AGREEMENT  dated July 22, 1998, by and between  PRODUCTIVITY  TECH NOLOGIES
CORP. ("PTC"), a Delaware  corporation,  RONALD M. PRIME ("Prime"),  residing at
6438 Brewer,  Flint,  Michigan 48507, MICHAEL D. AUSTIN ("Austin"),  residing at
3246 Fieldstone Drive,  Flushing,  Michigan 48433, 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 Ronald M. Prime Revocable Trust and The Michael
D. Austin  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  D-1,  D-2 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 Samuel N. Seidman
                Seidman & Co.
                509 Madison Avenue
                New York, New York 10022
                Telecopier No.: 212-843-1484

                with a copy to:

                Graubard Mollen & Miller
                600 Third Avenue
                New York, New York 10016
                Attention: Noah Scooler, Esq.
                Telecopier No.: 212-818-8881

       (ii)    If to Prime and Austin:

               Ronald M. Prime
               6438 Brewer
               Flint, Michigan 48507

               Michael D. Austin
               3246 Fieldstone Drive
               Flushing, Michigan 48433

               with a copy to:


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               Hicks, Schmidlin & Bancroft
               2300 Austin Parkway - Suite 120
               Flint, Michigan 48507
               Attention: Robert Bancroft, Esq.
               Telecopier No.: 810-232-5538


     (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/  Jesse A. Levine
                                    By:_______________________________
                                       Name:  Jesse A. Levine
                                       Title: Chief Financial Officer

                                        /s/ Ronald M. Prime
                                       _______________________________
                                        RONALD M. PRIME


                                        /s/ Michael D. Austin
                                        ______________________________
                                        MICHAEL D. AUSTIN


                                        ATLAS TECHNOLOGIES, INC.
 
                                            /s/ Ronald M. Prime
                                       By:______________________________
                                            Name:  Ronald M. Prime
                                            Title:  Chief Executive Officer



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