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
Agreement and thereafter only in accordance with the registration requirements
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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 from Austin 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
Atlas or its properties, and that they know of no facts or circumstances
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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
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and D-3, respectively.
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.
By:----------------------------------------
Name:
Title:
-----------------------------------------
XXXXXX X. PRIME
-----------------------------------------
XXXXXXX X. XXXXXX
ATLAS TECHNOLOGIES, INC.
By:-----------------------------------------
Name:
Title:
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