Exhibit 10.1

 

AEROVIRONMENT, INC.

 

2006 EQUITY INCENTIVE PLAN

 

LONG-TERM COMPENSATION AWARD GRANT NOTICE AND
LONG-TERM COMPENSATION AWARD AGREEMENT

 

AeroVironment, Inc., a Delaware corporation (the “Company”), pursuant to its
2006 Equity Incentive Plan (the “Plan”), hereby grants to the individual listed
below (“Participant”), a long-term compensation award (the “Award”).  The Award
is an Other Stock-Based Award pursuant to the terms of the Plan.  This Award is
subject to all of the terms and conditions as set forth herein and in the
Long-Term Compensation Award Agreement attached hereto as Exhibit A (the
“Long-Term Compensation Award Agreement”) and the Plan, each of which are
incorporated herein by reference.  Unless otherwise defined herein, the terms
defined in the Plan shall have the same defined meanings in this Grant Notice
and the Long-Term Compensation Award Agreement.

 

Participant:

 

 

 

Grant Date:

 

 

 

Goal Bonus Amount:

 

 

By his or her signature, Participant agrees to be bound by the terms and
conditions of the Plan, the Long-Term Compensation Award Agreement and this
Grant Notice.  Participant has reviewed the Long-Term Compensation Award
Agreement, the Plan and this Grant Notice in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Grant Notice
and fully understands all provisions of this Grant Notice, the Long-Term
Compensation Award Agreement and the Plan.  Participant hereby agrees to accept
as binding, conclusive and final all decisions or interpretations of the
Committee upon any questions arising under the Plan, this Grant Notice or the
Long-Term Compensation Award Agreement.

 

AEROVIRONMENT, INC.

 

PARTICIPANT

 

 

 

By:

 

 

By:

 

Print Name:

 

 

Print

 

Title:

 

 

Name:

 

Address:

181 Huntington Drive, Suite 202

 

Address:

 

 

Monrovia, CA  91016

 

 

 

 

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EXHIBIT A

 

TO LONG-TERM COMPENSATION AWARD GRANT NOTICE

 

LONG-TERM COMPENSATION AWARD AGREEMENT

 

Pursuant to the Long-Term Compensation Award Grant Notice (the “Grant Notice”)
to which this Long-Term Compensation Award Agreement (this “Agreement”) is
attached, the Company has granted to Participant the Award set forth in the
Grant Notice, subject to all of the terms and conditions set forth in this
Agreement, the Grant Notice and the Plan.

 

ARTICLE I.

GENERAL

 

1.1           Defined Terms.  Capitalized terms not specifically defined herein
shall have the meanings specified in the Plan and the Grant Notice.  The
following terms shall have the meanings given below when used in this Agreement:

 

“Achievement Percentage” shall mean (a) if the Highest Achievement Level is less
than 80%, then the Achievement Percentage will be 0%, (b) if the Highest
Achievement Level is 80%, then the Achievement Percentage will be 50%, (c) if
the Highest Achievement Level is 100%, then the Achievement Percentage will be
100%, and (d) if the Highest Achievement Level is 150%, then the Achievement
Percentage will be 200%.  If the Highest Achievement Level falls between the
foregoing levels, the Achievement Percentage will be determined by linear
interpolation between the applicable levels.  In no event will the Achievement
Percentage exceed 200%.  All percentage calculations shall be made to the
nearest one decimal point (i.e., 1/10th of one percent).

 

“Certification Date” shall mean the date following the end of the Performance
Period on which the Committee determines, in writing, whether and to what extent
the Financial Goals have been satisfied and the Participant’s Final Award
Amount.  The Committee’s certification of the Financial Goals shall be made
within the time prescribed by, and otherwise in compliance with, Section 162(m)
of the Code.

 

“Final Award Amount” shall mean (a) the Participant’s Goal Bonus Amount (as set
forth in the Grant Notice) multiplied by (b) the Achievement Percentage.

 

“Financial Goals” shall mean the objective financial goals set forth in Exhibit
B to the Grant Notice.

 

“Highest Achievement Level” shall mean the highest percentage achievement of the
Company relative to the applicable Financial Goals.  As there are two separate
Financial Goals applicable to the Award, if the Company’s financial performance
relative to the first Financial Goal is 85% and the Company’s financial
performance relative to the second Financial Goal is 95%, the Highest
Achievement Level will be 95%.

 

 “Performance Period” shall mean the performance period set forth in Exhibit B
to the Grant Notice.

 

 “Threshold Objective” shall mean 80% achievement for each of the Financial
Goals.  By way of example, as there are two separate Financial Goals applicable
to the Award, the Company must achieve financial performance at least equal to
80% of the target level for each such Financial Goal in order for

 

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the Award to be payable.  If the Company does not achieve the Threshold
Objective, then the Award will be forfeited.  All percentage calculations shall
be made to the nearest one decimal point (i.e., 1/10th of one percent).

 

1.2           Incorporation of Terms of Plan.  The Award is subject to the terms
and conditions of the Plan which are incorporated herein by reference.  In the
event of any inconsistency between the Plan and this Agreement, the terms of the
Plan shall control.

 

ARTICLE II.

AWARD

 

2.1           Grant of Award.

 

(a)           In consideration of Participant’s continued employment with the
Company or any Subsidiary thereof and for other good and valuable consideration,
the Company hereby grants to Participant the Award.  The Award represents a
potential incentive bonus that may become payable upon Participant’s continued
service and the achievement of the Financial Goals set forth in Exhibit B to the
Grant Notice.  Participant’s Goal Bonus Amount assumes that Participant is a
full-time employee of the Company throughout the Performance Period. 
Participant’s Goal Bonus Amount shall be proportionately adjusted by the
Committee in the event that Participant is classified as working less than 40
hours per week during any portion of the Performance Period.

 

(b)           The Final Award Amount, if any, will be a percentage of
Participant’s Goal Bonus Amount determined in accordance with the provisions of
this Agreement and Exhibit B to the Grant Notice.

 

(c)           Participant’s right and interest in the Award represents a mere
unfunded and unsecured contingent promise to pay by the Company.  This Award is
intended to constitute “qualified performance-based compensation” satisfying the
requirements of Treasury Regulations Sections 1.162-27(e)(2) through (e)(5) and
this Agreement shall be interpreted where necessary consistent with such intent.

 

2.2           Payment of Award.  In the event that (i) Participant remains an
Employee until the Certification Date, and (ii) during the Performance Period,
the Company achieves the Threshhold Objective (as such term is defined in
Exhibit B to the Grant Notice), then the Final Award Amount shall become payable
as follows: (i) 50% of the Final Award Amount shall be paid to Participant in
cash in a lump sum within 30 days following the Certification Date; and (ii) on
the Certification Date, Participant shall be granted such number of Restricted
Stock Units (“RSUs”) as is determined by dividing (x) 50% of the Final Award
Amount by (y) the Fair Market Value per share of Stock on April 30, 2013.  50%
of the RSUs shall vest on April 30, 2014, and 50% of the RSUs shall vest on
April 30, 2015, in each case subject to Participant’s continued service as an
Employee on each such vesting date. Unless and until the RSUs have vested in
accordance with the foregoing vesting schedule, Participant will have no right
to any distribution with respect to such RSUs.  In the event of Participant’s
termination of employment prior to the vesting of all of the RSUs, any unvested
RSUs will terminate automatically without any further action by the Company and
be forfeited without further notice and at no cost to the Company.  Participant
shall not be deemed to have a termination of employment merely because of a
change in the entity for which Participant renders such service, unless
following such change in capacity or service Participant is no longer serving as
an Employee of the Company or any Subsidiary.

 

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2.3           Distribution of RSUs.

 

(a)           Subject to Section 2.3(c) below, shares of Stock shall be
distributed to Participant with respect to such Participant’s vested RSUs
following the vesting date of the RSUs as specified in Section 2.2, subject to
the terms and provisions of the Plan and this Agreement.  All distributions
shall be made by the Company in the form of whole shares of Stock.

 

(b)           Any shares of Stock issued under the RSUs shall be issued to
Participant, at the sole discretion of the Committee, in either (i)
uncertificated form, with the shares recorded in the name of Participant in the
books and records of the Company’s transfer agent with appropriate notations
regarding the restrictions on transfer imposed pursuant to this Agreement; or
(ii) certificate form.

 

(c)           The Committee may, in its sole discretion, elect to settle any
vested RSUs in cash.  The cash amount to be paid by the Company upon
distribution of any vested RSUs shall be equal to (i) the number of vested RSUs
with respect to which Participant is entitled to a distribution multiplied by
(ii) the Fair Market Value per share of the Stock on the applicable vesting
date.  Such amount shall be paid by the Company on the applicable vesting date.

 

(d)           Except as described in this Section 2.3(c), neither the time nor
form of distribution of Stock with respect to the RSUs may be changed, except as
may be permitted by the Committee in accordance with the Plan and Section 409A
of the Code and the Treasury Regulations thereunder.

 

2.4           Tax Withholding.  Notwithstanding any other provision of this
Agreement:

 

(a)           The Company has the authority to deduct or withhold, or require
Participant to remit to the Company, an amount sufficient to satisfy applicable
federal, state, local and foreign taxes (including any FICA obligation) required
by law to be withheld with respect to any taxable event arising pursuant to this
Agreement.  The Company may permit Participant to make such payment in one or
more of the forms specified below:

 

(i)            by cash or check made payable to the Company;

 

(ii)           by the deduction of such amount from other compensation payable
to Participant;

 

(iii)          with respect to any withholding taxes arising as a result of the
vesting or settlement of the RSUs, by requesting that the Company withhold a net
number of vested shares of Stock otherwise issuable pursuant to the RSUs having
a then current Fair Market Value not exceeding the amount necessary to satisfy
the withholding obligation of the Company and its Subsidiaries based on the
minimum applicable statutory withholding rates for federal, state, local and
foreign income tax and payroll tax purposes;

 

(iv)          with respect to any withholding taxes arising as a result of the
vesting or settlement of the RSUs, by tendering vested shares of Stock having a
then current Fair Market Value not exceeding the amount necessary to satisfy the
withholding obligation of the Company and its Subsidiaries based on the minimum
applicable statutory withholding rates for federal, state, local and foreign
income tax and payroll tax purposes; or

 

(v)           in any combination of the foregoing.

 

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(b)           With respect to any withholding taxes arising as a result of the
vesting or settlement of the RSUs, in the event Participant fails to provide
timely payment of all sums required pursuant to Section 2.4(a), the Company
shall have the right and option, but not the obligation, to treat such failure
as an election by Participant to satisfy all or any portion of Participant’s
required payment obligation pursuant to Section 2.4(a)(ii) or
Section 2.4(a)(iii) above, or any combination of the foregoing as the Company
may determine to be appropriate. The Company shall not be obligated to deliver
any certificate representing shares of Stock issuable with respect to the RSUs
to Participant or his or her legal representative unless and until Participant
or his or her legal representative shall have paid or otherwise satisfied in
full the amount of all federal, state, local and foreign taxes applicable with
respect to the taxable income of Participant resulting from the vesting or
settlement of the this Award or any other taxable event related to the RSUs.

 

(c)           In the event Participant’s tax withholding obligation will be
satisfied under Section 2.4(a)(iii) above, then the Company may elect to
instruct any brokerage firm determined acceptable to the Company for such
purpose to sell on Participant’s behalf a whole number of shares from those
shares of Stock issuable to Participant upon settlement of the RSUs as the
Company determines to be appropriate to generate cash proceeds sufficient to
satisfy Participant’s tax withholding obligation.  Participant’s acceptance of
this Award constitutes Participant’s instruction and authorization to the
Company and such brokerage firm to complete the transactions described above,
including the transactions described in the previous sentence, as applicable. 
Any shares of Stock to be sold at the Company’s direction through a
broker-assisted sale will be sold on the day the tax withholding obligation
arises (i.e., the date Stock is delivered) or as soon thereafter as
practicable.  The shares of Stock may be sold as part of a block trade with
other participants of the Plan in which all participants receive an average
price.  Participant will be responsible for all broker’s fees and other costs of
sale, and Participant agrees to indemnify and hold the Company harmless from any
losses, costs, damages, or expenses relating to any such sale. To the extent the
proceeds of such sale exceed Participant’s tax withholding obligation, the
Company agrees to pay such excess in cash to Participant as soon as practicable.
Participant acknowledges that the Company or its designee is under no obligation
to arrange for such sale at any particular price, and that the proceeds of any
such sale may not be sufficient to satisfy Participant’s tax withholding
obligation.  The Company may refuse to issue any shares of Stock in settlement
of the RSUs to Participant until the foregoing tax withholding obligations are
satisfied.

 

2.5           Conditions to Issuance of Shares.  The Company shall not be
required to issue or deliver any shares of Stock issuable upon the vesting of
the RSUs prior to the fulfillment of all of the following conditions:

 

(a)           The admission of such shares to listing on all stock exchanges on
which the Stock is then listed; and

 

(b)           The completion of any registration or other qualification of such
shares under any state or federal law or under rulings or regulations of the
Securities and Exchange Commission or of any other governmental regulatory body,
which the Committee shall, in its absolute discretion, deem necessary or
advisable; and

 

(c)           The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and

 

(d)           The receipt by the Company of full payment of any applicable
withholding tax in any manner permitted under Section 2.4 above; and

 

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(e)           The lapse of such reasonable period of time following date the
RSUs vest as the Committee may from time to time establish for reasons of
administrative convenience, subject to Section 409A of the Code and the Treasury
Regulations and other guidance issued thereunder.

 

2.6           Negative Discretion.  The Committee may, in its discretion, and at
any time during or after the Performance Period, reduce or eliminate the Final
Award Amount or the number of RSUs otherwise payable to any Participant under
this Award.  Any such reduction or elimination may be made based on such
objective or subjective determinations as the Committee determines appropriate,
including, but not limited to, unusual or nonrecurring events or developments
affecting the Company or any Subsidiary or affiliate of the Company, or the
financial statements of the Company or any Subsidiary or affiliate of the
Company, or the effect of changes in applicable laws, regulations or accounting
principles during the Performance Period, where is determines that such
reduction or elimination is in the best interests of the Company.

 

ARTICLE III.

OTHER PROVISIONS

 

3.1           Award and Interests Not Transferable.  This Award and the rights
and privileges conferred hereby, including any RSUs awarded hereunder, shall not
be liable for the debts, contracts or engagements of Participant or his or her
successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect.

 

3.2           Rights as Stockholder.  Neither Participant nor any person
claiming under or through Participant shall have any of the rights or privileges
of a stockholder of the Company in respect of any shares of Stock issuable
hereunder unless and until certificates representing such shares (which may be
in uncertificated form) will have been issued and recorded on the books and
records of the Company or its transfer agents or registrars, and delivered to
Participant (including through electronic delivery to a brokerage account).  
After such issuance, recordation and delivery, Participant shall have all the
rights of a stockholder of the Company, including with respect to the right to
vote the shares and the right to receive any cash or share dividends or other
distributions paid to or made with respect to the shares.

 

3.3           Not a Contract of Employment or other Service Relationship. 
Nothing in this Agreement or in the Plan shall confer upon Participant any right
to continue to serve as an employee or other service provider of the Company or
any of its affiliates.  Participant understands and agrees that this Award does
not alter the at-will nature of his or her employment relationship with the
Company and is not a promise of continued employment for the vesting period of
the Award or any portion of it.

 

3.4           Administration.  The Committee shall have the power to interpret
the Plan and this Agreement and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent therewith and to
interpret, amend or revoke any such rules.  All actions taken and all
interpretations and determinations made by the Committee in good faith shall be
final and binding upon Participant, the Company and all other interested
persons.  No member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan,
this Agreement or the shares of Stock issuable with respect to the RSUs. In its
absolute discretion, the Board may at any time and from time to time exercise
any and all rights and duties of the Committee under the Plan and this
Agreement.

 

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3.5           Notices.  Any notice to be given under the terms of this Agreement
to the Company shall be addressed to the Company in care of the Secretary of the
Company at the address given beneath the signature of an authorized officer of
the Company on the Grant Notice, and any notice to be given to Participant shall
be addressed to Participant at the address given beneath Participant’s signature
on the Grant Notice.  By a notice given pursuant to this Section 3.5, either
party may hereafter designate a different address for notices to be given to
that party.  Any notice shall be deemed duly given when sent via email or when
sent by certified mail (return receipt requested) and deposited (with postage
prepaid) in a post office or branch post office regularly maintained by the
United States Postal Service.

 

3.6           Titles.  Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of this Agreement.

 

3.7           Construction.  This Agreement shall be administered, interpreted
and enforced under the laws of the State of Delaware without regard to conflicts
of laws thereof. Should any provision of this Agreement be determined by a court
of law to be illegal or unenforceable, the other provisions shall nevertheless
remain effective and shall remain enforceable.

 

3.8           Conformity to Securities Laws.  Participant acknowledges that the
Plan is intended to conform to the extent necessary with all provisions of the
Securities Act and the Exchange Act and any and all regulations and rules
promulgated by the Securities and Exchange Commission thereunder, and state
securities laws and regulations.  Notwithstanding anything herein to the
contrary, the Plan shall be administered, and the shares of Stock issuable with
respect to the RSUs shall be issued, only in such a manner as to conform to such
laws, rules and regulations.  To the extent permitted by applicable law, the
Plan and this Agreement shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.

 

3.9           Amendments.  This Agreement may not be modified, amended or
terminated except by an instrument in writing, signed by Participant and by a
duly authorized representative of the Company.

 

3.10         Successors and Assigns.  The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company.  Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Participant and his or her heirs, executors, administrators, successors and
assigns.

 

3.11         Entire Agreement.  The Plan, the Grant Notice and this Agreement
(including all Exhibits hereto) constitute the entire agreement of the parties
and supersede in their entirety all prior undertakings and agreements of the
Company and Participant with respect to the subject matter hereof.

 

3.12         Section 409A.

 

(a)           Notwithstanding any other provision of the Plan, this Agreement or
the Grant Notice, the Plan, this Agreement and the Grant Notice shall be
interpreted in accordance with, and incorporate the terms and conditions
required by, Section 409A of the Code (together with any Department of Treasury
regulations and other interpretive guidance issued thereunder, including without
limitation any such regulations or other guidance that may be issued after the
date hereof, “Section 409A”).  The Committee may, in its discretion, adopt such
amendments to the Plan, this Agreement or the Grant Notice or adopt other
policies and procedures (including amendments, policies and procedures with
retroactive effect), or take any other actions, as the Committee determines are
necessary or appropriate to comply with the requirements of Section 409A.

 

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(b)           This Agreement is not intended to provide for any deferral of
compensation subject to Section 409A of the Code, and, accordingly, the amounts
payable and any shares of Stock issuable hereunder shall be distributed to
Participant no later than the later of:  (i) the 15th day of the third month
following Participant’s first taxable year in which such amounts are no longer
subject to a substantial risk of forfeiture, and (ii) the fifteenth 15th day of
the third month following first taxable year of the Company in which such
amounts are no longer subject to substantial risk of forfeiture, as determined
in accordance with Section 409A and any Treasury Regulations and other guidance
issued thereunder.

 

3.13         Tax Representations.  Participant has reviewed with Participant’s
own tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by the Grant Notice and this
Agreement.  Participant is relying solely on such advisors and not on any
statements or representations of the Company or any of its agents. Participant
understands that Participant (and not the Company) shall be responsible for
Participant’s own tax liability that may arise as a result of this investment or
the transactions contemplated by this Agreement.

 

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EXHIBIT B

 

TO RESTRICTED STOCK UNIT AWARD GRANT NOTICE

 

FINANCIAL GOALS

 

“Financial Goals” shall mean: AV Operating Profits (as defined below) of
$[Insert applicable goal]  and AV Revenue of $[Insert applicable goal].

 

“AV Operating Profits” shall mean the operating profits of the Company for the
Performance Period as reflected in the Company’s audited financial statements
prepared in accordance with generally accepted accounting principles (“GAAP”)
and certified by the Company’s independent auditors, subject to adjustment as
set forth below).

 

“AV Revenue” shall mean the revenue of the Company for the Performance Period as
reflected in the Company’s audited financial statements prepared in accordance
with GAAP and certified by the Company’s independent auditors, subject to
adjustment as set forth below).

 

“Performance Period” shall mean the period comprised of the [Insert applicable
period] of the Company.

 

The Committee may, in its sole discretion, provide that one or more objectively
determinable and equitable adjustments shall be made to one or more of the
Financial Goals given certain business changes that might occur post goal
setting.  Such adjustments shall include: items related to a change in
accounting principle; items relating to financing activities; expenses for
restructuring or productivity initiatives; other non-operating items; items
related to acquisitions; items attributable to the business operations of any
entity acquired by the Company during the Performance Period; items related to
the disposal of a business or segment of a business; items related to
discontinued operations that do not qualify as a segment of a business under
generally accepted accounting principles; items attributable to any stock
dividend, stock split, combination or exchange of stock occurring during the
Performance Period; any other items of significant income or expense which are
determined to be appropriate adjustments; items relating to unusual or
extraordinary corporate transactions, events or developments; items related to
amortization of acquired intangible assets; items that are outside the scope of
the Company’s core, on-going business activities; items related to acquired
in-process research and development; items relating to changes in tax laws;
items relating to major licensing or partnership arrangements; items relating to
asset impairment charges; items relating to gains or losses for litigation,
arbitration and contractual settlements; or items relating to any other unusual
or nonrecurring events or changes in applicable laws, accounting principles or
business conditions.  Such determinations shall be made within the time
prescribed by, and otherwise in compliance with, Section 162(m) of the Code.

 

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