0001104659-04-013561.txt : 20040510 0001104659-04-013561.hdr.sgml : 20040510 20040510161721 ACCESSION NUMBER: 0001104659-04-013561 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNOVA INC CENTRAL INDEX KEY: 0001044590 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 954647021 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13279 FILM NUMBER: 04793362 BUSINESS ADDRESS: STREET 1: 6001 36TH AVENUE WEST CITY: EVERETT STATE: WA ZIP: 98203-1264 BUSINESS PHONE: 425-265-2400 MAIL ADDRESS: STREET 1: 6001 36TH AVENUE WEST CITY: EVERETT STATE: WA ZIP: 98203-1264 10-Q 1 a04-5263_110q.htm 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2004

OR

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

Commission file number 001-13279

UNOVA, INC.
(Exact name of registrant as specified in its charter)

	Delaware	95-4647021
	(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

	6001 36^th Avenue West Everett, WA www.unova.com	98203-1264
	(Address of principal executive offices and internet site)	(Zip Code)

	Registrant’s telephone number, including area code: (425) 265-2400

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý No o

On April 30, 2004 there were 60,532,559 shares of Common Stock outstanding, exclusive of treasury shares.

UNOVA, INC.

INDEX

REPORT ON FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2004

PART I. FINANCIAL INFORMATION

ITEM 1.	Financial Statements

	Consolidated Statements of Operations Three Months Ended March 31, 2004 and 2003 (unaudited)

	Consolidated Balance Sheets March 31, 2004 and December 31, 2003 (unaudited)

	Consolidated Statements of Cash Flows Three Months Ended March 31, 2004 and 2003 (unaudited)

	Notes to Consolidated Financial Statements (unaudited)

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk

ITEM 4.	Controls and Procedures

PART II. OTHER INFORMATION

ITEM 6.	Exhibits and Reports on Form 8-K

Signature

UNOVA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except per share amounts)

(unaudited)

	Three Months Ended March 31,
	2004			2003

Sales and Service Revenues:
Sales revenues	$	269,177		$	236,524
Service revenues	28,493			27,484
Total Sales and Service Revenues	297,670			264,008

Costs and Expenses:
Cost of sales	176,019			168,743
Cost of service	18,937			18,421
Selling, general and administrative	78,651			76,280
Depreciation and amortization	4,784			6,784
Special charges	383			998

Total Costs and Expenses	278,774			271,226

Operating Profit (Loss) from Continuing Operations	18,896			(7,218		)

Interest, net	(3,068		)	(3,862		)
Earnings (Loss) from Continuing Operations before Income Taxes	15,828			(11,080		)
Provision for Income Taxes	(5,316		)	(1,600		)
Earnings (Loss) from Continuing Operations	10,512			(12,680		)
Loss from Discontinued Operations, Net of Tax	(30		)	(2,203		)

Net Earnings (Loss)	$	10,482		$	(14,883	)

Basic Earnings (Loss) per Share Continuing Operations	$	0.17		$	(0.21	)
Discontinued Operations	(0.00		)	(0.04		)
Net Earnings (Loss) per share	$	0.17		$	(0.25	)

Diluted Earnings (Loss) per Share Continuing Operations	$	0.17		$	(0.21	)
Discontinued Operations	(0.00		)	(0.04		)
Net Earnings (Loss) per share	$	0.17		$	(0.25	)

Shares Used in Computing Basic Earnings (Loss) per Share	60,188			58,413

Shares Used in Computing Diluted Earnings (Loss) per Share	62,126			58,413

See accompanying notes to consolidated financial statements.

UNOVA, INC.

CONSOLIDATED BALANCE SHEETS

(amounts in thousands)

(unaudited)

	March 31, 2004			December 31, 2003

ASSETS

Current Assets:
Cash and cash equivalents	$	227,530		$	238,447
Accounts receivable, net of allowance for doubtful accounts of $18,505, 2004 and $21,964, 2003	280,600			275,594
Inventories, net of progress billings	150,330			132,324
Deferred tax assets	65,445			71,229
Assets held for sale	22,946			23,840
Other current assets	21,521			19,513
Total Current Assets	768,372			760,947

Property, Plant and Equipment, Net of Accumulated Depreciation of $219,653, 2004 and $215,944, 2003	76,009			77,292
Goodwill and Other Intangibles, Net	75,271			75,639
Deferred Tax Assets	113,486			111,820
Other Assets	61,966			65,119
Total Assets	$	1,095,104		$	1,090,817

LIABILITIES AND SHAREHOLDERS’ INVESTMENT

Current Liabilities:
Accounts payable and accrued expenses	$	266,552		$	265,626
Payroll and related expenses	43,624			54,893
Current portion of long-term obligations	100,000			—
Total Current Liabilities	410,176			320,519

Long-term Obligations	108,500			208,500
Other Long-term Liabilities	133,453			130,970

Shareholders’ Investment:
Common stock	608			605
Additional paid-in capital	694,437			690,745
Accumulated deficit	(247,084		)	(257,566		)
Accumulated other comprehensive loss	(4,986		)	(2,956		)
Total Shareholders’ Investment	442,975			430,828
Total Liabilities and Shareholders’ Investment	$	1,095,104		$	1,090,817

See accompanying notes to consolidated financial statements.

UNOVA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(unaudited)

	Three Months Ended March 31,
	2004			2003
Cash and Cash Equivalents at Beginning of Period	$	238,447		$	178,269

Cash Flows from Operating Activities:
Net earnings (loss)	10,482			(14,883		)
Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	4,784			7,165
Change in prepaid and accrued pension costs, net	2,654			1,894
Deferred taxes	1,666			454
Special charges	383			998
Changes in operating assets and liabilities:
Accounts receivable	(4,616		)	48,241
Inventories	(17,991		)	(1,482		)
Other current assets	(2,037		)	(2,133		)
Accounts payable and accrued expenses	2,349			(6,693		)
Payroll and related expenses	(9,279		)	(10,571		)
Other long-term liabilities	(973		)	761
Other operating activities	3,081			2,254

Net Cash Provided by (Used in) Operating Activities	(9,497		)	26,005

Cash Flows from Investing Activities:
Capital expenditures	(3,740		)	(4,387		)
Sale of property, plant and equipment	729			3,127
Other investing activities	(101		)	832

Net Cash Used in Investing Activities	(3,112		)	(428		)

Cash Flows from Financing Activities:
Stock Options exercised	1,686			4
Repayment of long-term obligations	—			(16,200		)
Other financing activities	6			(23		)

Net Cash Provided by (Used in) Financing Activities	1,692			(16,219		)

Resulting Increase (Decrease) in Cash and Cash Equivalents	(10,917		)	9,358
Cash and Cash Equivalents at End of Period	$	227,530		$	187,627

Supplemental Disclosure of Cash Flow Information:
Interest paid	$	(7,326	)	$	(8,775	)
Income taxes paid	$	(2,023	)	$	(1,363	)

See accompanying notes to consolidated financial statements.

UNOVA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1. Basis of Presentation

UNOVA, Inc. and subsidiaries (“UNOVA” or the “Company”) is a global supplier of mobile computing and wireless network products for non-office applications and of manufacturing systems technologies primarily for the automotive and aerospace industries. The Company is headquartered in Everett, Washington and incorporated in the state of Delaware.

The amounts included in this report are unaudited; however, in the opinion of management, all adjustments necessary for a fair presentation of results of operations, financial position and cash flows for the stated periods have been included. These adjustments are of a normal recurring nature. These consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2003. The results of operations for the interim periods presented are not necessarily indicative of operating results for the entire year.

2. Stock-Based Compensation

As permitted by Statement of Financial Accounting Standards (“SFAS”) No. 123, the Company accounts for its stock-based compensation plans in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” under which compensation cost is recognized over the vesting period if the fair value is greater than the exercise price (the intrinsic value method) at the grant of stock options. Had compensation cost for these plans been determined consistent with SFAS No. 123, “Accounting for Stock-Based Compensation,” the Company’s net earnings (loss) and basic and diluted loss per share for the three months ended March 31, 2004 and 2003 would have been reduced to the pro forma amounts indicated as follows (thousands of dollars):

	Three Months Ended March 31,
	2004			2003
Net earnings (loss) as reported	$	10,482		$	(14,883	)
Add: stock compensation expense recorded under the intrinsic value method	173			214
Less: pro forma stock compensation expense computed under the fair value method	(821		)	(1,090		)
Pro forma net earnings (loss)	$	9,834		$	(15,759	)

Pro forma basic and diluted earnings (loss) per share	$	0.16		$	(0.27	)

3. Inventories, Net of Progress Billings

Inventories, net of progress billings, comprise the following (thousands of dollars):

	March 31, 2004			December 31, 2003

Raw materials	$	93,654		$	89,085
Work in process	56,809			50,908
Finished goods.	18,713			16,105
Less progress billings	(18,846		)	(23,774		)
Inventories, net of progress billings	$	150,330		$	132,324

4. Long-term Obligations and Interest, net

The Company maintains two secured long-term credit facilities: a $100 million asset-based revolving credit facility (the “Revolving Facility”) and a £15.0 million ($27.2 million) revolving facility and related overdraft facility (collectively, the “UK Facility”).

Net of outstanding letters of credit and limitations on Minimum Availability, the Company had borrowing capacity at March 31, 2004, of $11.6 million under the Revolving Facility and £11.9 million ($21.7 million) under the UK Facility. The Company made no borrowings under the Revolving Facility or the UK Facility at any time during the first quarter of 2004 and as of March 31, 2004, no borrowings were outstanding under either facility. As of March 31, 2004, the Company was in compliance with the financial covenants of each of these agreements.

In March 1998, the Company sold $200.0 million principal amount of senior unsecured debt in an underwritten offering. The debt comprised $100.0 million of 6.875% seven-year notes and $100.0 million of 7.00% ten-year notes. Interest payments are due semi-annually. Including underwriting fees, discounts and other issuance costs, the effective interest rates on the seven-year and ten-year notes are 7.125% and 7.175%, respectively. As of March 31, 2004 the $100.0 million seven-year notes, maturing in March 2005, are classified as current portion of long-term obligations on the Company’s consolidated balance sheet.

The Company additionally has outstanding $8.5 million of 3.21% industrial revenue bonds, maturing in July 2005.

Interest, net comprises the following (thousands of dollars):

	Three Months Ended March 31,
	2004			2003
Interest expense	$	4,009		$	4,641
Interest income	(941		)	(779		)
Interest, net	$	3,068		$	3,862

The Company also has letter-of-credit reimbursement agreements primarily related to the Company’s performance on contracts with customers totaling $26.4 million at March 31, 2004. The Company believes it is not practicable to estimate fair values of these instruments and considers the risk of non-performance on the contracts to be remote.

5. Special Charges and Restructuring Activities

Special charges comprise the following by reportable segment (thousands of dollars):

	Three Months Ended March 31,
	2004		2003
IAS:
Facility consolidation	$	300	$	93
Impairment of property, plant and equipment	83		—
Severance	—		624
Total IAS	383		717

Corporate:
Facility consolidation	—		281
Total Corporate	—		281
Special charges	$	383	$	998

IAS Segment: The following table summarizes IAS restructuring activities during the three months ended March 31, 2004 (thousands of dollars):

	Workforce reduction			Consolidation of facilities			Total

Accrual balance at December 31, 2003	$	6,008		$	1,129		$	7,137
Total charges				300			300
Cash payments	(3,326		)	(724		)	(4,050		)
Accrual balance at March 31, 2004	$	2,682		$	705		$	3,387

In the fourth quarter of 2002, as a result of the continued economic downturn in the global automotive, aerospace and heavy equipment industries, the Company initiated a plan to consolidate its Cincinnati Machine, Lamb Machining Systems and Lamb Body & Assembly Systems divisions into the new operating entity, Cincinnati Lamb. The plan included the relocation of certain Cincinnati Machine operations, outsourcing of certain manufacturing activities, termination of employees, and the sale of certain plant and equipment. This restructuring, which was substantially completed by December 31, 2003, resulted in fourth quarter 2002 charges for severance of $14.7 million for the planned termination of 683 employees, early retirement of $4.2 million for 42 employees, and plant closure costs of $0.4 million. The related analysis of long-lived assets to be disposed of resulted in a fourth quarter 2002 non-cash impairment charge of $4.2 million to write down property, plant and equipment to the lower of its carrying value or estimated fair value less cost to sell (“net realizable value”). During the year ended December 31, 2003, in conjunction with the above described restructuring plan, IAS recorded severance charges of $2.1 million for an additional 165 employees and $2.1 million for other plant closure costs. The related analysis of long-lived assets to be disposed of resulted in the non-cash impairment charge of $4.0 million in the fourth quarter of 2003 to write down property, plant and equipment to the lower of its carrying value or estimated net realizable value. The fair value of long-lived assets to be disposed of was estimated based on the current market value of similar assets.

In the first quarter 2004, IAS recorded additional charges of $0.3 million for additional facility consolidation costs and $0.1 million for impairment of property, plant and equipment in conjunction with this plan. As of March 31, 2004, the IAS segment had terminated 787 employees and paid $16.6 million in severance, cumulatively, in conjunction with this plan. During the three months ended March 31, 2004, 103 employees were terminated and $3.3 million of severance was paid in conjunction with this plan. The number of employees terminated does not include 228 employees of Lamb Body & Assembly that are no longer IAS employees as a result of the divestiture of this operation in September 2003.

Corporate: During the third quarter 2002, the Company initiated a plan to relocate its corporate office to its existing Intermec Technologies Corporation facility in Everett, Washington. This action, which was substantially complete as of June 30, 2003, resulted in the accrual of severance costs for 19 employees totaling $2.0 million and other facility closure costs of $3.2 million in the third quarter 2002. In the fourth quarter 2002, an additional accrual was recorded for facility closure costs of $1.2 million. Additional charges of $1.7 million for facility move and employee relocation expenses were recorded during the year ended December 31, 2003. As of March 31, 2004, 22 employees had been terminated and $0.6 million in severance costs had been paid, cumulatively, of which 2 employee terminations and $0.2 million in severance payments occurred during the three months ended March 31, 2004. During the three months ending March 31, 2004 $1.4 million of the workforce reduction accrual, relating to certain pension obligations for certain individuals affected by the restructuring plan, was reclassified to other long-term liabilities. The corporate restructuring accrual as of March 31, 2004 of $2.1 million represents ongoing leased facility costs.

6. Loss from Discontinued Operations, Net of Tax

During the third quarter 2003, in conjunction with the consolidation plan described in Note 4, the Company sold substantially all the assets and existing backlog of its Lamb Body & Assembly Systems division for approximately the book value of the divested assets. The Company received $12.8 million in 2003 and $2.5 million in April 2004 and retained $9.9 million in accounts payable. The division meets the definition of a “component of an entity” and has been accounted for as a discontinued operation under Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” (“SFAS No. 144”). The Company’s consolidated statement of operations for the three month period ended March 31, 2003 has been restated to present this division as discontinued operations for comparative purposes.

Sales and service revenue from discontinued operations for the three months ended March 31, 2003 was $9.7 million. There was no revenue from discontinued operations for the three months ended March 31, 2004. The loss and related tax effect from discontinued operations for the three months ended March 31, 2004 were not material. Losses from discontinued operations were $2.2 million for the three months ended March 31, 2003. Losses from discontinued operations did not have a tax effect for the three months ended March 31, 2003, as the Company’s domestic income tax benefits for the quarter was offset by a corresponding valuation allowance.

The Company’s consolidated balance sheet as of March 31, 2004 includes $5.2 million in current assets, including $1.8 million of net property, plant and equipment classified as assets held for sale, and $7.5 million in current liabilities pertaining to discontinued operations. The Company’s consolidated balance sheet as of December 31, 2003 includes $3.7 million in current assets, including $1.8 million of assets held for sale, and $7.0 million in current liabilities pertaining to discontinued operations.

7. Provision for Income Taxes

The provision for income taxes for three months ended March 31, 2004, is primarily related to federal, state and foreign taxes. The provision for income taxes for the three months ended March 31, 2003, is primarily related to foreign and state taxes, as the domestic tax benefit for the quarter is offset by a corresponding valuation allowance.

8. Earnings (Loss) per Share and Shareholders’ Investment

Basic earnings (loss) per share is calculated using the weighted average number of common shares outstanding and issuable for the applicable period. Diluted earnings per share is computed using basic weighted average shares plus the dilutive effect of unvested restricted stock and outstanding stock options using the “treasury stock” method.

	Three Months Ended March 31,
	2004	2003
Weighted average common shares - Basic	60,187,811	58,412,735
Dilutive effect of unvested restricted shares and stock options	1,938,300	—
Weighted average shares - Diluted	62,126,111	58,412,735

Because the Company reported a net loss from continuing operations for the three months ended March 31, 2003, stock options and unvested restricted shares are excluded from the diluted earnings per share computation as their effect would have been antidilutive. Company employees and directors held options to purchase 5,535,025 shares of Company common stock as of March 31, 2003. Also, Company employees held a weighted average of 378,017 unvested restricted shares for the three month period ended March 31, 2003.

9. Comprehensive Earnings (Loss)

The Company’s comprehensive earnings (loss) amounts comprise the following (thousands of dollars):

	Three Months Ended March 31,
	2004			2003

Net income (loss)	$	10,482		$	(14,883	)
Change in equity due to foreign currency translation adjustments	(2,030		)	316

Comprehensive earnings (loss)	$	8,452		$	(14,567	)

10. Intellectual Property Settlements

During the three months ended March 31, 2004, the Company received compensation in relation to one settlement regarding certain of its intellectual property. The terms of this settlement are confidential. The operating profit from the IP settlement, net of legal fees, for the three months ended March 31, 2004 was $15.8 million.

11. Segment Reporting

The Company has two reportable segments, Automated Data Systems (“ADS”) and Industrial Automation Systems (“IAS”). Segments are determined principally on the basis of their products and services. The ADS segment comprises the Company’s wholly owned subsidiary Intermec Technologies Corporation (“Intermec”). Intermec products and services include rugged mobile computing solutions, wireless, radio frequency identification (RFID) and automated data collection systems for field workers, on-premises and site-based workers as well as wireless network systems for untethered enablement of an enterprise, and barcode label and printing solutions. ADS’s rugged and robust systems, solutions and services enable Intermec’s customers to more efficiently and effectively manage their supply chains and fulfillment activities. The IAS segment comprises the Cincinnati Lamb division and the Landis Grinding Systems division. IAS is a leading producer of value-added manufacturing technologies, products and services spanning the production cycle from process engineering and design to systems integration including comprehensive life cycle support. IAS serves primarily the global aerospace, automotive, off-road vehicle and diesel engine industries as well as industrial components, heavy equipment and general job shop markets.

Corporate and other amounts include corporate operating costs and currency transaction gains and losses. Intercompany transactions have been eliminated. The following table sets forth the Company’s operations by business segments (thousands dollars):

	Three Months Ended March 31,
	2004			2003
Sales and Service Revenues
Automated Data Systems	$	193,005		$	162,882
Industrial Automation Systems	104,665			101,126
Total Sales and Service Revenues	$	297,670		$	264,008

Operating Profit (Loss) from Continuing Operations
Segment Operating Profit
Automated Data Systems	$	28,046		$	9,002
Industrial Automation Systems	(5,253		)	(8,196		)
Total Segment Operating Profit	22,793			806
Corporate and Other	(3,514		)	(7,026		)
Special Charges	(383		)	(998		)
Total Operating Profit (Loss) from Continuing Operations	$	18,896		$	(7,218	)

12. Related Party Transactions

An amount due from a non-executive officer of $0.2 million is included in other assets at March 31, 2004 and December 31, 2003.

Unitrin, Inc., a significant shareholder of the Company, owning approximately 21% of the Company’s outstanding common shares, and various of its subsidiaries (collectively, “Unitrin”) participated as a lender in the Term Loan. In January 2003, the Company paid off the remaining $16.2 million balance of the Term Loan, of which Unitrin had committed to and funded $6.8 million. Interest expense associated with amounts funded by Unitrin was $0.1 million for the three months ended March 31, 2003, respectively.

13. Litigation, Commitments and Contingencies

Provisions for estimated expenses related to product warranties are made at the time products are sold. These estimates are established using historical information on the nature, frequency, and average cost of warranty claims. Management actively studies trends of warranty claims and takes action to improve product quality and minimize warranty claims. The following table indicates the change in the Company’s warranty accrual included in current liabilities (thousands of dollars):

	Product Warranty Liabilities

Beginning balance as of December 31, 2003	$	27,139
Payments	(4,712		)
Increase in liability (new warranties issued)	2,881
Adjustments (pre-existing warranties)	100
Currency translation adjustment	140
Ending Balance as of March 31, 2004	$	25,548

The Company has entered into a variety of agreements with third parties that include indemnification clauses, both in the ordinary course of business and in connection with our divestitures of certain product lines. These clauses require us to compensate these third parties for certain liabilities and damages incurred by them. FASB Interpretation No. 45, “Guarantors’ Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” requires that the Company estimate and record the fair value of guarantees as a liability. The Company has not made any significant indemnification payments as a result of these clauses, nor does it believe the fair value of any of these guarantees has a material impact on the Company’s financial position or results of operations.

The Company is currently, and is from time to time, subject to claims and suits arising in the ordinary course of its business. In the opinion of the Company’s General Counsel, the ultimate resolution of currently pending proceedings, with the potential exception of one case discussed below, will not have a material adverse effect on the Company’s consolidated financial statements.

Tower Automotive Products Co. v. Lamb Technicon Body and Assembly is a lawsuit filed on March 11, 2002 in the Kent County Circuit Court in Michigan, generally alleging a breach of contract involving a frame assembly production line. No specific claim for damages has been made by Tower Automotive Products Co. The Company has responded to the Complaint. A trial date has been scheduled for the fourth quarter of 2004. Management believes the lawsuit is without merit and is vigorously contesting the case. Nevertheless, should there be an unfavorable result it is possible that cash flows or results of operations could be materially affected in that period or subsequent periods.

14. Pension and Other Postretirement Benefit Plans.

The following represents the net periodic pension and post-retirement benefit costs and related components in accordance with SFAS 132(R) as described in Note 15:

Components of Net Pension and Postretirement Periodic Benefit Cost are as follows (thousands of dollars):

	U.S. Defined Benefit Plans						Non-U.S. Defined Benefit Plans						Postretirement Benefit Plans
Three Months Ended March 31,	2004			2003			2004			2003			2004			2003
Service Cost	$	2,459		$	2,422		$	1,449		$	1,276		$	39		$	119
Interest Cost	2,242			1,824			2,361			1,952			745			994
Expected return on plan assets	(2,448		)	(2,390		)	(2,428		)	(2,367		)	—			—
Amortization and deferrals:
Transition obligation (asset)	(11		)	(64		)	(85		)	(74		)	—			36
Actuarial Loss	787			239			480			55			287			136
Prior service cost (benefit)	179			181			—			—			(299		)	—
Special Termination Benefits	—			71			—			—			—			—
	$	3,208		$	2,283		$	1,777		$	842		$	772		$	1,285

During the three months ended March 31, 2004, the Company contributed approximately $4.1 million to its pension and other postretirement benefit plans, comprising $0.5 million in benefits paid pertaining to unfunded domestic pension plans, $0.9 million in matching contributions to its 401(k) plan, $1.6 million in contributions to its foreign pension plans, and $1.1 million in benefits paid pertaining to its other postretirement benefits plans. The Company presently anticipates contributing an additional $11.7 million to these plans during the remainder of 2004, of which $1.5 million relates to benefit payments on its unfunded domestic pension plans, $2.2 million in matching contributions to its 401(k) plan, $4.7 million in contributions to its foreign pension plans and $3.3 million in benefit payments pertaining to its other postretirement benefit plans.

15. Recent Accounting Pronouncements

In January 2004, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) No. 106-1, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” (the “Act”). FSP 106-1 permits a sponsor of a postretirement health care plan that provides a prescription drug benefit to make a one-time election to defer accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003. Regardless of whether a sponsor elects that deferral, certain disclosures are required pending further consideration of the underlying accounting issues. FSP 106-1 is effective for interim or annual financial statements of fiscal years ending after December 7, 2003. The Company elected to defer accounting for the effects of the Act on the Company’s postretirement healthcare plans. Accordingly, any measures of the accumulated postretirement benefit obligation (“APBO”) or net periodic postretirement benefit cost in the Company’s consolidated financial statements and accompanying notes do not reflect the effects of the Act. Specific authoritative guidance on the accounting for the federal subsidy is pending and that guidance, when issued, could require the Company to change previously reported information.

In December 2003, the FASB issued SFAS No. 132 (revised 2003), “Employer’s Disclosures about Pensions and Other Postretirement Benefits.” The revised statement retains the disclosure requirements contained in SFAS No. 132, which it replaces, and requires additional disclosures about the assets, obligations, cash flows and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. Except as noted below, the provisions of this statement are effective for the Company’s financial statements for the year ended December 31, 2003. The interim period disclosure requirements of the statement became effective for the Company’s interim financial statements for the quarter ending March 31, 2004, and are included in Note 14. The statement’s disclosure requirements relating to estimated future benefit payments and relating to foreign plans are effective for the Company’s financial statements for the year ended December 31, 2004.

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

Overview

UNOVA, Inc. (the “Company”) is a global technology company providing customers with integrated solutions for improving their efficiency and productivity. The Company earns revenues from the sale of products, technologies, solutions and services to businesses.

The Company has two reportable segments, Automated Data Systems (“ADS”) and Industrial Automation Systems (“IAS”). The ADS segment comprises the Company’s wholly owned subsidiary Intermec Technologies Corporation. Intermec products and services include rugged mobile computing solutions, wireless, radio frequency identification (RFID) and automated data collection systems for field, on-premises, and site-based workers as well as wireless network systems for untethered enablement of an enterprise, and barcode label and printing solutions. ADS’s rugged and robust systems, solutions and services enable Intermec customers to more efficiently and effectively manage their supply chains and fulfillment activities. The IAS segment, comprising the Cincinnati Lamb division and the Landis Grinding Systems division, is a leading producer of value-added manufacturing products and services spanning the production cycle from process engineering and design to systems integration including comprehensive life cycle support. IAS serves the global aerospace, automotive, off-road vehicle and diesel engine industries as well as the industrial components, heavy equipment and general job shop markets.

The Company’s strategy revolves around continued investment in technology, intellectual property, research and development and innovation; expanding and strengthening the product portfolio; providing integrated solutions; partnering with global industry leaders; delivering value to customers and working to reduce costs and improve profitability, market share and strength. The technology and innovation for which the Company focuses its research and development efforts are related to developing products, processes and services that help improve productivity, efficiency, information and controls in a variety of manufacturing, distribution, retail, field service and logistics supply chain applications. All the Company’s businesses offer integrated solutions as well as single products to their customers. Future growth in these businesses is expected to primarily result from expansion of the Company’s existing operations and customer base. The Company’s financial strength and ability to adapt to the current market and economic conditions are dependent in part on the generation of cash flow, effective management of working capital, funding commitments and other obligations, as well as the growth of the business.

Results of Operations

The following discussion compares the Company’s results of operations for the three months ended March 31, 2004 and 2003. Results from continuing operations exclude the operating results of Lamb Body & Assembly, classified as discontinued operations. Results of operations in millions of dollars and as a percentage of revenues were as follows:

	Three Months Ended March 31,
	2004					2003

Sales and Service Revenues	$	297.7				$	264.0

Costs and Expenses:
Cost of sales and service	195.0			65.5	%	187.1			70.9	%
Selling, general and administrative	78.6			26.4	%	76.3			28.9	%
Depreciation and amortization	4.8			1.6	%	6.8			2.6	%
Special charges	0.4			0.1	%	1.0			0.4	%
Total Costs and Expenses	278.8			93.7	%	271.2			102.7	%

Operating Profit (Loss) from Continuing Operations	18.9			6.3	%	(7.2		)	(2.7	)%

Interest, net	(3.1		)	(1.0	)%	(3.9		)	(1.5	)%

Earnings (Loss) from Continuing Operations before Income Taxes	15.8			5.3	%	(11.1		)	(4.2	)%

Provision for Income Taxes	(5.3		)	(1.8	)%	(1.6		)	(0.6	)%

Earnings (Loss) from Continuing Operations, net of tax	10.5			3.5	%	(12.7		)	(4.8	)%

Loss from Discontinued Operations	—			(0.0	)%	(2.2		)	(0.8	)%

Net Earnings (Loss)	$	10.5		3.5	%	$	(14.9	)	(5.6	)%

Sales and Service Revenues

Total revenues for the three months ended March 31, 2004, were $297.7 million, an increase of $33.7 million, or 12.8%, compared with the corresponding prior year period. The Company received compensation related to a settlement regarding certain of its intellectual property (“IP settlements”) which resulted in a significant, positive impact on the Company’s revenues and results of operations for the three months ended March 31, 2004. During the three months ended March 31, 2004, products and service revenue increased approximately $14.0 million, or 5.3%, compared with the corresponding prior year period. The related products and service operating profit increased $5.4 million from the prior year comparable period.

Costs and Expenses

Cost of sales and service increased $7.9 million, or 4.2%, to $195.0 million for the three months ended March 31, 2004 from $187.1 million for the three months ended March 31, 2003. Cost of sales and service as a percentage of sales decreased to 65.5% for the three months ended March 31, 2004, compared with 70.9% for the comparable period in 2003. The improvement in gross margin was primarily due to the impact of the IP settlement in the first quarter of 2004, a 3.2 percentage point improvement in ADS gross margins and the change in revenue mix toward a higher proportion of ADS products and services compared with the same

quarter of 2003. ADS product and service revenue for the quarter ended March 31, 2004 represents 62.3% of total UNOVA product and service revenue compared with 61.7% in the corresponding prior year period.

Selling, General and Administrative

Selling, general and administrative (“SG&A”) expenses were $78.6 million and $76.3 million for the three months ended March 31, 2004 and 2003, respectively. The increase of $2.3 million from the prior year period is primarily due to a $4.3 million increase in ADS research and development expense and a $2.9 million increase in SG&A expense due to the growth in ADS products and service revenues. Other ADS SG&A expense as a percentage of sales during the first quarter of 2004, which includes a reduction of approximately $1.3 million in certain liability accounts established in prior periods, was consistent with the comparable prior year quarter. The increase in SG&A expense within ADS was partially offset by the efficiencies resulting from the IAS restructuring and a $3.5 million reduction in corporate and other unallocated expenses resulting from the absence of loan termination expense, a favorable litigation outcome and the cost benefits received from transitioning the corporate headquarters to Everett. As a result of these factors and the IP settlement in the first quarter of 2004, SG&A as a percentage of total sales and service revenues decreased to 26.4% for the first quarter of 2004 compared to 28.9% for the corresponding prior year period.

Depreciation and Amortization

The decrease in depreciation and amortization expense of $2.0 million to $4.8 million for the three months ended March 31, 2004 from $6.8 million from the corresponding prior year period is primarily due to lower property, plant and equipment balances resulting from sales of IAS property, plant and equipment and the classification of certain assets as held for sale. In addition, during the third quarter 2003 in conjunction with the IAS restructuring, property, plant and equipment with a net book value of $30.0 million was reclassified to assets held for sale and depreciation on the assets was terminated.

Special Charges

The following table and discussion describe the restructuring activities the Company initiated in 2002, which resulted in charges for severance, facility consolidation, impairment of long-lived assets including goodwill and loss on sale of business, classified as special charges on the consolidated statements of operations (millions of dollars):

	Three Months Ended March 31,
	2004		2003
IAS:
Facility consolidation	$	0.3	$	0.1
Impairment of property, plant and equipment	0.1		—
Severance	—		0.6
Total IAS	0.4		0.7

Corporate:
Facility consolidation	—		0.3
Total Corporate	—		0.3
Special charges	$	0.4	$	1.0

IAS Segment: In the fourth quarter of 2002, as a result of the continued economic downturn in the global automotive, aerospace and heavy equipment industries, the Company initiated a plan to consolidate its Cincinnati Machine, Lamb Machining Systems and Lamb Body & Assembly Systems divisions into the new operating entity, Cincinnati Lamb. The plan included the relocation of certain Cincinnati Machine operations, outsourcing of certain manufacturing activities, termination of employees, and the sale of certain plant and equipment. This restructuring, which was substantially completed by December 31, 2003, resulted in fourth quarter 2002 charges for severance of $14.7 million for the planned termination of 683 employees, early retirement of $4.2 million for 42 employees, and plant closure costs of $0.4 million. The related analysis of long-lived assets to be disposed of resulted in a fourth quarter 2002 non-cash impairment charge of $4.2 million to write down property, plant and equipment to the lower of its carrying value or estimated fair value less cost to sell (“net realizable value”). During the year ended December 31, 2003, in conjunction with the above described restructuring plan, IAS recorded severance charges of $2.1 million for an additional 165 employees and $2.1 million for other plant closure costs. The related analysis of long-lived assets to be disposed of resulted in the non-cash impairment charge of $4.0 million in the fourth quarter of 2003 to write down property, plant and equipment to the lower of its carrying value or estimated net realizable

value. The fair value of long-lived assets to be disposed of was estimated based on the current market value of similar assets.

In the first quarter 2004, IAS recorded additional charges of $0.3 million for additional facility consolidation costs and $0.1 million for impairment of property plant and equipment in conjunction with this plan. As of March 31, 2004, the IAS segment had terminated 787 employees and paid $16.6 million in severance, cumulatively, in conjunction with this plan. During the three months ended March 31, 2004, 103 employees were terminated and $3.3 million severance was paid in conjunction with this plan. The number of employees terminated does not include 228 employees of Lamb Body & Assembly that are no longer IAS employees as a result of the divestiture of this operation in September 2003.

Corporate: During the third quarter of 2002, the Company initiated a plan to relocate its corporate office to its existing Intermec Technologies Corporation facility in Everett, Washington. This action, which was substantially complete by June 30, 2003, resulted in the accrual of severance costs for 19 employees totaling $2.0 million and other facility closure costs of $3.2 million in the third quarter of 2002. In the fourth quarter of 2002, an additional accrual was recorded for facility closure costs of $1.2 million. Additional charges of $1.7 million for facility move and employee relocation expense were recorded in the year ended December 31, 2003. As of March 31, 2004, 22 employees had been terminated and $0.6 million in severance costs had been paid, cumulatively, of which 2 employee terminations and $0.2 million in severance payments occurred during the three months ended March 31, 2004.

Interest, Net

Net interest expense decreased $0.8 million to $3.1 million for the three months ended March 31, 2004 compared to the corresponding prior year period as a result of lower average debt balances and higher cash balances during the first quarter of 2004 compared with comparable prior year quarter. In January 2003, the Company fully paid down and terminated the remaining $16.2 million balance of a term loan.

Provision for Income Taxes

The provision for income taxes for the three months ended March 31, 2004, is primarily related to federal and foreign taxes. The effective income tax rate of 34% for the three months ended March 31, 2004 was lower than the normal effective tax rate of 38% to 40% due to the recognition of certain previously unrecognized state income tax loss carryforwards. The provision for income taxes for the three months ended March 31, 2003, is primarily related to foreign and state taxes, as the domestic tax benefit for the quarter is offset by a corresponding valuation allowance.

Loss from Discontinued Operations

During the third quarter 2003, in conjunction with the IAS consolidation plan, the Company sold substantially all the assets and existing backlog of its Lamb Body and Assembly Systems division for a price approximately equal to the book value of the divested assets. The transaction is accounted for and reported under Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” The results of operations for this division are classified as a discontinued operation.

Sales and service revenue from discontinued operations for the three months ended March 31, 2003 was $9.7 million. There was no revenue from discontinued operations for the three months ended March 31, 2004. The losses from discontinued operations and tax effect of losses from discontinued operations for the three months ended March 31, 2004 were not material. Losses from discontinued operations for the three months ended March 31, 2003 were $2.2 million and did not have a tax effect for the three months ended March 31, 2003, as the Company’s domestic income tax benefit for the quarter was offset by a corresponding valuation allowance.

Segment Information

The following table sets forth sales and service revenues, segment operating profit and operating profit (loss) from continuing operations for the three month periods ended March 31, 2004 and 2003 (millions of dollars):

	Three Months Ended March 31,
	2004			2003

Sales and Service Revenues
Automated Data Systems	$	193.0		$	162.9
Industrial Automation Systems	104.7			101.1
Total Sales and Service Revenues	$	297.7		$	264.0

Operating Profit (Loss) from Continuing Operations
Segment Operating Profit
Automated Data Systems	$	28.0		$	9.0
Industrial Automation Systems	(5.2		)	(8.2		)
Total Segment Operating Profit	22.8			0.8

Corporate and Other	(3.5		)	(7.0		)
Special Charges	(0.4		)	(1.0		)
Total Operating Profit (Loss) from Continuing Operations	$	18.9		$	(7.2	)

Automated Data Systems

ADS segment revenues increased $30.1 million, or 18%, to $193.0 for the three month period ended March 31, 2004, compared to $162.9 million for the corresponding prior year period. The three months ended March 31, 2004 include significant revenue and operating profit related to an IP settlement. The specific terms of the settlement are confidential. For the three months ended March 31, 2004, the IP settlement, net of legal fees, resulted in a favorable impact on segment operating profit of $15.8 million, compared to $0.8 million of IP related legal expense in the comparable prior year period.

ADS product and service revenue for the three months ended March 31, 2004 increased $10.5 million, or 6.4% compared to corresponding prior year period. For the three months ended March 31, 2004, systems and solutions revenues increased by 6.7%, printer/media increased by 7.9% and service increased by 5.3% over the corresponding prior year period. Geographically, product and service revenue for EMEA increased 22.0%, North America increased 2.8%, and the rest of the world decreased 11.1% compared to the corresponding prior year period. Favorable foreign exchange rates contributed approximately $8.8 million of the revenue increase from the prior year quarter. The quarter ended March 31, 2003 included a significant direct store delivery rollout in Latin America.

Operating profit from ADS product and service revenue increased $2.5 million, or 25%, to $12.3 million for the three months ended March 31, 2004 compared to $9.8 for the corresponding prior year period. The improvement in operating profit is primarily due to the $10.5 million increase in revenues and the 3.2 percentage point increase in the product and service gross margin partially offset by a $4.3 million increase in research and development expense for the three months ended March 31, 2004 compared to the corresponding prior year period.

An additional patent infringement lawsuit regarding the Company’s battery power-management patents is pending and may result in future revenue. Settlements have been reached to date with companies that in the aggregate represent approximately ninety percent of U.S. laptop sales. Management cannot predict the outcome, timing or amount of future settlements or judgments.

Industrial Automation Systems

IAS segment revenues increased $3.5 million, or 3.5%, for the three months ended March 31, 2004, compared with the corresponding prior year period. The increase in revenue reflects a slight improvement in the continuing global weakness in capital spending, primarily in the North American automotive and worldwide aerospace industries. IAS operating losses were $5.3 million and $8.2 million for the three month periods ended March 31, 2004 and 2003, respectively. The $2.9 million reduction in the IAS operating loss is primarily due to the effect of the IAS restructuring programs which were largely complete as of December 31, 2003.

Backlog for the IAS segment was $247.7 million at March 31, 2004, compared with $266.1 million at December 31, 2003, adjusted to exclude discontinued operations. Bookings continue to be negatively impacted by delayed or canceled capital equipment investment by the U.S. automotive and worldwide aerospace industries and by weakness in the domestic machine tool market. The Company believes that increased capital equipment investment by its automotive customers will be necessary to facilitate introduction of new vehicles and engines. However, the timing of renewed capital equipment investments is unclear. The Company does not expect significant improvement in the near term.

The three month periods ending March 31, 2004 and 2003 include special charges resulting from the IAS segment’s cost reduction actions including consolidation of plant facilities, sale or closure of certain underperforming operations and the consolidation of the Cincinnati Machine and the Lamb Machining Systems operations. See the discussion above under the heading “Special Charges.”

Corporate and Other

Operating expenses from Corporate and Other were $3.5 million and $7.0 million for the three months ended March 31, 2004 and 2003, respectively. The decrease in expense of $3.5 million was primarily due to cost reductions from the relocation of corporate headquarters to Everett, Washington in 2003, a favorable ruling in an IP legal dispute during the three months ended March 31, 2004 and from a reduction in currency losses for the three months ended March 31, 2004, compared to the comparable prior year period.

Expectations

During its quarterly conference call on April 30, 2004, the Company provided projections of segment revenues and operating profit for the second quarter of 2004, as discussed below.

ADS products and service revenues for the second quarter of 2004 are expected to be in the range of $184 to $189 million, reflecting a projected increase in the range of 7% to 10% over the corresponding prior year quarter. The related operating profit is expected to be in the range of $11.6 to $13.6 million.

The IAS segment is expected to return to operating profitability for the second quarter and full year 2004, with a projected operating profit of approximately $1 million in the second quarter.

Liquidity and Capital Resources

Cash and cash equivalents decreased to $227.5 million at March 31, 2004, from $238.4 million at December 31, 2003. Long-term obligations decreased from $208.5 million at December 31, 2003 to $108.5 million at March 31, 2004 due to the reclassification of $100 million to current portion of long-term obligations which mature in March 2005. During the three months ended March 31, 2004, net cash, defined as cash and cash equivalents less total debt, decreased $10.9 million to $19.0 million, compared with $29.9 million at December 31, 2003. The decrease in net cash primarily reflects a decrease in cash and cash equivalents due to cash used in normal operations, net of proceeds from an IP settlement.

Cash used in operating activities of $9.5 million was due primarily to $7 million in bond interest paid and $2.5 million used by operations. Cash provided by the ADS segment was more than offset by working capital usage in the IAS segment supporting the early build cycle in certain long-term contracts. Investing activities used $3.1 million primarily due to capital expenditures. Financing activities provided $1.7 million from stock option exercises.

The Company had borrowing capacity at March 31, 2004, of $11.6 million under the Revolving Facility and £11.9 million ($21.7 million) under the UK Facility, net of outstanding letters of credit and limitations on Minimum Availability. The Company had no borrowings under the Revolving Facility or the UK Facility at any time during the three months ended March 31, 2004 and as of March 31, 2004, no borrowings were outstanding under either facility. As of March 31, 2004, the Company was in compliance with the financial covenants of each of these agreements. As of March 31, 2004 the Revolving Facility was amended to provide greater flexibility for the Company to, among other things, change the organizational structure of Intermec Technologies Corporation, acquire or create additional subsidiaries in connection with stock or asset purchases, recapitalize certain subsidiaries, prepay or repurchase certain debt and increase certain letters of credit in foreign exchange facilities.

The Company additionally has outstanding $8.5 million of 3.21% industrial revenue bonds, maturing in July 2005.

Management believes that cash and cash equivalents on hand combined with projected cash flow from operations will provide adequate funding to meet its expected working capital, capital expenditure, and restructuring cost requirements for the next twelve months. Projected cash flows from operations are largely based on the Company’s revenue estimates, cost estimates, and the related timing of cash receipts and cash disbursements. If actual performance differs from estimated performance, cash flow from operations could be positively or negatively impacted. Additional sources of liquidity for the Company include the Revolving Facility and the UK Facility.

Contractual Obligations

The Company’s contractual commitments as of March 31, 2004, have not changed materially from those disclosed in Item 7 of the Company’s annual report on Form 10-K for the year ended December 31, 2003.

Critical Accounting Policies

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” discusses the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual amounts could differ from those estimates under different assumptions or conditions. Management’s beliefs regarding significant accounting policies have not changed significantly from those disclosed in Item 7 of the Company’s annual report on Form 10-K for the year ended December 31, 2003.

New Accounting Pronouncements

quarter ending March 31, 2004, and are included in Note 14 to the Company’s consolidated financial statements. The statement’s disclosure requirements relating to estimated future benefit payments and relating to foreign plans are effective for the Company’s financial statements for the year ended December 31, 2004.

Forward-Looking Statements and Risk Factors

All statements in this report that are not historical facts or that include such words as “expect,” “project,” “estimate,” “believe,” “could,” “may” or “plan” or other similar words are forward-looking statements that the Company deems to be covered by and to qualify for the safe harbor protection of the Private Securities Litigation Reform Act of 1995 (alternatively: Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Forward-looking statements include, but are not limited to, statements about the following:

• The anticipated demand for the Company’s products and services;

• Anticipated improvements of existing products and development of new products in the Company’s ADS segment;

• The Company’s view of the short- and long-term outlook for and trends in the markets for the Company’s products and services;

• The Company’s ability to

• meet its working capital and capital expenditure requirements;

• achieve its goals with respect to revenues and cost savings in each of its segments;

• successfully manage and complete large-scale industrial systems contracts for customers;

• successfully obtain critical components for its products;

• complete large-scale mobile computing installations;

Forward-looking statements are not guarantees of future performance. Several factors govern whether the Company will or can achieve any forward-looking statement made in this report. Any one of these factors could cause the Company’s actual results to differ materially from those discussed in a forward-looking statement. The Company outlines these risk factors in reports that it files with the SEC, in press releases and on its website, www.unova.com. Such risk factors include, but are not limited to:

• Continued weakness in the automotive and aerospace markets could lead to reduced demand for the Company’s products.

• Technological changes and consequent market shifts could adversely impact demand for the Company’s products and systems.

• Some of the Company’s competitors have greater financial and other resources than the Company and, as a result, may be able to adapt more quickly to market trends or price declines.

• If the Company is unable to obtain key components of its products from its current suppliers, the cost of manufacturing the Company’s products could increase, the Company might have to re-engineer some products, and delivery times of some of the Company’s products could be delayed.

• The Company’s inability to successfully manage the reorganization of its IAS segment and reduce its operating costs could have a material adverse effect on its financial condition.

• Political instability outside of the U.S. and hostility against U.S. companies in foreign jurisdictions could adversely affect the Company’s international operations.

• Changes in U.S. and foreign government regulations regarding radio emissions could adversely affect the Company’s ability to sell its ADS products or complete development of anticipated new products.

Readers should consider the foregoing risk factors in evaluating the Company’s ability to achieve expected results or objectives set forth in any forward-looking statement. In addition, readers should not place undue reliance on forward-looking statements in making investment decisions regarding the Company. The Company disclaims any obligation to update publicly any forward-looking statement, whether as a result of new information, future events or otherwise.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to interest rate risk primarily from its short-term and long-term borrowings and to foreign exchange rate risk with respect to its foreign operations and from foreign currency transactions.

Due to its global operations, the Company’s cash flows and earnings are exposed to foreign exchange rate fluctuations. When appropriate, the Company may attempt to limit its exposure to changing foreign exchange rates by entering into short-term foreign currency exchange contracts. As of March 31, 2004, the Company held short-term contracts for the purpose of hedging foreign currency cash flows with an aggregate notional amount of $116.4 million.

Except as noted in the preceding paragraphs, as of March 31, 2004, there have been no material changes in information provided in Item 7A of the Company’s annual report on Form 10-K for the year ended December 31, 2003, which contains a complete discussion of the Company’s material exposures to interest rate and foreign exchange rate risks.

ITEM 4. CONTROLS AND PROCEDURES

The Company’s management, including the Chief Executive Officer and the Chief Financial Officer, supervised and participated in an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded as of the Evaluation Date that the Company’s disclosure controls and procedures were effective such that the information required to be disclosed in the Company’s Securities and Exchange Commission (“SEC”) reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to Company management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

4.1		Third Amendment to the Credit Agreement, dated as of March 31, 2004.

4.2		Credit Agreement among Barclays Bank PLC and UNOVA U.K. Limited, Cincinnati Machine U.K. Limited and Intermec Technologies U.K. Limited, as Borrowers, dated as of February 9, 2004.

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated as of May 10, 2004.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated as of May 10, 2004.

32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated as of May 10, 2004.

32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated as of May 10, 2004.

(b) Reports on Form 8-K:

On January 13, 2004, the Company filed a Form 8-K in regard to its press release announcing that the Board of Directors elected Kenneth L. Cohen Vice President, Treasurer, and an Executive Officer, effective January 1, 2004.

On February 13, 2004, the Company filed a Form 8-K in regard to its press release announcing its financial results for the year ended December 31, 2003.

SIGNATURE

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

	UNOVA, INC.
	(Registrant)


	By	/s/ Michael E. Keane

	Michael E. Keane
	Senior Vice President and
	Chief Financial Officer

	May 10, 2004

EX-4.1 2 a04-5263_1ex4d1.htm EX-4.1

Exhibit 4.1

THIRD AMENDMENT TO CREDIT AGREEMENT

This Third Amendment to Credit Agreement (this “Amendment”), dated as of March 31, 2004, is made by and among various financial institutions parties hereto (collectively, the “Lenders”), Bank of America, N.A., as administrative and collateral agent for the Lenders (in its capacity as administrative and collateral agent, the “Agent”), and UNOVA, Inc., a Delaware corporation (the “Parent”), UNOVA Industrial Automation Systems, Inc., a Delaware corporation, Intermec Technologies Corporation, a Washington corporation, R & B Machine Tool Company, a Michigan corporation, UNOVA JSM, Inc., formerly known as J.S. McNamara Company, a Michigan corporation, Intermec IP Corp., a Delaware corporation, and UNOVA IP Corp., a Delaware corporation (the Parent and each such corporation is individually hereinafter referred to as a “Borrower” and the Parent together with all such corporations are hereinafter collectively referred to as the “Borrowers”).

R E C I T A L S:

A. WHEREAS, the Borrowers and M M & E, Inc., a Nevada corporation (collectively, the “Original Borrowers”), the Lenders, the Agent and Heller Financial, Inc., as syndication agent (“Syndication Agent”), for the Lenders executed that certain Credit Agreement dated as of July 12, 2001 (as amended from time to time, the “Credit Agreement”) pursuant to which the Lenders have agreed to make available to the Borrowers a revolving line of credit for loans and letters of credit (collectively, the “Loans”);

B. WHEREAS, the Original Borrowers, the Lenders, the Agent and Syndication Agent executed a First Amendment to Credit Agreement dated as of March 1, 2002 (the “First Amendment”);

C. WHEREAS, the Borrowers, the Lenders and the Agent executed a Second Amendment to Credit Agreement dated as of April 15, 2003 (the “Second Amendment”; the Credit Agreement, as amended by the First Amendment and the Second Amendment, is hereinafter referred to as the “Credit Agreement”); and

D. WHEREAS, the Borrowers have requested that the Lenders and the Agent agree to amend the Credit Agreement again in certain respects and the Lenders and the Agent have agreed to such request in accordance with the terms hereof.

NOW, THEREFORE, in consideration of the premises, and in order to induce the Lenders and the Agent to amend the Credit Agreement pursuant to the terms hereof, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1. Recitals. The foregoing Recitals are accurate and are incorporated herein and made a part hereof.

2. Definitions. Unless otherwise defined herein, all capitalized terms and phrases used in this Amendment shall have the respective meanings ascribed to them in the Credit Agreement.

3. Amendment to Section 7.14. Section 7.14 of the Credit Agreement entitled “Prepayment” is hereby deleted in its entirety and the following is hereby substituted thereof:

“Prepayment. Neither the Parent nor any of its domestic Subsidiaries shall voluntarily prepay any Debt, except the Obligations in accordance with the terms of this Agreement, unless (i) no Default or Event of Default then exists or would exist after giving effect to any such payment, (ii) after giving effect to such prepayment, Availability is equal to or greater than $60,000,000, (iii) such prepayment is either (a) a voluntary, permanent prepayment of Debt other than the Debt now or hereafter described in the Indenture or (b) a voluntary prepayment of up to $60,000,000 in the aggregate of the Debt now or hereafter evidenced by and described in the Indenture, and (iv) Agent receives prior to such prepayment (A) a certification from Borrowers, including without limitation a current Borrowing Base Certificate and a calculation of Availability, confirming that Borrowers are in compliance with the provisions of this Section 7.14 and (B) notice from Borrowers notifying Agent that the contemplated prepayment is either (x) a voluntary, permanent prepayment of Debt other than the Debt now or hereafter evidenced by and described in the Indenture or (y) a voluntary, permanent prepayment in the aggregate of not more than $60,000,000 of the Debt now or hereafter evidenced by and described in the Indenture. Notwithstanding anything to the contrary in the first sentence of this Section 7.14, the proceeds (net of closing costs, fees and expenses and an amount equal to the tax liabilities arising as a result of any gain associated with such sale) of the sale of any Collateral that is subject to a Lien, which is not prohibited by the terms hereof and is prior to the Agent’s Lien, shall be applied first to repaying the Debt evidenced by such Lien.”

4. New Borrower. Notwithstanding anything to the contrary in the Credit Agreement and provided no Default or Event of Default then exists, Intermec Technologies Corporation is hereby authorized to transfer its manufacturing and research and development assets located in the State of Washington with a net tangible book value of approximately $50,000,000 to a new Subsidiary known as Intermec Technologies Manufacturing, LLC, a limited liability company organized under the laws of the State of Washington, which is either wholly owned by a Borrower or 99% owned by one of the Borrowers and 1% owned by a Subsidiary that is not a Borrower. Concurrently with such transfer, Intermec Technologies Manufacturing, LLC shall execute a Joinder Agreement in the general form of Exhibit A, attached hereto and made a part hereof, pursuant to which Intermec Technologies Manufacturing, LLC shall assume, on a joint and several basis with all other Borrowers, all of the obligations of the Borrowers under the Credit Agreement and the other Loan Documents. In addition, Intermec Technologies Manufacturing, LLC and its parent(s) shall execute and deliver to Agent concurrently therewith such other Loan Documents as Agent shall deem necessary and appropriate in Agent’s reasonable discretion to evidence and secure a pledge by its parent(s) of one hundred percent of its ownership interest in Intermec Technologies Manufacturing, LLC and a grant by Intermec Technologies Manufacturing, LLC of a security interest in all of its assets to Agent for the benefit of Lenders. Upon Intermec Technologies Manufacturing, LLC’s execution of the Joinder Agreement and Agent’s acceptance thereof, Schedule 6.5 of the Credit Agreement shall be deemed to be updated to show Intermec Technologies Manufacturing, LLC as a Borrower.

5. Permitted Acquisition. Notwithstanding anything to the contrary in the Credit Agreement, any Borrower is hereby authorized to acquire all of the ownership interests in Autoscan Technology Pte Ltd., a Singapore company, for an acquisition price of not more than

$10,000,000 U.S. in the aggregate, provided no Default or Event of Default then exists. The documentation relating to this acquisition shall be acceptable in all respects to Agent in Agent’s reasonable discretion. Concurrently with the closing of the acquisition, such Borrower shall pledge to Agent for the benefit of Lenders, on terms and conditions and subject to documentation reasonably acceptable to Agent, sixty five percent of its ownership interest in Autoscan Technology Pte Ltd. In addition and notwithstanding anything to the contrary in the Credit Agreement, the Agent and the Lenders hereby authorize any Borrower to acquire or create additional foreign or domestic Subsidiaries in connection with stock or asset purchases provided: (i) no Default or Event of Default exists prior to and after the closing of any such acquisition; (ii) the consideration paid for all such acquisitions does not exceed $15,000,000 in the aggregate; (iii) domestic Subsidiaries so acquired will be added as Borrowers to the Credit Agreement pursuant to a Joinder Agreement in the general form of Exhibit A attached hereto and otherwise pursuant to documentation in form and content reasonably acceptable to Agent; (iv) any domestic Subsidiary so acquired shall grant to Agent for the benefit of Lenders a security interest in all of its assets and the applicable Borrower shall pledge all of its ownership interests in such domestic Subsidiary to Agent for the benefit of Lenders pursuant to documentation reasonably acceptable in all respects to Agent; and (v) the applicable Borrower shall pledge sixty five percent of its ownership interest in any foreign Subsidiary so acquired to Agent for the benefit of Lenders on terms and conditions and pursuant to documentation reasonably acceptable to Agent. Borrowers are hereby authorized and required to update Schedule 6.5 of the Credit Agreement from time to time to reflect the existence of Subsidiaries created or acquired pursuant to the provisions of this paragraph or other applicable provisions of the Credit Agreement.

6. Permitted Recapitalization of Honsberg Lamb Sonderwerkzeugmachinen GmbH. At the request of Borrowers and notwithstanding anything to the contrary in the Credit Agreement, Agent and the Lenders hereby agree that Parent or one of the other Borrowers may contribute up to $20,000,000 U.S. in cash as additional equity into Honsberg Lamb Sonderwerkzeugmachinen GmbH (“Honsberg”). The Borrowers agree that Honsberg will use, and Borrowers will cause Honsberg to use, the full amount of the additional equity to pay down existing intercompany loans owed to Honsberg from foreign Affiliates of Borrowers. Furthermore, Borrowers covenant that Borrowers will cause the foreign Affiliates to use the proceeds from the repayment of the referenced loans to pay down intercompany payables owed by such foreign Affiliates to one or more of the Borrowers in the full amount of the equity contributed to Honsberg. Borrowers covenant and agree that the series of transactions described in this Paragraph 6 will be completed no later than 30 days from the date that any additional equity is first infused into Honsberg. Concurrently with the completion of each stage of the referenced series of transactions, Borrowers shall provide Agent for the benefit of Lenders with (i) written evidence reasonably acceptable to Agent that such stage has been completed as permitted hereunder and (ii) following completion of the last stage of the series of transactions, written evidence reasonably acceptable to Agent that the transactions were completed within the time period set forth above and that accounts payable that the foreign Affiliates owed to Borrowers have been permanently reduced by the full amount of the equity infused into Honsberg.

7. Amendment to Sections 6.5 and 7.28 and Intermec International Inc. The words “and Intermec International Inc., a Washington corporation” are hereby added after the words “Except for Factory Power” in the second sentence of Section 6.5 of the Credit Agreement; the word “tangible” is hereby inserted in Section 7.28 of the Credit Agreement after the word “net” and

before the word “tangible” to correct a scrivener’s error. At the request of Borrowers and notwithstanding anything to the contrary in the Credit Agreement, Intermec International Inc., a Washington corporation and a wholly-owned subsidiary of Parent, shall not be required to become an additional Borrower under the Credit Agreement unless and until its assets at any time measured at net tangible book value exceed $10,000,000. The foregoing agreement on the part of the Lenders shall not be deemed to limit or restrict the provisions of Sections 6.5 or 7.28, as modified hereinabove, of the Credit Agreement with respect to any other Subsidiary (other than Factory Power).

8. Permitted Stock Contribution and Related Transactions. At Borrower’s request and notwithstanding anything to the contrary in the Credit Agreement, the Agent and the Lenders hereby agree that UNOVA UK Limited may contribute the stock of Cincinnati Machine UK Holdings Limited, its wholly-owned subsidiary, to Cincinnati Machine Holdings UK Limited, provided Cincinnati Machine UK Holdings Limited is then liquidated or merged into Cincinnati Machine Holdings UK Limited. In addition, Intermec International Inc. is hereby authorized to permit or consummate a transaction in which the stock or assets of Intermec Holdings B.V., Intermec Printer AB or Intermec Technologies AB are merged up and into Intermec International Inc. or another Subsidiary of Intermec International Inc., at the discretion of Intermec International Inc., through liquidation or merger and on terms and subject to documentation reasonably acceptable to Agent.

9. Amendment to Section 7.18. Section 7.18 of the Credit Agreement entitled “Liens” is hereby deleted in its entirety and the following is hereby substituted thereof:

“Liens. Neither the Parent nor any of the other Borrowers shall create, incur, assume, or permit to exist any Lien on any property now owned or hereafter acquired by any of them, except (a) Permitted Liens, provided that the amount of cash and cash equivalents subject to Liens to third parties on the Closing Date relating to Liens identified in clause (i) of the definition of “Permitted Liens” shall not exceed in the aggregate $10,000,000 and the amount thereof after the Closing Date shall not at any time exceed $20,000,000 in the aggregate and the obligations secured by such Liens shall be deemed either to be permitted Debt of the Borrowers listed on Schedule 6.9 hereof or permitted Guaranties under Section 7.13 hereof, (b) Liens, if any, in effect as of the Closing Date and described in Schedule 6.9 securing Debt described in Schedule 6.9 and any permitted refinancings, renewals or extensions of such Debt, (c) Liens securing Capital Leases and purchase money Debt permitted in Section 7.13, (d) other Liens securing liabilities in an aggregate amount not to exceed $5,000,000 at any time, and (e) Liens on property acquired by Borrowers that is subject to such Liens at the time of acquisition, provided the Debt secured by such Liens constitutes Permitted Debt or such Liens are otherwise permitted under Section 7.18(c) or 7.18(d).”

10. Subsidiary Name Change. Agent and the Lenders hereby acknowledge that Borrowers have advised them that Intermec Technologies S.A. has changed its name to Intermec Technologies S.A.S. and Intermec Scanner Technologies Center S.A. has changed its name to Intermec Scanner Technologies Center S.A.S. To the extent that Agent is holding a pledge or is entitled to receive a pledge of any portion of the stock or other ownership interest of either or both of these two entities, at Agent’s request and at Borrowers’ expense, Borrowers will provide Agent with appropriate documents or amendments to the pledges reflecting these name changes.

11. Acknowledgment of the Borrowers. Each Borrower hereby acknowledges and agrees that: (a) such Borrower has no defense, offset or counterclaim with respect to the payment of any sum owed to the Lenders or the Agent under the Loan Documents, or with respect to the performance or observance of any warranty or covenant contained in the Credit Agreement or any of the other Loan Documents; and (b) the Lenders and the Agent have performed all obligations and duties owed to such Borrower through the date hereof.

12. Representations and Warranties of the Borrowers. To induce the Lenders and the Agent to amend the Credit Agreement, each Borrower represents and warrants to the Lenders and the Agent that:

(a) Compliance with Credit Agreement. On the date hereof, such Borrower is in compliance with all of the terms and provisions set forth in the Credit Agreement (as modified by this Amendment) and no Default or Event of Default has occurred and is continuing;

(b) Representations and Warranties. On the date hereof after giving effect to this Amendment, the representations and warranties set forth in Article 6 of the Credit Agreement are true and correct with the same effect as though such representations and warranties had been made on the date hereof, except to the extent that such representations and warranties expressly relate to an earlier date;

(c) Corporate Authority. Such Borrower has full power and authority to consummate this Amendment. No consent or approval of stockholders or of any public authority or regulatory body which has not been obtained is required as a condition to the validity or enforceability of this Amendment;

(d) Amendment as Binding Agreement. This Amendment and the Credit Agreement (as modified by this Amendment) constitute the valid and legally binding obligations of such Borrower fully enforceable against each Borrower in accordance with their respective terms (subject to the effects of bankruptcy, insolvency, reorganization, moratoriums or other similar laws affecting the rights and remedies of creditors generally); and

(e) No Conflicting Agreements. The execution and performance by such Borrower of this Amendment, and the borrowing by the Borrowers under the Credit Agreement (as modified by this Amendment), will not (i) to the best knowledge of such Borrower, violate any provision of law, any order of any court or other agency of government, or the Articles of Incorporation or Bylaws of such Borrower; or (ii) violate any material indenture, contract, agreement or other instrument to which such Borrower is a party, or by which any of its property is bound, or be in conflict with, result in a breach of or constitute (with due notice and or lapse of time) a default under, any such indenture, contract, agreement or other instrument; or (iii) result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of such Borrower, other than in favor of the Lenders and the Agent.

(f) The Term Loans have been repaid in full, all obligations owed by the Borrowers to the Term Debt Lender have been repaid in full other than contingent obligations which survive such repayment and the terms of the documents governing the Term Loans and as the date hereof all Term Debt Lender’s Liens have been fully and finally released and extinguished other than

terminations, filings and recordings that have been submitted to appropriate authorities and are currently still being processed in connection therewith.

13. Effectiveness of this Amendment. The amendments set forth above shall become effective as of the date of this Amendment only upon the satisfaction of the following conditions precedent:

Receipt of Documents. The Agent shall have received all of the following, each (in the case of documents) duly executed and dated the date of execution hereof, in form and substance satisfactory to the Agent:

(i) this Amendment duly executed by the Agent, the Borrowers and Required Lenders;

(ii) an opinion of the Borrowers’ general counsel or outside counsel, or a combination of both, in form and substance acceptable to the Agent;

(iii) true, complete and accurate copies, duly certified by an officer of the appropriate Borrower, of all documents evidencing any necessary corporate action, resolutions, consents and governmental approvals, if any, required for the execution, delivery and performance of this Amendment and any related document, instrument or agreement executed or delivered in connection therewith by such Borrower; and

(iv) such other instruments, documents, waivers and consents as the Lenders may reasonably request prior to the execution by the Lenders of this Amendment.

14. Effect on Credit Agreement. Except as specifically amended hereby, the terms and provisions of the Credit Agreement and the other Loan Documents are in all other respects ratified and confirmed and remain in full force and effect. No reference to this Amendment need be made in any notice, writing or other communication relating to the Credit Agreement and the other Loan Documents, any such reference to the Credit Agreement and the other Loan Documents to be deemed a reference thereto as respectively amended by this Amendment. All references to the Credit Agreement and the other Loan Documents in any document, instrument or agreement executed in connection with the Credit Agreement and the other Loan Documents shall be deemed to refer to the Credit Agreement and the other Loan Documents as respectively amended hereby.

15. Fees and Expenses. The Borrowers hereby agree to pay all reasonable out-of-pocket expenses incurred by the Agent in connection with the preparation, negotiation and consummation of this Amendment, and all other documents related hereto, including, without limitation, the reasonable fees and expenses of the Lenders’ counsel.

16. Successors. This Amendment shall be binding upon and inure to the benefit of the Borrowers, the Lenders, the Agent and their respective successors and assigns.

17. Governing Law. This Amendment shall be construed in accordance with and governed by the laws of the State of New York, without regard to the conflict of laws principles thereof.

18. Counterparts. This Amendment may be executed in the original or by telecopy in any number of counterparts, each of which shall be deemed original and all of which taken together shall constitute one and the same Amendment.

(SIGNATURE PAGES FOLLOW)

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written.

BORROWERS:

UNOVA, INC., a Delaware corporation

By:	/s/ Kenneth L. Cohen
Name:		Kenneth L. Cohen
Title:		Vice President and Treasurer

UNOVA INDUSTRIAL AUTOMATION SYSTEMS, INC., a Delaware corporation

By:	/s/ Kenneth L. Cohen
Name:		Kenneth L. Cohen
Title:		Vice President and Treasurer

INTERMEC TECHNOLOGIES CORPORATION, a Washington corporation

By:	/s/ Kenneth L. Cohen
Name:		Kenneth L. Cohen
Title:		Vice President and Treasurer

R & B MACHINE TOOL COMPANY, a Michigan corporation

By:	/s/ Kenneth L. Cohen
Name:		Kenneth L. Cohen
Title:		Vice President and Treasurer

UNOVA JSM, Inc., formerly known as J.S. MCNAMARA COMPANY, a Michigan corporation

By:	/s/ Kenneth L. Cohen
Name:		Kenneth L. Cohen
Title:		Vice President and Treasurer

INTERMEC IP CORP., a Delaware corporation

By:	/s/ Kenneth L. Cohen
Name:		Kenneth L. Cohen
Title:		Vice President and Treasurer

UNOVA IP CORP., a Delaware corporation

By:	/s/ Kenneth L. Cohen
Name:		Kenneth L. Cohen
Title:		Vice President and Treasurer

AGENT:

BANK OF AMERICA, N.A.

By:	/s/ Scott S. Ward
Name:			Scott S. Ward
Title:		V.P

LENDERS:

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

By:		/s/ Scott S. Ward
Name:				Scott S. Ward
	Title:		V.P

HELLER FINANCIAL, INC.


By:	/s/ Howard Bailey
Name:			Howard Bailey
Title:		Duly Authorized Signatory

THE CIT GROUP/BUSINESS CREDIT, INC.

By:	/s/ Donald Caskey
Name:			Donald Caskey
Title:		V.P.

CONGRESS FINANCIAL CORPORATION (WESTERN)

By:	/s/ Paul Truax
Name:			Paul Truax
Title:		Vice President

GMAC COMMERCIAL FINANCE LLC Successor to GMAC Business Credit, LLC

By:	/s/ Michael O’Connor
Name:			Michael O’Connor
Title:		Vice President

EXHIBIT A

JOINDER AGREEMENT

This Joinder Agreement (the “Joinder”) is made as of the day of , 200 by and between the undersigned , a (“Subsidiary”) and a subsidiary of , a corporation, and Bank of America, N.A., a national banking association, as agent (“Agent”) for itself and for various other lenders (collectively, the “Lenders”) to the Credit Agreement (as hereinafter defined). All capitalized terms used and not otherwise defined herein shall have the respective meanings ascribed thereto in the Credit Agreement.

WHEREAS, UNOVA, Inc., a Delaware corporation (the “Parent”), UNOVA Industrial Automation Systems, Inc., a Delaware corporation, Intermec Technologies Corporation, a Washington corporation, R & B Machine Tool Company, a Michigan corporation, J.S. McNamara Company, a Michigan corporation, Intermec IP Corp., a Delaware corporation, and UNOVA IP Corp., a Delaware corporation (the Parent and each such corporation is individually hereinafter referred to as a “Borrower” and the Parent together with such corporations and with any other entities that have assumed all of the liabilities and obligations of such corporations under the Credit Agreement are hereinafter collectively referred to as, the “Borrowers”) and M M & E, Inc., a Nevada corporation, the Lenders, Agent and Heller Financial, Inc., as syndication agent, for the Lenders executed that certain Credit Agreement dated as of July 12, 2001 (as amended from time to time, the “Credit Agreement”) pursuant to which the Lenders have agreed to make available to the Borrowers a revolving line of credit for loans and letters of credit (collectively, the “Loans”);

WHEREAS, Subsidiary has been created or acquired by the Parent or one of the other Borrowers and wishes to request and receive Loans under the Credit Agreement as set forth therein and, as a result of the foregoing and pursuant to the definition of “Borrowers” in the Credit Agreement, Subsidiary is either required or has requested to become a Borrower and a joint and several co-obligor with the Borrowers under the Credit Agreement and the other Loan Documents; and

WHEREAS, Subsidiary has agreed to execute this Joinder and to become a Borrower under the Credit Agreement.

NOW, THEREFORE, for and in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:

1. Joinder in Credit Agreement. Subsidiary hereby assumes, and agrees to perform, for the benefit of Lenders, all of the Obligations of a Borrower under the Credit Agreement and the other Loan Documents, as direct and primary obligations of Subsidiary (including any such Obligations that may have accrued prior to the date hereof or that are outstanding as of the date hereof), including, without limitation, its Obligations with respect to the Loans, and Subsidiary agrees that it shall comply with and be fully bound by the terms of the Credit Agreement and the other Loan Documents as if it had been a signatory thereto as of the original date thereof;

provided that the representations and warranties made by Subsidiary thereunder shall be deemed true and correct only as of and after the date of this Joinder. As a Borrower under the Credit Agreement, Subsidiary shall execute all Notes, if any, required by Agent for the benefit of Lenders for any Loans made, assumed or to be made, from time to time, by Lenders to such Subsidiary, and Subsidiary agrees to pay all Obligations owing by it to Lenders, including all payments of principal, interest and other charges due from time to time with respect to the Loans made, assumed or available to such Subsidiary. Upon acceptance of this Joinder by Agent on behalf of the Lenders, Subsidiary shall be entitled to all of the benefits of a Borrower under the Credit Agreement and the other Loan Documents.

2. Unconditional Joinder. Subsidiary acknowledges that such Subsidiary’s Obligations as a party to this Joinder are unconditional and are not subject to the execution of one or more Joinders by other subsidiaries of Parent or the other Borrower’s or any other parties.

3. Grant of a Security Interest. Subsidiary shall concurrently herewith or, as soon hereafter as Agent shall agree, grant a security interest to Agent, for the benefit of Agent and the Lenders, in all of its property and assets, pursuant to such documentation as Agent and its counsel shall reasonably deem necessary or appropriate to perfect in favor of Agent, for the benefit of Agent and Lenders, a first priority security interest in all such property or assets, except for such Permitted Liens as Agent shall approve in its reasonable discretion.

4. Reliance. Agent and Lenders shall be entitled to rely on this Joinder as evidence that Subsidiary has joined as a Borrower under the Credit Agreement and the other Loan Documents and is fully obligated thereunder as a Borrower.

5. Incorporation by Reference. All terms and conditions of the Credit Agreement, the other Loan Documents, including, but not limited to, all representations, warranties, covenants, indemnities, guaranties and other obligations of Borrowers, waivers and choice of law provisions thereunder are hereby incorporated by reference in this Joinder as if set forth herein in full.

6. Schedule 6.5 Upon the execution of the Joinder, Schedule 6.5 of the Credit Agreement shall automatically be deemed updated to include Subsidiary.

7. Counterparts. This Joinder may be executed in the original or by telecopy in any number of counterparts, each of which shall be deemed original and all of which taken together shall constitute one and the same Joinder.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Joinder Agreement as of the date set forth above.

	SUBSIDIARY:

	, a

	By:
	Name:
	Title:


	AGENT:

	BANK OF AMERICA, N.A., as Agent as aforesaid

	By:
	Name:
	Title:

EX-4.2 3 a04-5263_1ex4d2.htm EX-4.2

EXHIBIT 4.2

9^th February 2004

The Directors

UNOVA U.K. Limited

Cincinnati Machine U.K. Limited

Intermec Technologies U.K. Limited

UNOVA, Inc.

2nd Floor Sovereign House

Vastern Road

Reading

RG1 8BT

Dear Sirs

Barclays Bank PLC (the “Bank”) is pleased to offer to provide in aggregate short term facilities of up to £15,000,000 (fifteen million pounds sterling) to UNOVA U.K. Limited, Cincinnati Machine U.K. Limited and Intermec Technologies U.K. Limited (together the “Borrowers” and each a “Borrower”) subject to the terms and conditions set out below.

Capitalised words used below shall have the meanings given to them in clause 17 and elsewhere in this Facility Letter.

The Bank is also pleased to offer to provide the Borrowers with a spot and forward exchange transactions facility of up to £1,000,000 (the “SFET”). Utilisation under the SFET shall be in accordance with Schedule D attached hereto.

In addition, the Bank is prepared to provide the Borrowers with the following facilities (documented separately):

(a) Company Barclaycard facility of up to £268,500;

(b) BACS facility of up to £5,380,000; and

The Schedules attached hereto form part of the terms and conditions of this Facility Letter.

Subject to satisfaction of the conditions set out in clause 18 below, the Facility and the SFET will be available for utilisation by the Borrowers, subject to the following terms and conditions:

1. Options Available Within and Utilisation of the Facility

1.1 The Facility may be utilised by way of the following options and in accordance with the provisions of the Schedules related thereto:

Sterling and/or Currency Money Market Loan (the “Sterling/Currency MML”) (see Schedule A) and/or

Sterling Overdraft (the “Sterling Overdraft”) (see Schedule B) and/or

Bonds, Guarantees and Indemnities (the “Ancillary Facility”) (see Schedule C).

Within the Facility, the aggregate of the liabilities due, owing or incurred thereunder shall not at any time exceed £15,000,000 (or its currency equivalent).

Within the Facility, the aggregate of liabilities incurred or due and owing under the Sterling Overdraft shall not at any time exceed £1,000,000 or the unutilized portion of the Facility, which ever is less.

Within the Facility, the aggregate of the bonds, guarantees and indemnities issued under the Ancillary Facility shall not at any time exceed £10,500,000 (or its currency equivalent).

1.2 The sterling equivalent of the currency or currencies utilised or available to be utilised under the Facility and the SFET may be calculated by the Bank at any time by reference to the Bank’s spot rate of exchange in the London Foreign Exchange Market for the sale of the relevant currency or currencies for sterling.

2. Availability

If on the day of utilisation:

(a) no Event of Default or Potential Event of Default has occurred and is continuing; and

(b) the representations and warranties detailed within clause 9 below are true on such day, then the Facility is available for utilisation until the second anniversary of the date of acceptance of this letter (the “Expiry Date”) and no liability or liabilities may extend beyond the Expiry Date.

Shortly before the first anniversary of the acceptance of this offer and annually thereafter the Bank agrees to consider in its absolute discretion an extension of the Expiry Date by a further year if requested in writing by the Borrowers. The Bank’s agreement to any extension and/or change in any terms and conditions will be notified in writing to the Borrowers.

3. Security and Guarantees

3.1 All indebtedness owing by the Borrowers to the Bank is to be (i) guaranteed by the cross guarantees which are to have been executed in the Bank’s standard form (with such amendments thereto as the Bank and the Borrowers may agree) by each Borrower and UNOVA, Inc. (together the “Guarantors” and each a “Guarantor”) and (ii) secured by (a) the debentures which have already been executed in the Bank’s standard form (with such amendments thereto as the Bank and the Borrowers may agree) by each Borrower and (b) legal charges over the Properties which have already been executed in the Bank’s standard form (with such amendments thereto as the Bank and the Borrowers may agree) by UNOVA U.K. Limited and Cincinnati Machine U.K. Limited.

3.2 The Bank may from time to time require the Properties and the Trade Debtors to be professionally valued. The Borrower will pay the costs of one such valuation per Property per annum together with the costs of any such valuation of the Properties and the Trade Debtors carried out where the Bank suspects that a Potential Event of Default has occurred and is continuing.

4. Mandatory Prepayment

4.1 Each Borrower and UNOVA, Inc. undertakes that within 3 Business Days of receipt of the Disposal Proceeds, it shall (a) apply, or procure the application, in repayment of outstanding liabilities under the Sterling/Currency MML, an amount equal to the amount necessary to ensure compliance with the covenant set out at clause 10.2(a) and (b) reduce and cancel the Sterling/Currency MML by an amount equal to the amount necessary to ensure compliance with the covenant set out in clause 10.2(a).

4.2 Following a cancellation of the Sterling/Currency MML by the amount referred to in clause 4.1, the Borrowers may request that a portion of the cancelled amount of the Sterling/Currency MML become available for redrawing. Upon receipt of such request the Bank will enter into discussions with the Borrowers and may in its absolute discretion agree that such portion will become available for redrawing.

5. Cancellation

Any undrawn part of the Facility may be cancelled by the Borrowers in minimum amounts of £500,000 and multiples of £50,000 subject to the Borrowers:

(a) giving the Bank not less than seven Business Days’ notice in writing (such notice, once given, shall be irrevocable); and

(b) paying to the Bank a cancellation fee of 0.5% of the amounts cancelled together with any accrued non-utilisation fee thereon if such cancellation arises as a result of the Borrowers obtaining a replacement facility for this Facility from a bank or financial institution which is not part of the group comprising the Bank and its subsidiary undertakings.

The non_utilisation fee will then cease to accrue on such cancelled amounts. Amounts which are cancelled will no longer be available for utilisation.

6. Change of Circumstances

6.1 In the event of:

(a) any change in applicable law, regulation or practice resulting in the Bank being subjected to any new or additional tax, levy, duty, charge, penalty, deduction or withholding of any nature (other than tax on the Bank’s overall net profits and gains), or

(b) any existing requirements of any central bank, governmental, fiscal, monetary, regulatory or other authority in any applicable

jurisdiction affecting the conduct of the Bank’s business being changed or any new requirements being imposed (whether or not having the force of law), including, without limitation, any resulting from the introduction or operation of the euro and a request or requirement which affects the manner in which the Bank allocates capital resources to its commitments, including its obligations under this Facility Letter,

and the result is in the sole opinion of the Bank (directly or indirectly) to increase the cost to the Bank of funding, making available or maintaining the Facility or to reduce the amount of any payment received or receivable by the Bank or to reduce the effective return to the Bank, then the Borrowers shall pay to the Bank on demand such sum as may be certified in writing by the Bank to the Borrowers as necessary to compensate the Bank for such increased cost or such reduction.

6.2 The Borrowers may, at any time within six weeks after the date of certification from the Bank under clause 6.1, prepay all amounts outstanding under the Facility without penalty and without incurring any cancellation fee (subject to clause 16.3(iv)), by giving not less than five Business Days’ irrevocable notice to the Bank to that effect specifying the prepayment date. The Borrowers shall be obliged to prepay to the Bank all amounts outstanding under the Facility on such date, together with all interest accrued to the date of actual payment and all other sums due to the Bank hereunder. Unless prepayment is made within such period of six weeks, an amount equal to such increased cost or such reduction will be payable by the Borrowers under the preceding sub-clause from the date of such certification.

6.3 Reference to the cost of funds/sterling deposits and to the London Interbank Market shall, if such cost ceases to be market practice/ordinarily used by the Bank for the purpose of calculating interest on facilities of this kind or such market no longer exists in comparable form, be construed as meaning the appropriate and reasonable alternative cost or source of funds as the case may be, as determined by the Bank.

7. Fees

7.1 A non-utilisation fee at the rate of 0.5% per annum calculated on a daily basis from the date of the Borrowers’ acceptance of this offer on the undrawn portion of the Facility, will be payable to the Bank quarterly in arrears and on the Expiry Date.

7.2 A renewal fee at the rate of 0.25% on the available amount of the Facility will be payable by the Borrowers to the Bank annually in advance.

7.3 Any fee referred to in clauses 7.1 or 7.2 is exclusive of any VAT which might be chargeable in connection with that fee. If any VAT is so chargeable, it shall be paid by the Borrowers to the Bank at the same time as it pays the relevant fee.

8. Legal, Valuation and other Expenses

Any legal and valuation fees and expenses (including documentation fees) (including any applicable VAT) and other out of pocket expenses (including any applicable VAT) incurred by the Bank in connection with the preparation, execution and implementation of this Facility Letter (and the documents referred to herein) and the enforcement and preservation by the Bank of its rights under this Facility Letter or such documents will be reimbursed by the Borrowers on demand by the Bank on a full indemnity basis (whether or not the Facility is drawn down) and may be debited to the Borrowers’ account with the Bank without further authority from the Borrowers. Other than in connection with enforcement or preservation, the Bank will consult with the Borrowers prior to incurring such fees and expenses and shall provide estimates to the Borrowers.

9. Representations and Warranties

9.1 By accepting this Facility Letter, each Borrower makes the representations and warranties contained in (a) to (g) below, and each Guarantor makes the representations and warranties contained in (h) below:

(a) it has the necessary corporate power and authority to borrow the full amount of the Facility on the terms and conditions set out in this Facility Letter and to perform and observe its obligations under this Facility Letter and it has obtained all necessary approvals, authorisations, consents or clearances of all governmental, judicial or regulatory bodies and authorities required in connection with the execution, delivery and performance hereof and the carrying out of the transactions contemplated in this Facility Letter;

(b) there is no law, decree or similar enactment binding on it and no provision in any corporate document, mortgage, indenture, trust deed, contract or agreement binding on it or affecting its property which would conflict with or prevent it from borrowing under the Facility, or which would prevent it from observing any of its obligations in this Facility Letter;

(c) neither its acceptance of this offer nor the performance by it of its obligations or the exercise of any of its rights under the terms of this Facility Letter will result in the existence of, or oblige such Borrower to create, any security interest in favour of any third party (other than the Bank) over the whole or any part of the undertaking or assets, present or future, of such Borrower and there are no subsisting mortgages, charges or other encumbrances affecting any of the undertaking, property assets or revenues of such Borrower other than those detailed within clause 10.1(a) below;

(d) it is not in breach of any of the limits or restrictions or obligations imposed by any other agreement or instrument and no Event of Default has occurred and is continuing;

(e) to the best of its knowledge, information and belief, having made all reasonable enquiries, there are no legal or other proceedings pending or threatened before any court, tribunal, commission or other regulatory authority involving it which are likely to be adversely determined against it and which, if adversely determined, could reasonably be expected to have a Material Adverse Effect;

(f) all factual or financial information provided by or on its behalf to the Bank for the purpose of obtaining the Facility was true, complete and accurate in all material respects at the time it was provided and all forecasts and opinions provided to the Bank for such purpose were honestly made on reasonable grounds after careful enquiry by such Borrower and the most recent accounts provided by the Borrower pursuant to clause 11.1(a) below were prepared in accordance with the laws of its jurisdiction of incorporation and give a true and fair view of the state of its affairs and disclose all liabilities and unrealised or expected losses required to be disclosed under generally accepted accounting practices;

(g) no event has occurred between the date to which its latest audited consolidated accounts available to the Bank were prepared and the date on which this warranty is given or deemed to be given which could reasonably be expected to have a Material Adverse Effect; and

(h) each Guarantor has the necessary corporate power and authority to execute and observe its respective obligations under the guarantees and the security referred to in clause 3 above which constitute that Guarantor’s valid and binding obligations and no Guarantor is or would be in breach of any enactment or contractual document of whatsoever nature by reason of such execution and observance and the representations set out in (d), (e), (f) and (g) of this clause 9.1 would remain true if reference therein to each Borrower included reference to each Guarantor.

9.2 Each Borrower and Guarantor shall be deemed to repeat the representations and warranties contained in this clause 9 on the day of each utilisation (and in any event at intervals not exceeding six months) by reference to the circumstances then existing.

10. Covenants

10.1 By accepting this Facility Letter, each Borrower undertakes for so long as any liability remains outstanding hereunder that, save with the prior written consent of the Bank:

(a) no Borrower nor any UK Subsidiary will create or agree to create or permit to subsist (other than to the Bank) any Encumbrance on the whole or any part of its undertaking, property, assets or revenues, present or future, including uncalled capital, save that this restriction will not be breached by any of the following:

(i) the continuance of existing Encumbrances full details of which have been disclosed to the Bank in writing prior to the date of this Facility Letter, provided that the maximum principal amount outstanding and secured by any such Encumbrance is not at any time increased; or

(ii) the acquisition, after the date of this Facility Letter, of companies and/or properties having or being subject to existing secured borrowings, provided that the maximum principal amount for which such Encumbrance was originally given is not at any time increased and such Encumbrance is discharged or released within 180 days after the date of such acquisition; or

(iii) any Encumbrance over plant, machinery or equipment granted solely in connection with financing or operating leasing arrangements permitted under paragraph (c) of the definition of Permitted Disposal;

(b) no Borrower nor any UK Subsidiary will give any guarantee, bond or indemnity, or make available any new loan or financial accommodation to any person or increase the amount or extend the duration or otherwise alter in any material respect the terms of any such existing loans or financial accommodation, except that this clause 10.1(b) shall not apply to any Permitted Loan;

(c) no Borrower nor any UK Subsidiary will sell, transfer or otherwise dispose of the whole or any part of its undertaking, property, assets or revenues, whether by a single transaction or a number of transactions relating to assets the value of which, when aggregated with the value of all other sales, transfers or disposals of assets made by each Borrower and its UK Subsidiaries in the same accounting reference period, would exceed £3,000,000, calculated at the higher of market value or net book value (such aggregate figure being proportionately reduced or increased for any such period which is less than 360 days or more than 370 days), except that this clause 10.1(c) shall not apply to any Permitted Disposal;

(d) no Borrower nor any UK Subsidiary will make any material investment in shares, securities or debentures (whether secured or unsecured) of a company or in a business. For the purpose of this clause 10.1(d) “material” shall mean an amount in excess of £2,000,000 (gross cost), or the equivalent in other currencies, in the case of a single transaction or an amount which, when aggregated with all other investments made by each Borrower and its UK Subsidiaries in the same accounting reference period, exceeds £2,000,000 (gross cost), or the equivalent in other currencies (such figure being proportionately reduced or increased for any such period which is less than 360 days or more than 370 days);

(e) each Borrower shall maintain and procure that each of its Subsidiaries maintains adequate insurance on and in relation to its business and assets with reputable underwriters or insurance companies which are financially sound and having a rating of at least A+ or better by Best Rating Guide against such risks to the extent usual for persons carrying on a business such as that carried on by such Borrower or (as the case may be) such Subsidiary;

(f) each Borrower will forthwith, upon becoming aware of it, inform the Bank of any litigation, arbitration or administration proceeding pending or, to the best of its knowledge, information and belief, threatened against any Borrower or any Subsidiary which could reasonably be expected to have a Material Adverse Effect;

(g) each Borrower will forthwith, upon becoming aware of it, inform the Bank of the occurrence of any Event of Default or Potential Event of Default and also inform the Bank of any steps taken or proposed to be taken to remedy or mitigate the effect of any such event;

(h) no Borrower will declare or pay any dividend or make any distribution to its shareholders in respect of any accounting reference

period without the Bank’s prior written consent, which shall not be unreasonably withheld or delayed if (i) at the times that such dividend is both declared and paid, or such distribution is made, there are no outstanding drawings under the Sterling/Currency MML and (ii) the Operating Cashflow of such Borrower is positive for such accounting reference period;

(i) (other than Permitted Loans) no Borrower will make any loans or advances to, or enter into any management, consultancy, sale or other agreement of whatever kind with its Parent or any other Subsidiary of its Parent except on arms’ length terms for good commercial reasons or in the ordinary course of business and no material amendment shall be made to any such loan, advance or agreement existing at the date hereof which would cause such loan, advance or agreement to infringe this clause 10.1(i);

(j) each Borrower’s obligations under this Facility Letter shall at all times rank at least pari passu with all other present and future unsecured and unsubordinated indebtedness of such Borrower, except for any liabilities which would be accorded preferential ranking by statute in a winding_up;

(k) the claims of the Bank against each Borrower under this Facility Letter shall at all times rank prior to the claims of all other Borrowers and Subsidiaries against such Borrower; and

(l) no Borrower will make, and or procure that any of its Subsidiaries will make, any material change in the scope or nature of its business which would constitute a material change in the business of the Borrowers taken as a whole.

10.2 By accepting this Facility Letter, each Borrower undertakes for so long as any liability remains outstanding hereunder that, save with the prior written consent of the Bank, the amount of outstanding drawings hereunder shall not at any time exceed:

(a) 70% of the value of the Properties; or

(b) 66% of the face value of the Eligible Trade Debtors of Landis Lund (a division of UNOVA U.K. Limited); or

(d) 66% of the face value of the Eligible Trade Debtors of Cincinnati Machine U.K. Limited to be determined by the Bank; or

(e) 66% of the face value of the Eligible Trade Debtors of Intermec Technologies U.K. Limited to be determined by the Bank.

In the case of the Properties such value shall be determined from time to time on an open market value basis by professional valuers acceptable to the Bank.

11. Information

11.1 Each Borrower undertakes to provide to the Bank:

(a) copies of its audited consolidated accounts (including profit and loss account and balance sheet) as soon as they are available and not later than 180 days from the end of each accounting reference period together with its quarterly unaudited management accounts as soon as available and within 60 days of the end of each financial quarter except the final quarter which is to be received within 90 days;

(b) copies of its monthly aged trade debtor analysis as soon as available and within 30 days of the end of each calendar month;

(c) copies of any circular issued to its shareholders or holders of loan capital at the same time as received by its shareholders or holders of loan capital; and

(d) within 7 days following request (unless otherwise agreed by the Bank), any other information which the Bank may reasonably request from time to time.

11.2 UNOVA, Inc. undertakes to provide to the Bank:

(a) copies of its audited consolidated accounts (including profit and loss account and balance sheet) as soon as they are available and not later than 90 days from the end of each accounting reference period together with its quarterly unaudited management accounts as soon as available and within 60 days of the end of each financial quarter except the final quarter which is to be received within 90 days;

(b) a copy of each covenants compliance certificate delivered to Co-Agents under Section 5.2(d) of the US Facility Agreement, at the same time as delivered to such Co-Agents; and

(c) within 7 days following request (unless otherwise agreed by the Bank), any other information which the Bank may reasonably request from time to time.

11.3 In the event of any Borrower adopting any proposed change in accounting principles for the purposes of its audited consolidated accounts from those on the basis of which its most recent audited consolidated accounts as at the date of this Facility Letter were prepared, then, if the Bank is of the opinion that any such change materially affects any of the financial covenants detailed in clause 10.2 above, it shall be entitled to require such financial covenants to be amended in such manner as it may deem appropriate to reflect such change (but so as to place no more onerous obligation on the Borrowers than the existing financial covenants as if no such change in accounting principles had occurred).

12. Payments

12.1 All payments by each Borrower, whether of principal, interest or otherwise, shall be made to the Bank (or such other bank as the Bank may specify from time to time) for value on the due date by such times and in such funds as the Bank may specify as being customary at the time for settlement of transactions in the relevant currency in the place for payment, without set-off or counterclaim and free of any deduction or withholding for or on account of tax unless such Borrower

is compelled by law to make such a payment subject to the deduction or withholding of tax.

12.2 If a Borrower is compelled by law to make any such deduction or withholding, or the Bank is compelled by law to make any payment in respect of tax (other than tax on overall net income), in each case from or in respect of any amount payable or paid by such Borrower hereunder, such Borrower will pay to the Bank such additional amount as is required to ensure that the Bank receives and retains (free from any liability in respect of any such deduction or withholding) a net amount equal to the full amount which it would have received if no such deduction, withholding or payment had been made.

12.3 All taxes required by law to be deducted or withheld by a Borrower from any amounts payable or paid hereunder shall be paid by such Borrower to the appropriate authority within the time allowed for such payment under applicable law and such Borrower shall, within 30 days of the payment being made, deliver to the Bank evidence reasonably satisfactory to the Bank (including all relevant tax receipts) that the payment has been duly remitted to the appropriate authority.

12.4 The Bank shall be entitled to adjust the dates for the making of payments under the Facility, and the duration of interest periods, where in the Bank’s opinion it is necessary to do so in order to comply with the practice from time to time prevailing in the London Interbank Market or any other financial market relevant for the purposes of the Facility.

13. Events of Default

In the event of:

(a) failure by any Borrower to make any repayment of principal, or payment of interest or other money, under this Facility Letter on its due date unless such failure is caused solely by technical or administrative delays and repayment or payment is made within three Business Days of the due date; or

(b) (i) a breach by any Borrower in the performance of any of its obligations under clauses 9, 10.1 (other than under (e) or (f) thereof) or 11; or

(ii) a breach by any Borrower in the performance of any of its obligations under clause 10.2, if such breach (if sufficient funds are available for drawing under the US Facility or are otherwise available to UNOVA, Inc. and/or its Subsidiaries to remedy such breach) shall continue unremedied for three Business Days; or

(iii) a breach by any Borrower in the performance of its obligations under clauses 10.1 (e) or (f), of this Facility Letter if such breach (if capable of remedy) shall continue unremedied for 7 days; or

(iv) a breach by any Borrower or any Guarantor in the performance of any other obligations, covenants or undertakings under this Facility Letter or any guarantee and/or security held by the Bank

for the Facility and such breach (if capable of remedy) shall continue unremedied for 21 days; or

(c) any approval, authorisation, consent or clearance which is required either to ensure that this Facility Letter and the security and the guarantees referred to in clause 3 above are valid, binding and enforceable or to enable the obligations thereby created to be duly performed, ceasing to be in full force and effect or it becoming unlawful for the Borrower or any other person to perform all or any of its obligations under this Facility Letter or under any security or guarantee referred to in clause 3 above, or any such document not being or ceasing to be legal, valid and binding on it; or

(d) a petition being presented, an order being made or a meeting being convened or an effective resolution being passed, for winding up any Borrower or UNOVA, Inc. (or any Subsidiary where such action could reasonably be expected to have a Material Adverse Effect) (except for the purpose of a reconstruction or amalgamation while solvent on terms previously approved in writing by the Bank), or a petition being presented or an order being made for the administration of any Borrower or UNOVA, Inc. (or any Subsidiary where such action could reasonably be expected to have a Material Adverse Effect); or

(e) an encumbrancer taking possession or an administrator, liquidator, provisional liquidator, receiver, manager, trustee, sequestrator or similar officer being appointed of all or any of the assets of any Borrower or UNOVA, Inc. (or any Subsidiary where such action could reasonably be expected to have a Material Adverse Effect); or

(f) a distress, execution, attachment or other legal process being levied, enforced or sued out against any of the assets of any Borrower or UNOVA, Inc. (or any Subsidiary where such action could reasonably be expected to have a Material Adverse Effect) and not being discharged or paid in full within five Business Days; or

(g) any Borrower or UNOVA, Inc. (or any Subsidiary where such action could reasonably be expected to have a Material Adverse Effect) suspending payment of its debts or being unable to pay its debts as they fall due, or being deemed, under Section 123 of the Insolvency Act 1986, to be unable to pay its debts; or

(h) any Borrower or UNOVA, Inc. (or any Subsidiary where such action could reasonably be expected to have a Material Adverse Effect) proposing or entering into a voluntary arrangement (within the meaning of Section 1 of the Insolvency Act 1986) or taking or being subjected to any proceedings under any law, or commencing negotiations with one or more of its creditors, for the readjustment, rescheduling or deferment of its debts generally, or proposing or entering into any general assignment or composition with or for the benefit of its creditors; or

(i) control of any Borrower or UNOVA, Inc. passing or having passed, whether by virtue of any agreement, offer, scheme or otherwise, to any person or persons (including institutions or companies), either acting individually or in concert, without the prior written consent of the Bank, (“control” having the meaning ascribed to it in relation to a

body corporate by Section 840 of the Income and Corporation Taxes Act 1988) provided that an intra-group re-organisation will not give rise to a breach of this clause 13(i) so long as each Borrower remains a wholly-owned Subsidiary of UNOVA, Inc. (whether directly or indirectly); or

(j) any Borrower, UNOVA, Inc. or any Subsidiary ceasing or threatening to cease to carry on all or a substantial part of its business or operations, or selling, transferring or otherwise disposing of the whole or a substantial part of its undertaking or assets, whether by a single transaction or a number of transactions, where such cessation could reasonably be expected to have a Material Adverse Effect, without the prior written consent of the Bank; or

(k) any default shall occur under any agreement or instrument under or pursuant to which any other financial indebtedness of UNOVA, Inc. or any of the Borrowers (A) the individual outstanding principal amount of which exceeds $5,000,000 (or its currency equivalent) or (B) the aggregate principal amount of which exceeds $5,000,000 (or its currency equivalent), and such default shall continue for more than the period of grace (if any) therein specified, if the effect thereof (with or without the giving of notice or lapse of time or both) is:-

(X) to accelerate, or to permit the holders of any such financial indebtedness to accelerate, the maturity of any such financial indebtedness; or

(Y) to result in any such financial indebtedness being declared due and payable or be required to be prepaid (other than by regularly scheduled required prepayments) prior to the stated maturity thereof;

(l) there occurs an event having a Material Adverse Effect; or

(m) the cessation for any reason of any consent, authorisation, licence and/or exemption which is required to enable any Borrower, Subsidiary or any Guarantor to carry on all or any material part of its business, or the taking by any governmental, regulatory or other authority of any action in relation to any Borrower, Subsidiary or any Guarantor (whether or not having the force of law) which, in any such case, could reasonably be expected to have a Material Adverse Effect; or

(n) any Guarantor giving or purporting to give notice to determine its liability under any guarantee referred to in clause 3 above; or

(o) any event occurring in relation to any Borrower under the laws of any other applicable jurisdiction which has an effect substantially similar to any of the events specified in this clause 13; or

(p) any representation or warranty made by any Borrower or UNOVA, Inc. under this Facility Letter or for the purpose of obtaining the Facility, being incorrect in any material respect as at the date on which it is made or deemed to be made,

then whilst any such Event of Default is continuing, all moneys owing under the Facility shall become repayable forthwith upon written demand by the Bank at any time and no further utilisation may be made under the Facility. The Bank may, at any time after such demand (i) call for payment of full cash cover for all outstanding liabilities under the Ancillary Facility and/or the SFET and/or (ii) close out all or any contracts effected pursuant to the SFET. At any time whilst an Event of Default is continuing the Bank may enforce its rights to appoint an administrative receiver or other enforcement rights under any security provided by the Borrowers in connection with this Facility and may make demand of any Guarantor.

The Bank reserves the right, at any time following a demand under this clause, to purchase with sterling any currency necessary to convert any amounts outstanding under the Facility together with interest accrued thereon, to sterling whereupon the Borrowers shall then become liable to pay the Bank forthwith the relevant sterling amounts, together with all costs and expenses incurred by the Bank.

14. Interest on an Overdue Amount

14.1 Any money payable under this Facility Letter which is not paid when due by the Borrowers shall bear interest on a daily basis from the due date to the date of actual payment. Such interest shall be calculated by reference to successive default interest periods of such duration as the Bank may from time to time select, except that the first such period relating to any overdue amount in respect of the Sterling/Currency MML shall be such as to mature at the end of the interest period current at the time when such amount became due.

14.2 Interest shall be charged at the rate per annum determined by the Bank to be equal to 1% above the rate which would otherwise have been applicable to such overdue amount under the provisions of the relevant Schedule if such amount had been non-overdue principal (except that in the case of any amount that does not have an applicable interest rate hereunder the rate charged shall be 3% per annum over the Bank’s Base Rate current from time to time). Interest so accrued shall be due on demand or (in the absence of demand) on the last day of the default interest period in which it accrued and, if unpaid, shall be compounded on the last day of that and each successive interest period. Interest shall be charged and compounded on this basis both before and after any judgement obtained under this Facility Letter.

15 Assignment and Transfer

15.1 No Borrower may assign or transfer any of its rights or obligations under or in respect of this Facility Letter.

15.2 The Bank may, at any time, assign and/or transfer all or any of its rights, benefits and/or obligations in respect of the Facility, in whole or in part, to any person or persons and may, subject to obtaining customary undertakings protecting the confidentiality of such information, disclose to any actual or prospective assignee or transferee (or to any other person (i) in connection with an actual or proposed securitisation of all or any part of the Bank’s loan assets from time to time or (ii) who may otherwise enter or propose to enter

into contractual relations with the Bank in relation hereto) any information relevant to the Facility in the Bank’s possession relating to the Borrowers and the Subsidiaries and any related security or guarantee. Other than in connection with an actual or prospective securitisation referred to in (i), the Bank shall obtain the Borrowers’ prior written consent to any assignment or transfer (such consent not to be unreasonably withheld or delayed).

16. Miscellaneous

16.1 All notifications or determinations given or made by the Bank under this Facility Letter shall be conclusive and binding on each Borrower, except in any case of manifest error.

16.2 No delay or omission by the Bank in exercising any right or power under this Facility Letter shall impair such right or power, and any single or partial exercise of it shall not preclude any other right or power. The rights and remedies of the Bank under this Facility Letter are cumulative and not exclusive of any right or remedy provided by law.

16.3 Each Borrower shall indemnify the Bank on demand (without prejudice to the Bank’s other rights) for any expense, loss or liability incurred by the Bank in consequence of (i) any failure by any Borrower to borrow in accordance with a notice of drawing given by it to the Bank, or (ii) any default or delay by any Borrower in the payment of any amount when due under this Facility Letter, or (iii) the occurrence or continuance of any event referred to in clause 13 above, or (iv) all or part of the Facility being prepaid or repaid for any reason otherwise than on the maturity of the then current interest period including, without limitation, any loss (other than loss of margin), expense or liability sustained or incurred by the Bank in any such event in liquidating or re-deploying funds acquired or committed to fund, make available or maintain the Facility (or any part of it).

16.4 Any sum of money at any time standing to the credit of any Borrower with the Bank in any currency upon any account or otherwise may be applied by the Bank, at any time after the occurrence of an Event of Default (without notice to the Borrower), in or towards the payment or discharge of any indebtedness now or subsequently owing to the Bank by such Borrower and the Bank may use any such money to purchase any currency or currencies required to effect such application.

16.5 If, for any reason, any amount payable under this Facility Letter is paid or is recovered in a currency (the “other currency”) other than that in which it is required to be paid (the “contractual currency”), then, to the extent that the payment to the Bank (when converted at the then applicable rate of exchange) falls short of the amount unpaid under this Facility Letter, the Borrower shall, as a separate and independent obligation, fully indemnify the Bank on demand against the amount of the shortfall. For the purposes of this clause the expression “rate of exchange” means the rate at which the Bank is able as soon as practicable after receipt to purchase the contractual currency in London with the other currency.

16.6 If the UK moves to the third stage of EMU, the Bank shall be entitled to make such changes to this Facility Letter as it reasonably considers are necessary to reflect the changeover to the euro (including, without limitation, the rounding (up or down) of fixed monetary amounts to convenient fixed amounts in the euro and amending any provisions to reflect the market conventions for a facility of the kind contemplated in this Facility Letter).

16.7 A person who is not a party to this Facility Letter has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefits of this Facility Letter.

17. Interpretation

17.1 In this Facility Letter, unless the context otherwise requires:

“Best Rating Guide” means the rating guide published in the US under the name “Best Rating Guide”;

“Business Day” means a day on which the relevant London financial markets and the Bank are ordinarily open to effect transactions of the kind contemplated in this Facility Letter and, if a payment falls due under this Facility Letter, also a day on which banks in the principal financial centre for the relevant currency (as determined by the Bank) are open for dealings in such currency and if a payment is to be made in euros, on which such payment system as the Bank chooses is operating for the transfer of funds for the same day value;

“Co- Agents” has the meaning given to it in the US Facility Agreement;

“Disposal Proceeds” means the gross proceeds received in respect of a disposal referred to in sub-paragraph (b) of the definition of “Permitted Disposal” less the amount of any present and future taxes payable with respect to any gain resulting from such disposal, and all third party costs, fees and expenses properly incurred in arranging and effecting such disposal;

“Eligible Trade Debtors” means, at any time in respect of any Borrower or any division of any Borrower, the unencumbered book debts of such Borrower as appearing in its books at such time but excluding:

(a) each debt due to such Borrower from any of its Subsidiaries,

(b) each debt which has not been paid within 90 days (unless otherwise agreed by the Bank) after the date of the original invoice relating thereto,

(c) each debt which is not (i) due from a debtor incorporated in the European Union, Switzerland, Norway, The United States of America or Canada, or (ii) due from a wholly owned Subsidiary (wherever situate, subject to compliance by the Bank with applicable laws, regulations and the Bank’s internal compliance policies) of, BMW AG, Daimler-Chrysler AG, Fiat S.p.A., Ford Motor Company, General Motors Corporation, Hyundai Motor Company, Renault S.A., Peugeot S.A. or Volkswagen AG in each case subject to periodic review by the Bank, or (iii) guaranteed

or insured by the Export Credits Guarantee Department or other UK Government department or agency,

(d) each debt due from Cyltec LLC, and

(e) each debt in respect of retention monies due (forming all or part of any invoiced amount);

“EMU” means Economic and Monetary Union as contemplated in the Treaty establishing the European Community, as amended from time to time;

“Encumbrance” includes any mortgage, charge, pledge, lien (other than a lien arising solely by operation of law in the ordinary course of business and securing amounts not more than 90 days overdue for payment), assignment by way of security, hypothecation, security interest or other agreement or arrangement which results in (or has substantially the same commercial effect as) the creation of security (but excluding title retention agreements or arrangements entered into in the ordinary course of trading and not otherwise falling within this definition) and any right on the part of any person to call for the creation of any of the foregoing, in each case whether relating to existing or future assets;

“euro” and “€” means the single currency of the participating Member States adopted under the Council Regulation (EC) No 974/98;

“Event of Default” means any event or circumstance referred to in clause 13;

“Expiry Date” has the meaning given to it in clause 2;

“Facility” means the facility made available under this Facility Letter (as reduced from time to time in accordance with its provisions);

“financial indebtedness” means, without duplication, all liabilities, obligations and indebtedness of any Borrower, of any kind or nature, now or hereafter owing, arising, due or payable, howsoever evidenced, created, incurred, acquired or owing, whether primary, secondary, direct, contingent, fixed or otherwise, consisting of indebtedness for borrowed money or the deferred purchase price of property, excluding trade payables but including (a) all obligations and liabilities of any person secured by any Encumbrance on any Borrower’s or Guarantor’s property, even though such Borrower or Guarantor shall not have assumed or become liable for the payment thereof; provided, however, that all such obligations and liabilities which are limited in recourse to such property shall be included in financial indebtedness only to the extent of the book value of such property as would be shown on a balance sheet of such Borrower or Guarantor prepared in accordance with either UK or US generally accepted accounting standards (as applicable to the entity in question); (b) all obligations or liabilities created or arising under any finance lease or conditional sale or other title retention agreement with respect to property used or acquired by any Borrower or Guarantor, even if the rights and remedies of the lessor, seller or lender thereunder are limited to repossession of such property; provided, however, that all such obligations and liabilities which are

limited in recourse to such property shall be included in financial indebtedness only to the extent of the book value of such property as would be shown on a balance sheet of such Borrower or Guarantor prepared in accordance with either UK or US generally accepted accounting standards (as applicable to the entity in question); (c) all obligations and liabilities under guarantees; and (d) the present value (discounted at the greater of Bank of America N.A.’s “prime rate” or 0.50% above US Federal Funds Rate) of lease payments due under synthetic leases;

“indebtedness” includes any obligation for the payment or repayment of money, whether actual or contingent, present or future, secured or unsecured, and whether incurred as principal or surety or otherwise;

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties or condition (financial or otherwise) of the Borrowers and Guarantors taken as a whole; (b) a material impairment of the ability of the Borrowers and the Guarantors taken as a whole to perform under the Facility Letter and any guarantee or security provided in connection with the Facility Letter; or (c) a material adverse effect on the legality, validity, binding effect or enforceability against any Borrower or any Guarantor of this Facility Letter or any such guarantee or security;

“month” means a period starting on one day in a calendar month and ending on the corresponding day in the next calendar month or, if that is not a Business Day, on the next Business Day unless that falls in another calendar month in which case it shall end on the preceding Business Day, save that where a period starts on the last Business Day in a month or there is no corresponding day in the month in which the period ends, that period shall end on the last Business Day in the later month;

“Operating Cashflow” means, in relation to any accounting reference period of any Borrower, such Borrower’s Total Operating Profit plus amounts charged to depreciation, capital receipts from the disposals of assets and funds received from equity subscription and capital issues minus corporation tax paid and capital expenditure plus or minus movements in working capital (each as shown in such Borrower’s audited financial statements delivered to the Bank in accordance with clause 11.1 for such accounting reference period);

“Parent” means a parent undertaking of a Borrower within the meaning of Section 258 of the Companies Act 1985;

“Permitted Disposal” means (a) any sale of current assets in the ordinary course of trading by any Borrower or any Subsidiary, (b) a disposal which is referred to in the letter from UNOVA, Inc. to the Bank dated no later than the date hereof and is made in accordance with the terms of that letter, (c) any disposal to which the Bank has consented (such consent not to be unreasonably withheld or delayed) of plant, machinery or equipment made solely in connection with a Borrower entering into operating or finance leasing arrangements or (d) any other disposal by any Borrower or any Subsidiary agreed in writing from time to time between the Borrowers and the Bank;

“Permitted Loan” means any guarantee, bond, indemnity, loan or financial accommodation which either:

(a) forms trade credit in the normal course of business, or

(b) is made to any direct or indirect Subsidiary of UNOVA Inc. incorporated in Germany or Sweden, (each an “Approved Affiliate”) either (i) from the proceeds of any utilisation under the Sterling/Currency MML and does not exceed £5,000,000 when aggregated with all other loans or financial accommodation made by each Borrower and each UK Subsidiary to an Approved Affiliate from the proceeds of any utilisation under the Sterling/Currency MML or (ii) not from the proceeds of any utilisation under the Sterling/Currency MML;

“person” shall be construed as a reference to any person, firm, company, corporation, government, state or agency of a state or any association or partnership (whether or not having separate legal personality) of two or more of the foregoing;

“Potential Event of Default” means any event or circumstance which, with the giving of notice, lapse of time or fulfillment of any other condition, would be an Event of Default;

“Properties” means the leasehold and freehold industrial units and offices at (i) Hampstead Avenue, Mildenhall, Suffolk (described and demised by a conveyance dated 14 April 1988 between Lamb-Sceptre Engineering Limited (1) and Litton U.K. Limited (2)), (ii) Eastburn Works, Skipton Road, Cross Hills, Keighly, West Yorkshire (title no. WYK393531), (iii) Kingsbury Road, Erdington, Birmingham (title no’s WM542569, WM542383, WM711536, WM542336, WM645192).

“$” means the lawful currency of the US;

“Sterling” and “£” means the lawful currency for the time being of the UK;

“Subsidiary” means a subsidiary undertaking of a Borrower within the meaning of Section 258 of the Companies Act 1985;

“Total Operating Profit” means, in relation to any accounting reference period of any Borrower, such Borrower’s total operating profit for continuing operations, acquisitions (as a component of continuing operations) and discontinued operations (as set out in Financial Reporting Standard No. 3) but ignoring any exceptional items (each as shown in such Borrower’s audited financial statements delivered to the Bank in accordance with clause 11.1 for such accounting reference period);

“Trade Debtors” means the value of the Eligible Trade Debtors of each of Cincinnati Machine U.K. Limited, Intermec Technologies U.K. Limited, Lamb Technicon (a division of UNOVA U.K. Limited) and Landis Lund (a division of UNOVA U.K. Limited);

“UK” means the United Kingdom of Great Britain and Northern Ireland;

“UK Subsidiary” means any Subsidiary of the Borrower which is incorporated in the United Kingdom;

“US” means the United States of America;

“US Facility” means the facility made available under the US Facility Agreement;

“US Facility Agreement” means a syndicated facility agreement dated 12 July 2001 between (inter alia) UNOVA, Inc. and others as borrowers, Bank of America N.A. and Heller Financial, Inc. and others as lenders and/or agents (as amended, restated, extended or supplemented from time to time); and

“VAT” means value added tax or any similar tax substituted for it from time to time.

17.2 References to any statutory provision includes any amended or re-enacted version of such provision with effect from the date on which it comes into force.

17.3 Save where the context otherwise requires, any expression in this Facility Letter importing the singular shall include the plural and vice versa.

17.4 References to a time of the day are references to the time in London.

17.5 It is expressly stipulated that in the event of any conflict or inconsistency between the terms of any guarantee or security required delivered in connection with the Facility Letter, and the terms of this Facility Letter (as amended, replaced or extended from time to time) the terms of the Facility Letter (as so amended, replaced or extended) shall prevail

17.6 So long as any amount remains outstanding under this Facility, it is expressly stipulated that clause 6(b) of the Bank’s standard form of debenture referred to in clause 3.1 of this Facility Letter shall be deemed to have been deleted, clause 6(d) thereof shall be deemed amended by the insertion of “which are necessary and useful in the conduct of its business” after “thereof” on the second line and by the insertion of the words “(ordinary wear and tear excepted)” at the end of clause 6(d) and that clause 14 of the Bank’s standard form of Guarantee referred to in clause 3.1 of this Facility Letter shall be deemed amended by the insertion of the words “(which shall be exercised in good faith using its reasonable credit judgement)” after the word “discretion” on the 18th line thereof and by the deletion of the word “absolute” on such line.

18. Conditions Precedent

The Facility and the SFET will become available to the Borrowers for drawing only upon receipt by the Bank of the following in form and substance satisfactory to the Bank:

(a) this Facility Letter as required under clause 21 below;

(b) a certified true copy of a resolution of each Borrower’s Board of Directors and the Board of Directors of UNOVA, Inc:

(i) accepting the Facility and the SFET and this offer on the terms and conditions stated within this Facility Letter;

(ii) authorising a specified person, or persons, to countersign and return to the Bank the enclosed duplicate of this Facility Letter;

(iii) authorising the Bank to accept instructions and confirmations in connection with the Facility and the SFET signed in accordance with the Bank’s signing mandate current from time to time, and to accept instructions in connection with drawings under the Sterling/Currency MML and under the SFET, by telephone from any person specifically authorised to give such telephone instructions; and

(iv) containing confirmed specimens of the signatures of those officers referred to in (ii) and (iii) above, if not already known to the Bank; and

(c) a legal opinion from the U.S. legal counsel to UNOVA, Inc. addressed to the Bank in a form satisfactory to the Bank and which opinion includes confirmation that UNOVA, Inc. is legally empowered to accept and enter into the terms and conditions of this Facility Letter.

19. Governing Law and Jurisdiction

19.1 This Facility Letter shall be governed by and construed in accordance with English law.

19.2 Each Borrower and UNOVA, Inc. hereby irrevocably submit, for the exclusive benefit of the Bank, to the jurisdiction of the High Court of Justice in England (but without prejudice to the right of the Bank to commence proceedings against the Borrower in any other jurisdiction) and irrevocably waives any objections on the ground of venue or forum non conveniens or any similar grounds.

19.3 Without prejudice to any other mode of service allowed under any relevant law,

(a) UNOVA, Inc. irrevocably appoints UNOVA U.K. Limited as its agent for service of process in relation to any proceedings before the English courts in connection with this Facility Letter; and

(b) agrees that the failure by a process agent to notify UNOVA, Inc. of the process will not invalidate the proceedings concerned.

20. Notices

Every notice, request or other communication shall:

(a) be in writing delivered personally or by prepaid first class letter or facsimile transmission;

(b) be deemed to have been received by the Borrowers and UNOVA, Inc., in the case of a letter when delivered personally or 48 hours after it has been sent by first class post or, in the case of facsimile

transmission, at the time of transmission with a facsimile transmission report or other appropriate evidence (provided that if the date of transmission is not a Business Day it shall be deemed to have been received at the opening of business on the next Business Day); and

(c) be sent (i) to the Borrowers and UNOVA, Inc. at the address stated at the beginning of this Facility Letter and (ii) to the Bank at the address stated at the beginning of this Facility Letter, or to such other address in England as may be notified in writing by the relevant party to the other.

All communications by the Borrowers and UNOVA, Inc. shall be effective only on actual receipt by the Bank.

21. Acceptance

If each of the Borrowers and UNOVA, Inc. wish to accept this offer, this Facility Letter and the enclosed duplicate should be signed below by an authorised officer on its behalf and the signed duplicate returned to the Bank. This offer will remain available until 2 months from the date of this facility letter, after which it will lapse if not accepted.

Yours faithfully
for and on behalf of
BARCLAYS BANK PLC

/s/ John D. Oliver
John D. Oliver
Relationship Director


Accepted on the terms and conditions stated herein,

For and on behalf of

UNOVA U.K. Limited

by	/s/ Michael E. Keane

Date		March 10, 2004


Cincinnati Machine U.K. Limited

by	/s/ Michael E. Keane

Date		March 10, 2004


Intermec Technologies U.K. Limited


by	/s/ Michael E. Keane

Date		March 10, 2004


UNOVA, Inc.


By	/s/ Michael E. Keane

Date		March 10, 2004

SCHEDULE A

Sterling/Currency MML

The Sterling/Currency MML includes the option not only to draw by way of short term loans in sterling, but also for the Borrowers to draw by way of short term loans in US Dollars and euro if freely transferable and convertible into sterling and available to the Bank in the relevant amount for the relevant period in the normal course of business in the London Interbank Market. The Bank shall be the sole arbiter of the availability of such currencies.

The Sterling/Currency MML may be drawn in one or more amounts each drawing to be a minimum amount of £500,000 (or the equivalent thereof in other currencies) and multiples of £50,000 (or the equivalent thereof in other currencies) thereafter for periods of a minimum seven days up to a maximum of 12 months at the Borrower’s option or other mutually agreed period but no drawing should be made for an interest period with a maturity date of more than three months beyond the Expiry Date.

When wishing to draw under the Sterling/Currency MML, the Borrower should telephone the Bank’s dealers at Global Treasury Services (“GTS”) on 0345-231160 on or shortly before the Business Day on which funds are required, stating the currency and the amount of the drawing, the period required and giving instructions for payment of the funds. In the event these instructions do not stipulate that the funds must be credited to the Borrower’s current account with the Bank’s branch (the “Branch”) such instructions must be confirmed by letter to the Branch at the earliest opportunity.

Unless otherwise agreed between the Borrower and GTS, the interest rate on each drawing will be the aggregate of the Bank’s margin of 3% per annum plus LIBOR (to be conclusively determined by the Bank and dependent upon the conditions prevailing in the London financial markets) and any mandatory costs to compensate the Bank for the cost resulting from the imposition from time to time under the Bank of England Act 1998 and/or by the Bank of England and/or the Financial Services Authority (the “FSA”) (or other United Kingdom governmental authorities or agencies) of a requirement to place non-interest bearing cash ratio deposits or Special Deposits (whether interest bearing or not) with the Bank of England and/or pay fees to the FSA calculated by reference to liabilities used to fund the sum) for the period of drawing.

Interest will be payable without deduction at the maturity of each drawing, and calculated on the basis of actual days elapsed over a 365 day year for sterling drawings and a 360 day year for currency drawings (or if market practice differs, in accordance with the normal market practice for the relevant currency).

Each drawing, together with interest thereon, will be repaid on its maturity date in the currency in which such drawing is outstanding in accordance with the provisions of clause 12 of this Facility Letter.

SCHEDULE B

Sterling Overdraft

The Sterling Overdraft will be available on the Borrower’s current account at the Bank’s branch at 210 High Street, Hounslow, Middlesex TW3 1DL (the “Branch”) with interest charged at a rate of 1% per annum over the Bank’s Base Rate current from time to time. Interest together with other charges will be debited to the Borrower’s current account at the Branch quarterly in arrear in March, June, September and December each year or at such other times as may be determined by the Bank, and such interest will be calculated on the basis of actual days elapsed over a 365 day year (or on such other day count basis as the Bank considers is consistent with the then applicable market practice for facilities of this kind).

SCHEDULE C

Ancillary Facility - Guarantees, Bonds and Indemnities

The Bank is prepared to consider issuing guarantees, bonds and indemnities on behalf of any Borrower in respect of normally accepted and commercial transactions, up to a limit of £10,500,000 (ten million and five hundred thousand pounds) subject to prior agreement with the Bank and receipt of the necessary counter indemnities.

(Within this facility we have allocated to Barclays Frankfurt EUR2,474,976.00 to Honsberg Lamb Sonderwerkzeugmaschinen GmbH and therefore the revised sub-limit is £8,790,000 (eight million seven hundred and ninety thousand pounds).

Commission at the rate of 1% per annum of the principal amount of each outstanding guarantee, bond and indemnity will be payable by the relevant Borrower to the Bank, quarterly in advance.

SCHEDULE D

SFET

The SFET covers the maximum liability of the Borrower to the Bank outstanding at any time under contracts of not more than 12 months duration for the forward purchase or sale of foreign currency for delivery at a future date and the spot purchase or sale of foreign currencies, but excludes purchases or sales where the Bank is required irrevocably to pay away funds prior to receiving firm confirmation of incoming cover.

When wishing to utilize the SFET the Borrower should telephone the Bank’s dealers on 0345-231160. All payment and delivery instructions are to be advised to and processed by the Branch and confirmed by letter at the earliest opportunity.

SCHEDULE

Calculation of the Mandatory Cost

1. The Mandatory Cost is an addition to the interest rate to compensate the Bank for the cost of compliance with (a) the requirements of the Bank of England and/or the Financial Services Authority (or, in either case, any other authority which replaces all or any of its functions) or (b) the requirements of the European Central Bank.

2. On the first day of each Interest Period (or as soon as possible thereafter) the Bank shall calculate, as a percentage rate, a rate per annum (the “Additional Cost Rate”) in accordance with the paragraphs set out below.

3. The Additional Cost Rate for the Bank if lending from a Facility Office in a Participating Member State will be the percentage notified by the Bank to the Borrower as being its reasonable determination of the cost of complying with the minimum reserve requirements of the European Central Bank in respect of Advances made from that Facility Office.

4. The Additional Cost Rate for the Bank if lending from a Facility Office in the United Kingdom will be calculated as follows:

(a) in relation to the sterling Advance:

AB + C(B-D) + E x 0.01		per cent. per annum
100 – (A + C)

(b) in relation to an Advance in any currency other than sterling:

E x 0.01		per cent. per annum.
300		per cent. per annum.

Where:

A is the percentage of Eligible Liabilities (assuming thse to be in excess of any stated minimum) which the Bank is from time to time required to maintain as an interest free cash ration deposit with the Bank of England to comply with cash ration requirements.

B is the percentage rate of interest (excluding the Bank’s margin and the Mandatory Cost and, if the Loan is an overdue amount, the additional rate of interest specified in clause 14.2) payable for the relevant Interest Period on the Advance.

C is the percentage (if any) of Eligible Liabilities which the Bank is required from time to time to maintain as interest bearing Special Deposits with the Bank of England.

D is the percentage rate per annum payable by the Bank of England to the Bank on interest bearing Special Deposits.

E is designed to compensate the Bank for amounts payable under the Fees Rules and is calculated as the rate of charge payable by the Bank to the Financial Services Authority pursuant to the Fees Rules in respect of the relevant financial year of the Financial Services Authority (calculated for this purpose by the Bank as being the average of the Fee Tariffs applicable to the Bank for that financial year) and expressed in pounds per £1,000,000 of the Tariff Base of the Bank.

5. For the purposes of this Schedule:

(a) “Eligible Liabilities” and “Special Deposits” have the meanings given to them from time to time under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the Bank of England;

(b) “Fees Rules” means the rules on periodic fees contained in the FSA Supervision Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits;

(c) “Fee Tariffs” means the fee tariffs specified in the Fees Rules under the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee required pursuant to the Fees Rules but taking into account any applicable discount rate); and

(d) “Tariff Base” has the meaning given to it in, and will be calculated in accordance with, the Fees Rules.

6. In application of the above, formulae, A, B, C and D will be included in the formulae as percentages (i.e. 5 per cent. Will be included in the formula as 5 and not as 0.05). A negative result obtained by subtracting D from B shall be taken as zero. The resulting figures shall be rounded upward, if necessary, to the next 1/16%.

7. Any determination by the Bank pursuant to this Schedule in relation to a formula, the Mandatory Cost, an Additional Cost Rate or any amount payable to the Bank shall, in the absence of manifest error, be conclusive and binding on the parties hereto.

8. The Bank may from time to time, after consultation with the Borrower, determine and notify to the Borrower any amendments which are required to be made to this Schedule in order to comply with any change in law, regulation or any requirements from time to time imposed by the Bank of England, the Financial Services Authority or the European Central Bank (or, in any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest error, be conclusive and binding on the parties hereto.

EX-31.1 4 a04-5263_1ex31d1.htm EX-31.1

Exhibit 31.1

UNOVA, INC.
CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Larry D. Brady, certify that:

1. I have reviewed this quarterly report on Form 10-Q of UNOVA, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2004

/s/ Larry D. Brady
Larry D. Brady
Chief Executive Officer

EX-31.2 5 a04-5263_1ex31d2.htm EX-31.2

Exhibit 31.2

UNOVA, INC.
CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Michael E. Keane, certify that:

1. I have reviewed this quarterly report on Form 10-Q of UNOVA, Inc.;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2004

/s/ Michael E. Keane
Michael E. Keane
Chief Financial Officer

EX-32.1 6 a04-5263_1ex32d1.htm EX-32.1

Exhibit 32.1

CERTIFICATION
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(SUBSECTIONS (a) AND (b) OF SECTION 1350,
CHAPTER 63 OF TITLE 18, UNITED STATES CODE)

In connection with the Quarterly Report on Form 10-Q of UNOVA, Inc. (the “Company”) for the period ended March 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Larry D. Brady, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, that:

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

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

/s/ Larry D. Brady
Larry D. Brady
Chief Executive Officer
May 10, 2004

EX-32.2 7 a04-5263_1ex32d2.htm EX-32.2

Exhibit 32.2

CERTIFICATION
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(SUBSECTIONS (a) AND (b) OF SECTION 1350,
CHAPTER 63 OF TITLE 18, UNITED STATES CODE)

In connection with the Quarterly Report on Form 10-Q of UNOVA, Inc. (the “Company”) for the period ended March 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael E. Keane, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, that:

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

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

/s/ Michael E. Keane
Michael E. Keane
Chief Financial Officer
May 10, 2004