AGREEMENT dated July 22, 1998, by and between PRODUCTIVITY TECH NOLOGIES
CORP. ("PTC"), a Delaware corporation, XXXXXX X. PRIME ("Prime"), residing at
0000 Xxxxxx, Xxxxx, Xxxxxxxx 00000, XXXXXXX X. XXXXXX ("Xxxxxx"), residing at
0000 Xxxxxxxxxx Xxxxx, Xxxxxxxx, Xxxxxxxx 00000, and ATLAS TECHNOLOGIES, INC.
("Atlas"), a Michigan corporation.
WHEREAS, PTC, Prime and Austin, doing business as AMS Holding Company, and
Atlas are parties to a Merger Agreement dated December 18, 1995 (the "Merger
Agreement"); and
WHEREAS, Prime and Austin are each parties to individual Employment
Agreements with Atlas dated May 23, 1996 (respectively, the "Prime Agreement"
and the "Austin Agreement" and, collectively, the "Employment Agreements"); and
WHEREAS, the parties desire to settle certain issues arising under the
Merger Agreement and to amend the Employment Agreements, all as set forth
herein;
IT IS AGREED:
1. Defined Terms. Capitalized terms used herein and not otherwise defined
shall have the meanings assigned to them in the Merger Agreement.
2. Termination of Merger Agreement Escrows. The Adjustment Escrow Agreement
and the Indemnity Escrow Agreement are hereby terminated and all amounts in the
escrow accounts established thereunder (including accrued interest) shall be
distributed and paid to AMS Holding Company. The parties agree that there are no
amounts due to PTC and Atlas pursuant to Sections 2.04 and 9.01 of the Merger
Agreement.
3. Amendment of Employment Agreements. The Prime Agreement and the Austin
Agreement are hereby amended to read in the forms annexed hereto as Exhibits A
and B, respectively. Except as provided in Section 4 hereof, all obligations of
Atlas to make any further payments pursuant to Sections 2.6 and 2.7 of the
Employment Agreements as in effect prior to the date hereof are hereby
terminated.
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4. Termination of Bonus Escrow Agreement. The Bonus Escrow Agreement dated
January 27, 1998 among Atlas, NBD Bank, as escrow agent, Prime and Austin is
hereby terminated. Funds in the escrow account established thereunder (including
accrued interest) shall be distributed and paid as follows: $490,000 to Atlas,
$560,000 to the escrow account referred to in Section 5 below and the balance of
approximately $267,000 to Prime and Austin in equal shares. Payment of such
amounts to Prime and Austin constitutes payment of all obligations of Atlas
pursuant to Section 2.6 of the Employment Agreements.
5. Tax Indemnity and Establishment of Tax Escrow. Prime and Austin, jointly
and severally, shall indemnify and hold harmless Atlas from and against, and
shall reimburse Atlas for, all amounts disallowed by the Internal Revenue
Service ("IRS") or additional taxes assessed by the IRS, and penalties and
interest with respect thereto, with respect to research and experimentation
credits claimed by Atlas for the fiscal years ended June 30, 1991 through June
30, 1995 in excess of an aggregate amount of disallowances, additional taxes,
penalties and interest (including any thereof arising from the utilization of
such credits in years subsequent to June 30, 1995) of $187,000; provided that
the total amount of payments by Prime and Austin shall not exceed $560,000 plus
an amount equal to all interest earned on the amounts deposited in escrow
pursuant to the Tax Indemnity Escrow Agreement being entered into by Prime,
Austin and Atlas and NBD Bank, as escrow agent, concurrently with the execution
of this Agreement. Concurrently with the execution of this Agreement and the Tax
Indemnity Escrow Agreement Prime and Austin shall deposit the sum of $560,000 in
the escrow account established pursuant to the Tax Indemnity Escrow Agreement as
security for their obligations pursuant to this Section 5. Prime and Austin
shall use their best efforts on behalf of Atlas to support Atlas's contest of
such claims by the IRS. All costs incurred in contesting the tax dispute,
including the cost of appeal before the IRS or subsequent costs incurred before
the United States Tax Court, will be paid by Atlas without any ensuing claim
against Prime and Austin for indemnification for any such costs incurred.
6. Stock Issuance. As further consideration for the covenants of Prime and
Austin hereunder, within ten business days after the date hereof, PTC shall
issue and deliver to each of The Xxxxxx X. Prime Revocable Trust and The Xxxxxxx
X. Xxxxxx Revocable Trust 150,000 shares of the common stock, par value $.001
per share, of PTC. Prime and Austin agree that such shares shall not be
assignable or transferable or hypothecated by them or by such Trusts, by
operation of law or otherwise, for a period of three years from the date of this
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Agreement and thereafter only in accordance with the registration requirements
of the Securities Act of 1933, as amended, or an exemption therefrom and that
the certificate representing such shares shall bear an appropriate legend to
such effect.
7. Austin Directorship. PTC shall use its best efforts to cause Austin to
be nominated for election as a director of PTC during the term of the Austin
Agreement, commencing with the next meeting of stockholders of PTC at which
directors are elected.
8. Representations by Prime and Austin.
(a) Prime and Austin hereby, jointly and severally, represent and warrant
to the Board of Directors of PTC that, since July 1, 1997, through the date of
this Agreement, except as set forth in a letter dated June 19, 1998 and the
amending letter of July 22, 1998 to PTC, they have not received written or
verbal notice not disclosed by them in writing to the Board of Directors of PTC:
(i) from any person, including without
limitation governmental agencies and customers, suppliers and
employees (each a "Person") of Atlas making a claim (which
shall not include invoices and other similar commercial
correspondence rendered in the ordinary course of business) or
threatening or initiating legal or administrative proceedings,
including without limitation claims or legal proceedings
arising from commercial or employment relationships or
activities affecting the environment,
(ii) from any Person canceling a customer
purchase order or terminating a customer relationship or a
supplier relationship of Atlas or threatening to do any of the
foregoing, or
(iii) from any Person, including without
limitation federal, state and local taxing authorities,
advising of tax audits, tax deficiencies or other tax
liabilities of Atlas,
in each case which could reasonably be expected to have a material adverse
effect upon the business, condition (financial or otherwise) or prospects of
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Atlas or its properties, and that they know of no facts or circumstances
pertaining to the foregoing enumerated items which could reasonably be expected
to give rise to the giving of any such notice which have not been disclosed to
the Board of Directors of PTC.
(b) The representations and warranties contained in this Section 8 are for
the benefit of PTC and Atlas. In the event of a claim of a breach of any of the
foregoing representations and warranties arising from the alleged receipt of
verbal notice, PTC and Atlas shall have the burden of establishing such breach
by clear and convincing evidence.
(c) Notwithstanding anything to the contrary in this Agreement, (x) Prime
and Austin shall have no liability to PTC or Atlas as a result of any breach of
the representations and warranties in this Section 8 unless the loss, damage or
expenses ("Damages") incurred by PTC and Atlas as a result of such breach
(exclusive of attorneys' fees and expenses) is at least $150,000 but if the
Damages incurred by PTC and Atlas with respect to any such breach are at least
$150,000 the liability of Prime and Austin with respect thereto shall be for the
entire amount of such Damages, including the first $150,000 thereof, and the
reasonable attorneys' fees and expenses of PTC and Atlas, and (y) the maximum
amount of liability of Prime and Austin with respect to any breach of the
representations and warranties in this Section shall be the amount outstanding
and unpaid pursuant to Article 2A of their respective Employment Agreements
("Article 2A") at the time a claim is made and the maximum amount of their
liability for all such breaches shall not exceed $830,282.21 each less the sum
of all payments made pursuant to Article 2A. Subsequent to any date on which
payment is specified to be made pursuant to Article 2A, Atlas and PTC will have
no further right to seek indemnification with respect to any amount for which
payment has become due under Article 2A unless written notice of breach has been
received by Prime and Austin on or prior to the date such payment is due.
Indemnification payments pursuant to this Section shall be charged equally to
Prime and Austin. All claims for breaches of this Section shall be determined by
arbitration in New York, New York in accordance with the Commercial Arbitration
Rules of the American Arbitration Association. A claim shall be deemed made
hereunder when a notice of arbitration is delivered to the American Arbitration
Association in accordance with such rules.
9. Notices to Escrow Agents. Concurrently with the execution of this
Agreement, the parties shall execute and deliver to the escrow agents under the
Adjustment Escrow Agreement, the Indemnity Escrow Agreement and the Bonus Escrow
Agreement notices in the forms annexed hereto as Exhibits X-0, X-0 and D-3,
respectively.
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10. General Provisions.
(a) All notices and other communications given or made pursuant hereto
shall be in writing and shall be deemed to have been duly given or made as of
the date delivered or mailed if delivered personally or by nationally recognized
courier or mailed by registered mail (postage prepaid, return receipt requested)
or by telecopy to the Parties at the following addresses (or at such other
address for a party as shall be specified by like notice, except that notices of
changes of address shall be effective upon receipt):
(i) If to PTC or Atlas:
c/o Xxxxxx X. Xxxxxxx
Xxxxxxx & Co.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No.: 000-000-0000
with a copy to:
Xxxxxxxx Xxxxxx & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxx, Esq.
Telecopier No.: 000-000-0000
(ii) If to Prime and Austin:
Xxxxxx X. Prime
0000 Xxxxxx
Xxxxx, Xxxxxxxx 00000
Xxxxxxx X. Xxxxxx
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
with a copy to:
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Xxxxx, Xxxxxxxxx & Xxxxxxxx
0000 Xxxxxx Xxxxxxx - Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxx, Esq.
Telecopier No.: 000-000-0000
(b) Amendment. This Agreement may not be amended or modified except by an
instrument in writing signed by the parties.
(c) Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(d) Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
(e) Entire Agreement. This Agreement and the Schedules and Exhibits hereto
constitute the entire agreement and supersede all prior agreements and
undertakings, both written and oral, between the parties with respect to the
subject matter hereof and, except as otherwise expressly provided herein, are
not intended to confer upon any other person any rights or remedies hereunder.
(f) Benefit. This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of the parties.
(g) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the law of the State of New York.
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IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement on the date first above written.
PRODUCTIVITY TECHNOLOGIES CORP.
/s/ Xxxxx X. Xxxxxx
By:_______________________________
Name: Xxxxx X. Xxxxxx
Title: Chief Financial Officer
/s/ Xxxxxx X. Prime
_______________________________
XXXXXX X. PRIME
/s/ Xxxxxxx X. Xxxxxx
______________________________
XXXXXXX X. XXXXXX
ATLAS TECHNOLOGIES, INC.
/s/ Xxxxxx X. Prime
By:______________________________
Name: Xxxxxx X. Prime
Title: Chief Executive Officer
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