10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-4987

SL INDUSTRIES, INC.

(Exact Name of Registrant as Specified in Its Charter)

New Jersey	21-0682685
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
520 Fellowship Road, Suite A114, Mt. Laurel, NJ	08054
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: 856-727-1500

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer o	Accelerated filer o	Non-accelerated filer o	Smaller reporting Company þ
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o No þ

The number of shares of common stock outstanding as of November 1, 2010 was 4,729,699.

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets September 30, 2010 (Unaudited) and December 31, 2009		1
Consolidated Statements of Income and Comprehensive Income Three Months Ended September 30, 2010 and 2009 (Unaudited) and Nine Months Ended September 30, 2010 and 2009 (Unaudited)		2
Consolidated Statements of Cash Flows Nine Months Ended September 30, 2010 and 2009 (Unaudited)		3
Notes to Consolidated Financial Statements (Unaudited)		4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3. Quantitative and Qualitative Disclosures about Market Risk		36
Item 4. Controls and Procedures		36
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		37
Item 1A. Risk Factors		37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		38
Item 3. Defaults upon Senior Securities		38
Item 5. Other Information		38
Item 6. Exhibits		39
Signatures		40
Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 10.4
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

Item 1. Financial Statements

SL INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,
	2010			2009
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	10,857,000		$	9,967,000
Receivables, net		31,666,000			22,388,000
Inventories, net		21,492,000			18,815,000
Prepaid expenses		2,149,000			685,000
Deferred income taxes, net		4,752,000			4,058,000
Total current assets		70,916,000			55,913,000
Property, plant and equipment, net		8,970,000			9,274,000
Deferred income taxes, net		4,316,000			5,331,000
Goodwill		22,761,000			22,769,000
Other intangible assets, net		4,236,000			4,939,000
Other assets and deferred charges, net		1,023,000			1,225,000
Total assets	$	112,222,000		$	99,451,000
LIABILITIES
Current liabilities:
Accounts payable	$	13,960,000		$	10,208,000
Accrued income taxes		1,324,000			830,000
Accrued liabilities:
Payroll and related costs		6,224,000			3,482,000
Other		9,028,000			6,329,000
Total current liabilities		30,536,000			20,849,000
Deferred compensation and supplemental retirement benefits		2,250,000			2,365,000
Other liabilities		6,782,000			7,137,000
Total liabilities		39,568,000			30,351,000
Commitments and contingencies
SHAREHOLDERS’ EQUITY
Preferred stock, no par value; authorized, 6,000,000 shares; none issued	$	—		$	—
Common stock, $0.20 par value; authorized, 25,000,000 shares; issued, 8,298,000 shares		1,660,000			1,660,000
Capital in excess of par value		43,252,000			43,027,000
Retained earnings		46,269,000			42,071,000
Accumulated other comprehensive (loss)		(118,000	)		(141,000	)
Treasury stock at cost, 2,234,000, and 2,166,000 shares, respectively		(18,409,000	)		(17,517,000	)
Total shareholders’ equity		72,654,000			69,100,000
Total liabilities and shareholders’ equity	$	112,222,000		$	99,451,000

See accompanying notes to consolidated financial statements.

1

SL INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2010			2009			2010			2009
Net sales	$	49,141,000		$	36,379,000		$	139,064,000		$	107,568,000
Cost and expenses:
Cost of products sold		33,120,000			23,921,000			93,842,000			71,825,000
Engineering and product development		3,386,000			2,813,000			9,567,000			9,037,000
Selling, general and administrative		8,756,000			6,452,000			24,697,000			21,229,000
Depreciation and amortization		709,000			794,000			2,281,000			2,611,000
Restructuring charges		—			16,000			—			550,000
Total cost and expenses		45,971,000			33,996,000			130,387,000			105,252,000
Income from operations		3,170,000			2,383,000			8,677,000			2,316,000
Other income (expense):
Amortization of deferred financing costs		(61,000	)		(68,000	)		(182,000	)		(163,000	)
Fire related loss, net		(1,000	)		—			(109,000	)		—
Interest income		1,000			1,000			2,000			7,000
Interest expense		(7,000	)		(18,000	)		(49,000	)		(64,000	)
Income from continuing operations before income taxes		3,102,000			2,298,000			8,339,000			2,096,000
Income tax provision		777,000			422,000			2,675,000			322,000
Income from continuing operations		2,325,000			1,876,000			5,664,000			1,774,000
(Loss) from discontinued operations, net of tax		(267,000	)		(157,000	)		(1,466,000	)		(440,000	)
Net income	$	2,058,000		$	1,719,000		$	4,198,000		$	1,334,000
Basic net income (loss) per common share
Income from continuing operations	$	0.38		$	0.31		$	0.93		$	0.30
(Loss) from discontinued operations, net of tax		(0.04	)		(0.03	)		(0.24	)		(0.07	)
Net income	$	0.34		$	0.28		$	0.69		$	0.22	*
Diluted net income (loss) per common share
Income from continuing operations	$	0.38		$	0.31		$	0.93		$	0.30
(Loss) from discontinued operations, net of tax		(0.04	)		(0.03	)		(0.24	)		(0.07	)
Net income	$	0.34		$	0.28		$	0.69		$	0.22	*
Shares used in computing basic net income (loss) per common share		6,043,000			6,036,000			6,065,000			5,991,000
Shares used in computing diluted net income (loss) per common share		6,079,000			6,050,000			6,100,000			5,996,000

SL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2010		2009		2010		2009
Net income	$	2,058,000	$	1,719,000	$	4,198,000	$	1,334,000
Other comprehensive income, net of tax:
Foreign currency translation		32,000		14,000		23,000		5,000
Comprehensive income	$	2,090,000	$	1,733,000	$	4,221,000	$	1,339,000

* Earnings per share does not total due to rounding.

See accompanying notes to consolidated financial statements.

2

SL INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30,

(Unaudited)

	2010			2009
OPERATING ACTIVITIES
Net income	$	4,198,000		$	1,334,000
Adjustment for losses from discontinued operations		1,466,000			440,000
Income from continuing operations		5,664,000			1,774,000
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Depreciation		1,399,000			1,601,000
Amortization		882,000			1,010,000
Amortization of deferred financing costs		182,000			163,000
Non-cash fire related loss		(151,000	)		—
Non-cash restructuring		—			5,000
Non-cash compensation expense (benefit)		92,000			(43,000	)
Stock-based compensation		91,000			187,000
Provisions for losses on accounts receivable		15,000			67,000
Deferred compensation and supplemental retirement benefits		293,000			300,000
Deferred compensation and supplemental retirement benefit payments		(403,000	)		(614,000	)
Deferred income taxes		433,000			(242,000	)
(Gain) loss on sale of equipment		(2,000	)		38,000
Changes in operating assets and liabilities:
Accounts receivable		(9,294,000	)		3,409,000
Inventories		(2,836,000	)		1,997,000
Prepaid expenses		(764,000	)		85,000
Other assets		19,000			47,000
Accounts payable		3,747,000			(2,116,000	)
Accrued liabilities		2,969,000			(1,966,000	)
Accrued income taxes		1,404,000			928,000
Net cash provided by operating activities from continuing operations		3,740,000			6,630,000
Net cash (used in) operating activities from discontinued operations		(934,000	)		(1,529,000	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		2,806,000			5,101,000
INVESTING ACTIVITIES
Purchases of property, plant and equipment		(1,037,000	)		(720,000	)
Purchases of other assets		(254,000	)		(68,000	)
NET CASH (USED IN) INVESTING ACTIVITIES		(1,291,000	)		(788,000	)
FINANCING ACTIVITIES
Payments of deferred financing costs		—			(250,000	)
Proceeds from Revolving Credit Facility		—			100,000
Payments of Revolving Credit Facility		—			(100,000	)
Proceeds from stock options exercised		726,000			—
Tax benefit from exercise of stock options		146,000			—
Treasury stock (purchases) sales, net		(1,630,000	)		288,000
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(758,000	)		38,000
Effect of exchange rate changes on cash		133,000			12,000
NET CHANGE IN CASH AND CASH EQUIVALENTS		890,000			4,363,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		9,967,000			504,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	10,857,000		$	4,867,000
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest	$	49,000		$	64,000
Income taxes	$	1,251,000		$	174,000

See accompanying notes to consolidated financial statements.

3

SL INDUSTRIES, INC.

Notes to Consolidated Financial Statements (Unaudited)

1. Basis Of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying financial statements contain all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation. Operating results for interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2010. These financial statements should be read in conjunction with the Company’s audited financial statements and notes thereon included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

2. Receivables

Receivables consist of the following:

	September 30,			December 31,
	2010			2009
	(in thousands)
Trade receivables	$	31,420		$	22,607
Less: allowance for doubtful accounts		(666	)		(651	)
		30,754			21,956
Recoverable income taxes		130			—
Other		782			432
	$	31,666		$	22,388

3. Inventories

Inventories consist of the following:

	September 30,			December 31,
	2010			2009
	(in thousands)
Raw materials	$	15,817		$	15,234
Work in process		4,677			3,534
Finished goods		3,570			3,368
		24,064			22,136
Less: allowances		(2,572	)		(3,321	)
	$	21,492		$	18,815

4

4. Income Per Share

The Company has presented net income per common share pursuant to Accounting Standards Codification (“ASC”) 260 “Earnings Per Share.” Basic net income per common share is computed by dividing reported net income available to common shareholders by the weighted average number of shares outstanding for the period.

Diluted net income per common share is computed by dividing reported net income available to common shareholders by the weighted average shares outstanding for the period, adjusted for the dilutive effect of common stock equivalents, which consist of stock options, using the treasury stock method.

The tables below set forth the computation of basic and diluted net income per share:

	Three Months Ended September 30,
	2010						2009
	(in thousands, except per share amounts)
	Net				Per Share		Net				Per Share
	Income		Shares		Amount		Income		Shares		Amount
Basic net income per common share	$	2,058		6,043	$	0.34	$	1,719		6,036	$	0.28
Effect of dilutive securities		—		36		—		—		14		—
Diluted net income per common share	$	2,058		6,079	$	0.34	$	1,719		6,050	$	0.28

	Nine Months Ended September 30,
	2010						2009
	(in thousands, except per share amounts)
	Net				Per Share		Net				Per Share
	Income		Shares		Amount		Income		Shares		Amount
Basic net income per common share	$	4,198		6,065	$	0.69	$	1,334		5,991	$	0.22
Effect of dilutive securities		—		35		—		—		5		—
Diluted net income per common share	$	4,198		6,100	$	0.69	$	1,334		5,996	$	0.22

For the nine-month periods ended September 30, 2010 and September 30, 2009, approximately 191,000 and 254,000 stock options, respectively, were excluded from the dilutive computations because the option exercise prices were greater than the average market price of the Company’s common stock.

Stock-Based Compensation

The Company maintains two shareholder approved stock option plans that have expired: the Non-Employee Director Nonqualified Stock Option Plan (the “Director Plan”) and the Long-Term Incentive Plan (the “1991 Incentive Plan”). Stock options issued under each plan remain outstanding.

5

The Director Plan provided for the granting of nonqualified options to purchase up to 250,000 shares of the Company’s common stock to non-employee directors of the Company in lieu of paying quarterly retainer fees and regular quarterly meeting attendance fees. Stock options granted under the Director Plan stipulated an exercise price per share of the fair market value of the Company’s common stock on the date of grant. Each option granted under the Director Plan is exercisable at any time and expires ten years from date of grant. The expiration date of the Director Plan was May 31, 2003.

The 1991 Incentive Plan enabled the Company to grant either nonqualified options, with an exercise price per share established by the Compensation Committee (the “Compensation Committee”) of the Company’s Board of Directors (the “Board”), or incentive stock options, with an exercise price per share not less than the fair market value of the Company’s common stock on the date of grant. Each option granted under the 1991 Incentive Plan is exercisable at any time and expires ten years from the date of grant. The 1991 Incentive Plan expired on September 25, 2001.

On May 14, 2008, the shareholders approved the 2008 Incentive Stock Plan (the “2008 Plan”). The 2008 Plan was proposed to create an additional incentive to retain directors, key employees and advisors of the Company. The 2008 Plan provides up to 315,000 shares of the Company’s common stock that may be subject to options and stock appreciation rights. Options granted under the 2008 Plan are required to stipulate an exercise price per share of not less than the fair market value of the Company’s common stock on the business day immediately prior to the date of the grant. Options granted under the 2008 Plan are exercisable no later than ten years after the grant date.

On September 29, 2008, the Company granted 155,000 incentive options to select executives and a key employee under the 2008 Plan. The options issued vest in three equal installments, with the first installment vesting on the date of the grant and the remaining two installments each vesting on the second and third anniversary of the grant. During the three-month period ended June 30, 2010, two sets of options were issued to executives of the Company. One set of options was for 15,000 shares. The other set of options was for 100,000 shares. During the three-month period ended September 30, 2010, the Company granted an option to purchase up to 25,000 shares of common stock. Vesting periods range from a portion vesting upon issue to three years. Compensation expense is recognized over the vesting period of the options. Two sets of options totaling 135,000 shares were forfeited during the three-month period ending September 30, 2010. In recognition of such grants and forfeitures, the Company recorded $90,000 in compensation benefit for the three-month period ended September 30, 2010 and $63,000 in compensation expense for the three-month period ended September 30, 2009. The Company recorded $91,000 in compensation expense for the nine-month period ended September 30, 2010 and $187,000 in compensation expense for the nine-month period ended September 30, 2009.

As of September 30, 2010, there was a total of $785,000 of total unrecognized compensation expense related to the unvested stock options. Such unrecognized cost will be recorded over the next three years. Also, the Company has recognized income of $1,000 and an expense of $35,000 in the three-month periods ended September 30, 2010 and September 30, 2009, respectively, and an expense of $92,000 and a benefit of $43,000 in the nine-month periods ended September 30, 2010 and September 30, 2009, respectively, related to certain stock-based compensation arrangements.

6

The following table summarizes stock option activity for all plans:

	Outstanding			Weighted Average		Weighted Average		Aggregate Intrinsic
	Options			Exercise Price		Remaining Life		Value
	(in thousands)							(in thousands)
Outstanding as of December 31, 2009		380		$	10.13		3.48
Granted		140		$	12.00
Exercised		(102	)	$	7.11
Forfeited		(142	)	$	12.77
Expired		(33	)	$	11.20
Outstanding as of September 30, 2010		243		$	10.78		4.82	$	781
Exercisable as of September 30, 2010		110		$	9.38		2.56	$	510

During the nine-month periods ended September 30, 2010 and September 30, 2009, the total intrinsic value of options exercised was $516,000 and zero, respectively, and the actual tax benefit realized for the tax deduction from these option exercises was $146,000 and zero, respectively. During the nine-month period ended September 30, 2010, options to purchase approximately 102,000 shares of common stock with an aggregate exercise price of $726,000 were exercised by option holders. During the nine-month period ended September 30, 2009, no options to purchase common stock were exercised by option holders.

5. Income Tax

The Company calculates its interim tax provision in accordance with the provisions of ASC 740-270 “Income Taxes — Interim Reporting.” For each interim period the Company estimates its annual effective income tax rate and applies the estimated rate to its year-to-date income or loss before income taxes. The Company also computes the tax provision or benefit related to items separately reported, such as discontinued operations, and recognizes the items net of their related tax effect in the interim periods in which they occur. The Company also recognizes the effect of changes in enacted tax laws or rates in the interim periods in which the changes occur.

For the nine-month periods ended September 30, 2010 and September 30, 2009, the estimated income tax rate for continuing operations was 32% and 15%, respectively. The lower effective tax rate in 2009 was due to research and development tax credits recorded and lower income from continuing operations.

The Company has recorded gross unrecognized tax benefits, excluding interest and penalties, as of September 30, 2010 and December 31, 2009 of $2,175,000 and $2,526,000, respectively. Tax benefits are recorded pursuant to the provisions of ASC 740 “Income Taxes.” If such unrecognized tax benefits are ultimately recorded in any period, the Company’s effective tax rate would be reduced accordingly for such period.

The Company has been examined by the Internal Revenue Service (the “IRS”) for periods up to and including the calendar year 2004. In addition, a foreign tax authority is examining the Company’s transfer pricing policies. It is possible that this examination may be resolved within twelve months. In addition, it is reasonably possible that the balance of the Company’s unrecognized tax benefits may change within the next twelve months by an amount ranging from zero to $434,000. The Company records such unrecognized tax benefits upon the expiration of the applicable statute of limitations. The Company recorded a liability for unrecognized benefits of $581,000, $929,000 and $665,000 for federal, foreign and state taxes, respectively. Such benefits relate primarily to expenses incurred in those jurisdictions.

7

The Company classifies interest and penalties related to unrecognized tax benefits as income tax expense. At September 30, 2010, the Company has accrued approximately $513,000 for the payment of interest and penalties.

During the nine-month period ended September 30, 2010, the Company recorded additional benefits from research and development tax credits of $463,000. As of September 30, 2010, the Company’s gross research and development tax credit carryforwards totaled approximately $1,508,000. Of these credits, approximately $890,000 can be carried forward for 15 years and will expire between 2013 and 2025, and approximately $618,000 can be carried forward indefinitely. As of September 30, 2010, the Company’s gross foreign tax credits totaled approximately $2,493,000. These credits can be carried forward for ten years and will expire between 2017 and 2020.

6. Recently Adopted and Issued Accounting Pronouncements

In October 2009, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update No. 2009-13 “Multiple-Deliverable Revenue Arrangements” (“ASU No. 2009-13”). ASU No. 2009-13 amends guidance included within ASC 605-25 to require an entity to use an estimated selling price when vendor specific objective evidence or acceptable third party evidence does not exist for any products or services included in a multiple-element arrangement. The arrangement consideration should be allocated among the products and services based upon their relative selling prices, thus eliminating the use of the residual method of allocation. ASU No. 2009-13 also requires expanded qualitative and quantitative disclosures regarding significant judgments made and changes in applying this guidance. ASU No. 2009-13 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption and retrospective application are also permitted. The Company has one minor contract related to Multiple-Deliverable Revenue Arrangements and infrequently enters into such arrangements. The Company believes that adoption of the provisions of ASU No. 2009-13 will not have a material impact on its consolidated financial statements.

In October 2009, the FASB issued ASU No. 2009-14 “Certain Revenue Arrangements That Include Software Elements.” ASU No. 2009-14 amends guidance included within ASC 985-605 to exclude tangible products containing software components and non-software components that function together to deliver the product’s essential functionality. Entities that sell joint hardware and software products that meet this scope exception will be required to follow the guidance of ASU No. 2009-13. ASU No. 2009-14 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption and retrospective application are also permitted. The Company believes that the adoption of the provisions of ASU No. 2009-14 will not have a material impact on its consolidated financial statements.

8

In January 2010, the FASB issued ASU No. 2010-06 “Improving Disclosures about Fair Value Measurements.” ASU No. 2010-06 amends ASC 820 “Fair Value Measures and Disclosures” to require disclosure of transfers into and out of Level 1 and Level 2 fair value measurements, and also require more detailed disclosure about the activity within Level 3 fair value measurements. The Company adopted the guidance in ASU No. 2010-06 on January 1, 2010, except for the requirements related to Level 3 disclosures, which will be effective for annual and interim reporting periods beginning after December 15, 2010. This guidance requires expanded disclosures only. The Company believes that the adoption of the provisions of ASU No. 2010-06 will not have a material impact on its consolidated financial statements.

In February 2010, the FASB issued ASU No. 2010-09 “Subsequent Events — Amendments to Certain Recognition and Disclosure Requirements,” which amends ASC 855 “Subsequent Events.” ASU No. 2010-09 requires an entity that is an SEC filer to evaluate subsequent events through the date that the financial statements are issued and removes the requirement that an SEC filer disclose the date through which subsequent events have been evaluated. ASU No. 2010-09 was effective upon issuance. The adoption of the provisions of ASU No. 2010-09 did not have a material impact on the Company’s consolidated financial statements.

In April 2010, the FASB issued ASU No. 2010-13 “Compensation — Stock Compensation — Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades.” ASU No. 2010-13 provides amendments to ASC 718 to clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The amendments in ASU No. 2010-13 are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The Company believes that the adoption of the provisions of ASU No. 2010-13 will not have a material impact on its consolidated financial statements.

7. Goodwill And Intangible Assets

Goodwill and intangible assets consist of the following:

	September 30, 2010						December 31, 2009
			Accumulated						Accumulated
	Gross Value		Amortization		Net Value		Gross Value		Amortization		Net Value
	(in thousands)
Goodwill	$	22,761	$	—	$	22,761	$	22,769	$	—	$	22,769
Other intangible assets:
Customer relationships		3,700		1,952		1,748		3,700		1,570		2,130
Patents		1,244		1,093		151		1,271		1,053		218
Trademarks		1,672		—		1,672		1,672		—		1,672
Developed technology		1,700		1,168		532		1,700		940		760
Licensing fees		355		222		133		355		196		159
Covenant-not-to-compete		100		100		—		100		100		—
Other		51		51		—		51		51		—
Total other intangible assets		8,822		4,586		4,236		8,849		3,910		4,939
	$	31,583	$	4,586	$	26,997	$	31,618	$	3,910	$	27,708

9

In accordance with ASC 350 “Intangibles — Goodwill and Other,” goodwill and other indefinite-lived intangible assets are not amortized, but are tested for impairment. Such impairment testing is undertaken annually, or more frequently upon the occurrence of some indication that an impairment has taken place. The Company conducted an annual impairment test as of December 31, 2009.

A two-step process is utilized to determine if goodwill has been impaired. In the first step, the fair value of each reporting unit is compared to the net asset value recorded for such unit. If the fair value exceeds the net asset value, the goodwill of the reporting unit is not adjusted. However, if the recorded net asset value exceeds the fair value, the Company performs a second step to measure the amount of impairment loss, if any. In the second step, the implied fair value of the reporting unit’s goodwill is compared with the goodwill recorded for such unit. If the recorded amount of goodwill exceeds the implied fair value, an impairment loss is recognized in the amount of the excess.

For the testing conducted as of December 31, 2009, the Company concluded that no impairment charge was warranted. Going forward there can be no assurance that economic conditions or other events may not have a negative material impact on the long-term business prospects of any of the Company’s reporting units. In such case, the Company may need to record an impairment loss, as stated above. The next annual impairment test will be conducted as of December 31, 2010.

Management has not identified any triggering events, as defined by ASC 350, during 2010. Accordingly, no interim impairment test has been performed.

The other intangible assets that have definite lives are all amortizable and have original estimated useful lives as follows: customer relationships are amortized over approximately six years and eight years; patents are amortized over a range from five to 20 years; developed technology is amortized over approximately five years and six years; and licensing fees are amortized over approximately 10 years. Covenants-not-to-compete were amortized over approximately one and two-thirds years, prior to their expiration. Trademarks are not amortized. Amortization expense for intangible assets for each of the three-month periods ended September 30, 2010 and September 30, 2009 was $225,000. Amortization expense for intangible assets for each of the nine-month periods ended September 30, 2010 and September 30, 2009 was $676,000 and $679,000, respectively. Amortization expense for intangible assets subject to amortization in each of the next five fiscal years is estimated to be: $865,000 in 2011, $715,000 in 2012, $386,000 in 2013, $347,000 in 2014 and $4,000 in 2015. Intangible assets subject to amortization have a weighted average life of approximately seven years.

Changes in goodwill balances by segment (defined below) are as follows:

	Balance					Balance
	December 31,		Change in			September 30,
	2009		Goodwill			2010
	(in thousands)
SL Power Electronics Corp.	$	4,276	$	(8	)	$	4,268
High Power Group:
Teal Electronics Corp.		5,055		—			5,055
MTE Corporation		8,189		—			8,189
RFL Electronics Inc.		5,249		—			5,249
Total	$	22,769	$	(8	)	$	22,761

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8. Debt

On October 23, 2008, the Company and certain of its subsidiaries entered into an Amended and Restated Revolving Credit Facility (the “2008 Credit Facility”) with Bank of America, N.A., a national banking association, individually, as agent, issuer and a lender thereunder, and the other financial institutions party thereto. The 2008 Credit Facility was reset and amended during the third quarter of 2009.

The 2008 Credit Facility, as amended, provides for maximum borrowings of up to $40,000,000 and includes a standby and commercial letter of credit sub-limit of $10,000,000. The 2008 Credit Facility is scheduled to expire on October 1, 2011, unless earlier terminated by the agent thereunder following an event of default. Borrowings under the 2008 Credit Facility bear interest, at the Company’s option, at the British Bankers Association LIBOR rate plus 1.75% to 3.25%, or an alternative rate, 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, plus a margin rate ranging from 0% to 1.0%. The margin rates are based on certain leverage ratios, as provided in the facility documents. The Company is subject to compliance with certain financial covenants set forth in the 2008 Credit Facility, including a maximum ratio of total funded indebtedness to EBITDA (as defined), minimum levels of interest coverage and net worth and limitations on capital expenditures, as defined. Availability under the 2008 Credit Facility is based upon the Company’s trailing twelve month EBITDA, as defined.

As of the date hereof, September 30, 2010 and December 31, 2009, the Company had no outstanding balance under the 2008 Credit Facility. At September 30, 2010, the Company had a total availability thereunder of $39,500,000.

The Company’s obligations under the 2008 Credit Facility are secured by the grant of security interests in substantially all of its assets.

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9. Accrued Liabilities — Other

Accrued liabilities — other consist of the following:

	September 30,		December 31,
	2010		2009
	(in thousands)
Taxes (other than income) and insurance	$	690	$	209
Commissions		913		744
Litigation and legal fees		357		96
Other professional fees		612		674
Environmental		2,550		1,355
Warranty		1,305		1,373
Deferred revenue		97		28
Other		2,504		1,850
	$	9,028	$	6,329

A liability is established for estimated future warranty and service claims that relate to current and prior period sales. The Company estimates warranty costs based on historical claim experience and other factors including evaluating specific product warranty issues. The following is a summary of activity in accrued warranty and service liabilities:

	Nine Months Ended
	September 30, 2010
	(in thousands)
Liability, beginning of year	$	1,373
Expense for new warranties issued		426
Expense related to prior year warranties		8
Warranty claims		(502	)
Liability, end of period	$	1,305

10. Commitments And Contingencies

In the ordinary course of its business, the Company is subject to loss contingencies pursuant to foreign and domestic federal, state and local governmental laws and regulations and is also party to certain legal actions, which may occur in the normal operations of the Company’s business.

It is management’s opinion that the impact of legal actions brought against the Company and its operations will not have a material adverse effect on its consolidated financial position or results of operations. However, the ultimate outcome of these matters, as with litigation generally, is inherently uncertain, and it is possible that some of these matters may be resolved adversely to the Company. The adverse resolution of any one or more of these matters could have a material adverse effect on the business, operating results, financial condition or cash flows of the Company.

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Environmental Matters: Loss contingencies include potential obligations to investigate and eliminate or mitigate the effects on the environment of the disposal or release of certain chemical substances at various sites, such as Superfund sites and other facilities, whether or not they are currently in operation. The Company is currently participating in environmental assessments and cleanups at a number of sites under these laws and may in the future be involved in additional environmental assessments and cleanups. Based upon investigations completed to date by the Company and its independent engineering-consulting firms, management has provided an estimated accrual for all known costs believed to be probable in the amount of $7,078,000, of which $4,528,000 is included as other long-term liabilities as of September 30, 2010. However, it is the nature of environmental contingencies that other circumstances might arise, the costs of which are indeterminable at this time due to such factors as changing government regulations and stricter standards, the unknown magnitude of defense and cleanup costs, the unknown timing and extent of the remedial actions that may be required, the determination of the Company’s liability in proportion to other responsible parties, and the extent, if any, to which such costs are recoverable from other parties or from insurance. These contingencies could result in additional expenses or judgments, or offsets thereto. At the present time such expenses or judgments are not expected to have a material adverse effect on the Company’s consolidated financial position or results of operations, beyond the amount already reserved. Most of the Company’s environmental costs relate to discontinued operations and such costs have been recorded in discontinued operations.

The Company is the subject of administrative actions that arise from its ownership of SL Surface Technologies, Inc. (“SurfTech”), a wholly-owned subsidiary, the assets of which were sold in November 2003. SurfTech once operated chrome-plating facilities in Pennsauken Township, New Jersey (the “Pennsauken Site”) and Camden, New Jersey (the “Camden Site”).

In 2006 the United States Environmental Protection Agency (the “EPA”) named the Company as a potential responsible party (a “PRP”) in connection with the remediation of the Puchack Wellfield, which has been designated as a Superfund Site. The EPA has alleged that hazardous substances generated at the Pennsauken Site contaminated the Puchack Wellfield. As a PRP, the Company is potentially liable, jointly and severally, for the investigation and remediation of the Puchack Wellfield Superfund Site under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”).

The EPA is remediating the Puchack Wellfield Superfund Site in two separate operable units. The first operable unit consists of an area of chromium groundwater contamination that exceeds the selected cleanup standard of 70 parts per billion (“OU-1”). The second operable unit pertains to sites that are allegedly the sources of contamination for the first operable unit (“OU-2”).

In September 2006, the EPA issued a Record of Decision that selected a remedy for OU-1 to address the groundwater contamination. The estimated cost of the EPA selected remedy for OU-1, to be conducted over a five to ten year timeframe, is approximately $17,600,000, as stated in the Record of Decision. In an October 2010 meeting with the EPA, the EPA informed the Company that the OU-1 remedy will be implemented in two phases. The EPA stated that the estimated cost to complete the first phase would exceed $12,000,000. The EPA also stated that the estimated cost to complete the second phase was unknown, but could be equal to or in excess of $12,000,000. Therefore, the original estimated cost of $17,600,000 to complete the OU-1 remedy could increase. Prior to the issuance of the EPA’s Record of Decision, the Company had retained an experienced environmental consulting firm to prepare technical comments on the EPA’s proposed remediation of the Puchack Wellfield Superfund Site. In those comments, the Company’s consultant, among other things, identified flaws in the EPA’s conclusions and the factual predicates for certain of the EPA’s decisions and for the proposed selected remedy.

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Following the issuance of its Record of Decision, in November 2006, the EPA sent another letter to the Company encouraging the Company to either perform or finance the remedial actions for OU-1 identified in the EPA’s Record of Decision. In addition to paying for the OU-1 remediation, the EPA has sought payment of the past costs that EPA has allegedly incurred. In February 2007, the EPA sent another letter to the Company demanding reimbursement for past costs of approximately $11,500,000, which has been contested by the Company. The Company responded to the EPA that it is willing to investigate the existence of other PRPs and to undertake the activities necessary to design a final remediation for the Superfund Site. In July 2007, the EPA refused the Company’s offer to perform the work necessary to design the remediation plan without first agreeing to assume responsibility for the full remediation of the Superfund Site. The EPA did encourage the Company to investigate the existence of other PRPs and to submit evidence thereof, if appropriate. In January 2008, the Company submitted to the EPA evidence demonstrating the existence of several other PRPs. In an October 2010 meeting with EPA, EPA informed the Company that the EPA’s past costs have increased and are currently approximately $17,000,000.

The EPA is performing investigations relating to OU-2 of the Puchack Wellfield Superfund Site. In an October 2010 meeting with EPA, EPA informed the Company that it did not have an estimate of proposed OU-2 costs at that time. The EPA has not adopted a Record of Decision for OU-2. The Company is currently engaged in discussions with representatives of the EPA and the Department of Justice with respect to the Puchack Wellfield Superfund Site.

Notwithstanding the assertions of the EPA, based on discussions with its attorneys and consultants, the Company believes the EPA analytical effort is far from complete. Further, technical data has not established that offsite migration of hazardous substances from the Pennsauken Site caused the contamination of the Puchack Wellfield Superfund Site. In any event, the Company believes the evidence establishes that hazardous substances from the Pennsauken Site could have, at most, constituted only a small portion of the total contamination delineated in the vicinity of the Puchack Wellfield Superfund Site. There are other technical factors and defenses that indicate that the remediation proposed by the EPA is technically flawed. Based on the foregoing, the Company believes that it has significant defenses against the EPA claims and that other PRPs should be identified to support the ultimate cost of remediation. Nevertheless, the Company’s attorneys have advised that it is likely that it will incur some liability in this matter. Based on the information so far, the Company has estimated remediation liability for this matter of $4,000,000 ($2,480,000, net of tax), which was reserved and recorded as part of discontinued operations in the fourth quarter of 2006. This amount is included in the total environmental accrual stated below. In addition, the Company’s attorneys have advised it that based on statutory and regulatory changes and the second operable unit investigations, the Pennsauken Site will likely have to undergo additional remediation. The Company has retained environmental consultants to determine what, if any, measures must be undertaken to achieve full compliance. There can be no assurance as to what will be the ultimate resolution or exposure to the Company for this matter.

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With respect to the Camden Site, the Company has reported soil contamination and a groundwater contamination plume emanating from the site. The Company has been conducting tests and taking other actions to identify and quantify the contamination and to confirm areas of concern. In the third quarter of 2009, pursuant to an Interim Response Action (“IRA”) Workplan approved by the New Jersey Department of Environmental Protection, the Company completed building demolition and excavated and disposed of some of the contaminated soil underlying the building’s foundation. Treatability studies for in-situ remediation of the remaining unsaturated contaminated soil were completed in 2009. Implementation of a pilot study to remediate contaminated soils in-situ based on the treatability studies have commenced in October 2010. Treatability studies for the in-situ remediation of the groundwater contamination at the Camden Site were also conducted in 2009, with another one completed in 2010. Implementation of a pilot study to remediate contaminated groundwater is scheduled to commence in 2011. The Company reserved $2,250,000 during the last two quarters of 2008 to meet the anticipated expenses of implementing the IRA Workplan and field pilot studies and conducting routine groundwater monitoring. During the second quarter of 2010, the Company reviewed the most recent cost studies prepared by its environmental consultants and recorded an additional $1,273,000 reserve related to the Camden Site. At September 30, 2010, the Company had an accrual of $2,415,000 to remediate the Camden Site.

As of September 30, 2010 and December 31, 2009, the Company had recorded environmental accruals of $7,078,000 and $5,883,000, respectively.

11. Segment Information

The Company currently operates under four business segments: SL Power Electronics Corp. (“SLPE”), the High Power Group, SL Montevideo Technology, Inc. (“SL-MTI”) and RFL Electronics Inc. (“RFL”). Teal Electronics Corp. (“Teal”) and MTE Corporation (“MTE”) are combined into one business segment, which is reported as the High Power Group. Management has combined SLPE and the High Power Group into one business unit classified as the Power Electronics Group. The Company aggregates operating business subsidiaries into a single segment for financial reporting purposes if aggregation is consistent with the objectives of ASC 280 “Segment Reporting.” Business units are also combined if they have similar characteristics in each of the following areas:

• nature of products and services

• nature of production process

• type or class of customer

• methods of distribution

SLPE produces a wide range of custom and standard internal and external AC/DC and DC/DC power supply products to be used in customers’ end products. The Company’s power supplies closely regulate and monitor power outputs, resulting in stable and highly reliable power. SLPE, which sells products under three brand names (SL Power Electronics, Condor and Ault), is a major supplier to the original equipment manufacturers (“OEMs”) of medical, wireless and wire line communications infrastructure, computer peripherals, military, handheld devices and industrial equipment. The High Power Group sells products under two brand names (Teal and MTE). Teal designs and manufactures custom power conditioning and distribution units. Products are developed and manufactured for custom electrical subsystems for OEMs of semiconductor, medical imaging, military and telecommunication systems. MTE designs and manufactures power quality electromagnetic products used to protect equipment from power surges, bring harmonics into compliance and improve the efficiency of variable speed motor drives. SL-MTI designs and manufactures high power density precision motors. New motor and motion controls are used in numerous applications, including military and commercial aerospace equipment, medical devices and industrial products. RFL designs and manufactures communication and power protection products/systems that are used to protect utility transmission lines and apparatus by isolating faulty transmission lines from a transmission grid. The Other segment includes corporate related items, financing activities and other costs not allocated to reportable segments, which includes but is not limited to certain legal, litigation and public reporting charges and certain legacy costs. The accounting policies for the business units are the same as those described in the summary of significant accounting policies. For additional information, see Note 1 of the Notes to the Consolidated Financial Statements included in Part IV of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

15

Business segment operations are conducted through domestic subsidiaries. For all periods presented, sales between business segments were not material. Each of the segments has certain major customers, the loss of any of which would have a material adverse effect on such segment.

The unaudited comparative results for the three-month periods and the nine-month periods ended September 30, 2010 and September 30, 2009 are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2010		2009		2010		2009
	(in thousands)
Net sales
Power Electronics Group:
SLPE	$	20,969	$	13,214	$	58,402	$	39,529
High Power Group		14,719		11,190		41,054		33,127
Total		35,688		24,404		99,456		72,656
SL-MTI		8,044		7,184		22,914		20,542
RFL		5,409		4,791		16,694		14,370
Consolidated	$	49,141	$	36,379	$	139,064	$	107,568

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2010			2009			2010			2009
	(in thousands)
Income from operations
Power Electronics Group:
SLPE	$	2,153		$	639		$	4,527		$	62	*
High Power Group		1,422			1,217			3,665			2,450
Total		3,575			1,856			8,192			2,512
SL-MTI		1,206			1,293			3,236			3,071
RFL		570			351			2,286			990
Other		(2,181	)		(1,117	)		(5,037	)		(4,257	)
Consolidated	$	3,170		$	2,383		$	8,677		$	2,316

* Includes restructuring charges of $535,000.

16

	September 30,		December 31,
	2010		2009
	(in thousands)
Total assets
Power Electronics Group:
SLPE	$	33,829	$	27,255
High Power Group		31,570		27,192
Total		65,399		54,447
SL-MTI		12,286		11,520
RFL		15,119		15,096
Other		19,418		18,388
Consolidated	$	112,222	$	99,451

	September 30,		December 31,
	2010		2009
	(in thousands)
Goodwill and intangible assets, net
Power Electronics Group:
SLPE	$	5,160	$	5,433
High Power Group		16,455		16,866
Total		21,615		22,299
SL-MTI		—		—
RFL		5,382		5,409
Consolidated	$	26,997	$	27,708

12. Retirement Plans And Deferred Compensation

During the nine-month periods ended September 30, 2010 and September 30, 2009, the Company maintained a defined contribution pension plan covering all full-time, U.S. employees of SLPE, Teal, MTE, SL-MTI, RFL and the corporate office. The Company’s contributions to this plan are based on a percentage of employee contributions and/or plan year gross wages, as defined.

Costs incurred under these plans amounted to $998,000 during the nine-month period ended September 30, 2010 and $552,000 for the nine-month period ended September 30, 2009.

The Company has agreements with certain active and retired directors, officers and key employees providing for supplemental retirement benefits. The liability for supplemental retirement benefits is based on the most recent mortality tables available and discount rates ranging from 6% to 12%. The amount charged to expense in connection with these agreements amounted to $283,000 and $280,000 for the nine-month periods ended September 30, 2010 and September 30, 2009, respectively.

17

13. Fire Related Loss And Insurance Recovery

On March 24, 2010, the Company sustained fire damage at its leased manufacturing facility in Mexicali, Mexico. This facility manufactures products for both SLPE and MTE. The fire was contained to an area that manufactures MTE products. The Company is fully insured for the replacement of the assets damaged in the fire and for the loss of profits due to the business interruption and changed conditions caused by the fire. Details of the net fire related loss are as follows:

	Nine Months Ended
	September 30, 2010
	(in thousands)
Fire related loss	$	(669	)
Insurance recovery		560
Net fire related loss	$	(109	)

The Company’s fire related loss includes the destruction of property and equipment, damaged inventory, cleanup costs and increased operating expenses incurred as a result of the fire. The Company’s insurance recovery represents the replacement cost of property and equipment damaged as a result of the fire, the fair market value of inventory damaged in the fire, cleanup costs and increased business expenses, net of applicable adjustments and deductibles.

Any additional gains, losses and recoveries will be recognized in subsequent periods as amounts are determined and finalized with the Company’s insurance companies.

14. Related Party Transactions

RFL has an investment of $15,000 in RFL Communications PLC, (“RFL Communications”), representing 4.5% of the outstanding equity thereof. RFL Communications is a distributor of teleprotection and communication equipment located in the United Kingdom. It is authorized to sell RFL products in accordance with an international sales agreement. Sales to RFL Communications for each of the nine-month periods ended September 30, 2010 and September 30, 2009 were $479,000 and $547,000, respectively. Accounts receivable due from RFL Communications at September 30, 2010 were $116,000.

The Company was a party to a Management Agreement (the “Agreement”) dated April 1, 2002 with Steel Partners Ltd. (“Steel Partners”). Steel Partners is a management company controlled by Warren G. Lichtenstein. Glen M. Kassan and John H. McNamara are employed by Steel Partners. Messrs. Lichtenstein, Kassan and McNamara are directors of the Company. As previously reported, Mr. Lichtenstein was elected to the Board on March 30, 2010 to fill the vacancy created by the resignation of James R. Henderson. On May 18, 2010, the parties terminated the Agreement. Under the Agreement, Steel Partners provided certain management services to the Company in consideration for an annual fee of $475,000, paid monthly. The Agreement was terminated, effective January 31, 2010, for a one-time payment of $150,000. Fees of approximately $190,000 were expensed for the nine-month period ended September 30, 2010. Fees of approximately $356,000 were expensed for the nine-month period ended September 30, 2009.

18

15. Subsequent Events

The Company announced a modified “Dutch Auction” tender offer to purchase up to $20 million in shares of its common stock on September 14, 2010 (the “Tender Offer”). The Tender Offer expired on October 13, 2010. Under the terms of the Tender Offer, the Company’s shareholders had the option of tendering all or a portion of the Company’s common stock that they owned (1) at a price of not less than $13.00 and not more than $14.50, in increments of $0.25 per share, or (2) without specifying a purchase price, in which case the common stock that they owned would have been purchased at the purchase price determined in accordance with the Tender Offer. Shareholders who elected to tender have received the purchase price in cash, without interest, for common stock tendered in accordance with the terms of the Tender Offer. These provisions were described in the Offer to Purchase relating to the Tender Offer that was distributed to shareholders. All common stock purchased by the Company were purchased at the same price.

Based on the final count by the depositary for the Tender Offer, an aggregate of 1,334,824 shares of common stock were properly tendered and not withdrawn at prices at or below $14.50. Accordingly, pursuant to the terms of the Offer to Purchase, the Letter of Transmittal and applicable securities laws, the Company accepted for purchase 1,334,824 shares of its common stock at a purchase price of $14.50 per share. These shares represent approximately 22.0% of the shares outstanding as of October 18, 2010. With the completion of the tender offer, the Company had approximately 4,728,951 shares of common stock outstanding. The aggregate purchase price that has been paid by the Company in connection with the Tender Offer is $19,354,948, excluding transaction costs. The depositary has paid for the shares accepted for purchase in the Tender Offer. The Company paid for the tender with available cash and $7,500,000 in borrowings from its 2008 Credit Facility.

During October 2010, two former executives entered into Separation Agreements and Mutual Releases (the “Agreements”). The effective dates of the Agreements were October 22 and October 28, 2010. Total consideration to be paid to both executives is $1,032,984, minus applicable taxes and withholdings. The payments will be completed during the fourth quarter of 2010. The payments are for, among other things, accrued vacation, severance and for one executive, payment pursuant to a certain bonus agreement dated August 5, 2002. All related expenses have been accrued for at September 30, 2010.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company, through its subsidiaries, designs, manufactures and markets power electronics, motion control, power protection, power quality electromagnetic and specialized communication equipment that is used in a variety of commercial and military aerospace, computer, datacom, industrial, medical, telecom, transportation and utility equipment applications. The Company is comprised of four domestic business segments, three of which have significant manufacturing operations in Mexico. SLPE has manufacturing, engineering and sales capability in the People’s Republic of China. Most of the Company’s sales are made to customers who are based in the United States. However, over the years the Company has increased its presence in international markets. The Company places an emphasis on highly engineered, well-built, high quality, dependable products and is dedicated to continued product enhancement and innovations.

The Company’s business strategy has been to enhance the growth and profitability of each of its businesses through the penetration of attractive new market niches, further improvement of operations through the implementation of lean manufacturing principles and expansion of global capabilities. As the global economic recovery continues, the Company will be focused on improving efficiencies that better leverage the Company’s resources. Lean initiatives, both on the factory floor and throughout the organization, are ongoing. The Company expects to achieve its goals through organic growth and strategic acquisitions. The Company also continues to pursue strategic alternatives to maximize shareholder value. Some of these alternatives have included, and will continue to include, selective acquisitions, divestitures and sales of certain assets. The Company has provided, and may from time to time in the future provide, information to interested parties.

19

On August 30, 2010, the Board appointed Louis Belardi to serve as the Company’s Chief Financial Officer (“CFO”), effective immediately. Mr. Belardi replaced David Nuzzo, whose employment with the Company ended on June 14, 2010. Glen Kassan, the Company’s Chairman of the Board, served as the Interim Chief Financial Officer from June 14, 2010 until Mr. Belardi’s appointment as CFO. Prior to being appointed CFO, Mr. Belardi had served as the Company’s Corporate Controller since 2004, during which time he was responsible for management of the Company’s corporate accounting, SEC reporting functions and Sarbanes Oxley compliance. Mr. Belardi has served as the Company’s Secretary and Treasurer since July 2010.

Business Trends

Demand for the Company’s products and services increased during the third quarter of 2010, compared to the third quarter of 2009. At September 30, 2010, the Company’s backlog increased to $74,394,000, from $49,991,000 at September 30, 2009 and $54,695,000 at December 31, 2009, for an increase of 49% on a comparative basis. All but one of the Company’s operating segments recorded increases in backlog, which ranged from 2% to 107%. The Company’s net new orders for the third quarter of 2010 increased by 43%, compared to the third quarter of 2009.

During 2009, the Company experienced a significant decrease of sales and income due to the macro economic downturn. Given the nature of the global economic weakness and its effects on the Company’s end markets, contingency plans were implemented to reduce costs and align capacity with lower business levels. Capital investment was postponed, where feasible, during 2009.

In the sections that follow, statements with respect to the quarter ended 2010 or nine months ended 2010 refer to the three-month and nine-month periods ended September 30, 2010. Statements with respect to the quarter ended 2009 or nine months ended 2009 refer to the three-month and nine-month periods ended September 30, 2009. Also, statements with respect to operating costs refer to engineering and product development costs, selling, general and administrative costs and depreciation and amortization (“operating costs”).

Critical Accounting Policies

The Company’s consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”). GAAP requires management to make estimates and assumptions that affect the amounts of reported and contingent assets and liabilities at the date of the consolidated financial statements and the amounts of reported net sales and expenses during the reporting period.

The Securities and Exchange Commission (the “SEC”) has issued disclosure guidance for “critical accounting policies.” The SEC defines “critical accounting policies” as those that are most important to the portrayal of the Company’s financial condition and results, and that require application of management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

20

The Company’s significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements included in Part IV of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. Not all of these significant accounting policies require management to make difficult, subjective or complex judgments or estimates. However, the following policies are deemed to be critical within the SEC definition. The Company’s senior management has reviewed these critical accounting policies and estimates and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations with the Audit Committee of the Board.

Revenue Recognition

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the purchase price is fixed or determinable and collectability is reasonably assured. Revenue is recorded in accordance with Staff Accounting Bulletin (“SAB”) No. 104 and in certain circumstances in accordance with the guidance provided by ASC 605-25 “Revenue Recognition — Multiple-Element Arrangements.” Also during fiscal 2009, RFL and Teal recognized revenue under “Bill and Hold Arrangements” according to the guidance provided by SAB No. 104. The major portion of the Company’s revenue is derived from equipment sales. However, RFL has customer service revenue, which accounted for less than one percent of consolidated net revenue for each of the quarters ended 2010 and 2009. The Company recognizes equipment revenue upon shipment and transfer of title. Provisions are established for product warranties, principally based on historical experience. At times the Company establishes reserves for specific warranty issues known by management. Service and installation revenue is recognized when completed. At SL-MTI, revenue from one particular contract was considered a multiple-element arrangement and, in that case, is allocated among the separate accounting units based on relative fair value. In this case the total arrangement consideration was fixed and there was objective and reliable evidence of fair value. This contract was completed during 2010.

SLPE has two sales programs with distributors, pursuant to which credits are issued to distributors: (1) a re-stocking program and (2) a competitive discount program. The distributor re-stocking program allows distributors to scrap and/or rotate up to a pre-determined percentage of their purchases over the previous six month period. SLPE provides for this allowance as a decrease to revenue based upon the amount of sales to each distributor and other historical factors. The competitive discount program allows a distributor to sell a product out of its inventory at less than list price in order to meet certain competitive situations. SLPE records this discount as a reduction to revenue based on the distributor’s eligible inventory. The eligible distributor inventory is reviewed at least quarterly. No cash is paid under either distributor program. These programs affected consolidated gross revenue for each of the nine-month periods ended 2010 and 2009 by approximately 0.6% and 0.5%, respectively.

Certain judgments affect the application of the Company’s revenue policy, as mentioned above. Revenue recognition is significant because net revenue is a key component of results of operations. In addition, revenue recognition determines the timing of certain expenses, such as commissions, royalties and certain incentive programs. Revenue results are difficult to predict. Any shortfall in revenue or delay in recognizing revenue could cause operating results to vary significantly from year to year and quarter to quarter.

21

Allowance For Doubtful Accounts

The Company’s estimate for the allowance for doubtful accounts related to trade receivables is based on two methods. The amounts calculated from each of these methods are combined to determine the total amount reserved. First, the Company evaluates specific accounts where it has information that the customer may have an inability to meet its financial obligations (e.g., bankruptcy or insolvency). In these cases, the Company uses its judgment, based on the best available facts and circumstances, and records a specific reserve for that customer against amounts due to reduce the receivable to the amount that is expected to be collected. These specific reserves are reevaluated and adjusted as additional information is received that impacts the amount reserved. Second, a general reserve is established for all customers based on several factors, including historical write-offs as a percentage of sales. If circumstances change (e.g., higher than expected defaults or an unexpected material adverse change in a major customer’s ability to meet its financial obligation), the Company’s estimates of the recoverability of amounts due could be reduced by a material amount. The Company’s allowance for doubtful accounts represented 2.1% and 2.9% of gross trade receivables at September 30, 2010 and December 31, 2009, respectively.

Inventories

The Company values inventory at the lower of cost or market, and continually reviews the book value of discontinued product lines to determine if these items are properly valued. The Company identifies these items and assesses the ability to dispose of them at a price greater than cost. If it is determined that cost is less than market value, then cost is used for inventory valuation. If market value is less than cost, then related inventory is adjusted to market value.

If a write down to the current market value is necessary, the market value cannot be greater than the net realizable value, which is defined as selling price less costs to complete and dispose, and cannot be lower than the net realizable value less a normal profit margin. The Company also continually evaluates the composition of its inventory and identifies slow-moving and excess inventories. Inventory items identified as slow-moving or excess are evaluated to determine if reserves are required. If the Company were not able to achieve its expectations of the net realizable value of the inventory at current market value, it would have to adjust its reserves accordingly. The Company attempts to accurately estimate future product demand to properly adjust inventory levels. However, significant unanticipated changes in demand could have a significant impact on the value of inventory and of operating results. The Company’s inventory reserves represented approximately 11% of gross inventory at September 30, 2010 and 15% of gross inventory at December 31, 2009. Included in the inventory reserve is a LIFO reserve of $529,000 for both periods.

Accounting For Income Taxes

The Company has reported gross unrecognized tax benefits, excluding interest and penalties, of $2,175,000 and $2,526,000 as of September 30, 2010 and December 31, 2009, respectively. These amounts represent unrecognized tax benefits, which, if ultimately recognized, will reduce the Company’s effective tax rate. As of September 30, 2010, the Company reported accrued interest and penalties related to unrecognized tax benefits of $513,000. For additional disclosures related to ASC 740, see Note 3 of the Notes to the Consolidated Financial Statements included in Part IV of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

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Significant management judgment is required in determining the provision for income taxes, the deferred tax assets and liabilities and any valuation allowance recorded against deferred tax assets. The net deferred tax assets as of September 30, 2010 and December 31, 2009 were $9,068,000 and $9,389,000, respectively, net of valuation allowances of $358,000 and $560,000, respectively. The carrying value of the Company’s net deferred tax assets assumes that the Company will be able to generate sufficient future taxable income in certain tax jurisdictions. Valuation allowances are attributable to uncertainties related to the Company’s ability to utilize certain deferred tax assets prior to expiration. These deferred tax assets primarily consist of loss carryforwards. The valuation allowance is based on estimates of taxable income, expenses and credits by the jurisdictions in which the Company operates and the period over which deferred tax assets will be recoverable. In the event that actual results differ from these estimates or these estimates are adjusted in future periods, the Company may need to establish an additional valuation allowance that could materially impact its consolidated financial position and results of operations. Each quarter, management evaluates the ability to realize the deferred tax assets and assesses the need for additional valuation allowances.

Legal Contingencies

The Company is currently involved in certain legal proceedings. As discussed in Note 10 of the Notes to the Consolidated Financial Statements included in Part I of this Quarterly Report on Form 10-Q, the Company has accrued an estimate of the probable costs for the resolution of these claims. This estimate has been developed after investigation and is based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. Management does not believe these proceedings will have a further material adverse effect on the Company’s consolidated financial position. It is possible, however, that future results of operations for any particular quarterly or annual period could be materially affected by changes in these assumptions, or the effectiveness of these strategies, related to these proceedings.

Goodwill

The Company has allocated its adjusted goodwill balance to its reporting units. The Company tests goodwill for impairment annually at fiscal year-end and in interim periods if certain events occur indicating that the carrying value of goodwill may be impaired, such as a significant adverse change in business climate, an adverse action or assessment by a regulator or the decision to sell a business, that would make it more likely than not that an impairment may have occurred. The goodwill impairment test is a two-step process. The first step of the impairment analysis compares the fair value to the net book value. In determining fair value, the accounting guidance allows for the use of several valuation methodologies, although it indicates that quoted market prices are the best evidence of fair value. The Company uses a combination of expected present values of future cash flows and comparative market multiples. It has also performed a review of market capitalization with estimated control premiums at December 31, 2009. If the fair value of a reporting unit is less than its net book value, the Company would perform a second step in its analysis, which compares the implied fair value of goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, the Company recognizes an impairment loss equal to that excess amount. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units and determining the fair value of each reporting unit. Significant judgments required to estimate the fair value of reporting units include estimating future cash flows, determining appropriate discount and growth rates, operating margins and working capital requirements, selecting comparable companies within each reporting unit and market and determining control premiums. Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit. There were no impairment charges for the quarters ended 2010 and 2009. As of September 30, 2010 and December 31, 2009, goodwill totaled $22,761,000 and $22,769,000 (representing 20% and 23% of total assets), respectively.

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As of the testing conducted as of December 31, 2009, the Company concluded that no impairment charge was warranted. However, there can be no assurance that the economic conditions currently affecting the world economy or other events may not have a negative material impact on the long-term business prospects of any of the Company’s reporting units. In such case, the Company may need to record an impairment loss, as stated above. The next annual impairment test will be conducted as of December 31, 2010.

Management has not identified any triggering events, as defined by ASC 350 “Intangibles — Goodwill and Other,” during 2010. Accordingly, no interim impairment test has been performed.

Impairment Of Long-Lived And Intangible Assets

The Company’s long-lived and intangible assets primarily consist of fixed assets, goodwill and other intangible assets. The Company periodically reviews the carrying value of its long-lived assets held and used, other than goodwill and intangible assets with indefinite lives, and assets to be disposed of whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. The Company assesses the recoverability of the asset by estimated cash flows and at times by independent appraisals. It compares estimated cash flows expected to be generated from the related assets, or the appraised value of the asset, to the carrying amounts to determine whether impairment has occurred. If the estimate of cash flows expected to be generated changes in the future, the Company may be required to record impairment charges that were not previously recorded for these assets. If the carrying value of a long-lived asset is considered impaired, an impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds its fair value. Asset impairment evaluations are by nature highly subjective.

Environmental Expenditures

The Company is subject to United States, Mexican, Chinese and United Kingdom environmental laws and regulations concerning emissions to the air, discharges to surface and subsurface waters, and generation, handling, storage, transportation, treatment and disposal of waste materials. The Company is also subject to other federal, state and local environmental laws and regulations, including those that require it to remediate or mitigate the effects of the disposal or release of certain chemical substances at various sites, including some where the Company has ceased operations. It is impossible to predict precisely what effect these laws and regulations will have in the future.

Expenditures that relate to current operations are charged to expense or capitalized, as appropriate. Expenditures that relate to an existing condition caused by formerly owned operations are expensed and recorded as part of discontinued operations. Expenditures include costs of remediation and legal fees to defend against claims for environmental liability. Liabilities are recorded when remedial efforts are probable and the costs can be reasonably estimated. The liability for remediation expenditures includes, as appropriate, elements of costs such as site investigations, consultants’ fees, feasibility studies, outside contractor expenses and monitoring expenses. Estimates are not discounted and they are not reduced by potential claims for recovery from insurance carriers. The liability is periodically reviewed and adjusted to reflect current remediation progress, prospective estimates of required activity and other relevant factors, including changes in technology or regulations. For additional information related to environmental matters, see Note 13 of the Notes to the Consolidated Financial Statements included in Part IV of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

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The above listing is not intended to be a comprehensive list of all of the Company’s accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP with no need for management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternatives would not produce a materially different result. For a discussion of accounting policies and other disclosures required by GAAP, see the Company’s audited Consolidated Financial Statements and Notes thereto included in Part IV of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 and Note 10 to this Quarterly Report.

Liquidity And Capital Resources

	September 30,		December 31,
	2010		2009		$ Variance		% Variance
	(in thousands)
Cash and cash equivalents	$	10,857	$	9,967	$	890		9	%
Bank debt	$	—	$	—	$	—		—
Working capital	$	40,380	$	35,064	$	5,316		15	%
Shareholders’ equity	$	72,654	$	69,100	$	3,554		5	%

The net cash provided by operating activities from continuing operations during the nine-month period ended September 30, 2010 was $3,740,000, as compared to net cash provided by operating activities from continuing operations during the nine-month period ended September 30, 2009 of $6,630,000. The sources of cash from operating activities for the nine-month period ended September 30, 2010 were an increase in accounts payable of $3,747,000, an increase in accrued liabilities of $2,969,000 and an increase in accrued income taxes of $1,404,000. Of the increased accounts payable, $1,711,000 was attributable to SLPE and $1,037,000 was attributable to SL-MTI. These sources of cash were partially offset by an increase in accounts receivable of $9,294,000 and an increase in inventories of $2,836,000. The increases in accounts receivable and inventories were primarily related to increased sales at all business segments. Accounts receivable increased by $5,277,000 at SLPE, $1,765,000 at Teal, $1,190,000 at MTE and $880,000 at SL-MTI. The sources of cash from operating activities for the nine-month period ended September 30, 2009 were a decrease in accounts receivable of $3,409,000 and a decrease in inventories of $1,997,000. The decrease in accounts receivable was primarily related to reduced sales at most entities. The reduced accounts receivable were $575,000 at SLPE, $658,000 at Teal, $866,000 at MTE, $496,000 at SL-MTI and $799,000 at RFL. These sources of cash were primarily offset by a decrease in accounts payable of $2,116,000 and a decrease in accrued liabilities of $1,966,000. Of the decreased accounts payable, $1,566,000 was attributable to SLPE and $192,000 was attributable to Teal. Legal and consulting payables of $370,000 related to environmental matters were charged to discontinued operations.

During the nine-month period ended September 30, 2010, net cash used in investing activities was $1,291,000. This use of cash was primarily related to a down payment on land rights in China and the purchases of machinery, computer hardware and demonstration equipment. During the nine-month period ended September 30, 2009, net cash used in investing activities was $788,000. This use of cash was primarily related to a building expansion in Matamoros, Mexico for SL-MTI and the purchases of machinery, computer hardware, software and demonstration equipment.

During the nine-month period ended September 30, 2010, net cash used in financing activities was $758,000, which was related to the purchase of the Company’s treasury stock, partially offset by the proceeds from stock options exercised. During the nine-month period ended September 30, 2009, net cash provided by financing activities was $38,000, which was related to treasury stock activity, offset by the payment of deferred financing costs.

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On October 23, 2008, the Company entered into the 2008 Credit Facility, with Bank of America, N.A., a national banking association, individually, as agent, issuer and a lender thereunder, and the other financial institutions party thereto. During the third quarter of 2009, the 2008 Credit Facility was amended and reset. It currently provides for maximum borrowings of $40,000,000. Additional information with respect to the 2008 Credit Facility is found in Note 8 of the Notes to the Consolidated Financial Statements included in Part I to this Quarterly Report on Form 10-Q.

The Company’s current ratio was 2.32 to 1 at September 30, 2010 and 2.68 to 1 at December 31, 2009. Current assets increased by $15,003,000 from December 31, 2009, while current liabilities increased by $9,687,000 during the same period.

The Company had no outstanding bank debt at September 30, 2010 or at December 31, 2009.

The Company announced a Tender Offer on September 14, 2010, which expired on October 13, 2010. Based on a final count, an aggregate of 1,334,824 shares of common stock were tendered. These shares represented approximately 22% of the shares outstanding as of October 18, 2010. As of October 27, 2010, the Company had approximately 4,728,723 shares outstanding. The aggregate purchase price of the Tender Offer was approximately $19,355,000, excluding transaction costs. The Company paid for the tender with available cash and $7,500,000 in borrowings from its 2008 Credit Facility. The Company’s availability under the 2008 Credit Facility post tender was approximately $32,000,000.

Capital expenditures were $1,037,000 in 2010, which represented an increase of $317,000, or 44%, from the capital expenditure levels of 2009. Capital expenditures in 2010 were attributable to a down payment on land rights in China and the purchases of machinery, computer hardware and demonstration equipment. Capital expenditures of $720,000 were made during the first nine months of 2009. These expenditures were attributable to a plant expansion, as mentioned above, and the purchases of machinery, computer hardware, software and demonstration equipment.

The Company has been able to generate adequate amounts of cash to meet its operating needs and expects to do so in the future.

With the exception of the segment reported as “Other” (which consists primarily of corporate office expenses, financing activities, certain legal, litigation, public reporting costs, legacy costs and costs not specifically allocated to the reportable business segments), all of the Company’s operating segments recorded income from operations for the three and nine month periods ended September 30, 2010.

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Contractual Obligations

The following is a summary of the Company’s contractual obligations at September 30, 2010 for the periods indicated:

	Less Than		1 to 3		4 to 5		After
	1 Year		Years		Years		5 Years		Total
	(in thousands)
Operating Leases	$	1,385	$	2,065	$	411	$	—	$	3,861
Debt		—		—		—		—		—
Capital Leases		—		—		—		—		—
	$	1,385	$	2,065	$	411	$	—	$	3,861

Off-Balance Sheet Arrangements

It is not the Company’s usual business practice to enter into off-balance sheet arrangements such as guarantees on loans and financial commitments, indemnification arrangements and retained interests in assets transferred to an unconsolidated entity for securitization purposes. Consequently, the Company has no off-balance sheet arrangements, except for operating lease commitments disclosed in the table above, which have, or are reasonably likely to have, a material current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Results of Operations

Three months ended September 30, 2010, compared with three months ended September 30, 2009

While differences exist among the Company’s business units, demand for the Company’s products and services increased in the quarter ended 2010, compared to the quarter ended 2009, resulting in aggregate sales growth of $12,762,000, or 35%, and an increase in income from operations of $787,000, or 33%, for the comparable periods. The growth in sales is due principally to the global economic recovery that began in the fourth quarter of 2009. Both the domestic and international markets experienced sales growth. Domestic sales increased by 37% while international sales increased by 28%. The growth in income from operations is primarily related to a significant increase in sales, improved economic conditions and actions taken by the Company in 2009 to reduce its cost structure to align capacity with lower business levels.

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The tables below show the comparisons of net sales and income from operations for the quarter ended September 30, 2010 (“2010”) and the quarter ended September 30, 2009 (“2009”):

	Net Sales
	Three Months		Three Months		$ Variance		% Variance
	Ended		Ended		From		From
	September 30,		September 30,		Same Quarter		Same Quarter
	2010		2009		Last Year		Last Year
	(in thousands)
Power Electronics Group:
SLPE	$	20,969	$	13,214	$	7,755		59	%
High Power Group		14,719		11,190		3,529		32	%
Total		35,688		24,404		11,284		46	%
SL-MTI		8,044		7,184		860		12	%
RFL		5,409		4,791		618		13	%
Total	$	49,141	$	36,379	$	12,762		35	%

	Income from Operations
	Three Months			Three Months			$ Variance			% Variance
	Ended			Ended			From			From
	September 30,			September 30,			Same Quarter			Same Quarter
	2010			2009			Last Year			Last Year
	(in thousands)
Power Electronics Group:
SLPE	$	2,153		$	639		$	1,514			237	%
High Power Group		1,422			1,217			205			17	%
Total		3,575			1,856			1,719			93	%
SL-MTI		1,206			1,293			(87	)		(7	%)
RFL		570			351			219			62	%
Other		(2,181	)		(1,117	)		(1,064	)		(95	%)
Total	$	3,170		$	2,383		$	787			33	%

Consolidated net sales for 2010 increased by $12,762,000, or 35%, when compared to the same period in 2009. When compared to 2009, net sales of the Power Electronics Group increased by $11,284,000, or 46%, net sales of SL-MTI increased by $860,000, or 12%, and net sales of RFL increased by $618,000, or 13%.

The Company recorded income from operations of $3,170,000 for 2010, compared to income from operations of $2,383,000 for 2009, representing an increase of $787,000, or 33%. Income from operations equaled 6% of net sales in 2010, compared to 7% of net sales in 2009. All of the operating segments reported income from operations in 2010 and 2009.

Income from continuing operations amounted to $2,325,000 (includes other income and expense and the tax provision), or $0.38 per diluted share, in the quarter ended 2010, compared to income from continuing operations of $1,876,000, or $0.31 per diluted share, for the same period in 2009. Income from continuing operations was approximately 5% of net sales in 2010 and in 2009. The Company’s business segments and the components of operating expenses are discussed in the following sections.

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The Power Electronics Group, which is comprised of SLPE and the High Power Group (a combination of Teal and MTE), recorded a sales increase of 46%, when comparing the quarter ended 2010 to the quarter ended 2009. Income from operations increased by $1,719,000, or 93%; this was primarily attributable to an increase of $1,514,000, or 237%, at SLPE.

SLPE recorded income from operations of $2,153,000, representing 10% of its net sales, in 2010. SLPE reported income from operations of $639,000, representing 5% of its net sales, in 2009. As a percentage of consolidated net sales, SLPE represented 43% of consolidated net sales in 2010, compared to 36% of consolidated net sales in 2009. SLPE experienced sales increases in all of its product lines ranging from 21% to 88%. Sales of its medical product line increased by $4,861,000, sales of its industrial equipment product line increased by $1,617,000, sales of its data communications product line increased by $642,000 and sales of their other product lines increased by $635,000. The increase in sales from the medical equipment product line was due to the relatively low demand in 2009 and increased distribution sales in 2010. The increase in sales of the industrial product line was principally generated by increased orders from distributors compared to relatively low levels experienced in 2009. The data communications product line increase was also due primarily to increased activity from distributors. Returns and distributor credits were 1% of gross sales in 2010 and in 2009. Domestic sales increased by 93% and international sales decreased by 4%. Domestic sales were driven by relatively strong sales in the medical equipment product line. While SLPE recorded a sales increase of 59%, its cost of products sold percentage increased by approximately 1% due to an unfavorable product mix, increased commodity prices, labor rate increases in China and overtime costs incurred to meet the significant increase in demand. SLPE recorded increased operating costs of $888,000, or 24%, in 2010, when compared to 2009, due primarily to greater sales related costs.

The High Power Group recorded income from operations, as a percentage of its net sales, of 10% in 2010, compared to 11% in 2009. As a percentage of consolidated net sales, the High Power Group represented 30% of consolidated net sales in 2010, compared to 31% of consolidated net sales in 2009. Teal reported income from operations, as a percentage of sales, of 12% in 2010, compared to 14% in 2009. Teal reported a sales increase of $1,708,000, or 25%. Teal’s cost of products sold percentage increased by 3%, compared to 2009, primarily due to greater copper and steel prices and to a lesser extent product mix. Sales to semiconductor manufacturers increased by $729,000. This sales increase is primarily related to internationally based customers which had been depressed in 2009. Sales to medical imaging equipment manufacturers increased by $1,033,000 due to sales to large international original equipment manufacturers, while sales to military and aerospace customers decreased by $97,000. Operating costs at Teal increased by $195,000 in 2010, compared to 2009. MTE reported income from operations, as a percentage of sales, of 6% in 2010 and in 2009. Sales increased by $1,821,000, or 42%. MTE experienced sales increases in all of its markets. Domestic sales increased 35%, while international sales increased 79%. MTE’s cost of products sold percentage increased by 3%, due to increased commodity costs, particularly copper and increased packaging costs. MTE experienced increased operating costs of $294,000 in 2010, compared to 2009. This increase is primarily due to sales related costs.

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Net sales for SL-MTI increased by $860,000, or 12%, while income from operations decreased by $87,000, or 7%. As a percentage of consolidated net sales, sales for SL-MTI represented 16% of consolidated net sales in 2010, compared to 20% of consolidated net sales in 2009. This sales increase was primarily due to an increase of $563,000 to customers in the defense and commercial aerospace industries. The other product lines of SL-MTI recorded a net sales increase of $297,000. SL-MTI’s cost of products sold percentage increased by 2%, compared to 2009 primarily due to sales mix. Operating costs increased by 19%, due to increased sales related costs as well as increased research and development costs of $135,000. Income from operations as a percentage of sales was 15% in 2010, compared to 18% in 2009.

Net sales for RFL increased by $618,000, or 13%, while income from operations increased by $219,000, or 62%. As a percentage of consolidated net sales, sales for RFL represented 11% of consolidated net sales in 2010, compared to 13% of consolidated net sales in 2009. Sales increases were reported for all of its product lines. Sales of protection products increased by $516,000, or 24%, which are primarily related to sales of the new GARD product. Sales of communication products increased by $89,000, or 4%, which are primarily related to sales of the new eXmux product. Customer service sales increased by a minor amount. Domestic sales decreased by $310,000, or 8%, while international sales increased by $927,000, or 131%. Operating costs increased by $134,000, due to sales related expenses. The increase in income from operations is primarily related to the increase in sales. Income from operations as a percentage of sales was 11% in 2010, compared to 7% in 2009.

Cost of Products Sold

As a percentage of consolidated net sales, cost of products sold was approximately 67% for the quarter ended 2010, compared to 66% for the quarter ended 2009. SLPE, the High Power Group, and SL-MTI recorded increases in their cost of products sold as a percentage of sales of 1% to 3%. RFL had a slight decrease of approximately 1% compared to 2009. The reasons for the increase of cost of products sold percentage at SLPE were previously mentioned, which included increased commodity costs and higher labor rates in China. The High Power Group experienced higher copper and steel prices. SL-MTI’s cost of products sold percentage increased primarily due to an increase in its excess and obsolete inventory reserve of $244,000 recorded during the quarter and product mix. RFL’s improvement in its cost of products sold percentage is primarily related to product mix and lean initiatives.

Engineering and Product Development Expenses

Engineering and product development expenses were approximately 7% of consolidated net sales in 2010, compared to approximately 8% of net sales in 2009. Engineering and product development expenses in 2010 increased by $573,000, or 20%. This increase was primarily attributable to an increase at SLPE of $290,000, or 22%. This increase was due to higher employment costs, increased consulting expenses and purchases of prototype materials. The High Power Group recorded an increase of $147,000, or 24%, and SL-MTI recorded an increase of $135,000, or 28%.

Selling, General and Administrative Expenses

Selling, general and administrative expenses, as a percentage of net sales, for 2010 and for 2009 were approximately 18% of sales. These expenses increased by $2,304,000, or 36%, primarily due to the increase in net sales of $12,762,000, or 35%, compared to prior year. SLPE’s expenses increased by $664,000, due primarily to sales related costs and, to a lesser extent, increases in travel expenses, consulting and marketing costs. The High Power Group’s selling, general and administrative expenses increased by $344,000, due to costs related to higher sales of 32%, new hires, higher agency and professional fees. RFL’s selling, general and administrative expenses increased by $138,000, due to higher sales commissions and bonus accruals on increased sales. Corporate and Other expenses increased by $1,064,000, or 95%, primarily due to an increase in legal fees and accrued severance cost related to two former executives.

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Amortization of Deferred Financing Costs

In connection with entering into the 2008 Credit Facility and related waivers and amendments, the Company incurred costs of approximately $808,000. These costs have been deferred and are being amortized over the term of the 2008 Credit Facility in accordance with the guidance provided by ASC 470-50 “Debt-Modification and Extinguishments.”

Taxes (Continuing Operations)

The effective tax rate for continuing operations for the quarter ended 2010 was approximately 25%. For the quarter ended 2009, the effective tax rate was approximately 18%. The effective tax rate reflects the statutory rate after adjustments for state and international tax provisions and the recording of benefits primarily related to research and development tax credits recorded in 2009.

Discontinued Operations

For 2010, the Company recorded a loss from discontinued operations of $267,000, net of tax, compared to a loss of $157,000, net of tax, in 2009. These amounts represent legal and environmental charges related to discontinued operations.

Results of Operations

Nine months ended September 30, 2010, compared with nine months ended September 30, 2009

The tables below show the comparisons of net sales and income from operations for the nine months ended September 30, 2010 (“2010”) and the nine months ended September 30, 2009 (“2009”).

	Net Sales
	Nine Months		Nine Months		$ Variance		% Variance
	Ended		Ended		From		From
	September 30,		September 30,		Same Period		Same Period
	2010		2009		Last Year		Last Year
	(in thousands)
Power Electronics Group:
SLPE	$	58,402	$	39,529	$	18,873		48	%
High Power Group		41,054		33,127		7,927		24	%
Total		99,456		72,656		26,800		37	%
SL-MTI		22,914		20,542		2,372		12	%
RFL		16,694		14,370		2,324		16	%
Total	$	139,064	$	107,568	$	31,496		29	%

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	Income from Operations
	Nine Months			Nine Months			$ Variance			% Variance
	Ended			Ended			From			From
	September 30,			September 30,			Same Period			Same Period
	2010			2009			Last Year			Last Year
	(in thousands)
Power Electronics Group:
SLPE	$	4,527		$	62		$	4,465			7202	%
High Power Group		3,665			2,450			1,215			50	%
Total		8,192			2,512			5,680			226	%
SL-MTI		3,236			3,071			165			5	%
RFL		2,286			990			1,296			131	%
Other		(5,037	)		(4,257	)		(780	)		(18	%)
Total	$	8,677		$	2,316		$	6,361			275	%

Consolidated net sales for 2010 increased by $31,496,000, or 29%, when compared to the same period in 2009. When compared to 2009, net sales of the Power Electronics Group increased by $26,800,000, or 37%; net sales of SL-MTI increased by $2,372,000, or 12%; and net sales of RFL increased by $2,324,000, or 16%.

The Company recorded income from operations of $8,677,000 for 2010, compared to income from operations of $2,316,000 for 2009, representing an increase of $6,361,000. Income from operations was 6% of sales compared with income from operations of 2% in 2009. All of the Company’s operating entities had income from operations in 2010 and 2009.

Income from continuing operations was $5,664,000 (includes other income and expense cost and the tax provision or benefit), or $0.93 per diluted share, in the first nine months of 2010, compared to income from continuing operations of $1,774,000, or $0.30 per diluted share, for the same period in 2009. Income from continuing operations was approximately 4% of net sales in 2010, compared to income from continuing operations of 2% of net sales in 2009. The Company’s business segments and the components of operating expenses are discussed more fully in the following sections.

The Power Electronics Group recorded a sales increase of 37%, when comparing the first nine months of 2010 to the first nine months of 2009. Income from operations increased by $5,680,000 or 226%, which was attributable to an increase of $4,465,000, or 7,202%, at SLPE and an increase of $1,215,000, or 50%, at the High Power Group.

SLPE recorded income from operations of $4,527,000, representing 8% of its net sales, in 2010. In 2009, SLPE reported income from operations of $62,000, representing less than 1% of its net sales. In 2009, SLPE’s income from operations was negatively impacted by the recording of restructuring costs of $535,000. As a percentage of consolidated net sales, SLPE represented 42% of consolidated net sales in 2010, compared to 37% in 2009. At SLPE, sales of its medical product line increased by $12,775,000, or 56%, sales of its industrial equipment product line increased by $3,318,000, or 55%, and sales of its data communications product line increased by $2,220,000, or 23%. The increase in sales of the medical equipment product line and the data communications product line was due in part to weak market demand in these segments in 2009. The increase in sales of the industrial product line is the result of increased demand in orders from distributors, as a result of increased economic activity compared to 2009. Returns and distributor credits also affected net sales, which represented approximately 1% and 2% of gross sales in 2010 and 2009, respectively. Domestic sales increased by 51% and international sales increased by 38%.

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The High Power Group recorded income from operations, as a percentage of its net sales, of 9% in 2010, compared to 7% in 2009. As a percentage of consolidated net sales, the High Power Group represented 30% of consolidated net sales in 2010, compared to 31% in 2009. Teal reported income from operations, as a percentage of sales, of 11% in 2010, compared to income from operations, as a percentage of sales, of 12% in 2009. Teal reported a sales increase of $2,674,000, or 13%, while the cost of products sold increased by approximately 3%. Teal’s sales to the semi-conductor market increased by $1,652,000 partly due to the low level of sales in 2009. The semi-conductor market has experienced increased activity in 2010 and is almost entirely driven by international sales. Sales to medical imaging equipment manufacturers increased by $1,553,000 as customers replenished their low inventory levels carried in 2009. Sales to military and aerospace customers decreased by $715,000, compared to 2009, as the first two quarters of 2009 were big shipment quarters. MTE reported income from operations, as a percentage of sales, of 6% in 2010, compared to income from operations, as a percentage of sales, of 1% in 2009. This increase is due to a sales increase of $5,253,000, or 42%. Sales to both OEMs and distributors have increased sharply from last year when MTE’s products were in decline as a result of the global economic downturn. The increase in sales is due to an across the board increase in all of MTE’s markets. Domestic sales increased 31%, while international sales increased 91%. This increase in international sales is due to an increase in project based sales to South America in the oil and gas markets and Asian customers involved in infrastructure projects. MTE’s cost of product sold percentage remained constant.

SL-MTI’s net sales increased $2,372,000, or 12%, while income from operations increased by $165,000, or 5%. As a percentage of consolidated net sales, SL-MTI represented 16% of consolidated net sales in 2010, compared to 19% in 2009. Sales to customers in the defense and commercial aerospace industries increased by $1,650,000. Sales of medical products and commercial products increased by $156,000 and $566,000, respectively. SL-MTI’s cost of products sold percentage increased by approximately 1%, compared to 2009.

RFL’s net sales increased by $2,324,000, or 16%, compared to 2009. As a percentage of consolidated net sales, RFL represented 12% of consolidated net sales in 2010, compared to 13% in 2009. Sales of RFL’s protection products increased by $1,397,000, or 20%, and sales of its communications products increased by $906,000, or 14%. Customer service sales remained relatively flat. The increase in protection products is primarily related to sales of the new GARD product. The increase in sales in the communications product line was primarily due to increased sales related to multiplexer products and higher volume of replacement orders. Domestic sales increased by $1,320,000, or 12%, while international sales increased by $1,004,000, or 35%. Income from operations increased by $1,296,000, or 131%. The increase in income from operations is primarily related to higher sales volume, partially offset by increased operating costs of $381,000.

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Cost of Products Sold

As a percentage of net sales, cost of products sold was approximately 67% for the first nine months of 2010 and for the first nine months of 2009. The cost of products sold percentage remained flat on a sales increase of 29%. SLPE, the High Power Group, and SL-MTI recorded increases in their cost of products sold as a percentage of sales of 1% to 2%. RFL had a decrease of approximately 4%. The increase in cost of products sold as a percentage of sales at SLPE is due primarily to (1) unfavorable product mix, (2) higher commodity prices, (3) increased overtime expenses to meet the increased volume and customer demands, and (4) direct labor rate increases in China. The High Power Group had an increase in its cost of products sold percentage due primarily to sales mix and higher commodity prices. SL-MTI had a slightly higher percentage of cost of products sold due mainly to product mix. RFL’s decrease in the percentage of cost of products sold was due to favorable mix and lean initiatives which began in 2009.

Engineering and Product Development Expenses

Engineering and product development expenses were approximately 7% of net sales in 2010, compared to 8% in 2009. Engineering and product development expenses in 2010 increased by $530,000, or 6%. The High Power Group and RFL experienced relatively minor changes in engineering and product development expenses, when compared to 2009. SLPE and SL-MTI did experience increases of $415,000, or 10%, and $130,000, or 9%, respectively, due primarily to reduced customer funding for development projects. Also SLPE experienced increased employee related costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses, as a percentage of net sales, for 2010 were approximately 18% of sales, compared to 20% of sales in 2009. Selling, general and administrative expenses increased by $3,468,000, or 16%, on a 29% increase in sales. SLPE’s expenses increased by $1,315,000, compared to 2009, due to an increase in sales related costs as previously mentioned, higher travel cost, stock option expense and business taxes with respect to the China manufacturing operations. The High Power Group recorded an increase in selling, general and administrative expenses of $522,000, due to the addition of employees, recruiting fees, increased commissions and bonuses due to the higher sales level. SL-MTI increased by $257,000, primarily related to higher sales levels. RFL’s expenses increased by $469,000 on sales related expenses including commissions on higher sales. Corporate and Other expenses increased by $780,000, or 18%, primarily due to higher legal fees and accrued severance costs for two former executives.

Restructuring Charges

In 2009 the Company incurred a restructuring charge of $550,000, which was recorded at SLPE and MTE. These charges primarily related to costs associated to reduce workforce levels. The costs represented actions taken in 2009 to align SLPE’s cost structure in response to a further reduction in business levels. Workforce reductions in 2009 principally affected personnel in Mexico, but also impacted operations in China and the United States. There were no restructuring charges or payments made in 2010.

Depreciation and Amortization

Depreciation and amortization expenses were approximately 2% of net sales in 2010 and in 2009.

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Fire Related Loss, Net

On March 24, 2010, the Company sustained fire damage at its leased manufacturing facility in Mexicali, Mexico. This facility manufactures products for both SLPE and MTE. The fire was contained to an area that manufactures MTE products. The Company is fully insured for the replacement of the assets damaged in the fire and for the loss of profits due to business interruption and changed conditions caused by the fire. The Company’s fire related loss includes the destruction of property and equipment, damaged inventory, cleanup costs and increased operating expenses incurred as a result of the fire. The Company’s insurance recovery represents indemnification for all of these costs, net of applicable adjustments and deductibles. The Company recorded its estimated loss related to the fire of $109,000 in the nine months ended September 30, 2010.

Any additional gains, losses and recoveries will be recognized in subsequent periods as amounts are determined and finalized with the Company’s insurance carriers. In July 2010, the Company received a $200,000 advance from its carrier related to the fire loss.

Taxes (Continuing Operations)

The effective tax rate for continuing operations for the first nine months of 2010 was approximately 32%. For the first nine months of 2009, the effective tax rate was approximately 15%. The effective tax rate reflects the statutory rate after adjustments for state and international tax provisions and after recording benefits primarily related to research and development tax credits. The effective tax rate in 2010 and 2009 was positively impacted by the recognition of previously unrecognized tax benefits on research and development tax credits due to a lapse of the applicable statute of limitations.

Discontinued Operations

For 2010, the Company recorded a loss from discontinued operations, net of tax, of $1,466,000, compared to $440,000, net of tax, in 2009. These amounts represent legal and environmental charges related to discontinued operations. During the second quarter of 2010, the Company increased the reserves at its Camden Site by $784,000, net of tax, to provide for additional anticipated environmental remediation costs.

Forward-Looking Information

From time to time, information provided by the Company, including written or oral statements made by representatives, may contain forward-looking information as defined in the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, contain forward-looking information, particularly statements that address activities, events or developments that the Company expects or anticipates will or may occur in the future, such as expansion and growth of the Company’s business, future capital expenditures and the Company’s prospects and strategy. These statements are identified by the use of such terms as “may,” “would,” “could,” “expect,” “intend,” “believe,” “plan,” “estimate,” “forecast,” “project,” “anticipate,” “likely,” “continue” or other comparable terms. In reviewing such information, it should be kept in mind that actual results may differ materially from those projected or suggested in such forward-looking information. This forward-looking information is based on various factors and was derived utilizing numerous assumptions. Many of these factors previously have been identified in filings or statements made by or on behalf of the Company.

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Important assumptions and other important factors that could cause actual results to differ materially from those set forth in the forward-looking information include changes in the general economy, changes in capital investment and/or consumer spending, competitive factors and other factors affecting the Company’s business in or beyond the Company’s control. These factors include a change in the rate of inflation, a change in state or federal legislation or regulations, an adverse determination with respect to a claim in litigation or other claims (including environmental matters), the ability to recruit and develop employees, the ability to successfully implement new technology and the stability of product costs. These factors also include the timing and degree of any business recovery in certain of the Company’s markets that have experienced a cyclical economic downturn.

Other factors and assumptions not identified above could also cause actual results to differ materially from those set forth in the forward-looking information. The Company does not undertake to update forward-looking information contained herein or elsewhere to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking information.

Future factors include the effectiveness of cost reduction actions undertaken by the Company; the timing and degree of any business recovery in certain of the Company’s markets that have experienced economic uncertainty; increasing prices, products and services offered by U.S. and non-U.S. competitors, including new entrants; rapid technological developments and changes and the Company’s ability to continue to introduce and develop competitive new products and services on a timely, cost-effective basis; availability of manufacturing capacity, components and materials; credit concerns and the potential for deterioration of the credit quality of customers; customer demand for the Company’s products and services; U.S. and non-U.S. governmental and public policy changes that may affect the level of new investments and purchases made by customers; changes in environmental and other U.S. and non-U.S. governmental regulations; protection and validity of patent and other intellectual property rights; compliance with the covenants and restrictions of bank credit facilities; and outcome of pending and future litigation and governmental proceedings. These are representative of the future factors that could affect the outcome of the forward-looking statements. In addition, such statements could be affected by general industry and market conditions and growth rates, general U.S. and non-U.S. economic conditions, including economic instability in the event of a future terrorist attack or sharp increases in the cost of energy and interest rate and currency exchange rate fluctuations and other future factors.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s “disclosure controls and procedures,” as such term is defined in Rules 13a-15e and 15d-15e promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Conclusion of Evaluation

Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.

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Inherent Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the Company’s disclosure controls and procedures, management recognizes that any control, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the third quarter of 2010 that have materially affected or are reasonably likely to materially affect its internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 10 of the Notes to the Consolidated Financial Statements included in Part I to this Quarterly Report on Form 10-Q. Also, see Note 13 of the Notes to the Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, for additional disclosure related to the Company’s legal proceedings.

ITEM 1A. RISK FACTORS

Not applicable.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On December 30, 2008, the Board authorized the repurchase of up to 500,000 shares of the Company’s stock. Previously, the Board of Directors had authorized the repurchase of up to 560,000 shares of the Company’s common stock. Any repurchases pursuant to the Company’s stock repurchase program would be made in the open market or in negotiated transactions. For the nine months ended September 30, 2010, the Company did not repurchase any shares pursuant to its existing stock repurchase program. The Company did purchase shares through its deferred compensation plans during the nine-month periods ended September 30, 2010 and September 30, 2009, in the amount of 220,476 and 138,900 shares, respectively.

						Total Number		Maximum Number
						of Shares		of Shares That May
	Total					Purchased as Part		Yet Be Purchased
	Number of			Average		of Publicly		under Publicly
	Shares			Price Paid		Announced Plans		Announced Plans or
Period	Purchased			per Share		or Programs		Programs
January 2010		13,351	(1)	$	8.36		—		500,000
February 2010		5,131	(1)	$	8.08		—		500,000
March 2010		101,694	(1)	$	8.09		—		500,000
April 2010		14,300	(1)	$	10.51		—		500,000
May 2010		73,000	(1)	$	11.38		—		500,000
June 2010		2,900	(1)	$	12.47		—		500,000
July 2010		5,400	(1)	$	12.69		—		500,000
August 2010		1,900	(1)	$	12.73		—		500,000
September 2010		2,800	(1)	$	14.00		—		500,000
Total		220,476		$	9.64		—

⁽¹⁾ The Company purchased these shares other than through a publicly announced plan or program.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 5. OTHER INFORMATION

Pursuant to Section 10A(i)(2) of the Exchange Act, the Company is responsible for listing the non-audit services performed by Grant Thornton, the Company’s external auditor, in the first nine months of 2010, as approved by its Audit Committee. During the nine-month period ended September 30, 2010, there were no non-audit services performed by Grant Thornton LLP.

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ITEM 6. EXHIBITS

10.1	*	Separation Agreement and Mutual Release of a former officer.
10.2	*	Separation Agreement and Mutual Release of a former officer.
10.3	*	Change of Control Agreement, dated August 31, 2010, between the SL Industries, Inc. and Louis J. Belardi.
10.4	*	Stock Option Agreement, dated September 2, 2010, between the SL Industries, Inc. and Louis J. Belardi
31.1		Certification by Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (transmitted herewith).
31.2		Certification by Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (transmitted herewith).
32.1		Certification by Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (transmitted herewith).
32.2		Certification by Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (transmitted herewith).

* Indicates a management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 8, 2010	SL INDUSTRIES, INC. (Registrant)
	By:	/s/ William T. Fejes
		William T. Fejes
		Chief Executive Officer (Principal Executive Officer)

By:	/s/ Louis J. Belardi
	Louis J. Belardi Chief Financial Officer
	(Principal Accounting Officer)

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EX-10.1

Exhibit 10.1

SEPARATION AGREEMENT AND MUTUAL RELEASE

This Separation Agreement and Mutual Release (this “Agreement”) is made and entered into as of October 20, 2010 between SL Industries, Inc. (“SL” or the “Company”), a New Jersey corporation, with principle offices located at 520 Fellowship Road, Suite A-114, Mt. Laurel, New Jersey, 08054 and David R. Nuzzo (“Executive”), an individual with a residence at 904 Clinton Street, Philadelphia, PA 19107 (together, the “Parties”).

1. Termination of Employment. As of June 14, 2010 (“Termination Date”), Executive shall no longer be, or hold himself out as, an employee, agent, board member, trustee or representative of SL, any of its subsidiaries or affiliates, or any of their collective committees, boards, divisions, ventures, or employee benefit plans (collectively, “SL Entities”). The Parties agree that Executive’s termination of employment constitutes a “separation from service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code"). Upon the Company’s request, Executive shall immediately execute such other instruments as are necessary to resign from any other positions he may hold with or for any of the SL Entities.

2. Consideration; Severance. In exchange for Executive’s release of claims and the other covenants and consideration set forth below, SL shall provide Executive with the following payments and benefits, which Executive agrees are fair and sufficient and which he otherwise would not be entitled to:

(a) A payment of $8,669, minus applicable taxes and withholdings, representing Executive’s earned but unused vacation at Executive’s rate of compensation immediately prior to the Termination Date, payable in one lump sum on the first regular payroll date that is at least five (5) days after the Effective Date (as defined below).

(b) Severance pay in the total amount of $274,166.67, minus applicable taxes and withholdings, representing fourteen (14) months of salary at Executive’s last annual rate of salary, payable in one lump sum on the first regular payroll date that is at least five (5) days after the Effective Date (as defined below).

(c) SL will pay Executive’s COBRA premiums, at the level of benefits Executive was receiving as of the Termination Date, including coverage of Executive’s family, for a period of twelve (12) months following the Termination Date (including reimbursing Executive for COBRA premiums totaling $7446.20 paid by Executive between the Termination Date and the Effective Date); provided, however, that the Company’s payment of COBRA premiums shall cease at any time Executive is deemed eligible for group medical and dental coverage from another employer. Reimbursement for the $7446.20 in COBRA payments previously made by Executive under this provision will be made within five (5) days of the Effective Date (as defined below). After the Company’s payment of COBRA ceases, Executive may continue COBRA coverage at his own expense as long as he remains eligible for COBRA under federal law.

(d) SL will pay Executive $5,000, representing reimbursement for a portion of the legal fees incurred by Executive in the negotiation of this Agreement, payable in one lump sum on the first regular payroll date that is at least five (5) days after the Effective Date (as defined below).

3. Mutual Releases.

(a) In exchange for the severance payments and the other consideration set forth in this Agreement, which Executive acknowledges are fair and sufficient, Executive hereby irrevocably and unconditionally waives, releases, and forever discharges all of the SL Entities and all of their collective employees, agents, officers, directors, trustees, fiduciaries, attorneys, shareholders (including but not limited to Steel Partners LLC; Steel Partners II, L.P.; Steel Partners Holdings L.P.; Steel Partners Holdings GP Inc.; and Steel Partners II GP LLC (collectively “Steel Partners”); all of Steel Partners’ affiliates, and all of Steel Partners’ and its affiliates’ collective employees, principals, officers, representatives, attorneys, and agents), successors, and assigns (collectively “SL Parties” and each an “SL Party”), from any and all claims, liabilities, damages, and causes of action of any kind, which Executive had, now has, or may have against any of the SL Parties by reason of any actual or alleged act, omission, transaction, practice, conduct, statement, occurrence, or other matter, whether such claims, liabilities, damages, or causes of action are known or unknown to Executive. The claims being waived hereunder include, but are not limited to: (i) any and all claims or rights arising out of, or which might be considered to arise out of, or be connected in any way with, Executive’s employment with, or termination from, any of the SL Entities; (ii) any claims under any contracts, agreements, or understandings with any of the SL Parties, whether written or oral, including but not limited to any change in control plan, bonus plan, equity plan, or other plan or agreement; (iii) any claims arising under any federal, state, or local statute, rule, regulation, or ordinance, including but not limited to Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 1981, the Americans with Disabilities Act, the Fair Labor Standards Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act, the Age Discrimination in Employment Act, the Worker Adjustment and Retraining Notification Act, the Sarbanes-Oxley Act, the New Jersey Law Against Discrimination, the New Jersey Genetic Privacy Act, the New Jersey Worker and Community Right to Know Act, the New Jersey Family Leave Act, the New Jersey Military Leave Law, the New Jersey Smoke-Free Air Act, the New Jersey Conscientious Employee Protection Act, the New Jersey Worker Freedom from Employer Intimidation Act, the New Jersey Wage and Hour Laws, the New Jersey WARN Act; and all other applicable federal, state, local, or international laws; (iv) any tort, express or implied contract, public policy, whistleblower law, or the common law; (v) any claim for compensation, wages, commissions, bonuses, royalties, stock options, restricted stock, deferred compensation, equity, other monetary or equitable relief, vacation, personal or sick time, other fringe benefits, attorneys’ fees, or any tangible or intangible property; and (vi) claims under any other applicable laws, regulations, or rules. Notwithstanding the foregoing, Executive shall not be deemed to have released (A) any claim he otherwise might have to indemnification under any law, insurance policy, or agreement, including SL’s By-Laws, (B) any vested rights Executive may have under the Company’s 401(k) plan, or (C) Executive’s right to enforce the terms of this Agreement.

(b) For and in consideration of the promises and obligations set forth in this Agreement, which the SL Parties agree are fair and sufficient, the SL Parties hereby irrevocably and unconditionally waive, release, and forever discharge Executive for any and all claims, liabilities, damages, and causes of action of any kind, which any of the SL Parties had, now have, or may have against Executive by reason of any actual or alleged act, omission, transaction, practice, conduct, statement, occurrence, or other matter, whether such claims, liabilities, damages, and causes of action are known or unknown to the SL Parties, including but not limited to: (i) any and all claims or rights arising out of, or which might be considered to arise out of, or be connected in any way with, Executive’s employment by, or termination from, any of the SL Parties; (ii) any claims under any contracts, agreements, or understandings with any of the SL Parties, whether written or oral; (iii) any claims or causes of action arising under any international, federal, state, or local statute, rule, regulation, or ordinance; (iv) any claims under any tort, express or implied contract, public policy, or the common law; (v) any claim for monetary or equitable relief or attorneys’ fees; and (vi) claims under any other applicable laws, regulations, or rules; provided, however, that the SL Parties do not release acts, omissions, transactions, practices, conduct, statements, occurrences, or other matters that constitute fraud, gross negligence, bad faith, or willful misconduct. Notwithstanding the foregoing, SL shall not be deemed to have released the SL Parties’ right to enforce the terms of this Agreement.

(c) Should either Party bring a lawsuit or other action or proceeding asserting claims waived hereunder, the prevailing party in such action shall be entitled to recoup its attorneys’ fees and costs in connection with such action.

4. Executive acknowledges and agrees that the payments and other consideration provided to him under this Agreement are in full discharge of any and all liabilities and obligations of the SL Parties to Executive, monetarily or otherwise. Executive acknowledges and agrees that he is not owed any salary, bonuses, commissions, change-in-control payments, equity, sick pay, vacation pay, long or short time incentive payments, or other compensation or remuneration of any kind except as set forth in this Agreement.

5. Confidentiality; Company Property; Restrictive Covenants

(a) Executive acknowledges that as the Company’s President and Chief Financial Officer, he had access to substantial confidential and proprietary information of the SL Parties, including but not limited to information regarding the SL Parties’ products, services, strategies, finances, pricing, purchases, investments, employees, customers, prospective customers, investors, prospective investors, and vendors, including but not limited to the SL Parties’ business and marketing strategies, risk management strategies, existing and prospective business projects, lists of actual or prospective customers or investors, data regarding customer preferences and/or order histories, and customer, investor, and vendor contact information (collectively, “Confidential Information”). Executive agrees that he will maintain the confidentiality of all Confidential Information, and will not disclose any Confidential Information to any other person or entity, or use Confidential Information, for any reason whatsoever; provided, however, that Executive may disclose Confidential Information pursuant to a valid subpoena or other court order or legal process; and provided further, that if Executive receives a subpoena or other process from any person or entity which would or may require Executive to disclose Confidential Information, Executive will (a) notify the Chief Executive Officer of SL Industries, within three (3) days of receiving such subpoena or process (and in any event before any disclosure of Confidential Information), in a manner that is consistent with the Notice provisions of Section 17 hereof; and (b) use his best efforts not to make any disclosure until the SL Parties have had a reasonable opportunity to seek to participate in the proceeding or matter or otherwise protect their confidentiality interests in connection therewith; and provided further that nothing in this Section 5 shall be read to violate any law.

(b) Executive acknowledges that should he become employed by or affiliated with a competitor of the Company, he inevitably would disclose the SL Parties’ Confidential Information in the course of providing services to such competitor. Therefore, and in light of the substantial severance payments and other consideration Executive is receiving under this Agreement, Executive hereby covenants that through the period one (1) year from and after the Termination Date, Executive shall not directly or indirectly: (i) solicit, hire, attempt to hire, cause to be hired, retain, contract with, or compensate any individual who (A) is an employee, officer, director, or consultant of any of the SL Entities or (B) was an employee, officer, director, or consultant of any of the SL Entities at any time during the two (2) years prior to the Termination Date; (ii) in connection with any aspect of the Business (as defined below), solicit, seek business from, contract with, or do business with (A) any customers or vendors of any SL Entity, (B) any persons or entities that were customers or vendors of any of the SL Entities at any time in the two (2) years prior to the Termination Date; or (C) any potential customer that any of the SL Entities were actively soliciting at any time during the one (1) year prior to the Termination Date; (iii) attempt to entice away from any of the SL Entities any customers, vendors, or potential customers or vendors, or (iv) render any type of services to a Competitive Entity (as defined below), including but not limited to as an employee, officer, director, owner, shareholder, principal, consultant, volunteer, agent, or representative, or in any other capacity. For purposes of this Agreement, “Competitive Entity” shall include any business or venture that in whole or in part Competes With the Business conducted by any of the SL Entities including, without limitation, SL, SL Power Electronics Corporation, RFL Electronics, Inc., SL Montevideo Technology, Inc., Teal Electronics Corporation, and/or MTE Corporation. For the purposes of this Agreement, “the Business” means the design, manufacture, or marketing of any of the following: (a) ruggedized communication or teleprotection equipment intended for the utility transmission, rail, or intelligent transportation system industries; (b) sub-3000 watt AC/DC or DC/DC power supplies; (c) low voltage power conditioning or distribution systems; and/or (d) sub-4 inch electric motors. For purposes of this Agreement, “Competes With” means designs, manufactures, or markets the products that any of the SL Entities, including without limitation, SL, SL Power Electronics Corporation, RFL Electronics, Inc., SL Montevideo Technology, Inc., Teal Electronics Corporation, and/or MTE Corporation, currently designs, manufactures, or markets, for the market segments in which any of the SL Entities currently operates.

(c) Executive represents that as of the date he executes this Agreement, he has returned to the Company all of the SL Parties’ property in his possession, custody, or control, including but not limited to all computers, laptops, PDAs, cell phones, CD ROMs, disks, drives, and other equipment or devices, as well as all documents and information belonging to any SL Party, including but not limited to information residing on his home computer, laptop, portable hard drive, PDA, CD ROM(s), or other storage devices.

6. Mutual Non-Disparagement.

(a) Executive agrees not to make or publish, directly or indirectly, any disparaging, degrading, or negative statements (whether written or oral) about any of the SL Parties, and not to defame or publicly criticize any of the SL Parties, including, without limitation, with respect to any SL Party’s services, business ventures, business plans, integrity, veracity, acumen, performance, or personal or professional reputation.

(b) The SL Entities agree that their officers and directors shall not make or publish, directly or indirectly, any disparaging, degrading, or negative statements (whether written or oral) about Executive, or defame or publicly criticize Executive, including, without limitation, with respect to any of Executive’s services, business ventures, business plans, integrity, veracity, acumen, performance, or personal or professional reputation.

(c) Notwithstanding the foregoing, nothing in this Agreement shall be read to (i) prevent any SL Party or Executive from testifying truthfully in any legal preceding in which the SL Party or Executive has been subpoenaed to testify, (ii) prevent SL from complying with its obligations under the securities laws, including filing a Form 8-K announcing the termination of Executive’s employment, or (iii) otherwise violate any law.

7. Cooperation. For a period of one year after the Effective Date, Executive will remain available to the SL Parties to answer questions that may arise in connection with the business of the SL Entities or Executive’s services to the SL Entities, and to share any knowledge or information Executive may possess in connection with the SL Parties. This cooperation shall include, but not be limited to, (a) a three (3) hour meeting with SL’s interim CEO or his designee to be scheduled for a mutually convenient time within fifteen (15) days of the Effective Date to discuss transition issues and all pending matters and open issues; (b) cooperating with the Company, its Board of Directors, or any Committee of the Board (including any advisors, counsel, auditors or agents thereto) to provide full and accurate information with respect to events that occurred in whole or in part during his employment; and (c) assisting the SL Parties in connection with any existing or future investigation or legal actions involving any of the SL Parties to the extent such investigation(s) or legal action(s) relate to matters that arose in full or in part during Executive’s employment with the SL Entities. Other than with respect to subsection 7a above, for which there will be no compensation, Executive shall be compensated at the rate of $200 per hour, for each hour or part thereof that he provides services requested pursuant to this section, provided, however, that Executive’s obligations under this Section 7 shall not be unduly burdensome to Executive and shall be subject to reasonable accommodations to Executive’s personal and professional schedule, and provided further that absent Executive’s agreement, Executive shall not be required to spend more than two (2) hours in any week providing such services.

8. Injunctive Relief; Effect of Breach.

(a) Executive agrees that Section 5 of this Agreement is reasonable in nature and scope and is necessary for the protection of the SL Parties and their legitimate business interests; that Executive’s breach (or threatened breach) of any such provisions or obligations will result in irreparable injury to the SL Parties; that such injury will not adequately be compensable in monetary damages; and that the SL Parties shall be entitled to seek and obtain, in addition to any legal remedies that might be available to them, injunctive relief to prevent and/or remedy such a breach or threatened breach. In any proceeding for an injunction and upon any motion for a temporary, preliminary, or permanent injunction (each, an “Injunctive Action”), the SL Parties’ right to receive monetary damages in addition to any injunction shall not be a bar, or be interposed as a defense, to the granting of such relief. Any Injunctive Action may be brought in any appropriate state or federal court in the state of New Jersey and the Parties hereby irrevocably submit to the jurisdiction of such courts and waive any claim or defense of inconvenient or improper forum, lack of personal jurisdiction, or improper or undesirable venue under any applicable law or decision. Upon the issuance (or denial) of an injunction, the underlying merits of any dispute shall be resolved in accordance with the arbitration provisions of Section 9 of this Agreement.

(b) If Executive should materially breach any of his obligations under this Agreement, or if Executive should directly or indirectly challenge the lawfulness of the covenants contained in Section 5 of this Agreement, SL (i) shall have no further obligation to make the payments or provide any other consideration described in this Agreement, and (ii) shall have the right to recoup all amounts paid or provided to Executive hereunder.

9. Arbitration. Should a dispute arise in connection with this Agreement or otherwise between the parties, the Parties agree that arbitration is a preferable method of resolving such dispute to litigation in court. Therefore, except as provided in Section 8 of this Agreement, any dispute arising between the Parties under this Agreement or otherwise shall be submitted to binding arbitration before JAMS for resolution. Such arbitration shall be conducted in New Jersey, and the arbitrator will apply New Jersey law, including federal law as applied in New Jersey courts. The arbitration shall be conducted in accordance with the JAMS’ Employment Arbitration Rules, and shall be conducted on a confidential basis. The arbitration shall be conducted by a single arbitrator, who shall be an attorney who specializes in the field of employment law and who shall have prior experience arbitrating employment disputes. The award of the arbitrator shall be final and binding on the Parties, and judgment on the award may be confirmed and entered in any state or federal court in the state of New Jersey.

10. Medical and Welfare Benefits. Executive’s medical and welfare benefits provided through SL would have ceased as of July 1, 2010. Pursuant to federal law, and independent of this Agreement, Executive and his eligible dependents may be entitled to elect benefit continuation coverage under COBRA if Executive timely applies for COBRA benefits. Information regarding Executive’s rights under COBRA was provided to him in a separate mailing, and Executive timely applied for such benefits. As explained more fully in the materials Executive received, COBRA coverage may cease at any time Executive is deemed eligible for group health coverage from another employer.

11. Severability; Blue Pencil. No provision of this Agreement shall be deemed unenforceable if it is subject to an interpretation that would render it enforceable. If a court of competent jurisdiction finds that any provision of this Agreement, including but not limited to any provision set forth in Sections 5 through 7, is unenforceable, in whole or in part, (a) such a finding will not disturb the validity and enforceability of the remaining provisions of this Agreement, and (b) the court shall have the authority to modify and/or “blue pencil” this Agreement in order to render it enforceable and to effect the original intent of the Parties to the fullest extent permitted by law.

12. Interpretation; Entire Agreement. This Agreement (a) shall be fairly interpreted in accordance with its terms and without any strict construction in favor of or against either Party, regardless of which Party may have drafted any particular provision; (b) may not be modified or amended, or any of its provisions waived, except by a further written agreement signed by Executive and an authorized representative of SL; (c) constitutes the entire agreement, arrangement, and understanding between the Parties; and (d) supersedes any prior or contemporaneous agreements, arrangements, or understandings, whether written or oral, between Executive on one hand and any of the SL Parties on the other hand, including but not limited to the 2008 Incentive Stock Plan, SL’s Long Term Incentive Plan, SL’s Short Term Incentive Plan, any and all long-term and short-term incentive plans or arrangements, any and all equity agreements, and any and all commission, bonus, change-in-control, or other agreements, plans, or arrangements.

13. Time to Consider; Effective Date.

(a) Executive shall have up to forty-five (45) days from his receipt of this Agreement (including its Appendix A) to consider its terms and conditions. Executive may sign this Agreement prior to the end of such 45-day time period should Executive knowingly and voluntarily elect to do so. Executive may accept this Agreement by fully executing it and returning a signed original to the Chief Executive Officer of SL Industries, Inc., in accordance with the Notice provisions of Section 17. If Executive does not sign and return the Agreement by December 6, 2010, the offer to enter into this Agreement shall be withdrawn and the Agreement shall be null and void.

(b) This Agreement shall not become effective until the eighth (8^th) day following Executive’s signing of this Agreement (the “Effective Date”). Executive may revoke this Agreement by delivering written notice of revocation before the end of the seventh (7^th) day following his signing of this Agreement (the “Revocation Period”) to the Chief Executive Officer of SL Industries, Inc., in accordance with the Notice provisions of Section 17. If the last day of the Revocation Period falls on a Saturday, Sunday or Federal Holiday, the last day of the Revocation Period will be deemed to be the next business day thereafter. In the event that Executive revokes this Agreement prior to the eighth (8^th) day after signing the Agreement, this Agreement and the promises contained herein (including, but not limited to the obligation of SL to provide the severance payments, benefits and other things of value set forth in Section 2 hereof) shall automatically be null and void. If Executive signs this Agreement and does not revoke the Agreement within the Revocation Period, this Agreement will automatically become irrevocable, binding, and enforceable on the Effective Date, without any further action or writing on the part of either Party.

14. Tax Obligations. Executive acknowledges and agrees that he is solely and entirely responsible for the payment and discharge of all federal, state, and local taxes, if any, that he owes under any federal, state, and/or local laws as a result of the payments and other consideration provided pursuant to this Agreement, including but not limited to the payments and other consideration set forth in Section 2, above. SL will endeavor to make appropriate withholdings from all payments made pursuant to this Agreement. Executive agrees to indemnify, defend, and hold harmless the SL Parties from and against any claim or liability for any such taxes and related penalties and interest, in the event such taxes, penalties, and/or interest are assessed by the United States Internal Revenue Service or any other taxing authority. Executive expressly acknowledges that neither the SL Parties nor their attorneys have made any representations to him regarding the tax consequences of the consideration provided to him pursuant to this Agreement.

15. Code Section 409A.

(a) Notwithstanding anything herein to the contrary, this Agreement is intended to be interpreted and applied so that the payments and benefits set forth herein either shall be exempt from the requirements of Code Section 409A or shall comply with the requirements of Code Section 409A, and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be exempt from or in compliance with Code Section 409A. To the extent that SL determines in good faith that any provision of this Agreement would cause Executive to incur any additional tax or interest under Code Section 409A, SL shall be entitled to reform such provision to attempt to comply with or be exempt from Code Section 409A through good faith modifications. Each payment under this Agreement or otherwise (including any installment payments) shall be treated as a separate payment for purposes of Code Section 409A.

(b) With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Code Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, (ii) the amount of expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year, and (iii) such payments shall be made on or before the last day of Executive’s taxable year following the taxable year in which the expense was incurred. None of the SL Parties makes any guarantee or representation that this Agreement complies with Code Section 409A, and none of the SL Parties shall have any liability with respect to any failure to comply with Code Section 409A.

16. Binding Effect; Assignment. All of the terms and provisions contained in this Agreement shall be binding upon the Parties hereto and inure to the benefit of Executive and his heirs, on the one hand, and the SL Parties, as well as the successors (whether by merger, sale, or otherwise) and assigns of the SL Parties, on the other hand.

17. Notice. Any notice required or permitted under this Agreement shall be given in writing and shall be deemed effective: (a) immediately upon personal delivery or facsimile transmission (with delivery confirmation) to the Party to be notified, or (b) one (1) day after deposit with a commercial overnight courier with tracking capabilities, to the Party to be notified. If to SL, notice shall be given to the Chief Executive Officer of SL Industries, Inc., 520 Fellowship Road, Suite A-114, Mt. Laurel, New Jersey, 08054 with a copy to Richard J. Rabin, Akin Gump Strauss Hauer & Feld LLP, One Bryant Park, New York, NY, 10036, (212) 872-1086, or at such other address as SL may designate upon ten (10) days’ advance written notice. If to Executive, notice shall be given to David Nuzzo, at his address set forth herein, with a copy to Jeffrey L. Braff Esq., Cozen O’Connor, 1900 Market Street, Philadelphia, PA, 19103, (215) 665-2048, or at such other address as Executive may designate upon ten (10) days’ advance written notice.

18. No Admission of Liability or Wrongdoing. This Agreement shall not in any way be construed as an admission that the SL Parties, Executive, or any other individual or entity has any liability to or acted wrongfully in any way with respect to Executive, the SL Parties, or any other person.

19. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original and both of which together shall constitute a single instrument. True and accurate copies of this Agreement shall have the same force and effect as originals thereof.

20. EXECUTIVE AGREES AND ACKNOWLEDGES THAT HE IS ENTERING INTO THIS AGREEMENT FREELY, KNOWINGLY, AND VOLUNTARILY, WITHOUT DURESS OR COERCION. EXECUTIVE REPRESENTS THAT HE IS COMPETENT TO MANAGE HIS PERSONAL AND PROFESSIONAL AFFAIRS AND THAT HE ENTERS INTO THIS AGREEMENT WITH A FULL UNDERSTANDING OF ITS TERMS. EXECUTIVE ACKNOWLEDGES THAT HE HAS BEEN ADVISED TO CONSULT WITH AN ATTORNEY OF HIS OWN CHOOSING ABOUT THIS AGREEMENT, AND THAT HE HAS RETAINED AND BEEN ADVISED BY COMPETENT COUNSEL IN CONNECTION HEREWITH. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, HE MAY BE WAIVING IMPORTANT RIGHTS.

IN WITNESS WHEREOF, the Parties have executed this Separation Agreement and Mutual Release:

/s/ SL Industries, Inc.
SL Industries, Inc.	Date
Accepted and agreed:
/s/ David R. Nuzzo
David R. Nuzzo	Date

APPENDIX A

OWBPA INFORMATION

PLEASE REVIEW CAREFULLY

PLEASE DO NOT SIGN THE SEPARATION AGREEMENT AND MUTUAL RELEASE
PRIOR TO REVIEWING THE INFORMATION PROVIDED IN THIS DOCUMENT

In accordance with the requirements of the Age Discrimination in Employment Act and Older Workers Benefit Protection Act, SL is providing you with the following information:

Certain SL executives are being offered severance packages in connection with their termination from the Company and execution of a Separation Agreement and Mutual Release (“Agreement”).

All eligible employees who have attained the age of forty (40) years or older will have up to forty-five (45) calendar days to review the terms and conditions of the severance package and sign the Agreement. Employees who sign the Agreement will have up to seven (7) calendar days to revoke their acceptance of its terms. If an employee does not revoke the Agreement within the seven (7) day revocation period, the Agreement will become effective and irrevocable on the eighth (8^th) calendar day after the employee signs it.

Listed below are the job titles and ages of the SL employees eligible for a severance package in connection with their termination and signing of a release and those employees who were not so eligible.

Job Title	Ages of Those Eligible	Ages of Those Not Eligible
Chief Executive Officer	45
Chief Financial Officer and General Counsel	53

EX-10.2

Exhibit 10.2

SEPARATION AGREEMENT AND MUTUAL RELEASE

This Separation Agreement and Mutual Release (this “Agreement”) is made and entered into as of  October 14, 2010 between SL Industries, Inc. (“SL” or the “Company”), a New Jersey corporation, with principle offices located at 520 Fellowship Road, Suite A-114, Mt. Laurel, New Jersey, 08054 and James C. Taylor (“Executive”), an individual with a residence at 231 South Goldflake Terrace, P.O. Box 3577, Breckenridge, CO 80424 (together, the “Parties”).

1. Termination of Employment. As of June 14, 2010 (“Termination Date”), Executive shall no longer be, or hold himself out as, an employee, agent, board member, trustee or representative of SL, any of its subsidiaries or affiliates, or any of their collective committees, boards, divisions, ventures, or employee benefit plans (collectively, “SL Entities”). The Parties agree that Executive’s termination of employment constitutes a “separation from service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code"). Upon the Company’s request, Executive shall immediately execute such other instruments as are necessary to resign from any other positions he may hold with or for any of the SL Entities.

2. Consideration; Severance. In exchange for Executive’s release of claims and the other covenants and consideration set forth below, SL shall provide Executive with the following payments and benefits, which Executive agrees are fair and sufficient and which he otherwise would not be entitled to:

(a) A payment of $31,550, minus applicable taxes and withholdings, representing twenty one and nine-tenths (21.9) days of earned but unused vacation at Executive’s rate of compensation immediately prior to the Termination Date, payable in one lump sum on the first regular payroll date that is at least five (5) days after the Effective Date (as defined below).

(b) Severance pay in the total amount of $500,000, minus applicable taxes and withholdings. Of this total amount, $453,450 (minus applicable taxes and withholdings) shall be payable in one lump sum on the first regular payroll date that is at least five (5) days after the Effective Date (as defined below). The remaining $46,500 (minus applicable taxes and withholdings) shall be paid on the first regular payroll date after December 14, 2010, but in no event later than December 31, 2010.

(c) SL will pay Executive’s COBRA premiums, at the level of benefits Executive was receiving as of the Termination Date, including coverage of Executive’s family, for a period of eighteen (18) months following the Termination Date (including reimbursing Executive for those COBRA premiums paid by Executive between the Termination Date and the Effective Date); provided, however, that the Company’s payment of COBRA premiums shall cease at any time Executive is deemed eligible for group medical and dental coverage from another employer. Any reimbursement for COBRA payments previously made by Executive under this provision will be made within thirty (30) days of Executive’s presentation of proof of payment of the relevant premiums, and in no event later than December 31 of the calendar year following the year in which it was incurred. After the Company’s payment of COBRA ceases, Executive may continue COBRA coverage at his own expense as long as he remains eligible for COBRA under federal law.

(d) SL will pay Executive $5,000, representing reimbursement for a portion of the legal fees incurred by Executive in the negotiation of this Agreement, payable in one lump sum on the first regular payroll date that is at least five (5) days after the Effective Date (as defined below).

(e) Pursuant to the bonus agreement between the Parties dated on or about August 5, 2002 (the “2002 Bonus Agreement”), a payment of $218,597.81, minus applicable taxes and withholdings, payable in one lump sum on the first regular payroll date that is at least five (5) days after the Effective Date (as defined below).

3. Mutual Releases.

(a) In exchange for the severance payments and the other consideration set forth in this Agreement, which Executive acknowledges are fair and sufficient, Executive hereby irrevocably and unconditionally waives, releases, and forever discharges all of the SL Entities and all of their collective employees, agents, officers, directors, trustees, fiduciaries, attorneys, shareholders (including but not limited to Steel Partners LLC; Steel Partners II, L.P.; Steel Partners Holdings L.P.; Steel Partners Holdings GP Inc.; and Steel Partners II GP LLC (collectively “Steel Partners”); all of Steel Partners’ affiliates, and all of Steel Partners’ and its affiliates’ collective employees, principals, officers, representatives, attorneys, and agents), successors, and assigns (collectively “SL Parties” and each an “SL Party”), from any and all claims, liabilities, damages, and causes of action of any kind, which Executive had, now has, or may have against any of the SL Parties by reason of any actual or alleged act, omission, transaction, practice, conduct, statement, occurrence, or other matter, whether such claims, liabilities, damages, or causes of action are known or unknown to Executive. The claims being waived hereunder include, but are not limited to: (i) any and all claims or rights arising out of, or which might be considered to arise out of, or be connected in any way with, Executive’s employment with, or termination from, any of the SL Entities; (ii) any claims under any contracts, agreements, or understandings with any of the SL Parties, whether written or oral, including but not limited to any change in control plan, bonus plan, equity plan, or other plan or agreement; (iii) any claims arising under any federal, state, or local statute, rule, regulation, or ordinance, including but not limited to Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 1981, the Americans with Disabilities Act, the Fair Labor Standards Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act, the Age Discrimination in Employment Act, the Worker Adjustment and Retraining Notification Act, the Sarbanes-Oxley Act, the New Jersey Law Against Discrimination, the New Jersey Genetic Privacy Act, the New Jersey Worker and Community Right to Know Act, the New Jersey Family Leave Act, the New Jersey Military Leave Law, the New Jersey Smoke-Free Air Act, the New Jersey Conscientious Employee Protection Act, the New Jersey Worker Freedom from Employer Intimidation Act, the New Jersey Wage and Hour Laws, the New Jersey WARN Act; and all other applicable federal, state, local, or international laws; (iv) any tort, express or implied contract, public policy, whistleblower law, or the common law; (v) any claim for compensation, wages, commissions, bonuses, royalties, stock options, restricted stock, deferred compensation, equity, other monetary or equitable relief, vacation, personal or sick time, other fringe benefits, attorneys’ fees, or any tangible or intangible property; and (vi) claims under any other applicable laws, regulations, or rules. Notwithstanding the foregoing, Executive shall not be deemed to have released (A) any claim he otherwise might have to indemnification under any law, insurance policy, or agreement, including SL’s By-Laws, (B) any vested rights Executive may have under the Company’s 401(k) plan, or (C) Executive’s right to enforce the terms of this Agreement.

(b) For and in consideration of the promises and obligations set forth in this Agreement, which the SL Parties agree are fair and sufficient, the SL Parties hereby irrevocably and unconditionally waive, release, and forever discharge Executive for any and all claims, liabilities, damages, and causes of action of any kind, which any of the SL Parties had, now have, or may have against Executive by reason of any actual or alleged act, omission, transaction, practice, conduct, statement, occurrence, or other matter, whether such claims, liabilities, damages, and causes of action are known or unknown to the SL Parties, including but not limited to: (i) any and all claims or rights arising out of, or which might be considered to arise out of, or be connected in any way with, Executive’s employment by, or termination from, any of the SL Parties; (ii) any claims under any contracts, agreements, or understandings with any of the SL Parties, whether written or oral; (iii) any claims or causes of action arising under any international, federal, state, or local statute, rule, regulation, or ordinance; (iv) any claims under any tort, express or implied contract, public policy, or the common law; (v) any claim for monetary or equitable relief or attorneys’ fees; and (vi) claims under any other applicable laws, regulations, or rules; provided, however, that the SL Parties do not release acts, omissions, transactions, practices, conduct, statements, occurrences, or other matters that constitute fraud, gross negligence, bad faith, or willful misconduct. Notwithstanding the foregoing, SL shall not be deemed to have released the SL Parties’ right to enforce the terms of this Agreement.

(c) Should either Party bring a lawsuit or other action or proceeding asserting claims waived hereunder, the prevailing party in such action shall be entitled to recoup its attorneys’ fees and costs in connection with such action.

4. Executive acknowledges and agrees that the payments and other consideration provided to him under this Agreement are in full discharge of any and all liabilities and obligations of the SL Parties to Executive, monetarily or otherwise. Executive acknowledges and agrees that he is not owed any salary, bonuses, commissions, change-in-control payments, equity, sick pay, vacation pay, long or short time incentive payments, or other compensation or remuneration of any kind except as set forth in this Agreement. The Parties acknowledge and agree that no change in control has occurred for purposes of any Company plan or program, and that Executive is not entitled to any payments or benefits under that certain Change-in-Control Agreement by and between the Company and Executive dated on or about May 1, 2004.

5. Confidentiality; Company Property; Restrictive Covenants

(a) Executive acknowledges that as the Company’s President and Chief Executive Officer, he had access to substantial confidential and proprietary information of the SL Parties, including but not limited to information regarding the SL Parties’ products, services, strategies, finances, pricing, purchases, investments, employees, customers, prospective customers, investors, prospective investors, and vendors, including but not limited to the SL Parties’ business and marketing strategies, risk management strategies, existing and prospective business projects, lists of actual or prospective customers or investors, data regarding customer preferences and/or order histories, and customer, investor, and vendor contact information (collectively, “Confidential Information”). Executive agrees that he will maintain the confidentiality of all Confidential Information, and will not disclose any Confidential Information to any other person or entity, or use Confidential Information, for any reason whatsoever; provided, however, that Executive may disclose Confidential Information pursuant to a valid subpoena or other court order or legal process; and provided further, that if Executive receives a subpoena or other process from any person or entity which would or may require Executive to disclose Confidential Information, Executive will (a) notify the Chief Executive Officer of SL Industries, within three (3) days of receiving such subpoena or process (and in any event before any disclosure of Confidential Information), in a manner that is consistent with the Notice provisions of Section 17 hereof; and (b) use his best efforts not to make any disclosure until the SL Parties have had a reasonable opportunity to seek to participate in the proceeding or matter or otherwise protect their confidentiality interests in connection therewith; and provided further that nothing in this Section 5 shall be read to violate any law.

(b) Executive acknowledges that should he become employed by or affiliated with a competitor of the Company, he inevitably would disclose the SL Parties’ Confidential Information in the course of providing services to such competitor. Therefore, and in light of the substantial severance payments and other consideration Executive is receiving under this Agreement, Executive hereby covenants that through the period one (1) year from and after the Termination Date, Executive shall not directly or indirectly: (i) solicit, hire, attempt to hire, cause to be hired, retain, contract with, or compensate any individual who (A) is an employee, officer, director, or consultant of any of the SL Entities or (B) was an employee, officer, director, or consultant of any of the SL Entities at any time during the two (2) years prior to the Termination Date; (ii) in connection with any aspect of the Business (as defined below), solicit, seek business from, contract with, or do business with (A) any customers or vendors of any SL Entity, (B) any persons or entities that were customers or vendors of any of the SL Entities at any time in the two (2) years prior to the Termination Date; or (C) any potential customer that any of the SL Entities were actively soliciting at any time during the one (1) year prior to the Termination Date; (iii) attempt to entice away from any of the SL Entities any customers, vendors, or potential customers or vendors, or (iv) render any type of services to a Competitive Entity (as defined below), including but not limited to as an employee, officer, director, owner, shareholder, principal, consultant, volunteer, agent, or representative, or in any other capacity. For purposes of this Agreement, “Competitive Entity” shall include any business or venture that in whole or in part Competes With the Business conducted by any of the SL Entities including, without limitation, SL, SL Power Electronics Corporation, RFL Electronics, Inc., SL Montevideo Technology, Inc., Teal Electronics Corporation, and/or MTE Corporation. For the purposes of this Agreement, “the Business” means the design, manufacture, or marketing of any of the following: (a) ruggedized communication or teleprotection equipment intended for the utility transmission, rail, or intelligent transportation system industries; (b) sub-3000 watt AC/DC or DC/DC power supplies; (c) low voltage power conditioning or distribution systems; and/or (c) sub-4 inch electric motors. For purposes of this Agreement, “Competes With” means designs, manufactures, or markets the products that any of the SL Entities, including without limitation, SL, SL Power Electronics Corporation, RFL Electronics, Inc., SL Montevideo Technology, Inc., Teal Electronics Corporation, and/or MTE Corporation, currently designs, manufactures, or markets, for the market segments in which any of the SL Entities currently operates.

(c) Executive represents that as of the date he executes this Agreement, he has returned to the Company all of the SL Parties’ property in his possession, custody, or control, including but not limited to all computers, laptops, PDAs, cell phones, CD ROMs, disks, drives, and other equipment or devices, as well as all documents and information belonging to any SL Party, including but not limited to information residing on his home computer, laptop, portable hard drive, PDA, CD ROM(s), or other storage devices.

6. Mutual Non-Disparagement.

(a) Executive agrees not to make or publish, directly or indirectly, any disparaging, degrading, or negative statements (whether written or oral) about any of the SL Parties, and not to defame or publicly criticize any of the SL Parties, including, without limitation, with respect to any SL Party’s services, business ventures, business plans, integrity, veracity, acumen, performance, or personal or professional reputation.

(b) The SL Entities agree that their officers and directors shall not publish, directly or indirectly, any disparaging, degrading, or negative statements (whether written or oral) about Executive, or defame or publicly criticize Executive, including, without limitation, with respect to any of Executive’s services, business ventures, business plans, integrity, veracity, acumen, performance, or personal or professional reputation.

(c) Notwithstanding the foregoing, nothing in this Agreement shall be read to (i) prevent any SL Party or Executive from testifying truthfully in any legal preceding in which the SL Party or Executive has been subpoenaed to testify, (ii) prevent SL from complying with its obligations under the securities laws, including filing a Form 8-K announcing the termination of Executive’s employment, or (iii) otherwise violate any law.

7. Cooperation. For a period of one year after the Effective Date, Executive will remain available to the SL Parties to answer questions that may arise in connection with the business of the SL Entities or Executive’s services to the SL Entities, and to share any knowledge or information Executive may possess in connection with the SL Parties. This cooperation shall include, but not be limited to, (a) a three (3) hour meeting with SL’s interim CEO or his designee to be scheduled for a mutually convenient time within fifteen (15) days of the Effective Date to discuss transition issues and all pending matters and open issues; (b) cooperating with the Company, its Board of Directors, or any Committee of the Board (including any advisors, counsel, auditors or agents thereto) to provide full and accurate information with respect to events that occurred in whole or in part during his employment; and (c) assisting the SL Parties in connection with any existing or future investigation or legal actions involving any of the SL Parties to the extent such investigation(s) or legal action(s) relate to matters that arose in full or in part during Executive’s employment with the SL Entities. Other than with respect to subsection 7a above, for which there will be no compensation, Executive shall be compensated at the rate of $200 per hour, for each hour or part thereof that he provides services requested pursuant to this section, provided, however, that Executive’s obligations under this Section 7 shall not be unduly burdensome to Executive and shall be subject to reasonable accommodations to Executive’s personal and professional schedule, and provided further that absent Executive’s agreement, Executive shall not be required to spend more than two (2) hours in any week providing such services.

8. Injunctive Relief; Effect of Breach.

(a) Executive agrees that Section 5 of this Agreement is reasonable in nature and scope and is necessary for the protection of the SL Parties and their legitimate business interests; that Executive’s breach (or threatened breach) of any such provisions or obligations will result in irreparable injury to the SL Parties; that such injury will not adequately be compensable in monetary damages; and that the SL Parties shall be entitled to seek and obtain, in addition to any legal remedies that might be available to them, injunctive relief to prevent and/or remedy such a breach or threatened breach. In any proceeding for an injunction and upon any motion for a temporary, preliminary, or permanent injunction (each, an “Injunctive Action”), the SL Parties’ right to receive monetary damages in addition to any injunction shall not be a bar, or be interposed as a defense, to the granting of such relief. Any Injunctive Action may be brought in any appropriate state or federal court in the state of New Jersey and the Parties hereby irrevocably submit to the jurisdiction of such courts and waive any claim or defense of inconvenient or improper forum, lack of personal jurisdiction, or improper or undesirable venue under any applicable law or decision. Upon the issuance (or denial) of an injunction, the underlying merits of any dispute shall be resolved in accordance with the arbitration provisions of Section 9 of this Agreement.

(b) If Executive should materially breach any of his obligations under this Agreement, or if Executive should directly or indirectly challenge the lawfulness of the covenants contained in Section 5 of this Agreement, SL (i) shall have no further obligation to make the payments or provide any other consideration described in this Agreement, and (ii) shall have the right to recoup all amounts paid or provided to Executive hereunder.

9. Arbitration. Should a dispute arise in connection with this Agreement or otherwise between the parties, the Parties agree that arbitration is a preferable method of resolving such dispute to litigation in court. Therefore, except as provided in Section 8 of this Agreement, any dispute arising between the Parties under this Agreement or otherwise shall be submitted to binding arbitration before JAMS for resolution. Such arbitration shall be conducted in New Jersey, and the arbitrator will apply New Jersey law, including federal law as applied in New Jersey courts. The arbitration shall be conducted in accordance with the JAMS’ Employment Arbitration Rules, and shall be conducted on a confidential basis. The arbitration shall be conducted by a single arbitrator, who shall be an attorney who specializes in the field of employment law and who shall have prior experience arbitrating employment disputes. The award of the arbitrator shall be final and binding on the Parties, and judgment on the award may be confirmed and entered in any state or federal court in the state of New Jersey.

10. Medical and Welfare Benefits. Executive’s medical and welfare benefits provided through SL would have ceased as of July 1, 2010. Pursuant to federal law, and independent of this Agreement, Executive and his eligible dependents may be entitled to elect benefit continuation coverage under COBRA if Executive timely applies for COBRA benefits. Information regarding Executive’s rights under COBRA was provided to him in a separate mailing, and Executive timely applied for such benefits. As explained more fully in the materials Executive received, COBRA coverage may cease at any time Executive is deemed eligible for group health coverage from another employer.

11. Severability; Blue Pencil. No provision of this Agreement shall be deemed unenforceable if it is subject to an interpretation that would render it enforceable. If a court of competent jurisdiction finds that any provision of this Agreement, including but not limited to any provision set forth in Sections 5 through 7, is unenforceable, in whole or in part, (a) such a finding will not disturb the validity and enforceability of the remaining provisions of this Agreement, and (b) the court shall have the authority to modify and/or “blue pencil” this Agreement in order to render it enforceable and to effect the original intent of the Parties to the fullest extent permitted by law.

12. Interpretation; Entire Agreement. This Agreement (a) shall be fairly interpreted in accordance with its terms and without any strict construction in favor of or against either Party, regardless of which Party may have drafted any particular provision; (b) may not be modified or amended, or any of its provisions waived, except by a further written agreement signed by Executive and an authorized representative of SL; (c) constitutes the entire agreement, arrangement, and understanding between the Parties; and (d) supersedes any prior or contemporaneous agreements, arrangements, or understandings, whether written or oral, between Executive on one hand and any of the SL Parties on the other hand, including but not limited to that certain Change in Control Agreement dated on or about May 1, 2004, the 2002 Bonus Agreement, the 2008 Incentive Stock Plan, SL’s Long Term Incentive Plan, SL’s Short Term Incentive Plan, any and all long-term and short-term incentive plans or arrangements, any and all equity agreements, and any and all commission, bonus, or other agreements, plans, or arrangements.

13. Time to Consider; Effective Date.

(a) Executive shall have up to forty-five (45) days from his receipt of this Agreement (including its Appendix A) to consider its terms and conditions. Executive may sign this Agreement prior to the end of such 45-day time period should Executive knowingly and voluntarily elect to do so. Executive may accept this Agreement by fully executing it and returning a signed original to the Chief Executive Officer of SL Industries, Inc., in accordance with the Notice provisions of Section 17. If Executive does not sign and return the Agreement by November 29, 2010, the offer to enter into this Agreement shall be withdrawn and the Agreement shall be null and void.

(b) This Agreement shall not become effective until the eighth (8^th) day following Executive’s signing of this Agreement (the “Effective Date”). Executive may revoke this Agreement by delivering written notice of revocation before the end of the seventh (7^th) day following his signing of this Agreement (the “Revocation Period”) to the Chief Executive Officer of SL Industries, Inc., in accordance with the Notice provisions of Section 17. If the last day of the Revocation Period falls on a Saturday, Sunday or Federal Holiday, the last day of the Revocation Period will be deemed to be the next business day thereafter. In the event that Executive revokes this Agreement prior to the eighth (8^th) day after signing the Agreement, this Agreement and the promises contained herein (including, but not limited to the obligation of SL to provide the severance payments, benefits and other things of value set forth in Section 2 hereof) shall automatically be null and void. If Executive signs this Agreement and does not revoke the Agreement within the Revocation Period, this Agreement will automatically become irrevocable, binding, and enforceable on the Effective Date, without any further action or writing on the part of either Party.

14. Tax Obligations. Executive acknowledges and agrees that he is solely and entirely responsible for the payment and discharge of all federal, state, and local taxes, if any, that he owes under any federal, state, and/or local laws as a result of the payments and other consideration provided pursuant to this Agreement, including but not limited to the payments and other consideration set forth in Section 2, above. SL will endeavor to make appropriate withholdings from all payments made pursuant to this Agreement. Executive agrees to indemnify, defend, and hold harmless the SL Parties from and against any claim or liability for any such taxes and related penalties and interest, in the event such taxes, penalties, and/or interest are assessed by the United States Internal Revenue Service or any other taxing authority. Executive expressly acknowledges that neither the SL Parties nor their attorneys have made any representations to him regarding the tax consequences of the consideration provided to him pursuant to this Agreement.

15. Code Section 409A.

(a) Notwithstanding anything herein to the contrary, this Agreement is intended to be interpreted and applied so that the payments and benefits set forth herein either shall be exempt from the requirements of Code Section 409A or shall comply with the requirements of Code Section 409A, and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be exempt from or in compliance with Code Section 409A. To the extent that SL determines in good faith that any provision of this Agreement would cause Executive to incur any additional tax or interest under Code Section 409A, SL shall be entitled to reform such provision to attempt to comply with or be exempt from Code Section 409A through good faith modifications. Each payment under this Agreement or otherwise (including any installment payments) shall be treated as a separate payment for purposes of Code Section 409A.

(b) With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Code Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, (ii) the amount of expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year, and (iii) such payments shall be made on or before the last day of Executive’s taxable year following the taxable year in which the expense was incurred. None of the SL Parties makes any guarantee or representation that this Agreement complies with Code Section 409A, and none of the SL Parties shall have any liability with respect to any failure to comply with Code Section 409A. 16. Binding Effect; Assignment. All of the terms and provisions contained in this Agreement shall be binding upon the Parties hereto and inure to the benefit of Executive and his heirs, on the one hand, and the SL Parties, as well as the successors (whether by merger, sale, or otherwise) and assigns of the SL Parties, on the other hand.

17. Notice. Any notice required or permitted under this Agreement shall be given in writing and shall be deemed effective: (a) immediately upon personal delivery or facsimile transmission (with delivery confirmation) to the Party to be notified, or (b) one (1) day after deposit with a commercial overnight courier with tracking capabilities, to the Party to be notified. If to SL, notice shall be given to the Chief Executive Officer of SL Industries, Inc., 520 Fellowship Road, Suite A-114, Mt. Laurel, New Jersey, 08054 with a copy to Richard J. Rabin, Akin Gump Strauss Hauer & Feld LLP, One Bryant Park, New York, NY, 10036, (212) 872-1086, or at such other address as SL may designate upon ten (10) days’ advance written notice. If to Executive, notice shall be given to James Taylor, at his address set forth herein, with a copy to Jeffrey L. Braff Esq., Cozen O’Connor, 1900 Market Street, Philadelphia, PA, 19103, (215) 665-2048, or at such other address as Executive may designate upon ten (10) days’ advance written notice.

18. No Admission of Liability or Wrongdoing. This Agreement shall not in any way be construed as an admission that the SL Parties, Executive, or any other individual or entity has any liability to or acted wrongfully in any way with respect to Executive, the SL Parties, or any other person.

19. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original and both of which together shall constitute a single instrument. True and accurate copies of this Agreement shall have the same force and effect as originals thereof.

20. EXECUTIVE AGREES AND ACKNOWLEDGES THAT HE IS ENTERING INTO THIS AGREEMENT FREELY, KNOWINGLY, AND VOLUNTARILY, WITHOUT DURESS OR COERCION. EXECUTIVE REPRESENTS THAT HE IS COMPETENT TO MANAGE HIS PERSONAL AND PROFESSIONAL AFFAIRS AND THAT HE ENTERS INTO THIS AGREEMENT WITH A FULL UNDERSTANDING OF ITS TERMS. EXECUTIVE ACKNOWLEDGES THAT HE HAS BEEN ADVISED TO CONSULT WITH AN ATTORNEY OF HIS OWN CHOOSING ABOUT THIS AGREEMENT, AND THAT HE HAS RETAINED AND BEEN ADVISED BY COMPETENT COUNSEL IN CONNECTION HEREWITH. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, HE MAY BE WAIVING IMPORTANT RIGHTS.

IN WITNESS WHEREOF, the Parties have executed this Separation Agreement and Mutual Release:

/s/ SL Industries, Inc.
SL Industries, Inc.	Date
Accepted and agreed:
/s/ James C. Taylor
James C. Taylor	Date

APPENDIX A

OWBPA INFORMATION

PLEASE REVIEW CAREFULLY

PLEASE DO NOT SIGN THE SEPARATION AGREEMENT AND MUTUAL RELEASE
PRIOR TO REVIEWING THE INFORMATION PROVIDED IN THIS DOCUMENT

In accordance with the requirements of the Age Discrimination in Employment Act and Older Workers Benefit Protection Act, SL is providing you with the following information:

Certain SL executives are being offered severance packages in connection with their termination from the Company and execution of a Separation Agreement and Mutual Release (“Agreement”).

All eligible employees who have attained the age of forty (40) years or older will have up to forty-five (45) calendar days to review the terms and conditions of the severance package and sign the Agreement. Employees who sign the Agreement will have up to seven (7) calendar days to revoke their acceptance of its terms. If an employee does not revoke the Agreement within the seven (7) day revocation period, the Agreement will become effective and irrevocable on the eighth (8^th) calendar day after the employee signs it.

Listed below are the job titles and ages of the SL employees eligible for a severance package in connection with their termination and signing of a release and those employees who were not so eligible.

Job Title	Ages of Those Eligible	Ages of Those Not Eligible
Chief Executive Officer	45
Chief Financial Officer and General Counsel	53

EX-10.3

Exhibit 10.3

CHANGE-IN-CONTROL AGREEMENT

AGREEMENT, made and entered into as of August 31, 2010 (the “Effective Date”), by and between SL Industries, Inc., a New Jersey corporation (the “Company”), and Louis Belardi (the “Employee”).

WHEREAS, the Employee is the Chief Financial Officer of the Company; and

WHEREAS, the Company desires to provide certain protection to the Employee in the event of a change-in-control of the Company, in order to induce the Employee to remain in the employ of the Company notwithstanding any risks and uncertainties created by a potential change-in-control;

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the Company and the Employee agree as follows:

1. EFFECTIVENESS; TERM

This Agreement shall become effective as of the date hereof and shall terminate on the seventh anniversary of the date hereof, or on such other date as the parties hereto mutually agree in writing.

2. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE-IN-CONTROL

(a) If (i) the Employee’s employment is terminated by the Company or its successor without Cause (as hereinafter defined) within one year following a Change-in-Control (as hereinafter defined), or within one year following execution by the Company of a definitive agreement contemplating a Change-in-Control that occurs, whichever is later, or (ii) the Employee terminates his employment with the Company or its successor for Good Reason (as hereinafter defined) (x) following an Occurrence (as hereinafter defined), (y) the Occurrence occurs within one year following a Change-in-Control or within one year following execution by the Company of a definitive agreement contemplating a Change-in-Control that occurs, whichever is later, and (z) the termination occurs within 120 days following the date of the Occurrence, then in either case of clause (i) or (ii) above, the Employee shall be entitled to receive a Change-in-Control Payment (as hereinafter defined) with respect to such termination. The date of termination in either such case is hereinafter the “Termination Date”. Termination of employment shall have the same meaning as separation from service under Code Section 409A and Regulation Section 1.409A-1(h).

(b) Notwithstanding the foregoing, the Employee shall not be entitled to receive the Change-in-Control Payment if any of the Circumstances of Ineligibility (as hereinafter defined) apply to the Employee.

(c) “Change-in-Control Payment” means the product of one times the Employee’s annual base salary in effect as of the Termination Date. In the case of a termination of employment for Good Reason based on a reduction of the Employee’s annual base salary, the annual base salary shall be calculated as the Employee’s annual base salary in effect immediately prior to such reduction.

(d) “Change-in-Control” means that any of the following has occurred within a 12 month period:

(i) (aa) the sale of the Company; (bb) the sale of all or substantially all of the assets of the Company following which substantially all of the net proceeds of such sale are distributed to the Company’s stockholders; or (cc) a consolidation or merger of the Company with another corporation, the consummation of which would result in the stockholders of the Company immediately before the occurrence of the consolidation or merger owning, in the aggregate, fifty percent (50%) or less of the Voting Stock of the surviving entity; and such transaction occurs; or

(ii) any person or other entity, including any person as defined in Section 13(d)(3) of the Securities Exchange Act of 1934 as amended (the “Exchange Act”), but excluding the Existing Holders, becomes the beneficial owner, as defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of at least fifty percent (50%) or more of the total combined voting power of all classes of capital stock of the Company entitled to vote for the election of directors of the Company (the “Voting Stock”). As used herein, the Existing Holders means Mario J. Gabelli, GAMCO Investors, Inc., Gabelli Funds, LLC, Warren Lichtenstein, Steel Partners II, L.P., Steel Partners Holdings, L.P., Steel Partners LLC, and each of their affiliates.

(e) “Cause” means, and shall be subject to the procedures set forth herein:

(i) conviction of the Employee for (x) any crime constituting a felony in the jurisdiction in which committed, (y) any crime involving moral turpitude (whether or not a felony) or (z) any criminal act against the Company or any affiliate of the Company involving dishonesty whether or not a felony;

(ii) substance abuse (including drunkenness) by the Employee which is repeated after written notice from the Company to the Employee identifying such abuse;

(iii)	the failure or the refusal of the Employee to follow lawful and proper directives of the Board of Directors or Chief Executive Officer of the Company which is not corrected within thirty (30) days after written notice from such Board or Chief Executive Officer to the Employee identifying such failure or refusal; or
(iv)	willful malfeasance or gross misconduct by the Employee which may discredit or damage the Company or any affiliate of the Company.

(f) “Good Reason” means the occurrence of any of the following without the prior written consent of the Employee:

(i) removal from the most senior job title or position held by the Employee with respect to the Company on the 181st day prior to the Change-in-Control or any more senior position or title that the Employee subsequently achieves (the “Measuring Position”);

(ii) except as provided in the last paragraph of this Section 2(f), the assignment of duties or responsibilities materially inconsistent with those customarily associated with the Measuring Position, or any other action by the Company or a successor that results in a material diminution of the Employee’s position, authority, duties or responsibilities compared to the Measuring Position, other than an isolated action that is not taken in bad faith and is remedied by the Company or a successor promptly after receipt of written notice thereof from the Employee;

(iii) a reduction in the Employee’s annual base salary; or

(iv) the involuntary relocation of the Employee’s principal place of employment to a location more than thirty (30) miles from the Employee’s principal place of employment immediately prior to the Change-in-Control, except for required travel on the Company’s business to an extent substantially consistent with the Employee’s business travel obligations as of such date.

A voluntary termination of employment for Good Reason must occur within 120 days of the initial occurrence (the “Occurrence”) of one or more of the preceding conditions. In such event, the Employee shall notify the Company within 30 days of the occurrence of such condition, whereupon the Company shall have 30 days from the receipt of such notice to cure the condition.

Notwithstanding the foregoing, in the event that following the occurrence of a Change-in-Control there is a change in size, scale, form, or strategy of the Company, such as the Company then having a significantly smaller operating business, corporate staff or the Board of Directors of the Company determining to wind down the Company’s remaining businesses, among other possibilities, then so long as Employee is continuing in the Measuring Position, the modification of his duties or responsibilities, consistent with the Company’s needs or requirements following such change in size, scale, form, strategy or otherwise, shall not be deemed to be an Occurrence.

(g) “Circumstances of Ineligibility” means any one or more of the following circumstances:

(i) if the Employee’s employment with the Company or its successor is terminated due to death or disability (defined as the inability or incapacity of the Employee, due to any medically determined physical or mental impairment, to perform the Employee’s duties and responsibilities for the Company for a total of one hundred eighty (180) days in any consecutive 365 day period);

(ii) if the Employee elects to voluntarily terminate the Employee’s employment, including a termination due to retirement, with the Company or its successor, unless such termination by the Employee is for Good Reason; or

(iii) if the Employee’s employment with the Company or a successor is terminated for Cause at any time preceding or following a Change-in-Control.

3. TIME OF PAYMENT OF CHANGE-IN-CONTROL PAYMENT

(a) Any Change-in-Control Payment to which the Employee is entitled under Section 2 above shall be paid to the Employee in cash (subject to appropriate withholding) in a lump sum. Upon the effective date of the release of claims executed by the Employee pursuant to Section 6(d) below such payment will be made on the sixtieth (60^th) day after the Termination Date. If, at the time of the Change in Control payment, the Employee is a specified employee as defined in Code Section 409A and Regulation Section 1.409A-1(i), the lump sum shall be the lesser of the amount to which he would be entitled under Section 2, and the maximum amount payable under the Regulation Section 1.409A-1(b)(9)(iii). The difference, if any, shall be paid six months after the Change in Control payment date.

(b) Notwithstanding the foregoing, in the event that the payment of a Change-in-Control Payment would cause the Company to violate the terms of one or more financial covenants set forth in any credit agreement then in effect between the Company and its lenders of funded debt, such payment shall be deferred until the earliest practicable date without causing such violation, but not later than the end of the taxable year of the Company in which the payment of a Change in Control Payment can be made without violating the terms of any Credit Agreement.

(c) The Employee shall be paid interest, compounded daily, at the prime lending rate as announced from time to time by PNC Bank or its successor on all or any part of the Change-in-Control Payment that is not paid when due.

4. CONTINUATION OF WELFARE BENEFITS

Notwithstanding anything contained herein to the contrary, if the Employee is entitled to receive the Change-in-Control Payment, and provided Employee is eligible for and timely elects COBRA, the Company or its successor shall pay premiums on behalf of the Employee, to the extent the Company paid such premiums while the Employee was employed, in the medical, dental and hospitalization insurance programs and/or arrangements of the Company or any of its subsidiaries in which the Employee was participating on the Termination Date on the same terms and conditions as other employees under such plans, programs and/or arrangements until the earlier of (i) the end of the twelve (12) month period following the Termination Date or (ii) the date, or dates, the Employee is entitled to receive substantially equivalent coverage and benefits under the plans, programs and/or arrangements of a subsequent employer (such coverage and benefits to be determined on a coverage-by-coverage or benefit-by-benefit basis), after which the Employee shall be eligible to continue his COBRA benefits at his own expense, to the extent provided by law. For the same duration set forth in Sections 4(i) and (ii) above, the Company or its successor shall also continue to pay premiums on behalf of the Employee, as if the Employee were still an employee of the Company, in the life insurance programs and/or arrangements of the Company or any of its subsidiaries in which the Employee was participating on the Termination Date, on the same terms and conditions as other employees under such plan(s), program(s) and/or arrangement(s).

5. NON-COMPETE AND NON-SOLICITATION

(a) In consideration of the Company entering into this Agreement and providing the compensation and benefits to be provided by the Company to the Employee, the Employee agrees that the Employee will not, from the Effective Date until one (1) year after the Termination Date, engage in any Competitive Activity. For purposes of this Agreement, the term “Competitive Activity” shall mean (i) serving as a director of any Competitor (as hereinafter defined); (ii) directly or indirectly through one or more intermediaries, either (x) controlling any Competitor or (y) owning any equity or debt interests in any Competitor (other than equity or debt instruments that are public traded and, at the time of any acquisition, when combined with other holdings, do not exceed five percent (5%) of the particular class of interests outstanding) (it being understood that, if interests in any Competitor are owned by an investment vehicle or other entity in which the Employee owns an equity interest, a portion of the interests in such Competitor owned by such entity shall be attributed to the Employee, such portion determined by applying the percentage of the equity interest in such entity); (iii) employment by (including serving as an officer or partner of), providing consulting services, other than accounting services, to (including, without limitation, as an independent contractor), or managing or operating the business or affairs of, or being a lender to, any Competitor; or (iv) participating in the ownership, management, operation or control of any Competitor. For purposes of this Agreement, the term “Competitor” shall mean any person (other than the Company or any majority-owned subsidiary of the Company) that engages in any business (as determined at the time of termination of employment) in the United States in competition with the Company. For purposes of this Agreement, the term business shall include any activity engaged in by any subsidiary or division of the Company.

(b) The Employee agrees that, if the Employee receives a Change-in-Control Payment as set forth in Section 2 above, the Employee shall not directly or indirectly through another entity (i) induce or attempt to induce any employee of the Company or of any affiliate of the Company to leave the employ of the Company or such affiliate, or in any way interfere with the relationship between the Company and such affiliate and any employee thereof, or (ii) induce or attempt to induce any customer, supplier, licensee, licensor, franchisee or other business relation of the Company (or any affiliate of the Company) to cease doing business with the Company (or any affiliate of the Company), or in any way interfere with the relationship between such customer, supplier, licensee or business relation of the Company (or any affiliate of the Company). For purposes of this Agreement, a customer, supplier, licensee, licensor, franchisee or business relation means any person or entity which at the time of determination is, or has been within one (1) year prior to such time, a customer, supplier, licensee, licensor, franchisee or other business relation of the Company (or any affiliate of the Company).

(c) In the event of a Change-in-Control Payment, the Company may value the non-competition and non-solicitation covenants and allocate the Payment accordingly.

(d) The Employee agrees that any violation of this Agreement will cause immediate and irreparable harm to the Company, the amount of which will be impossible to estimate or determine. The Employee further agrees that the Company shall have the right to equitable relief by injunction or otherwise (without the necessity of posting bond or other security) and the Employee hereby knowingly waives the claim or defense that the Company has an adequate remedy at law. The rights and remedies of the Company under this Agreement are cumulative and are in addition to all other rights and remedies the Company may have under any local, state or federal law, rule or regulation or otherwise. It shall not be a defense to the Company’s enforcement of this Agreement that the Company did breach or may have breached this Agreement or any other agreement with the Employee (with the exception of the non-payment of any portion of the Change-In-Control Payment to Employee as provided in this Agreement), any such defense to the Company’s enforcement of this Agreement being hereby waived.

6. MISCELLANEOUS

(a) NO EMPLOYMENT AGREEMENT. This Agreement does not constitute a contract of employment or impose on the Company any obligation to retain the Employee as an employee.

(b) EMPLOYEE-AT-WILL. Employee acknowledges that the terms of this Agreement do not and are not intended to create either an express or implied contract of employment for a specified period of time. It is understood either Employee or the Company can terminate the employment relationship at any time with or without prior notice for any reason whatsoever or no reason at all. Moreover, both Employee and the Company acknowledge that there is no agreement express or implied for any specific period of employment, or for continued employment.

(c) DEDUCTIONS AND WITHHOLDING. The Employee agrees that the Company shall withhold from any and all compensation required to be paid to the Employee pursuant to this Agreement all federal, state, local and/or other taxes which the Company determines are required to be withheld in accordance with applicable statutes and regulations from time to time in effect.

(d) WAIVER AND RELEASE. The Employee acknowledges that (i) this Agreement provides benefits greater than the benefits that the Employee would otherwise be entitled to receive under any employment or severance agreement, plan, program or arrangement of the Company or between the Company and the Employee, and (ii) the Company has no obligation to enter into this Agreement. In consideration of the Company assuming these additional obligations and entering into this Agreement, the Employee agrees to execute an agreement and release of all claims related to the Employee’s employment or termination thereof in a form acceptable to the Company, prior to payment of the Change-in-Control Payment.

(e) ARBITRATION. Except for enforcement of the Employee’s covenants under Section 5, any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration conducted in New Jersey under the Commercial Arbitration Rules then prevailing of the American Arbitration Association and such submission shall request the American Arbitration Association to: (i) appoint an arbitrator experienced and knowledgeable concerning the matter then in dispute; (ii) require the testimony to be transcribed; (iii) require the award to be accompanied by findings of fact and a statement of reasons for the decision; and (iv) request the matter to be handled by and in accordance with the expedited procedures provided for in the Commercial Arbitration Rules. The determination of the arbitrators, which shall be based upon a de novo interpretation of this Agreement, shall be final and binding and judgment may be entered on the arbitrators’ award in any court having jurisdiction. All costs of the American Arbitration Association and the arbitrator shall be borne by the Company, unless the position advanced by the Employee is determined by the arbitrator to be frivolous in nature.

(f) NO DUTY TO MITIGATE/SET-OFF. The Company agrees that in order for the Employee to receive payments or benefits under this Agreement, the Employee shall not be required to seek other employment. Further, the amount of any such payment or benefit shall not be reduced by any compensation earned by the Employee or any benefit provided to the Employee as the result of employment by another employer or otherwise, except as provided in Section 4 or 6(g) hereof. The Company’s obligations to make any payment or provide any benefit under this Agreement shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company or a successor may have against the Employee.

(g) OFFSET. The Change-in-Control Payment shall be reduced by any severance cash payment made by the Company or any subsidiary of the Company to the Employee pursuant to (i) any severance plan, program, policy or arrangement of the Company or any subsidiary of the Company, (ii) any employment or consulting agreement between the Company or any subsidiary of the Company and the Employee, and (iii) any federal, state or local statute, rule, regulation or ordinance. The Change-In-Control Payment shall not be reduced by any benefits or payments paid pursuant to Section 4 of this Agreement.

(h) ENTIRE AGREEMENT. This Agreement embodies the entire agreement of the parties with respect to any payment and benefit which may become due or owing to the Employee in the event of a termination in connection with a Change-in-Control and supersedes any other prior oral or written agreements between the Employee and the Company with respect thereto. To the extent that any payment or benefit conferred upon the Employee herein are invalidated or rendered unenforceable by a court of competent jurisdiction, the payment or benefit provided in such other agreements shall remain in full force and effect.

(i) OTHER AGREEMENTS. Except as provided in paragraph (h) above, nothing in this Agreement shall affect or modify (i) any obligations the Employee has under any agreement with the Company with respect to confidential information, assignment of inventions and discoveries, non-solicitation of employees and/or customers, non-competition, or otherwise or (ii) any payments or benefits the Employee may be entitled to receive under any agreement with respect to severance payments, the acceleration of options or other Stock Awards, or otherwise, and all such agreements shall remain in full force and effect.

(j) AMENDMENTS. No party may amend, modify or terminate this Agreement without the express written consent of the other party.

(k) BINDING AGREEMENT. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to the benefit of and be enforceable by the Employee’s personal or legal representatives, executors, administrators, heirs, distributees, devises and legatees and the Company’s successors and assigns.

(l) LEGAL ADVICE. The Employee acknowledges that (i) he has been strongly encouraged by the Company to review this Agreement with his personal attorney and has either done so or has knowingly and voluntarily waived his right to do so and (ii) he understands all of the terms and conditions of this Agreement and agrees to be bound by its terms and conditions.

(m) GOVERNING LAW; VENUE AND JURISDICTION. This Agreement shall be governed and construed in accordance with the laws of the State of New Jersey without reference to conflict of laws principles. The Employee does hereby irrevocably consent that any legal action or proceeding arising out of or in any manner relating to this Agreement, or any other document delivered in connection herewith, shall be brought exclusively in any state court or in any federal court in New Jersey. The Employee further irrevocably consents to the service of any complaint, summons, notice or other process relating to any such action or proceeding by delivery thereof to the Employee by hand or by any other manner provided for below. The Employee hereby expressly and irrevocably waives any claim or defense in any such action or proceeding based on any alleged lack of personal jurisdiction, improper venue or forum non conveniens or any similar basis.

(n) NOTICES. All notices required or permitted by this Agreement shall be in writing and shall be given by personal delivery or sent by registered or certified mail, postage prepaid, return receipt requested, or by reputable overnight courier, prepaid, receipt acknowledged, to the following addresses:

If to the Company:

SL Industries, Inc.
520 Fellowship Road, A-114
Mt. Laurel, NJ 08054
Attention:  James A. Risher
                  Compensation Committee Chairman

If to the Employee:

Louis Belardi
2347 Schlosser Road
Harleysville, PA 19438

(o) COUNTERPARTS. This Agreement may be executed and delivered in separate counterparts, each of which when so executed and delivered shall be deemed an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of the signature page to this Agreement by facsimile transmission shall be effective as manual delivery of an executed counterpart. Any party so delivering this Agreement by facsimile transmission shall promptly manually deliver an executed counterpart, provided that any failure to do so shall not affect the validity of the counterpart delivered by facsimile transmission.

(p) NUMBER AND GENDER. All terms and words used in this Agreement, regardless of the number and gender in which they are used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context or sense of this Agreement or any portion of this Agreement may require, the same as if such words had been fully and properly written in the number and gender.

(q) NO WAIVER. The forbearance to enforce any provision or right hereunder shall not be deemed a waiver thereof, and no waiver of any breach of valid term or covenant herein shall be construed as a waiver or any other breach of the same, or any term or covenant herein.

(r) PARTIAL INVALIDITY; SEPARATE COVENANTS. If any term, covenant or condition of this Agreement or the application thereof to any person or circumstance shall to any extent, be invalid or unenforceable, the remainder of this Agreement or the application of such term, covenant or condition to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant and condition of this Agreement shall be valid and enforceable to the fullest extent permitted by law. Furthermore, each covenant, agreement, obligation and other provision contained in this Agreement is, and shall be deemed and construed as a separate and independent covenant of the party bound by, undertaking or making the same, and not dependent on any other provision of this Agreement unless expressly so provided.

(s) HEADINGS. The article and section heading contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

(t) RECITALS. The recitals in this Agreement are hereby incorporated herein as though fully set forth below.

(u) COMPUTATION OF DAYS. In computing a number of days for any purpose of this Agreement, all days shall be counted including Saturdays, Sundays and holidays.

(v) FURTHER DOCUMENTS. Each party shall, at any time and from time to time hereafter execute, acknowledge, and deliver to the other party any and all instruments, documents, and other assurances which may be necessary or appropriate to carry out the provisions of this Agreement and to effectuate its intent and purpose.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first written above.

SL INDUSTRIES, INC.
By:	/s/ James A. Risher James A. Risher
	Compensation Committee Chairman
By:	/s/ Louis J. Belardi Louis Belardi

EX-10.4

Exhibit 10.4

SL INDUSTRIES, INC.
520 Fellowship Road, Suite A114
Mt. Laurel, NJ 08054

September 2, 2010

To: Louis Belardi

We are pleased to inform you that on August 30, 2010 the Compensation Committee (the “Committee”) of SL Industries Inc. (the “Company”) granted you (i) an incentive stock option (the “Incentive Option”), as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), to purchase 24,000 shares of the Company’s common stock, par value $0.20 per share, and (ii) a non-qualified option (the “Nonqualified Option” and together with the Incentive Option, the “Options”) to purchase 1,000 shares of the Company’s common stock, each at a price of $12.50 per share and otherwise in accordance with the Company’s 2008 Incentive Stock Plan (the “Plan”). The shares of Common Stock issuable upon exercise of the Options are referred to hereinafter as the “Stock.”

The Options will become exercisable as follows: (i) the Incentive Option: (a) as to 8,000 shares of Stock, on or after August 30, 2011; (b) as to a further 8,000 shares of Stock, on or after August 30, 2012; and (c) as to the remaining 8,000 shares of Stock, on or after August 30, 2013; and (ii) the Nonqualified Option: (a) as to 333 shares of Stock, on or after August 30, 2011; (b) as to a further 333 shares of Stock, on or after August 30, 2012; and (c) as to the remaining 334 shares of Stock, on or after August 30, 2013, and that each such Option will expire on August 29, 2017.

These Options are issued in accordance with and are subject to and conditioned upon all of the terms and conditions of the Plan (a copy of which in its present form is attached hereto), as from time to time amended, provided, however, that no future amendment or termination of the Plan shall, without your consent, alter or impair any of your rights or obligations under the Options. Reference is made to the terms and conditions of the Plan, all of which are incorporated by reference in this option agreement as if fully set forth herein.

Notwithstanding any other provision in this option agreement or the Plan, no Option may be exercised unless and until the Stock to be issued upon the exercise of the Option has been registered under the Securities Act of 1933 (the “Securities Act”) and applicable state securities laws, or are, in the opinion of counsel to the Company, exempt from such registration in the United States. The Company shall not be under any obligation to register the Stock, although the Company may in its sole discretion register the Stock at such time as the Company shall determine. If the Company chooses to comply with an exemption from registration, the Stock may, at the direction of the Committee, bear an appropriate restrictive legend restricting the transfer or pledge of the Stock, and the Committee may also give appropriate stop transfer instructions with respect to the Stock to the Company’s transfer agent.

You understand and acknowledge that, under existing law, unless at the time of the exercise of these Options a registration statement under the Securities Act is in effect as to the Stock (i) any Stock purchased by you upon exercise of these Options may be required to be held indefinitely unless the Stock is subsequently registered under the Securities Act or an exemption from such registration is available; (ii) any sales of the Stock made in reliance upon Rule 144 promulgated under the Securities Act may be made only in accordance with the terms and conditions of that rule (which, under certain circumstances, restricts the number of shares which may be sold and the manner in which shares may be sold); (iii) in the case of securities to which Rule 144 is not applicable, some other exemption will be required; (iv) certificates for Stock to be issued to you hereunder shall bear a legend to the effect that the Stock has not been registered under the Securities Act and that the Stock may not be sold, hypothecated or otherwise transferred in the absence of an effective registration statement under the Securities Act relating thereto or an opinion of counsel satisfactory to the Company that such registration is not required; (v) the Company may place an appropriate “stop transfer” order with its transfer agent with respect to the Stock; and (vi) the Company has undertaken no obligation to register the Stock or to include the Stock in any registration statement which may be filed by it subsequent to the issuance of the Stock to you. In addition, you understand and acknowledge that the Company has no obligation to you to furnish information necessary to enable you to make sales under Rule 144.

These Options (or installment thereof) are to be exercised by delivering to the Company a written notice of exercise in the form attached hereto as Exhibit A, specifying the number of shares of Stock to be purchased, together with payment of the purchase price of the Stock to be purchased. The purchase price is to be paid in cash or, at the discretion of the Committee, by one of the other means provided in the Plan and referenced on Exhibit A.

Kindly evidence your acceptance of these Options and your agreement to comply with the provisions hereof and of the Plan by executing this option agreement under the words “Agreed To and Accepted.”

Very truly yours,
SL INDUSTRIES, INC.
By:	/s/ William T. Fejes Name: William T. Fejes
	Title: CEO

AGREED TO AND ACCEPTED:

/s/ Louis Belardi Louis Belardi

Exhibit A

SL INDUSTRIES, INC.
520 Fellowship Road, Suite A114
Mt. Laurel, NJ 08054

Gentlemen:

Notice is hereby given of my election to purchase  _____  shares of Common Stock, $0.20 par value (the “Stock”), of SL Industries, Inc. (the “Company”), at a price of $12.50 per share, pursuant to the provisions of the stock option granted to me on August 30, 2010 under the Company’s 2008 Incentive Stock Plan. Enclosed in payment for the Stock is:

	o my check in the amount of $ _____.
*	o _____ shares of Stock having a total value of $ _____, such value based on the Fair Market Value (as defined in the Plan) of the Stock.
*	o the cancellation of  _____  shares of Stock pursuant to the cashless exercise provision of the Plan having a total value of $ _____, such value based on the Fair Market Value (as defined in the Plan) of the Stock.
*	o a combination of the foregoing, as indicated above.

The following information is supplied for use in issuing and registering the Stock purchased hereby:

Number of Certificates and Denominations

Name

Address

Social Security Number

Dated:                                         

Very truly yours,

* Subject to the approval of the Committee.

EX-31.1

Exhibit 31.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, William T. Fejes, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of SL Industries, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

November 8, 2010

By:	/s/ William T. Fejes
	Name:	William T. Fejes
	Title:	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Louis J. Belardi, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of SL Industries, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

November 8, 2010

By:	/s/ Louis J. Belardi
	Name:	Louis J. Belardi
	Title:	Chief Financial Officer, Treasurer and Secretary

EX-32.1

Exhibit 32.1

Certification of Principal Executive Officer
Pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)

I, William T. Fejes, Chief Executive Officer (Principal Executive Officer) of SL Industries, Inc. (the “Registrant”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge, the Quarterly Report on Form 10-Q for the period ended September 30, 2010 of the Registrant (the “Report”):

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

By:	/s/ William T. Fejes
	William T. Fejes
	Chief Executive Officer  Date: November 8, 2010

This certification is being provided pursuant to 18 U.S.C 1350 and is not to be deemed a part of the Report, nor is it to be deemed to be “filed” for any purpose whatsoever.

EX-32.2

Exhibit 32.2

Certification of Principal Financial Officer
Pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)

I, Louis J. Belardi, Chief Financial Officer (Principal Financial Officer) of SL Industries, Inc. (the “Registrant”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge, the Quarterly Report on Form 10-Q for the period ended September 30, 2010 of the Registrant (the “Report”):

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

By:	/s/ Louis J. Belardi
	Louis J. Belardi
	Chief Financial Officer  Date: November 8, 2010

This certification is being provided pursuant to 18 U.S.C 1350 and is not to be deemed a part of the Report, nor is it to be deemed to be “filed” for any purpose whatsoever.