SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 26, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file no. 1-11056
ADVANCED PHOTONIX, INC.
Incorporated pursuant to the Laws of Delaware
IRS Employer Identification No. 33-0325826
1240 Avenida Acaso, Camarillo, CA 93012
(805) 987-0146
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
On February 7, 2000, 11,569,704 shares of Class A Common Stock,$.001 par value,
and 36,135 shares of Class B Common Stock, $.001 par value, were outstanding.
<PAGE>
ADVANCED PHOTONIX, INC.
INDEX
PAGE
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) 3 - 6
Consolidated Statements of Operations for the
three and nine month periods ended
December 26, 1999 and December 27, 1998 3
Consolidated Balance Sheets
at December 26, 1999 and March 28, 1999 4 - 5
Consolidated Statements of Cash Flows for the
nine month periods ended December 26, 1999 and
December 27, 1998 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 8 - 10
PART II OTHER INFORMATION 10
SIGNATURES 10
2
<PAGE>
<TABLE>
ADVANCED PHOTONIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------------------- ---------------------------------------------
December 26,1999 December 27,1998 December 26,1999 December 27,1998
---------------------- ---------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
NET SALES $ 1,346,000 $ 1,866,000 $ 4,474,000 $ 5,785,000
Cost of sales 828,000 1,115,000 3,010,000 3,530,000
------------- ------------- ------------- -------------
GROSS PROFIT 518,000 751,000 1,464,000 2,255,000
OPERATING COSTS & EXPENSES:
Research and development 203,000 146,000 605,000 351,000
Marketing and sales 211,000 237,000 723,000 771,000
General and administrative 222,000 253,000 904,000 824,000
------------- ------------- ------------- -------------
636,000 636,000 2,232,000 1,946,000
------------- ------------- ------------- -------------
OPERATING INCOME (LOSS) (118,000) 115,000 (768,000) 309,000
------------- ------------- ------------- -------------
OTHER INCOME
Interest income 29,000 29,000 83,000 91,000
Other, net (7,000) (1,000) (9,000) -
------------- ------------- ------------- -------------
22,000 28,000 74,000 91,000
------------- ------------- ------------- -------------
NET INCOME (LOSS) $ (96,000) $ 143,000 $ (694,000) $ 400,000
============= ============= ============= ==============
NET PROFIT (LOSS) Per Share $ (.01) $ 0.01 $ (.06) $ 0.04
============= ============= ============= ==============
Weighted Average Number 10,917,000 10,917,000 10,917,000 10,917,000
of Common Shares Outstanding ============= ============= ============= ==============
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
3
<PAGE>
ADVANCED PHOTONIX, INC.
CONSOLIDATED BALANCE SHEETS
December 26, 1999 March 28, 1999
UNAUDITED AUDITED
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,073,000 $ 664,000
Short-term investments - 1,867,000
Accounts receivable, less allowance
of $83,000 in December 1999
and March 1999 676,000 986,000
Inventories 1,731,000 1,551,000
Prepaid expenses and other current assets 60,000 88,000
------------- -------------
Total Current Assets 4,540,000 5,156,000
------------- -------------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS,
at cost 3,109,000 2,985,000
Less accumulated depreciation
and amortization (2,636,000) (2,474,000)
------------- -------------
473,000 511,000
OTHER ASSETS
Goodwill, net of accumulated amortization
of $278,000 in December 1999 and
$253,000 in March 1999 558,000 583,000
Patents, net of accumulated amortization
of $32,000 in December 1999 and
$28,000 in March 1999 67,000 52,000
Other 24,000 26,000
------------- -------------
649,000 661,000
------------- -------------
$ 5,662,000 $ 6,328,000
============= =============
See notes to consolidated financial statements.
4
<PAGE>
<TABLE>
ADVANCED PHOTONIX, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 26, 1999 March 28, 1999
UNAUDITED AUDITED
- -------------------------------------------------------------------- ---------------- ---------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 223,000 $ 263,000
Accrued expenses:
Salaries and employee benefits 414,000 310,000
Warranty 95,000 95,000
Other 97,000 133,000
---------------- ---------------
Total Current Liabilities 829,000 801,000
---------------- ---------------
COMMITMENTS AND CONTINGENICES
STOCKHOLDERS' EQUITY
Class A Common Stock, par value $.001 per share; authorized
50,000,000 shares;
December 26, 1999 - 10,849,260 shares issued and outstanding
March 28, 1999 - 10,849,260 shares issued and outstanding 11,000 11,000
Class B Common Stock, par value $.001 per share; authorized
4,420,113 shares;
December 26, 1999 - 68,135 shares issued and outstanding
March 28, 1999 - 68,135 shares issued and outstanding - -
Convertible Preferred Stock at redemption value; authorized
10,000,000 shares
December 26, 1999 - 80,000 shares issued and outstanding
March 28, 1999 - 80,000 shares issued and outstanding 64,000 64,000
Additional paid-in capital 22,704,000 22,704,000
Accumulated Deficit (17,946,000) (17,252,000)
---------------- ---------------
4,833,000 5,527,000
---------------- ---------------
$ 5,662,000 $ 6,328,000
================ ===============
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
5
<PAGE>
<TABLE>
ADVANCED PHOTONIX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<CAPTION>
For the nine month period ended December 26, 1999 December 27, 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (694,000) $ 400,000
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation 162,000 258,000
Amortization 29,000 28,000
Changes in assets and liabilities:
Short-term investments 1,867,000 (898,000)
Accounts receivable 310,000 (257,000)
Inventories (180,000) 214,000
Prepaid expenses and other assets 11,000 7,000
Accounts payable and accrued expenses 28,000 (338,000)
---------------- ----------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 1,533,000 (586,000)
---------------- ----------------
NET CASH USED IN INVESTING ACTIVITIES
Capital expenditures (124,000) (119,000)
---------------- ----------------
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS 1,409,000 (705,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 664,000 1,386,000
---------------- ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,073,000 $ 681,000
================ ================
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
6
<PAGE>
ADVANCED PHOTONIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 26, 1999
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) necessary for a fair presentation have been
included. Operating results for the nine month period ended December 26, 1999,
are not necessarily indicative of the results that may be expected for the
fiscal year ending March 26, 2000. For further information, refer to the
consolidated financial statements and notes thereto included in the Advanced
Photonix, Inc. (together with its subsidiary, the "Company") Annual Report on
Form 10-K for the fiscal year ended March 28, 1999.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Net Income (Loss) Per Share: Net loss per share is based on the weighted average
number of common and common equivalent shares outstanding. Net income (loss) per
share calculations are in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings per Share". Accordingly, "basic" net
income (loss) per share is computed by dividing net income (loss) by the
weighted average number of shares outstanding for the year. "Diluted" net income
(loss) per share has not been presented as the impact is either not material or
anti-dilutive.
Inventories: Inventories consist of the following:
December 26, 1999 March 28, 1999
-------------------------- ---------------------
Raw materials $ 526,000 $ 453,000
Work in progress 1,020,000 926,000
Finished products 185,000 172,000
-------------------------- ---------------------
$ 1,731,000 $ 1,551,000
========================== =====================
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
- ---------------------
NET SALES
The Company's net sales for the third quarter ("Q3 00") and nine month period
("YTD 00") ended December 26, 1999, were $1.3 million and $4.5 million,
respectively. Net sales for the Q3 00 and YTD 00 period were down 28% and 23%,
respectively, when compared to $1.9 million and $5.8 million in the comparable
periods of the prior year ("Q3 99" and "YTD 99"). The decrease in net sales was
primarily due to lower volume in military aerospace products, which decreased by
approximately 65% in Q3 00, and by 58% for YTD 00 when compared to the
comparable periods in the prior year. The Company completed deliveries on orders
related to a large military program during the second half of fiscal 1999. New
purchase orders under this military program totaling more than $400,000 have
been booked and an additional order in excess of $500,000 is anticipated during
Q4 00. Deliveries under these new orders are expected to resume during Q4 00. In
addition, orders on another military program totaling $500,000 were booked
during Q4 for deliveries during Q4 00 and Q1 of fiscal 2001. During YTD 00,
shipments of Large Area Avalanche Photodiode (LAAPD) products (included in net
sales) were 2% higher than the same period in the prior year. While YTD 00 net
sales from these products represented 7% of total net sales, the Company
anticipates increasing volume from sales of LAAPD products as markets begin to
implement this "enabling" technology.
COST OF SALES
Cost of sales decreased by $287,000 (26%) during Q3 00 and by $520,000 (15%)
during YTD 00 compared to Q3 99 and YTD 99, respectively. The decreases are
primarily attributable to lower product shipments. Cost of sales as a percent of
net sales increased by 2 percentage points in Q3 00 compared to Q3 99 and by 6
percentage points in YTD 00 compared to YTD 99 due to a number of factors,
including inefficiencies associated with lower volume, lower margins stemming
from variability in product mix, and decreased sales from engineering design.
OPERATING COSTS & EXPENSES
Research and development costs for the Q3 00 and YTD 00 period were higher by
39% and 72%, respectively, when compared to $146,000 and $351,000 in the
comparable periods of the prior year. The increase in R&D costs is primarily due
to two factors: a.) higher overhead rates due to lower overall volume and b.) an
increase in internal R&D efforts as the Company focuses on improving its current
line of LAAPD products as well as expanding into new derivatives of the patented
technology. The Company is developing an Extreme Ultra Violet LAAPD capable of
detecting low light levels well below 200 nm. In addition, the Company continues
the development of a new generation two-dimensional LAAPD Array. R&D costs have
varied significantly in the past, and may continue to do so, due to the level of
activity associated with development contracts as well as the number and
complexity of new process and product development projects, the qualification of
new process developments and customer evaluation and acceptance of new products.
8
<PAGE>
Marketing and sales expenses decreased by $26,000 (11%) to $211,000 in Q3 00
compared to Q3 99 and by $48,000 (6%) to $723,000 in YTD 00 compared to YTD 99
primarily due to a decrease in commissions paid. The Company believes its
marketing and sales expenses will increase in the near term as the Company
pursues its plan of adding additional sales personnel, increased trade show
attendance and substantial print media advertising.
General and administrative expenses decreased by $31,000 (12%) to $222,000 in Q3
00 compared to Q3 99 and increased by $80,000 (10%) to $904,000 in YTD 00
compared to YTD 99 primarily due to severance costs associated with a management
change. General and administrative expenses before the impact of severance costs
decreased by $100,000 (12%) in YTD 00 when compared to the same period of the
prior year. These decreases were primarily due to manpower cutbacks and general
efforts to reduce costs.
LIQUIDITY AND CAPITAL RESOURCES
At December 26, 1999, the Company had cash and cash equivalents of $2.1 million,
working capital of $3.7 million and an accumulated deficit of $17.9 million. The
Company's cash, cash equivalents and short-term investments decreased by
$458,000 during the nine months ended December 26, 1999. Cash of $334,000 was
used for operating activities (before cash provided by short-term investments).
Cash of $124,000 was used for capital equipment, compared to $119,000 during the
comparable period of the prior year.
To enable the Company to meet its capital commitment needs, the Company has
historically supplemented cash provided by operations with proceeds from private
and public sales of capital stock and borrowings. These funds have been used to
grow the core business and finance the development and initial commercialization
of the Company's LAAPD technology. While the Company believes that initial
commercialization has been completed and has reduced its expenditures for
research and development, it continues development of other derivatives of the
base technology. The continued development of LAAPD derivative products as well
as revenue growth in the business may require additional funds.
The Company's revolving line of credit agreement with a bank for the lesser of
$1,000,000 or 75 percent of eligible trade accounts receivable, as defined by
the agreement, expired on July 16, 1999. The Company does not foresee a need for
borrowing based upon current projections and, therefore, has elected to forego
the costs for maintaining the line at this time. The Company believes that it
would be most efficient to establish a line when the situation warrants.
During the period from January 1, 2000 to February 7, 2000, the Company's cash
position has improved due to the exercise of stock options. During that period,
a total of $1.3 million has been received for such exercises resulting in a cash
balance of approximately $3.2 million at February 7, 2000. Total shares
outstanding at February 7, 2000 was 11,605,839
The Company believes that the moderate rate of inflation over the past few years
has not had a significant impact on the Company's sales or operating results.
9
<PAGE>
FORWARD LOOKING STATEMENTS
The information contained herein includes forward looking statements that are
based on assumptions that management believes to be reasonable but are subject
to inherent uncertainties and risks including, but not limited to, unforeseen
technological obstacles which may prevent or slow the development and/or
manufacture of new products, limited (or slower than anticipated) customer
acceptance of new products which have been and are being developed by the
Company (particularly its LAAPD product line), the availability of other
competing technologies and a decline in the general demand for optoelectronic
products.
PART II OTHER INFORMATION
Items 1 - 5
None
Item 6 Exhibits and Reports on Form 8-k
--------------------------------
(a) Exhibits
Exhibit
No. Description
- ------- -------------
10.5 Employment Agreement dated January 1, 2000, between Advanced Photonix,
Inc. and Patrick J. Holmes
10.6 Employment Agreement dated January 1, 2000, between Advanced Photonix,
Inc. and Brock Koren
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Advanced Photonix, Inc.
(Registrant)
Date: February 8, 2000 /s/ P. J. Holmes
---------------- ----------------
Patrick J. Holmes
Executive Vice President, Chief Financial
Officer and Secretary/Treasurer
10
Exhibit 10.5
EMPLOYMENT AGREEMENT
This Agreement, made this 1st day of January, 2000 by and between Advanced
Photonix, Inc., a Delaware corporation (hereinafter called "Company"), and
Patrick J. Holmes, an individual (hereinafter called "Employee").
W I T N E S S E T H :
Company wishes to employ Employee and Employee wishes to enter into the employ
of the Company on the terms and conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the facts, mutual promises and covenants
contained herein and intending to be legally bound hereby, Company and Employee
agree as follows:
1. Employment
Company hereby employs Employee and Employee hereby accepts employment by the
Company for the period and upon the terms and conditions contained in this
Agreement. Both the Company and individual acknowledge and agree that this
Agreement supercedes all previous Employment Agreements between the parties.
2. Office and Duties
a) Employee shall serve Company generally as Executive Vice President, Secretary
& Chief Financial Officer. In his capacity, Employee shall have such authority
and such responsibilities as the Board of Directors reasonably may determine
from time to time.
b) Throughout the term of this Agreement, Employee shall devote his entire
working time, energy, skill and best efforts to the performance of his duties
hereunder in a manner which will faithfully and diligently further the business
and interests of the Company. Notwithstanding the foregoing, Employee shall be
permitted to maintain memberships on the Boards of Directors and in
organizations identified to the Company in writing, provided that such
activities shall not, at any time, preclude Company or any Subsidiary (as herein
defined) of the Company, from obtaining contracts from any such company or
organization. Employee shall also be permitted to serve as a director or
consultant of additional organizations and participate in other activities for
the federal government and other groups upon the prior written approval by the
Company, which approval shall not unreasonably be withheld; provided, however,
that no such activities shall, at any time, exclude Company or any subsidiary of
the Company from obtaining contracts from the government or any other
organizations. For purposes of this Agreement, any corporation with respect to
which Company has the ability to control more than fifty percent of the voting
power shall be a "subsidiary" and all such corporations shall be "Subsidiaries".
3. Term
This Agreement shall be for a term of two years, commencing on January 1, 2000,
and ending on December 31, 2001, unless sooner terminated as hereinafter
provided. Unless either party elects to terminate this Agreement at the end of
the original or any renewal term by giving the other party notice of such
election at least ninety (90) days before the expiration of the then current
term, this Agreement shall be deemed to have been extended for an additional
term of one (1) year commencing on the day after the expiration of the then
current term.
Page 1 of 7
<PAGE>
4. Compensation and Benefits
a) For all the services rendered by the Employee to the Company, Employee shall
receive a base salary at the rate of $125,000 per year, ("Base Salary"), payable
in reasonable installments in accordance with Company's regular payroll
practices in effect from time to time.
b) Employee shall be eligible for additional salary increases as well as cash
and stock bonuses during the term of this Agreement at the discretion of the
Board of Directors. Incentive cash bonus will be $15,000 or greater on an annual
basis.
c) Benefits to the Employee shall be the same as those customarily provided by
the Company to other employees except employee shall accrue vacation at a rate
of three weeks per year since original date of employment and follow the normal
progression from that date as outlined in the Company's employee manual.
5. Expenses
Company will reimburse Employee for all reasonable expenses incurred by Employee
in connection with the performance of the Employee's duties hereunder, upon
receipt of appropriate documentation and in accordance with Company's regular
reimbursement procedures and practices in effect from time to time.
6. Disability
a) If Employee becomes unable to perform his duties hereunder due to partial or
total disability or incapacity resulting from a mental or physical illness,
injury or other cause, Company will continue the payment of Employee's Base
Salary at its current rate for a period of twenty-six (26) weeks following the
date Employee is first unable to perform his duties due to such disability or
incapacity. Thereafter, Company shall have no obligation for Base Salary or
other compensation payments to Employee during the continuance of such
disability of incapacity.
b) If Employee is unable to perform his duties hereunder due to partial or total
disability or incapacity resulting from a mental or physical illness, injury or
any other cause for a period of twenty-six (26) consecutive weeks or for a
cumulative period of twenty-six (26) weeks during any twelve month period,
Company shall have the right to terminate this Agreement thereafter, in which
event company shall have no further obligations or liabilities hereunder after
the date of such termination.
7. Death
If Employee dies, all payments hereunder shall cease at the end of the month in
which Employee's death shall occur and Company shall have no further obligations
or liabilities hereunder to Employee's estate or legal representative or
otherwise.
8. Discharge for Cause
Company may discharge Employee at any time for criminal conduct (whether or not
related to Employee's employment), intoxication or drug addiction (if either of
these conditions impairs the Employee's ability to perform his duties),
insubordination, gross negligence, any violation of any express direction or any
reasonable rule or regulation established by the Company from time to time
regarding the conduct of its business, any misrepresentation made in this
Agreement, or any violation by Employee of the terms and conditions of this
Agreement, in which event Company shall have no further obligations or
liabilities hereunder after the date of such discharge.
Page 2 of 7
<PAGE>
9. Termination of Employment
(a) In the event Company shall terminate Employee's employment during the term
of this agreement (the "termination date"), other than as a result of disability
as set forth in Paragraph 6 or for cause as set forth in Paragraph 8, at any
time prior to the expiration date of this Agreement as set forth in Paragraph 3,
Company shall be obligated to continue Employee's compensation and benefits set
forth in Paragraph 4 and 5 hereof until the later of the expiration date of this
Agreement or twelve months from the termination date. In either such event, (i)
Company's liability to Employee as a result of any such termination shall be
limited as set forth above and (ii) Employee shall have the obligation to
mitigate his damages by using his best efforts to seek employment for which he
is suitably trained and experienced elsewhere. In the event Employee's
compensation from any such employment during the applicable period in which he
is entitled to receive compensation and benefits as set forth in this paragraph
shall be less than that available to him under this Agreement, Company shall pay
Employee any such difference. Employment from consulting activities defined in
Paragraph 2.b) and identified to the Company in writing will not be considered
for purposes of this section.
(b) In the event Company terminates Employee's employment after termination of
this agreement, other than as a result of disability or for cause, Company shall
continue compensation and medical benefits for a period of twelve months after
such termination. Employee shall have the obligation to mitigate his damages by
using his best efforts to seek employment for which he is suitably trained and
experienced elsewhere. In the event Employee's compensation from any such
employment during the applicable period in which he is entitled to receive
compensation and benefits as set forth in this paragraph shall be less than that
available to him under this Agreement, Company shall pay Employee any such
difference. Employment from consulting activities identified to the Company in
writing will not be considered for purposes of this section.
10. Company Property
All research, technology developed or being developed, advertising, sales,
manufacturers' and other materials or article or information, including without
limitation data processing reports, customer sales analyses, invoices, price
lists or information, samples or any other materials or data of any kind
furnished to Employee by Company, learned by Employee from Company's direction
or for Company's use or otherwise in connection with Employee's employment
hereunder, are and shall remain the sole and confidential property of Company;
provided, however, the foregoing shall not apply to any such material in the
public domain other than by reason of a breach of this Paragraph 10. If the
Company requests the return of such materials at any time during or at or after
the termination of Employee's employment, Employee shall immediately deliver the
same to Company.
11. Noncompetition, Trade Secrets, Etc.
a) During the term of this Agreement and for a period of one year after the
termination of his employment with the Company for any reason whatsoever,
Employee shall not, directly or indirectly, solicit, induce, encourage or
attempt to influence any client, customer, salesman or supplier of Company to
cease to do business with or to terminate his employment with Company and shall
not utilize for any such purpose any names and addresses of customers or clients
of Company or any data on or relating to past, present or prospective (at the
time of termination of Employee's employment) customers or clients of Company.
Page 3 of 7
<PAGE>
b) During the term of this Agreement, Employee shall not engage in (as a
principal, partner, director, officer, agent, employee, consultant or otherwise)
or be financially interested in any business operating within the United States,
which is involved in business activities which are the same as the business
activities carried on by Company, or being definitely planned by Company,
including exploitation of the technology developed by Company or being developed
by Company at the time of the termination of Employee's employment. However,
nothing contained in this paragraph 11 shall prevent Employee from holding for
investment no more than five percent (5%) of any class of equity securities of a
company whose securities are traded on a national securities exchange.
c) During the term of this Agreement and at all times thereafter, Employee shall
not use for his personal benefit, or disclosure, communicate or divulge to, or
use for the direct or indirect benefit of any person, firm, association or
company other than Company, any material referred to in this paragraph 11 or any
confidential information regarding the business methods, business policies,
procedures, techniques, research or development projects or results, trade
secrets, or other knowledge or processes of or developed by Company or any names
and addresses of customers or clients or any data on or relating to past,
present or prospective customers or clients or any other confidential
information relating to or dealing with the business operations or activities of
Company, made known to Employee or learned or acquired by Employee while in the
employ of Company.
d) Any and all writings, inventions, improvements, processes, procedures and/or
techniques which Employee may make, conceive, discover or develop, either solely
or jointly with any other person or persons, at any time during the term of this
Agreement, whether during working hours or at any other time and whether at the
request or upon the suggestion of the Company or otherwise, which relate to or
are useful in connection with any business now or hereafter carried on or
contemplated by the Company, including developments or expansions of its present
fields of operations, shall be the sole and exclusive property of Company.
Employee shall make full disclosure to Company of all such writings, inventions,
improvements, processes, procedures and techniques, and shall do everything
necessary or desirable to vest the absolute title thereto in Company. Employee
shall write and prepare all specifications and procedures regarding such
inventions, improvements, processes, procedures and techniques and otherwise aid
and assist Company so the Company can prepare and present applications for
copyright or Letters of Patent wherever possible, as well as reissues, renewals,
and extensions thereof in all countries in which it may desire to have copyright
or patent protection. Employee shall not be entitled to any additional or
special compensation or reimbursement regarding any and all such writings,
inventions, improvements, processes, procedures and techniques.
e) Employee acknowledges that the restrictions contained in the foregoing
subparagraphs a), b), and c), in view of the nature of the business in which
Company is engaged are reasonable and necessary in order to protect the
legitimate interests of Company, and that any violation thereof would result in
irreparable injuries to Company, and Employee therefore acknowledges that, in
the event of his violation of any of these restrictions, Company shall be
entitled to obtain from any court of competent jurisdiction preliminary and
permanent injunctive relief as well as damages and an equitable accounting of
all earnings, profits and other benefits arising from such violation, which
rights shall be cumulative and in addition to any other rights or remedies to
which Company may be entitled.
Page 4 of 7
<PAGE>
f) If the period of time or the area specified in subparagraphs a) or b) above
should be adjudged unreasonable in any proceeding, then the period of time shall
be reduced by such number of months or the area shall be reduced by the
elimination of such portion thereof or both so that such restrictions may be
enforced in such area and for such time as is adjusted to be reasonable. If
Employee violates any of the restrictions extended for that period beginning at
the time of the commencement of any such violation and running until such time
as such violation shall be cured by Employee to the satisfaction of Company, on
a day to day basis.
12. Prior Agreements
Employee represents to Company a) that there are no restrictions, agreements or
understandings whatsoever to which Employee is a party which would prevent or
make unlawful his execution of this Agreement and his employment hereunder shall
not constitute a breach of any contract, agreement or understanding, oral or
written, to which he is a party or by which he is bound and b) that he is free
and able to execute this Agreement and to enter into employment by Company.
13. Personal Rights and Obligations
This Agreement and all rights and obligations hereunder are personal and shall
not be assignable by either party except as provided in this subparagraph, and
any purported assignment in violation thereof shall be null and void. Any
person, firm or corporation succeeding to the business of Company (or that
portion of the business with which Employee is involved) by merger,
consolidation, purchase of assets or otherwise, must assume by contract or
operation of law the obligations of Company hereunder and in such a case
Employee shall continue to honor this Agreement with such person, firm or
corporation substituted for Company as the employer; provided, however, that
Company shall, if it still exists as a separate entity, notwithstanding such
assumption and/or assignment, remain liable and responsible for the fulfillment
of the terms and conditions of this Agreement on the part of the Company.
14. Miscellaneous
a) Indulgences, Etc.
Neither the failure nor any delay on the part of either party to exercise any
right, remedy, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, remedy, power or
privilege preclude any other or further exercise of the same or any other right,
remedy, power or privilege, nor shall any waiver of any right, remedy, power or
privilege with respect to any occurrence be construed as a waiver of such right,
remedy, power or privilege with respect to any other occurrence. No waiver shall
be effective unless it is in writing and is signed by the party asserted to have
granted such waiver.
b) Notices
All notices, requests, demands and other communications required or permitted
under this Agreement shall be in writing and shall be deemed to have been duly
given, made and received only when delivered (personally, by courier service
such as Federal Express, or by other messenger) or when deposited in the United
States mails, registered or certified mail, postage prepaid, return receipt
requested, addressed as set forth below:
(i) if to Employee: (ii) if to Company:
Patrick J. Holmes Advanced Photonix, Inc.
259 High Meadow St. 1240 Avenida Acaso
Simi Valley, CA 93065 Camarillo, CA 93012
Page 5 of 7
<PAGE>
In addition, notice by mail shall be by air mail if posted outside of the
continental United States.
Any party may alter the address to which communications or copies are to be sent
by giving notice of such change of address in conformity with the provisions of
this paragraph for the giving of notice.
c) Binding Nature of Agreement
This Agreement shall be binding upon and inure to the benefit of Company and its
successors and assigns and shall be binding upon Employee, his heirs and legal
representatives.
d) Execution in Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original as against any party whose signature appears
thereon, and all of which shall together constitute one and the same instrument.
This Agreement shall become binding when one or more counterparts hereof,
individually or taken together, shall bear the signatures of all of the parties
reflected hereon as the signatories.
e) Provisions Separable
The provisions of this Agreement are independent of and separable from each
other, and no provision shall be affected or rendered invalid or unenforceable
by virtue of the fact that for any reason any other or others of them may be
invalid or unenforceable in whole or in part.
f) Entire Agreement
This Agreement contains the entire understanding among the parties hereto with
respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written, except as herein contained. The express
terms hereof control and supersede any course of performance and/or usage of the
trade inconsistent with any of the terms hereof. This Agreement may not be
modified or amended other than by agreement in writing.
g) Paragraph Headings
The paragraph headings in this Agreement are for convenience only; they form no
part of this Agreement and shall not affect its interpretation.
h) Gender, Etc.
Words used herein, regardless of the number and gender specifically used, shall
be deemed and construed to include any other number, singular or plural, and any
other gender, masculine, feminine or neuter, as the context indicates is
appropriate.
i) Number of Days
In computing the number of days for purposes of this Agreement, all days shall
be counted, including Saturdays, Sundays and holidays; provided, however, that
if the final day of any time period falls on a Saturday, Sunday or holiday on
which federal banks are or may elect to be closed, then the final day shall be
deemed to be the next day which is not a Saturday, Sunday or holiday.
Page 6 of 7
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first above written.
ADVANCED PHOTONIX, Inc. EMPLOYEE
By: /s/Hayden Leason By:/s/ P. J. Holmes
- ---------------------------- ----------------------------
Hayden Leason Patrick J. Holmes
Chairman
Attest:
/s/ Brock Koren
- -----------------------------
Brock Koren
President & Chief Executive Officer
Page 7 of 7
Exhibit 10.6
EMPLOYMENT AGREEMENT
This Agreement, made this 1st day of January, 2000 by and between Advanced
Photonix, Inc., a Delaware corporation (hereinafter called "Company"), and Brock
Koren, an individual (hereinafter called "Employee").
W I T N E S S E T H :
Company wishes to employ Employee and Employee wishes to enter into the employ
of the Company on the terms and conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the facts, mutual promises and covenants
contained herein and intending to be legally bound hereby, Company and Employee
agree as follows:
1. Employment
Company hereby employs Employee and Employee hereby accepts employment by the
Company for the period and upon the terms and conditions contained in this
Agreement. Both the Company and individual acknowledge and agree that this
Agreement supercedes all previous Employment Agreements between the parties.
2. Office and Duties
a) Employee shall serve Company generally as President and Chief Executive
Officer. In his capacity, Employee shall have such authority and such
responsibilities as the Board of Directors reasonably may determine from time to
time.
b) Throughout the term of this Agreement, Employee shall devote his entire
working time, energy, skill and best efforts to the performance of his duties
hereunder in a manner which will faithfully and diligently further the business
and interests of the Company. Notwithstanding the foregoing, Employee shall be
permitted to maintain memberships on the Boards of Directors and in
organizations identified to the Company in writing, provided that such
activities shall not, at any time, preclude Company or any Subsidiary (as herein
defined) of the Company, from obtaining contracts from any such company or
organization. Employee shall also be permitted to serve as a director or
consultant of additional organizations and participate in other activities for
the federal government and other groups upon the prior written approval by the
Company, which approval shall not unreasonably be withheld; provided, however,
that no such activities shall, at any time, exclude Company or any subsidiary of
the Company from obtaining contracts from the government or any other
organizations. For purposes of this Agreement, any corporation with respect to
which Company has the ability to control more than fifty percent of the voting
power shall be a "subsidiary" and all such corporations shall be "Subsidiaries".
3. Term
This Agreement shall be for a term of two years, commencing on January 1, 2000,
and ending on December 31, 2001, unless sooner terminated as hereinafter
provided. Unless either party elects to terminate this Agreement at the end of
the original or any renewal term by giving the other party notice of such
election at least ninety (90) days before the expiration of the then current
term, this Agreement shall be deemed to have been extended for an additional
term of one (1) year commencing on the day after the expiration of the then
current term.
Page 1 of 7
<PAGE>
4. Compensation and Benefits
a) For all the services rendered by the Employee to the Company, Employee shall
receive a base salary at the rate of $175,000 per year, ("Base Salary"), payable
in reasonable installments in accordance with Company's regular payroll
practices in effect from time to time.
b) Employee shall be eligible for additional salary increases as well as cash
and stock bonuses during the term of this Agreement at the discretion of the
Board of Directors. Incentive cash bonus will be $25,000 or greater on an annual
basis.
c) Benefits to the Employee shall be the same as those customarily provided by
the Company to other employees except employee shall accrue vacation at three
weeks per year from October 19, 1999 and follow the normal progression from that
date as outlined in the Company's employee manual.
5. Expenses
Company will reimburse Employee for all reasonable expenses incurred by Employee
in connection with the performance of the Employee's duties hereunder, upon
receipt of appropriate documentation and in accordance with Company's regular
reimbursement procedures and practices in effect from time to time.
6. Disability
a) If Employee becomes unable to perform his duties hereunder due to partial or
total disability or incapacity resulting from a mental or physical illness,
injury or other cause, Company will continue the payment of Employee's Base
Salary at its current rate for a period of twenty-six (26) weeks following the
date Employee is first unable to perform his duties due to such disability or
incapacity. Thereafter, Company shall have no obligation for Base Salary or
other compensation payments to Employee during the continuance of such
disability of incapacity.
b) If Employee is unable to perform his duties hereunder due to partial or total
disability or incapacity resulting from a mental or physical illness, injury or
any other cause for a period of twenty-six (26) consecutive weeks or for a
cumulative period of twenty-six (26) weeks during any twelve month period,
Company shall have the right to terminate this Agreement thereafter, in which
event company shall have no further obligations or liabilities hereunder after
the date of such termination.
7. Death
If Employee dies, all payments hereunder shall cease at the end of the month in
which Employee's death shall occur and Company shall have no further obligations
or liabilities hereunder to Employee's estate or legal representative or
otherwise.
8. Discharge for Cause
Company may discharge Employee at any time for criminal conduct (whether or not
related to Employee's employment), intoxication or drug addiction (if either of
these conditions impairs the Employee's ability to perform his duties),
insubordination, gross negligence, any violation of any express direction or any
reasonable rule or regulation established by the Company from time to time
regarding the conduct of its business, any misrepresentation made in this
Agreement, or any violation by Employee of the terms and conditions of this
Agreement, in which event Company shall have no further obligations or
liabilities hereunder after the date of such discharge.
Page 2 of 7
<PAGE>
9. Termination of Employment
(a) In the event Company shall terminate Employee's employment during the term
of this agreement (the "termination date"), other than as a result of disability
as set forth in Paragraph 6 or for cause as set forth in Paragraph 8, at any
time prior to the expiration date of this Agreement as set forth in Paragraph 3,
Company shall be obligated to continue Employee's compensation and benefits set
forth in Paragraph 4 and 5 hereof until the later of the expiration date of this
Agreement or twelve months from the termination date. In either such event, (i)
Company's liability to Employee as a result of any such termination shall be
limited as set forth above and (ii) Employee shall have the obligation to
mitigate his damages by using his best efforts to seek employment for which he
is suitably trained and experienced elsewhere. In the event Employee's
compensation from any such employment during the applicable period in which he
is entitled to receive compensation and benefits as set forth in this paragraph
shall be less than that available to him under this Agreement, Company shall pay
Employee any such difference. Employment from consulting activities defined in
Paragraph 2.b) and identified to the Company in writing will not be considered
for purposes of this section.
(b) In the event Company terminates Employee's employment after termination of
this agreement, other than as a result of disability or for cause, Company shall
continue compensation and medical benefits for a period of twelve months after
such termination. Employee shall have the obligation to mitigate his damages by
using his best efforts to seek employment for which he is suitably trained and
experienced elsewhere. In the event Employee's compensation from any such
employment during the applicable period in which he is entitled to receive
compensation and benefits as set forth in this paragraph shall be less than that
available to him under this Agreement, Company shall pay Employee any such
difference. Employment from consulting activities identified to the Company in
writing will not be considered for purposes of this section.
10. Company Property
All research, technology developed or being developed, advertising, sales,
manufacturers' and other materials or article or information, including without
limitation data processing reports, customer sales analyses, invoices, price
lists or information, samples or any other materials or data of any kind
furnished to Employee by Company, learned by Employee from Company's direction
or for Company's use or otherwise in connection with Employee's employment
hereunder, are and shall remain the sole and confidential property of Company;
provided, however, the foregoing shall not apply to any such material in the
public domain other than by reason of a breach of this Paragraph 10. If the
Company requests the return of such materials at any time during or at or after
the termination of Employee's employment, Employee shall immediately deliver the
same to Company.
11. Noncompetition, Trade Secrets, Etc.
a) During the term of this Agreement and for a period of one year after the
termination of his employment with the Company for any reason whatsoever,
Employee shall not, directly or indirectly, solicit, induce, encourage or
attempt to influence any client, customer, salesman or supplier of Company to
cease to do business with or to terminate his employment with Company and shall
not utilize for any such purpose any names and addresses of customers or clients
of Company or any data on or relating to past, present or prospective (at the
time of termination of Employee's employment) customers or clients of Company.
Page 3 of 7
<PAGE>
b) During the term of this Agreement, Employee shall not engage in (as a
principal, partner, director, officer, agent, employee, consultant or otherwise)
or be financially interested in any business operating within the United States,
which is involved in business activities which are the same as the business
activities carried on by Company, or being definitely planned by Company,
including exploitation of the technology developed by Company or being developed
by Company at the time of the termination of Employee's employment. However,
nothing contained in this paragraph 11 shall prevent Employee from holding for
investment no more than five percent (5%) of any class of equity securities of a
company whose securities are traded on a national securities exchange.
c) During the term of this Agreement and at all times thereafter, Employee shall
not use for his personal benefit, or disclosure, communicate or divulge to, or
use for the direct or indirect benefit of any person, firm, association or
company other than Company, any material referred to in this paragraph 11 or any
confidential information regarding the business methods, business policies,
procedures, techniques, research or development projects or results, trade
secrets, or other knowledge or processes of or developed by Company or any names
and addresses of customers or clients or any data on or relating to past,
present or prospective customers or clients or any other confidential
information relating to or dealing with the business operations or activities of
Company, made known to Employee or learned or acquired by Employee while in the
employ of Company.
d) Any and all writings, inventions, improvements, processes, procedures and/or
techniques which Employee may make, conceive, discover or develop, either solely
or jointly with any other person or persons, at any time during the term of this
Agreement, whether during working hours or at any other time and whether at the
request or upon the suggestion of the Company or otherwise, which relate to or
are useful in connection with any business now or hereafter carried on or
contemplated by the Company, including developments or expansions of its present
fields of operations, shall be the sole and exclusive property of Company.
Employee shall make full disclosure to Company of all such writings, inventions,
improvements, processes, procedures and techniques, and shall do everything
necessary or desirable to vest the absolute title thereto in Company. Employee
shall write and prepare all specifications and procedures regarding such
inventions, improvements, processes, procedures and techniques and otherwise aid
and assist Company so the Company can prepare and present applications for
copyright or Letters of Patent wherever possible, as well as reissues, renewals,
and extensions thereof in all countries in which it may desire to have copyright
or patent protection. Employee shall not be entitled to any additional or
special compensation or reimbursement regarding any and all such writings,
inventions, improvements, processes, procedures and techniques.
e) Employee acknowledges that the restrictions contained in the foregoing
subparagraphs a), b), and c), in view of the nature of the business in which
Company is engaged are reasonable and necessary in order to protect the
legitimate interests of Company, and that any violation thereof would result in
irreparable injuries to Company, and Employee therefore acknowledges that, in
the event of his violation of any of these restrictions, Company shall be
entitled to obtain from any court of competent jurisdiction preliminary and
permanent injunctive relief as well as damages and an equitable accounting of
all earnings, profits and other benefits arising from such violation, which
rights shall be cumulative and in addition to any other rights or remedies to
which Company may be entitled.
Page 4 of 7
<PAGE>
f) If the period of time or the area specified in subparagraphs a) or b) above
should be adjudged unreasonable in any proceeding, then the period of time shall
be reduced by such number of months or the area shall be reduced by the
elimination of such portion thereof or both so that such restrictions may be
enforced in such area and for such time as is adjusted to be reasonable. If
Employee violates any of the restrictions extended for that period beginning at
the time of the commencement of any such violation and running until such time
as such violation shall be cured by Employee to the satisfaction of Company, on
a day to day basis.
12. Prior Agreements
Employee represents to Company a) that there are no restrictions, agreements or
understandings whatsoever to which Employee is a party which would prevent or
make unlawful his execution of this Agreement and his employment hereunder shall
not constitute a breach of any contract, agreement or understanding, oral or
written, to which he is a party or by which he is bound and b) that he is free
and able to execute this Agreement and to enter into employment by Company.
13. Personal Rights and Obligations
This Agreement and all rights and obligations hereunder are personal and shall
not be assignable by either party except as provided in this subparagraph, and
any purported assignment in violation thereof shall be null and void. Any
person, firm or corporation succeeding to the business of Company (or that
portion of the business with which Employee is involved) by merger,
consolidation, purchase of assets or otherwise, must assume by contract or
operation of law the obligations of Company hereunder and in such a case
Employee shall continue to honor this Agreement with such person, firm or
corporation substituted for Company as the employer; provided, however, that
Company shall, if it still exists as a separate entity, notwithstanding such
assumption and/or assignment, remain liable and responsible for the fulfillment
of the terms and conditions of this Agreement on the part of the Company.
14. Miscellaneous
a) Indulgences, Etc.
Neither the failure nor any delay on the part of either party to exercise any
right, remedy, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, remedy, power or
privilege preclude any other or further exercise of the same or any other right,
remedy, power or privilege, nor shall any waiver of any right, remedy, power or
privilege with respect to any occurrence be construed as a waiver of such right,
remedy, power or privilege with respect to any other occurrence. No waiver shall
be effective unless it is in writing and is signed by the party asserted to have
granted such waiver.
b) Notices
All notices, requests, demands and other communications required or permitted
under this Agreement shall be in writing and shall be deemed to have been duly
given, made and received only when delivered (personally, by courier service
such as Federal Express, or by other messenger) or when deposited in the United
States mails, registered or certified mail, postage prepaid, return receipt
requested, addressed as set forth below:
(i) if to Employee: (ii) if to Company:
Brock Koren Advanced Photonix, Inc.
3043 Vista Grande 1240 Avenida Acaso
Camarillo, CA 93012 Camarillo, CA 93012
Page 5 of 7
<PAGE>
In addition, notice by mail shall be by air mail if posted outside of the
continental United States.
Any party may alter the address to which communications or copies are to be sent
by giving notice of such change of address in conformity with the provisions of
this paragraph for the giving of notice.
c) Binding Nature of Agreement
This Agreement shall be binding upon and inure to the benefit of Company and its
successors and assigns and shall be binding upon Employee, his heirs and legal
representatives.
d) Execution in Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original as against any party whose signature appears
thereon, and all of which shall together constitute one and the same instrument.
This Agreement shall become binding when one or more counterparts hereof,
individually or taken together, shall bear the signatures of all of the parties
reflected hereon as the signatories.
e) Provisions Separable
The provisions of this Agreement are independent of and separable from each
other, and no provision shall be affected or rendered invalid or unenforceable
by virtue of the fact that for any reason any other or others of them may be
invalid or unenforceable in whole or in part.
f) Entire Agreement
This Agreement contains the entire understanding among the parties hereto with
respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written, except as herein contained. The express
terms hereof control and supersede any course of performance and/or usage of the
trade inconsistent with any of the terms hereof. This Agreement may not be
modified or amended other than by agreement in writing.
g) Paragraph Headings
The paragraph headings in this Agreement are for convenience only; they form no
part of this Agreement and shall not affect its interpretation.
h) Gender, Etc.
Words used herein, regardless of the number and gender specifically used, shall
be deemed and construed to include any other number, singular or plural, and any
other gender, masculine, feminine or neuter, as the context indicates is
appropriate.
i) Number of Days
In computing the number of days for purposes of this Agreement, all days shall
be counted, including Saturdays, Sundays and holidays; provided, however, that
if the final day of any time period falls on a Saturday, Sunday or holiday on
which federal banks are or may elect to be closed, then the final day shall be
deemed to be the next day which is not a Saturday, Sunday or holiday.
Page 6 of 7
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first above written.
ADVANCED PHOTONIX, Inc. EMPLOYEE
By: /s/ Hayden Leason By: /s/ Brock Koren
- ---------------------------- ---------------------------
Hayden Leason Brock Koren
Chairman
Attest:
/s/ P. J. Holmes
- -----------------------------
Patrick J. Holmes
Executive Vice President
Page 7 of 7
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<PERIOD-START> MAR-29-1999
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