Securities Purchase Agreement among SL Industries Vertrieb GmbH, SL Industries, Inc., and DCX-Chol Holding GmbH et al. (January 3, 2003)

 EXHIBIT 2.1 SECURITIES PURCHASE AGREEMENT by and among SL INDUSTRIES, INC., SL INDUSTRIES VERTRIEB GMBH, and DCX-CHOL HOLDING GMBH DCX-CHOL ENTERPRISES, INC. CHOL ENTERPRISES, INC. dated as of January 3, 2003  SECURITIES PURCHASE AGREEMENT This SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of January ___, 2003, is by and among SL Industries Vertrieb GmbH, a German corporation registered with the Commercial Register in Ingolstadt, Germany under HRB 3181 ("Vertrieb" or "Seller") and SL Industries, Inc. ("SL Industries"), on the one hand, and DILIGENTIA Vierundachtzigste Vermoegensverwaltungs-GmbH (the name of which is to be changed to DCX-Chol Holding GmbH on the basis of a notarized shareholders' resolution as of January 3, 2003), a German corporation registered with the Commercial Register in Cologne, Germany under HRB 48027 (the "Purchaser"), DCX-Chol Enterprises, Inc., a Colorado corporation ("DCX-Chol") and Chol Enterprises, Inc., a California corporation ("Chol Enterprises"), on the other hand. WHEREAS, SL Industries owns all of the issued and outstanding stock of SL Delaware, Inc., a Delaware corporation ("SL Delaware"); WHEREAS, SL Delaware owns the sole limited partnership interests (Kommanditanteil) in, and is the sole limited partner of SL Holding GmbH & Co. KG, a German limited partnership registered with the Commercial Register in Ingolstadt, Germany under HRA 1455 ("KGH"); WHEREAS, KGH owns all of the issued and outstanding capital stock (Geschaftsanteile) of Vertrieb, which corporation is the sole general partner of KGH; Vertrieb owns all of the issued and outstanding Capital Stock of Elektro-Metall Export GmbH, a German corporation registered with the Commercial Register in Ingolstadt, Germany under HRB 201 ("EME"), and EME owns 96.67% of the issued and outstanding Capital Stock of Elektro-Metall Paks KFT, a Hungarian corporation ("Paks") (each of SL Delaware, KGH, Vertrieb, EME and Paks shall be referred to herein as an "EME Entity," and the EME Entities collectively shall be referred to herein as the "EME Group"); and WHEREAS, the Purchaser desires to acquire from Vertrieb, and Vertrieb desires to sell to the Purchaser, all of the Capital Stock of EME in accordance with and subject to the terms and conditions of this Agreement; NOW, THEREFORE, in consideration of the foregoing premises and the mutual representations, warranties, covenants and agreements herein contained, the Parties agree as follows: ARTICLE I DEFINITIONS 1.1. Definitions. The terms defined in this Article I, whenever used herein, shall have the following meanings for all purposes of this Agreement. "Accountants" shall mean Grant Thornton LLP, or such other accountants mutually determined by the Parties. "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under the Exchange Act.  "Affiliate Agreements" shall have the meaning ascribed thereto in Section 3.2. "Agreement" shall have the meaning set forth in the preamble hereto. "AktG" shall have the meaning set forth in Section 4.5 hereof. "Annual Financial Statements" shall have the meaning set forth in Section 3.6 hereof. "Basler Agreement" shall have the meaning ascribed thereto in Section 2.4 hereof. "Business Day" shall include any day other than a Saturday, Sunday or other day on which banking institutions in Los Angeles are authorized by law, regulation or executive order to remain closed. "Capital Stock" shall mean the capital stock issued by a corporation, or equivalent interest in any other Person, including all voting and non-voting capital stock, Voting Rights or equivalent interest. "Chol Enterprises" shall have the meaning ascribed thereto in the preamble. "Closing" shall have the meaning ascribed thereto in Section 2.2 hereof. "Closing Date" shall have the meaning ascribed thereto in Section 2.2 hereof. "Closing Documents" shall have the meaning ascribed thereto in Section 2.2 hereof. "Closing Documents Releases" shall have the meaning ascribed thereto in Section 2.2 hereof. "Confidential Information" shall have the meaning ascribed thereto in Section 5.8(a) hereof. "Confirmation of Execution and Notarization" shall have the meaning ascribed thereto in Section 2.2 hereof. "Consents" shall have the meaning ascribed thereto in Section 3.5 hereof. "Contract" shall mean any contract, agreement, arrangement, commitment, guaranty, lease, indenture, mortgage, note, bond, encumbrance, license, government registration, franchise, permit or other instrument, including, without limitation, any written, oral or unwritten amendments, waivers or legally binding understandings with respect thereto. "Damages" shall have the meaning ascribed thereto in Section 8.3(f)(ii) hereof. "Datron" shall mean Datron Inc. and its successors and assigns. "Disclosure Schedule" shall mean the Disclosure Schedule attached hereto as Annex I, dated as of the date hereof, delivered in connection with this Agreement. 3  "Down Payment" shall have the definition ascribed thereto in Section 2.3(a). "Due Date" shall have the meaning ascribed thereto in Section 5.6(b) hereof. "EME" shall have the meaning ascribed thereto in the preamble hereof. "EME Additional Tax Payment" shall mean (i) the payment that would have been due by EME to the German tax authorities for the year 2002 if EME were not a party to the Profit and Loss Agreement, minus (ii) the EME Payment. "EME Entity" shall have the meaning ascribed thereto in the preamble hereof. "EME Group" shall have the meaning ascribed thereto in the preamble hereof. "EME Payment" shall mean the payment of taxes by EME to the German tax authorities that was made on account of the calendar year ending December 31, 2002 in the aggregate amount of 255,286.12 Euros for income tax and 223,160.00 Euros for trade tax. "Environmental Claim" shall mean any claim, action, demand, order, or notice by or on behalf of, any Governmental Entity or Person alleging potential liability arising out of, based on or resulting from the violation of any Environmental Law or permit or relating to any Hazardous Materials. "Environmental Laws" shall mean all foreign, Federal, state, and local laws and regulations that are applicable to EME and/or Paks relating to Releases or threatened Releases of Hazardous Materials or otherwise relating to pollution or protection of the environment, health, safety or natural resources, including, without limitation, those relating to (A) the Releases or threatened releases of Hazardous Materials or materials containing Hazardous Materials or (B) the manufacture, generation, handling, treatment, storage, transport, disposal or handling of Hazardous Materials or materials containing Hazardous Materials. "Environmental Permits" shall have the meaning ascribed thereto in Section 3.16 hereof. "Escrow Agent" shall mean Olshan Grundman Frome Rosenzweig & Wolosky LLP. "Escrow Agreement" shall mean that certain Escrow Agreement by and among the Parties and the Escrow Agent, dated as of the date hereof, in the form attached hereto as Exhibit "A". "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Financial Statements" shall have the meaning ascribed thereto in Section 3.6 hereof. "GAAP" means United States generally accepted accounting principles as in effect on the date or for the period with respect to which such principles are applied. "German Accounting Standards" shall have the meaning ascribed thereto in Section 3.6 hereof. 4  "Governmental Entity" shall have the meaning set forth in Section 3.5 hereof. "Guaranty" shall have the meaning ascribed thereto in Section 2.3(b). "Hazardous Materials" means all substances, matters and other particles defined or listed as "hazardous" or "toxic" under Environmental Laws or are otherwise subject to or regulated by Environmental Laws. "Hungarian Accounting Standards" means the Hungarian general principles for audits and economic examiners in effect for the relevant year. "Insurance Policies" shall have the meaning set forth in Section 3.15 hereof. "Intellectual Property Rights" shall have the meaning set forth in Section 3.14(b) hereof. "Interim Financial Statements" shall have the meaning ascribed thereto in Section 3.6 hereof. "Inventory" shall have the meaning ascribed thereto in Section 3.21 hereof. "KGH" shall have the meaning ascribed thereto in the preamble hereof. "Law" shall mean all laws, statutes, ordinances, executive orders, decrees, judgments, orders, writs, injunctions, rules and regulations of any United States (federal, state or local) or foreign government (including Germany and Hungary) or any political subdivision thereof, or any governmental, regulatory or administrative authority, agent or commission or court of competent jurisdiction. "Lien" shall mean any and all mortgages, liens, attachments, encumbrances, charges, options, rights of first refusal, any conditional sale or other title retention agreement, restrictions, claims, leases, easements or security interests of any nature whatsoever. "Material Adverse Effect" shall mean a material adverse effect on the business, operations, assets, liabilities, condition (financial or otherwise) or results of operations on EME and Paks, taken together as a whole, or on the ability of EME and Paks, taken together as a whole, to conduct their business in the manner in which it is currently operated or conducted. "1998 Agreement" shall mean that certain Purchase Agreement by and between Datron and Seller, dated as of June 30, 1998. "Notice of Offset" shall have the meaning ascribed thereto in Section 8.3(g) hereof. "Paks" shall have the meaning ascribed thereto in the preamble hereof. "Parties" shall mean Seller, SL Industries, the Purchaser, DCX-Chol and Chol Enterprises. "Permits" shall have the meaning set forth in Section 3.10 hereof. 5  "Permitted Liens" shall have the meaning ascribed thereto in Section 3.13 hereof. "Person" means any individual, corporation, partnership, limited partnership, limited liability partnership, limited liability company, joint venture, association, trust, Governmental Entity or other entity. "Prior Environmental Losses" shall mean any Purchaser Losses arising from claims of breach of Section 3.16 hereof caused by actions arising prior to the "Closing Date" as such term is defined in the 1998 Agreement. "Profit and Loss Agreement" shall mean that certain Profit and Loss Transfer Agreement by and between KGH and EME dated as of November 18, 2002. "Purchase Price" shall have the meaning ascribed thereto in Section 2.3 hereof. "Purchased Shares" shall have the meaning ascribed thereto in Section 2.1. "Purchaser Environmental Losses" shall mean Purchaser Losses arising from claims of breach of Section 3.16 hereof caused by actions arising after the "Closing Date" as such term is defined in the 1998 Agreement, and prior to the Closing Date as defined herein. "Purchaser Indemnified Parties" shall have the meaning ascribed thereto in Section 8.3. "Purchaser Losses" shall have the meaning ascribed thereto in Section 8.3. "Purchaser Material Adverse Effect" shall mean a material adverse effect on the business, operations, assets, financial condition or results of operations on Purchaser, DCX-Chol and Chol Enterprises, taken together as a whole. "Purchaser Threshold" shall have the meaning ascribed thereto in Section 8.3 hereof. "Release" shall mean any release (whether or not sudden and/or accidental), spill, emission, seepage, transfer, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Materials into the indoor or outdoor environment, including the movement of Hazardous Materials through the air, soil, surface water or groundwater. "Representative" means, with respect to any Person, each of such Person's Affiliates, directors, officers, employees, partners, members, representatives, agents, contractors, advisors and consultants and each of the heirs, executors and assigns of any of the foregoing. "Secured Note" shall have the meaning ascribed thereto in Section 2.3 hereof. "Securities Act" means the Securities Act of 1933, as amended. "Seller Dividend" shall have the meaning ascribed thereto in Section 2.3. "Seller Indemnified Parties" shall have the meaning ascribed thereto in Section 8.3. 6  "Seller's Knowledge" shall mean the actual knowledge of any of Warren Lichtenstein, Glen Kassan, David Nuzzo, Uwe Basler or Peter Kraft after inquiry of each other. Any actual knowledge of any of Warren Lichtenstein, Glen Kassan, David Nuzzo, Uwe Basler or Peter Kraft shall be imputed to the other persons. "Seller Losses" shall have the meaning ascribed thereto in Section 8.3. "Seller Release of Claims" shall have the meaning ascribed thereto in Section 2.4 hereof. "Seller Resignations" shall have the meaning ascribed thereto in Section 2.4 hereof. "Seller Threshold" shall have the meaning ascribed thereto in Section 8.3 hereof. "Share Transfer and Pledge Agreement" shall mean the share transfer and pledge agreement as is required to be notarized by the German notary. "Taxes" shall have the meaning set forth in Section 3.12 hereof. "Tax Refund" shall mean the refunds that may be owing from the German tax authorities to the EME Group as a result of the EME Payment. "Tax Return" shall have the meaning set forth in Section 3.12(d) hereof. "Transaction Documents" shall mean this Agreement, the Secured Note, the Unsecured Note, the Guaranty, the Seller Release of Claims, the Seller Resignations, the Closing Documents Releases, the Escrow Agreement, the Basler Agreement, the Share Transfer and Pledge Agreement and the Confirmation of Execution and Notarization. "Unsecured Note" shall have the meaning ascribed thereto in Section 2.3 hereof. "Vertrieb" shall have the meaning ascribed thereto in the preamble hereof. "Voting Rights" shall mean the Hungarian form of capital stock issued by a corporation, or equivalent interest in any other Person, including all voting and non-voting capital stock. All dollar amounts used herein refer to United States Dollars. ARTICLE II PURCHASE AND SALE OF CAPITAL STOCK. 2.1. Purchase and Sale of EME Capital Stock. Subject to the terms and conditions herein stated, Seller hereby sells, assigns, transfers and delivers to the Purchaser on the Closing Date, and the Purchaser hereby purchases and accepts the assignment, transfer and delivery from Seller on the Closing Date, free and clear of all Liens, except the Liens granted pursuant to the Share Transfer and Pledge Agreement, one-hundred percent (100%) of the Capital Stock of EME (the "Purchased Shares"). 2.2. Closing. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place on January 3, 2003 (the "Closing Date") as follows: 7  (i) One day prior to the Closing Date, the Parties shall have executed all Transaction Documents and other documents, certificates and instruments required to be delivered hereunder for the Closing (collectively, "Closing Documents"), other than the Share Transfer and Pledge Agreement and those described in clauses (ii) and (iii) of this Section 2.2, and the Parties shall provide such Closing Documents, together with the Down Payment, to the Escrow Agent, which Closing Documents and Down Payment shall be held by the Escrow Agent pursuant to the Escrow Agreement and shall not be released except as provided in the Escrow Agreement pursuant to clause (iii) of this Section 2.2; (ii) on the Closing Date, the Share Transfer and Pledge Agreement shall be executed by the Seller's German counsel on behalf of Seller on the one hand (which German counsel shall have been so authorized by Seller), and by Purchaser's, German counsel on behalf of Purchaser, on the other hand (which German counsel shall have been so authorized by Purchaser, and shall be executed in front of a German notary in accordance with German Law; and immediately thereafter, the respective German counsels shall execute and fax to Purchaser and Seller a Confirmation of Execution and Notarization in the form attached hereto as Exhibit "B" (the "Confirmation of Execution and Notarization"); (iii) upon receipt of and conditioned upon the Confirmation of Execution and Notarization, the Purchaser and Seller shall each execute and fax to the Escrow Agent a Closing Documents Release in the forms attached hereto as Exhibit "C" and Exhibit "D" (the "Closing Documents Releases"), which shall authorize the release by the Escrow Agent to the Parties of all Closing Documents; and (iv) upon receipt of, and conditioned upon receipt of, each of (x) the Confirmation of Execution and Notarization, (y) Seller's Closing Documents Release, and (z) Purchaser's Closing Documents Release, the Escrow Agent shall transmit the Secured Note, the Unsecured Note, the Guaranty to Seller, the Down Payment shall be delivered by wire transfer to the bank account(s) designated by Seller, and the Escrow Agent shall transmit the Seller Release of Claims, the Seller Resignations, the legal opinions referred to in Section 2.3(c), the Basler Agreement and any other Closing Documents to Purchaser, and the Closing shall occur upon the receipt by Seller. 2.3. Purchase Price and Deliveries at Closing. The Purchaser shall purchase the Purchased Shares for an aggregate purchase price equal to Ten Million Dollars ($10,000,000), payable as follows, (the "Purchase Price"): (a) Down Payment. On the Closing Date, the Purchaser shall deliver to Seller, a down payment in the amount of Four Million Dollars ($4,000,000), by wire transfer (or other mutually satisfactory form) to the bank account(s) designated by Seller (the "Down Payment"); plus 8  (b) Seller Financing. (i) Secured Note. Purchaser shall deliver to Seller a promissory note executed by Purchaser, dated the Closing Date, in the form of Exhibit "E" attached hereto (the "Secured Note"), in the original principal amount of Three Million Dollars ($3,000,000), payable on the later of (a) March 15, 2003 or (b) the completion and delivery by the Accountant of the audit of the financial statements of EME and Paks for the period ended December 31, 2002, but in no event later than May 1, 2003 with interest at a rate equal to the LaSalle Bank National Association, Chicago, Illinois, publicly announced prime rate in effect from time to time, plus Two Percent (2%), per annum; (ii) Share Transfer and Pledge Agreement. The Purchaser shall deliver to Seller that certain Share Transfer and Pledge Agreement in the form of Exhibit "F" attached hereto (the "Share Transfer and Pledge Agreement") executed by the Purchaser and EME in favor of Seller, which Share Transfer and Pledge Agreement shall secure the Secured Note; (iii) Guaranty. The Purchaser shall deliver to Seller that certain Guaranty executed by DCX-Chol and Chol Enterprises in favor of Seller in the form attached hereto as Exhibit "G" (the "Guaranty"), by which DCX-Chol and Chol Enterprises shall jointly and severally guaranty the obligations of Purchaser under the Secured Note and the Unsecured Note; (iv) Unsecured Note. The Purchaser shall deliver to Seller a promissory note executed by Purchaser, dated the Closing Date, in the form of Exhibit "H" attached hereto (the "Unsecured Note"), in the original principal amount of One Million Dollars ($1,000,000), as it may be decreased if so required pursuant to Section 8.3(g), payable by April 3, 2004, with interest at a rate of Twelve Percent (12%) per annum for so long as the Unsecured Note remains unsecured. If Purchaser elects to provide security for the Unsecured Note by granting to Seller a first priority lien on assets of the Purchaser, DXC-Chol and/or Chol Enterprises that are sufficient in Seller's reasonable opinion to secure the principal amount of the Unsecured Note, then the interest rate on the Unsecured Note shall be reduced to a rate equal to the LaSalle Bank National Association, Chicago, Illinois, publicly announced prime rate in effect from time to time, plus Two Percent (2%), per annum from and after the granting of such lien; plus (c) Seller Dividend. On or prior to January 2, 2003, Seller shall cause EME and/or Paks to distribute (or as of the Closing Date, EME and/or Paks shall have distributed) up to Two Million Dollars ($2,000,000) to Seller, either by way of dividend, distribution or other payment from EME's annual earnings, to the extent EME and Paks are not prohibited from making such dividend, distribution or other payment by applicable Law or their governing documents (the "Seller Dividend"). Since December 1, 2002, Seller has already caused EME and/or Paks to distribute Two Million Dollars ($2,000,000) to Seller in satisfaction of the Seller Dividend. The actual amount of the Seller Dividend shall constitute a part of the Purchase Price. 9  2.4. Other Deliveries (a) Seller Release of Claims. Seller and SL Industries shall execute and deliver, and shall cause KGH and SL Delaware to execute and deliver, to Purchaser the Seller Release of Claims in the form attached hereto as Exhibit "I" releasing EME and Paks from any and all liabilities to Seller, SL Industries, KGH, SL Delaware and their Affiliates as set forth therein (the "Seller Release of Claims"). (b) Resignations. Seller shall execute and deliver to Purchaser resignations from any Representatives of Seller or its Affiliates who are board members or officers of EME and/or Paks who are not residents of Germany or Hungary, in the form attached hereto as Exhibit "J" (the "Seller Resignations"). (c) Legal Opinions. Seller shall deliver to Purchaser an opinion of Olshan Grundman Frome Rosenzweig & Wolosky LLP in the form attached hereto as Exhibit "K", and an opinion of Holters & Elsing in the form attached hereto as Exhibit "L". (d) Other Transaction Documents. The Parties shall execute and deliver to the appropriate other Parties all other Closing Documents requested by the other Parties to consummate the Closing. (e) Basler Agreement. Uwe Basler, Seller and EME, shall execute the Basler Agreement substantially in the form of Exhibit "M" hereto. 2.5. Ownership of Purchased Shares. At the Closing, unless explicitly specified otherwise in the Share Transfer and Pledge Agreement, the Purchaser immediately shall become the owner of all right, title and interest in and to one hundred percent (100%) of the Purchased Shares free and clear of all Liens, subject only to the Liens granted pursuant to the Share Transfer and Pledge Agreement. 2.6. Audit Fees. The fees and expenses of the Accountants in connection with the audit in accordance with GAAP of EME and Paks for the period ended December 31, 2002 will be split equally between Seller and SL Industries, on the one hand, and Purchaser, DCX-Chol and Chol Enterprises, on the other hand. 2.7. Payment of Intercompany Advances. EME shall make a payment to SL Industries at or prior to the Closing in payment of all outstanding intercompany advances and loans then due and owing in the amounts set forth in Section 5.6(d) of the Disclosure Schedule. ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER and SL INDUSTRIES Seller and SL Industries jointly and severally represent and warrant to the Purchaser, DCX-Chol, Chol Enterprises and their respective Affiliates as follows: 3.1. Corporate Organization, Etc. Each of Seller, SL Industries, EME and Paks is a corporation or partnership duly organized, validly existing and, to the extent applicable under the laws of the relevant jurisdiction, in good standing under the laws of the jurisdiction of its incorporation or organization 10  and has all requisite corporate or partnership power and authority to conduct its business as it is now being conducted and to own, lease and operate its property and assets. Each of Seller and SL Industries is qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction in which ownership of property or the conduct of its business requires such qualification or license, except where the failure to be so qualified or licensed will not have a Material Adverse Effect. True and complete copies of the organizational and governing documents of each of EME and Paks, as presently in effect, have been heretofore delivered to the Purchaser. 3.2. Capitalization; Affiliate Transactions. (a) Seller owns one hundred percent (100%) of the Capital Stock of EME and EME owns 96.67% of the Voting Rights of Paks. The Purchased Shares are subject to no restrictions on transferability or any other Liens other than restrictions imposed by (i) the Securities Act, (ii) applicable state securities laws, and (iii) applicable German securities laws, none of which restrictions prohibit the transactions contemplated in the Transaction Documents. Except for this Agreement, and except as set forth in Section 3.2(a) of the Disclosure Schedule, there are no outstanding options or other rights to acquire, directly or indirectly, from Seller, SL Industries or any EME Entity, or any plans, Contracts or commitments providing for the issuance of, or the granting of rights by Seller, SL Industries and/or any EME Entity to acquire, directly or indirectly: (i) any interest in the capital, profits, losses, assets or liabilities of EME or Paks or (ii) any securities convertible into or exchangeable for any interest in the capital, profits, losses, assets or liabilities of EME or Paks. Except as described in Schedule 3.2(a) of the Disclosure Schedule, there are no outstanding agreements or understandings with respect to the voting, holding or selling of any interest in the capital, profits, losses, assets or liabilities or Capital Stock of EME or Paks. (b) Except as set forth in Schedule 3.2(b) of the Disclosure Schedule there are no and have not been any (i) advances or loans by Seller, SL Industries or any of their respective Affiliates to or on behalf of or from EME or Paks or (ii) other Contracts between EME or Paks and Seller, SL Industries or any EME Entity (clauses (i) and (ii), collectively, "Affiliate Agreements"). All Affiliate Agreements have been performed in accordance with their terms. None of the Affiliate Agreements have resulted in or given rise to, nor will they result in or give rise, any Taxes that have not been paid in full or accrued on the Interim Financial Statements. None of the Affiliate Agreements shall survive after the Closing. 3.3. Capitalization and Ownership Structure of Seller, EME and Paks. (a) Seller. The authorized capital of Seller in the aggregate nominal amount of DM 50,000 consists exclusively of two shares as follows: one share in the nominal amount of DM 49,500 and one share in the nominal amount of DM 500, all of which are issued and outstanding. KGH owns all such outstanding capital stock of Seller. (b) EME. The authorized capital of EME in the aggregate nominal amount of DM 3,000,000 consists exclusively of four shares as follows: one share in the nominal amount of DM 1,400,000, one share in the nominal amount of DM 1,200,000 and two shares each in the nominal amount of DM 200,000, all of which are issued and outstanding. Seller owns all such outstanding capital stock of EME. 11  (c) Paks. The authorized capital of Paks consists exclusively of 2,300 Voting Rights with a value of 10,000 HUF per Voting Right, all of which are issued and outstanding. EME owns 2,208 Voting Rights of Paks, and Peter Starke owns 92 Voting Rights of Paks. All of the issued and outstanding Capital Stock of each of EME and Paks are duly authorized, validly issued, fully paid and nonassessable, and are owned directly by Seller, free and clear of all Liens and any preemptive rights in respect thereto, other than with respect to 92 Voting Rights of Paks which are owned by Peter Starke. True and complete copies of the organizational and governing documents of each of Seller, EME and Paks have been heretofore delivered to the Purchaser. 3.4. Authority Relative to the Transaction Documents. Each of Seller and SL Industries has all requisite corporate authority and power to execute and deliver this Agreement and the other Transaction Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all required corporate, shareholder or partnership action on the part of Seller, SL Industries and each EME Entity and no other corporate, shareholder or partnership proceedings on the part of Seller, SL Industries or any EME Entity are necessary to authorize this Agreement or the other Transaction Documents or to consummate the transactions contemplated hereby or thereby. The Transaction Documents to which they are a party have been duly and validly executed and delivered by Seller, SL Industries and each EME Entity, respectively, as applicable, and, assuming the Transaction Documents have been duly authorized, executed and delivered by the Purchaser, DCX-Chol and/or Chol Enterprises, as applicable, the Transaction Documents to which they are a party constitute the valid and binding agreement of Seller, SL Industries and each EME Entity, enforceable against Seller, SL Industries and such EME Entity in accordance with their terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally, including the effect of statutory and other laws regarding fraudulent conveyances and preferential transfers and subject to the limitations imposed by general equitable principles (regardless whether such enforceability is considered in a proceeding at law or in equity). 3.5. Consents and Approvals; No Violations. Neither the execution and delivery of this Agreement and the other Transaction Documents by Seller, SL Industries and the respective EME Entities, nor the consummation of the transactions contemplated hereby and thereby will (a) violate any provision of the organizational or governing documents of Seller, SL Industries or any EME Entity or any applicable Law, (b) require any consent, waiver, approval, exemption, registration, declaration, license, authorization or permit of, or filing with or notification to, any federal, state, local or foreign government, executive official thereof, governmental or regulatory authority, agency or commission, including courts of competent jurisdiction, domestic or foreign (a "Governmental Entity"), (c) require any consent, waiver, approval, exemption, registration, declaration, license, authorization or permit of, or filing with or notification to, any other Person, except, with respect to this clause (d), for such consents, waivers, approvals, exemptions, registrations, declarations, licenses, authorizations, permits, filings or notifications which are listed in Section 3.5 of the Disclosure Schedule (the "Consents"), or which, if not obtained or made, will not allow for the termination, cancellation or acceleration or any obligation to repay under, any of the terms, conditions or 12  provisions of any Contract or obligation that would cost EME and Paks collectively more than Twenty Thousand Dollars ($20,000) for each instance or One Hundred Thousand Dollars ($100,000) in the aggregate for all instances, (e) result in the imposition of any Lien, (f) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration or any obligation to repay) under, any of the terms, conditions or provisions of any Contract or obligation to which Seller, SL Industries, EME or Paks is a party or by which Seller, SL Industries, EME or Paks or any of their respective properties or assets may be bound, which violation, breach or default could have a Material Adverse Effect, or (g) violate any order, writ, judgment, injunction, decree, statute, ordinance, rule or regulation of any Governmental Entity applicable to Seller, SL Industries, EME or Paks or by which any of their respective properties or assets may be bound which violation could have a Material Adverse Effect. 3.6. Financial Statements. The Purchaser, DCX-Chol and Chol Enterprises have previously been furnished with (i) the audited balance sheets of EME and the related audited statements of earnings, retained earnings and cash flows of EME (including any related notes) for the fiscal year ended December 31, 1999 (EME did not own Paks in 1999), and the audited balance sheets of EME (which includes Paks as an investment) and the related audited statements of earnings, retained earnings and cash flows of EME (which includes Paks as an investment) (including any related notes) for the fiscal year ended December 31, 2000 and December 31, 2001 (in English), together with the report thereon of the independent public accountant of EME and Paks (the "Annual Financial Statements") and (ii) the unaudited balance sheets of EME (which includes Paks as an investment) and related unaudited statements of earnings, retained earnings and cash flows of EME (which includes Paks as an investment) (including any related notes) for the eleven-month period ending November 30, 2002 (the "Interim Financial Statements"), and together with the Annual Financial Statements, the "Financial Statements"). Each of the balance sheets included in the Financial Statements, in all material respects, fairly presents the financial position of EME (for 1999) and EME (which includes Paks as an investment) (for 2000 and 2001) as of its date, and the other related statements included in the Financial Statements, in all material respects, fairly present the results of operations and changes in the financial position of EME (for 1999) and EME (which includes Paks as an investment) (for 2000 and 2001) for the periods presented therein, all in conformity with Law and with the principles of sound accounting and generally accepted accounting practice in the Federal Republic of Germany (the "German Accounting Standards") in respect of the Annual Financial Statements and in conformity with GAAP in respect of the Interim Financial Statements, except for the absence of footnotes and normal year-end adjustments with respect to the Interim Financial Statements. Except as explicitly set forth on the balance sheets in the Financial Statements, neither EME nor Paks has any liability or obligation of any nature (whether accrued, absolute, contingent or otherwise) which would be required to be reflected on an audited balance sheet prepared in accordance with the German Accounting Standards in respect of the Annual Financial Statements and in accordance with GAAP in respect of the Interim Financial Statements. Each of Seller, KGH and SL Delaware have no operations, have no assets other than interests in other EME Entities, and have no liabilities other than in connection with the ownership of such EME Entities and maintaining their organizational status and preparing Tax Returns and other filings required to Governmental Entities. 13  3.7. Absence of Certain Changes. Except as set forth in Section 3.7 of the Disclosure Schedule, since November 30, 2002, (a) there has not been any change in the business, operations, assets, liabilities, condition (financial or otherwise) or operations of EME or Paks, except such changes which, in the aggregate, do not and will not have a Material Adverse Effect, (b) there has not been any event or circumstance which could have a Material Adverse Effect, (c) there has not been any actual, threatened, anticipated or contemplated damage, destruction, loss (whether or not covered by insurance), conversion, termination, cancellation, default or taking by eminent domain or other action by any third party or Governmental Entity with respect to any EME Entity which has or may have a Material Adverse Effect; (d) none of the EME Entities has conducted its respective businesses in any material respect not in the ordinary and usual course consistent with past practice, and (e) none of the EME Entities has (i) incurred any indebtedness or issued any debt securities or assumed, guaranteed or endorsed the obligations of any other Person, (ii) declared, set aside for payment or paid any dividend or other distribution (whether in cash, stock, property or any combination thereof), or redeemed or otherwise acquired any shares of capital stock of any Person, (iii) sold, transferred or otherwise disposed of, any of its material property or assets or, (iv) created any Lien on any of its property or assets. 3.8. Contracts and Commitments. Except as set forth in Section 3.8 of the Disclosure Schedule, neither EME nor Paks is in breach or default and, to Seller's Knowledge, no other party to any of the material Contracts relating to, binding on or affecting EME or Paks, or the assets used in the business of EME or Paks, is as of the date of this Agreement and will not be at the Closing, in breach or default (and no event has occurred which with notice or the lapse of time or both would constitute a default or violation) under any of the material Contracts of EME or Paks, except such defaults which, individually or in the aggregate, will not have a Material Adverse Effect. To the Seller's Knowledge, there has not been any threatened cancellation of any material Contract relating to, binding on or affecting EME or Paks, or the assets used in the business of EME or Paks, or any outstanding dispute under any such Contract, or to the Seller's Knowledge, any bases for any claim or breach or default thereunder other than in the ordinary course of business consistent with past practice. The execution, delivery and performance by Seller and SL Industries of this Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby will not entitle any other party to any material Contract of EME or Paks to cancel, suspend or terminate any such Contract. To Seller's Knowledge, there is no reason to believe that any of such material Contracts that are renewable solely at the option of the other party thereto will not be renewed by the other party on reasonable terms. 3.9. No Undisclosed Liabilities. Except as and to the extent set forth in the Financial Statements or in Section 3.9 of the Disclosure Schedule, none of the EME Entities has any liabilities of any nature (whether accrued, absolute, matured, contingent or otherwise) which would be required by the German Accounting Standards in respect of the Annual Financial Statements or by GAAP in respect of the Interim Financial Statements to be reflected on its audited consolidated balance sheet prepared in accordance with the German Accounting Standards in respect of the Annual Financial Statements or by GAAP in respect of the Interim Financial Statements, except such liabilities which were incurred in the ordinary course of business since November 30, 2002. 14  3.10. No Default or Violation. Except as set forth in Section 3.10 of the Disclosure Schedule, neither EME nor Paks is in default or violation (and no event has occurred which with notice or the lapse of time or both would constitute a default or violation) of any term, condition or provision of (i) its organizational or governing documents or (ii) any Law applicable to EME or Paks. Each of EME and Paks has all governmental permits, licenses and authorizations necessary for the conduct of their businesses in all material respects as presently conducted (the "Permits") and each of EME and Paks is in material compliance with the terms of the Permits, and no suspension, revocation, termination or cancellation of any of such Permits is pending or, to Seller's Knowledge, threatened. 3.11. Litigation; Product Liability. (a) Except as set forth in Section 3.11(a) of the Disclosure Schedule, as of the date of this Agreement, there is no action, suit or proceeding pending, and, to Seller's Knowledge, there is no action, suit or proceeding threatened, against or affecting EME or Paks or any properties or rights of EME or Paks, before any arbitrator or Governmental Entity. As of the date of this Agreement, none of Seller, SL Industries or any EME Entity has received notice that EME or Paks is subject to any outstanding injunction, writ, judgment, order or decree of any arbitrator or Governmental Entity. (a) Except as set forth in Section 3.11(b) of the Disclosure Schedule, as of the date of this Agreement, neither EME nor Paks has been subject to any written claim, suit or proceeding relating to product liability, breach of product warranty, or similar claims in 2001 or 2002, and to Seller's Knowledge neither EME nor Paks has been subject to any oral claim, suit or proceeding relating to product liability, breach of product warranty, or similar claims in 2001 or 2002. Except as set forth in Section 3.11(a) of the Disclosure Schedule, to Seller's Knowledge, none of the current products of EME or Paks nor any of the manufacturing processes, designs, schematics or procedures of or relating to any products of EME or Paks contains any defects or deficiencies that could result in any product liability or similar claims in excess of $50,000 in the aggregate, except as to any such defects of deficiencies to which the customer has consented in writing. 3.12. Taxes. (a) Each EME Entity has, within the time and manner prescribed by law, (i) filed or placed on extension with the appropriate taxing authorities (or joined in the filing of) all Tax Returns required to be filed by it in respect of any Taxes that were or may become due by or in respect of EME or Paks, and each such Tax Return was complete and accurate in all material respects and (ii) paid in full or accrued for all Taxes due by or in respect of EME or Paks whether or not reflected on the Tax Returns, including but not limited to, Taxes required to be withheld by EME or Paks, excluding Taxes currently being disputed in good faith. (b) No deficiencies for any Taxes have been asserted or assessed in writing or, to Seller's Knowledge, verbally proposed against EME or Paks which remain unpaid. (c) Neither the Seller Dividend nor the activities carried out in connection therewith will give rise to any liability or obligation for Taxes for EME, Paks, the Purchaser or its Affiliates nor, except for the Taxes specifically referred to as being split by the parties pursuant to Section 9.11, will the consummation of the transactions contemplated in this Agreement and the other Transaction Documents give rise to any liability or obligation for Taxes for EME or Paks, including but not limited to Taxes required to be withheld. 15  (d) For purposes of this Agreement, (i) "Tax" or "Taxes" shall mean all national, federal, state, local or foreign and other taxes, assessments, duties, income, profits, franchise, gross receipts, alternative minimum, capital, withholding, payroll, sales, use, property, excise, transfer, documentary, recording, social security contributions and similar charges of any kind, whether computed on a separate, unitary, combined or any other basis, imposed by any Governmental Entity, including interest, penalties and additions thereto, and (ii) "Tax Return" shall mean any return, report, information return or other document (including any related or supporting information) with respect to Taxes including any schedule or attachment thereto and including any amendment thereof. (e) The Interim Financial Statements reflect an adequate reserve for all unpaid Taxes attributable to the activities and operations of EME and Paks during all Tax periods or portions thereof through the date of such Interim Financial Statements, including, but not limited to, any Taxes required to be withheld by EME or Paks. (f) Each of Seller, EME and Paks is characterized as a foreign corporation as described in Section 7701(a)(5) of the Internal Revenue Code of 1986, as amended (the "Code"), for United States federal income tax purposes and no EME Entity has taken a position with any Governmental Entity contrary to such characterization of the Seller, EME or Paks for U.S. Income Tax purposes. (g) None of Seller, EME or Paks is a foreign corporation engaged in trade or business within the United States, whether for purposes of Section 882 of the Code, Section 6038C of the Code or other United States federal income tax purposes. (h) Neither EME nor Paks is doing business or maintains a taxable presence in a jurisdiction in which it does not file Tax Returns and no claim has been made by any Governmental Entity in a jurisdiction in which EME or Paks does not file Tax Returns that EME or Paks may be subject to Taxes assessed by such jurisdiction. (i) Neither EME nor Paks is under any current or potential obligation to indemnify any other person with respect to any Tax or pay the Taxes of any other person as a transferee or successor, by contract or otherwise. Except for the Profit and Loss Agreement, neither EME nor Paks is a party to or bound by any tax indemnity, sharing or allocation agreement or arrangement that provides for the allocation, apportionment, sharing or assignment of any Tax liability or benefit, or the transfer or assignment of income, revenues, receipts or gains for the principal purposes of determining Tax liability. (j) No income under any arrangement or understanding to which any EME Entity is a party will be attributed to EME or Paks in any Tax period (or portion thereof) after the Closing Date to the extent such income is not also represented by receipts to with EME or Paks, as the case may be, is legally entitled after the Closing. (k) Neither EME nor Paks is required to report in a Tax Return for the taxable period ending after the Closing income attributable to transactions that economically accrued in a prior taxable period but on which neither EME nor Paks was subject to Tax in any prior taxable period. 16  (l) There is no agreement or other document extending the period of assessment, payment, remittance or collection of any Taxes by or on behalf of EME or Paks. No power of attorney with respect to any Taxes has been executed or filed with any Governmental Entity, including without limitation the United States Internal Revenue Service, by or on behalf of EME or Paks. (m) Each of EME and Paks has complied in all material respects with all applicable laws, rules and regulations relating to the payment and withholding of Taxes in connection with amounts paid or owing to an employee, independent contractor, shareholder, EME Entity or any other party including, without limitation, withholding of Taxes pursuant to Code Section 1441, or under any corresponding provisions of state, local or foreign income tax law and has, within the time and manner prescribed by law, withheld from and paid over to the proper Governmental Entities all amounts required to be so withheld and paid over under applicable law. (n) There are no liens for Taxes (other than for current Taxes not yet due and payable) on the assets of EME or Paks. (o) Neither EME nor Paks is a party to any joint venture, partnership or other arrangement or contract that could be treated as a partnership for Tax purposes. (p) Any loan payable by EME or Paks to SL Industries, Seller, or any Affiliate thereof has been forgiven and contributed to the capital of EME or Paks, as the case may be, by the lender. Any loans payable to EME or Paks by SL Industries, Seller, or any Affiliate thereof, have been repaid in full to EME or Paks, as the case may be. 3.13. Title to Properties. Except as set forth on Section 3.13(a) of the Disclosure Schedule: (a) EME and Paks have good and valid title to all of the assets and properties (real and personal) which are reflected on the Interim Financial Statements (except for assets and properties sold, consumed or otherwise disposed of by them in the ordinary course of business, not to exceed $20,000 in fair market value in the aggregate, excluding inventory sold in the ordinary course of business, and except for properties (real and personal) that are leased as set forth in Section 3.13(b)), and such assets and properties are owned free and clear of all Liens, except for (i) the Liens listed on Section 3.13(a) of the Disclosure Schedule, (ii) any Liens that would be revealed by a personal inspection of the properties, (iii) rights of utility companies to lay, maintain and repair pipes, lines conduits, cable boxes and other installations on, under and across the properties and any rights, easements and licenses in favor of, or agreements with, any public utility company, including but not limited to, gas, electricity, telephone, telegraph and cable television services and private sewer agreements, if any, (iv) Liens for taxes, assessments, water and sewer charge and the like for which payments may still be made without the imposition of a penalty, and (v) Liens, including those described in Section 3.13(a)(iii), whose existence does not materially adversely affect the current use and operation of such properties (the "Permitted Liens") and such assets and properties are sufficient to conduct the business of EME and Paks as currently conducted without interference. 17  (b) EME and Paks hold under valid lease agreements all real and personal properties being held under capitalized leases, and all real and personal property that is subject to the operating leases, all of which are set forth in Section 3.13(b) of the Disclosure Schedule, and each of EME and Paks enjoys peaceful and undisturbed possession of such properties under such leases. None of SL Industries, Seller, or the EME Entities has received any written notice of any adverse claim to the title to any properties owned by EME or Paks or with respect to any lease under which any properties are held by EME or Paks. (c) All items of property, plant and equipment of EME and Paks have been adequately maintained consistent with normal industry practice, with reasonable wear and tear excepted, and are sufficient to permit the conduct of the business of EME and Paks as currently conducted. 3.14. Patents, Trademarks, Etc. (a) Section 3.14 of the Disclosure Schedule sets forth a true and complete list as of the date of this Agreement of all Intellectual Property Rights filed by, or issued or registered to or owned by, each EME Entity and all material intellectual property license agreements to which any EME Entity is a party. With respect to registered trademarks, such list sets forth a list of all jurisdictions in which such trademarks are registered or applied for and all registration and application numbers. The Intellectual Property Rights listed in Section 3.14 of the Disclosure Schedule are not subject to any maintenance fees or renewal fees except as disclosed in Section 3.14 of the Disclosure Schedule. Except as set forth in Section 3.14 of the Disclosure Schedule, to Seller's Knowledge, none of the EME Entities is required to pay any royalty or other amount to anyone with respect to any of the Intellectual Property Rights. (b) (i) Each of EME and Paks own or possess adequate licenses or other valid rights to use all patents, trademarks (registered or unregistered), trade names, service marks, copyrights and applications and registrations therefor (whether filed or unfiled), trade secrets and other intellectual property and proprietary rights, whether or not subject to statutory registration or protection, which are material to the conduct of the business of EME and Paks (the "Intellectual Property Rights"), (ii) as of the date of this Agreement, the validity of the Intellectual Property Rights and the title or rights to use thereof by EME and Paks are not being questioned in any litigation to which any EME Entity is a party, nor to Seller's Knowledge, is any such litigation threatened, (iii) as of the date of this Agreement, none of Seller, SL Industries nor any EME Entity has received notice that it is a party to any litigation in connection with which a Person has alleged that the conduct of the business of EME or Paks infringed or infringes with any valid patents, trademarks, trade name, service marks or copyrights of others, nor, to Seller's Knowledge , is any such litigation threatened, (iv) to Seller's Knowledge, (A) no Person is infringing upon or violating any of the Intellectual Property Rights and (B) no claim is pending or threatened to that effect and (v) none of the EME Entities is under any obligation or commitment, absolute or contingent, to any third party to sell, assign, transfer, convey or effect a sale, assignment, transfer or conveyance of any of the Intellectual Property Rights or to enter into any contract with respect to the foregoing. 3.15. Insurance. EME and Paks maintain policies of fire and casualty, property, life, theft, auto, casualty, product liability, general liability, workmen's compensation, health, medical, disability, business interruption, employee fidelity and other forms of insurance in such amounts, with such deductibles and against such risks and losses, and with such reputable 18  insurers, as are reasonable for their business, assets and properties (the "Insurance Policies") and all such Insurance Policies are listed in Section 3.15 of the Disclosure Schedule. All such Insurance Policies are in full force and effect and all premiums due and payable thereon have been paid in full, and no notice of cancellation or termination has been received with respect to any such policy which has not been replaced on substantially similar terms prior to the date of such cancellation. As of the date of this Agreement, there are no pending material claims under the Insurance Policies by any EME Entity as to which the insurers have denied liability. To Seller's Knowledge, none of such Insurance Policies will be cancelable or terminable, and none of the provisions or coverages of any such Insurance Policies will be affected in respect of EME and Paks, as a result of the transactions contemplated in the Transaction Documents other than Insurance Policies which are maintained other than at the EME or Paks level, in which EME and Paks shall no longer have an insurable interest and which Insurance Policies are, to Seller's Knowledge, listed on Section 3.15(b) of the Disclosure Schedule. To Seller's Knowledge, EME and Paks have tendered all claims under their Insurance Policies to their insurance carrier. 3.16. Environmental Matters. Except as set forth in Section 3.16 of the Disclosure Schedule, (a) Seller, EME and Paks are in compliance with all applicable Environmental Laws, except where failure to be in compliance would not have a Material Adverse Effect; (b) there is no Environmental Claim pending or, to Seller's Knowledge, threatened against Seller, EME or Paks; (c) EME and Paks have obtained all material permits, approvals, identification numbers, licenses or other authorizations required under any applicable Environmental Laws (the "Environmental Permits") and is and has been in compliance with their requirements; (d) such Environmental Permits may be retained by EME and Paks after the Closing without the consent of any Governmental Entity; (e) there are no underground or aboveground storage tanks or any surface impoundments, septic tanks, barrels, pits, sumps or lagoons in which Hazardous Materials are being or have been treated, used, stored or disposed of on, or under, any real or personal property currently owned or leased by EME or Paks, or to Seller's Knowledge, on any real or personal property formerly owned, leased or occupied by EME or Paks; (f) neither EME nor Paks has released, discharged or disposed of Hazardous Materials on, from, over, or beneath any real or personal property owned or leased or on any real or personal property formerly owned or leased by EME or Paks, and none of such real or personal property is contaminated with any Hazardous Materials other than in compliance with Environmental Laws; (g) no EME Entity has undertaken or completed any investigation or assessment or remedial or response action relating to any Release of Hazardous Materials at any site, location or operation of EME or Paks, either voluntarily or pursuant to the order of any Governmental Entity or the requirements of any Environmental Law; and (h) since January 1, 2000, there have been no pending or threatened actions, suits, demands, demand letters, claims, liens, notices of non-compliance or violation, notices of liability or potential liability, investigations, proceedings, consent orders or consent agreements relating in any way to Environmental Laws, any Environmental Permits or any Hazardous Materials (the "Environmental Claims") against any EME Entity or any of its property. SL Industries and Seller have provided to Purchaser, DCX-Chol and Chol Industries true and correct copies of all pages (including all disclosure schedules) of the 1998 Agreement that relate to any of the matters addressed in this Section 3.16. 3.17. Employee and Labor Matters. Except as set forth in Section 3.17 of the Disclosure Schedule, no EME Entity is a party to any collective bargaining or other labor union contract or shop agreement applicable to EME or Paks or has established a shop practice applicable to persons employed by EME or 19  Paks, no collective bargaining agreement is being negotiated by any EME Entity in respect of EME or Paks, and none of SL Industries, Seller and the EME Entities know of any activities or proceedings of any labor union to organize any of the employees of EME or Paks. Except as set forth in Section 3.17 of the Disclosure Schedule, as of the date hereof, (i) each EME Entity is in compliance in all material respects with all applicable Laws relating to employment and employment practices, wages, hours, occupational safety, health standards, severance payments, equal opportunity, payment of social security, national insurance and other Taxes, and terms and conditions of employment, in each case in relation to EME and Paks or their businesses (ii) there are no charges with respect to or relating to any EME Entity pending, or to Seller's Knowledge, threatened before or any Governmental Entity responsible for the prevention of unlawful, unfair labor or discriminatory employment practices in relation to EME or Paks or their businesses, and (iii) there is no labor dispute, strike or work stoppage against any EME Entity, pending or, to Seller's Knowledge, threatened which may interfere with the business activities of EME or Paks. Except as set forth in Section 3.17 of the Disclosure Schedule, to Seller's Knowledge, all sums due for employee compensation and benefits, including pension and severance benefits, and all vacation time owing to any employees of EME and Paks have been duly and adequately accrued on the accounting records, in accordance with GAAP and the German Accounting Standards, of EME and Paks. 3.18. Brokers and Finders. None of Seller, SL Industries, any EME Entity nor any of their respective Representatives has employed any broker or finder or incurred any liability for any investment banking fees, brokerage fees, commissions or finders' fees in connection with the transactions contemplated by this Agreement other than Imperial Capital LLC, the costs of which shall be paid by Seller. 3.19. Certain Business Practices. Neither EME nor Paks, nor any director, officer, or, to Seller's Knowledge, any agent or employee of EME or Paks has (a) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, (b) made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns or (c) made any other unlawful payment. 3.20. Change in Control. Except as set forth in Section 3.20 of the Disclosure Schedule, none of the EME Entities is a party to any Contract related to employment or consulting services that contains a "change in control," "potential change in control" or similar provision, which, as a result of the consummation of the transactions contemplated in the Transaction Documents would (either alone or upon the occurrence of any additional acts or events) (a) result in any payment (whether of severance pay or otherwise) becoming due from EME or Paks to any Person, (b) result in the acceleration of any obligations under such Contract payable by or otherwise binding on EME or Paks or (c) reasonably be expected to prevent or delay the Closing. 3.21. Inventory. Except (a) for Inventory (as defined below) which has been adequately reserved for in the balance sheet of the Interim Financial Statements, (b) for Inventory that is obsolete and the cumulative effect of such obsolescence would not have a Material Adverse Effect, or (c) as disclosed in Section 3.21 of the Disclosure Schedule, the Inventory of each EME Entity is usable and salable in the ordinary course of business, is of consistent and merchantable quality and quantity, is fit for its intended purposes and not subject to any write down or write off in accordance with GAAP and has been 20  produced in accordance with all applicable Laws. As used in this Agreement, the term "Inventory" shall mean all items which are included in the term Inventory on the Financial Statements, under GAAP, including, without limitation, finished products, samples, work-in-process, raw materials, labels and packaging materials that are used in, or held for use in, the operations of the business of EME and Paks. 3.22. Relationship with Suppliers. In the three (3) month period prior to the date hereof, there has not been any change in the business relationship between EME or Paks and any of their top current twenty (20) suppliers that could have a Material Adverse Effect, and to Seller's Knowledge there is no reason to believe that there will be any change in such relationship in the future that could have a Material Adverse Effect, outside of the ordinary course of business or in a manner inconsistent with precedent business practices, as a result of the consummation of the transactions contemplated in the Transaction Documents. 3.23. Relationship with Customers. Except as set forth in Section 3.23 of the Disclosure Schedule, in the three (3) month period prior to the date hereof, there has not been any change in the purchasing relationship between EME or Paks and any of their current top twenty (20) customers that could have a Material Adverse Effect, and to Seller's Knowledge there is no reason to believe that there will be any change in such relationship in the future that could have a Material Adverse Effect, outside of the ordinary course of business or in a manner inconsistent with precedent business practices, as a result of the consummation of the transactions contemplated in the Transaction Documents. 3.24. Accounts Receivable. The Accounts Receivable (as hereinafter defined) of EME and Paks have arisen solely out of bona fide sales and deliveries of goods, performance of services or other business transactions in the ordinary course of business consistent with past practice. The allowances for collection losses associated with such Accounts Receivable reflected in such balance sheet have been determined in accordance with GAAP and Hungarian Accounting Standards consistent with past practice. Except as is consistent with past practice, there are no discounts, trade promotions or similar marketing arrangements that affect the collectibility or value of any such Accounts Receivable. As used in this Agreement, the term "Accounts Receivable" shall mean all of the trade notes or accounts receivable arising out of Inventory sold or shipped or services performed that are set forth in the accounts receivable line of the Interim Financial Statements or arising in the ordinary course of business thereafter. 3.25. Affiliate Relationships. Section 3.25 of the Disclosure Schedule sets forth a complete and accurate list of all Contracts involving any of Seller, SL Industries or any EME Entity in which any of Seller's, SL Industries' or such EME Entity's officers, directors, shareholders or Affiliates have a direct or indirect financial interest, including indebtedness owed to Seller, SL Industries by EME or Paks or any EME Entity and indebtedness owed by Seller, SL Industries or any EME Entity to EME or Paks. 3.26. Disclosure. None of this Agreement, the other Transaction Documents, the Financial Statements, any Schedule or Exhibit hereto or thereto or, to Seller's Knowledge, any certificate, document or other statement delivered to the Purchaser, DCX-Chol, Chol Enterprises or their Affiliates by any of SL Industries, the EME Entities or their officers, directors, employees 21  or agents, including, but not limited to Imperial Capital, in connection with the transactions contemplated in the Transaction Documents, taken as a whole, contains any untrue statement of a material fact or omits any statement of material fact necessary to make the statements contained in this Agreement, the other Transaction Documents, the Financial Statements, any Schedule or Exhibit hereto or thereto or any certificate document or other statement delivered to the Purchaser by any of SL Industries, the EME Entities or their officers, directors, employees or agents, including, but not limited to Imperial Capital, in connection with the transactions contemplated in the Transaction Documents, taken as a whole, not misleading. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF Purchaser, DCX-CHOL and chol enterprises The Purchaser, DCX-Chol and Chol Enterprises jointly and severally represent and warrant to Seller and SL Industries as follows: 4.1. Corporate Organization; Etc. Each of Purchaser, DCX-Chol and Chol Enterprises is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to conduct its business as it is now being conducted and to own, lease and operate its property and assets except where the failure to be so organized, existing and in good standing or to have such power or authority would not, in the aggregate, either (i) have a Purchaser Material Adverse Effect or (ii) impair, hinder or adversely affect the ability of Purchaser, DCX-Chol or Chol Enterprises to perform any of its obligations under the Transaction Documents or to consummate the transactions contemplated hereby or thereby. 4.2. Authority Relative to the Transaction Documents. Each of Purchaser, DCX-Chol and Chol Enterprises has all requisite corporate authority and power to execute and deliver this Agreement and the other Transaction Documents to which they are a party and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the other Transaction Documents to which Purchaser, DCX-Chol or Chol Enterprises is a party and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all required corporate action on the part of Purchaser, DCX-Chol and Chol Enterprises and no other corporate proceedings on the part of Purchaser, DCX-Chol or Chol Enterprises are necessary to authorize such Transaction Documents or to consummate the transactions contemplated hereby and thereby. The Transaction Documents to which each of Purchaser, DCX-Chol and Chol Enterprises is a party have been duly and validly executed and delivered by Purchaser, DCX-Chol and Chol Enterprises and, assuming the Transaction Documents have been duly authorized, executed and delivered by Seller, SL Industries and the EME Entities, as the case may be, the Transaction Documents constitute the valid and binding agreement of Purchaser, DCX-Chol and Chol Enterprises, respectively, enforceable against Purchaser, DCX-Chol and Chol Enterprises in accordance with their terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally, including the effect of statutory and other laws regarding fraudulent conveyances and preferential transfers and subject to the limitations imposed by general equitable principles (regardless whether such enforceability is considered in a proceeding at law or in equity). 22  4.3. Brokers and Finders. None of Purchaser, DCX-Chol or Chol Enterprises or any of their Representatives has employed any investment banker, broker or finder or incurred any liability for any investment banking fees, brokerage fees, commissions or finders' fees in connection with the transactions contemplated by this Agreement. 4.4. Investment Intent. (a) Purchaser is acquiring the Purchased Shares for its own account and not for distribution (other than for potential subsequent transfers to Purchaser's Affiliates, including DCX-Chol and Chol Enterprises) and acknowledges that it must bear the economic risk of the investment in the such portion of the Purchased Shares for an indefinite period of time under applicable securities laws and regulations. The Purchaser agrees that the Purchased Shares acquired by it pursuant to this Agreement will not be offered, sold, transferred, assigned or otherwise disposed of without compliance with applicable securities laws and regulations. The Purchaser has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of acquiring its portion of the Purchased Shares pursuant to this Agreement and the other Transaction Documents; and Purchaser has the financial ability to bear the economic risks of acquiring and holding the Purchased Shares to be acquired by Purchaser pursuant to this Agreement for investment. (b) Purchaser understands that the Purchased Shares are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that Seller and SL Industries are relying in part upon the truth and accuracy of, and Purchaser's compliance with, the representations, warranties, agreements, acknowledgments and understandings of Purchaser set forth in this Agreement in order to determine the availability of such exemptions and the eligibility of Purchaser to acquire the Purchased Shares. 4.5. German Control of Concentrations. The annual worldwide sales of Purchaser, including the worldwide sales of all undertakings controlled by or controlling (whether alone or jointly together with other enterprises) Purchaser within the sense of section 17 of the German Stock Corporation Act (Aktiengesetz, or "AktG") as well as the sales of all companies belonging to the same group as Purchaser within the sense of section 18 AktG, together with the worldwide sales of EME which, in the fiscal year ended December 31, 2002, amounted to approximately 28,600,000 Euros, did not exceed, in the last business year, the amount of 500,000,000 Euros. ARTICLE V COVENANTS 5.1. Commercial Register. Purchaser hereby agrees that, within 30 days of the Closing Date, Purchaser shall notify the Commercial Register in Ingolstadt, Germany that a share transfer has occurred. 5.2. Profit and Loss Agreement. The Parties undertake to take all actions necessary to terminate the Profit and Loss Agreement effective January 1, 2003 0.00 hrs or any other date as soon as legally possible thereafter and to insure that any notification to the Commercial Register required in such context shall be carried out with no undue delay. Furthermore, the Parties shall ensure 23  that, in the event the termination should not be legally possible as of January 1, 2003 0.00 hrs, there shall be no obligations to transfer any profits or absorb any losses, as the case may be, for the period from January 1 and the point in time when the termination of the Profit and Loss Agreement becomes effective, and to indemnify each other against such transfer or absorption. 5.3. Insurance. Seller and SL Industries will not cancel Insurance Policies in the name of and for the benefit of EME and Paks after the Closing Date, other than Insurance Policies which are maintained other than at the EME and/or Paks level, in which EME and Paks shall no longer have an insurable interest, which Insurance Policies are, to Seller's Knowledge, listed on Section 3.15(b) of the Disclosure Schedule. 5.4. Filings. Promptly after the execution of this Agreement, each of the Parties shall prepare and make or cause to be made any required filings, submissions, disclosures and notifications under the laws of any domestic or foreign jurisdiction to the extent that such filings are necessary to consummate or as a result of the transactions contemplated hereby and in the other Transaction Documents and will use its reasonable best efforts to take all other actions necessary to consummate the transactions contemplated hereby in a manner consistent with applicable law. Each of the Parties will furnish to the other Parties such necessary information and reasonable assistance as such other Parties may reasonably request in connection with the foregoing. In the event that a Party is required to disclose confidential information of the other Parties hereto in any such filings, submissions, disclosures and notifications, such disclosing Party shall notify the affected Party and provide the affected Party a reasonable period to review and comment on such disclosures in advance. 5.5. Further Assurances. Upon the terms and subject to the conditions herein provided, each of the Parties agrees to use its best efforts to take or cause to be taken all action, to do or cause to be done, and to assist and cooperate with the other Parties hereto in doing, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement, including, but not limited to, the execution and delivery of such instruments, and the taking of such other actions as the other Parties hereto may reasonably require in order to carry out the intent of this Agreement. 5.6. Tax Covenants. (a) Cooperation on Tax and Audit Matters. The Purchaser, on the one hand, and Seller and SL Industries, on the other hand, shall cooperate fully, as and to the extent reasonably requested by the other Party, in connection with the filing of Tax Returns and any audit, litigation or other proceeding with respect to Taxes of EME or Paks or audit of the 2002 financial statement of EME. Such cooperation shall include the retention and (upon the other Party's request) the provision of records and information which are reasonably relevant to any such audit, litigation, or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The Purchaser agrees, and will cause EME and Paks, and Seller and SL Industries agree, and will cause KGH and SL Delaware, (i) (A) to retain all books and records with respect to Tax and audit matters pertinent to EME or Paks relating to any taxable period beginning before the Closing Date until the expiration of the 24  applicable statute of limitations (and any extensions thereof) of the respective taxable periods, and to abide by all record retention agreements entered into with any taxing authority and to retain financial records relating to the audit of all periods through the Closing Date, and (B) to give the other Party reasonable written notice prior to transferring, destroying or discarding any such books and records and, if the other Party so requests, to allow the other Party to take possession of such books and records. Seller and SL Industries will provide Purchaser and will cause KGH and SL Delaware to provide Purchaser within sixty (60) days after the Closing (i) Forms 5471 for EME and Paks, (ii) complete trial balances as of and for the year ending December 31, 2002 and (iii) an existing appraisal containing a detailed fixed asset listing and architectural drawing for the sites and buildings used by EME or Paks. (b) Responsibility for Filing 2002 Tax Returns. Seller and SL Industries, with the cooperation of EME and Paks, shall prepare or cause to be prepared all Tax Returns for or in which EME and Paks are included for the period ended December 31, 2002 and shall pay any and all Taxes that are payable in respect of the period ended December 31, 2002 (the "Final Period Returns") and in respect of the payments and writeoffs set forth on Section 3.2(b) of the Disclosure Schedule. Purchaser shall file or cause to be filed all the Final Period Returns for EME and Paks. The Final Period Returns shall be prepared in accordance with applicable Law. No position will be taken on the Final Period Returns, except to the extent required by applicable law, that would adversely affect EME or Paks after the Closing. SL Industries shall deliver to the Purchaser a copy of each Final Period Return, together with any schedules, work papers and other documentation that are relevant to their preparation, not later than thirty (30) days prior to the due date for such Final Period Return (including applicable extensions) (the "Due Date"). The Purchaser may provide comments, including but not limited to requested revisions, to the proposed Final Period Return, which comments shall be delivered to SL Industries within ten (10) days after the Purchaser's receipt of the copy of such proposed Final Period Returns. The Seller and SL Industries shall consider in good faith any such comments to such Final Period Return as are reasonably requested by the Purchaser. Purchaser shall file the Final Period Returns on the earlier of (i) the provision to SL Industries by Purchaser of written notice from the Purchaser indicating the Purchaser's consent to such filing or (ii) one (1) day prior to the Due Date. (c) Tax Refunds. Upon receipt of the Tax Refund, the Purchaser shall, within five (5) days of receipt thereof, pay over (or cause to paid over) to the Seller the Tax Refund, together with any notices from the appropriate taxing authorities regarding such Tax Refund. Additionally, no later than the earlier of (i) three days prior to the due date or (ii) September 30, 2003, the Purchaser shall pay to the Seller the EME Additional Tax Payment. Any other refund of Taxes received by EME or Paks after the Closing that relates to any Tax period or portions thereof ending on or before the Closing Date and that are not accrued for on the Interim Financial Statements shall be for the account of and shall be paid to Seller within five (5) days following receipt. (d) Affiliated Loans. Any loan payable by EME or Paks to SL Industries, Seller, or any Affiliate thereof will be forgiven and contributed to the capital of EME or Paks, as the case may be, by the lender. Prior to the Closing, any loans payable to EME or Paks by SL Industries, Seller, or any Affiliate thereof, will be forgiven by EME or Paks, as the case may be. 25  (e) Defense. In the event Purchaser, EME or Paks shall receive a written claim for taxes ("Claim") from any jurisdiction for any period ending on or before December 31, 2002 with respect to EME or Paks, Purchaser shall promptly send a copy thereof to SL Industries. SL Industries shall at its sole cost then have the right to contest the Claim and SL Industries shall have the right to select the attorneys and other persons necessary to represent EME and Paks ("Seller's Representatives") in contesting the Claim. Purchaser shall cooperate, and shall cause EME and Paks to cooperate, with SL Industries as may be reasonably requested by SL Industries in contesting the Claim. If SL Industries receives the Claim directly, then SL Industries shall have the right to contest the Claim under the above procedures and Purchaser will cooperate, and shall cause EME and Paks to cooperate, with SL Industries as provided above. 5.7. Non-Competition. Each of Seller and SL Industries will not, for two (2) years from the Closing Date, directly or indirectly through subsidiaries, as an owner, partner, shareholder, joint venturer, corporate officer, director, employee, manager, consultant, principal, trustee or licensor, or an other capacity whatsoever of or for any Person: (a) solicit, divert or take away, or attempt to solicit, divert or take away, the business or patronage of any of the clients, customers or suppliers of EME of Paks; or (b) lend or allow its name or reputation to be used by or otherwise allow its skill, knowledge or experience to be used by any Person that competes with the businesses of EME or Paks in the German, Hungarian and European market as such businesses exist as of the Closing Date, except for the business of SL Montevideo Technology, Inc., together with its subsidiaries. Upon the sale of SL Industries or any of its subsidiaries, the restrictions contained in this Section 5.7 shall terminate with respect to the operations of such division or subsidiary being sold. 5.8 Confidentiality. (a) Each of Seller, SL Industries, and their Affiliates has had access to, and there has been disclosed to each of Seller, SL Industries, and their Affiliates, information of a confidential nature that has great value to EME and Paks and constitutes a substantial basis upon which the value of EME and Paks is predicated. Such information includes trade secrets, customer or supplier lists, pricing information, marketing arrangements, strategies, business plans, internal performance statistics, training manuals, and other information concerning EME or Paks that is competitively sensitive or confidential (the "Confidential Information"). (b) Each of Seller and SL Industries will not, and will cause their respective Affiliates to not, (i) use or divulge any Confidential Information, except: (A) to EME's or Paks' personnel; (B) to the extent disclosure may be required by Law; or (C) if such information becomes lawfully obtainable from other sources who were not under a duty of confidentiality and 26  (ii) use or permit to be used any Confidential Information for the gain or benefit of any Person other than the Purchaser or for his or its own personal gain or benefit. 5.9 Reasonableness of Restrictions and Enforceability. Given Seller's and SL Industries' position as a direct or indirect shareholder, partner or owner of EME and Paks and Seller's and SL Industries' strong business ties that are significant to the growth of the businesses of EME and Paks, each of Seller and SL Industries acknowledges that the restrictions in this Agreement are reasonable both individually and in the aggregate and that the duration, geographic scope, extent and application of each of such restrictions are no greater than is necessary for the protection of EME's and Paks' legitimate business interests, which include but are not limited to EME's and Pak's trade secrets and other valuable confidential business information acquired by the Purchaser, its substantial relationships with prospective or existing customers and suppliers, and the goodwill associated with the businesses of EME and Paks. 5.10 Termination of Profit and Loss Agreement. Purchaser, DCX-Chol and Chol Enterprises agree that, in the event a trade creditor makes a claim against KGH arising from termination of the Profit and Loss Agreement, they shall indemnify KGH from such liability to the extent such liability was stated on the Interim Financial Statements or arise in the ordinary course of business thereafter. 5.11 Severable Covenants. The Parties intend that the covenants in Section 5.7 will be construed as a series of separate covenants. All such separate covenants will be deemed identical. The Parties desire and intend that this Agreement be enforced to the fullest extent permissible under the Laws and public policies applied in each jurisdiction in which enforcement is sought. If any particular provision of Sections 5.7, 5.8 and 5.9 is adjudicated to be invalid or unenforceable, (a) each of the Parties agrees that if such provisions would be valid or enforceable if some part or parts of them were deleted or the period or area of application reduced, the applicable restriction will apply with the modifications necessary to make it valid and enforceable, and (b) such adjudication will apply only with respect to the operation of this Agreement in the particular jurisdiction in which the adjudication is made, and the unenforceable covenant will be eliminated from this Agreement to the extent necessary to permit the remaining separate covenants (or portions of them) to be enforced. ARTICLE VI [Intentionally left blank] ARTICLE VII [Intentionally left blank] 27  ARTICLE VIII INDEMNIFICATION 8.1. [Intentionally left blank] 8.2. [Intentionally left blank] 8.3. Indemnification. (a) Indemnification by SL Industries and Seller. Regardless of any pre-Closing investigations, examinations or prior knowledge of the Purchaser, DCX-Chol, Chol Enterprises or their Affiliates or Representatives or due diligence conducted by the Purchaser, DCX-Chol, Chol Enterprises or their Affiliates or their Representatives or disclosure by SL Industries, Seller, the EME Entities or their Affiliates or Representatives, SL Industries and Seller, (together, the "Seller Indemnifying Parties") jointly and severally, shall indemnify and hold harmless the Purchaser, DXC-Chol and their Affiliates, together with their respective transferees, directors, officers, employees, managers, agents and advisors (the "Purchaser Indemnified Parties"), from, against and with respect to any and all demands, claims, actions or causes of action, assessments, liabilities, losses, costs, damages, penalties, charges or expenses, including without limitation interest, penalties and reasonable counsel and accountants' fees, disbursements and expenses (collectively, "Purchaser Losses") arising out of, or related to: (i) any breach of any representation, warranty, covenant or agreement (or in the case of claims made by third parties, any claim or allegation that if true would constitute a breach of any representation, warranty, covenant or agreement) made by SL Industries or Seller in this Agreement, including the Disclosure Schedule and Exhibits hereto or any other document or agreement delivered by or on behalf of SL Industries or Seller in connection therewith; and (ii) without limiting the preceding clause (i), any claims arising out or in connection with the potential liability relating to any items listed in Section 8.3(a)(ii) of the Disclosure Schedule. (b) Indemnification by Purchaser, DCX-Chol and Chol Enterprises. The Purchaser, DCX-Chol and Chol Enterprises (together, the "Purchaser Indemnifying Parties") shall jointly and severally indemnify, defend and hold harmless Seller, SL Industries, SL Delaware, KGH and their Affiliates, together with their respective directors, officers, employees, managers, representatives, transferees, agents and advisors ("Seller Indemnified Parties") from, against and with respect to any and all demands, claims, actions or causes of action, assessments, liabilities, losses, costs, damages, penalties, charges or expenses, including without limitation interest, penalties and reasonable counsel and accountants' fees, disbursements and expenses (collectively, "Seller Losses") arising out of, or related to any breach of any representation, warranty, covenant or agreement (or in the case of claims made by third parties, any claim or allegation that if true would constitute a breach of any representation, warranty, covenant or agreement) made by Purchaser, DCX-Chol and Chol Enterprises in this Agreement, including the Schedules and Exhibits hereto, if any, or any other document or agreement delivered by or on behalf of Purchaser, DCX-Chol and Chol Enterprises in connection therewith. 28  (c) Length of Indemnity Obligation of Seller and SL Industries. The right of the Purchaser Indemnified Parties to make a claim for indemnity under Section 8.3(a) will survive the Closing and remain in full force and effect thereafter until the eighteen (18) month anniversary of the Closing Date, except that any claim for indemnity arising in connection with the representations and warranties contained in (i) Sections 3.2, 3.3, and 3.12 and the indemnity provided in Section 8.3(a)(ii) and in connection with the covenants contained in Section 5.6 shall survive the Closing and remain in full force and effect thereafter until 30 days following the expiration of the applicable statutes of limitations (including any extensions), and (ii) Section 3.16 shall survive the Closing in the cases of claims relating (x) to Purchaser's Environmental Losses until the four (4) year anniversary of the Closing Date, and (y) Prior Environmental Losses under the applicable statute of limitation under the 1998 Contract; provided, however, that with respect to a claim of actual fraud, each of the representations and warranties shall survive until the applicable statutes of limitations for actual fraud have expired. (d) Length of Indemnity Obligation of Purchaser. The right of the Seller Indemnified Parties to make a claim for indemnity under Section 8.3(b) will survive the Closing and remain in full force and effect thereafter until the eighteen (18) month anniversary of the Closing Date; provided, however, that with respect to a claim of actual fraud, each of the representations and warranties shall survive until the applicable statutes of limitations for actual fraud have expired. (e) Indemnification Procedures. (i) Any claim for recovery or indemnification pursuant to Section 8.3(a) or 8.3(b) will be made promptly after discovery of the circumstances underlying such claim in a written statement signed by the Party seeking such recovery or indemnification, which will specify in reasonable detail each individual item of Purchaser Loss or Seller Loss, as the case may be, suffered by the Party seeking recovery or indemnification and the estimated amount thereof, the date such item was claimed or the facts giving rise to such claim were discovered, the basis for any alleged liability and the nature of the breach or claim to which each such item is related. (ii) The Party seeking indemnification for any third party claim will give the indemnifying party(s) prompt notice of such third party claim which might give rise to liability of the indemnifying party(s) for indemnification hereunder. If the indemnifying party(s) contest any third party claim, it will have the option to defend (retaining counsel acceptable to the indemnified party, which acceptance shall not be unreasonably withheld or delayed), at the indemnifying party's expense, any such matter, provided that the indemnified party will have the right, at its own cost and expense, to participate in the defense of such claim. However, notwithstanding the preceding sentence, (a) if the indemnifying party elects not to defend the claim, or (b) if the claim has been brought or asserted against the indemnifying party(s) as well as the indemnified party and such indemnified party reasonably concludes that there may be one or more factual or legal defenses available to it that are in conflict with those available to the indemnifying party(s) and the indemnifying party is unwilling to raise such defenses, then the indemnified party may elect to 29  conduct its defense on its own behalf, in which case the reasonable fees and expenses of the indemnified party's counsel will be at the expense of the indemnifying party(s). In the latter event, the indemnified party may settle such claim, after giving notice of such proposed settlement to the indemnifying party, on such terms as the indemnified party may reasonably deem appropriate and no such action taken by the indemnified party in defending or settling such claim will release the indemnifying party of any obligation hereunder. Except under the circumstances described in the preceding sentence, the indemnified party will not enter into any settlement agreement without the indemnifying party's consent which will not be unreasonably withheld or delayed. The indemnifying party(s) will not, without the prior written consent of the indemnified party (which will not be unreasonably withheld), enter into any settlement of a claim, if pursuant to or as a result of such settlement, injunctive or other equitable relief will be imposed against the indemnified party or if such settlement does not expressly unconditionally release the indemnified party from all liabilities or obligations with respect to such claim, with prejudice. The indemnified party and the indemnifying party(s) will cooperate with the each other in the defense, compromise or settlement of any claim for which indemnification is sought. (f) Limitation on Indemnification Obligation. (i) Seller, SL Industries, SL Delaware and KGH shall not be liable, and the Purchaser Indemnified Parties agree not to enforce any claim for indemnification until the aggregate amount of all such claims exceeds $100,000 (the "Purchaser Threshold"); provided, however, that once the amount of claims exceeds the Purchaser Threshold, the Purchaser Indemnified Parties shall be entitled to recover the entire amount from all claims in excess of $100,000. The Purchaser, DCX-Chol and Chol Enterprises shall not be liable, and the Seller Indemnified Parties agree not to enforce any claim for indemnification until the aggregate amount of all such claims exceeds $100,000 (the "Seller Threshold"); provided, however, that once the amount of claims exceeds the Seller Threshold, the Seller Indemnified Parties shall be entitled to recover the entire amount from all claims in excess of $100,000. Notwithstanding anything to the contrary contained herein, all claims for indemnity for claims arising in connection with the representations and warranties contained in Sections 3.2, 3.3, 3.12 and 3.16 and in connection with the covenants contained in Section 5.6 shall not be subject to the Purchaser Threshold or the Seller Threshold, and the party seeking indemnity shall be entitled to recover the entire amount for all such claims, except that, to the extent the claim for indemnity under Section 3.16 relates to Prior Environmental Losses, the Seller and SL Industries shall have no liability of any kind for any such claim, and Seller's and SL Industries' sole responsibility shall be to, in good faith, using commercially reasonable efforts, and at their sole cost, seek to recover from Datron for such claim, to the extent permitted under the 1998 Agreement, and to remit such funds (net of reimbursed costs from Datron) to Purchaser upon receipt. The total liability for Purchaser Losses by Seller or SL Industries shall not exceed $5,000,000 in the aggregate; provided, that there 30  shall be no limit in respect of Purchaser Losses and Purchaser Environmental Losses arising in connection with the representations and warranties contained in Sections 3.2, 3.3, 3.12 and 3.16 and the indemnity provided under Section 8.3(a)(ii) and in connection with the covenants contained in Section 5.6. The total liability for Seller Losses by Purchaser, DCX-Chol and Chol Industries shall not exceed $5,000,000 in the aggregate. (ii) Each party hereto shall use commercially reasonable efforts to recover Purchaser Losses or Seller Losses, as the case may be ("Damages") under all applicable insurance policies and from all third parties prior to seeking recovery pursuant to this Article 8 and the amount of any Damages for which a party may be indemnified under Article 8 shall be reduced by any such recovery. If a Seller Indemnified Party or a Purchaser Indemnified Party, as the case may be, recovers insurance proceeds after recovering any Damages pursuant to this Article 8, then such party shall promptly remit to the Seller Indemnifying Parties or the Purchaser Indemnifying Parties, as the case may be (the "Indemnifying Party") that paid such indemnification hereunder the amount of such insurance proceeds to the extent the insurance proceeds together with the amount paid by the Indemnifying Party exceeds the amount of the Damages up to the amount of the indemnification for Damages that was paid by the Indemnifying Party hereunder. (g) Purchaser's Right of Offset. Notwithstanding anything to the contrary contained in this Agreement or the other Transaction Documents, the Purchaser, DCX-Chol and Chol Enterprises shall have the right to offset any Purchaser Losses arising in connection with the representations and warranties set forth in Section 3.12 against any amounts payable under the terms of the Unsecured Note. Purchaser shall provide written notice to Seller at least two (2) days prior to the date of such offset (the "Notice of Offset"). Under no circumstances shall any amounts, including without limitation Purchaser Losses, be offset against any amounts payable under the terms of the Secured Note. ARTICLE IX MISCELLANEOUS 9.1. Amendment and Modifications. This Agreement may be amended, modified or supplemented at any time by the Parties. This Agreement may be amended only by an instrument in writing signed on behalf of all Parties. 9.2. Extension; Waiver. At any time prior to the Closing, the Parties entitled to the benefits of the respective term or provision may (i) extend the time for the performance of any of the obligations or other acts of the other Parties, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document, certificate or writing delivered pursuant hereto or (iii) waive compliance with any obligation, covenant, agreement or condition contained herein in order to effectuate the Closing. Any agreement on the part of any Party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of the Parties entitled to the benefits of such extended or waived term or provision, and no such extension or waiver shall be deemed to be a waiver or release of any 31  losses or damages (including Purchaser Indemnified Losses or Seller Indemnified Losses) that the extending or waiving Party may incur as a result of any underlying breach or failure that was extended or waived in order to effectuate the Closing. No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by Law. 9.3. Entire Agreement; Assignment. This Agreement and the other Transaction Documents (a) constitute the entire agreements among the Parties with respect to the subject matter hereof and thereof and supersedes all other prior agreements and understandings, both written and oral, among the Parties or any of them with respect to the subject matter hereof and (b) shall not be assigned by operation of law or otherwise. Notwithstanding the foregoing, Purchaser, DCX-Chol and Chol Enterprises may assign their rights under this Agreement to an Affiliate or Affiliates after the Closing in connection with a transfer of the Purchased Shares to such Affiliate or Affiliates, in which case the representations, warranties, indemnities, covenants and other obligations of Seller, SL Industries, SL Delaware and KGH hereunder and under the Transaction Documents shall inure to the benefit of such Affiliate or Affiliates. 9.4. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, each of which shall remain in full force and effect. 9.5. Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered personally, sent by facsimile (which is confirmed during a Business Day between the hours of 8:00 am and 6:00 pm), one day following being sent by overnight courier or five days following being sent by registered or certified mail (postage prepaid, return receipt requested) to the Parties at the following addresses: If to the Purchaser, DCX-Chol or Chol Enterprises, to: c/o DCX-Chol Enterprises, Inc. 12831 South Figueroa Street Los Angeles, CA 90061 Attention: Neal Castleman Facsimile: (310) 516-1693 With a copy to: Silver & Freedman, APLC 2029 Century Park East, Suite 1900 Los Angeles, California 90067-3005 Attention: Perry Silver, Esq. Facsimile: (310) 556-0832 32  If to Seller, SL Industries, SL Delaware or KGH, to: Seller c/o SL Industries, Inc. 520 Fellowship Rd., Suite A114 Mt. Laurel, New Jersey 08054 Attention: David Nuzzo Facsimile: (856) 727-1683 With a copy to: Olshan Grundman Frome Rosenzweig & Wolosky LLP 505 Park Avenue New York, New York 10022 Attention: Adam W. Finerman, Esq. Facsimile: (212) 755-1467 or to such other address as the Person to whom notice is given may have previously furnished to the others in writing in the manner set forth above (provided that notice of any change of address shall be effective only upon receipt thereof). 9.6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof, or, in the event that the court of competent jurisdiction does not apply the laws of the State of Delaware, then this Agreement shall be governed by and construed in accordance with the laws of the State of California. 9.7. [Intentionally Left Blank] 9.8. Jurisdiction; Forum. (a) By the execution and delivery of this Agreement, the Parties hereto submit to the personal jurisdiction of any state or federal court in the State of California in any suit or proceeding arising out of or relating to this Agreement, except as otherwise provided in the Secured Note, the Unsecured Note and the Guaranty. (b) The Parties agree that the appropriate and exclusive forum for any disputes between any of the Parties arising out of this Agreement or the transactions contemplated hereby shall be in any state or Federal court in the State of California. The Parties further agree that the Parties will not bring suit with respect to any disputes arising out of this Agreement or the transactions contemplated hereby in any court or jurisdiction other than the above specified courts; provided, however, that the foregoing shall not limit the rights of the Parties to obtain execution of judgment in any other jurisdiction. The Parties further agree, to the extent permitted by law, that final and unappealable judgment against a Party in any action or proceeding contemplated above shall be conclusive and may be enforced in any other jurisdiction within or outside the United States by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of the fact and amount of such judgment. 33  9.9. Descriptive Headings. The descriptive headings herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. 9.10. Counterparts. This Agreement and the other Transaction Documents may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. 9.11. Expenses. Whether or not the transactions contemplated by this Agreement are consummated, and except as otherwise expressly set forth herein, all legal and other costs and expenses incurred in connection with the transactions contemplated by this Agreement shall be paid by the Party incurring such expenses. All expenses incurred in Germany in connection with the Transaction Documents and the transactions contemplated therein, such as notary fees, sales, use, transfer, real estate, recording, stamp and other taxes, duties or fees shall be paid equally by Purchaser and Seller. Seller and SL Industries shall use their own funds and not the funds or properties of any EME Entity to pay for any of expenses referred to in this Section 9.11. 9.12. Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each Party and its respective successors and assigns and, except as set forth in herein, nothing in this Agreement, express or implied, is intended by or shall confer upon any other Person or Persons any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement. 9.13. Attorneys' Fees. If any legal action or any arbitration or other proceeding is brought either for enforcement of this Agreement or the other Transaction Documents, or because of an alleged dispute, breach, default, or material misrepresentation in connection with any of the provisions of the this Agreement or the other Transaction Documents, the prevailing party shall be entitled to recover reasonable attorneys' fees and other costs incurred in that action or proceeding, in addition to any other relief to which such party may be entitled. 9.14. Interpretation. No reference in this Agreement to "best efforts" or "all reasonable efforts" shall require a Person obligated to use such efforts to incur unreasonable out-of-pocket expenses or indebtedness or, except as expressly provided herein, to institute litigation or to consent generally to service of process in any jurisdiction. All references to "dollars" or "$" herein refer to United States dollars. All references in this Agreement to Exhibits, Schedules, Articles, Sections, subsections, or other subdivisions refer to the corresponding Exhibits, Schedules, Articles, Sections, subsections, and other subdivisions of this Agreement unless expressly provided otherwise. The words "this Agreement," "herein," "hereby," "hereunder," and "hereof," and words of similar import, refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The words "this Section," "this subsection," and words of similar import, refer only to the Sections or subsections hereof in which such words occur. The word "including" (in its various forms) means "including without limitation" and the word "or" is not exclusive. Pronouns in masculine, feminine, or neuter genders shall be construed to state and include any other gender and words, terms, and titles (including terms defined herein) in the singular form shall be construed to include the plural and vice versa, unless the context otherwise expressly requires. 34  IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written. PURCHASER: DCX-CHOL HOLDING GMBH By:______________________________ Name: Title: DCX-CHOL: DCX-Chol Enterprises, Inc. By:______________________________ Name: Title: CHOL ENTERPRISES Chol Enterprises, Inc. By:______________________________ Name: Title: SELLER: SL INDUSTRIES VERTRIEB GMBH By:______________________________ Name: Title: SL INDUSTRIES: SL INDUSTRIES, INC. By:______________________________ Name: Title: S-1