**Exhibit 10.20**

 

**ADVANCED POWER TECHNOLOGY, INC.**

 

**EMPLOYMENT AGREEMENT**

**(MANAGEMENT & TECHNICAL PERSONNEL)**

EXEMPTSALARIED EMPLOYEES

 

THIS EMPLOYMENT AGREEMENT ismade and entered into this 23 day of February, 2004, by andbetween ADVANCED POWER TECHNOLOGY, INC., a Delaware corporation (“Company”) and George J. Krausse III, anindividual (“Employee”).

 

WHEREAS,Company desires to employ Employee upon the terms and conditions hereinafterset forth, and Employee desires to be so employed;

 

NOW, THEREFORE, in considerationof the mutual promises contained herein, Company and Employee agree as follows:

 

1.******                                   ****EMPLOYMENT**

Companyhereby employs Employee as Vice President Commercial RF Products of theCompany with the powers and duties consistent with such position, and Employeehereby accepts such employment, on the terms and conditions hereinafter setforth. Employee, subject to the control of the Management of Company, agrees todiligently utilize his or her best efforts to further the interests of theCompany and to discharge those responsibilities and duties required for theplanning, development, operation, promotion and advancement of the Company, andsuch other duties as Company may require.

 

2.                                       **TERM AND TERMINATION**

 

2.1                               This Agreement shall terminate upon the happeningof any of the following events:

 

(a)                                  By mutual agreement between Company andEmployee;

 

(b)                              Unilaterally by Employee without cause;

 

(c)                               Upon the death of Employee

 

(d)                               Upon the good faith determination of theChief Executive Officer of the Company that Employee has become so physicallyor mentally disabled as to be incapable of satisfactorily performing his or herduties. (Refer to Sick Pay Policy.)

 

(e)                                By the Company for cause, that is to say onlyupon Employee’s conviction of a felony, commission of any material act ofdishonesty against the Company, material breach of this Agreement by Employee,or misconduct by Employee having a substantial adverse effect on the businessof the Company.

 

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(f)                                  By the Company without cause, in which event(Section 2.2. to the contrary notwithstanding) the Company will continue to payEmployee the full amount due as salary for a period of thirty days followingnotice of termination.

 

2.2                               In the event that this Agreement isterminated pursuant to Paragraph 2.1, neither Company nor Employee shall haveany remaining duties or obligations hereunder, except that Company shall pay toEmployee, or his or her representatives, such compensation as is due pursuant to Sub-Section 2.1 (f) andSection 3. The provisions of Section 4-9 shall survive termination.

 

2.3                               This Agreement shall not be terminated byany:

 

(a)                               Merger, whether the Company is or is not thesurviving corporation; or

 

(b)                              Transfer of all or substantially all of theassets of the Company; or

 

(c)                               Voluntary or involuntary dissolution orliquidation of the Company; or

 

(d)                              Consolidation to which the Company is aparty.

 

In the event of any suchmerger, transfer of assets, dissolution, liquidation, or consolidation, thesurviving corporation or transferee, as the case may be, shall be bound by andshall have the benefits of this Agreement, and Company shall take all action toensure that such corporation or transferee is bound by the provisions of thisAgreement.

 

3.                                       **COMPENSATION**

 

3.1                               As the total consideration for the serviceswhich Employee agrees to render hereunder, Employee shall be entitled to thefollowing:

 

(a)                                Beginning on February 23, 2004 an annual basesalary at the rate of   One Hundred Twenty Thousand One HundredTwenty   Dollars ($  120,120  ), subject toincreases at the discretion of Company, in accordance with the regular andordinary payment practices of Company. All payroll payments shall be subject todeduction of payroll taxes and related deductions as required by law.

 

(b)                               Participation in all plans or programssponsored by Company for employees in general, including without limitationparticipation in any group health plan, medical reimbursement plan and lifeinsurance plan, pension and profit sharing plan.

 

(c)                                Reimbursement of any and all reasonable anddocumented expenses incurred by Employee from time to time in the performanceof his or her duties hereunder, including without limitation entertainmentexpenses and air fare, taxi, automobile, and other traveling expenses.

 

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(d)                              Refer to Vacation Policy.

 

(e)                               Such other benefits as Company, in its solediscretion, may from time to time provide.

 

3.2                               Subject to the limitations contained inSection 2.1, if Employee shall be absent on account of personal injuries orphysical or mental disability, Employee shall continue to receive all paymentsprovided in this Agreement; provided, however, that any such payments may, atthe sole option of Company, be reduced by any amount that Employee receives forthe period covered by such payments as disability compensation under insurancepolicies mantained by Company or under governmental programs.

 

3.3                               Company shall have the right to deduct fromthe compensation due to Employee hereunder any and all sums required for socialsecurity and withholding taxes and for any other federal, state, or local taxor charge which may be in effect or hereafter enacted or required as a chargeon the compensation of Employee.

 

3.4                               Employee shall repay relocation expenses paidby Company if he or she voluntarily termnates employment within one year fromdate of employment.

 

3.5                               Any payments, whether incurred by the Companyor by an employee or officer of the Company on behalf of and reimbursed by theCompany, including, without limitation, salary, commission, bonus, interest,rent or travel and entertainment expenses, which are disallowed in whole or inpart as a deductible expense for federal income tax purposes on the groundsthat said payments constitute unreasonable compensation to an employee orofficer, shall be repaid by the employee or officer to the Company to the fullextent of the disallowance, if the Board, in its discretion, agrees to enforcethe repayment of each such amount disallowed.

 

4.                                       **NON-DISCLOSURE**

 

Employee shall not discloseor use in any way, either during his or her employment with Company orthereafter, except as required in the course of his or her employment withCompany, any confidential business or technical information or trade secretacqured during his or her employment by Company, whether or not conceived of,discovered, developed or prepared by Employee, including without limitation anyformulae, patterns, inventions, procedures, processes, plans, devices,products, operations, techniques, know-how, specifications, data, compilationsof information, customer lists, records, financing or production methods,costs, employees, and information concerning specific customer requirements,preferences, practices and methods of doing business, all of which areexclusive and valuable property of Company.

 

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5.                                       **ASSIGNMENT OF PROPRIETARYINTEREST**

 

Employee hereby assigns andtransfers to Company his or her entire right, title and interest in and to anyand all inventions, improvements, processes, sketches, methods of production,designs, discoveries, ideas (whether or not shown or described in writing) orservices (collectively “inventions”) whether or not patentable, which are made,conceived or first reduced to practice by Employee with Company’s equipment,supplies, facilities, or trade secrets and on Company’s time, or which relatesto the business of Company or Company’s actual or anticipated research orbusiness development, or which results from any work performed by the Employeefor Company. Employee agrees that Company shall have the right to keep suchinventions as trade secrets. To permit Company to claim rights to which it maybe entitled, the Employee agrees to promptly disclose to Company in confidenceall inventions which the employee makes, conceives, or first reduces topractice during the course of his or her employment or within one year afterterminatin thereof if such inventions relate to a product, process or serviceupon which Employee worked during the period of his or her employment byCompany, and all patent or copyright applications filed by the Employee withina year after termination of this Agreement. Both during and after the period ofemployment with Company, Employee shall further assist Company in obtainingpatents or copyrights on all inventions deemed patentable or copyrightable byCompany in the United States and in all foreign countries, and shall executeall documents and do all things necessary to obtain letters patent and/orcopyrights, to vest Company with full and extensive title thereto, and toprotect Company’s rights against infringement by others. Employee furtheragrees that any patent application fled within a year after termination of hisor her employment on an invention for which the Employee was partially ortotaly responsible shall be presumed to relate to an invention made during theterm of the Employee’s employement unless the Employee can provide evidence tothe contrary.

 

6.                                       **TANGIBLE ITEMS AS PROPERTYOF COMPANY**

 

Excluding any personalproperty owned by Employee prior to the date hereof, all files, records,documents, drawings, plans, specifications, manuals, books, forms, receipts,notes, reports, memoranda, studies, data, calculations, recordings, catalogues,compilations of information, correspondence and all copies, abstracts andsummaries of the foregoing, instruments, tools and equipment and all otherphysical items related to the business of Company, other than a merely personalitem of a general professional nature, whether of a public nature or not, andwhether prepared by Employee or not, are and shall remain the exclusiveproperty of Company and shall not be removed from the premises of Company underany circumstances whatsoever without the prior written consent of Company, andthe same shall be promptly returned to Company by Employee on the expiration ortermination of his or her employment with Company or at any time prior theretoupon the request of Company.

 

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7.                                       **SOLICITATION OF CUSTOMERSAND EMPLOYEES:**

 

Both during and after theperiod of employment, Employee shall not in any way attempt to interfere withthe business of Company and, shall not call on, solicit, interfere with or attemptto entice away, either directly or indirectly, any employee or customer ofCompany with whom he or she became acquainted during his or her employment withCompany, either for his or her own benefit or purposes or for the benefit orpurposes of any other person, partnership, corporation, firm, association orother business organization, entity or enterprise.

 

8.                                       **NONCOMPETITION**

 

Except as set forth in thisSection 8, for a period of 18 months after termination of this Agreement,Employee shall not, directly or indirectly, engage or participate in, assist orhave any interest in any person, partnership, corporation, firm, association orother business organization, entity or enterprise (whether as an employee,officer, director, agent, security holder, creditor, consultant or otherwise)which, directly or indirectly, manufactures, designs, develops, engineers,markets or otherwise produces or offers for sale or sells inventions, products,processes, systems or services the same as, similar to or competitive with anydevices, inventions, products, processes, systems or services manufactured,designed, developed, engineered, marketed or otherwise produced or offered forsale or sold by Company (or any successor thereof) in the United States orabroad.

 

The parties intend that thecovenant contained in this Section 8 shall be construed as a series of separatecovenants. If, in any judicial or arbitration proceeding, a court shall refuseto enforce any of the separate covenants deemed included in this Section 8, thenthis unenforceable covenant shall be deemed eliminated from these provisionsfor the purpose of those proceedings to the extent necessary to permit theremaining separate covenants to be enforced. Moreover, if, in any judicial orarbitration proceeding, the term of non-competition shall be determined to beunreasonable, the parties agree that the term shall be shortened to the maximumperiod deemed reasonable under the laws of the state of Oregon, and thatmodified period shall be enforceable as though originally set forth herein.

 

9.                                       **INJUNCTIVE RELIEF**

 

Employee hereby acknowledgesand agrees that it would be difficult to fully compensate Company for damagesresulting from the breach or threatened breach of Sections 4, 5, 6, 7, or 8 ofthis Agreement, and accordingly, that Company shall be entitled to temporaryand injunctive relief, including temporary restraining orders, preliminaryinjunctions and permanent injunctions, to enforce such Sections without thenecessity of proving actual damages therewith. This provision with respect toinjunctive relief shall not, however, diminish Company’s right to claim andrecover damages.

 

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10.                               **INDEMNIFICATION**

 

Company shall, to themaximum extent permitted by law, indemnify and hold Employee harmless againstexpenses, including reasonable attorney’s fees, judgments, fines, settlemens,and other amounts actually and reasonably incurred in connection with anyproceeding arising by reason of Employee’s employment with Company if Employee,in incurring the above expenses, acted in good faith and in a manner Employeebelieved to be in the best interests of Company and, in the case of a criminalproceeding, had no reasonable cause to believe Employee’s conduct was unlawful.

 

11.                               **COPIES OF AGREEMENT**

 

Employee authorizes Companyto send a copy of this Agreement to any and all future employers which he orshe may have, and to any and all persons, firms, and corporations, with whom heor she may become affiliated in a business or commercial enterprise, and toinform any and all such employers, persons, firms or corporations that Companyintends to exercise its legal rights should Employee breach the terms of thisAgreement or should another party induce a breach of Employee’s part.

 

12.                               **SEVERABLE PROVISIONS**

 

The provisions of thisAgreement are severable and if anyone or more provisions may be determined tobe illegal or otherwise unenforceable, in whole or in part, the remainingprovisions, and any partially unenforceable provisions to the extentenforceable, shall nevertheless be binding and enforceable.

 

13.                               **BINDING AGREEMENT**

 

This Agreement shall inureto the benefit of and shall be binding upon Company, its successors andassigns.

 

14.                               **CAPTIONS**

 

The Section captions are insertedonly as a matter of convenience and reference and in no way define, limit ordescribe the scope of this Agreement or the intent of any provisions hereof.

 

15.                               **ENTIRE AGREEMENT**

 

This Agreement, contains theentire agreement of the parties relating to the subject matter hereof, and theparties hereto have made no agreements, representations or warranties relatingto the subject matter of this Agreement that are not set forth herein. Nomodification of this Agreement shall be valid unless made in writing and signedby the parties hereto.

 

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16.                               **GOVERNING LAW**

 

This Agreement shall begoverned and construed in accordance with the laws of the state of Oregon.

 

17.                               **NOTICES**

 

Any notice or demandrequired or permitted to be given hereunder shall be in writing and shall bedeemed effective upon the personal delivery thereof or, if mailed, forty-eighthours after having been deposited in the United States mails, postage prepaid,and addressed to the party to whom it is directed at the address set forthbelow:

 

If to Company:

 
| ADVANCED POWER TECHNOLOGY,  INC. |
|----------------------------------|
| 405 S. W. Columbia Street        |
| Bend, Oregon 97702               |
|                             |
|                             |
| If to EMPLOYEE:                  |   |
|                             |   |
| George J Krausse III             |   |
|                             |
| 4236 Durango PL.                 |   |
|                             |
| Fort Collins CO 80526            |   |
|                                  |  |  |

 

 

Either party may change theaddress to which such notices are to be addressed by giving the other partynotice in the manner herein set forth.

 

IN WITNESS WHEREOF, theparties have executed this Agreement on the day and year first written above.

 
|   | ADVANCE POWER TECHNOLOGY,  INC.               |
|--------|-----------------------------------------------|
|   | A Delaware corporation  (“Company”) |
|   |                                          |
|   | By                                            |   |   |
|   | Patrick Sireta                                |
|   | President and Chief  Executive Officer        |
|   |                                          |
|   |                                          |
|   | (“Employee”)                        |

 

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