**Exhibit 10.7**

 

**VIA FAX 212.661.1031**

 

June 30, 2005

 

MAGIndustrial Automation Systems LLCMainco, Inc.c/o Maxor Inc.60 E. 42nd StreetNew York, NY 10165

 

***Attention: Mr. Mo Meidar***

*** ***

**Re:****                             Purchaseand Sale of Cincinnati Lamb Group – Settlement Agreement**

 

Dear Mo:

 

This letter agreement setsforth certain agreements of the Parties to the Purchase and Sale Agreement (the“Purchase and Sale Agreement”), dated March 17, 2005, as amended, amongUNOVA, Inc. and certain of its subsidiaries (the “Selling Entities”) andMainco, Inc., MAG Industrial Automation Systems LLC and certain of theirsubsidiaries (the “Purchasing Entities”) pursuant to which the PurchasingEntities acquired the business and substantially all of the assets and certaincapital stock of the Cincinnati Lamb Group. These agreements fully and finally resolve certain potential claims andobligations of the Parties under the Purchase and Sale Agreement and therelated letter agreement (the “NWA Side Letter”) pursuant to which the SellingEntities agreed that the net working assets (as defined in the Purchase andSale Agreement) on the Closing Balance Sheet would be at least $130,500,000,and that to the extent that such net working assets were less than that amount,UNOVA would pay to the Purchasing Entities the amount of such difference (the “NWAAdjustment”) in cash.  Capitalizedterms used and not otherwise defined in this letter have the meanings stated inthe Purchase and Sale Agreement.

 

1.                                       ClosingBalance Sheet and NWA Adjustment. Attached as Exhibit A is the final, agreed upon Closing BalanceSheet. The Parties agree that the NWA Adjustment is $12,553,000.  On April 15, 2005, UNOVA paid toPurchaser the estimated NWA Adjustment in the amount of $9,550,000.  Upon execution and delivery of this letteragreement, UNOVA shall pay to Purchaser $3,003,000 in full and final settlementof the Selling Entities’ obligations under Section 1.8(d) of thePurchase and Sale Agreement and the NWA Side Letter.

 

2.                                       Proceedsof Alenia Judgment.  Upon executionof this agreement, UNOVA will pay to Purchaser the proceeds received by theSelling Entities from the Alenia judgment in the amount of €1,552,800.

 

----

 

3.                                       Modificationof Promissory Notes.  The existingSecured Note is comprised of three notes, Domestic, German and Foreign.  The Domestic Secured Note and the Lamb U.K.Restructure Note will be modified and restated into a new Domestic SecuredNote, dated the Transfer Date, in the principal amount of $6,454,000 and with anew payment schedule (the “New Domestic Secured Note”).  The principal payment schedule under theGerman Secured Note and the Foreign Secured Note shall be amended, so thataggregate principal payments under the New Domestic Secured Note, the GermanSecured Note and the Foreign Secured Note shall be payable on the followingschedule:

 

(i) $1,454,000 (in the aggregate) shall bepayable on the 24-month anniversary of the Transfer Date,

(ii) $2,000,000 (in the aggregate) shall bepayable on the 30-month anniversary of the Transfer Date,

(iii) $2,000,000 (in the aggregate) shall bepayable on the 36-month anniversary of the Transfer Date,

(iv) $2,500,000 (in the aggregate) shall bepayable on the 42-month anniversary of the Transfer Date,

(v) $2,000,000 (in the aggregate) shall bepayable on the 48-month anniversary of the Transfer Date, and

(vi) $2,500,000 (in the aggregate) shall bepayable on the 54-month anniversary of the Transfer Date.

 

The New Domestic Secured Note shall bear interest atthe rate of LIBOR + 3%, payable quarterly.

 

4.                                       Costto Modify Promissory Notes and Related Security Documents.  UNOVA and Purchaser shall share equally thecost to modify the promissory notes as indicated above, to amend the existingsecurity agreements and to make any requisite filings.  Such costs shall include only Silver Pointfees, attorney fees and filing fees that are specifically related to suchmodification and amendment.

 

5.                                       SalineReal Estate and Equipment.  TheSelling Entities retained as Excluded Assets certain real property andequipment located in Saline, Michigan, and classified as Assets Held for Sale,with an approximate aggregate book value of $6.6 million (collectively, the “SalineProperty”).  Purchaser shall use its reasonablebest efforts to obtain within 90 days following the execution of this agreementup to three offers to purchase the Saline Property (“Third-Party Offers”).  A Third-Party Offer less the costs of sale isreferred to as a “Net Third-Party Offer.” In the event that any of the Net Third-Party Offers are at or above $4million, the Selling Entities may elect to sell the Saline Property pursuant tosuch Third-Party Offer for the amount equal to the highest Net Third-PartyOffer and at the time of such sale (or 90 days after the execution of thisagreement if sooner), the Selling Entities shall pay to Purchaser $2 million;provided, however, that (i) to the extent the Net Third-Party Offer isgreater than $4 million but less than or equal to $5 million, the amount bywhich it exceeds $4 million shall be shared by the Selling Entities andPurchaser at the rate of 60% to the Selling Entities and 40% to

 

2

----

 

Purchaser, and (ii) to the extent that the NetThird-Party Offer is greater than $5 million, the first $1.0 million above $4million shall be shared as provided in clause (i) and the amount by whichit exceeds $5 million shall be shared by the Selling Entities and Purchaser atthe rate of 80% to the Selling Entities and 20% to Purchaser.  The Selling Entities may but shall not beobligated to sell the Saline Property if the Net Third-Party Offer is less than$4 million.  In the event that there areno Third-Party Offers or the Net Third-Party Offers are less than $4 million,then 90 days after the execution of this agreement the Selling Entities shallpay to Purchaser $2 million.

 

6.                                       Paymentof Management Bonuses.  ThePurchasing Entities agree to pay the management bonuses to the ContinuingEmployees as accrued on the Closing Balance Sheet.

 

7.                                       Waiver of Certain Additional Claims.  TheParties agree that except for claims based on fraud:

 

(i) the PurchasingEntities hereby waive, discharge and release any claim or cause of action thatany such Party now has or may have, known or unknown, or that may arise in thefuture, for indemnification from the Selling Entities under (a) Section 11.1(a)(Misrepresentation or Breach of Warranty), to the extent such claims are basedon any misrepresentation or breach of warranty under the following Sections ofthe Purchase and Sale Agreement :(A) 3.2(a) (Financial), (B) 3.3(Accounts Receivable), (C) 3.4 (Inventories), (D) 3.7 (Right to UseProperties, Rights and Assets ), (E) 3.8 (Contracts and Commitments), or(F)3.12 (Product and Service Warranties) (collectively, the “ReleasedRepresentations and Warranties”); or (b) Section 11.1(b) (Breachof Covenant or Agreement) to the extent that such claim relates to a breach ornonfulfillment, prior to the date of this letter agreement, of a covenant,agreement or other obligation set forth in the Purchase and Sale Agreement; and

 

(ii) the SellingEntities hereby waive, discharge and release any claim or cause of action thatany such Party now has or may have, known or unknown, or that may arise in thefuture, for indemnification from the Purchasing Entities under Section 11.2(b) (Breachof Covenant or Agreement) to the extent that such claim relates to a breach ornonfulfillment, prior to the date of this letter agreement, of a covenant,agreement or other obligation set forth in the Purchase and Sale Agreement.

 

8.                                       No Further Payments by Selling Entities.  ThePurchasing Entities further agree that, (i) except as specificallyprovided in this letter agreement and (ii) except for any indemnificationclaim under Section 11.1(a) (Misrepresentation or Breach of Warranty)other than the Released Representations and Warranties, Section 11.1(b) (Breachof Covenant or Agreement) to the extent that such claim relates to a breach ornonfulfillment, following the date of this letter agreement, of a covenant,agreement or other obligation set forth in the Purchase and Sale Agreement, Section 11.1(c) (ExcludedLiabilities), 11.1(d) (R&B Liabilities), 11.1(e) (ProductLiability), 11.1(f) (Retained Environmental Liabilities of TransferredSubsidiaries), 11.1(g) (Offsite Disposal), or

 

3

----

 

11.1(h) (Bulk Sales),the Purchasing Entities shall be responsible for all debts, liabilities,obligations, costs and expenses of the Business and shall not be entitled toand will not make any claim for any additional payment whatsoever from any ofthe Selling Entities or their Affiliates under or in connection with thePurchase and Sale Agreement or the Business, including but not limited to anyclaim for amounts incurred by the Purchasing Entities relating to the operationof the Business prior to or after the Transfer Date or claims by third partiesrelating to the Business, and the Purchasing Entities will not tender any suchmatter to the Selling Entities or their Affiliates or request of them paymentof or reimbursement for any such amounts or for any other amount.

 

9.                                       Undertaking.  Each of UNOVA, Inc., withrespect to the other Selling Entities, and MAG Industrial Automation SystemsLLC, with respect to the other Purchasing Entities, agrees to use itsreasonable best efforts to cause such other parties to the Purchase and SaleAgreement to sign this letter agreement as soon as practicable.

 

If the foregoing accurately sets forth our agreement,please so indicate by signing on behalf of the Purchasing Entities whereindicated below.

 

Sincerely,

 

UNOVA, INC.

Individuallyand on behalf of the Selling Entities

 

 
| /s/ Michael E.  Keane |   |
|-----------------------|--------|

 

 

Michael E. Keane

Senior Vice President andChief Financial Officer

 

Enclosure

 

***SO AGREED***

 

MAG INDUSTRIAL AUTOMATIONSYSTEMS LLC ****Individually and on behalf of the Purchasing Entities

 
| By: | /s/ Mo Meidar |   |
|-----|---------------|--------|

 

Mo Meidar

 

***SO AGREED***

 

UNOVA U.K. LIMITED

 
| By:           | /s/ Cathy Younger |   |
|---------------|-------------------|--------|
| Cathy Younger |

 

4

----

 

***SO AGREED***

 

UNOVA OPERATIONS U.K.LIMITED

 

(FKA Cincinnati Machine UKLimited)

 
| By:           | /s/ Cathy Younger |   |
|---------------|-------------------|--------|
| Cathy Younger |

 

***SO AGREED***

 

HONSBERG LAMBSONDERWERKZEUGMASCHINEN GMBH

 
| By:           | /s/ Cathy Younger |   |
|---------------|-------------------|--------|
| Cathy Younger |

 

***SO AGREED***

 

INTERMEC CANADA LIMITED

(Successor by Amalgamation toUNOVA CANADA, Inc.)

 
| By:           | /s/ Cathy Younger |   |
|---------------|-------------------|--------|
| Cathy Younger |

 

***SO AGREED***

 

UNOVA INDUSTRIAL AUTOMATIONSYSTEMS, INC.

 
| By:           | /s/ Cathy Younger |   |
|---------------|-------------------|--------|
| Cathy Younger |

 

***SO AGREED***

 

UNOVA IP CORP.

 
| By:           | /s/ Cathy Younger |   |
|---------------|-------------------|--------|
| Cathy Younger |

 

***SO AGREED***

 

R&B Plastics Holdings, Inc.

 
| By:            | /s/ James Benjamin |   |
|----------------|--------------------|--------|
| James Benjamin |

 

***SO AGREED***

 

Cincinnati Machine LLC

 
| By:            | /s/ James Benjamin |   |
|----------------|--------------------|--------|
| James Benjamin |

 

***SO AGREED***

 

Lamb Technicon LLC

 
| By:            | /s/ James Benjamin |   |
|----------------|--------------------|--------|
| James Benjamin |

 

5

----

 

***SO AGREED***

 

Lamb Assembly and Test, LLC

 
| By:            | /s/ James Benjamin |   |
|----------------|--------------------|--------|
| James Benjamin |

 

***SO AGREED***

 

“Caroline” Ein hundertdritte

Vermö gensverwaltungsgesellschaft MbH

 
| By:            | /s/ James Benjamin |   |
|----------------|--------------------|--------|
| James Benjamin |

 

***SO AGREED***

 

MAGUS GmbH

 
| By:            | /s/ James Benjamin |   |
|----------------|--------------------|--------|
| James Benjamin |

 

***SO AGREED***

 

MAG IP GmbH

 
| By: | /s/ James Benjamin |   |
|-----|--------------------|--------|

 

***SO AGREED***

 

Lamb Technicon, Ltd.

 
| By:            | /s/ James Benjamin |   |
|----------------|--------------------|--------|
| James Benjamin |

 

***SO AGREED***

 

Cincinnati Machine Limited

 
| By:            | /s/ James Benjamin |   |
|----------------|--------------------|--------|
| James Benjamin |

 

***SO AGREED***

 

Lamb Technicon Limited

 
| By:            | /s/ James Benjamin |   |
|----------------|--------------------|--------|
| James Benjamin |

 

6

----