**Exhibit10.40**

**FORBEARANCE AGREEMENT**

**THIS FORBEARANCE AGREEMENT** (this “Agreement”), dated as ofSeptember 22, 2006, is entered into by and among the Lenders signatory hereto, **ABLECO FINANCE LLC**, a Delaware limitedliability company, as collateral agent and administrative agent for the Lenders(in such capacities, “Agent”), **MAGNETEK,INC.**, a Delaware corporation (“Borrower”), and each of Borrower’sSubsidiaries identified on the signature pages hereof (such Subsidiaries,together with Borrower, are referred to hereinafter as a “Loan Party”and individually and collectively, jointly and severally, as the “LoanParties”).  Terms used herein withoutdefinition shall have the meanings ascribed to them in the Financing Agreementdefined below.

**RECITALS**

A.            The Lenders, Agent and Loan Partieshave previously entered into that certain Financing Agreement dated September30, 2005, as amended by that certain Amendment No. 1 to Financing Agreement andWaiver, dated November 29, 2005 and by that certain Amendment No. 2 to FinancingAgreement, dated April 24, 2006 (as amended, modified and supplemented fromtime to time, the “Financing Agreement”), pursuant to which the Lendershave made certain loans and financial accommodations available to the LoanParties.

B.            Certain Events of Default haveoccurred and are continuing under the Financing Agreement due to Loan Parties’failure to (i) achieve the minimum amount of TTM EBITDA set forth in Section 7.03(c)of the Financing Agreement for the period ending June 30, 2006, (ii) maintainthe minimum Fixed Charge Coverage Ratio set forth in Section 7.03(b) of the FinancingAgreement as of June 30, 2006 and (iii) maintain a Leverage Ratio of no morethan the amount set forth in Section 7.03(a) of the Financing Agreement as ofJune 30, 2006 (collectively, the “Known Existing Defaults”).

C.            The Loan Parties have requested thatthe Agent and Lenders forbear from exercising their rights and remedies underthe Financing Agreement and the other Loan Documents in order to give the LoanParties time to negotiate a sale of the Stock of MagneTek S.p.A., a companyorganized under the laws of Italy, and of certain other assets associated withits “Power Electronics Group” division.

D.            Agent and the Lenders are willing,for a limited period of time and on the terms and conditions set forth herein,to forbear from exercising their rights and remedies under the FinancingAgreement and the other Loan Documents with respect to the Known ExistingDefaults.

E.             The Loan Parties are entering intothis Agreement with the understanding and agreement that, except asspecifically provided herein, none of the Agent’s or Lenders’ rights orremedies as set forth in the Financing Agreement or any other Loan Document arebeing waived or modified by the terms of this Agreement.

**AGREEMENT**

NOW,THEREFORE, in consideration of the foregoing and the mutual covenants hereincontained, and for other good and valuable consideration, the receipt andsufficiency of which are hereby acknowledged, the parties hereby agree asfollows:

1.             Incorporation of Recitals.  Eachof the above recitals is expressly incorporated herein and is represented byeach Loan Party to be true and correct.

2.             Reaffirmation of Obligations.  EachLoan Party hereby acknowledges that the Loan Documents and the Obligationsconstitute the valid and binding obligations of such Loan Party enforceableagainst such Loan Party in accordance with their respective terms, and each LoanParty hereby reaffirms its 

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obligationsunder the Loan Documents.  Agent’s andthe Lenders’ entry into this Agreement or any of the documents referencedherein, their negotiations with any party with respect to any Loan Document,their conduct of any analysis or investigation of any Collateral for theObligations or any Loan Document, their acceptance of any payment from any LoanParty or any other party of any payments made prior to the date hereof, or anyother action or failure to act on the part of Agent or any Lender shall notconstitute (a) a modification of any Loan Document or (b) a waiver of anyDefault or Event of Default under the Financing Agreement, including, withoutlimitation, the Known Existing Defaults, or a waiver of any term or provisionof any Loan Document.

3.             Agreement to Forbear.  Forthe Forbearance Period (as defined below), the Agent and Lenders shall not takeany action or commence any proceedings with respect to the enforcement of anyof their rights or remedies under the Loan Documents as a result of the KnownExisting Defaults.  The parties agreethat neither the foregoing agreement by Agent and Lenders nor the acceptance byAgent or Lenders of any of the payments provided for in the Loan Documents, norany payment prior to the date hereof shall, however, (a) excuse any party fromany of its obligations under the Loan Documents (other than as set forth in Section5 below), or (b) toll the running of any time periods applicable to anysuch rights and remedies, including, without limitation, any grace periods withrespect to Defaults under the Loan Documents or otherwise.  Each Loan Party agrees that it will notassert laches, waiver or any other defense to the enforcement of any of theLoan Documents based upon the foregoing agreement Agent and Lenders to forbearor the acceptance by Agent or Lenders of any of the payments provided for inthe Loan Documents or any payment prior to the date hereof.  As used herein, “Forbearance Period”shall mean the period commencing upon the effectiveness of this Agreement andcontinuing until the earlier to occur of: (x) any Default or Event of Defaultunder any of the Loan Documents (other than any Known Existing Default) or (y)October 31, 2006.

4.             Termination of Agreement to Forbear.  EachLoan Party acknowledges and agrees that upon the termination of the Agent andLenders’ agreement to forbear as provided in Section 3 hereof, Agent, onbehalf of the Lenders, shall be entitled to exercise any or all of its remediesunder the Loan Documents, including, without limitation, the appointment of areceiver, the acceleration of the Obligations and the enforcement under theCode of any liens in favor of Agent, as a result of the Known ExistingDefaults, and at any time Agent and Lenders shall be entitled to exercise anyor all of their remedies under the Loan Documents as a result of any otherDefault or Event of Default under the Loan Documents.

5.             Agreement to Defer October 1, 2006 PrincipalPayment.  Anything in Section 2.03(b) of theFinancing Agreement notwithstanding, the parties hereby agree that the October1, 2006 installment principal payment of $1,000,000 shall not be due until theend of the Forbearance Period.

6.             Release; Covenant Not to Sue.

(a)           Each Loan Party hereby absolutely and unconditionally releases andforever discharges Agent and Lenders, and any and all of their respectiveparticipants, parent corporations, subsidiary corporations, affiliatedcorporations, insurers, indemnitors, successors and assigns thereof, togetherwith all of the present and former directors, officers, agents and employees ofany of the foregoing (each a “Released Party”), from any and all claims,demands or causes of action of any kind, nature or description, whether arisingin law or equity or upon contract or tort or under any state or federal law orotherwise, which such Loan Party has had, now has or has made claim to haveagainst any such person for or by reason of any act, omission, matter, cause orthing whatsoever arising from the beginning of time to and including the dateof this Agreement, whether such claims, demands and causes of action arematured or unmatured or known or unknown. It is the intention of each Loan Party in providing this release thatthe same shall be effective as a bar to each and every claim, demand and causeof action specified, and in furtherance of this intention it waives andrelinquishes all rights and benefits under Section 1542 of the Civil Code ofthe State of California (or any comparable provision of any other applicablelaw), which provides:

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“A general release does not extend to claimswhich the creditor does not know or suspect to exist in his favor at the timeof executing the release, which if known by him might have materially affectedhis settlement with the debtor.”

Each Loan Party acknowledges that it may hereafter discover factsdifferent from or in addition to those now known or believed to be true withrespect to such claims, demands, or causes of action and agrees that thisinstrument shall be and remain effective in all respects notwithstanding anysuch differences or additional facts. Each Loan Party understands, acknowledges and agrees that the releaseset forth above may be pleaded as a full and complete defense and may be usedas a basis for an injunction against any action, suit or other proceeding whichmay be instituted, prosecuted or attempted in breach of the provisions of suchrelease.

(b)           Each Loan Party, on behalf of itself and its successors, assigns, andother legal representatives, hereby absolutely, unconditionally andirrevocably, covenants and agrees with and in favor of each Released Partyabove that it will not sue (at law, in equity, in any regulatory proceeding orotherwise) any Released Party on the basis of any claim released, remised anddischarged by such Loan Party pursuant to the above release.  If any Loan Party or any of its successors,assigns or other legal representations violates the foregoing covenant, each LoanParty, for itself and its successors, assigns and legal representatives, agreesto pay, in addition to such other damages as any Released Party may sustain asa result of such violation, all attorneys’ fees and costs incurred by suchReleased Party as a result of such violation.

7.             Effectiveness of this Agreement. Agent must have received the following items, in form and contentacceptable to Agent, before this Agreement is effective and the Lenders arerequired to resume making extensions of credit to Loan Parties under the FinancingAgreement.

(a)           Agreement; Acknowledgement and Release.  ThisAgreement and the attached Acknowledgement and Release by Guarantors, eachfully executed in a sufficient number of counterparts for distribution to allparties.

(b)           Forbearance as to First Lien CreditAgreement, etc.  Evidence that the Loan Parties, First LienAgent and the Lenders (as defined in the First Lien Credit Agreement) haveentered into a forbearance agreement with respect to the First Lien CreditAgreement reflecting substantially the same terms set forth in this Agreement(the “First Lien Forbearance”) or otherwise satisfactory to Agent.

(c)           Representations and Warranties. Except for the existence of the Known Existing Defaults, therepresentations and warranties set forth herein and in the Financing Agreementmust be true and correct in all material respects (except where any suchrepresentation and warranty is already subject to a materiality standard, inwhich case such representation and warranty is true and correct in allrespects) on and as of the date hereof as though made on and as of the datehereof (other than any such representations and warranties that, by theirterms, are specifically made as of a date other than the date hereof).

(d)           Other Required Documentation.  Allother documents and legal matters in connection with the transactionscontemplated by this Agreement shall have been delivered or executed orrecorded, as required by Agent.

8.             Representations and Warranties.  EachLoan Party represents and warrants as follows:

(a)           Authority.  Each Loan Party has therequisite corporate power and authority to execute and deliver this Agreement,and to perform its obligations hereunder and under the Loan Documents to whichit is a party.  The execution, deliveryand performance by each Loan Party of this Agreement have been duly approved byall necessary corporate action and no other corporate proceedings are necessaryto consummate such transactions.

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(b)           Enforceability.  ThisAgreement has been duly executed and delivered by each Loan Party.  This Agreement and each Loan Document is thelegal, valid and binding obligation of each Loan Party, enforceable againstsuch Loan Party in accordance with its terms, and is in full force and effect.

(c)           Representations and Warranties.  Therepresentations and warranties contained in each Loan Document (other than anysuch representations or warranties that, by their terms, are specifically madeas of a date other than the date hereof) are true and correct in all materialrespects (except where any such representation and warranty is already subjectto a materiality standard, in which case such representation and warranty istrue and correct in all respects) on and as of the date hereof as though madeon and as of the date hereof.

(d)           Due Execution.  Theexecution, delivery and performance of this Agreement are within the power ofeach Loan Party, have been duly authorized by all necessary corporate action,have received all necessary governmental approval, if any, and do notcontravene any law or any contractual restrictions binding on such Loan Party.

(e)           No Default.  Other than the Known ExistingDefaults, no event has occurred and is continuing that constitutes a Default oran Event of Default.

(f)            No Duress.  This Agreement has beenentered into without force or duress, of the free will of each Loan Party.  Each Loan Party’s decision to enter into thisAgreement is a fully informed decision and such Loan Party is aware of alllegal and other ramifications of such decision.

(g)           Counsel.  Each Loan Party has read andunderstands this Agreement, has consulted with and been represented by legalcounsel in connection herewith, and has been advised by its counsel of itsrights and obligations hereunder and thereunder.

9.             Choice of Law.  Thevalidity of this Agreement, its construction, interpretation and enforcement,the rights of the parties hereunder, shall be determined under, governed by,and construed in accordance with the internal laws of the State of New Yorkgoverning contracts only to be performed in that State.

10.           Counterparts.  ThisAgreement may be executed in any number of counterparts and by different partiesand separate counterparts, each of which when so executed and delivered, shallbe deemed an original, and all of which, when taken together, shall constituteone and the same instrument.  Delivery ofan executed counterpart of a signature page to this Agreement by telefacsimileor other similar method of electronic transmission shall be effective asdelivery of a manually executed counterpart of this Agreement.

11.           Reference to and Effect on the Loan Documents.

(a)           Upon and after the effectiveness of this Agreement, each reference inthe Financing Agreement to “this Agreement”, “hereunder”, “hereof” or words oflike import referring to the Financing Agreement, and each reference in theother Loan Documents to “the Financing Agreement”, “thereof” or words of likeimport referring to the Financing Agreement, shall mean and be a reference tothe Financing Agreement as supplemented hereby.

(b)           The Financing Agreement and all other Loan Documents, are and shallcontinue to be in full force and effect and are hereby in all respects ratifiedand confirmed and shall constitute the legal, valid, binding and enforceableobligations of each Loan Party to Agent and Lenders.

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(c)           The execution, delivery and effectiveness of this Agreement shall notoperate as a waiver of any right, power or remedy of the Agent or Lenders underany of the Loan Documents, nor constitute a waiver of any provision of any ofthe Loan Documents.

12.           Ratification.  EachLoan Party hereby restates, ratifies and reaffirms each and every term andcondition set forth in the Financing Agreement and the Loan Documents effectiveas of the date hereof.

13.           Integration.  This Agreement, together withthe other Loan Documents, incorporates all negotiations of the parties heretowith respect to the subject matter hereof and is the final expression andagreement of the parties hereto with respect to the subject matter hereof.

14.           Severability.  Incase any provision in this Agreement shall be invalid, illegal orunenforceable, such provision shall be severable from the remainder of thisAgreement and the validity, legality and enforceability of the remainingprovisions shall not in any way be affected or impaired thereby.

15.           Submission of Amendment.  Thesubmission of this Agreement to the parties or their agents or attorneys forreview or signature does not constitute a commitment by Agent or the Lenders toforbear from exercising any of their rights and remedies under the LoanDocuments, and this Agreement shall have no binding force or effect until allof the conditions to the effectiveness of this Agreement have been satisfied asset forth herein.

16.           Modification.  ThisAgreement may not be amended, waived or modified in any manner without thewritten consent of the party against whom the amendment, waiver or modificationis sought to be enforced.

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INWITNESS WHEREOF, the parties have entered into this Agreement as of the datefirst above written.

 
|            | **BORROWER:**                              |
|------------|--------------------------------------------|
| ** ** | ** **                                 |
| ** ** | **MAGNETEK,  INC.**                        |
| ** ** | ** **                                 |
| ** ** | ** **                                 |
|       | By:                                        | /s/ David P.  Reiland |
|       | Name:                                      | David P. Reiland |
|       | Title:                                     | Executive VP and  CFO |
|       |                                       |
|       |                                       |
| ** ** | **GUARANTORS:**                            |
| ** ** | ** **                                 |
| ** ** | **MAGNETEK  ADS POWER, INC.**              |
| ** ** | ** **                                 |
| ** ** | ** **                                 |
|       | By:                                        | /s/ David P.  Reiland |
|       | Name:                                      | David P. Reiland |
|       | Title:                                     | Executive VP and  CFO |
|       |                                       |
|       |                                       |
| ** ** | **MAGNETEK  MONDEL HOLDING, INC.**         |
| ** ** | ** **                                 |
| ** ** | ** **                                 |
|       | By:                                        | /s/ David P.  Reiland |
|       | Name:                                      | David P. Reiland |
|       | Title:                                     | Executive VP and  CFO |
|       |                                       |
|       |                                       |
| ** ** | **MONDEL  ULC**                            |
|       | By:                                        | /s/ David P.  Reiland |
|       | Name:                                      | David P. Reiland |
|       | Title:                                     | Executive VP and  CFO |
|       |                                       |
|       |                                       |
| ** ** | **MAGNETEK  NATIONAL ELECTRIC COIL, INC.** |
| ** ** | ** **                                 |
| ** ** | ** **                                 |
|       | By:                                        | /s/ David P.  Reiland |
|       | Name:                                      | David P. Reiland |
|       | Title:                                     | Executive VP and  CFO |
|       |                                       |
|       |                                       |
| ** ** | **MAGNETEK  ALTERNATIVE ENERGY, INC.**     |
| ** ** | ** **                                 |
| ** ** | ** **                                 |
|       | By:                                        | /s/ David P.  Reiland |
|       | Name:                                      | David P. Reiland |
|       | Title:                                     | Executive VP and  CFO |
|            |                                            |  |  |  |

 

 

[MAGNETEK, INC.]

[SIGNATURE PAGE TOFORBEARANCE AGREEMENT]

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|            | **COLLATERAL  AGENT AND**                      |
|------------|------------------------------------------------|
| ** ** | **ADMINISTRATIVE  AGENT:**                     |
| ** ** | ** **                                     |
| ** ** | **ABLECO  FINANCE LLC**                        |
| ** ** | ** **                                     |
| ** ** | ** **                                     |
|       | By:                                            | /s/ Michael  Grenier |
|       | Name:                                          | Michael Grenier |
|       | Title:                                         | Vice President |
|       |                                           |
|       |                                           |
| ** ** | **LENDERS:**                                   |
| ** ** | ** **                                     |
| ** ** | **ABLECO  FINANCE LLC,**                       |
|       | on behalf of  itself and its affiliate assigns |
|       |                                           |
|       |                                           |
|       | By:                                            | /s/ Michael  Grenier |
|       | Name:                                          | Michael Grenier |
|       | Title:                                         | Vice President |
|            |                                                |  |  |  |

 

 

[MAGNETEK, INC.]

[SIGNATURE PAGE TOFORBEARANCE AGREEMENT]

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