Jersey, and for each other property subject to a Mortgage(i) zoning certification, (ii) a flood certification, and (iii) a survey; in each case satisfactory to the Agent.

5.01.4 Financial Documents.

(a)audited financial statements of Parent Borrower and its Subsidiaries on a Consolidated basis for the fiscal year ended December 31, 2004, together with projections of financial statements respecting each fiscal year through the fiscal year 2008, which projections shall be approved by the chief financial officer of Parent Borrower and based on reasonable assumptions; and

(b)pro forma financial statements giving the effect to the acquisition of 100% of the capital stock of XYZ, Inc. for consideration paid entirely in cash.

5.01.5 Consents, Certificates and Opinions.

(a)any required governmental consents or other required consents to the closing of this Agreement or to the execution, delivery and performance of this Agreement and the other Loan Documents, each of which shall be in form and substance satisfactory to the Agent;

(b)a certificate of each Loan Party to which is attached each of the following certified as such by a duly authorized officer of such Loan Party:

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(i)a certificate of incumbency with respect to each Authorized Signatory thereof that signs any Loan Documents,

(ii)a copy of the charter or other organizational documents of such Loan Party certified by the Secretary of State or similar state official of the jurisdiction of formation of such Loan Party,

(iii)a copy of the bylaws or other constituent documents of such Loan Party,

(iv)a certificate of good standing or subsistence, as the case may be, for such Loan Party issued as of a recent date by the Secretary of State or similar state official in the jurisdiction of its organization and in each state in which such Loan Party is qualified to do business as set forth on Schedule 6.01,

(v)a copy of the resolutions duly adopted by the Board of Directors or other governing body of such Loan Party authorizing it to execute, deliver and perform each Loan Document to which it is, or is to be, a party, and

(vi)a copy of any shareholders agreement or similar agreement respecting such Loan Party, if any such agreement exists;

(c)a legal opinion of Olshan Grundman Frome Rosenzweig & Wolosky LLP, counsel to each of the Loan Parties;

(d)a certificate of the chief financial officer or Treasurer of the Parent Borrower with respect to the solvency and adequacy of capital of Parent Borrower and each Subsidiary Borrower after giving effect to the initial Loan and the application of the proceeds thereof.

5.01.6Third Party Agreements. Evidence that, prior to or substantially simultaneously with the making of the initial Loan, (i) all Indebtedness under the Prior Facility shall have been repaid, (ii) all commitments to lend in respect of the Prior Facility shall have been effectively terminated and (iii) all UCC-3 termination statements and all other documents necessary in the determination of the Agent to effectively terminate of record all security interests related to the Prior Facility shall have been duly executed by the proper parties and shall have been delivered to the Agent, all pledged instruments shall have been returned to the proper parties, and other arrangements with respect thereto satisfactory to the Agent shall have been made;

5.01.7Merger Documents. True and correct copies of drafts of the Merger Documents.

Section 5.02Payment of Fees and Costs. In addition to the conditions specified in Section 5.01 (Conditions Precedent to Initial Loan) above, prior to making the initial Loan, the Agent shall receive payment of all accrued costs and fees and (if then ascertainable) expenses

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arising out of reasonable attorneys’ fees for the preparation of the Loan Documents and related services.

Section 5.03Conditions Precedent to Each Loan. The obligation of the Lenders to make each Loan (including the initial Loan) or issue a Letter of Credit is subject to the fulfillment of each of the following conditions:

(a)All of the representations and warranties of the Borrowers in this Agreement and all representations and warranties of each Loan Party in each other Loan Document shall be true and correct in all material respects at such time, both before and after giving effect to the application of the proceeds of such Loan;

(b)No Default or Event of Default hereunder shall then exist or be caused thereby;

(c)No Material Adverse Change shall have occurred and no event shall have occurred which could reasonably be expected to result in a Material Adverse Change;

(d)The Agent shall have received a duly executed Request for Advance, or, as to a Letter of Credit, a Notice of LC Credit Event; and

(e)If after giving effect to the requested Loan or the requested issuance of a Letter of Credit, the Revolving Credit Outstandings would exceed $25 million, then either (i) Parent Borrower shall have acquired 100% of the outstanding capital stock of XYZ, Inc. and the provisions of Section 9.03(h) and Section 9.27 shall have been fully satisfied with respect to XYZ, Inc. and its direct and indirect subsidiaries, or (ii) the Borrower shall have delivered to the Agent a letter of credit in the stated amount of $5 million in form and substance satisfactory to the Agent and from an issuing bank satisfactory to the Agent, upon which the Agent may draw upon the occurrence of an Event of Default, or, if the conditions of subsection (e)(i) above have not been satisfied on or before December 30, 2005, after that date and on or before January 15, 2006.

Section 5.04Method of Satisfying Certain Conditions. The request for, and acceptance of, each Loan by the Borrowers shall be deemed a representation and warranty by the Borrowers that the conditions specified in subparts (a), (b) and (c) of Section 5.03 (Conditions Precedent to Each Loan) have been satisfied.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES OF BORROWERS

In order to induce the Lenders to enter into this Agreement, the Borrowers jointly and severally make the following representations, covenants and warranties:

Section 6.01Organization and Qualification. Each Borrower and each of its Foreign Subsidiaries are corporations or other entities, duly organized, validly existing and in good standing under the laws of their respective jurisdictions of organization. Each Borrower and each

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of its Foreign Subsidiaries have the lawful power to own or lease their respective properties and to engage in the respective business they presently conduct or propose to conduct. Each Borrower and each of its Foreign Subsidiaries are duly licensed or qualified and in good standing in each jurisdiction where property is owned or leased by them, or the nature of the business transacted by them, or both, makes such licensing or qualification necessary, except where the failure to be so qualified could not reasonably be expected to result in a Material Adverse Change. Schedule 6.01 hereto shows as of the date hereof each state or jurisdiction in which each Borrower and each of its Foreign Subsidiaries are qualified and their respective jurisdictions of incorporation or organization, as applicable.

Section 6.02Capitalization and Ownership of Subsidiary Borrowers. The name of each Borrower and each of its Foreign Subsidiaries, their authorized equity or other ownership interests, the number of issued and outstanding equity and other ownership interests and the owners thereof as of the date hereof are set forth on Schedule 6.02 attached hereto. All outstanding equity or other ownership interests of the Loan Parties are duly authorized, validly issued, fully paid and nonassessable and are owned free and clear by the Borrowers except as pledged pursuant to the Loan Documents and except for Permitted Liens to the extent arising by operation of law. As of the date hereof, there are no options, warrants or other rights outstanding to purchase any such equity and other ownership interests except as indicated on said Schedule 6.02. Each Borrower has the unrestricted right to vote the issued and outstanding equity and other ownership interests owned by it. Each Borrower’s ownership interest in a Subsidiary represents a direct controlling interest of such Subsidiary for purposes of directing or causing the direction of the management and policies of such Subsidiary.

Section 6.03Authorization and Execution. The execution, delivery and performance of this Agreement, and each other Loan Document to which any Loan Party is, or will be, a party are within such Loan Party’s power and authority and have been duly authorized by all necessary corporate or other applicable action. This Agreement has been, and each other Loan Document when delivered hereunder will be, duly executed by each Loan Party which is a party hereto or thereto, as the case may be.

Section 6.04Enforceability; Consents. This Agreement is, and each of the other Loan Documents when delivered hereunder will be, a legal, valid and binding obligation of each of the Loan Parties which is, or will then be, a party hereto or thereto, as the case may be, enforceable against each such Loan Party in accordance with its terms. No recording, filing, registration, notice, consent (governmental or otherwise) or other similar action including, without limitation, any action involving any federal, state, local or other applicable regulatory body, is required in order to insure the legality, validity, binding effect or enforceability of this Agreement or the other Loan Documents as against all Persons, except the filing of UCC-1 financing statements and the recording of the Mortgages as contemplated by this Agreement.

Section 6.05 Security Interests in Collateral.

(a)As of the date hereof, upon the filing of the UCC-1 financing statements in the jurisdictions listed on Schedule 6.05 attached hereto and the delivery of the stock certificates listed on Schedule 3.9(a) to the Security Agreement, no further action, including without limitation, any filing or recording of any document or the obtaining of any consent, is necessary in order to establish, perfect and maintain the Agent’s first priority security

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interests in the Collateral being encumbered pursuant to the Security Agreement, subject to Permitted Liens to the extent taking priority by operation of law, except for the periodic filing of continuation statements with respect to such UCC-1 financing statements. As of the date hereof, the perfection questionnaire previously delivered to the Agent by Borrowers is true and correct and there have been no changes thereto since the date of delivery.

(b)The Mortgages when duly filed in the offices listed on Schedule 6.05 attached hereto, will create perfected Liens on the real property described in the Mortgages subject to no Liens of equal or greater priority except for Permitted Liens to the extent taking priority by operation of law, and no further action, including, without limitation, the filing or recording of any document, is necessary to maintain such perfected Liens.

Section 6.06Real Property of Borrowers. As of the date hereof, Schedule 6.06 attached hereto is a complete and correct list of all real property owned or leased by each Borrower, specifying, in each case, whether such property is owned or leased and specifying the owner/lessee thereof.

Section 6.07Absence of Conflict with other Agreements, Etc. The execution, delivery and performance by each Borrower of this Agreement and the other Loan Documents to which it is, or will be, a party do not and will not (a) require any consent or approval, governmental or otherwise, not already obtained, (b) violate any Applicable Law respecting such Borrower, (c) conflict with, result in a breach of, or constitute a default under, the organizational and governing documents of such Borrower or any of its Foreign Subsidiaries, or under any material indenture, agreement, license or other instrument to which such Borrower or any of its Foreign Subsidiaries are party to or by which any of them or their respective properties may be bound, or (d) result in, or require the creation or imposition of, any Lien upon or with respect to any property now owned or hereafter acquired by any Borrower or any of its Foreign Subsidiaries other than as contemplated hereby.

Section 6.08Business. Each Borrower, together with each of its Foreign Subsidiaries, is currently engaged in the business of designing, manufacturing and marketing power electronics, power motion, power protection, teleprotection and specialized communication equipment that is used in a variety of medical, aerospace, computer, datacom, industrial, telecom, transportation, and electric power utility equipment applications.

Section 6.09Condition of Assets. All of the material properties, equipment and systems of each Borrower and each of its Foreign Subsidiaries are in good repair, working order and condition for their intended use, ordinary wear and tear excepted, and are and will be in material compliance with all standards or rules imposed by any governmental agency or authority (including, without limitation, any federal or state or local governments or instrumentalities) or otherwise under Applicable Law.

Section 6.10Use of Proceeds. The proceeds of the Loans will be used for the Acquisition of XYZ, Inc. certain Permitted Acquisitions, general corporate purposes and working capital purposes. No proceeds of any Loan shall be used for any illegal purposes.

Section 6.11Litigation. Except as described in Schedule 6.11, There is no action, suit, proceeding or investigation pending against, or, to the best of the Borrowers’ knowledge,

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threatened against or in any other manner relating to, any Borrower or any of its Foreign Subsidiaries or any of their respective properties, in any court or before any arbitrator of any kind or before or by any governmental body, which individually or in the aggregate, could (if adversely determined) reasonably be expected to result in a Material Adverse Change, nor is any Borrower or any of its Foreign Subsidiaries in violation of any order, writ, injunction or decree of any such governmental body which could reasonably be expected to result in a Material Adverse Change.

Section 6.12Indebtedness. As of the date hereof, Schedule 6.12 attached hereto correctly describes all outstanding Indebtedness of each Borrower and each of its Foreign Subsidiaries, and any commitments of any such Person to incur additional Indebtedness (other than Indebtedness pursuant to this Agreement), and shows the Indebtedness to be paid off on the date hereof.

Section 6.13 Financial Statements.

(a)The audited financial statements for Parent Borrower and its Subsidiaries on a Consolidated basis for the fiscal year ended December 31, 2004, and the unaudited consolidated financial statements of Parent Borrower and its Subsidiaries on a Consolidated basis for the three months ended March 31, 2005, together with any other financial statements furnished to the Lenders, are complete and correct in all material respects and present fairly in accordance with GAAP the financial position of Parent Borrower and its Subsidiaries on a Consolidated basis on and as at such dates and the results of operations for the periods then ended (subject, in the case of unaudited financial statements, to normal year-end adjustments). Neither Parent Borrower nor any of its Subsidiaries has any material liabilities, contingent or otherwise, other than as disclosed in the financial statements referred to in the preceding sentence and there are not now and not anticipated any material unrealized losses of Parent Borrower or any of its Subsidiaries.

(b)The projections delivered to the Lenders pursuant to Section 5.01 (Conditions Precedent to Initial Loan) above and Section 8.01 (Financial Statements) below are made in good faith, based on reasonable assumptions by the Parent Borrower.

(c)Since December 31, 2004, there has been no Material Adverse Change.

Section 6.14 Fiscal Year. The fiscal year of each Borrower ends on December 31.

Section 6.15Title to Assets. Borrowers have good, legal and marketable title to, or a valid leasehold interest in, all of the assets included on the last balance sheet previously delivered to the Lenders except for assets disposed of in the ordinary course of business or as permitted hereby. Each of Borrowers’ Subsidiaries has good, legal and marketable title to, or a valid leasehold interest in, all of its assets included on the last balance sheet previously delivered to the Lenders except for assets disposed of in the ordinary course of business. None of such properties or assets is subject to any Liens, except for Permitted Liens and liens to be released on the Closing Date. No financing statement under the Uniform Commercial Code as in effect in any jurisdiction and no other filing which names any Borrower or any of its Subsidiaries as debtor or which covers or purports to cover any of the assets of any Borrower or any of its Subsidiaries is

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currently effective and on file in any state or other jurisdiction, and neither any Borrower nor any of its Subsidiaries have signed any such financing statement or filing or any security agreement authorizing any secured party thereunder to file any such financing statement or filing except with respect to Permitted Liens and Liens to be released on the Closing Date.

Section 6.16Patents, Trademarks, Licenses and Franchises. Each Borrower and each of its Foreign Subsidiaries hold or have the right to use all patents, trademarks, service marks, trade names, copyrights, franchises, licenses and authorizations, governmental or otherwise, necessary for the conduct of their business as now conducted, without any known material conflict with the rights of others which could reasonably be expected to result in a Material Adverse Change. As of the date hereof Schedule 6.16 attached hereto correctly lists all patents, trademarks and copyrights registered to the Loan Parties as well as all material governmental licenses, authorizations and similar rights. Each license agreement necessary to any Borrower’s or any of its Foreign Subsidiaries’ business, and under which any Borrower or any of its Foreign Subsidiaries are the licensee is a valid and binding license agreement, enforceable against the licensee and, to Borrowers’ knowledge, the licensor.

Section 6.17Compliance with Law. Each Borrower and each of its Foreign Subsidiaries are in material compliance with all Applicable Law.

Section 6.18 Compliance with ERISA.

(a)Neither Borrowers, Borrowers’ Subsidiaries, nor any ERISA Affiliate thereof maintains or contributes to any Plan, Multiemployer Plan or other employee benefit plan, except as disclosed on Schedule 6.18 attached hereto.

(b)Each Plan, which is intended to be qualified within the meaning of Section 401(a) of the Code, is the subject of a favorable determination by the Internal Revenue Service with respect to all plan document qualification requirements for which the remedial amendment period under Section 401(b) of the Code has closed, any plan document amendments required by such determination letter were made as and when required by such determination letter, and nothing has occurred, whether by action or failure to act, since the date of such letter which would prevent any such plan from remaining so qualified. Each Borrower has furnished to the Agent a copy of the most recent actuarial report for each Plan which is a defined benefit plan as defined in Section 3(35) of ERISA and for any Plan that is a funded employee welfare benefit plan, and each such report is accurate in all material respects.

(c)Each Borrower, each of its Subsidiaries and their respective ERISA Affiliates have operated each Plan in all material respects in compliance with the requirements of the Code and ERISA and the terms of each Plan.

(d)Except as specifically disclosed on Schedule 6.18 attached hereto, (1) no Plan has engaged in any transaction in connection with which any Borrower or any of its Subsidiaries or ERISA Affiliates could be subject to either a material civil penalty assessed pursuant to Section 502(i) of ERISA or a material tax penalty imposed pursuant to Section 4975 of the Code, (2) there is no Accumulated Funding Deficiency with respect to any Plan, whether or not waived, or an unfulfilled obligation to contribute to any Multiemployer Plan or withdrawal from any Multiemployer Plan, (3) no Plan has been terminated under conditions which resulted,

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or could result in any material liability to the PBGC, (4) no material liability to the PBGC has been or is expected by any Borrower to be incurred with respect to any Plan by any Borrower or any of its Subsidiaries or ERISA Affiliates except for required premium payments to the PBGC, (5) there has been no Reportable Event with respect to any Plan, and no event or condition exists which presents a material risk of termination of any Plan by the PBGC, (6) none of the Borrowers or any of their Subsidiaries or any ERISA Affiliate have incurred or anticipate incurring Withdrawal Liability with respect to any Multiemployer Plan, (7) no Multiemployer Plan is in Reorganization, and neither any Borrower, any of its Subsidiaries, or any ERISA Affiliate reasonably expects any Multiemployer Plan to be in Reorganization, (8) each Borrower and each of its Subsidiaries and ERISA Affiliates have complied in all material respects with the requirements of COBRA and HIPAA, and no material liability, and no circumstances exist pursuant to which any such material liability could reasonably be imposed on any Borrower, any of its Subsidiaries or any ERISA Affiliate under Sections 4980B, 4980D or 5000 of the Code or Sections 409 and 502(l) of ERISA, (9) there are no unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA) in respect of any Plan, (10) there is no violation of the Code or ERISA with respect to the filing of applicable reports, documents and notices regarding any Plan with the Secretary of Labor, the Secretary of the Treasury, the PBGC or any other governmental entity or the furnishing of documents as required to participants and/or beneficiaries, (11) there is no Plan providing for retiree health and/or life insurance or other death benefits or any other “employee benefit welfare plan” (as defined in Section 3(1) of ERISA) having unfunded liabilities, and (12) neither any Borrower, any of its Subsidiaries nor any ERISA Affiliate are subject to the Early Warning Program of the PBGC (as described in PBGC Technical Update 00-3) or have been contacted by the PBGC in connection with the PBGC’s Early Warning Program; except for any event described in the foregoing clauses (1)-(12) which could not reasonably be expected to have a Material Adverse Effect.

(e)No liability (whether or not such liability is being litigated) has been asserted against any Borrower, any of its Subsidiaries or any ERISA Affiliate in connection with any Plan or any Multiemployer Plan by the PBGC other than for required premium payments to the PBGC, by a trustee appointed pursuant to Section 4042(b) or (c) of ERISA, or by a sponsor or an agent of a sponsor of a Multiemployer Plan, and no Lien has been attached and no Person has threatened to attach a Lien on any property of any Borrower, any of its Subsidiaries or ERISA Affiliates as a result of failure to comply with ERISA or as a result of the termination of any Plan.

Section 6.19Compliance with Regulations U and X. Neither any Borrower nor any of its Foreign Subsidiaries are engaged principally or as one of their important activities in the business of using credit for the purpose of purchasing or carrying, any “margin security” or “margin stock” as defined in Regulations U and X of the Board of Governors of the Federal Reserve System.

Section 6.20Investment Company Act. Neither any Borrower nor any of its Foreign Subsidiaries are an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

Section 6.21Public Utility Holding Company Act. Neither any Borrower nor any of its Foreign Subsidiaries are considered a “holding company”, or a “subsidiary company” or

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“affiliate” of a “holding company”, as such terms are defined in the Public Utility Holding Company Act of 1935, as amended.

Section 6.22Absence of Default. No event has occurred which constitutes a Default or an Event of Default.

Section 6.23Agreements with Affiliates and Management Agreements; Management Compensation. Except for agreements or arrangements with Affiliates in which any Borrower or any of its Foreign Subsidiaries provides services to such Affiliates or vice versa for fair consideration and which are set forth on Schedule 6.23 attached hereto, as of the date hereof neither any Borrower nor any of its Foreign Subsidiaries have any contracts or written agreements or binding arrangements of any kind with any Affiliate.

Section 6.24No Burdensome Agreements; Material Agreements. Neither any Borrower nor any of its Foreign Subsidiaries are parties to any agreement or instrument or subject to any corporate or other restrictions which, assuming compliance by such Persons with the terms of such agreements or instruments could result in a Material Adverse Change. Schedule 6.24 hereto lists all material agreements as of the date hereof (the “Material Agreements”) of each Borrower and each of its Foreign Subsidiaries. Neither any Borrower nor any of its Foreign Subsidiaries are in material default of any of the Material Agreements. Except where any Borrower or any of its Foreign Subsidiaries have allowed a Material Agreement to terminate because such termination was in the best interests of such Borrower or such Foreign Subsidiary, each of the Material Agreements remains in full force and effect.

Section 6.25Solvency. After giving effect to the transactions contemplated by the Loan Documents: (i) the property of each Borrower, at a fair valuation, will exceed its debt; (ii) the capital of each Borrower will not be unreasonably small to conduct its business; (iii) each Borrower will not have incurred debts, or have intended to incur debts, beyond its ability to pay such debts as they mature; and (iv) the present fair salable value of the assets of each Borrower will be materially greater than the amount that will be required to pay its probable liabilities (including debts) as they become absolute and matured. The representations set forth in the preceding sentence are equally true of the Loan Parties on a Consolidated basis and of each Subsidiary in a Consolidating basis. For purposes of this Section, “debt” means any liability on a claim, and “claim” means (i) the right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, undisputed, legal, equitable, secured or unsecured, or (ii) the right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, undisputed, secured or unsecured.

Section 6.26Taxes. All federal, state and other tax returns of each Borrower and each of its Foreign Subsidiaries required by law to be filed have been duly filed and all federal, state and other taxes, as applicable, including, without limitation, withholding taxes, assessments and other governmental charges or levies required to be paid by such Borrower or Foreign Subsidiary, which are due and payable, have been paid, provided that there shall not be deemed to be a violation of this representation if any such tax is being diligently contested in good faith by appropriate proceedings promptly initiated and diligently conducted and for which adequate reserves shall have been set aside on the appropriate books, but only if no foreclosure, distraint,

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sale or similar proceeding shall have been commenced. The charges, accruals and reserves on the books of each Borrower and each of its Foreign Subsidiaries in respect of taxes are adequate.

Section 6.27Environmental Compliance. Except as would not reasonably be expected to result in a Material Adverse Change or as scheduled in Schedule 6.27:

(a)None of the real property currently owned or occupied by any Borrower or any of its Foreign Subsidiaries has ever been used by any Borrower or any of its Foreign Subsidiaries during its or their ownership or occupancy, or, to the best of Borrowers’ knowledge, by previous owners or occupiers to treat, produce, store, handle, transfer, process, transport, dispose of or otherwise release any Hazardous Substances in violation of any Environmental Law.

(b)There is no condition which exists on the real property owned or occupied by any Borrower or any of its Foreign Subsidiaries which requires Remedial Action and which was caused by any Borrower or any of its Foreign Subsidiaries or, to Borrowers’ knowledge, any other Person.

(c)Neither any Borrower nor any of its Foreign Subsidiaries have been notified of, or have actual knowledge of any notification having been filed with regard to, a Release on or into any real property owned or occupied by any Borrower or any of its Foreign Subsidiaries.

(d)Neither any Borrower nor any of its Foreign Subsidiaries have received a summons, citation, notice of violation, administrative order, directive, letter or other communication, written or oral, from any governmental or quasi-governmental authority concerning any Release or need for Remedial Action.

(e)There are no “friable” (as that term is defined in regulations under the Federal Clean Air Act) asbestos or friable asbestos-containing materials which have not been encapsulated as required by Environmental Laws in accordance with accepted guidelines promulgated by the United States Environmental Protection Agency existing in or on any real property owned and/or in the portion of any other property occupied by any Borrower or any of its Foreign Subsidiaries.

(f)No equipment for which any Borrower or any of its Foreign Subsidiaries are responsible containing polychlorinated biphenyls, including electrical transformers, is located on any real property owned or occupied by any Borrower or any of its Foreign Subsidiaries in levels which exceed those permitted by any and all governmental authorities with jurisdiction over such premises or which are not properly labeled in accordance with requisite standards.

(g)There are no tanks on any real property owned or occupied by any Borrower or any of its Foreign Subsidiaries that have been used for the storage of petroleum products or any other substance, nor, to the knowledge of the Borrowers, have any such tanks been located on such property at any time.

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Section 6.28Labor Disputes and Acts of God. Neither the business nor the properties of any Borrower or any of its Foreign Subsidiaries are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy, or other casualty (whether or not covered by insurance) which could reasonably be expected to result in a Material Adverse Change.

ARTICLE 7

FINANCIAL COVENANTS

Section 7.01Financial Covenants. Each Borrower shall, and shall cause each of its Subsidiaries to, maintain compliance with the following financial covenants:

(a)Maximum Total Leverage Ratio. As of any fiscal quarter end, the ratio of (a) Total Funded Indebtedness as of such date to (b) EBITDA for the period of four (4) consecutive fiscal quarters ending on or prior to such date shall not be greater than 3:25 to 1:00.

(b)Minimum Interest Coverage Ratio. As of any fiscal quarter end, the ratio of (a) EBIT for the period of four (4) consecutive fiscal quarters ending on or immediately prior to such date to (b) Interest Expense (whether or not paid) payable during the period of four (4) consecutive fiscal quarters ending on or immediately prior to such date, shall not be less than 2:50 to 1:00.

(c)Minimum Net Worth. As of any fiscal quarter end, the total amount of stockholders’ equity of Parent Borrower and its Subsidiaries, on a consolidated basis, shall be not less than the sum of

(i)Thirty-Three Million, Nine Hundred Eighteen Thousand and Three Hundred Dollars ($33,918,300)

plus

(ii)an amount equal to 50% of the cumulative amount of Net Income (which shall not be reduced by the amount of any net loss for any fiscal quarter) of Parent Borrower and its Subsidiaries, on a consolidated basis, for the period commencing on April 1, 2005 and ending on the date of determination

minus

(iii)the aggregate amount paid on or after April 1, 2005 for permitted stock purchases described in Section 9.04(a).

(d)Maximum Capital Expenditures. The aggregate amount of Capital Expenditures made during any period of twelve (12) calendar months shall not exceed Five Million Dollars ($5,000,000), without cumulation or carryover, which amount shall not include any amounts used for Permitted Acquisitions.

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Section 7.02Calculations. Calculations made pursuant to Section 7.01 shall give effect, on a pro forma basis, to all Acquisitions and dispositions made during the period to which the required compliance relates (the “Applicable Period”), as if such Acquisition or disposition had been consummated on the first day of the applicable period such that (a) the results of operations of the assets or entities acquired or disposed of are included or excluded, as applicable, and (b) any Indebtedness assumed or incurred or paid off in connection with such Acquisition or disposition is included or excluded, as applicable, on a pro forma basis from the first day of the Applicable Period.

ARTICLE 8

COVENANTS CONCERNING REPORTING REQUIREMENTS

Section 8.01Financial Statements. So long as any of the Obligations is unpaid or any Lender has any commitment to make Loans hereunder, the Parent Borrower shall, from time to time, furnish (or cause to be furnished, as the case may be) to the Lenders the following information:

(a)Annual Financial Statements. As soon as available and in any event within ninety (90) calendar days after the end of each of each fiscal year of the Parent Borrower, but no later than the date upon which the Parent Borrower’s annual report on Form 10-K is to be filed with the Securities and Exchange Commission, the Parent Borrower shall deliver to the Lenders audited Consolidated financial statements, together with any notes thereto of the Parent Borrower and its Subsidiaries, consisting of a balance sheet as at the end of such fiscal year and related statements of income, cash flows, and changes in retained earnings for the fiscal year then ended, all in reasonable detail and setting forth in comparative form the respective consolidated financial statements as at the end of and for the preceding fiscal year, prepared in accordance with GAAP and Unqualifiedly Certified by independent certified public accountants of nationally recognized standing satisfactory to the majority Lenders. The Parent Borrower shall also deliver a letter signed by such accountants stating that, having conducted an ordinary and customary examination of the affairs of the Parent Borrower in connection with the preparation of the respective Consolidated financial statements, they are not aware of the existence of any condition or event which constitutes a Default or an Event of Default hereunder, and, promptly upon receipt, a copy of any management letter.

(b)Quarterly Financial Statements. As soon as available and in any event within forty-five (45) calendar days after the end of each of the first three fiscal quarters in each fiscal year of the Parent Borrower, the Parent Borrower shall deliver to the Lenders Consolidated financial statements of the Parent Borrower and its Subsidiaries, consisting of a balance sheet as at the end of such fiscal quarter and related statements of income, cash flows, and changes in retained earnings for the fiscal quarter then ended and the fiscal year through that date, all in reasonable detail and setting forth in comparative form the respective Consolidated financial statements of the corresponding date and period in the previous fiscal year and certified (subject to normal year-end audit adjustments) by the President or chief financial officer of the Parent Borrower as (i) having been prepared in accordance with GAAP and (ii) presenting fairly the financial position of the Parent Borrower and its Subsidiaries as at the end of each fiscal quarter.

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(c)Subsidiary Financial Statements. At the same time as the financial statements delivered under subsections (a) and (b) above, a balance sheet, statement of income and statement of cash flows for each Subsidiary of the Parent Borrower in form reasonably satisfactory to the Agent.

(d)Business Plan. As soon as available and in any event within seventy-five (75) calendar days after the end of each fiscal year, the Parent Borrower shall deliver to the Lenders the annual budget for the Parent Borrower and its Subsidiaries, including forecasts of the income statement, the balance sheet, cash flow report and an EBITDA statement for such year on a quarter by quarter basis. Such Business Plan shall be accompanied by a certification of the President or Chief Financial Officer of the Parent Borrower that such Business Plan is reasonable, made in good faith, consistent with the Loan Documents, and represents the Parent Borrower’s best judgment as to such matters.

Section 8.02Officer’s Compliance Certificates. As soon as available and in any event within forty-five (45) calendar days after the end of each of the first three fiscal quarters, and within ninety (90) calendar days after the end of each fiscal year, but no later than the date upon which the Parent Borrower’s annual report on Form 10-K is to be filed with the Securities and Exchange Commission, the Parent Borrower shall deliver to the Lenders a certificate of the President or Chief Financial Officer of the Parent Borrower, in substantially the form of Exhibit D attached hereto, containing the following information:

(a)a statement that no Default or Event of Default exists and is continuing on the date of such certificate; and

(b)calculations in sufficient detail to demonstrate compliance as of the date of the relevant financial statements with all of the financial covenants contained in Article 7 (Financial Covenants) hereof.

Section 8.03Auditors’ Reports. Promptly upon receipt, the Parent Borrower shall deliver to the Lenders copies of all financial reports or written recommendations, if any, submitted to the Parent Borrower or any of its Subsidiaries by its auditors in connection with each annual or interim auditor examination of its books by such auditors.

Section 8.04Notice of Default. Promptly after any officer of any Borrower has learned of the occurrence of a Default or an Event of Default, the Parent Borrower shall deliver to the Agent, the Issuer and the Lenders a notice of such Default or Event of Default. Each such notice pursuant to this Section shall set forth details of the matter referred to therein and state what action the Parent Borrower or the affected Subsidiary has taken, is taking and proposes to take, with respect thereto, and shall be certified by the President or Chief Financial Officer of the Parent Borrower as true and correct in all material respects.

Section 8.05Notice Concerning Representations and Warranties. Each Borrower shall give the Agent notice of any changes in facts or circumstances on which the representations and warranties set forth in this Agreement are made which makes such representations and warranties false or misleading in any material respect. Such notice shall be given promptly, but in any event not later than ten (10) days after any officer of any Borrower becomes aware of its

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occurrence. Except as set forth in the proviso to Section 5.03 (Conditions Precedent to Each Loan), the delivery of such a notice shall not imply any waiver by the Lenders.

Section 8.06Notice of Litigation. Promptly after the commencement thereof, but in any event not later than ten (10) days after any officer or director of any Borrower becomes aware thereof, the Parent Borrower shall deliver to the Agent notice of any actions, suits, and proceedings before any court or governmental department, commission, board, bureau, agency, or instrumentality, domestic or foreign, affecting any Borrower or any of its Subsidiaries in which the amount involved is $250,000 or more or, which, if not solely for monetary damages, could result in a Material Adverse Change.

Section 8.07SEC Disclosure. Promptly after the sending or filing thereof, the Parent Borrower shall deliver to the Agent and the Lenders copies of all proxy statements, financial statements, and reports which the Parent Borrower or any Subsidiary sends to its shareholders, and copies of all regular, periodic, and special reports, and all registration statements which the Parent Borrower or any Subsidiary files with the Securities and Exchange Commission (or any governmental authority which may be substituted therefor, or with any national securities exchange or regulatory body thereof.

Section 8.08Conditions Affecting Collateral. Each Borrower shall give the Agent at least thirty (30) days prior written notice of any of the following conditions: (a) the opening or acquisition of a new facility or office; (b) a change in the jurisdiction of incorporation of any Borrower or any Subsidiary of a Borrower; (c) any creation or acquisition of a Subsidiary; (d) acquisition of any material amount of property by such Borrower or any Subsidiary not subject to a valid and perfected Lien pursuant to the then existing Loan Documents with the priority required by the Loan Documents; or (e) or any change of domicile or change of name or any change of address of the chief executive office of any Loan Party.

Section 8.09ERISA Notices. (a) Promptly after the filing or receiving thereof, each Borrower shall deliver to the Agent copies of all reports and notices, including annual reports and audited financial statements, which any Borrower or any Subsidiary or any ERISA Affiliate files with or receives from PBGC, the U.S. Department of Labor under ERISA, or the Internal Revenue Service, (b) as soon as possible and in any event within ten (10) business days after any Borrower or any Subsidiary or any ERISA Affiliate knows or has reason to know that (i) any Reportable Event has occurred or is reasonably expected to occur with respect to any Plan, (ii) that the PBGC or any Borrower or any Subsidiary, or any ERISA Affiliate has instituted or will institute proceedings under Title IV of ERISA to terminate any Plan, (iii) that any Withdrawal Liability from a Multiemployer Plan has been or will be incurred by any Borrower or any of its Subsidiaries or any ERISA Affiliate, (iv) that any Multiemployer Plan is or will be in Reorganization terminated, partitioned or declared insolvent, (v) an Accumulated Funding Deficiency has been incurred or an application has been made to the Secretary of the Treasury for a waiver or modification of the minimum funding standard or an extension of any amortization period under Section 412 of the Code with respect to a Plan, (vi) an action has been instituted pursuant to Section 515 of ERISA to collect a delinquent contribution to a Multiemployer Plan, (vii) any event, transaction or condition has occurred or will occur that could reasonably be expected to result in the imposition of a lien under Part 3 of Subtitle B of Title I of ERISA or Title IV of ERISA, (viii) any Prohibited Transaction or other transaction, event or condition has occurred or will occur with respect to a Plan that could reasonably be

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expected to result in any Borrower, any of its Subsidiaries or any ERISA Affiliate incurring a material liability or becoming subject to a material penalty or excise tax, or (ix) the PBGC has contacted any Borrower, any of its Subsidiaries or any ERISA Affiliate with respect to the PBGC’s Early Warning Program, each Borrower shall deliver to the Agent a certificate of the chief financial officer of such Borrower setting forth details as to such event, transaction or condition and the action such Borrower has taken, is taking or proposes to take with respect thereto, in either case, which respects an event, transaction or condition which could result in a Material Adverse Change.

Section 8.10Miscellaneous. With reasonable promptness, each Borrower shall give to the Agent and the Lenders such other information respecting the business operations and financial condition of such Borrower or any of its Subsidiaries as the Agent may, from time to time, request, including with limitation any change in management.

Section 8.11Authorization of Third Parties to Deliver Information. Each Borrower hereby agrees that any opinion, report or other information delivered to the Agent or the Lenders pursuant to the Loan Documents is hereby deemed to have been authorized and directed by the Borrowers to be delivered for the benefit, and reliance thereupon, of the Agent and the Lenders.

ARTICLE 9

BUSINESS COVENANTS

So long as any of the Obligations is unpaid or any of the Lenders has any commitment to make Loans hereunder, the Borrowers shall, and shall cause each of their Subsidiaries to, comply with the following covenants.

Section 9.01 Indebtedness.

(a)Each Borrower shall not, and shall not permit any of its Foreign Subsidiaries to, directly or indirectly, create, assume, incur or otherwise become or remain obligated in respect of, or permit to be outstanding, any Indebtedness, except:

(i) Indebtedness in favor of the Lenders;

(ii)obligations in an aggregate principal amount not to exceed at any time Two Million Five Hundred Thousand Dollars ($2,500,000) in respect of Capital Lease Obligations and purchase money Indebtedness in respect of equipment;

(iii)obligations owing to any Borrower or any of its Foreign Subsidiaries;

(iv)Indebtedness outstanding on the Closing Date as set forth on Schedule 9.01 and refinancings thereof, but not Indebtedness shown thereon as being paid off on the date hereof; and

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(v)Other Indebtedness not described in clauses (i)-(iv) above in an amount not to exceed Two Million Five Hundred Thousand Dollars ($2,500,000).

(b)In addition to the limitations on the incurrence or existence of Indebtedness referred to above, no Indebtedness may be incurred by any Borrower or any of its Foreign Subsidiaries unless immediately before and after giving effect to the incurrence of such Indebtedness, no Default or Event of Default shall have occurred and be continuing.

(c)Each Borrower shall not, and shall not permit any of its Foreign Subsidiaries to, directly or indirectly, (i) pay, make or set aside any amount for payment of the Indebtedness set forth in clauses (i)-(v) of Section 9.01(a) above (collectively, “Permitted Indebtedness”), except for regularly scheduled payments required by the provisions of any agreements governing Permitted Indebtedness, or (ii) amend or otherwise modify the terms of any agreements governing Permitted Indebtedness.

Section 9.02 Liens.

(a)Each Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, assume, incur or permit to exist, any Lien on any of its properties or assets, whether now owned or hereafter acquired, except the following (collectively, the “Permitted Liens”):

(i)Liens in favor of the Agent arising out of the Collateral Agreements;

(ii)Liens for taxes, assessments, or other governmental charges the payment of which is not at the time required to be paid pursuant to Section 9.14 (Payment of Taxes and Claims), not yet subject to penalty or which are being contested in good faith and by appropriate proceedings, if adequate reserves with respect thereto are maintained on the books of the Borrowers in accordance with GAAP;

(iii)statutory Liens of bankers, carriers, landlords, warehousemen, mechanics, laborers and materialmen incurred in the ordinary course of business for sums not yet due, or which are being contested in good faith and by appropriate proceedings and adequate reserves with respect thereto are maintained on the books of the Borrowers in accordance with GAAP;

(iv)Capital Leases and purchase money security interests incurred in compliance with clause (a)(ii) of Section 9.01 (Indebtedness) above, provided, that no such Liens shall extend to or cover any property other than the leased property or equipment purchased by proceeds of such permitted purchase money Indebtedness;

(v)zoning restrictions, easements, rights-of-way, minor restrictions and other similar encumbrances on real property, in each case incidental to, and not interfering with, the ordinary conduct of the business of such Person;

(vi)Liens incurred or deposits made in the ordinary course of business to secure the obligations of each Borrower and each Foreign Subsidiary under workers’

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compensation, unemployment insurance and other types of social security legislation or otherwise to secure statutory or regulatory obligations or for the payment of rent of each Borrower or any of its Foreign Subsidiaries in the ordinary course of business consistent with past practice, including to secure the performance of tenders, surety and appeal bonds, performance bonds, performance of bids, leases, trade contracts, governmental contracts, operating leases, performance and return-of-money bonds and other similar obligations (exclusive in each case of obligations for the payment of borrowed money); provided, that the obligations in connection with which such Liens were incurred or deposits made shall have been incurred in the ordinary course of business and shall otherwise be permitted by this Agreement;

(vii)Judgment Liens not giving rise to an Event of Default so long as any such Lien is adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired;

(viii)Liens securing Indebtedness, or Liens on shares of capital stock, of a Person existing at the time such Person becomes a Subsidiary or is merged with or into any Borrower or any of its Foreign Subsidiaries pursuant to a Permitted Acquisition or any Lien securing Indebtedness incurred in connection with a Permitted Acquisition, provided that (A) such Liens were in existence prior to the date of such Permitted Acquisition, were not incurred in anticipation thereof, and do not extend to any other assets; and (B) do not exceed One Million Dollars ($1,000,000) in the aggregate;

(ix)licenses, leases or subleases granted to other Persons in the ordinary course of business not materially interfering with the conduct of the business of any Borrower or any of its Foreign Subsidiaries or materially detracting from the value of the assets of any Borrower or any of its Foreign Subsidiaries; and

(x)Liens disclosed on the title reports delivered to Agent on the date hereof or listed on Schedule 9.02, provided that such Liens do not extend to assets or secure liabilities in addition to those existing on the date hereof.

(b)Each Borrower shall not, and shall not permit any of its Foreign Subsidiaries to, agree with any Person to restrict or place limitations on the right of any Borrower or any of its Foreign Subsidiaries to create, incur, assume or permit to exist any Lien on or with respect to any property or asset of any Borrower or any of its Foreign Subsidiaries, other than the lessor as to a Capital Lease or the secured party as to a purchase money security interest, as long as the restriction applies only to the specific equipment involved.

(c)Each Borrower shall not, and shall not permit any of its Foreign Subsidiaries to, license or sublicense any of their owned or licensed Intellectual Property or general intangibles except to any Subsidiary and in the ordinary course of business consistent with past practice as described on Schedule 9.02.

Section 9.03Investments and Acquisitions. Each Borrower shall not, and shall not permit any Foreign Subsidiary to, directly or indirectly, make or permit to exist any Investment or make any Acquisition, except that so long as no Default or Event of Default then exists or would be caused thereby, any Borrower and any of its Foreign Subsidiaries may:

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(a)maintain existing Investments in direct or indirect wholly-owned Subsidiaries;

(b)create new direct or indirect wholly-owned Subsidiaries, subject to the provisions of Section 9.27 (Joinder of Subsidiaries);

(c)make Investments in Cash Equivalents; 

(d)make Investments in securities of trade creditors, customers or any debtor of any Borrower or any of its Subsidiaries received in compromise of obligations incurred in the ordinary course of business, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors, customers or debtors and any Investments received in satisfaction of judgments;

(e)make loans or advances to employees, directors, officers or consultants of any Borrower or any of its Subsidiaries of the types consistent with past practice in an aggregate amount at any time outstanding not to exceed Five Hundred Thousand Dollars ($500,000);

(f)make payroll, travel and similar advances to cover matters that are expected at the time of the advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business and consistent with past practice;

(g)make Investments in any Person to the extent such Investments consist of prepaid expenses, negotiable instruments held for collection and lease, utility and workers’ compensation, performance and other similar deposits made in the ordinary course of business and consistent with past practice;

(h)acquire a majority (but not less than a majority) of the outstanding common stock of XYZ, Inc., provided that each of the requirements set forth in Schedule 9.03 shall first have been satisfied in form and substance satisfactory to the Agent; or

(i)make Acquisitions and Investments, including additional Investments in Foreign Subsidiaries, if the aggregate Consideration paid or payable with respect thereto, plus all amounts paid or payable under Section 9.04(a), shall not exceed Ten Million Dollars ($10,000,000) for any fiscal year, without cumulation or carry-over, provided that all of the Acquisition Requirements shall have been fulfilled and satisfied as to each Acquisition and Investment.

Section 9.04Restricted Payments. Each Borrower shall not, and shall not permit any of its Foreign Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum or property for any Restricted Payment or agree with any Person to restrict or place limitations on the right of each Borrower or any of its Foreign Subsidiaries to declare, order, pay, make or set apart any sum or property for any Restricted Payment, except that:

(a)the Parent Borrower may, subject to compliance with 9.03(i), purchase its registered capital stock then issued and outstanding;

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(b)Subsidiaries may make Restricted Payments to the Borrowers or another Subsidiary of the Borrowers which is not a Foreign Subsidiary;

(c)so long as no Default or Event of Default shall have occurred and be continuing, the payment of cash dividends to Parent Borrower to the extent applied by Parent Borrower to repurchase, redeem or otherwise retire or acquire equity or other ownership interests of Parent Borrower from its employees or directors (or their heirs or estates) or employees or directors (or their heirs or estates) of Parent Borrower or its Subsidiaries, in each case, pursuant to the terms of any stockholders agreement, employment agreement, severance agreement, employee stock option agreement or similar agreement in accordance with the provisions of any such arrangement as in effect on the date hereof, in an aggregate amount pursuant to this paragraph (b) to all such employees or directors (or their heirs or estates) not to exceed $500,000 per fiscal year on and after the date hereof;

(d)the payment of cash dividends to Parent Borrower (i) to the extent applied by Parent Borrower to pay reasonable and customary directors fees payable to, and indemnity provided on behalf of, the Board of Directors of Parent Borrower, indemnity provided on behalf of officers and employees of Parent Borrower, and customary reimbursement of travel and similar expenses incurred in the ordinary course of business (without giving effect to any amendment or supplement thereto or modification thereof), (ii) in an aggregate not to exceed $250,000 per fiscal year, to the extent applied by Parent Borrower to pay its general administrative expenses, including, without limitation, in respect of director fees and expenses, administrative, legal and accounting services, or (iii) solely to enable Parent Borrower to make payments in cash to holders of its capital stock in lieu of the issuance of fractional shares of its capital stock in an aggregate amount not to exceed $200,000 on and after the date hereof;

(e)Payments may be made to the Parent Borrower to the extent applied to the tax liability of any Subsidiary, computed as if the Subsidiary Borrowers and their Subsidiaries were a separate group filing a consolidated return, reduced by the amount of such tax liability actually paid by the Parent Borrower; and

(f)Payments may be made pursuant to the Management Agreement referred to in Section 9.05(b).

Section 9.05 Affiliate Transactions.

(a)Each Borrower shall not, and shall not permit any of its Foreign Subsidiaries to, directly or indirectly, engage in any transaction with an Affiliate, or make an assignment or other transfer of any of its properties or assets to any Affiliate on terms that are less favorable to such Borrower or such Foreign Subsidiary than those which might be obtained at the time from unaffiliated third parties; provided, however, the foregoing restrictions shall not apply to transactions exclusively among the Borrowers;

(i)Each Borrower shall not, and shall not permit any of its Foreign Subsidiaries to, (a) enter into any management agreement with any Person that gives such Person the right to manage its business except for usual and customary employment agreements and consulting agreements consistent with past practice, or (b) directly or indirectly pay or accrue to any Person any sum or property for fees for management or similar services

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rendered in connection with the operation of a business except as set forth in clause (a) above; except for a certain Management Agreement dated as of January 23, 2002 between the Parent Borrower and Steel Partners II, L.P., providing for $475,000 in annual management fees, which shall not be materially amended, supplemented or otherwise modified without the Agent’s prior written consent, except to permit (i) an annual bonus of up to $250,000, if approved in advance by the Board of Directors and the Compensation Committee of Parent Borrower or (ii) reductions in compensation; provided that, while payments are being made under such Management Agreement, Steel Partners II, L.P. shall maintain material involvement in the management of Parent Borrower, and Parent Borrower shall not hire any senior executive officer not employed by Parent Borrower on the date hereof.

Section 9.06Disposition of Assets. Each Borrower shall not, and shall not permit any of its Foreign Subsidiaries to, directly or indirectly, sell, assign, lease, abandon, or otherwise transfer or dispose of any of their assets (including, without limitation, shares of stock and indebtedness of Subsidiaries, receivables, and leasehold interests), except:

(a)inventory disposed of in the ordinary course of its business as presently conducted;

(b)the sale or other disposition of assets no longer used or useful in the conduct of its business;

(c)that any Foreign Subsidiary may assign or otherwise transfer its assets to any Borrower; or

(d)property subject to a governmental condemnation.

Section 9.07Liquidation or Merger. Each Borrower shall not, and shall not permit any of its Foreign Subsidiaries to, liquidate or dissolve itself (or suffer any liquidation or dissolution) or otherwise wind up, or enter into any merger or consolidation or division or similar transaction, other than:

(a)a merger or consolidation between any two or more Borrowers,

(b)a merger or consolidation between or among two or more Foreign Subsidiaries, or

(c)the liquidation and dissolution of a non-operating Subsidiary or a Subsidiary having book assets not in excess of $100,000.00.

Section 9.08Change in Organizational Documents. Each Borrower shall not, and shall not permit any Foreign Subsidiary to, amend or otherwise modify, the respective articles or certificate of incorporation, bylaws or other organizational documents of such Person, except in connection with a merger permitted by Section 9.07 (Liquidation or Merger) above.

Section 9.09Issuance of Equity. Each Borrower shall not, and shall not permit any of its Foreign Subsidiaries to, issue, authorize the issuance of, or obligate itself to issue any shares

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of its capital stock or other equity (including, without limitation, any options, warrants or other rights in respect thereof) to any Person that (a) would contravene any other provision of this Agreement (including any provision respecting Change of Control) or (b) would result in there being equity of any Subsidiary of any Borrower that is not pledged pursuant to the Security Agreement.

Section 9.10Environmental Violations. Each Borrower shall not, and shall not permit any of its Foreign Subsidiaries to, or permit any Person to, use, generate, treat, store, dispose of or otherwise introduce, any Hazardous Materials into or on any real property owned or leased by any of them and shall not permit such actions to occur, except in an environmentally safe manner through methods which have been approved by and meet all of the standards of the federal Environmental Protection Agency and any other federal, state or local agency with authority to enforce Environmental Laws except where the failure to comply with the foregoing sentence could not reasonably be expected to result in a Material Adverse Change. Without limiting the generality of any other indemnities provided under this Agreement, each Borrower hereby agrees to indemnify, reimburse, defend and hold harmless any Indemnified Person for, from and against all demands, liabilities, damages, costs, claims, suits, actions, legal or administrative proceedings, interest, losses, expenses and reasonable attorney’s fees (including any such fees and expenses incurred in enforcing this indemnity) asserted against, imposed on or incurred by any of the Indemnified Persons, directly or indirectly, pursuant to, or in connection with, the application of any Environmental Law to acts or omissions occurring at any time on or in connection with any real estate owned or leased by any Borrower or any of its Foreign Subsidiaries or any business conducted thereon except those which result from the gross negligence or willful misconduct of any Indemnified Person.

Section 9.11Preservation of Existence, Etc. Except as permitted by Section 9.07, each Borrower shall at all times preserve and keep in full force and effect (a) its corporate, partnership or other existence and (b) the corporate, partnership or other existence of each Foreign Subsidiary and (c) the good standing of such Persons in all states or jurisdictions in which they are formed or required to qualify to do business, except, as to qualification only, where the failure to keep in full force and effect any such good standing could not result in a Material Adverse Change.

Section 9.12Permitted Businesses. Each Borrower shall, and shall cause each of its Foreign Subsidiaries to engage in the businesses permitted under Section 6.08 and no other business.

Section 9.13Compliance with Law. Each Borrower shall, and shall cause each of its Foreign Subsidiaries to, comply with the requirements of all Applicable Law and will obtain or maintain all franchises, permits, licenses and other governmental authorizations and approvals, necessary to the ownership, acquisition or disposition of their respective properties or to the conduct of their respective businesses except where failure to comply with, obtain or maintain any of the foregoing could not reasonably be expected to result in a Material Adverse Change.

Section 9.14Payment of Taxes and Claims. Each Borrower shall, and shall cause each of its Foreign Subsidiaries to, timely file all tax and information returns required by federal, state or local tax authorities. Each Borrower shall, and shall cause each of its Foreign Subsidiaries to, pay all taxes (including, without limitation, withholding taxes), assessments and

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governmental charges or levies required to be paid by it or imposed on it or on its income or profits or upon any of its properties or assets, prior to the date on which penalties attach thereto or interest accrues, and all claims for (including, without limitation, claims for labor, services, materials and supplies) for sums which have become due and payable and which, if unpaid, might become a Lien upon its properties or assets; provided that it shall not be deemed to be a violation of this covenant if any such charge or claim not paid is being diligently contested in good faith by appropriate proceedings promptly initiated and diligently conducted and for which adequate reserves shall have been set aside on the appropriate books, but only so long as no foreclosure, distraint, sale or similar proceeding shall have been commenced.

Section 9.15Tax Consolidation. Each Borrower shall not file or consent to or permit the filing of any consolidated income tax return on behalf of it or any Subsidiary with any Person (other than a consolidated return for the group of which Parent Borrower is the common parent). Each Borrower shall not, and shall not permit any Subsidiary to, enter into any agreement with any Person which would cause such Borrower or such Subsidiary to bear more than the amount of taxes to which it would have been subject had it separately filed (or filed as part of a consolidated return among the Parent Borrower’s Subsidiaries).

Section 9.16Maintenance of Properties. Each Borrower shall, and shall cause each of its Foreign Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition (ordinary wear and tear excepted) all properties used or useful in its business (whether owned or leased), such maintenance to include, without limitation, repair, renewal, replacement or improvement thereto; and keep, and cause each Subsidiary to keep, all systems and equipment which may now or in the future be subject to compliance with any standard or rules imposed by any Governmental Authority in compliance in all material respects with such standards or rules. Each Borrower shall, and shall cause each of its Foreign Subsidiaries to, maintain, preserve and protect, and, when necessary, renew, all franchises, licenses, patents, copyrights, permits, service marks, trademarks and trade names and other general intangibles held by any of them and all agreements to which any of them are parties which are necessary to conduct such Borrower’s or any applicable Subsidiary’s business.

Section 9.17 Insurance.

(a)Each Borrower shall, and shall cause each of its Foreign Subsidiaries to, maintain or cause to be maintained with financially sound and reputable insurers, insurance with respect to the properties and business of such Borrower or any such Foreign Subsidiary against loss or damage of the kinds and in the amounts reasonably prudent for the operation of its business and including such risks as are customarily insured against by entities of established reputation having similar properties similarly situated or engaged in the same or similar type of businesses. Each Borrower and each of its Foreign Subsidiaries shall cause each insurance policy issued in connection herewith to provide, and the insurer issuing such policy to certify to the Agent that (i) the Agent will be named as additional insured and lender loss payee or mortgagee, as appropriate, under each such insurance policy; (ii) if such insurance be proposed to be cancelled or materially changed for any reason whatsoever, such insurer will promptly notify the Agent and such cancellation or change shall not be effective as to the Agent for at least thirty (30) days after receipt by the Agent of such notice, unless the effect of such change is to extend or increase coverage under the policy; and (iii) the Agent will have the right

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(but no obligation) at its election to remedy any default in the payment of premiums within thirty (30) days of notice from the insurer of such default.

(b)If no Default or Event of Default exists, loss payments will be applied by each Borrower or the relevant Subsidiary to the repair and/or replacement of property with respect to which the loss was incurred to the extent reasonably feasible, and any loss payments or the balance thereof remaining, to the extent not so applied or used to purchase other assets useful in the business of each such Borrower and each such Subsidiary within 360 days of receipt thereof and subject to the Liens of the Agent hereunder, shall be payable to the Agent on behalf of the Lenders and applied to the Obligations. If an Event of Default or Default shall then exist then such proceeds shall, at the option of the Agent, be applied to reduce the Obligations, and at the Agent’s election the Commitment shall be permanently reduced, or be reinvested in the business of such Borrower or applicable Subsidiary. Notwithstanding the foregoing, payments received by the Agent in excess of all Obligations shall be paid over by the Agent to the Borrowers. Copies of such policies or the related certificates, in each case, naming the Agent as additional insured and lender loss payee or mortgagee, as appropriate, shall be delivered to the Agent annually at the time of the delivery of the financial statements referred to in Section 8.01(a) above and at the time any new policy of insurance is issued. If no Default or Event of Default exists, no claim may be adjusted without the consent of the Borrowers.

(c)Each Borrower shall maintain or cause to be maintained all insurance available through the PBGC and/or insurers acceptable to the Agent against their obligations and the obligations of any of its Foreign Subsidiaries to the PBGC.

Section 9.18 Compliance with ERISA.

(a)Each Borrower shall, and shall cause each of its Subsidiaries and any ERISA Affiliates to comply in all material respects with the requirements of the Code and ERISA with respect to the operation of all Plans and Multiemployer Plans.

(b)Each Borrower shall, and shall cause each of its Subsidiaries and any ERISA Affiliates to, comply in all material respects with the requirements of COBRA, HIPAA and Section 1862(b) of the Social Security Act with respect to any Plans subject to the requirements thereof.

(c)Each Borrower shall not take, and shall prevent each of its Subsidiaries and any ERISA Affiliate from taking, any of the following actions and shall not permit any of the following events to occur if such action or event together with all other such actions or events, would subject any Borrower, any of its Subsidiaries or any of its ERISA Affiliates to any tax, penalty, or other liabilities which could reasonably be expected to result in a Material Adverse Change:

(i)engage in or knowingly consent to any “party in interest” or any “disqualified person,” as such terms are defined in Section 3(14) of ERISA and Section 4975(e)(2) of the Code respectively, engaging in any Prohibited Transaction in connection with which any Borrower, any of its Subsidiaries or any ERISA Affiliate could be subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code;

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(ii)terminate any Plan in a manner, or take any other action, which could result in any liability of any Borrower, any of its Subsidiaries or any ERISA Affiliate to the PBGC;

(iii)fail to make full payment when due of all amounts which, under the provisions of any Plan or any Multiemployer Plan, any Borrower, any of its Subsidiaries or any ERISA Affiliate is required to pay as contributions thereto, or permit to exist any Accumulated Funding Deficiency, whether or not waived, with respect to any Plan or fail to pay PBGC premiums when due;

(iv)permit the current value of all accrued benefits under all Plans which are subject to Title IV of ERISA to exceed the current value of the assets of such Plans allocable to such vested accrued benefits, except as may be permitted under actuarial funding standards adopted in accordance with Section 412 of the Code;

(v)withdraw from any Multiemployer Plan, if such withdrawal would result in the imposition of Withdrawal Liability; or

(vi)adopt a Plan amendment which results in significant underfunding (as defined in Section 307 of ERISA) which requires any Borrower or any of its Subsidiaries or ERISA Affiliates to provide security.

(d)The Borrower shall comply with the ERISA reporting requirements set forth in Section 8.09 (ERISA Notices).

As used in this Section 9.18, the term “accrued benefit” has the meaning specified in Section 3(23) of ERISA and the term “current value” has the meaning specified in Section 4001(a)(18)(B) of ERISA.

Section 9.19Maintenance of Records; Fiscal Year. Each Borrower shall, and shall cause each of its Foreign Subsidiaries to, keep at all times books of record and account in which entries will be made of all dealings or transactions in relation to its business and affairs as required by GAAP. Each Borrower shall keep, and shall cause each of its Foreign Subsidiaries to keep, its books of account and financial statements in accordance with GAAP and report on the basis of a fiscal year ending December 31.

Section 9.20Inspections and Field Examinations. Upon reasonable notice (and for this purpose no more than two Business Days notice shall be required under any circumstances) if no Event of Default or Default shall exist, or at any time with or without notice after the occurrence of an Event of Default or Default, each Borrower shall, and shall cause each of its Foreign Subsidiaries to, allow any representative of the Agent or any Lender to visit and inspect any of the properties of such Borrower and any of its Foreign Subsidiaries, to examine the books of account and other records and files of such Borrower and any of its Foreign Subsidiaries (including, without limitation, the financial statements (audited and unaudited, to the extent prepared) of each Subsidiary and information with respect to each business operated by such Borrower and any of its Foreign Subsidiaries), to make copies thereof and to discuss the affairs, business, finances and accounts of such Borrower and its Foreign Subsidiaries with its personnel and accountants. The Agent or any Lender shall also be permitted to conduct field examinations

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at Borrowers’ expense, not more than once a year before the occurrence of an Event of Default and thereafter without limitation. The Agent and the Lenders’ inspections are solely for the protection of the Agent and the Lenders and no action or inaction of the Agent or the Lenders shall constitute any representation by the Agent or the Lenders that the Borrowers are in compliance with the terms of any Loan Documents or that the Agent or the Lenders approve of the Borrowers’ affairs, business, finances or accounts.

Section 9.21Exchange of Notes. Upon receipt of a written notice of loss, theft, destruction or mutilation of a Note and of a letter of indemnity from the affected Lender or its successors or assigns, and upon surrendering for cancellation such Note if mutilated (in which event no indemnity shall be required), each Borrower shall execute and deliver a new Note of like tenor in lieu of such lost, stolen, destroyed or mutilated Note, as the case may be.

Section 9.22Compliance with Federal Reserve Regulations. The Loans shall not be used, in whole or in part, for the purpose of purchasing or carrying any margin stock, secured directly or indirectly by margin stock, within the meaning of Regulation U of the Board of Governors of the Federal Reserve System. Following application of the proceeds of each Loan, not more than 25 percent of the value of the assets of any Borrower or the Borrowers and their Subsidiaries on a Consolidated basis, which are subject to the provisions of Section 9.02(a) or Section 9.06 or subject to any restriction contained in any agreement or instrument between any Borrower and any Lender or any Affiliate of any Lender, is represented by margin stock. If requested by the Agent or any Lender, each Borrower shall complete and sign Part I of a copy of the Federal Reserve Form U-1 referred to in Regulation U of the Board of Governors of the Federal Reserve System and deliver such copy to the Agent or such Lender. Neither any Borrower nor any of its Foreign Subsidiaries, nor any bank acting on any of their behalf, have taken or will take any action which might cause this Agreement or the Notes to violate Regulation U or X or any other regulation of the Board of Governors of the Federal Reserve System, as now or hereafter in effect.

Section 9.23Limitations on Certain Restrictive Provisions. Each Borrower shall not, and shall not permit any of its Foreign Subsidiaries to (a), permit or place any restriction, directly or indirectly, on (i) the payment of dividends or distributions by any Subsidiary or (ii) the making of advances or other cash payments by any such Subsidiary or (iii) the transfer by any Subsidiary of any of its properties or assets, in each case to any Borrower or its Subsidiaries, or (b) agree with any Person other than Agent and the Lenders that the Borrowers and/or their Subsidiaries shall not amend the Loan Documents.

Section 9.24Corporate Separateness. Each Borrower and each of its Foreign Subsidiaries, on the one hand, shall conduct their business and operations separate from that of each other and their Affiliates, on the other hand. Without limiting the generality of the foregoing, each Borrower shall not, and shall not permit any of its Foreign Subsidiaries, to commingle funds with any Person that is not a Borrower or a Subsidiary of a Borrower.

Section 9.25Deposit and Securities Accounts. Each Borrower and its Foreign Subsidiaries shall at all times maintain their primary demand, time and other deposit accounts with the Agent or a Lender approved by the Agent in order to facilitate the making of the Loans and to provide security for repayment of the Obligations. Deposits and investments in securities accounts with financial institutions, other than as provided above, shall at no time exceed an

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aggregate of $200,000,provided that, (a) one account may be maintained in each of England, China, Germany and Mexico, with deposits in each such account to be limited to an aggregate of $100,000, and (b) amounts in excess of the aggregate limits stated above may be deposited in employee payroll accounts (whether domestic or foreign) on any particular day if such excess is paid as compensation to employees on such day.

Section 9.26 Collateral; Lockbox.

(a)Without limiting the generality of the provisions of Section 9.28 (Further Assurances) below, at any time that any Borrower or any of its Foreign Subsidiaries shall (a) acquire any property, whether real, personal or other and whether tangible or intangible, (b) change the location of any property, (c) transfer or otherwise issues shares of capital stock, (d) change its name or (e) take any action that would cause the Agent to fail to have a valid, perfected first priority security interest in all the property of the Borrowers and the Foreign Subsidiaries and in all the equity or other ownership interests of the Borrowers and the Foreign Subsidiaries, subject only to the exceptions explicitly permitted under the terms of this Agreement, or at any time any condition shall exist which results in such failure of the Agent to be so secured, then each Borrower shall, and shall cause its Subsidiaries to, take such action as is necessary to provide such security to the Agent, all at the expense of the Borrowers.

(b)If any Borrower or any of its Foreign Subsidiaries elect at any time to maintain a lockbox or any other mechanism for the direct deposit or collection of accounts receivable or from which collected accounts receivable will be swept into another deposit account, such lockbox or mechanism shall be maintained with Agent or with a Lender approved by the Agent, and no other Person, and it shall be maintained pursuant to documentation reasonably satisfactory to Agent.

Section 9.27Joinder of Subsidiaries. Without limiting the generality of the provisions of Section 9.28, at any time that any Borrower or any of its Foreign Subsidiaries forms or acquires any new Subsidiary (a “New Subsidiary”), which formation or acquisition shall be effected only if no Default or Event of Default has occurred or would be caused thereby and only if all of the Acquisition Requirements are satisfied, then such New Subsidiary shall simultaneously deliver to the Agent:

(a)a duly executed joinder in the form of Exhibit F to this Agreement and joinders satisfactory to the Agent to the Security Agreement and Notes;

(b)a perfection questionnaire duly completed by such New Subsidiary;

(c)the results of tax, judgments and other lien searches in form and substance satisfactory to the Agent, and from such jurisdictions as may be satisfactory to the Agent, together with U.S. Patent and Trademark Office and Copyright Office searches of a recent date, in each case, with respect to such New Subsidiary, showing no Liens except Permitted Liens.

(d)Mortgages on all real property located in the United States owned by such New Subsidiary;

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(e)for each property subject to a Mortgage, (i) title insurance insuring the priority of the Mortgage, (ii) zoning certification, (iii) a flood certification, and (iv) a survey; in each case satisfactory to the Agent;

(f)any required governmental consents or other required consents to the execution, delivery and performance of the Loan Documents, each of which shall be in form and substance satisfactory to the Agent;

(g)a certificate of such New Subsidiary to which is attached each of the following certified as such by a duly authorized officer of such New Subsidiary:

(i)a certificate of incumbency with respect to each Authorized Signatory thereof that signs any Loan Documents,

(ii)a copy of the charter or other organizational documents of such New Subsidiary certified by the Secretary of State or similar state official of the jurisdiction of formation of such New Subsidiary,

(iii)a copy of the bylaws or other constituent documents of such New Subsidiary,

(iv)a certificate of good standing or subsistence, as the case may be, for such New Subsidiary issued as of a recent date by the Secretary of State or similar state official in the jurisdiction of its organization and in each state in which such New Subsidiary,

(v)a copy of the resolutions duly adopted by the Board of Directors or other governing body of such New Subsidiary authorizing it to execute, deliver and perform each Loan Document to which it is, or is to be, a party, and

(vi)a copy of any shareholders agreement or similar agreement respecting such New Subsidiary, if any such agreement exists;

(h)a legal opinion of counsel and special local counsel in such states as may be reasonably requested by the Agent speaking to such matters as the Agent may reasonably request; and

(i)such stock certificates and other documentation as shall be necessary or advisable to perfect the pledge of the equity of the New Subsidiary in favor of the Agent;

providedthat, if such New Subsidiary is a Foreign Subsidiary, the foregoing agreements delivered by the New Subsidiary shall be modified to the extent necessary that income is not recognized by one or more of the Borrowers due to the operation of Code Section 956(d); the Agent may waive delivery of one or more of the required items to the extent that in its discretion such items are not material; and the Foreign Subsidiary shall execute and deliver a joinder to the Foreign Subsidiary Guaranty.

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Section 9.28Further Assurances. Each Borrower, at its own expense, will promptly execute and deliver or cause to be executed and delivered to the Agent all such other and further documents, agreements and instruments, and shall provide or cause to be provided to the Agent such additional information, and shall do or cause to be done such further acts, as may be necessary or proper in the reasonable opinion of the Agent or any Lender to carry out more effectively the provisions and purposes of this Agreement and the other Loan Documents.

ARTICLE 10

DEFAULT

Section 10.01Events of Default. Each of the following shall constitute an Event of Default, whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or otherwise:

(a)Any Borrower shall fail to make any payment of principal on the Loans on the dates when the same shall become due and payable, whether at stated maturity or at a date fixed for any installment or prepayment thereof or otherwise;

(b)Any Borrower shall fail to make any payment of interest on the Loans or shall fail to pay the commitment fees or any other amounts owing hereunder (other than principal of the Loans) or under the other Loan Documents on the dates when such interest, commitment fees or other amounts shall become due and payable and such failure continues for more than three (3) Business Days;

(c)Any representation or warranty made in any Loan Document shall prove to have been incorrect or misleading in any material respect when made or deemed to have been made;

(d)Any Borrower shall fail (i) to perform or observe of any agreement or covenant contained in Article 7 or Article 9 (other than those sections referred to in subsection (d)(iii) below) hereof or (ii) to provide any financial statement or report under Article 8 hereof, and, with respect to this clause (ii) only, such failure shall not be cured within a period of ten (10) days from the occurrence thereof or (iii) to perform or observe any agreement or covenant contained in Section 9.13, 9.16 or 9.19 and, with respect to this clause (iii) only, such failure shall not be cured within a period of ten (10) days from the occurrence thereof;

(e)Any Borrower or any Subsidiary shall fail to perform or observe any other agreement or covenant contained in this Agreement or any other Loan Document other than those referred to in subsections (a), (b), (c) or (d) above, and, if such failure is capable of being remedied, such failure shall not be cured within a period of thirty (30) days from the occurrence thereof;

(f)Any breach, violation, default or event of default shall occur in connection with any Indebtedness of any Borrower or any of its Subsidiaries aggregating Two Hundred Fifty Thousand Dollars ($250,000) or more which would permit, or which after the

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giving of notice or passage of time would permit, the acceleration of the payment or maturity of any such indebtedness;

(g)Any Collateral Agreement shall at any time after its execution and delivery for any reason cease to create a valid and perfected first priority security interest in and to the property purported to be subject to such Collateral Agreement;

(h)Judgments, assessments or orders for the payment of money which aggregate at any time in excess of Five Hundred Thousand Dollars ($500,000) shall be entered against any Borrower and/or any of its Subsidiaries by a court or other tribunal of competent jurisdiction, which judgments, assessments or orders are not discharged, vacated, bonded or stayed pending appeal within a period of thirty (30) days from the date of entry;

(i)Any Borrower or any of its Subsidiaries shall suspend or discontinue its business, shall make an assignment for the benefit of creditors or a composition with creditors, shall generally not be paying their debts as they mature, shall admit their inability to pay their debts as they mature, shall file a petition in bankruptcy, shall become insolvent (howsoever such insolvency may be evidenced), shall be adjudicated insolvent or bankrupt, shall petition or apply to any tribunal for the appointment of any receiver, custodian, liquidator or trustee of or for them or any substantial part of their property or assets, shall commence any proceeding relating to them under any bankruptcy, reorganization, arrangement, readjustment of debt, receivership, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or if there shall be commenced against any Borrower or any of its Subsidiaries, any such proceeding and the same shall not be dismissed within sixty (60) days after an order, judgment or decree approving the petition in any such proceeding shall be entered against any Borrower or any of its Subsidiaries; or if any Borrower or any of its Subsidiaries shall by any act or failure to act indicate their consent to, approval of or acquiescence in, any such proceeding or any appointment of any receiver, custodian, liquidator or trustee of or for it or for any substantial part of its property or assets; or if any court of competent jurisdiction shall assume jurisdiction with respect to any such proceeding and the same shall not be dismissed within sixty (60) days; or if a receiver or a trustee or other officer or representative of a court, governmental office or agency, shall, under color of legal authority, take and hold possession of any substantial part of the property or assets of any Borrower or any of its Subsidiaries, and shall not have relinquished possession within sixty (60) days; or if any Borrower or any of its Subsidiaries shall have concealed, removed, or permitted to be concealed or removed, any part of its property, with intent to hinder, delay or defraud its creditors, or any of them, or shall have made or suffered a transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law;

(j)There shall be any Accumulated Funding Deficiency, whether or not waived, with respect to any Plan maintained by any Borrower or any of its Subsidiaries or any ERISA Affiliate, or to which any Borrower or any of its Subsidiaries or any ERISA Affiliate has any liabilities, or any trust created thereunder; or a trustee shall be appointed by a United States District Court to administer any such Plan; or PBGC shall institute proceedings to terminate any such Plan; or any Borrower or any of its Subsidiaries or any ERISA Affiliate shall incur any liability to PBGC in connection with the termination of any such Plan or their withdrawal from any such Plan with respect to which they are substantial employer within the meaning of Section 4063(b) of ERISA; or any Plan or trust created under any Plan of any

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Borrower or any of its Subsidiaries or any ERISA Affiliate shall engage in a Prohibited Transaction which would subject any such Plan, any trust created thereunder, any trustee or administrator thereof, or any party dealing with any such Plan or trust to the tax or penalty on Prohibited Transactions imposed by Section 502 of ERISA or Section 4975 of the Code; or any Borrower or any Subsidiary or ERISA Affiliate fails to make a quarterly installment to a Plan as required under Section 412(m) of the Code if such failure results in a lien in favor of the Plan under Section 412(n) of the Code; or any Borrower or any Subsidiary or ERISA Affiliate incurs any Withdrawal Liability which, individually or in the aggregate, could reasonably be expected to result in a liability in excess of One Million Dollars ($1,000,000);

(k)If there shall occur a Material Adverse Change that, in the reasonable judgment of the Agent, could be expected to result in any Borrower’s failure to pay the Obligations when due;

(l)Any Loan Document shall cease to be a legal, valid and binding agreement, enforceable against each Loan Party signatory thereto, in accordance with its terms or shall in any way be declared ineffective or inoperative or shall in any way be challenged or contested by any Loan Party;

(m)Any attachment or garnishment proceeding or similar type of action shall be commenced against or involving the property of any Borrower or any of its Subsidiaries, which proceeding or action could affect or involve any deposits held by any Borrower or any of its Subsidiaries with any Lender; or

	(n)	A Change of Control shall occur.
Section 10.02	Remedies.

(a)Termination of Obligation to Make Loans. Without limiting the generality of Section 5.03, at any time after an Event of Default, the Lenders shall have no obligation to make any Loans or otherwise extend credit hereunder.

(b)Acceleration. At any time an Event of Default specified in Section 10.01 above (other than an Event of Default under subsection (i) thereof) shall have occurred and shall be continuing, the Agent may, by providing written notice to the Parent Borrower, declare the principal, interest and other amounts due hereunder and under the Notes and all other Obligations to be forthwith due and payable without presentment, demand, protest or notice of protest, notice of dishonor or other notice of any kind, all of which are hereby expressly waived, anything in any Loan Document to the contrary notwithstanding.

(c)Automatic Acceleration in Connection with Bankruptcy or Insolvency Proceeding. Upon the occurrence of an Event of Default specified in subsection (i) of Section 10.01 above, all principal, interest and other amounts due hereunder and under the Note, and all other Obligations, shall be immediately due and payable, all without any action by the Agent or the Lenders and without presentment, demand, protest or other notice of protest or other notice of dishonor of any kind, all of which are expressly waived, anything in the Loan Documents to the contrary notwithstanding.

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(d)Appointment of Receiver. Upon acceleration of the Note as provided in paragraphs (b) or (c) above, the Agent shall have the right to the appointment of a receiver for the properties and assets of any Borrower and its Subsidiaries. Each Borrower, for itself and on behalf of its Subsidiaries, hereby consents to such right and such appointment and hereby waives any objection it or any Subsidiary may have thereto or the right to have a bond or other security posted by, or on behalf of, the Agent, in connection therewith.

(e)Additional Remedies. In addition to the remedies set forth above, the Agent and the Lenders shall have all of the post-default rights granted to it under any of the Loan Documents and under Applicable Law.

Section 10.03Cash Collateral. If (a) any Event of Default specified in Section 10.01(i) shall occur, (b) the Obligations shall have otherwise been accelerated pursuant to Section 10.02, or (c) the Commitment shall have been terminated pursuant to Section 10.02, then without any request or the taking of any other action by Agent, Borrowers shall immediately comply with the provisions of Section 1.04(e) with respect to the deposit of cash collateral to secure the existing Letter of Credit Liabilities and future payment of related fees.

ARTICLE 11

DEFINITIONS

Section 11.01Defined Terms. For the purposes of this Agreement, the following terms shall have the meanings specified in this Article 13 unless the context otherwise requires:

“Acquisition” means (whether by purchase, lease, exchange, issuance of equity or debt securities, merger, reorganization or any other method) (i) any acquisition by any Borrower or any of its Subsidiaries of an interest in any other Person which shall then become Consolidated with any Borrower or any such Subsidiary in accordance with GAAP, or (ii) any acquisition by any Borrower or any of its Subsidiaries of all or any substantial part of the assets of any other Person.

“Acquisition Requirements” means all of the following:

(a)the Person whose assets or securities are to be acquired does not oppose the Acquisition or Investment and the line or lines of business of such Person are, in the reasonable judgment of the Agent, substantially similar to, or ancillary or complementary to, one or more line or lines of business conducted by the Borrowers;

(b)no Default or Event of Default is in existence at the time of the consummation of such Acquisition or Investment or would exist after giving effect thereto, and the Parent Borrower shall deliver to the Agent a certificate signed by its chief executive officer, its controller/chief accounting officer or its treasurer stating that such condition precedent has been fulfilled;

(c)the Parent Borrower shall deliver to the Agent such updated schedules to this Agreement as may be required to make such schedules accurate in light of such Acquisition or Investment;

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(d)in the case of an Acquisition, the Person acquired shall be or become a Consolidated Subsidiary, or be merged into a Borrower, immediately upon consummation of the Acquisition (or if assets are being acquired, the acquirer shall be a Borrower);

(e)the Parent Borrower shall deliver to the Agent a certificate signed by its Chief Executive Officer, its Chief Financial Officer, controller/chief accounting officer, or its treasurer, certifying as to such officer’s good faith belief that the financial covenants contained in Article VII hereof will continue to be met for the first four (4) full fiscal quarters following the consummation of such Acquisition or Investment, to which shall be attached computations as to such financial covenants and pro forma financial statements in form and substance satisfactory to the Agent giving effect to such Acquisition or Investment; and

(f)in the case of an Acquisition, all of the requirements of Section 9.27 shall be satisfied and fulfilled.

“Accumulated Funding Deficiency” means any accumulated funding deficiency as defined in Section 302(a) of ERISA.

“Affiliate” means, with respect to a Person, a spouse of such Person, any relative (by blood, adoption or marriage) of such Person within the third degree, any director, officer or employee of such Person, any other Person of which such first Person is a partner, member, director, officer or employee, and any other Person directly or indirectly controlling or controlled by or under common control with such first Person. For purposes of this definition “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Person, means the possession, direct or indirect, of the power to direct, or cause the direction of, the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. Without limiting the generality of the foregoing, (a) Steel shall be deemed to be an “Affiliate” of the Borrowers, and (b) any Person who has the direct or indirect beneficial ownership of more than thirty percent (30%) of the voting securities or voting equity of another Person shall be deemed an Affiliate of such other Person.

“Agreement” means this Revolving Credit Agreement, as the same may be amended, modified or supplemented, from time to time.

“Applicable Law” means, with respect to any Person, all provisions of constitutions, laws, statutes, ordinances, rules, treaties, regulations, permits, licenses, approvals, interpretations and orders of court or Governmental Authorities and all orders of arbitrators with appropriate jurisdiction (by contract or otherwise), and decrees of all courts and arbitrators in proceedings or actions to which the Person is a party or by which it (or any of its property) is bound.

“Applicable Margin” means the interest rate margin applicable to the Loans as follows:

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Tier	If the Total Leverage Ratio is:	Revolving Credit Loans Then the Applicable Margin is
		LIBOR +	Base Rate +
1	Less than or equal to 1.50 to 1.00	.90%	0%
2	Greater than 1.50 to 1.00, but less         than or equal to 2.50 to 1.00	1.40%	.25%
3	Greater than 2.50 to 1.00	1.90%	.50%

The Applicable Margin shall be determined and adjusted quarterly on the date (each a “Calculation Date”) ten (10) Business Days after the date by which the Parent Borrower is required to provide a Compliance Certificate pursuant to Section 8.02 for the most recently ended fiscal quarter of the Parent Borrower; provided, however, that if the Parent Borrower fails to provide the Compliance Certificate as required by Section 8.02 for the most recently ended fiscal quarter of the Parent Borrower preceding the applicable Calculation Date, the Applicable Margin from such Calculation Date shall be based on Tier 3 until such time as an appropriate Compliance Certificate is provided, at which time the Tier shall be determined by reference to the Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Parent Borrower preceding such Calculation Date. The Applicable Margin shall be effective from one Calculation Date until the next Calculation Date. Any adjustment in the Applicable Margin shall be applicable to all Loans then existing or subsequently made or issued.

“Assignee” has the meaning set forth in Section 13.05(c).

“Assignment and Acceptance Agreement” means an Assignment and Acceptance Agreement in substantially the form of Exhibit E attached hereto.

“Authorized Signatory” means, with respect to any documents, agreements or instruments, such officer(s) of a Person as may be duly authorized by its Board of Directors, its bylaws or similar authority to execute the relevant documents, agreements or instruments on behalf of such Person.

“Available Commitment” means that portion of the Commitment which, at any date of determination, the Borrowers are eligible to borrow under the terms of this Agreement.

“Base Rate” means, at any time, the higher of (i) the variable per annum rate of interest so designated from time to time by the Agent as its prime rate (which rate is a reference rate and does not necessarily represent the lowest or best rate being charged to any customer) and (ii) the Federal Funds Rate plus one-half of one percent (½%). The Base Rate is not necessarily the lowest rate of interest charged by the Agent. Changes in the rate of interest resulting from changes in the Agent’s prime rate shall take place immediately without notice or demand of any kind.

“Base Rate Loan” means any Loan that bears interest at the Base Rate plus the Applicable Margin.

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“Borrower” means each Borrower referred to in the preamble hereto, together with such successors and assigns thereof as are permitted pursuant to the terms of Section 12.05 (Successors and Assigns) below.

“Business Day” means any day on which commercial banks are not required or permitted to be closed for the transaction of business in Philadelphia, Pennsylvania and, if the applicable Business Day relates to a LIBOR Loan, then the term “Business Day” shall exclude any day on which dealings are not carried on in the London Interbank Eurocurrency Market.

“Business Plan” means,for any fiscal year of the Parent Borrower, a detailed budget by operating Subsidiary setting forth the amounts budgeted on a quarterly basis for revenues and operating expenses by category for each Subsidiary as well as the amount of Capital Expenditures, along with a comparison of the actual amounts (and, if applicable, the budgeted amounts) of such items for the preceding year.

“Capital Expenditures” means expenditures for the purchase of assets of long-term use which are or should be capitalized in accordance with GAAP.

“Capital Lease” means, with respect to any Person, any lease which has been, or should be in accordance with GAAP, accounted for as a capital lease in respect of which such Person is liable as lessee.

“Capital Lease Obligation” means that portion of any obligation of a Person as lessee under a Capital Lease which at the time appears, or in accordance with GAAP should appear, on the balance sheet of such Person or in a note to such balance sheet.

“Cash Equivalent” means:

(a)securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided, that the full faith and credit of the United States of America is pledged in support thereof),

(b)securities issued or directly and fully guaranteed or insured by any state of the United States of America or any agency or instrumentality thereof and that are rated within one of the two highest ratings for such securities by Standard & Poor’s Corporation or Moody’s Investors Service, Inc.,

(c)demand and time deposits, certificates of deposit, bankers’ acceptances and commercial paper issued by the parent corporation of any domestic commercial bank of recognized standing having capital and surplus in excess of $500 million,

(d)commercial paper issued by others rated at least A-2 or the equivalent thereof by Standard & Poor’s Corporation or at least P-2 or the equivalent thereof by Moody’s Investors Service, Inc.,

(e)repurchase obligations with a term of not more than seven days for underlying securities of the types described in (a) through (d) above entered into with any financial institution meeting the qualifications specified in (d) above, or

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(f)money market funds, substantially all of the assets of which constitute Cash Equivalents of the kinds described in (a) through (e) of this definition,

and in the case of each of (b), (c), (d) and (e) maturing within one year after the date of acquisition.

“CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time.

“Change of Control” means

(a)any “person” or “group” (each as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), other than any person or group which was on April 14, 2005 the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of outstanding shares of common stock of Parent Borrower (or securities convertible into or exchangeable for such stock) representing twenty-five percent (25%) or more of the outstanding common stock of the Parent Borrower as set forth in the Parent Borrower’s Proxy Statement dated April 20, 2005 for the Parent Borrower’s 2005 Annual Meeting of Shareholders, either (A) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of voting Stock of the Parent Borrower (or securities convertible into or exchangeable for such voting Stock) representing thirty percent (30%) or more of the combined voting power of all voting Stock of the Parent Borrower (on a fully diluted basis) or (B) otherwise has the ability, directly or indirectly, to elect a majority of the board of directors of the Parent Borrower; or

(b)During any period of two consecutive years, individuals who at the beginning of such period constituted the board of directors (together with any new directors whose election by such board of directors or whose nomination for election by the shareholders of the Parent Borrower was approved by a vote of 66 2/3% of the directors of the Parent Borrower at the time of such approval who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) of Parent Borrower cease for any reason to constitute a majority of the board of directors then in office;

(c)Parent Borrower shall cease to own 100% of the outstanding equity or other ownership interests of the Subsidiary Borrowers, except as permitted under Section 9.07;

(d)The Agent shall fail to have a valid, first priority Lien in all issued and outstanding shares of capital stock of each Borrower (other than Parent Borrower) and its Subsidiaries (except to the extent provided in Section 9.27);

(e)Any Borrower or any Subsidiary adopts a plan of liquidation, except as permitted under Section 9.07;

(f)any merger or consolidation of Parent Borrower with or into another Person or the merger of another Person with or into Parent Borrower, unless in the case of a merger or consolidation transaction, holders of securities that represented 100% of the aggregate voting power of Parent Borrower’s voting stock immediately prior to such transaction

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(together with holders of nonvoting securities that were convertible into Borrower’s voting stock immediately prior to such transaction) own directly or indirectly at least a majority of the aggregate voting power of the voting stock of the surviving Person in such merger or consolidation transaction immediately after such transaction or have the right or ability by voting power, contract or otherwise to elect or designate for a election a majority of Parent Borrower’s Board of Directors;

(g)the sale of all or substantially all of Parent Borrower’s assets (determined on a consolidated basis) to another Person; or

(h)There exists any “change of control” or “change in control” as defined under any agreement to which any Borrower or any Subsidiary is party or is subject.

For purposes of this definition, “voting stock” means capital stock or other ownership interests of any class or classes of a corporation or another entity the holders of which are entitled to elect a majority of the corporate directors or Persons performing similar functions.

“COBRA” means group health plan continuation coverage requirements of Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA.

“Code” means the Internal Revenue Code of 1986, as amended from time to time, and any regulations, revenue rulings or technical information releases issued thereunder.

“Collateral” means all property which is, or is to be, subject to the Lien granted by the Collateral Agreements.

“Collateral Documents” means the Security Agreement, the Mortgages, the IP Collateral Agreement, the Uniform Commercial Code financing statements, and all other Loan Documents which purport to grant or perfect a Lien in favor of the Agent, on behalf of the Lenders, securing the Obligations.

“Commitment” means the obligation of the Lenders pursuant to the terms hereof to make Revolving Credit Loans to the Borrowers in an initial aggregate principal amount outstanding at any time not to exceed Thirty Million Dollars ($30,000,000), from time to time until the Termination Date. The amount of the Commitment may be reduced pursuant to the terms hereof.

“Commitment Fee Margin” means the corresponding percentages set forth below:

Tier	If the Total Leverage Ratio is:	Then the Commitment Fee Margin is
1	Less than or equal to 1.50 to 1.00	.25%
2	Greater than 1.50 to 1.00, but less than or equal to 2.50 to 1.00	.35%
3	Greater than 2.50 to 1.00	.50%

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The Commitment Fee Margin shall be determined and adjusted quarterly on the date (each a “Calculation Date”) ten (10) Business Days after the date by which the Parent Borrower is required to provide a Compliance Certificate pursuant to Section 8.02 for the most recently ended fiscal quarter of the Parent Borrower; provided, however, that if the Parent Borrower fails to provide the Compliance Certificate as required by Section 8.02 for the most recently ended fiscal quarter of the Parent Borrower preceding the applicable Calculation Date, the Commitment Fee Margin from such Calculation Date shall be based on Tier 3 until such time as an appropriate Compliance Certificate is provided, at which time the Tier shall be determined by reference to the Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Parent Borrower preceding such Calculation Date. The Commitment Fee Margin shall be effective from one Calculation Date until the next Calculation Date. Any adjustment in the Applicable Margin shall be applicable to all Loans then existing or subsequently made or issued.

“Consideration” means an amount equal to the sum of (a) the aggregate fair market value of any securities and any other non-cash consideration, (including, without limitation, any joint venture interest delivered to, or retained by, the applicable selling entity), issued or delivered or to be issued or delivered and any cash or deferred consideration paid or payable in connection with an Acquisition, and (b) the amount of all indebtedness and preferred stock of the selling entity which is assumed or acquired by the applicable Borrower or retired or defeased in connection with an Acquisition. The fair market value of any securities issued and any other non-cash consideration delivered or retained in connection with an Acquisition shall be the value stated in the agreements governing such Acquisition.

“Consolidated” means, with respect to any Person and any specified Subsidiaries, the consolidation of financial statements of such Person and such Subsidiaries in accordance with GAAP.

“Default” means any event which, with the giving of notice or passage of time, or both, would constitute an Event of Default.

“Default Rate” is defined in Section 3.03.

“Disqualified Stock” means, with respect to any Person, any capital stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable): (a) matures or is mandatorily redeemable for any reason, (b) is convertible or exchangeable for Indebtedness or Disqualified Stock, or (c) is redeemable at the option of the holder thereof, in whole or in part, in each case on or prior to the first anniversary of the stated maturity of the Notes.

“EBIT” means, for any Person for any period, the Net Income of such Person for such period (before deducting fees either paid in cash or deferred during the applicable period under the Management Agreement referenced in Section 9.05) plus the sum of the following (to the extent deducted in the computation of such Net Income):

(a) Interest Expense;

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(b)income taxes including (with respect to each Subsidiary Borrower) any amounts payable or paid to Parent Borrower for such taxes (but, if there is a net tax benefit, that should be deducted from Net Income in calculating EBIT).

“EBITDA” means, for any Person for any period, the Net Income of such Person for such period (before deducting fees either paid in cash or deferred during the applicable period under the Management Agreement referenced in Section 9.05) plus the sum of the following (to the extent deducted in the computation of such Net Income):

(a)depreciation expense;

(b)amortization expense (including amortization expense associated with purchase accounting write-up of tangible and intangible assets) and deferred financing costs;

(c)Interest Expense;

(d)income taxes including (with respect to each Subsidiary Borrower) any amounts payable or paid to Parent Borrower for such taxes (but, if there is a net tax benefit, that should be deducted from Net Income in calculating EBITDA);

(e)restructuring charges (as determined in accordance with GAAP) relating to the consolidation of operations or reduction in head-count;

(f)all other non-cash charges reducing Net Income for such period (A) including, but not limited to, (1) non-cash charges attributable to the grant, exercise or repurchase of options for or shares of capital stock to or from employees of such Person and its Consolidated Subsidiaries determined in accordance with GAAP, (2) unrealized losses resulting solely from the marking to market of derivative securities or securities held in deferred compensation plans, (3) non-cash charges associated with the amortization or write-off of deferred financing costs and debt issuance costs of such Person and its Consolidated Subsidiaries during such period, and (4) non-cash charges associated with the purchase accounting write-up of inventory, but (B) excluding non-cash charges that require an accrual of or a reserve for cash charges for any future periods and normally occurring accruals such as reserves for accounts receivable; and

(g)any premium or penalty paid in connection with redeeming or retiring Indebtedness of such Person and its Consolidated Subsidiaries prior to the stated maturity thereof pursuant to the agreements governing such Indebtedness.

less:

(i)all non-cash items increasing Consolidated Net Income for such period (including unrealized gains resulting solely from the marking to market of derivative securities or securities held in deferred compensation plans), and

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(ii)the amount of all cash payments made by such Person or any of the Subsidiaries during such period to the extent such payments relate to non-cash charges that were added back in determining EBITDA for such period or any prior period.

“Eligible Assignee” one or more banks or other financial institutions, each having a combined capital surplus of at least $500,000,000.

“Eligible Institution” means any federally chartered or state chartered bank or any financial institution whose deposits are insured by the Federal Deposit Insurance Corporation.

“Environmental Laws” means all Applicable Laws relating to the pollution or protection of the environment, including, without limitation, Applicable Laws relating to the release, discharge, emission, spill, leaching, or disposal of Hazardous Substances to air, water or land, or to the withdrawal or use of ground water, or to the use, handling, disposal, treatment, storage or management of Hazardous Substances, including, without limitation, CERCLA and the Resource Conservation and Recovery Act of 1976, as amended.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any rules and regulations issued thereunder.

“ERISA Affiliate” means (i) any corporation included with any Borrower in a controlled group of corporations within the meaning of Section 414(b) of the Code, (ii) any trade or business (whether or not incorporated) which is under common control with the Borrowers within the meaning of Section 414(c) of the Code, (iii) any member of an affiliated service group of which any Borrower is a member within the meaning of Section 414(m) of the Code, and (iv) any other entity required to be aggregated with any Borrower pursuant to Section 414(o) of the Code.

“Event of Default” means any of the events specified in Section 10.01 (Events of Default), provided that any requirement for notice or lapse of time has been satisfied.

“Federal Funds Rate” means, for any period, a fluctuating interest rate equal, for each day during such period, to the rate announced by the Federal Reserve Bank of New York on each such day as the weighted average of the rates on overnight federal funds transactions with the members of the Federal Reserve System arranged by federal funds brokers (or, if such day is not a Business Day, for the next preceding Business Day) or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three (3) federal funds brokers of recognized standing selected by the Agent.

“Foreign Subsidiary” means any Subsidiary of any Borrower which (i) is not organized under the laws of the United States, any state thereof or the District of Columbia and (ii) conducts substantially all of its business operations outside the United States of America.

“Foreign Subsidiary Guaranty” means a Guaranty of the Obligations executed by each Foreign Subsidiary in favor of the Agent and the Lenders.

“Fronting Fee” has the meaning specified in Subsection 1.04(b).

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“GAAP” means generally accepted accounting principles in the United States, which, as to any Borrower and its Subsidiaries, shall be consistently applied with those applied in the preparation of the financial statements referred to in Section 5.01.4(a) (Conditions Precedent to Initial Loan), with such changes as may be agreed pursuant to Section 11.02.

“Governmental Authority” means any nation, province, state or political subdivision thereof, and any government or any Person exercising executive, legislative, regulatory or administrative functions of or pertaining to government, including, without limitation, any central bank or comparable agency and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.

“Guaranty” or “Guaranteed,” as applied to any Person (the “guarantor”) means and includes any direct or indirect liability, contingent or otherwise, of such guarantor with respect to any indebtedness, lease, dividend or other financial or performance obligation of another Person (“primary obligor”), including, but not limited to (1) any direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), discount or sale with recourse by such guarantor of the obligations of the primary obligor and (2) any agreement (contingent or otherwise) to (a) purchase, repurchase or otherwise acquire an obligation of the primary obligor or any security therefor, (b) provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), (c) maintain the solvency or financial condition of the primary obligor, or (d) make payment for any products, materials, supplies or services tendered or rendered to the primary obligor, in any case if the purpose or intent of such agreement or arrangement is to provide assurance that the primary obligor’s obligation will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected against loss in respect thereof. In addition to the other restrictions on Guaranties set forth in this Agreement, no Guaranty shall be permitted by this Agreement unless the maximum dollar amount of the obligation being guaranteed is readily ascertainable by the terms of such obligation or the agreement or instrument evidencing such Guaranty specifically limits the dollar amount of the maximum exposure of the guarantor thereunder. For purposes of making computations under this Agreement, the amount of any Guaranty made during any period shall be the aggregate amount of the obligation guaranteed (or such lesser amount as to which the maximum exposure of the guarantor shall have been specifically limited), less any amount by which the guarantor may have been discharged with respect thereto (including any discharge by way of a reduction in the amount of the obligation guaranteed).

“Hazardous Substances” means any and all pollutants, contaminants, toxic or hazardous wastes or any other substances that might pose a hazard to health or safety, the removal of which may be required, or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage or filtration of which may be restricted, prohibited or penalized by any Environmental Law (including, without limitation, petroleum products, asbestos, urea formaldehyde foam insulation and polychlorinated biphenyls and substances defined as Hazardous Substances under CERCLA).

“HIPAA” means the Health Insurance Portability and Accountability Act of 1996, as amended from time to time.

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“Indebtedness” means, with respect to any Person (without duplication):

(a)all indebtedness for borrowed money of such Person;

(b)all obligations of such Person for the deferred purchase price of capital assets or other property or services (other than accounts payable incurred in the ordinary course of business) to the extent such liabilities and obligations would appear as a liability upon the Consolidated balance sheet of such specified Person in accordance with GAAP;

(c)all obligations of such Person evidenced by notes, bonds, debentures or other instruments;

(d)all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property) and all other obligations secured by a Lien on the property or assets of such Person;

(e)all Capital Lease Obligations of such Person;

(f)all obligations, contingent or otherwise, of such Person under acceptances, letters of credit or similar facilities;

(g)all obligations of such Person in respect of Disqualified Stock or other obligations of such Person to purchase, redeem, retire or otherwise acquire for value any capital stock of such Person or any warrants, rights or options to acquire such capital stock, which obligations shall be valued, in the case of redeemable preferred stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends and, in the case of other such obligations, at the amount that, in light of all the facts and circumstances existing at the time of determination, is reasonably expected to be payable;

(h)interest accrued but not paid on the scheduled date;

(i)all Guarantees of such Person;

(j)all Indebtedness referred to in clauses (a) through (i) above secured by (or which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness;

(k)all fixed (but not variable) payments required by such Person under non-compete agreements; and

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(l)all obligations of such Person that are the functional equivalent of the Indebtedness referred to in clauses (a) through (k) above.

“Indemnified Person” means the Agent, the Issuer, the other Lenders and their officers, agents, employees, attorneys, consultants and Affiliates and any successors, assigns and participants thereof.

“Intellectual Property” means the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, (i) all copyrights arising under the laws of the United States, any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished, registrations and recordings thereof, and all applications in connection therewith, including, without limitation, all registrations, recordings and applications in the United States Copyright Office, (ii) all letters patent of the United States, any other country or any political subdivision thereof, all reissues and extensions thereof and all goodwill associated therewith, and all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part thereof, (iii) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers, and all goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, or otherwise, and all common-law rights related thereto, (iv) all rights to obtain any reissues or extensions of the foregoing and (v) all licenses for any of the foregoing.

“Interest Expense” means, with respect to any Person for any period, all cash interest expense (including imputed interest with respect to Capitalized Lease Obligations and accreted interest on zero coupon bonds and similar obligations) paid, accrued or accreted, or to be paid, accrued or accreted, with respect to any Indebtedness of such Person during such period pursuant to the terms of the agreement respecting such Indebtedness, together with all fees (including, without limitation, commitment or unused fees) payable in respect thereof, all as calculated in accordance with GAAP, excluding amortization or write-off or deferred financing cost and debt issuance cost of such Person for such period.

“Interest Period” means a period commencing, in the case of the first Interest Period applicable to a LIBOR Loan, on the day of the making of, or conversion into, such Loan, and, in the case of each subsequent, successive Interest Period applicable thereto, on the last day of the immediately preceding Interest Period, and ending on the same day in the first, second, third or sixth calendar month thereafter except that

(a)any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day, unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day and

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(b)any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month in which such Interest Period ends) shall end on the last Business Day of the calendar month in which such Interest Period ends.

“Inventory” means “inventory” (as defined in Article 9 of the UCC) of Borrowers and their Subsidiaries.

“Investment” means, as applied to any Person, any direct or indirect purchase or other acquisition by such Person of stock or other securities of another Person, or any direct or indirect loan, advance or capital contribution by such Person to any other Person, including all Indebtedness and accounts receivable from such other Person which are not current assets or did not arise from sales to such other Person in the ordinary course of business.

“IP Collateral Agreement” means the one or more IP Collateral Agreement(s) executed or to be executed and delivered pursuant to the terms of the Security Agreement, as such IP Collateral Agreement(s) may be amended, modified or supplemented from time to time.

“Issuer” means Bank so long as it is a Lender, or if Bank is no longer a Lender, then a Lender designated by the Parent Borrower as Issuer and acceptable to the Agent.

“Lender” means each of the Persons that execute this Agreement as a Lender together with any other Persons which become parties to this Agreement as a Lender from time to time.

“Lender Required Payment” has the meaning set forth in Section 4.07.

“Letter of Credit” means a standby letter of credit issued for the account of Borrowers or any of their Subsidiaries by Issuer which expires by its terms within one year after the date of issuance and in any event at least thirty (30) days prior to the Revolving Credit Termination Date. Notwithstanding the foregoing, a Letter of Credit may provide for automatic extensions of its expiry date for one or more successive one (1) year periods provided that the Issuer has the right to terminate such Letter of Credit on each such annual expiration date and no renewal term may extend the term of the Letter of Credit to a date that is later than the thirtieth (30^th) day prior to the Revolving Credit Termination Date.

“Letter of Credit Facility” means the facility extended pursuant to Section 1.04 for the Borrowers to request Letters of Credit from Issuer.

“Letter of Credit Liabilities” means, at any time of calculation, the sum of (i) the amount then available for drawing under all outstanding Letters of Credit (without regard to whether any conditions to drawing thereunder can then be met), plus (ii) the aggregate unpaid amount of all reimbursement obligations in respect of previous drawings made under such Letters of Credit.

“LIBOR Loan” means any Loan bearing interest at a rate equal to the LIBOR Rate plus Applicable Margin.

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“LIBOR Rate” means, as applicable to any LIBOR Loan, the rate per annum as determined on the basis of the offered rates for deposits in U.S. Dollars, for a period of time comparable to such LIBOR Loan which appears on the Telerate page 3750 as of 11:00 a.m. London time on the day that is two London Banking Days preceding the first day of such LIBOR Loan; provided, however, if the rate described above does not appear on the Telerate System on any applicable interest determination date, the LIBOR rate shall be the rate (rounded upward, if necessary, to the nearest one hundred-thousandth of a percentage point), determined on the basis of the offered rates for deposits in U.S. dollars for a period of time comparable to such LIBOR Loan which are offered by four major banks in the London interbank market at approximately 11:00 a.m. London time, on the day that is two (2) London Banking Days preceding the first day of such LIBOR Loan as selected by the Agent. The principal London office of each of the four major London banks will be requested to provide a quotation of its U.S. Dollar deposit offered rate. If at least two such quotations are provided, the rate for that date will be the arithmetic mean of the quotations. If fewer than two quotations are provided as requested, the rate for that date will be determined on the basis of the rates quoted for loans in U.S. dollars to leading European banks for a period of time comparable to such LIBOR Loan offered by major banks in New York City at approximately 11:00 am. New York City time, on the day that is two London Banking Days preceding the first day of such LIBOR Loan. In the event that the Agent is unable to obtain any such quotation as provided above, it will be deemed that LIBOR pursuant to a LIBOR Loan cannot be determined. In the event that the Board of Governors of the Federal Reserve System shall impose a Reserve Percentage with respect to LIBOR deposits of Bank, then for any period during which such Reserve Percentage shall apply, LIBOR shall be equal to the amount determined above divided by an amount equal to 1 minus the Reserve Percentage. “Reserve Percentage” shall mean the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed on member banks of the Federal Reserve System against “Euro-currency Liabilities” as defined in Regulation D. “Banking Day” shall mean, in respect of any city, any day on which commercial banks are open for business in that city.

“Lien” means any mortgage, lien, pledge, adverse claim, assignment, charge, security interest, title retention agreement, separate beneficial interest, levy, execution, seizure, attachment, garnishment or other encumbrance in respect of any property, whether created by statute, contract, common law or otherwise, and whether or not choate, vested or perfected.

“Loan Documents” means this Agreement, the Notes, the Foreign Subsidiary Guarantee, the Collateral Agreements, and all other documents and agreements executed or delivered in connection with or contemplated by this Agreement, in each case as amended, modified or supplemented, from time to time.

“Loan Party” means any Borrower, any of its Foreign Subsidiaries, and any other obligor under any of the Loan Documents.

“Loans” means the Revolving Credit Loans.

“Majority Lenders” means at any time, Lenders having greater than or equal to fifty-one percent (51%) of the Commitment (whether borrowed or not).

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“Material Adverse Change” means (a) any material adverse change in the business, condition (financial or otherwise), assets, liabilities, results of operations, properties, or business prospects of the Borrowers and the Foreign Subsidiaries on a Consolidated basis, or (b) any material adverse change with respect to the binding nature, validity, or enforceability of this Agreement or any other Loan Document, or with respect to the ability of any Loan Party to perform its obligations under this Agreement or deed(s) of trust, as applicable, whether resulting from any single act, omission, situation or event or taken together with other such acts, omissions, situations or events.

“Material Agreements” has the meaning set forth in Section 6.25 (No Burdensome Agreements; Material Agreements).

“Maturity Date” means June 30, 2008.

“Mortgage” means one or more real estate mortgages or deeds of trust, as applicable, executed or to be executed and delivered pursuant to the terms of this Agreement, as such instruments may be amended, modified or supplemented, from time to time.

“Multiemployer Plan” means a multiemployer pension plan as defined in Section 3(37) of ERISA to which any Borrower, any of its Subsidiaries or any ERISA Affiliate is, or was, required to contribute.

“Net Income” means, for any Person and for any period, the net income (or net loss) of such Person for such period determined in accordance with GAAP provided that such amount shall be adjusted to exclude (to the extent otherwise included therein and without duplication) the following:

(a)any write-up or write-down of any asset;

(b)any net gain from the collection of the proceeds of life insurance policies;

(c)any gain (or loss) arising from the acquisition or sale of any securities or Indebtedness of such Person and any gain or loss arising from the exercise of any warrant of such Person;

(d)any aggregate net gain (or loss) during such period arising from the sale, exchange or other disposition of capital assets (such term to include all fixed assets, whether tangible or intangible, all inventory sold in conjunction with the disposition of fixed assets and all securities) other than any sale, exchange or other disposition in the ordinary course of business;

(e)all other extraordinary items; 

(f)any net income that is attributable to or derived from an entity or other issuer that is not a Subsidiary of such Person; and

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(g)all non-recurring items properly identified as such on such Person’s financial statements and reports including, for the quarter ending June 30, 2004, with respect to all fees and costs relating to the transactions contemplated by this Agreement.

“New Subsidiary” has the meaning set forth in Section 9.27.

“Non-U.S. Lender” has the meaning set forth in Section 4.05(e).

“Notes” means the promissory notes in the original aggregate principal amount of Thirty Million Dollars ($30,000,000) issued by the Borrowers to the Lenders in substantially the form of Exhibit A attached hereto, and any other promissory note or notes issued by the Borrowers to evidence the Loans and Reimbursement Obligations pursuant to this Agreement and any replacement or restatement of, and any supplement to, such note.

“Notices” has the meaning set forth in Section 13.01.

“Notice of LC Credit Event” means a written notice from an Authorized Signatory of Parent Borrower to the Issuer with respect to any issuance, increase or extension of a Letter of Credit specifying: (i) the date of issuance or increase of a Letter of Credit; (ii) the expiry date of such Letter of Credit; (iii) the proposed terms of such Letter of Credit, including the face amount; and (iv) the transactions or additional transaction or transactions that are to be supported or financed with such Letter of Credit or increase thereof.

“Obligations” means (a) all payment and performance obligations of every kind, nature and description of the Borrowers and any other Loan Party to the Agent or any Lender under this Agreement and the other Loan Documents (including, without limitation, any interest, fees and other charges on the Loans or otherwise under the Loan Documents that would accrue but for the filing of a bankruptcy action, whether or not such claim is allowed in such bankruptcy action), whether such obligations are direct or indirect, absolute or contingent, due or not due, contractual or tortious, liquidated or unliquidated, arising by operation of law or otherwise, now existing or hereafter arising, and (b) (to the extent not included in the preceding clause (a)) the obligation of the Borrowers or any obligor to pay an amount equal to the amount of any and all damage which the Agent or any Lender may suffer by reason of a breach by such Person of any obligation, covenant or undertaking with respect to this Agreement or any other Loan Document.

“Other Taxes” has the meaning set forth in Section 4.05(b).

“Payment Date” means (a) the last Business Day of each calendar month and (b) the Revolving Credit Termination Date.

“Permitted Indebtedness” has the meaning set forth in Section 9.01.

“Permitted Liens” has the meaning set forth in Section 9.02 (Liens).

“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all its functions under ERISA.

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“Person” means an individual, corporation, limited liability company, association, partnership, business, joint venture, trust, estate, unincorporated organization, government or any agency or political subdivision thereof, or any other entity.

“Plan” means an “Employee Pension Benefit Plan” (as defined in Section 3(2) of ERISA) and/or an “Employee Welfare Benefit Plan” (as defined in Section 3(1) of ERISA) which is or has been established or maintained, or to which contributions are, or are required to be, or were, or were required to be, made by any Borrower, any of its Subsidiaries or any ERISA Affiliate (or any predecessor thereof), except a Multiemployer Plan.

“Prior Facility” has the meaning set forth in the Recitals hereto.

“Prohibited Transaction” has the meaning given to such term in Section 406 of ERISA, Section 4975(c) of the Code, or any successor sections, and any Treasury regulations issued thereunder.

“Regulatory Change” means any Applicable Law including, without limitation, any interpretation, directive, request or guideline (whether or not having the force of law) or any change therein or in the administration or enforcement thereof, that becomes effective or is implemented or first required or expected to be complied with after the date of this Agreement (including any Applicable Law that shall have become such as the result of any act or omission of any Borrower or any of its Affiliates without regard to when such Applicable Law shall have been enacted or implemented), whether the same is (i) the result of an enactment by a government or any agency or political subdivision thereof, a determination of a court or regulatory authority or otherwise; or (ii) enacted, adopted, issued or proposed before or after the date of this Agreement, including any such that imposes, increases or modifies any tax, reserve requirement, insurance charge, special deposit requirement, assessment or capital adequacy requirement.

“Reimbursement Obligations” means, at any date, the obligations of Borrowers then outstanding to reimburse the Issuer for payments made by the Issuer under a Letter of Credit.

“Release” means a release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration of any Hazardous Substance into the indoor or outdoor environment or into or out of any property, including the movement of Hazardous Substances through or in air, soil, surface water or groundwater on any property.

“Remedial Action” means any action necessary to comply with any Environmental Law with respect to (1) clean up, removal, treatment or handling of Hazardous Substances in the indoor or outdoor environment; (2) prevention of Releases or threats of Releases or minimization of further Releases so they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment; or (3) performance of pre-remedial studies and investigations and post-remedial monitoring and care.

“Reorganization” means reorganization as defined in Section 4241(a) of ERISA.

“Reportable Event” means an event described in Section 4043(c) of ERISA.

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“Request for Advance” means a certificate designated as a “Request for Advance”, signed by an Authorized Signatory of the Parent Borrower requesting an Advance hereunder, which shall be substantially in the form of Exhibit B attached hereto.

“Reserve Percentage” means, with respect to any LIBOR Loan, the maximum rate at which reserves (including any marginal, supplemental or emergency reserves) are required to be maintained during the relevant Interest Period under Regulation D (and/or other similar regulation) of the Board of Governors of the Federal Reserve System against “Eurocurrency Liabilities” (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Percentage shall reflect any other reserves required to be maintained by reason of any regulatory change against (i) any category of liabilities which includes deposits by reference to which LIBOR Rate is to be determined as provided in the definition of “LIBOR Rate” or (ii) any category of extensions of credit or other assets which include loans the interest rate of which is based on LIBOR Rate.

“Restricted Payment” means:

(a)any direct or indirect distribution, dividend or other payment (other than stock dividends and stock splits) to any Person on account of (i) any general or limited partnership interest in, or shares of capital stock or other securities of, any Borrower or any of its Subsidiaries or (ii) any warrants or other rights or options to acquire shares of capital stock of, or other interest in, any Borrower or any of its Subsidiaries;

(b)any redemption, retirement, purchase or other acquisition or any other payment on account of any interests or securities listed above, except to the extent that the consideration therefor consists solely of shares of stock of any Borrower or its Subsidiary, as the case may be;

(c)any sinking fund, other prepayment or installment payment on account of the foregoing;

(d)any other payment, loan or advance to a shareholder, partner or equity owner of any Borrower or any of its Subsidiaries (whether or not in its capacity as shareholder, partner or equity owner) other than salaries or compensation which are (i) not otherwise restricted under the Loan Documents, (ii) in reasonable amounts and (iii) paid in the ordinary course of business; and

(e)any forgiveness or release without adequate consideration by any Borrower or any of its Subsidiaries of any Indebtedness or other obligation of a shareholder, partner or equity owner.

“Revolving Credit Facility” means the Revolving Credit Facility of Thirty Million Dollars ($30,000,000) extended hereunder, consisting of the Revolving Loan Facility and the Letter of Credit Facility.

“Revolving Credit Loans” means the loans made by the Lenders to the Borrowers pursuant to Section 1.01 (Commitment to Lend) below.

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“Revolving Credit Outstandings” means at any time of calculation the sum of the then existing aggregate outstanding principal amount of Revolving Credit Loans and the then existing Letter of Credit Liabilities.

“Revolving Credit Termination Date” means the Maturity Date, or such earlier date on which the Commitment shall be completely terminated hereunder.

“Revolving Loan Facility” means the facility extended pursuant to Article 1 for the Borrowers to make Revolving Loans from Lender.

“Security Agreement” means the one or more Security Agreement(s) executed and delivered pursuant to the terms of this Agreement, as such Security Agreement(s) may be amended, modified or supplemented from time to time.

“Subsidiary” means, as applied to any Person, (a) any corporation of which more than fifty percent (50%) of the outstanding stock (other than directors’ qualifying shares) having ordinary voting power to elect a majority of the board of directors of such corporation (regardless of whether the holders of any class or classes of securities shall or might have such voting power upon the occurrence of any contingency) is directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries, or by one or more of such Person’s other Subsidiaries, (b) any partnership, joint venture or other association which is owned or controlled by such Person, by such Person and one or more of its other Subsidiaries, or by one or more of such Person’s other Subsidiaries, or (c) any other entity which is directly or indirectly controlled or capable of being controlled by such Person, or by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person.

“Taxes” has the meaning set forth in Section 4.05(a)(i).

“Total Funded Indebtedness” means all Indebtedness other than that described in subsections (h), (i), (j) and (k) of the definition thereof.

“Transferee” has the meaning set forth in Section 9.11.

“Type” with respect to any Loan, means its designation as a Base Rate Loan or LIBOR Loan of a specified Interest Period. Loans with Interest Periods ending on different days or of differing durations shall be deemed to be different Types of Loans.

“UCC” shall have the meaning set forth in the Security Agreement.

“Unqualifiedly Certified” when used in connection with audited financial statements delivered pursuant to Section 8.01 (Financial Statements) hereby by the Parent Borrower’s independent auditors or accountants, means the absence of any qualification, limitation, exception or explanatory paragraph that would (x) call into question or express substantial doubt about the ability of the Parent Borrower or any Subsidiary to continue as a going concern, as discussed in the American Institute of Certified Public Accountants Statement of Auditing Standard Number 59, (y) relate to the limited scope of examination of matters relevant to such financial statements or (z)

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relate to the treatment or classification of any item in such financial statements and, which as a condition of its removal would require an adjustment to such item the effect of which would be to cause the occurrence of a Default or an Event of Default.

“Withdrawal Liability” means any withdrawal liability as defined in Section 4201 of ERISA.

“XYZ, Inc.” means the corporation identified as such in a separate letter executed by Parent Borrower and the Agent.

Section 11.02Accounting Terms. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder (including without limitation determinations made pursuant to the exhibits hereto) shall be made, and all financial statements required to be delivered hereunder shall be prepared on a consolidated basis in accordance with GAAP applied on a basis consistent with the audited consolidated financial statements of Parent Borrower and its Consolidated Subsidiaries for the year ended December 31, 2004 delivered to the Lenders; provided, that if (a) Parent Borrower shall object to determining compliance with the provisions of this Agreement on such basis by written notice delivered to the Lenders at the time of delivery of required financial statements due to any change in GAAP or the rules promulgated with respect thereto or (b) the Majority Lenders shall so object in writing by written notice delivered to Parent Borrower within sixty (60) days after delivery of such financial statements, then compliance with this Agreement shall be determined on a basis consistent with the above-referenced financial statements, but the parties hereto shall promptly enter into negotiations in order to amend the financial covenants and other terms of this Agreement and so as to equitably reflect such changes in GAAP with the desired result that the criteria for evaluating the financial condition of Parent Borrower and its Consolidated Subsidiaries and such other terms shall be the same in all material respects after such changes as if such changes had not been made. All amounts used for purposes of financial calculations required to be made herein shall be without duplication.

Section 11.03Other Definitional Provisions. References in this Agreement to “Articles”, “Sections”, “Annexes” or “Exhibits” shall be to Articles, Sections, Annexes or Exhibits of or to this Agreement unless otherwise specifically provided. Any term defined herein may be used in the singular or plural. “Include”, “includes” and “including” shall be deemed to be followed by “without limitation”. Except as otherwise specified herein, references to any Person include the successors and assigns of such Person. References “from” or “through” any date mean, unless otherwise specified, “from and including” or “through and including”, respectively. References to any statute or act shall include all related current regulations and all amendments and any successor statutes, acts and regulations. Unless the context otherwise requires, any terms used in the masculine form shall also include the feminine and neuter forms and vice versa and any terms used in the plural shall include the singular and vice versa.

ARTICLE 12

AGENT

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Section 12.01Authority. The Lenders (for themselves and their successors and assigns) hereby irrevocably appoint Bank to act as Agent as specified herein and in the other Loan Documents. Each such Person hereby irrevocably authorizes Bank to execute and take such action on its behalf under the provisions of this Agreement, the Notes, and the other Loan Documents and to exercise such powers under the Loan Documents as are specifically delegated to the Agent by the terms of the Loan Documents and such powers as are reasonably incidental thereto.

Section 12.02Expenses. In default of reimbursement or indemnification by the Borrowers, the Lenders will, in proportion to their respective portions of the Commitment, reimburse the Agent for and against all expense, liability, penalty and damage of any nature whatsoever (including but not limited to reasonable attorneys’ fees) which may be incurred or sustained by the Agent in any way in connection with the Loan Documents or its duties under the Loan Documents provided that no Lender shall be liable for any portion of the foregoing items resulting from the gross negligence or willful misconduct of the Agent. Without limiting the generality of any other provision excusing the Agent form taking any actions, the Agent shall not have any obligation to take any action in connection with the performance of its duties as Agent under the Loan Documents which, in its opinion, requires the payment of expenses or the incurrence of liability, if there is any ground for belief that reimbursement of such expenses or liability is not reasonably assured to it.

Section 12.03Action by Agent. The Agent is authorized to take any action specified in this Agreement and all actions reasonably related thereto. However, except for actions expressly required to be taken by the Agent in this Agreement (which actions the Agent will take as required subject to all of the exculpatory provisions herein), the Agent is not required to take actions that it may be authorized to take.

Section 12.04 Exculpatory Provisions.

(a)General Standard. Neither the Agent nor any of its officers, directors, employees or agents, shall be liable for any action taken or omitted under the Loan Documents or in connection with the Loan Documents unless caused by its or their gross negligence or willful misconduct. Neither the Agent nor any of its officers, directors, employees or agents, shall be liable for any action taken or omitted by it at the direction of the Majority Lenders. The Agent shall not be responsible for any recitals, warranties or representations in the Loan Documents or for the validity, enforceability, collectability or due execution of this Agreement or any of the other Loan Documents.

(b)Agents and Employees. The Agent may execute any of its duties by or through agents or employees, all of whom shall be entitled to the benefits of any exculpatory provision herein.

(c)Advice of Professionals. Agent shall be entitled to advice of counsel, accountants or other professionals of its selection concerning all matters pertaining to the Loan Documents and its duties under the Loan Documents. Agent is entitled to rely on the advice of its professionals whether or not the advice is correct.

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(d)Reliance on Information Believed to Be Genuine. The Agent shall be entitled to rely upon any writing or other document, telegram or telephone conversation believed by it to have been signed, sent or made by the proper person or persons.

Section 12.05Investigation by Lenders. Each Lender expressly acknowledges that the Agent has not made any representation or warranty to it and that no act taken by the Agent shall be deemed to constitute a representation or warranty by the Agent to the Lenders. Each Lender further acknowledges that it has taken and will continue to take such action and to make such investigation as it deems necessary to inform itself of the affairs of the Loan Parties. Each Lender further acknowledges that it has made and will continue to make its own independent investigation of the creditworthiness and the business and operations of the Loan Parties. In entering into this Agreement, and in making an advance under this Agreement, each Lender represents that it has not relied and shall not rely upon any information or representations furnished or given by the Agent or by any other Lender. The Agent shall be under no duty or responsibility to the Lenders to ascertain or to inquire into the performance or observance by the Loan Parties of any of the provisions of this Agreement or any document or instrument now or hereafter executed in connection with this Agreement.

Section 12.06Notice of Events of Default. Without limiting the generality of the provisions of the preceding Section 12.05, it is expressly understood and agreed that the Agent shall not be deemed to have knowledge of the existence, occurrence or continuance of an Event of Default or Default, unless the Agent shall have been notified in writing of such Event of Default by any Lender or the Borrowers pursuant to a writing designated as a “Notice of Event of Default”. For the avoidance of doubt, the provisions of this Section 12.06 are expressly not for the benefit of the Borrowers.

Section 12.07Resignation; Termination. The Agent may resign at any time by giving prior written notice to the Parent Borrower and the Lenders and the Agent may be removed at any time with or without cause by the Majority Lenders. Such resignation or removal shall take effect at the end of the sixty (60) day period after such notice of resignation or removal has been given or upon the earlier appointment of a successor agent. The Lenders shall (with the consent of the Parent Borrower so long as no Event of Default has occurred and is then continuing), upon receipt of such notice, appoint a successor agent from among the Lenders. The Lenders and the Borrowers shall execute such documents as shall be necessary to effect such appointment. During any period that there shall not be a duly appointed and acting Agent, the Borrowers agree to make each payment due under this Agreement and under the Notes directly to each Lender entitled thereto and to provide copies of each certificate or other document required under this Agreement directly to each Lender.

Section 12.08Sharing. If any Lender shall at any time receive payment of principal on account of all or a part of any Note held by it, whether by set-off or otherwise, in a greater proportion than the principal payments made on the Notes held by the other Lenders, such Lender shall simultaneously purchase, without recourse, for cash, ratably from each of the other Lenders, such portion of the Notes held by such other Lenders so that, after such purchase, each Lender will hold an unpaid principal amount of Notes in the same proportion that the outstanding principal balance due to such Lender immediately prior to such payment bore to the aggregate outstanding principal balance due to all Lenders immediately prior to such payment. In the event that, at any time, any Lender shall be required to refund any amount which has been paid to or

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received by it on account of any Note held by it, and which has been applied to the purchase of a portion of the Notes held by other Lenders pursuant to this Section, then, upon notice from such Lender, each of the other Lenders shall simultaneously purchase, without recourse, its portion for cash, to the extent of its ratable share thereof, of the Notes held by the Lender required to make such refund.

Section 12.09Other Relationships. It is acknowledged that the Agent, the Lenders and/or any of their Affiliates may now or hereafter have lending or other relationships with the Borrowers and Affiliates of the Borrowers. It is agreed that the Agent and the Lenders are free to act with respect thereto without consulting with one another and without regard to the effect of any such action or relationship upon the Loans or other Obligations. With respect to the portion of the Loans made by it and Notes issued to it, the Agent shall have the same rights and powers under the Loan Documents as any other Lender or holder of a Note and may exercise the same as though it were not the Agent, and the term “Lenders” or “Holders of Notes” or any similar term shall, unless the context otherwise indicates, include the Agent in its capacity as a Lender.

ARTICLE 13

MISCELLANEOUS

Section 13.01Notices. All notices, requests, demands, directions and other communications (collectively, “Notices”) given to or made upon any party hereto under the provisions of this Agreement shall be by telephone or in writing (including telex or facsimile communication) unless otherwise expressly provided hereunder and, if in writing, shall be delivered or sent by telex or facsimile to the respective parties at the addresses and numbers set forth under their respective names on the signature pages hereof or in accordance with any subsequent unrevoked written direction from any party to the others. All Notices shall, except as otherwise expressly herein provided, be effective (a) in the case of facsimile, when received, (b) in the case of over-night courier or other hand-delivered notice, when hand-delivered, (c) in the case of telephone or e-mail, when telephoned or e-mailed; provided, however, that in order to be effective, telephonic Notices or e-mail must be confirmed in writing by another medium provided for in this Section 13.01, received no later than the next day, (d) if given by mail, four (4) days after such communication is deposited in the mails with first class postage prepaid, return receipt requested, and (e) if given by any other means (including by air courier), when delivered. In the event of a discrepancy between any telephonic or written notice, the written notice shall control. Any Lender giving any Notice to the Borrowers shall simultaneously send a copy of such Notice to the Agent.

Section 13.02Duration; Survival. All representations and warranties of the Borrowers contained in the Loan Documents shall survive the making of the Loans and shall not be waived by the execution and delivery of any Loan Document or any investigation by the Agent or the Lenders, or payment in full of the Loans. All such representations and warranties as well as all other covenants and agreements of the Borrowers contained in the Loan Documents shall continue in full force and effect from and after the date hereof so long as the Borrowers may borrow hereunder and until termination of the Commitment and payment in full of the Obligations.

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Section 13.03Borrower Representative. Each Subsidiary Borrower does hereby irrevocably make, constitute and appoint the Parent Borrower as its agent and attorney-in-fact for all purposes in connection with the Loan Documents, including, without limitation, with respect to any and all payments, borrowings, disbursements and notices described hereunder. All actions taken by the Agent or the Lenders for the benefit of the Parent Borrower with respect to the matters described above shall be deemed to have been taken for the benefit of each Borrower. The power of attorney granted in this Section 13.03 is coupled with an interest. All actions taken by the Parent Borrower with respect to the matters described above shall be deemed to have been taken on behalf of each Borrower. The Agent and the Lender shall be entitled to rely conclusively upon the status of the Parent Borrower as agent and attorney-in-fact of each Subsidiary Borrower.

Section 13.04No Implied Waiver; Rights Cumulative. No failure or delay on the part of the Agent or any Lender in exercising any right, power or privilege hereunder or under any other Loan Document and no course of dealing between the Borrowers and the Agent or any Lender shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Loan Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein expressly provided are cumulative and not exclusive of any other rights or remedies which the Agent or any Lender would otherwise have. No notice to or demand on the Borrowers in any case shall entitle the Borrowers to any other or further notice or demand in similar or other circumstances or shall constitute a waiver of the right of the Agent or any Lender to take any other or further action in any circumstances without notice or demand.

Section 13.05 Entire Agreement and Amendments.

(a)This Agreement and the other Loan Documents are intended by the parties as the final, complete and exclusive statement of the transactions evidenced by this Agreement. All prior or contemporaneous promises, agreements and understandings, whether oral or written, are deemed to be superceded by this Agreement and the other Loan Documents, and no party is relying on any promise, agreement or understanding not set forth in this Agreement and the other Loan Documents.

(b)This Agreement and the other Loan Documents may not be amended, waived or modified except by a written instrument describing such amendment, waiver or modification executed by Borrowers, Agent and Majority Lenders provided, however, that, unless approved in writing by all the Lenders, no such amendment, waiver or consent shall (i) waive any Event of Default under Section 10.01(a) or (b) hereof, change the amount or maturity date of the principal of, or reduce the rate or extend the time of payment of interest on, any Note, or reduce any fee to be paid to the Lenders, (ii) change the amount of any of the Commitments, (iii) change or affect the definition of “Majority Lenders,” (iv) subordinate the Obligations in right of payment to any other Indebtedness or obligation whatsoever, (v) change or affect any provision of this Section, (vi) waive a Section 10.01(i) Event of Default or release a material part of the Collateral, (vii) release all or substantially all of the Guarantors or (viii) change or affect Section 4.01(f) in a manner that would alter the pro rata sharing of payments among the Lenders.

(c)Any such waiver, consent or approval shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on the Borrowers,

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any Subsidiary or any Guarantor in any case shall entitle the Borrowers, any Subsidiary or any Guarantor to any other or further notice or demand in the same, similar or other circumstances. Each holder of any Note outstanding shall be bound by any modification, waiver, or consent authorized by this Section, whether or not such Note shall have been marked to indicate such modification, waiver or consent.

(d)No waiver by the Agent or any Lender of any breach or default of or by the Borrowers, any Subsidiary or any Guarantor under this Agreement or Loan Document shall be deemed a waiver of any other previous breach or default or any thereafter occurring.

Section 13.06 Successors and Assigns.

(a)Successors Bound. Whenever in this Agreement or any other Loan Document any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Borrowers or the Agent or the Lenders that are contained in such agreement shall bind and inure to the benefit of their respective successors and assigns; provided, however, without the prior written consent of the Lenders, the Borrowers may not assign, or permit or suffer the assignment whether by operation of law or otherwise any of its rights or delegate any of its duties or obligations hereunder.

(b)Participations. With the prior written consent of the Parent Borrower and the Agent, which shall not be unreasonably withheld, any Lender may sell participations to any Person (other than a natural person or the Borrowers or any of the Borrowers’ Affiliates or Subsidiaries) (each a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrowers, the Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender shall not, without the consent of the Participant, agree to any amendment, modification or waiver with respect to the amounts and dates on which the Obligations are due and payable and the release of any material portion of the Collateral. A Lender may furnish any information concerning Borrowers in its possession from time to time to prospective Participants provided that such Lender shall require any such prospective Participant to agree in writing to maintain the confidentiality of such information.

(c)Assignments. Any Lender shall have the right at any time or from time to time, upon the Parent Borrower’s and Agent’s prior written consent, which shall not be unreasonably withheld, to assign all or any portion of its rights and obligations hereunder to one or more Lenders or other financial institutions (each, an “Assignee”), and Borrowers and each Guarantor agrees that it shall execute, or cause to be executed, such documents, including without limitation, amendments to this Agreement and to any other documents, instruments and agreements executed in connection herewith as the Agent shall deem necessary to effect the

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foregoing. In addition, upon request Borrowers shall issue one or more new Notes, as applicable, to any such Assignee and, if the transferor Lender has retained any of its rights and obligations hereunder following such assignment, to such transferor Lender, which new Notes shall be issued in replacement of, but not in discharge of, the liability evidenced by the Note held by such transferor Lender prior to such assignment and shall reflect the amount of the respective commitments and loans held by such Assignee and the transferor Lender after giving effect to such assignment. Upon the execution and delivery of the Assignment and Assumption Agreement in the form attached hereto as Exhibit G and any other documentation required by the Agent in connection with such assignment, and the payment by Assignee of the purchase price agreed to by the transferor Lender, and such Assignee, such Assignee shall be a party to this Agreement and shall have all of the rights and obligations of a Lender hereunder (and under any and all other guaranties, documents, instruments and agreements executed in connection herewith) to the extent that such rights and obligations have been assigned by such transferor Lender pursuant to the assignment documentation between such transferor Lender and such Assignee, and such transferor Lender shall be released from its obligations hereunder and thereunder to a corresponding extent. Borrowers may furnish any information concerning Borrowers in their possession from time to time to prospective Assignees, provided that the transferor Lender shall require any such prospective Assignees to agree in writing to maintain the confidentiality of such information.

(d)Issuance of New Note. Within five (5) Business Days after receipt of an Assignment and Acceptance Agreement, the Borrowers, at their own expense, shall execute and deliver to the Assignee in exchange for the surrendered Note (a) a new Note (or Notes) to the order of the Assignee in an amount equal to its portion of the Commitment and Loans assigned to it pursuant to such Assignment and Acceptance Agreement and (b) a new Note (or Notes) to the order of the transferor Lender in an amount equal to the Commitment and Loans retained by it thereunder. Such Note(s) shall be in an aggregate principal amount equal to the aggregate principal amount of the surrendered Note(s) shall be dated the date of such surrendered Note(s) and shall otherwise be in substantially the form of Exhibit A hereto. Cancelled Notes shall be returned to the Borrowers upon the execution of such new Notes.

(e)Assignment to Federal Reserve Lender. Any Lender may at any time pledge or assign all or any portion of its rights under the Loan Documents including any portion of the promissory note to any of the twelve (12) Federal Reserve Lenders organized under Section 4 of the Federal Reserve Act. 12 U.S.C. Section 341. No such pledge or assignment or enforcement thereof shall release the Lender from its obligations under any of the Loan Documents.

(f)Register. The Agent, acting solely for this purpose as an agent of the Borrowers, shall maintain at one of its offices in the United States a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrowers, the Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrowers and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

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Section 13.07Descriptive Headings. The descriptive headings of the several sections of this Agreement are inserted for convenience only and shall not affect the meaning or construction of any of the provisions hereof.

Section 13.08Governing Law. This Agreement and the rights and obligations of the parties hereunder shall be construed and interpreted in accordance with the laws of the Commonwealth of Pennsylvania (the “Governing State”) (excluding the laws applicable to conflicts or choice of law).

Section 13.09Payments Due on Non-Business Days. If any payment under the Loan Documents becomes due on a day which is not a Business Day, the due date of such payment shall be extended to the next succeeding Business Day, and such extension of time shall be included in computing interest and fees in connection with such payment.

Section 13.10Counterparts. This Agreement and the other Loan Documents may be executed in one or more counterparts, each of which shall constitute an original, but all of which together shall constitute one and the same instrument. Delivery of a photocopy or telecopy of an executed counterpart of a signature page to any Loan Document shall be as effective as delivery of a manually executed counterpart of such Loan Document.

Section 13.11 Maximum Lawful Interest Rate.

(a)All agreements between Borrowers and Guarantor(s) and the Lenders are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of acceleration of maturity of the indebtedness evidenced hereby or otherwise, shall the amount paid or agreed to be paid to the Lenders for the use or the forbearance of the indebtedness evidenced hereby exceed the maximum permissible under applicable law. As used herein, the term “Applicable Law” shall mean the law in effect as of the date hereof; provided, however, that in the event there is a change in the law, which results in a higher permissible rate of interest, then this Agreement shall be governed by such new law as of its effective date. In this regard, it is expressly agreed that it is the intent of Borrowers and the Lenders in the execution, delivery and acceptance of this Agreement to contract in strict compliance with the laws of the Commonwealth of Pennsylvania from time to time in effect. If, under or from any circumstances whatsoever, fulfillment of any provision hereof or of any of the Loan Documents at the time of performance of such provision shall be due, shall involve transcending the limit of such validity prescribed by Applicable Law, then the obligation to be fulfilled shall automatically be reduced to the limits of such validity, and if under or from circumstances whatsoever the Lenders should ever receive as interest an amount which would exceed the highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the principal balance evidenced hereby and not to the payment of interest. This provision shall control every other provision of all agreements between Borrowers, Guarantor(s) and the Lenders.

(b)If, at any time, the rate of interest, together with all amounts which constitute interest and which are reserved, charged or taken by the Lenders as compensation for fees, services or expenses incidental to the making, negotiating or collection of the loan evidenced hereby, shall be deemed by any competent court of law, governmental agency or tribunal to exceed the maximum rate of interest permitted to be charged by the Lenders to Borrowers under applicable law, then, during such time as such rate of interest would be deemed

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excessive, that portion of each sum paid attributable to that portion of such interest rate that exceeds the maximum rate of interest so permitted shall be deemed a voluntary prepayment of principal.

Section 13.12Set-off of Bank Accounts. The Borrowers hereby grant to Agent for the pro rata benefit of the Lenders and their successors and assigns a continuing lien, security interest and right of set-off as security for all Obligations, whether now existing or hereafter arising, upon and against all deposits, credits, collateral and property now or hereafter in the possession, custody, safekeeping or control of any Lender or any entity under common control with any Lender or in transit to any of them. At any time following an Event of Default which is continuing without demand or notice (any such notice being expressly waived by the Borrowers), the Agent and/or such Lender may set-off the same or any part thereof and apply the same to the Obligations of the Borrowers or any Guarantor even though unmatured and regardless of the adequacy of the other Collateral. ALL RIGHTS TO REQUIRE THE AGENT OR ANY LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE LOANS, PRIOR TO EXERCISING ITS RIGHT TO SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWERS, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

Section 13.13Severability. Every provision of the Loan Documents is intended to be severable, and if any term or provision hereof or thereof shall be invalid, illegal or unenforceable for any reason, the validity, legality and enforceability of the remaining provisions hereof or thereof shall not be affected or impaired thereby, and any invalidity, illegality or unenforceability in any jurisdiction shall not affect the validity, legality or enforceability of any such term or provision in any other jurisdiction.

Section 13.14Payment and Reimbursement of Costs and Expenses; Indemnification.

(a)Whether or not any Loans are made, the Borrowers shall, unconditionally upon demand, pay or reimburse the Agent for, and indemnify and save the Agent harmless against, any and all liabilities, losses (including judgments, penalties and fines), costs, expenses, claims, and/or charges (including without limitation reasonable fees and disbursements of legal counsel, accountants, investigators, the reasonable allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees and expenses, and any fees and expenses associated with travel or other costs relating to any appraisals or examinations conduction with the Loans or any Collateral, and other experts, whether or not they are employees of the Agent) (collectively, “Losses”) arising out of, relating to or connected with:

(i)the negotiation, preparation, default, collection, waiver or amendment of any of the Loan Documents, whether or not executed, or any waiver, modification, restatement, reaffirmation, amendment or consent thereunder or thereto;

(ii)the administration of the Loan Documents, including, without limitation, performing audits or investigations or consulting with attorneys or other advisors with respect to any matter in any way arising out of, related to, or connected with, the Loan Documents; and

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(iii)the Agent’s exercise, preservation or enforcement of any of its rights, remedies or options hereunder.

(b)Without limiting the generality of the foregoing paragraph (a), whether or not any Loans are made, the Borrowers shall, unconditionally upon demand, pay or reimburse each Indemnified Person for, and indemnify and save each Indemnified Person harmless against, any and all Losses incurred by such Indemnified Person in connection with, arising out of or in any way relating to:

(i)any claim (whether civil, criminal or administrative and whether sounding in tort, contract or otherwise) arising out of, related to or connected with, the Loan Documents (including, without limitation, related to property subject to Mortgages or Leasehold Mortgages), whether such claim arises or is asserted before or after the date hereof or before or after the Maturity Date (whether such claim is asserted by such Indemnified Person or the Borrowers or any other Person), or

(ii)any investigation, governmental or otherwise, arising out of, related to, or in any way connected with, the Loan Documents or the relationships established thereunder, including the prosecution or defense or investigation thereof and any litigation or proceeding with respect thereto (whether or not, in the case of any such litigation or proceeding, such Indemnified Party is a party thereto);

(iii)protecting, preserving, exercising or enforcing any of the rights of the Agent and the Lenders in, under or related to the Loan Documents;

(iv)all transfer, documentary, stamp and similar taxes, and all recording and filing fees and taxes payable in connection with, arising out of, or in any way related to, the execution, delivery and performance of the Loan Documents or the making of the Loans; and

(v)commissions or claims by or on behalf of brokers, finders or agents not retained by the Lenders; the Borrowers represent that they have not engaged or used any such broker, finder or agent;

except to the extent any of the foregoing is held by a final, non-appealable judgment of a court of competent jurisdiction to have resulted solely and directly from the gross negligence or willful misconduct of such Indemnified Person.

(c)The amount of all of such Losses shall, beginning ten (10) days following notification of the Parent Borrower thereof until paid, bear interest at the rate applicable to Base Rate Loans hereunder (including the Default Rate) and all obligations of Borrowers in respect thereof shall be secured by the Collateral.

Section 13.15Consent to Jurisdiction. For the purpose of any action that may be brought in connection with this Agreement or any Loan Document, the Borrowers hereby consent to the jurisdiction and venue of the courts of the Commonwealth of Pennsylvania or of any federal court located in such state and waives personal service of any and all process upon it and consents that all such service of process be made by certified or registered mail directed to

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such Borrowers at the address provided for in Section 13.01 (Notices) and service so made shall be deemed to be completed on actual receipt. The Borrowers waive the right to contest the jurisdiction and venue of the courts located in the Commonwealth of Pennsylvania on the ground of inconvenience or otherwise and, further, waives any right to bring any action or proceeding against the Lenders in any court outside the City of Philadelphia in the Commonwealth of Pennsylvania. The provisions of this Section shall not limit or otherwise affect the right of the Agent or any Lender to institute and conduct an action in any other appropriate manner, jurisdiction or court.

Section 13.16Termination. This Agreement shall remain in full force and effect until the later of (a) the time that all Obligations shall have been indefeasibly paid in full and (b) the time that there shall be no Commitment; provided, however, that the Borrowers’ expense and indemnification obligations pursuant to Section 13.13 above as well as any liability in connection with any untrue representation or warranty, shall survive such termination.

Section 13.17Waiver of Right to Jury Trial. EACH PARTY MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF THE AGENT OR ANY LENDER RELATING TO THE ADMINISTRATION OF THE LOAN OR ENFORCEMENT OF THE LOAN DOCUMENTS, AND AGREE THAT NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. EXCEPT AS PROHIBITED BY LAW, BORROWERS HEREBY WAIVE ANY RIGHT THEY MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. BORROWERS CERTIFY THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE AGENT OR ANY LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE AGENT OR ANY LENDER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR LENDER TO ACCEPT THIS AGREEMENT AND MAKE THE LOAN.

Section 13.18Confidentiality. The Agent and the Lenders agree to keep confidential all non-public information provided to it by any Loan Party pursuant to this Agreement; provided that nothing herein shall prevent the Agent and the Lenders from disclosing any such information (a) to any Transferee or prospective Transferee that agrees to comply with the provisions of this Section (or executes a confidentiality agreement with confidentiality terms that are substantially similar to the terms of this Section), (b) to any of its employees, directors, agents, attorneys, accountants and other professional advisors), (c) upon the request or demand of any Governmental Authority or self-regulatory body having or claiming to have jurisdiction over it, (d) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any requirement of law, (e) if requested or required to do so in connection with any litigation or similar proceeding to which it is a party (so long as the

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pertinent Loan Party is given a reasonable opportunity to seek a protective order to safeguard such information), or (f) in connection with the exercise of any remedy hereunder or under any other Loan Document. Notwithstanding any other express or implied agreement, arrangement or understanding to the contrary, each of the parties hereto hereby agree that, each party hereto (and each of its employees, representatives or agents) are permitted to disclose to any and all persons, without limitation, the tax treatment and tax aspects of the Loans and the other transactions contemplated hereby, and all materials of any kind (including opinions or other tax analyses) that are provided to the Loan Parties or the Agent and the Lenders, related to such tax treatment and tax aspects. To the extent not inconsistent with the immediately preceding sentence, this authorization does not extend to disclosure of any other information or any other term or detail not related to the tax treatment or tax aspects of the Loans or the other transactions contemplated hereby.

Section 13.19USA Patriot Act. Each Lender that is subject to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”) hereby notifies the Borrowers that, pursuant to the requirements of the Act, it is required to obtain, verify and record information that identifies each Borrower, which information includes the name and address of each Borrower and other information that will allow such Lender to identify such Borrower in accordance with the Act.

[the next pages are the signature pages]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or caused it to be executed by their duly authorized officers, all as of the day and year first above written.

Parent Borrower:
SL INDUSTRIES, INC.
By:	/s/ David R. Nuzzo
	Name: David R. Nuzzo
	Title: Vice President, Finance & Administration, Secretary and Finance & Treasurer
	Phone: (856) 222-5515
	Fax: (856) 727-1683
	E-Mail: david.nuzzo@slindustries.com
Subsidiary Borrowers:

CEDAR CORPORATION
CONDOR D.C. POWER SUPPLIES, INC.
CONDOR HOLDINGS, INC.
RFL ELECTRONICS INC.
SL AUBURN, INC.
SL DELAWARE, INC.
SL DELAWARE HOLDINGS, INC.
SL SURFACE TECHNOLOGIES, INC.
SL MONTEVIDEO TECHNOLOGY, INC.
SLW HOLDINGS, INC.
TEAL ELECTRONICS CORPORATION
WABER POWER, LTD
By:	/s/ David R. Nuzzo
	Name: David R. Nuzzo
	Title: Authorized Officer
See contact information above

[signature page for Credit Agreement]

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Agent and Lender:
BANK OF AMERICA, N.A.
By:	/s/ Henry Bullit
	Name: Henry Bullitt
	Title: Senior Vice President
	Mail Stop: PA7-188-11-01
	1600 John F. Kennedy Blvd.
	4 Penn Center, Suite 1100
	Philadelphia, PA 19103
	Phone: 267-675-0194
	Fax: 267-675-0219
	E-Mail:henry.bullitt@bankofamerica.com
Wire Transfer Information:
ABA #
G/L AC/#
RE:
Att:

[signature page for Credit Agreement]

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