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Exhibit 10.1
 
BUSINESS LOAN AGREEMENT
 
Principal
Loan Date
Maturity
Loan No
Call/Coll
Account
Officer
Initials
$25,000,000.00
08-31-2007
08/31/2009
9329000055-1
 
9329000055-1
22163
JL
References in the shaded area are for the Lender’s use only and do not limit the
applicability of this document to any particular loan or item.  Any item above
containing “***” has been omitted due to text length limitations

Borrower:
AeroVironment Inc.
Lender:
California Bank & Trust
 
181 W. Huntington Drive, Suite 202
 
Los Angeles Commercial Banking
 
Monrovia, CA  91016
 
550 South Hope Street, Suite 300
     
Los Angeles, CA  90071

 
THIS BUSINESS LOAN AGREEMENT dated August 31, 2007, is made and executed between
AeroVironment, Inc. (“Borrower”) and California Bank & Trust (‘Lender”) on the
following terms and conditions. Borrower has received prior commercial loans
from Lender or has applied to Lender for a commercial loan or loans or other
financial accommodations, including those which may be described on any exhibit
or schedule attached to this Agreement (“Loan’). Borrower understands and agrees
that: (A) in granting, renewing, or extending any Loan. Lender is relying upon
Borrower’s representations, warranties, and agreements as set forth in this
Agreement; (B) the granting, renewing, or extending of any Loan by Lender at all
times shall be subject to Lenders sole judgment and discretion; and (C) all such
Loans shall be and remain subject to the terms and conditions of this Agreement.
 
TERM. This Agreement shall be effective as of August 31, 2007, and shall
continue in full force and effect until such time as all of Borrower’s Loans in
favor of Lender have been paid in full, including principal, interest, costs,
expenses, attorneys’ fees, and other fees and charges, or until such time as the
parties may agree in writing to terminate this Agreement.
 
ADVANCE AUTHORITY. The following persons currently are authorized to request
advances and authorize payments under the line of credit until Lender receives
from Borrower, at Lender’s address shown above, written notice of revocation of
their authority: Timothy Conver, President/CEO of AeroVironment, Inc.; Stephen
C. Wright. CFO/VP of Finance/Sec. of AeroVironment, Inc.; and Suzanne Gilman,
Controller.
 
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender’s obligation to make the initial
Advance and each subsequent Advance under this Agreement shall be subject to the
fulfillment to Lender’s satisfaction of all of the conditions set forth in this
Agreement and in the Related Documents.
 
Loan Documents. Borrower shall provide to Lender the following documents for the
Loan: (1) the Note; (2) Security Agreements granting to Lender security
interests in the Collateral; (3) financing statements and all other documents
perfecting Lender’s Security Interests; (4) evidence of insurance as required
below; (5) together with all such Related Documents as Lender may require for
the Loan; all in form and substance satisfactory to Lender and Lender’s counsel.
 
Borrower’s Authorization. Borrower shall have provided in form and substance
satisfactory to Lender properly certified resolutions, duly authorizing the
execution and delivery of this Agreement, the Note and the Related Documents. In
addition, Borrower shall have provided such other resolutions, authorizations,
documents and instruments as Lender or its counsel, may require.
 
Payment of Fees and Expenses. Borrower shall have paid to Lender all fees,
charges, and other expenses which are then due and payable as specified in this
Agreement or any Related Document.
 
Representations and Warranties. The representations and warranties set forth in
this Agreement, in the Related Documents, and in any document or certificate
delivered to Lender under this Agreement are true and correct.
 
No Event of Default. There shall not exist at the time of any Advance a
condition which would constitute an Event of Default under this Agreement or
under any Related Document.
 
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any indebtedness exists:
 
Organization. Borrower is a corporation for profit which is, and at all times
shall be, duly organized, validly existing, and in good standing under and by
virtue of the laws of the State of Delaware. Borrower is duly authorized to
transact business in all other states in which Borrower is doing business,
having obtained all necessary filings, governmental licenses and approvals for
each state in which Borrower is doing business. Specifically, Borrower is. and
at all times shall be, duly qualified as a foreign corporation in all states in
which the failure to so qualify would have a material adverse effect on its
business or financial condition. Borrower has the full power and authority to
own its properties and to transact the business in which it is presently engaged
or presently proposes to engage. Borrower maintains an office at 2711
Centerville Road, Suite 400, Wilmington, DE 19808. Unless Borrower has
designated otherwise in writing, the principal office is the office at which
Borrower keeps its books and records including its records concerning the
Collateral. Borrower will notify Lender prior to any change in the location of
Borrower’s state of organization or any change in Borrower’s name. Borrower
shall do all things necessary to preserve and to keep in full force and effect
its existence, rights and privileges, and shall comply with all regulations,
rules, ordinances, statutes, orders and decrees of any governmental or
quasi-governmental authority or court applicable to Borrower and Borrower’s
business activities.
 
Assumed Business Names. Borrower has filed or recorded all documents or filings
required by law relating to all assumed business names used by Borrower.
Excluding the name of Borrower, the following is a complete list of all assumed
business names under which Borrower does business: None.
 
Authorization. Borrower’s execution, delivery, and performance of this Agreement
and all the Related Documents have been duly authorized by all necessary action
by Borrower and do not conflict with, result in a violation of, or constitute a
default under (1) any provision of (a) Borrower’s articles of incorporation or
organization, or bylaws, or (b) any agreement or other instrument binding upon
Borrower or (2) any law, governmental regulation, court decree, or order
applicable to Borrower or to Borrower’s properties.
 
Financial Information. Each of Borrower’s financial statements supplied to
Lender truly and completely disclosed Borrower’s financial condition as of the
date of the statement, and there has been no material adverse change in
Borrowers financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.
 
Legal Effect. This Agreement constitutes, and any instrument or agreement
Borrower is required to give under this Agreement when delivered will constitute
legal, valid, and binding obligations of Borrower enforceable against Borrower
in accordance with their respective terms.
 
Properties. Except as contemplated by this Agreement or as previously disclosed
in Borrower’s financial statements or in writing to Lender and as accepted by
Lender, and except for property tax liens for taxes not presently due and
payable, Borrower owns and has good title to all of Borrowers properties free
and clear of all Security Interests, and has not executed any security documents
or financing statements relating to such properties. All of Borrower’s
properties are titled in Borrower’s legal name, and Borrower has not used or
filed a financing statement under any other name for at least the last five (5)
years.
 

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BUSINESS LOAN AGREEMENT
 
(Continued)
 

Loan No. 0329000055-1 
 Page 2

 
Hazardous Substances. Except as disclosed to and acknowledged by Lender in
writing, Borrower represents and warrants that: (1) During the period of
Borrower’s ownership of the Collateral, there has been no use, generation,
manufacture, storage, treatment, disposal, release or threatened release of any
Hazardous Substance by any person on, under, about or from any of the
Collateral. (2) Borrower has no knowledge of, or reason to believe that there
has been (a) any breach or violation of any Environmental Laws; (b) any use,
generation, manufacture, storage, treatment, disposal, release or threatened
release of any Hazardous Substance on, under, about or from the Collateral by
any prior owners or occupants of any of the Collateral; or (c) any actual or
threatened litigation or claims of any kind by any person relating to such
matters. (3) Neither Borrower nor any tenant, contractor, agent or other
authorized user of any of the Collateral shall use, generate, manufacture,
store, treat, dispose of or release any Hazardous Substance on, under, about or
from any of the Collateral; and any such activity shall be conducted in
compliance with all applicable federal, state, and local laws, regulations, and
ordinances, including without limitation all Environmental Laws. Borrower
authorizes Lender and its agents to enter upon the Collateral to make such
inspections and tests as Lender may deem appropriate to determine compliance of
the Collateral with this section of the Agreement. Any inspections or tests made
by Lender shall be at Borrower’s expense and for Lender’s purposes only and
shall not be construed to create any responsibility or liability on the part of
Lender to Borrower or to any other person. The representations and warranties
contained herein are based on Borrower’s due diligence in investigating the
Collateral for hazardous waste and Hazardous Substances. Borrower hereby (1)
releases and waives any future claims against Lender for indemnity or
contribution in the event Borrower becomes liable for cleanup or other costs
under any such laws, and (2) agrees to indemnify, defend, and hold harmless
Lender against any and all claims, losses, liabilities, damages, penalties, and
expenses which Lender may directly or indirectly sustain or suffer resulting
from a breach of this section of the Agreement or as a consequence of any use,
generation, manufacture, storage, disposal, release or threatened release of a
hazardous waste or substance on the Collateral. The provisions of this section
of the Agreement, including the obligation to indemnify and defend, shall
survive the payment of the Indebtedness and the termination, expiration or
satisfaction of this Agreement and shall not be affected by Lender’s acquisition
of any interest in any of the Collateral, whether by foreclosure or otherwise.
 
Litigation and Claims. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against Borrower
is pending or threatened, and no other event has occurred which may materially
adversely affect Borrower’s financial condition or properties, other than
litigation, claims, or other events, if any, that have been disclosed to and
acknowledged by Lender in writing.
 
Taxes. To the best of Borrower’s knowledge, all of Borrower’s tax returns and
reports that are or were required to be filed, have been filed, and all taxes,
assessments and other governmental charges have been paid in full, except those
presently being or to be contested by Borrower in good faith in the ordinary
course of business and for which adequate reserves have been provided.
 
Lien Priority. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or permitted
the filing or attachment of any Security Interests on or affecting any of the
Collateral directly or indirectly securing repayment of Borrower’s Loan and
Note, that would be prior or that may in any way be superior to Lender’s
Security Interests and rights in and to such Collateral.
 
Binding Effect. This Agreement, the Note, all Security Agreements (if any), and
all Related Documents are binding upon the signers thereof, as well as upon
their successors, representatives and assigns, and are legally enforceable in
accordance with their respective terms.
 
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long
as this Agreement remains in effect, Borrower will:
 
Notices of Claims and Litigation. Promptly inform Lender in writing of (1) all
material adverse changes in Borrower’s financial condition, and (2) all existing
and all threatened litigation, claims, investigations, administrative
proceedings or similar actions affecting Borrower or any Guarantor which could
materially affect the financial condition of Borrower or the financial condition
of any Guarantor.
 
Financial Records. Maintain its books and records in accordance with GAAP,
applied on a consistent basis, and permit Lender to examine and audit Borrower’s
books and records at all reasonable times.
 
Financial Statements. Furnish Lender with the following:
 
Annual Statements. As soon as available, but in no event later than ninety (90)
days after the end of each fiscal year. Borrower’s balance sheet and income
statement for the year ended, audited by a certified public accountant
satisfactory to Lender.
 
Interim Statements. As soon as available, but in no event later than forty-five
(45) days after the end of each fiscal quarter, Borrower’s balance sheet and
profit and loss statement for the period ended, prepared by Borrower.
 
All financial reports required to be provided under this Agreement shall be
prepared in accordance with GAAP, applied on a consistent basis, and certified
by Borrower as being true and correct.
 
Additional Information. Furnish such additional information and statements, as
Lender may request from time to time. Financial Covenants and Ratios. Comply
with the following covenants and ratios:
 
Working Capital Requirements. Borrower shall comply with the following working
capital ratio requirements:
 
Quick Ratio. Maintain a Quick Ratio in excess of 1.000 to 1.000. The term ‘Quick
Ratio” means Borrower’s Cash & Equivalent  plus Borrower’s net Trade Receivables
divided by Borrower’s total Current Liabilities. This liquidity ratio will be
evaluated as of quarter-end.
 
Tangible Net Worth Requirements. Borrower shall comply with the following net
worth ratio requirements:
 
Debt / Worth Ratio. Maintain a ratio of Debt / Worth not in excess of 2.250 to
1.000. The ratio “Debt / Worth” means Borrower’s Total Liabilities divided by
Borrower’s Tangible Net Worth. This leverage ratio will be evaluated as of
quarter-end.
 
Other Requirements.
 
Debt Service Coverage Ratio. Maintain a minimum Debt Service Coverage ratio of
2.50 to 1.00, to be measured quarterly on a rolling 4-quarter basis. Debt
Service Coverage Ratio is defined as “Earning Before Interest Expenses, Taxes,
Depreciation and Amortization Expenses divided by Current Portion of Long-Term
Debt plus Interest Expense.
 
Additional Provision. Borrower covenants and agrees with Lender that,
notwithstanding anything herein to the contrary, while this Agreement is in
effect, (a) Borrower shall be allowed to issue dividends of up to 50% of net
annual earnings provided that such dividends does not result in the violation of
any covenant (other than the conveanant against eh payment of dividend set forth
in subsection (3) under “NEGATIVE COVENANCTS – Continuity of Operations”); and
(b) Borrower shall be allowed to acquire or invest in other entities in an
amount not to exceed $15,000,000 provided that such acquisition/Investment does
not result in the violation of any covenant (other than the convenants against
acquisitions and investments set forth in subsection (2) under “NEGATIVE
COVENANCES – continuity of Operations” and subsection (1) and (2) under
“NEGATIVE COVENANTS – Loans, Acquisitions and Guaranties”).
 

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BUSINESS LOAN AGREEMENT
 
(Continued)
 

Loan No. 0329000055-1 
 Page 3

Except as provided above, all computations made to determine compliance with the
requirements contained in this paragraph shall be made in accordance with
generally accepted accounting principles, applied on a consistent basis, and
certified by Borrower as being true and correct.
 
Insurance. Maintain fire and other risk insurance, public liability insurance,
and such other insurance as Lender may require with respect to Borrower’s
properties and operations, in form, amounts, coverages and with insurance
companies acceptable to Lender. Borrower, upon request of Lender, will deliver
to Lender from time to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverages will not be
cancelled or diminished without at least ten (10) days prior written notice to
Lender. Each insurance policy also shall include an endorsement providing that
coverage in favor of Lender will not be impaired in any way by any act, omission
or default of Borrower or any other person. In connection with all policies,
covering assets in which Lender holds or is offered a security interest for the
Loans, Borrower will provide Lender with such lender’s loss payable or other
endorsements as Lender may require.
 
Insurance Reports. Furnish to Lender, upon request of Lender, reports on each
existing insurance policy showing such information as Lender may reasonably
request, including without limitation the following: (1) the name of the
insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties
insured; (5) the then current property values on the basis of which insurance
has been obtained, and the manner of determining those values; and (6) the
expiration date of the policy. In addition, upon request of Lender (however not
more often than annually), Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash value or
replacement cost of any Collateral. The cost of such appraisal shall be paid by
Borrower.
 
Other Agreements. Comply with all terms and conditions of all other agreements,
whether now or hereafter existing, between Borrower and any other party and
notify Lender immediately in writing of any default in connection with any other
such agreements.
 
Loan Proceeds. Use all Loan proceeds solely for Borrower’s business operations,
unless specifically consented to the contrary by Lender in writing.
 
Taxes. Charges and Liens. Pay and discharge when due all of its indebtedness and
obligations, including without limitation all assessments, taxes, governmental
charges, levies and liens, of every kind and nature, imposed upon Borrower or
its properties, income, or profits, prior to the date on which penalties would
attach, and all lawful claims that, if unpaid, might become a lien or charge
upon any of Borrower’s properties, income, or profits.
 
Performance. Perform and comply, in a timely manner, with all terms, conditions,
and provisions set forth in this Agreement, in the Related Documents, and in all
other instruments and agreements between Borrower and Lender. Borrower shall
notify Lender immediately in writing of any default in connection with any
agreement.
 
Operations. Maintain executive and management personnel with substantially the
same qualifications and experience as the present executive and management
personnel; provide written notice to Lender of any change in executive and
management personnel; conduct its business affairs in a reasonable and prudent
manner.
 
Environmental Studies. Promptly conduct and complete, at Borrower’s expense, all
such investigations, studies, samplings and testings as may be requested by
Lender or any governmental authority relative to any substance, or any waste or
by-product of any substance defined as toxic or a hazardous substance under
applicable federal, state, or local law, rule, regulation, order or directive,
at or affecting any property or any facility owned, leased or used by Borrower.
 
Compliance with Governmental Requirements. Comply with all laws, ordinances, and
regulations, now or hereafter in effect, of all governmental authorities
applicable to the conduct of Borrower’s properties, businesses and operations,
and to the use or occupancy of the Collateral, including without limitation, the
Americans With Disabilities Act. Borrower may contest in good faith any such
law, ordinance, or regulation and withhold compliance during any proceeding,
including appropriate appeals, so long as Borrower has notified Lender in
writing prior to doing so and so long as, in Lender’s sole opinion, Lender’s
interests in the Collateral are not jeopardized. Lender may require Borrower to
post adequate security or a surety bond, reasonably satisfactory to Lender, to
protect Lenders interest.
 
Inspection. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower’s other
properties and to examine or audit Borrower’s books, accounts, and records and
to make copies and memoranda of Borrower’s books, accounts, and records. If
Borrower now or at any time hereafter maintains any records (including without
limitation computer generated records and computer software programs for the
generation of such records) in the possession of a third party. Borrower, upon
request of Lender, shall notify such party to permit Lender free access to such
records at all reasonable times and to provide Lender with copies of any records
it may request, all at Borrower’s expense.
 
Environmental Compliance and Reports. Borrower shall comply in all respects with
any and all Environmental Laws; not cause or permit to exist, as a result of an
intentional or unintentional action or omission on Borrower’s part or on the
part of any third party, on property owned and/or occupied by Borrower, any
environmental activity where damage may result to the environment, unless such
environmental activity is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within thirty
(30) days after receipt thereof a copy of any notice, summons, lien, citation,
directive, letter or other communication from any governmental agency or
instrumentality concerning any intentional or unintentional action or omission
on Borrower’s part in connection with any environmental activity whether or not
there is damage to the environment and/or other natural resources.
 
Additional Assurances. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, assignments, financing
statements, instruments, documents and other agreements as Lender or its
attorneys may reasonably request to evidence and secure the Loans and to perfect
all Security Interests.
 
LENDER’S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lenders interest in the Collateral or if Borrower fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Borrower’s failure to discharge or pay when due any amounts
Borrower is required to discharge or pay under this Agreement or any Related
Documents, Lender on Borrower’s behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on any Collateral and paying all
costs for insuring, maintaining and preserving any Collateral. All such
expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Borrower. All such expenses will become a
part of the Indebtedness and, at Lender’s option, will (A) be payable on demand;
(B) be added to the balance of the Note and be apportioned among and be payable
with any installment payments to become due during either (1) the term of any
applicable insurance policy; or (2) the remaining term of the Note; or (C) be
treated as a balloon payment which will be due and payable at the Note’s
maturity.
 

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BUSINESS LOAN AGREEMENT
 
(Continued)
 

Loan No. 0329000055-1 
 Page 4

 
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
 
Indebtedness and Liens. (1) Except for trade debt incurred in the normal course
of business and indebtedness to Lender contemplated by this Agreement, create,
incur or assume indebtedness for borrowed money, including capital leases, (2)
sell, transfer, mortgage, assign, pledge, lease, grant a security interest in,
or encumber any of Borrower’s assets (except as allowed as Permitted Liens), or
(3) sell with recourse any of Borrower’s accounts, except to Lender.
 
Continuity of Operations. (1) Engage in any business activities substantially
different than those in which Borrower is presently engaged, (2) cease
operations, liquidate, merge, transfer, acquire or consolidate with any other
entity, change its name, dissolve or transfer or sell Collateral out of the
ordinary course of business, or (3) pay any dividends on Borrower’s stock (other
than dividends payable in its stock), provided, however that notwithstanding the
foregoing, but only so long as no Event of Default has occurred and is
continuing or would result from the payment of dividends, if Borrower is a
“Subchapter S Corporation” (as defined in the Internal Revenue Code of 1986, as
amended), Borrower may pay cash dividends on its stock to its shareholders from
time to time in amounts necessary to enable the shareholders to pay income taxes
and make estimated income tax payments to satisfy their liabilities under
federal and state law which arise solely from their status as Shareholders of a
Subchapter S Corporation because of their ownership of shares of Borrower’s
stock, or purchase or retire any of Borrower’s outstanding shares or alter or
amend Borrower’s capital structure,
 
Loans. Acquisitions and Guaranties. (1) Loan, invest in or advance money or
assets to any other person, enterprise or entity, (2) purchase, create or
acquire any interest in any other enterprise or entity, or (3) incur any
obligation as surety or guarantor other than in the ordinary course of business.
 
Agreements. Borrower will not enter into any agreement containing any provisions
which would be violated or breached by the performance of Borrower’s obligations
under this Agreement or in connection herewith.
 
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(A) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes
incompetent or becomes insolvent, files a petition in bankruptcy or similar
proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse
change in Borrower’s financial condition, in the financial condition of any
Guarantor, or in the value of any Collateral securing any Loan; or ID) any
Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such
Guarantor’s guaranty of the Loan or any other loan with Lender; or (E) Lender in
good faith deems itself insecure, even though no Event of Default shall have
occurred.
 
DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:
 
Payment Default. Borrower fails to make any payment when due under the Loan.
 
Other Defaults. Borrower fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Agreement or in any of the
Related Documents or to comply with or to perform any term, obligation, covenant
or condition contained in any other agreement between Lender and Borrower.
 
Default in Favor of Third Parties. Borrower or any Grantor defaults under any
loan, extension of credit, security agreement, purchase or sales agreement, or
any other agreement, in favor of any other creditor or person that may
materially affect any of Borrower’s or any Grantor’s property or Borrower’s or
any Grantor’s ability to repay the Loans or perform their respective obligations
under this Agreement or any of the Related Documents.
 
False Statements. Any warranty, representation or statement made or furnished to
Lender by Borrower or on Borrower’s behalf under this Agreement or the Related
Documents is false or misleading in any material respect, either now or at the
time made or furnished or becomes false or misleading at any time thereafter.
 
Insolvency. The dissolution or termination of Borrower’s existence as a going
business, the insolvency of Borrower, the appointment of a receiver for any part
of Borrower’s property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.
 
Defective Collateralization. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
document to create a valid and perfected security interest or lien) at any time
and for any reason.
 
Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower or by any governmental agency against
any collateral securing the Loan. This includes a garnishment of any of
Borrower’s accounts, including deposit accounts, with Lender. However, this
Event of Default shall not apply if there is a good faith dispute by Borrower as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Borrower gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.
 
Events Affecting Guarantor. Any of the preceding events occurs with respect to
any Guarantor of any of the Indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any
Guaranty of the Indebtedness. In the event of a death, Lender, at its option,
may, but shall not be required to, permit the Guarantor’s estate to assume
unconditionally the obligations arising under the guaranty in a manner
satisfactory to Lender, and, in doing so, cure any Event of Default.
 
Change in Ownership. Any change in ownership of twenty-five percent (25%) or
more of the common stock of Borrower.
 
Adverse Change. A material adverse change occurs in Borrower’s financial
condition, or Lender believes the prospect of payment or performance of the Loan
is impaired.
 
Insecurity. Lender in good faith believes itself insecure.
 
Right to Cure. If any default, other than a default on Indebtedness, is curable
and if Borrower or Grantor, as the case may be, has not been given a notice of a
similar default within the preceding twelve (12) months, it may be cured if
Borrower or Grantor, as the case may be, after receiving written notice from
Lender demanding cure of such default: (1) cure the default within fifteen (15)
days; or (2) if the cure requires more than fifteen (15) days, immediately
initiate steps which Lender deems in Lender’s sole discretion to be sufficient
to cure the default and thereafter continue and complete all reasonable and
necessary steps sufficient to produce compliance as soon as reasonably
practical.
 
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
further Loan Advances or disbursements), and, at Lender’s option, all
Indebtedness immediately will become due and payable, all without notice of any
kind to Borrower, except that in the case of an Event of Default of the type
described in the ‘Insolvency’ subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender’s rights
and remedies shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to take action to
perform an obligation of Borrower or of any Grantor shall not affect Lender’s
right to declare a default and to exercise its rights and remedies.
 

--------------------------------------------------------------------------------

BUSINESS LOAN AGREEMENT
 
(Continued)
 

Loan No. 0329000055-1 
 Page 5

 
DEPOSIT AGREEMENT SECURITY. Borrower hereby grants a security interest to Lender
in any and all deposit accounts (checking, savings, money market or time) of
Borrower at Lender, now existing or hereinafter opened, to secure the
Indebtedness. This includes all deposit accounts Borrower holds jointly with
someone else.
 
JURY WAIVER; JUDICIAL REFERENCE. Borrower and Lender each waive their respective
rights to a trial before a jury in connection with any disputes related to this
Agreement, any of the Related Documents and the transactions contemplated hereby
and thereby. Such disputes include without limitation any claim by Borrower or
Lender, claims brought by Borrower as a class representative on behalf of
others, and claims by a class representative on Borrower’s behalf as a class
member (so-called “class action” suits). This provision shall not apply if, at
the time an action is brought, Borrower’s loan is funded or maintained in a
state where this jury trial waiver is not permitted by law.
 
If a jury trial waiver is not permitted by applicable law and a dispute arises
between Borrower and Lender with respect to this Agreement, any of the Related
Documents, the enforcement hereof or thereof or the transactions contemplated
hereby or thereby, either of Borrower or Lender may require that it be resolved
by judicial reference in accordance with California Code of Civil Procedure,
Sections 638, et seq., including without limitation whether the dispute is
subject to a judicial reference proceeding. The referee shall be a retired
judge, agreed upon by the parties, from either the American Arbitration
Association (AAA) or Judicial Arbitration and Mediation Service, Inc. (JAMS). If
the parties cannot agree on the referee, the party who initially selected the
reference procedure shall request a panel of ten retired judges from either AAA
or JAMS, and the court shall select the referee from that panel. The referee
shall be appointed to sit with all of the powers provided by law. The parties
agree that time is of the essence in conducting the judicial reference
proceeding set forth herein. The costs of the judicial reference proceeding,
including the fee for the court reporter, shall be borne equally by the parties
as the costs are incurred, unless otherwise awarded by the referee. The referee
shall hear all pre-trial and post-trial matters (including without limitation
requests for equitable relief), prepare an award with written findings of fact
and conclusions of law and apportion costs as appropriate. The referee shall be
empowered to enter equitable relief as well as legal relief, provide all
temporary or provisional remedies, enter equitable orders that are binding on
the parties and rule on any motion that would be authorized in a trial,
including without limitation motions for summary judgment or summary
adjudication. Judgment upon the award shall be entered in the court in which
such proceeding was commenced and all parties shall have full rights of appeal.
This provision will not be deemed to limit or constrain Lenders right of offset,
to obtain provisional or ancillary remedies, to interplead funds in the event of
a dispute, to exercise any security interest or lien Lender may hold in property
or to comply with legal process involving Borrower’s accounts or other property.
 
INCREASED COSTS. If any change in a law, rule or regulation, or the
interpretation or application thereof, or Lender’s compliance with any request,
guideline or directive (whether or not having the force of law) of any
governmental authority (collectively, a “Change in Law’) shall (i) impose,
modify or deem applicable any reserve, special deposit or similar requirement
against or with respect to the assets of, deposits with or for the account of or
credit extended by Lender or (ii) impose on Lender any other condition affecting
this Agreement or the loans hereunder or any letter of credit or participation
therein and the result of any of the foregoing shall be to increase the cost to
Lender of making or maintaining any loan (or its commitment to make any such
loan) or to increase the cost to Lender of issuing or maintaining any letter of
credit or to reduce the amount of any sum received or receivable by Lender
hereunder, then Borrower will pay to Lender such additional amount as will
compensate Lender for such additional costs or reduction. lf Lender determines
that any Change in Law regarding capital requirements has or would have the
effect of reducing the rate of return on the capital of Lender or Lenders
holding company from this Agreement or the loans or letters of credit made or
issued by Lender to a level below that which Lender or Lender’s holding company
could have achieved but for such Change in Law (taking into consideration
Lender’s policies and the policies of Lender’s holding company with respect to
capital adequacy), then from time to time Borrower will pay to Lender such
additional amount as will compensate Lender or Lender’s holding company for any
such reduction, as set forth in a certificate of Lender describing in reasonable
detail the amount or amounts necessary to compensate Lender or its holding
company. The amounts and description in such certificate shall be conclusive
absent manifest error, and Borrower agrees to pay to Lender the amount shown in
such certificate within ten (10) business days after receipt thereof Failure or
delay on the part of Lender to demand compensation pursuant to this section
shall not constitute a waiver of Lender’s right to demand such compensation.
 
AMENDED AND RESTATED BUSINESS LOAN AGREEMENT. THIS AGREEMENT AMENDS AND RESTATES
THE BUSINESS LOAN AGREEMENT DATED JUNE 16, 2005, BETWEEN BORROWER AND LENDER, AS
AMENDED PRIOR TO THE DATE HEREOF (the “Original Loan Agreement”). Upon the
execution and delivery of this Agreement, the Indebtedness, obligations and
other liabilities, including without limitation interest and fees accrued to the
date hereof under the Original Loan Agreement (collectively, the “Prior
Obligations”), shall continue to exist and be in full force and effect but shall
be governed by the terms and conditions set forth in this Agreement. The Prior
Obligations, together with any and all additional Indebtedness and other
obligations incurred by Borrower hereunder or the Related Documents shall
continue to be secured by all of the pledges and security interests pursuant to
the Commercial Security Agreement dated June 16, 2005, between Borrower and
Lender (the “Original Security Agreement”) and from and after the date hereof
shall be secured by all of the pledges and security interests provided in
connection with this Agreement, all as more specifically set forth in the
Commercial Security Agreement dated August 31, 2007, which shall amend and
restate the Original Security Agreement. Borrower hereby reaffirms the
Indebtedness and its other obligations under the Original Loan Agreement and the
Related Documents as defined in the Original Loan Agreement (collectively. the
“Original Loan Documents”), as amended, supplemented or otherwise modified by
this Agreement and Related Documents. Borrower further agrees that each such
Original Loan Document shall remain in full force and effect following the
execution and delivery of this Agreement and that all references to the Business
Loan Agreement or the Loan Agreement in the Original Loan Documents shall be
deemed to refer to this Agreement. The execution and delivery of this Agreement
shall constitute an amendment, replacement and restatement, but not novation or
repayment, of the Prior Obligations.
 
ADDITIONAL PROVISION. Borrower’s waiver of its right to privacy in the section
entitled “MISCELLANEOUS PROVISIONS - Consent to Loan Participation” shall be
subject to the condition precedent that Lender and the purchaser of any
participation interest (the “Participant”) enter into a confidentiality
agreement that provides for the Participant to maintain the confidentiality and
not disclose of any confidential or proprietary information of Borrower to the
same extent that Lender is required to maintain the confidentiality or privacy
of such information disclosed by Borrower to Lender.
 
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
 
Amendments. This Agreement, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Agreement. No alteration of or amendment to this Agreement shall be
effective unless given in writing and signed by the party or parties sought to
be charged or bound by the alteration or amendment.
 
Attorneys’ Fees; Expenses. Borrower agrees to pay upon demand all of Lenders
costs and expenses, including Lenders attorneys’ fees and Lenders legal
expenses, incurred in connection with the enforcement of this Agreement. Lender
may hire or pay someone else to help enforce this Agreement, and Borrower shall
pay the costs and expenses of such enforcement. Costs and expenses include
Lender’s attorneys’ fees and legal expenses whether or not there is a lawsuit,
including attorneys’ fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. Borrower also
shall pay all court costs and such additional fees as may be directed by the
court.
 

--------------------------------------------------------------------------------

BUSINESS LOAN AGREEMENT
 
 (Continued)
 

Loan No. 0329000055-1 
 Page 6

 
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
 
Consent to Loan Participation. Borrower agrees and consents to Lenders sale or
transfer, whether now or later, of one or more participation interests in the
Loan to one or more purchasers, whether related or unrelated to Lender. Lender
may provide, without any limitation whatsoever, to any one or more purchasers,
or potential purchasers, any information or knowledge Lender may have about
Borrower or about any other matter relating to the Loan, and Borrower hereby
waives any rights to privacy Borrower may have with respect to such matters.
Borrower additionally waives any and all notices of sale of participation
interests, as well as all notices of any repurchase of such participation
interests. Borrower also agrees that the purchasers of any such participation
interests will be considered as the absolute owners of such interests in the
Loan and will have all the rights granted under the participation agreement or
agreements governing the sale of such participation interests. Borrower further
waives all rights of offset or counterclaim that it may have now or later
against Lender or against any purchaser of such a participation interest and
unconditionally agrees that either Lender or such purchaser may enforce
Borrower’s obligation under the Loan irrespective of the failure or insolvency
of any holder of any interest in the Loan. Borrower further agrees that the
purchaser of any such participation interests may enforce its interests
irrespective of any personal claims or defenses that Borrower may have against
Lender.
 
Governing Law.This Agreement will be governed by federal law applicable to
Lender and, to the extent not preempted by federal law, the laws of the State of
California without regardto its conflicts of law provisions. This Agreement has
been accepted by Lender in the State of California.
 
Choice of Venue. If there is a lawsuit, Borrower agrees upon Lender’s request to
submit to the jurisdiction of the courts of Los Angeles County, State of
California.
 
No Waiver by Lender. Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall operate as
a waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lenders right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Borrower, or between Lender and any Grantor, shall constitute a
waiver of any of Lenders rights or of any of Borrower’s or any Grantor’s
obligations as to any future transactions. Whenever the consent of Lender is
required under this Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent to subsequent instances where
such consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
 
Notices. Any notice required to be given under this Agreement shall be given in
writing, and shall be effective when actually delivered, when actually received
by telefacsimile (unless otherwise required by law), when deposited with a
nationally recognized overnight courier, or, if mailed, when deposited in the
United States mail, as first class, certified or registered mail postage
prepaid, directed to the addresses shown near the beginning of this Agreement.
Any party may change its address for notices under this Agreement by giving
formal written notice to the other parties, specifying that the purpose of the
notice is to change the party’s address. For notice purposes, Borrower agrees to
keep Lender informed at all times of Borrowers current address. Unless otherwise
provided or required by law, if there is more than one Borrower, any notice
given by Lender to any Borrower is deemed to be notice given to all Borrowers.
 
Severability. If a court of competent jurisdiction finds any provision of this
Agreement to be illegal, invalid, or unenforceable as to any circumstance, that
finding shall not make the offending provision illegal, invalid, or
unenforceable as to any other circumstance, If feasible, the offending provision
shall be considered modified so that it becomes legal, valid and enforceable, If
the offending provision cannot be so modified, it shall be considered deleted
from this Agreement. Unless otherwise required by law, the illegality,
invalidity, or unenforceability of any provision of this Agreement shall not
affect the legality, validity or enforceability of any other provision of this
Agreement.
 
Subsidiaries and Affiliates of Borrower. To the extent the context of any
provisions of this Agreement makes it appropriate, including without limitation
any representation, warranty or covenant, the word “Borrower” as used in this
Agreement shall include all of Borrower’s subsidiaries and affiliates.
Notwithstanding the foregoing however, under no circumstances shall this
Agreement be construed to require Lender to make any Loan or other financial
accommodation to any of Borrower’s subsidiaries or affiliates.
 
Successors and Assigns. All covenants and agreements by or on behalf of Borrower
contained in this Agreement or any Related Documents shall bind Borrower’s
successors and assigns and shall inure to the benefit of Lender and its
successors and assigns. Borrower shall not, however, have the right to assign
Borrower’s rights under this Agreement or any interest therein, without the
prior written consent of Lender.
 
Survival of Representations and Warranties. Borrower understands and agrees that
in extending Loan Advances, Lender is relying on all representations,
warranties, and covenants made by Borrower in this Agreement or in any
certificate or other instrument delivered by Borrower to Lender under this
Agreement or the Related Documents. Borrower further agrees that regardless of
any investigation made by Lender, all such representations, warranties and
covenants will survive the extension of Loan Advances and delivery to Lender of
the Related Documents, shall be continuing in nature, shall be deemed made and
redated by Borrower at the time each Loan Advance is made, and shall remain in
full force and effect until such time as Borrower’s Indebtedness shall be paid
in full, or until this Agreement shall be terminated in the manner provided
above, whichever is the last to occur.
 
Time is of the Essence. Time is of the essence in the performance of this
Agreement.
 
DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. Accounting
words and terms not otherwise defined in this Agreement shall have the meanings
assigned to them in accordance with generally accepted accounting principles as
in effect on the date of this Agreement:
 
Advance. The word “Advance” means a disbursement of Loan funds made, or to be
made, to Borrower or on Borrower’s behalf on a line of credit or multiple
advance basis under the terms and conditions of this Agreement.
 
Agreement. The word “Agreement” means this Business Loan Agreement, as this
Business Loan Agreement may be amended or modified from time to time, together
with all exhibits and schedules attached to this Business Loan Agreement from
time to time.
 
Borrower. The word “Borrower” means AeroVironment, Inc. and includes all
co-signers and co-makers signing the Note and all their successors and assigns.
 

--------------------------------------------------------------------------------

BUSINESS LOAN AGREEMENT
 
 (Continued)
 

Loan No. 0329000055-1 
 Page 7

Cash & Equivalent. The words ‘Cash & Equivalent” mean all of Borrower’s cash,
marketable securities, and other near-cash items, excluding sinking funds.
 
Collateral. The word “Collateral” means all property and assets granted as
collateral security for a Loan, whether real or personal property, whether
granted directly or indirectly, whether granted now or in the future, and
whether granted in the form of a security interest, mortgage, collateral
mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage,
collateral chattel mortgage, chattel trust, factor’s lien, equipment trust,
conditional sale, trust receipt, lien, charge, lien or title retention contract,
lease or consignment intended as a security device, or any other security or
lien interest whatsoever, whether created by law, contract, or otherwise.
 
Environmental Laws. The words “Environmental Laws” mean any and all state,
federal and local statutes, regulations and ordinances relating to the
protection of human health or the environment, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended. 42 U.S.C. Section 9601, et seq. (“CERCLA’), the Superfund Amendments
and Reauthorization Act of 1985, Pub. L. No. 99-499 (‘SARA”), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., Chapters 6.5
through 7.7 of Division 20 of the California Health and Safety Code, Section
25100, et seq., or other applicable state or federal laws, rules, or regulations
adopted pursuant thereto.
 
Event of Default. The words “Event of Default” mean any of the events of default
set forth in this Agreement in the default section of this Agreement.
 
GAAP. The word “GAAP” means generally accepted accounting principles.
 
Grantor. The word “Grantor” means each and all of the persons or entities
granting a Security Interest in any Collateral for the Loan, including without
limitation all Borrowers granting such a Security Interest.
 
Guarantor. The word “Guarantor” means any guarantor, surety, or accommodation
party of any or all of the Loan.
 
Guaranty. The word “Guaranty” means the guaranty from Guarantor to Lender,
including without limitation a guaranty of all or part of the Note.
 
Hazardous Substances. The words “Hazardous Substances” mean materials that,
because of their quantity, concentration or physical, chemical or infectious
characteristics, may cause or pose a present or potential hazard to human health
or the environment when improperly used, treated, stored, disposed of,
generated, manufactured, transported or otherwise handled. The words “Hazardous
Substances” are used in their very broadest sense and include without limitation
any and all hazardous or toxic substances, materials or waste as defined by or
listed under the Environmental Laws. The term “Hazardous Substances” also
includes, without limitation, petroleum and petroleum by-products or any
fraction thereof and asbestos.
 
Indebtedness. The word “Indebtedness” means the indebtedness evidenced by the
Note or Related Documents, including all principal and interest together with
all other indebtedness and costs and expenses for which Borrower is responsible
under this Agreement or under any of the Related Documents.
 
Lender. The word “Lender” means California Bank & Trust, its successors and
assigns.
 
Loan. The word “Loan” means any and all loans and financial accommodations from
Lender to Borrower whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations described
herein or described on any exhibit or schedule attached to this Agreement from
time to time.
 
Note. The word ‘Note” means the Note executed by AeroVironment Inc. in the
original principal amount of $10,000,000.00 dated March 31, 2004. together with
all renewals of, extensions of, modifications of, refinancings of,
consolidations of, and substitutions for the Note or Credit Agreement or any
other subsequent Notes evidencing further Indebtedness.
 
Permitted Liens. The words “Permitted Liens” mean (1) liens and security
interests securing Indebtedness owed by Borrower to Lender; (2) liens for taxes,
assessments, or similar charges either not yet due or being contested in good
faith; (3) liens of materialmen, mechanics, warehousemen, or carriers, or other
like liens arising in the ordinary course of business and securing obligations
which are not yet delinquent; (4) purchase money liens or purchase money
security interests upon or in any property acquired or held by Borrower in the
ordinary course of business to secure indebtedness outstanding on the date of
this Agreement or permitted to be incurred under the paragraph of this Agreement
titled “indebtedness and Liens”; (5) liens and security interests which, as of
the date of this Agreement, have been disclosed to and approved by the Lender in
writing; and (6) those liens and security interests which in the aggregate
constitute an immaterial and insignificant monetary amount with respect to the
net value of Borrower’s assets.
 
Related Documents. The words “Related Documents” mean all promissory notes,
credit agreements, loan agreements, environmental agreements, guaranties,
security agreements, mortgages, deeds of trust, security deeds, collateral
mortgages, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Loan.
 
Security Agreement. The words “Security Agreement” mean and include without
limitation any agreements, promises, covenants, arrangements, understandings or
other agreements, whether created by law, contract, or otherwise, evidencing,
governing, representing, or creating a Security Interest.
 
Security Interest. The words “Security Interest” mean, without limitation, any
and all types of collateral security, present and future, whether in the form of
a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment,
pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel
trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien or
title retention contract, lease or consignment intended as a security device, or
any other security or lien interest whatsoever whether created by law, contract,
or otherwise.
 
Tangible Net Worth. The words ‘Tangible Net Worth” mean Borrower’s total assets
excluding all intangible assets (i.e., goodwill, trademarks, patents,
copyrights, organizational expenses, and similar intangible items, but including
leaseholds and leasehold improvements) less total debt.
 
Trade Receivables. The words “Trade Receivables” mean all of Borrower’s accounts
from trade, net of allowance for doubtful accounts.
 

--------------------------------------------------------------------------------

BUSINESS LOAN AGREEMENT
 
 (Continued)
 

Loan No. 0329000055-1 
 Page 8

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS
DATED AUGUST 31, 2007.
 
BORROWER:
 
AEROVIRONMENT. INC. 
               
By:
/s/ Timothy Conver
 
By:
/s/ Stephen Wright
         
Timothy Conver, 
   
Stephen Wright,
President/CEO 
   
CFO /VP of Finance/Secretary
                   
LENDER: 
               
CALIFORNIA BANK & TRUST 
               
By:
/s/ Joe Lim                
Authorized Signer 
     

--------------------------------------------------------------------------------

CHANGE OF TERMS
 
Principal
Loan Date
Maturity
Loan No
Call/Coll
Account
Officer
Initials
$25,000,000.00
08-31-2007
08/31/2009
9329000055-1
 
9329000055-1
22163
JL
References in the shaded area are for the Lender’s use only and do not limit the
applicability of this document to any particular loan or item.  Any item above
containing “***” has been omitted due to text length limitations

Borrower:
AeroVironment Inc.
Lender:
California Bank & Trust
 
181 W. Huntington Drive, Suite 202
 
Los Angeles Commercial Banking
 
Monrovia, CA  91016
 
550 South Hope Street, Suite 300
     
Los Angeles, CA  90071

 
Principal Amount: $25,000,000.00
Initial Rate: 8.000%
Date of Agreement: August 31, 2007

 
DESCRIPTION OF EXISTING INDEBTEDNESS.
 
The Business Loan Agreement dated June 16, 2005 and Promissory Note dated March
31, 2004, in the original amount of $10,000,000.00, as amended by those certain
Change In Terms Agreements dated May 11, 2004 and June 16, 2005 from
AeroVironment, Inc. to Lender.
 
DESCRIPTION OF COLLATERAL.
 
All inventory, equipment, accounts (including but not limited to all
health-care-insurance receivables), chattel paper, instruments (including but
not limited to all promissory notes), letter-of-credit rights, letters of
credit, documents, deposit accounts, investment property, money, other rights to
payment and performance, and general intangibles (including but not limited to
all software and all payment intangibles); all fixtures; all attachments,
accessions, accessories, fittings, increases, tools, parts, repairs, supplies,
and commingled goods relating to the foregoing property, and all additions,
replacements of and substitutions for all or any part of the foregoing property;
all insurance refunds relating to the foregoing property; all good will relating
to the foregoing property; all records and data and embedded software relating
to the foregoing property, and all equipment, inventory and software to utilize,
create, maintain and process any such records and data on electronic media; and
all supporting obligations relating to the foregoing property; all whether now
existing or hereafter arising, whether now owned or hereafter acquired or
whether now or hereafter subject to any rights in the foregoing property; and
all products and proceeds (including but not limited to all insurance payments)
of or relating to the foregoing property.
 
Without limiting the generality of the foregoing, the Collateral shall include
the following government contracts:
 
Government Contract Number W58RGZ-04 for US Army Raven
 
Government Contract Number DAAHO1-03-C0134 for US Army Raven
 
Government Contract Number DAAD16-03-C-0074 for SOCOM/NATICK Repair
 
Government Contract Number W91 IQY-04-C-0046
 
Government Contract Number FA8620 for AFOSOC Pointer
 
Government Contract Number M67854-04-D-101 1-0001 for Dragon Eye BOA
 
Government Contract Number N41756-04-D-4726 for Swift IDQ
 
Government Contract Number NCA4-3 for Pathfinder/Systems
Analysis/Refurbish/Flight Testing.
 
 
DESCRIPTION OF CHANGE IN TERMS.
 
1) The Maturity Date is hereby extended from August 31, 2007 to August 31, 2009.
 
2) The Revolving Line of Credit is hereby increased from $16,500,000.00 to
$25,000,000.00.
 
3) The interest rate is hereby amended from the California Bank & Trust Prime
Rate, variable or the option of the One Month, Two Months, Three Months or Four
Months, LIBOR plus 2.50% to California Bank & Trust Prime Rate minus 0.25%,
variable or the option of the One Month, Two Months, Three Months or Four
Months, LIBOR plus 2.00%.
 
4) The Stand-By Letter of Credit Subline is hereby amended and restated as set
forth in the attached exhibit.
 
5) The Letter of Credit Subline is hereby amended and restated as set forth in
the attached exhibit.
 
6) The Note is subject to the terms and conditions of that Business Loan
Agreement executed by Borrower in favor of Lender, as amended and restated as of
August31 2007.
 
The Note is hereby amended and restated as follows:
 
PROMISE TO PAY. AeroVironment, Inc. (“Borrower’) promises to pay to California
Bank & Trust (‘Lender”), or order, in lawful money of the United States of
America, the principal amount of Twenty Five Million and 00/100 Dollars
($25,000,000.00) or so much as may be outstanding. together with interest on the
unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each advance.
 
PAYMENT. Borrower will pay this loan in one payment of all outstanding principal
plus all accrued unpaid interest on August 31, 2009. In addition, Borrower will
pay regular monthly payments of all accrued unpaid interest due as of each
payment date, beginning September 30, 2007, with all subsequent interest
payments to be due on the last day of each month after that. Unless otherwise
agreed or required by applicable law, payments will be applied first to any
accrued unpaid interest; then to principal; then to any unpaid collection costs;
and then to any late charges. Interest on this loan is computed en a 365/360
simple interest basis; that is, by applying the ratio of the annual interest
rate over a year of 360 days, multiplied by the outstanding principal balance,
multiplied by the actual number of days the principal balance is outstanding.
Borrower will pay Lender at Lender’s address shown above or at such other place
as Lender may designate in writing.
 
VARIABLE INTEREST RATE. Subject to designation of a different interest rate
index by Borrower as provided below, the interest rate on this loan is subject
to change from time to time based on changes in an index which is the rate of
interest set from time to time by Bank as its Prime Rate- California Bank &
Trust Prime Rate is determined by Bank as a means of pricing credit extensions
to some customers and is neither tied to any external rate of interest or index
nor is it necessarily the lowest rate of interest charged by Bank at any given
time for any particular class of customers or credit extensions (the “Index”).
The Index is not necessarily the lowest rate charged by Lender on its loans and
is set by Lender in its sole discretion. If the Index becomes unavailable during
the term of this loan, Lender may designate a substitute index after notifying
Borrower. Lender will tell Borrower the current Index rate upon Borrower’s
request. The interest rate change will not occur more often than each Day.
Borrower understands that Lender may make loans based on other rates as well.
The Index currently is 8.250% per annum. The interest rate to be applied to the
unpaid principal balance during this loan will be at a rate of 0.250 percentage
points under the Index, resulting in an initial rate of 8.000% per annum.
NOTICE: Under no circumstances will the interest rate on this loan be more than
the maximum rate allowed by applicable law.
 
INTEREST RATE OPTIONS. On the terms and subject to the conditions set forth
herein, Borrower will be able to select, from one of the following Rate Options,
an interest rate which will be applicable to a particular dollar increment of
amounts outstanding, or to be disbursed, under this Agreement. Principal shall
be payable as specified herein in the “Payment” section, and interest shall be
payable as specified for each Rate Option. The following Rate Options are
available to Borrower:
 

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CHANGE IN TERMS AGREEMENT
 
(Continued)
 

Loan No. 0329000055-1 
 Page 2

 
(A) Default Option. The interest rate margin and index described in the
“VARIABLE INTEREST RATE paragraph herein (the “Default Option’).
 
(B) LIBOR. A margin of 2.000 percentage points over LIBOR. For purposes of this
Agreement. LIBOR shall mean Lender’s LIBOR rate for the relevant Interest Period
determined as of the start of each Interest Period. The length of the Interest
Period selected shall be designated One Month, Two Months, Three Months or Four
Months, though the actual length of such periods shall be calculated as set
forth below. The initial Interest Period, unless commenced on the first business
day of a month, shall, notwithstanding the length of the Interest Period
selected by Borrower, (i) for Interest Periods beginning before the 25th of each
calendar month, end on the first business day of the month following
commencement of the initial Interest Period; and (ii) for Interest Periods
beginning on or after the 25th of each calendar month, end on the first business
day of the second month following commencement of the initial Interest Period.
All subsequent Interest Periods shall commence on the first business day of the
relevant month and end on the first business day of the month determined by the
length of the Interest Period selected by Borrower. The Bank’s calculation
pursuant to the provision of the length of the Interest Periods shall be in its
sole and absolute discretion and shall conclusively bind the Borrower absent
manifest error. Lender’s LIBOR rate shall mean the rate per annum quoted by
Lender as Lender’s LIBOR rate based upon quotes from the London Interbank
Offered Rate from the British Bankers Association Interest Settlement Rates, as
quoted for U.S. Dollars by Bloomberg, or other comparable services selected by
the Lender, This definition of Lender’s LIBOR rate is to be strictly interpreted
and is not intended to serve any purpose other than providing an index to
determine the interest rate used herein. Lender’s LIBOR rate may not necessarily
be the same as the quoted offered side in the Eurodollar time deposit market by
any particular institution or service applicable to any interest period.
Interest based on this Rate Option is a floating rate and will change on and as
of the date of a change in LIBOR (the “Interest Period”). Adjustments in the
interest rate due to changes in the maximum nonusurious interest rate allowed
(the “Highest Lawful Rate”) shall be made on the effective day of any change in
the Highest Lawful Rate. Under this Rate Option, Borrower shall make monthly
interest payments on the same day of the month, with a final payment of all
accrued and unpaid interest on the last day of such Interest Period and, in the
case of an Interest Period greater than three (3) months, at three month (3
month) intervals after the first day of such Interest Period.
 
The following provisions concerning Rate Options are a part of this Agreement:
 
Selection of Rate Options. Provided Borrower is not in default under this
Agreement, Borrower may request (a “Rate Request”) that a $100,000.00 increment
or any amount in excess thereof (an “Increment”) of the outstanding principal
of, or amounts to be disbursed under, this Agreement bear interest at the
selected rate. Borrower may make this Rate Request by telephonic notice, however
no later than 10:00 AM PDT three (3) business days prior to the effective date
of the Rate Request to permit Lender to quote the rate requested.
 
Applicable Interest Rate. Borrower’s Rate Request will become effective, and
interest on the increment designated will be calculated at the rate (the
‘Effective Rate”), which Borrower requested, for the applicable Interest Period,
subject to the following:
 
(1) Notwithstanding any Rate Request, interest shall be calculated on the basis
of the Default Option if (a) Lender, in good faith, is unable to ascertain the
requested Rate Option by reason of circumstances then affecting the applicable
money market or otherwise, (b) it becomes unlawful or impracticable for Lender
to maintain loans based upon the requested Rate Option, or (c) Lender, in good
faith, determines that it is impracticable to maintain loans based on the
requested Rate Option because of increased taxes, regulatory costs, reserve
requirements, expenses or any other costs or charges that affect such Rate
Options. Upon the occurrence of any of the events described in this “Interest
Rate Options” section, any increment to which a requested Rate Option applies
shall be immediately (or at the option of Lender, at the end the current
Interest Period), without further action of Lender or Borrower, converted to an
increment to which the Default Option applies.
 
(2) Borrower may have no more than a total of 2 Effective Rates applicable to
amounts outstanding under this Agreement at any given time.
 
(3) A Rate Request shall be effective as to amounts to be disbursed under this
Agreement only if, on the effective date of the Rate Requests, such amounts are
in fact disbursed to or for Borrower’s account in accordance with the provisions
of this Agreement and any related loan documents.
 
(4) Any amounts of outstanding principal for which a Rate Request has not been
made, or is otherwise not effective, shall bear interest until paid in full at
the Default Option.
 
(5) Any amounts of outstanding principal bearing interest based upon a Rate
Option shall bear interest at such rate until the end of the Interest Period
therefor, and thereafter shall bear interest based upon the Default Option
unless a new Rate Request for a Rate Option complying with the terms hereof has
been made and has become effective.
 
(6) If Borrower is in default under this Agreement (‘Default’), then Lender
shall no longer be obligated to honor any Rate Requests.
 
(7) No Interest Period shall extend beyond the maturity date of this Agreement.
 
Notices: Authority to Act. Borrower acknowledges and agrees that the agreement
of Lender herein to receive certain notices by telephone is solely for
Borrower’s convenience. Lender shall be entitled to rely on the authority of the
person purporting to be a person authorized by Borrower to give such notice, and
Lender shall have no liability to Borrower on account of any action taken by
Lender in reliance upon such telephonic notice, Borrower’s obligation to repay
all sums owing under the Note shall not be affected in any way or to any extent
by any failure by Lender to receive written confirmation of any telephonic
notice or the receipt by Lender of a confirmation which is at variance with the
terms understood by Lender to be contained in the telephonic notice.
 
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of
this Agreement, Borrower understands that Lender is entitled to a minimum
interest charge of $200.00. Other than Borrower’s obligation to pay any minimum
interest charge, Borrower may pay without penalty all or a portion of the amount
owed earlier than it is due. Early payments will not, unless agreed to by Lender
in writing, relieve Borrower of Borrower’s obligation to continue to make
payments of accrued unpaid interest. Rather, early payments will reduce the
principal balance due. Borrower agrees not to send Lender payments marked “paid
in full”, “without recourse”, or similar language. If Borrower sends such a
payment. Lender may accept it without losing any of Lender’s rights under this
Agreement, and Borrower will remain obligated to pay any further amount owed to
Lender. All written communications concerning disputed amounts, including any
check or other payment instrument that indicates that the payment constitutes
‘payment in full” of the amount owed or that is tendered with other conditions
or limitations or as full satisfaction of a disputed amount must be mailed or
delivered to: California Bank & Trust, Los Angeles Commercial Banking, 550 South
Hope Street, Suite 300, Los Angeles, CA 9D071.
 
LATE CHARGE. If a payment is 15 days or more late, Borrower will be charged
6.000% of the regularly scheduled payment or $500.00, whichever is less.
 

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CHANGE IN TERMS AGREEMENT
 
(Continued)
 

Loan No. 0329000055-1 
 Page 3

 
INTEREST AFTER DEFAULT. Upon default, the interest rate on this loan shall, if
permitted under applicable law, immediately increase by adding a 5.000
percentage point margin (“Default Rate Margin”). The Default Rate Margin shall
also apply to each succeeding interest rate change that would have applied had
there been no default.
 
DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:
 
Payment Default. Borrower fails to make any payment when due under the
Indebtedness.
 
Other Defaults. Borrower fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Agreement or in any of the
Related Documents or to comply with or to perform any term, obligation, covenant
or condition contained in any other agreement between Lender and Borrower.
 
Default in Favor of Third Parties. Borrower defaults under any loan, extension
of credit, security agreement, purchase or sales agreement, or any other
agreement, in favor of any other creditor or person that may materially affect
any of Borrowers property or Borrower’s ability to perform Borrower’s
obligations under this Agreement or any of the Related Documents.
 
False Statements. Any warranty, representation or statement made or furnished to
Lender by Borrower or on Borrower’s behalf under this Agreement or the Related
Documents is false or misleading in any material respect, either now or at the
time made or furnished or becomes false or misleading at any time thereafter.
 
Insolvency. The dissolution or termination of Borrower’s existence as a going
business, the insolvency of Borrower, the appointment of a receiver for any part
of Borrower’s property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.
 
Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower or by any governmental agency against
any collateral securing the Indebtedness. This includes a garnishment of any of
Borrower’s accounts, including deposit accounts, with Lender. However, this
Event of Default shall not apply if there is a good faith dispute by Borrower as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Borrower gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.
 
Events Affecting Guarantor. Any of the preceding events occurs with respect to
any guarantor, endorser, surety, or accommodation party of any of the
Indebtedness or any guarantor, endorser, surety, or accommodation party dies or
becomes incompetent, or revokes or disputes the validity of, or liability under,
any Guaranty of the Indebtedness evidenced by this Note. In the event of a
death, Lender, at its option, may, but shall not be required to, permit the
guarantor’s estate to assume unconditionally the obligations arising under the
guaranty in a manner satisfactory to Lender, and, in doing so, cure any Event of
Default.
 
Change In Ownership. Any change in ownership of twenty-five percent (25%) or
more of the common stock of Borrower.
 
Adverse Change. A material adverse change occurs in Borrower’s financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
 
Insecurity. Lender in good faith believes itself insecure.
 
Cure Provisions. If any default, other than a default in payment is curable and
if Borrower has not been given a notice of a breach of the same provision of
this Agreement within the preceding twelve (12) months, it may be cured if
Borrower, after receiving written notice from Lender demanding cure of such
default: (1) cures the default within fifteen (15) days; or (2) if the cure
requires more than fifteen (15) days, immediately initiates steps which Lender
deems in Lender’s sole discretion to be sufficient to cure the default and
thereafter continues and completes all reasonable and necessary steps sufficient
to produce compliance as soon as reasonably practical.
 
LENDER’S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance under this Agreement and all accrued unpaid interest immediately due,
and then Borrower will pay that amount.
 
ATTORNEYS’ FEES; EXPENSES. Lender may hire or pay someone else to help collect
this Agreement if Borrower does not pay. Borrower will pay Lender that amount.
This includes, subject to any limits under applicable law, Lender’s attorneys’
fees and Lender’s legal expenses, whether or not there is a lawsuit, including
attorneys’ fees, expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), and appeals. Borrower also
will pay any court costs, in addition to all other sums provided by law.
 
GOVERNING LAW, This Agreement will be governed by federal law applicable to
Lender and, to the extent not preempted by federal law, the laws of the State of
California without regard to its conflicts of law provisions. This Agreement has
been accepted by Lender in the State of California.
 
CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender’s request to
submit to the jurisdiction of the courts of Los Angeles County, State of
California.
 
COLLATERAL. Borrower acknowledges this Agreement is secured by the following
collateral described in the security instrument listed herein: inventory,
chattel paper, accounts, equipment and general intangibles described in a
Commercial Security Agreement dated August 31, 2007.
 
LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances
under this Agreement may be requested either orally or in writing by Borrower or
as provided in this paragraph. Lender may, but need not, require that all oral
requests be confirmed in writing. All communications, instructions, or
directions by telephone or otherwise to Lender are to be directed to Lender’s
office shown above. The following persons currently are authorized to request
advances and authorize payments under the line of credit until Lender receives
from Borrower, at Lender’s address shown above, written notice of revocation of
their authority: Timothy Conver, President/CEO of AeroVironment, Inc.; Stephen
C. Wright, CFO/VP of Finance/Sec. of AeroVironment, Inc.; and Suzanne Gilman,
Controller. Borrower agrees to be liable for all sums either: (A) advanced in
accordance with the instructions of an authorized person or (B) credited to any
of Borrower’s accounts with Lender. The unpaid principal balance owing on this
Agreement at any time may be evidenced by endorsements on this Agreement or by
Lender’s internal records, including daily computer print-outs.
 
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of
the original obligation or obligations, including all agreements evidenced or
securing the obligation(s), remain unchanged and in full force and effect.
Consent by Lender to this Agreement does not waive Lender’s right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a satisfaction
of the obligation(s), It is the intention of Lender to retain as liable parties
all makers and endorsers of the original obligation(s), including accommodation
parties, unless a party is expressly released by Lender in writing. Any maker or
endorser, including accommodation makers, will not be released by virtue of this
Agreement. If any person who signed the original obligation does not sign this
Agreement below, then all persons signing below acknowledge that this Agreement
is given conditionally, based on the representation to Lender that the
non-signing party consents to the changes and provisions of this Agreement or
otherwise will not be released by it. This waiver applies not only to any
initial extension, modification or release, but also to all such subsequent
actions.
 

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CHANGE IN TERMS AGREEMENT
 
(Continued)
 

Loan No. 0329000055-1 
 Page 4

 
FINANCIAL STATEMENT CERTIFICATIONS. The undersigned hereby certifies to
California Bank & Trust (“Bank’) that all financial information (“Information”)
submitted to Bank now and at all times during the terms of this loan does, and
will, fairly and accurately represent the financial condition of the
undersigned, all Borrowers and Guarantors. Financial Information includes, but
is not limited to all Business Financial Statements (including Interim and
Year-End financial statements that are company prepared and/or CPA-prepared),
Business Income Tax Returns, Borrowing Base Certificates, Accounts Receivable
and Accounts Payable Agings, Personal Financial Statements and Personal Income
Tax Returns. The undersigned understands that the Bank will rely on all
financial information, whenever provided, and that such information is a
material inducement to Bank to make, to continue to make, or otherwise extend
credit accommodations to the undersigned. The undersigned covenants and agrees
to notify Bank of any adverse material changes in her/his/its financial
condition in the future. The undersigned further understands and acknowledges
that there are criminal penalties for giving false financial information to
federally insured financial institutions.
 
DEPOSIT AGREEMENT SECURITY. Borrower hereby grants a security interest to Lender
in any and all deposit accounts (checking, savings, money market or time) of
Borrower at Lender, now existing or hereinafter opened, to secure its
Indebtedness hereunder. This includes all deposit accounts Borrower holds
jointly with someone else. -
 
JURY WAIVER; JUDICIAL REFERENCE. Borrower and Lender each waive their respective
rights to a trial before a jury in connection with any disputes related to this
Note, the loan evidenced hereby and any other loan documents in connection
herewith and therewith. Such disputes include without limitation any claim by
Borrower or Lender, claims brought by Borrower- as a class representative on
behalf of others, and claims by a class representative on Borrower’s behalf as a
class member (so-called “class action” suits). This provision shall not apply
if, at the time an action is brought, Borrower’s loan is funded or maintained in
a state where this jury trial waiver is not permitted by law.
 
If a jury trial waiver is not permitted by applicable law and a dispute arises
between Borrower and Lender with respect to this Note, its enforcement or the
transactions contemplated by the related loan documents, either of Borrower or
Lender may require that it be resolved by judicial reference in accordance with
California Code of Civil Procedure, Sections 638, et seq., including without
limitation whether the dispute is subject to a judicial reference proceeding.
The referee shall be a retired judge, agreed upon by the parties, from either
the American Arbitration Association (AAA) or Judicial Arbitration and Mediation
Service, Inc. (JAMS). If the parties cannot agree on the referee, the party who
initially selected the reference procedure shall request a panel of ten retired
judges from either AAA or JAMS, and the court shall select the referee from that
panel. The referee shall be appointed to sit with all of the powers provided by
law. The parties agree that time is of the essence in conducting the judicial
reference proceeding set forth herein. The costs of the judicial reference
proceeding, including the fee for the court reporter, shall be borne equally by
the parties as the costs are incurred, unless otherwise awarded by the referee.
The referee shall hear all pre-trial and post-trial matters (including without
limitation requests for equitable relief), prepare an award with written
findings of fact and conclusions of law and apportion costs as appropriate. The
referee shall be empowered to enter equitable relief as well as legal relief,
provide all temporary or provisional remedies, enter equitable orders that are
binding on the parties and rule on any motion that would be authorized in a
trial, including without limitation motions for summary judgment or summary
adjudication. Judgment upon the award shall be entered in the court in which
such proceeding was commenced and all parties shall have full rights of appeal.
This provision will not be deemed to limit or constrain Lender’s right of
offset, to obtain provisional or ancillary remedies, to interplead funds in the
event of a dispute, to exercise any security interest or lien Lender may hold in
property or to comply with legal process involving Borrower’s accounts or other
property.
 
STAND-BY LETTER OF CREDIT SUBLINE EXHIBIT. An exhibit, titled “Stand-By Letter
of Credit Subline, is attached to this Agreement and by this reference is made a
part of this Agreement just as if all the provisions, terms and conditions of
the Exhibit had been fully set forth in this Agreement.
 
LETTER OF CREDIT SUBLINE EXHIBIT. An exhibit, titled “Letter of Credit Subline
Exhibit,” is attached to this Agreement and by this reference is made a part of
this Agreement just as if all the provisions, terms and conditions of the
Exhibit had been fully set forth in this Agreement.
 
SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Agreement on
transfer of Borrower’s interest, this Agreement shall be binding upon and inure
to the benefit of the parties, their successors and assigns. If ownership of the
Collateral becomes vested in a person other than Borrower, Lender, without
notice to Borrower, may deal with Borrower’s successors with reference to this
Agreement and the Indebtedness by way of forbearance or extension without
releasing Borrower from the obligations of this Agreement or liability under the
Indebtedness.
 
MISCELLANEOUS PROVISIONS. If any part of this Agreement cannot be enforced, this
fact will not affect the rest of the Agreement. Lender may delay or forgo
enforcing any of its rights or remedies under this Agreement without losing
them. Borrower and any other person who signs, guarantees or endorses this
Agreement, to the extent allowed by law, waive any applicable statute of
limitations, presentment, demand for payment, and notice of dishonor. Upon any
change in the terms of this Agreement, and unless otherwise expressly stated in
writing, no party who signs this Agreement, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability. All such
parties agree that Lender may renew or extend (repeatedly and for any length of
time) this loan or release any party or guarantor or collateral; or impair, fail
to realize upon or perfect Lender’s security interest in the collateral; and
take any other action deemed necessary by Lender without the consent of or
notice to anyone. All such parties also agree that Lender may modify this loan
without the consent of or notice to anyone other than the party with whom the
modification is made. The obligations under this Agreement are joint and
several.
 
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER
AGREES TO THE TERMS OF THE AGREEMENT.
 
BORROWER:
 
AEROVIRONMENT, INC.
 
By:
/s/ Timothy Conver
 
By:
/s/ Stephen C. Wright
 
Timothy Conver, President/CEO of
   
Stephen C. Wright, CFO/VP of
 
AeroVironment Inc.
   
Finance/Sec. Of AeroVironment, Inc.

 
 

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