EXHIBIT 4
RECONCILIATION AGREEMENT
This RECONCILIATION AGREEMENT (this "AGREEMENT") is entered into as of
December 31, 1998 by and among Encore Computer Corporation, a Delaware
corporation, Encore Computer International, Inc., a Delaware corporation, Encore
Computer U.S., Inc., a Delaware corporation, Xxxxx Electronics, Inc., an Ohio
corporation, and Encore Real Time Computing, Inc., a Delaware corporation
(formerly Encore Acquisition Corp.)
INTRODUCTION
The parties hereto entered into that certain Asset Purchase Agreement
dated as of June 1, 1998, with respect to the purchase of certain assets and the
assumption of certain liabilities of Encore Computer Corporation and its
affiliates (as amended to the date hereof, the "PURCHASE AGREEMENT"). The
parties are unable to collect all of the requisite data prior to Closing with
respect to their respective payment obligations under the Management Agreement,
the Loan Agreement, the Note and the Guaranty or relating to the expenses of the
Business and other obligations and amounts payable or receivable with respect to
the Business (collectively, the "OBLIGATIONS"). In addition, a dispute has
arisen between the parties with respect to the accuracy of certain
representations and warranties set forth in the Purchase Agreement. Also, as a
result of that certain Amendment Number Two to the Purchase Agreement dated as
of the date hereof (the "AMENDMENT"), certain items in the Disclosure Schedule
may need to be modified. The parties desire that the Closing occur and to
provide for the reconciliation and satisfaction of the Obligations and for the
resolution of such disputes and any other disputes that may arise as a result of
the modification of the Disclosure Schedule on the terms set forth in this
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINED TERMS. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the Purchase
Agreement.
2. RECONCILIATION OF OBLIGATIONS. Within thirty (30) days following the
Closing, the Company shall prepare a schedule showing, as of the Closing Date:
(a) all amounts payable pursuant to the Management Agreement; (b) all amounts
payable pursuant to the Loan Agreement, the Note and the Guaranty; (c) all
expenses that are allocable (pursuant to the Purchase Agreement) to one party
hereto (or an affiliate thereof) but which have been paid or otherwise satisfied
by another party hereto (or an affiliate thereof) and for which the paying party
has not been reimbursed; (d) all other obligations or amounts payable that are
allocable (pursuant to the Purchase Agreement) to one party hereto (or an
affiliate thereof) but which have been paid or otherwise satisfied by another
party hereto (or an affiliate thereof) and for which the paying party has not
been reimbursed; (e) all revenues or other amounts receivable that are allocable
(pursuant to the Purchase Agreement) to one party hereto (or an affiliate
thereof) but which have been collected or received by another Party hereto (or
an affiliate thereof) and which have not been remitted to the party to which
such amount is allocable; (f) any adjustments as the result of the modification
of the Disclosure Schedule by the Seller; (g) any adjustments in connection with
that certain account receivable heretofore owed to the Seller by CLG
Incorporated and included by the Seller among the receivables to be transferred
pursuant to the Purchase Agreement; (h) all amounts payable to the Buyer with
respect to tax benefits pursuant to Section 24 of the Amendment; and (i) the net
amount payable after setting the foregoing amounts off against each other (the
"PAYMENT BALANCE") together with a statement as to the party which owes such
amount, the party to which such amount is owed, and the origin or nature of such
obligation. The Company shall provide a copy of such schedule, and any
modification of the Disclosure Schedule, to the Buyer no later than thirty (30)
days after the Closing Date. The Buyer shall have the right to review the books
and records of the Company for a period of thirty (30) days after receiving the
Payment Balance, to verify and confirm the accuracy thereof. If, after such
review, the Buyer agrees with the Payment Balance, the Buyer shall promptly (and
in any event within thirty (30) days after receiving the Payment Balance) notify
the Company and, if the Payment Balance is negative, the Company shall pay such
amount to the Buyer and, if the Payment Balance is positive, the Buyer shall pay
such amount to the Company, in either event together with interest on such
amount from the date of this Agreement to the date of payment at the rate of ten
percent (10%) per annum. Any such payment shall be made by wire transfer of
immediately available funds, to an account designated by the payee, within five
(5) days of the delivery of the Buyer's notice to the Company. If, after such
review, the Buyer objects to the Payment Balance, the Buyer shall promptly
provide to the Company a detailed statement indicating the basis for the Buyer's
objections, and the Buyer and the Company shall meet and confer in an effort to
resolve such disagreement in good faith and, whether or not there is such a
disagreement, the Buyer shall propose an allocation of the Purchase Price and
the Assumed Liabilities among the Purchased Assets and the noncompetition
covenant of the Seller in Section 4.9 of the Purchase Agreement. In the event
that the Buyer and the Company are unable to resolve a disagreement as to the
Payment Balance or the allocation within thirty (30) days (or such longer period
as the Buyer and the Company may agree), the Payment Balance or the allocation,
as the case may be, shall be determined by such accounting firm or arbitrator as
the Buyer and the Company may agree upon and the decision of such accounting
firm or arbitrator shall be final and binding upon the parties. The expense of
retaining such accounting firm shall be borne equally by the parties. Within
five (5) days after the determination of the Payment Balance pursuant to either
of the two immediately preceding sentences, the Company shall pay to the Buyer
the amount by which the Payment Balance is negative or the Buyer shall pay to
the Company the amount by which the Payment Balance is positive as the case may
be, by wire transfer of immediately available funds to an account designated by
the payee. In the event that fifty percent (50%) of the amount of the tax
benefit actually realized with respect to Section 24 of the Purchase Agreement
is greater or less than the amount determined by the parties with respect to
Section 2(h) above, the Seller shall pay to the Buyer, or the Buyer shall pay to
the Seller, respectively, the amount of such excess or deficit in such party's
share of the tax benefits promptly upon the determination of such difference.
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3. RAYTHEON DISPUTE. The issues regarding the claims set forth by
Raytheon Corporation pursuant to its letter dated June 1, 1998 (the "RAYTHEON
CLAIM") have been resolved in accordance with the terms of that certain letter
agreement among the Seller, the Buyer and Raytheon Corporation dated June ___,
1998.
4. RELEASE. To the extent that the resolution of the Raytheon Claim
pursuant to Paragraph 3 above results in or causes a breach or inaccuracy of a
representation or warranty, or a failure to perform any covenant or agreement,
contained in the Purchase Agreement, each party hereto irrevocably releases and
forever discharges each other party hereto from any Losses which arise or result
from such breach, inaccuracy or failure to perform.
5. COMPENSATION. As compensation in respect of the Raytheon Claim, and
the release with respect thereto set forth in Section 4 above, the Company shall
pay to the Buyer Two Hundred Fifty Thousand Dollars ($250,000) in immediately
available funds at the Closing. The Buyer may in its discretion credit the
amount of such compensation against the Purchase Price payable at the Closing,
and remit the net amount to the Company in satisfaction of the Purchase
Agreement.
6. SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law, rule, regulation or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
7. AMENDMENTS. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
8. FULL FORCE AND EFFECT. Except as provided in this Agreement, all of
the terms and provisions of the Purchase Agreement shall remain unmodified and
in full force and effect and are hereby ratified and confirmed.
9. GOVERNING LAW. The internal laws of the State of Delaware shall
govern and be used to construe this Agreement without giving regard to
principles of conflict of laws thereof.
10. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, and all of which shall constitute one and
the same instrument.
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the date first above written.
ENCORE REAL TIME COMPUTING, INC.
By:
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Name:
Title:
ENCORE COMPUTER CORPORATION
By:
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Name:
Title:
ENCORE COMPUTER U.S., INC.
By:
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Name:
Title:
ENCORE COMPUTER INTERNATIONAL, INC.
By:
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Name:
Title:
XXXXX ELECTRONICS INC.
By:
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Name:
Title:
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