Document:

exv10w3

 

Exhibit 10.3

AEROVIRONMENT, INC.

NONQUALIFIED STOCK OPTION AGREEMENT

This Nonqualified Stock Option Agreement (the “Agreement”) is made as of the
_______ day of                                         , _______, by and between AeroVironment, Inc., a California
corporation, with its principal office at Monrovia, California (hereinafter called the “Company”),
and                                          (hereinafter called “Optionee”).

WITNESSETH:

     WHEREAS, the Board of Directors and the stockholders of the Company have adopted the
AeroVironment, Inc. Nonqualified Stock Option Plan (hereinafter referred to as the “Plan”); and

     WHEREAS, the Plan is to be administered by the Company’s Board of Directors; and

     WHEREAS, the Board of Directors, at a meeting duly held, determined that Optionee should be
granted an option under the Plan for the purchase of that number of shares of the Company’s Common
Stock specified in Section 1 hereof at the price specified in Section 2 hereof, subject to the
terms and conditions set forth in the Plan and in this Agreement;

     NOW, THEREFORE, IT IS AGREED:

1. GRANT OF OPTION

     The Company hereby grants to Optionee the right and option to purchase all or any part of an
aggregate of                     shares (___) of the Company’s capital stock, subject to the terms
and conditions of the Plan and as hereinafter set forth.

     A copy of the Plan has been delivered to Optionee, receipt of which is hereby acknowledged.
Except as otherwise expressly provided herein, all of the terms, provisions

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and conditions of the Plan are hereby made a part hereof for all purposes. To the extent that any
provisions of this Agreement are inconsistent with those set forth in the Plan, the provisions of
the Plan shall be deemed to be controlling.

2. OPTION PRICE

     The option price shall be                                          Dollars ($___) per share, being at least
one hundred percent (100%) of the fair market value per share as of the date of this Agreement as
determined at the sole discretion of the Board of Directors of the Company.

3. WHEN OPTION MAY BE EXERCISED

     This option shall become exercisable on the anniversaries of the date hereof indicated in the
following table as to the number of shares set forth opposite said respective anniversaries less
the number of shares previously purchased under this option:

	 	 	 	 	 
	Anniversary of the Date Hereof	 	Number of Shares	 	 
	First
	 	 	 	 
	 

	 	 	 	 
	Second
	 	 	 	 
	 

	 	 	 	 
	Third
	 	 	 	 
	 

	 	 	 	 
	Fourth
	 	 	 	 
	 

	 	 	 	 
	Fifth
	 	 	 	 
	 

	 	 	 	 

and such option shall remain exercisable as to all of such shares until and including the
twentieth anniversary of the date hereof, which may be extended by the Board of Directors,
subject however to the provisions of Sections 5 and 6 hereof. Shares as to which such option
becomes exercisable pursuant to the foregoing provision may be purchased at any time thereafter
prior to the expiration or termination of the option.

     Optionee acknowledges and understands that this is a nonqualified stock option plan, and that
upon exercise of the option, the optionee shall become taxable on the fair market value of the
stock received upon exercise of the option less the exercise price paid in connection therewith.
Optionee further acknowledges and agrees that Company may

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have a withholding obligation in connection with any such exercise, and that Company is authorized to
withhold from other compensation payable to Optionee amounts necessary to provide for such
withholding, or require a deposit of such funds by Optionee prior to the delivery of shares to be
issued upon exercise of the option. Company shall have no obligation with respect to the tax
liability of Optionee created hereunder.

4. OPTION PERSONAL TO OPTIONEE

     This option may be exercised during the life of Optionee only by him and may not be assigned,
transferred, pledged, hypothecated, sold or otherwise disposed of in whole or in part, either
voluntarily or involuntarily; any attempted assignment, transfer, pledge, hypothecation, sale or
other disposition will be void and of no effect; and if voluntarily entered into by Optionee, shall
terminate the option. Notwithstanding the foregoing, in the event of Optionee’s death prior to the
full exercise of this option, it may be transferred under his will to, and exercised by, Optionee’s
personal representative or other such transferee or by operation of the laws of descent and
distribution in accordance with Section 6.

5. TERMINATION OF EMPLOYMENT

     No part of this option may be exercised more than three months after the termination of
Optionee’s employment with the Company except in the case of his death or disability (as defined in
Section 105(d)(4) of the Internal Revenue Code of 1986, as amended) during said three month period.
This option shall in no way confer upon Optionee any rights to remain in the employ of the
Company. Except as otherwise provided in this Section 5, the maximum number of shares as to which
this option may be exercised during the aforesaid three month period following termination of
employment shall be the remaining number of shares which Optionee could have purchased, pursuant to
Section 3 hereof, on the date of termination of his employment.

6. DEATH OR DISABILITY OF OPTIONEE

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     If Optionee should die or become disabled within the meaning of Section 105(d)(4) of the
Internal Revenue Code of 1986, as amended, while employed by the Company or within any three month
period after termination of his employment during which he is entitled to exercise the option
pursuant to Section 5 hereof, this option, to the extent not previously exercised and in an amount
not exceeding the number of shares Optionee could have purchased hereunder on the date of
termination of employment, may be exercised by the Optionee, or if the Optionee has died, by his
personal representative, heir or legatee, in whole or in part within twelve months after the
Optionee ceases to be an employee of the Company (but not later than the final date set forth in
Section 3 hereof).

7. LEAVE OF ABSENCE

     Military or sick leave shall not be considered a termination of employment for any purpose
under this Agreement unless such period exceeds 90 days and the Optionee’s right to reemployment is
not guaranteed either by statute or by contract, in which case the employment relationship shall be
deemed to have terminated on the 91st day of such leave.

8. PARENT, SUBSIDIARY AND SUCCESSOR OF THE COMPANY

     All reference herein to the Company shall be deemed to include any parent or subsidiary of the
Company (as defined in Section 425 of the Internal Revenue Code of 1954, as amended), unless the
context shall otherwise require or indicate.

9. EXERCISE OF OPTION

     This option or any portion thereof shall be exercised by written notice delivered to the
Company at its then principal offices, setting forth the number of shares with respect to which the
option is being exercised, accompanied by the full amount of the purchase price, in the form of a
certified or cashier’s check, or cash, or, if deemed acceptable at the discretion of the Board of
Directors of the Company, stock of the Company whose fair market value equals the exercise price
per share of the option multiplied by the number of shares being purchased, or such other lawful
consideration as is determined acceptable by the Board of Directors at their discretion. Upon
receipt of notice and payment as aforesaid,

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the Company shall promptly make arrangement for the issuance to Optionee of the number of shares as
to which this option was exercised. Provided, however, that if any law or any regulation of any
regulatory agency or other body having jurisdiction in the premises shall require any action to be
taken in connection with the shares specified in said notice, then the delivery date of such shares
shall be extended for a period reasonably necessary to permit the Company to take such action.
Provided further that the Company shall not be obligated to issue shares pursuant to the option if
counsel for the Company determines that such issuance would or would likely be in violation of any
applicable securities laws. The Company reserves the right to require that the Optionee, prior to
receipt of the shares, represent and warrant in writing, in form and substance satisfactory to the
Company, that the shares purchased are being acquired without any view to the distribution thereof
and agree in writing to the imposition of legends on the stock certificates setting forth any
restrictions upon disposition under applicable securities laws.

     In the event Optionee wishes to sell any shares purchased pursuant to this option prior to the
expiration of (a) one year from the date of their issuance, or (b) two years from the date of the
granting of this option, he shall notify the Company in writing not less than thirty days prior to
such sale.

10. FRACTIONAL SHARES

     Notwithstanding any other provisions herein to the contrary, the Optionee shall in no event be
entitled to exercise his option for any fractional shares and any such fractional interests shall
be disregarded.

11. ADJUSTMENT UPON CHANGES IN CAPITALIZATION

     The shares subject to this option shall be subject to equitable and proportionate adjustment
by the Board of Directors in the manner set forth in Section 13 of the Plan in the event of the
occurrence of any of the events specified therein.

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12. SHARES SUBJECT TO STOCK REPURCHASE AGREEMENT

     Notwithstanding any other Section of this Agreement, under Section 2 of the Plan, and pursuant
to this Section 12, the stock to be received upon exercise of this option Agreement will be subject
to a Stock Repurchase Agreement to be executed, at the time any or all of this option grant is
first exercised, between the Company and the Optionee, which Stock Repurchase Agreement will be in
substantially the same form as Exhibit “A” hereto. Notwithstanding any other Section of this
Agreement, the Company need not issue any stock to Optionee pursuant to this Agreement unless and
until the parties hereto execute a Stock Repurchase Agreement as described above.

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.

	 	 	 	 	 	 	 
	 	 	“Company”:
	 
	 	 	 	 	 	 
	 	 	AEROVIRONMENT, INC.
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Timothy E. Conver, President	 	 
	 
	 	 	 	 	 	 
	(Corporate Seal)

	 	By	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Joseph S. Edwards, Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	“Optionee”:
	 
	 	 	 	 	 	 
	 	 	 	 	 

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Exhibit 10.4

AEROVIRONMENT, INC.

DIRECTORS’ NONQUALIFIED STOCK OPTION PLAN

1. PURPOSE:

     The purpose of this Directors’ Nonqualified Stock Option Plan (hereinafter referred to as the
“Plan”) is to provide a means whereby Directors of AeroVironment, Inc. (hereinafter referred to as
the “Company”), or any parent or subsidiary thereof, may be given an opportunity to purchase stock
in the Company by grant of options which are intended to constitute nonqualified stock options.
The underlying objectives which the Plan seeks to accomplish are to retain the services of
Directors of the Company and its subsidiaries and to grant to such Directors an opportunity to
acquire proprietary interests in the business and thereby provide an added incentive to increase
the Company’s earnings.

2. ADMINISTRATION:

     This Plan shall be administered by the Board of Directors of the Company. Subject to the
express provisions of the Plan, the Board of Directors shall have the authority to construe and
interpret the Plan and to define the terms used herein, to prescribe, amend and rescind rules and
regulations relating to the administration of the Plan, to determine the duration and purpose of
leaves of absence which may be granted to participants without constituting a termination of their
position as a Director for the purposes of the Plan, to grant the options and to make all other
determinations necessary or desirable for the administration of the Plan. The Board of Directors
may insert into any options granted under this Plan any other terms, provisions, and conditions not
inconsistent with the Plan as may be determined by the Board of Directors. Specifically, the Board
of Directors may, among other things, provide any or all Nonqualified Stock Option Agreements
pursuant to which options are granted under this Plan that the Company’s stock to

 

 

be received upon the exercise of the option will be subject to a Stock Repurchase Agreement,
which Stock Repurchase Agreement the Company may require any grantee under this Plan to execute and
be bound by as a condition for receiving the Company’s stock pursuant to the exercise of options
granted under this Plan. The determination of the Board of Directors on the matters referred to in
this Section 2 shall be conclusive. For purposes of this Plan, however, matters related to any
member of the Board of Directors shall be acted upon by Directors of the Company excluding the
interested Director.

     The Board of Directors may appoint a committee consisting of not less than three Directors who
shall serve at the pleasure of the Board of Directors to administer the Plan. Such committee shall
have all or such part of the authority of the Board of Directors with respect to the Plan as
provided in the resolution establishing the committee or in resolutions adopted from time to time
thereafter. If such a committee is established, references herein to the Board of Directors shall
be deemed to mean such committee to the extent appropriate in light of the authority of such
committee. Notwithstanding the foregoing, in no instance shall a committee which includes as a
member the Director for whose benefit the option is to be created have authority to act with
respect to such option, and the action of the committee members excluding such interested Director
shall have the authority otherwise provided such committee by the Board.

3. STOCK SUBJECT TO THE PLAN:

     The stock to be offered under the Plan shall be shares of the Company’s authorized but
unissued capital stock or any shares of authorized but unissued stock into which such shares are
changed, reclassified or converted. Subject to adjustment as provided in Section 14 hereof, the
aggregate number of shares to be delivered upon exercise of all options granted under the Plan may
not exceed the lesser of ten thousand (10,000) shares or thirty percent (30%) of the total of

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the then outstanding shares of the issuer and then outstanding options to purchase shares of
the issuer. If any option shall expire or terminate for any reason without having been exercised
in full, the unpurchased shares subject thereto shall revert to the Plan and again be available for
the purposes of the Plan.

     It is the intention in establishing this Plan that options shall be granted to allow the
purchase of stock at an amount substantially equivalent to the fair market value of the stock as of
the date of the grant of the option. The Board of Directors shall have discretion to determine
what constitutes fair market value of the stock of the Company as of the date of grant of options
under this Plan, and whether options should, if ever, be issued at an exercise price less than fair
market value at the date of grant of the option.

4. OBLIGATION OF COMPANY TO ISSUE SHARES:

     The Plan, and the grant and exercise of options thereunder, and the Company’s obligation to
sell and deliver stock under such options, shall be subject to all applicable federal and state
laws, rules and regulations and to such approvals by any regulatory agencies as may be required or
advisable. In no event shall the Company be required to issue fractional shares upon the exercise
of an option. This Plan is intended to serve as a discretionary plan exercisable by the Board of
Directors to allow the grant of options to certain Directors of the Company. The adoption of this
Plan shall not imply any obligation or undertaking of any nature on the part of the Company to
issue options other than as determined in the discretion of the Board of Directors of the Company.

5. ELIGIBILITY:

     Directors of the Company or of any parent or subsidiary corporation (as that term is defined
in Section 425 of the Internal Revenue Code of 1954, as amended) shall be eligible for selection to
participate in the Plan. No Director shall be disqualified to receive such an option

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merely because he is already a shareholder of the Company nor merely because he is a member of
the Board of Directors of the Company. The Board of Directors shall determine the individuals to
whom options shall be granted, the terms and provisions of the respective option agreements (which
need not be identical), the time at which such options shall be granted, and the number of shares
subject to each option, and the Board of Directors shall grant such options. An individual who has
been granted an option may, if he is otherwise eligible, be granted an additional option or options
if the Board of Directors shall so determine.

6. OPTION PRICE:

     The option price per share of stock purchasable under options granted pursuant to the Plan
shall be determined by the Board of Directors. It is intended that options will in most instances
be issued at a price not less than one hundred percent (100%) of the fair market value of the
common stock of the Company on the day the option is granted. For the purposes hereof, the fair
market value of the Company’s common stock shall be determined in good faith by the Board of
Directors each time an option is granted hereunder, acting upon such information and advice as it
shall deem necessary, which determination shall be conclusive. The Board of Directors may,
however, in their discretion, grant options at an exercise price greater or lesser than fair market
value of the common stock at the date of grant. Notwithstanding the foregoing, issuance of stock
to any employee, Director or consultant of the Company must be issued at an exercise price which is
not less than eighty-five percent (85%) of the fair value of the stock at the time the option is
granted, except that the price shall be one hundred ten percent (110%) of the fair value in the
case of any person who owns stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or its parent or subsidiary corporations.

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7. OPTION PERIOD:

     Each option, and all rights and obligations thereunder, by its terms, shall expire on such
date as the Board of Directors may determine. No option shall be issued for an exercise period in
excess of one hundred twenty (120) months from the date the option is granted.

8. CONTINUATION OF EMPLOYMENT:

     Nothing contained in the Plan (or in any option granted pursuant to the Plan) shall confer
upon any Director any right to remain a Director or an employee of the Company or any parent or
subsidiary corporation or interfere in any way with the right of the Company or any parent or
subsidiary corporation to terminate such Director’s position as a Director or an employee of the
Company at any time or to increase or decrease his compensation from the rate in existence at the
time of the granting of an option, and nothing contained herein or in any option agreement shall
affect any contractual rights of a Director of the Company.

9. EXERCISE OF OPTIONS:

     Each option shall be exercisable, and the total number of shares subject thereto shall be
purchasable, in such installments, which need not be equal, as the Board of Directors shall
determine. Except as otherwise provided for by the Board of Directors on the grant of the option,
any option granted hereunder shall be exercisable in five (5) equal annual installments, commencing
one (1) year after the date of the grant of the option. No option or installment thereof shall be
exercisable except in respect of whole shares, and fractional share interests shall be disregarded.
Not less than ten (10) shares may be purchased at any one time unless the number purchased is the
total number at the time available for purchase under the option.

     Options may be exercised only by written notice to the Company, stating the number of shares
being purchased and accompanied by payment in full of the option price for the number of shares
being purchased by (1) cash, (2) check, (3) stock of the Company whose fair market value

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is at least equal to the aggregate exercise price under the option, or (4) such other
consideration as the Board may approve at the time the option is granted, so long as the fair
market value of such consideration is no less than the applicable exercise price for purchase of
the stock.

10. NON-TRANSFERABILITY OF OPTIONS:

     Options granted under the Plan shall, by their terms, be non-transferable by the option holder
other than by will or similar device of testamentary disposition or equivalent or the laws of
descent and distribution, and shall be exercisable during his lifetime only by him.

11. TERMINATION OF POSITION AS DIRECTOR:

     If the option holder ceases to be Director of the Company or any parent or subsidiary
corporation for any reason other than his death or disability, his option shall, subject to earlier
termination pursuant to Section 7, expire three (3) months thereafter (or upon termination of the
term of the option if shorter than such period), and during such period after he ceases to be a
Director such option shall be exercisable only as to that number of shares which the option holder
could have purchased as of the date of such termination.

12. DEATH OR DISABILITY OF DIRECTOR:

     If any option holder dies or becomes disabled within the meaning of Section 105(d)(4) of the
Internal Revenue Code of 1986, as amended, while he is a Director the Company or any parent or
subsidiary, or during the three (3) month period after termination referred to in Section 11
hereof, his option shall, subject to earlier termination pursuant to Section 7, expire one (1) year
after the option holder ceases to be a Director of the Company (or after such shorter period as may
be provided in the option). During such one (1) year period the option holder, or if the option
holder has died the person or persons to whom the option holder’s rights under the option have
passed by will or similar testamentary device or equivalent or by the applicable laws of

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descent and distribution, may, to the extent of the number of shares exercisable as of the
date of the termination of his Directorship, exercise such option.

13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION:

     If the outstanding shares of the stock of the Company are increased, decreased, or changed
into, or exchanged for a different number or kind of shares of securities of the Company through
reorganization, merger, recapitalization, reclassification, stock split-up, stock dividend, stock
consolidation or otherwise, an appropriate and proportionate adjustment shall be made in the number
and kind of shares as to which options may be granted. A corresponding adjustment changing the
number or kind of shares and the exercise price per share allocated to unexercised options or
portions thereof, which options shall have been granted prior to any such change, shall likewise be
made. Any such adjustment, however, in an outstanding option, shall be made without change in the
total price applicable to the unexercised portion of the option but with a corresponding adjustment
in the price for each share covered by the option.

     Upon the dissolution or liquidation of the Company, or upon a reorganization, merger or
consolidation of the Company with one or more corporations as a result of which the Company
transfers substantially all of the property of the Company to another corporation, the Plan shall
terminate, and any option theretofore granted hereunder shall terminate, unless, in connection with
such transaction, the Company provides for the substitution of options, as defined below. In the
event that provision is not made for the substitution of options in connection with a
reorganization, merger or consolidation in which the Company is not the surviving company, or a
sale of substantially all of the Company’s assets, option holders shall have the right, immediately
prior to or concurrently with such transaction, to exercise any unexpired option rights granted
hereunder to the full extent theretofore not exercised and regardless of any installment provisions
for the exercise of such option rights which may be provided in any stock

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option agreement entered into hereunder, but in any event subject to the expiration date of
the option under the option agreement. The phrase “provides for the substitution of options” as
used in this paragraph shall mean either the issuance of a new option or the assumption of the
Company’s option by the surviving corporation or its parent or subsidiary in such form and on such
terms and conditions that the substituted option shall meet the requirements of Section 425 of the
Internal Revenue Code of 1986, as amended; and the phrase “parent or subsidiary” shall have the
meaning assigned in said Section 425. A substituted option shall not be less favorable to the
option holder than his prior option.

     Adjustments under this Section 13 shall be made by the Board of Directors of the Company,
whose determination as to what adjustments shall be made, and the extent thereof, shall be final,
binding and conclusive. No fractional shares of stock shall be issued under the Plan on account of
any such adjustment.

14. AMENDMENT AND TERMINATION:

     This Plan shall expire on the tenth (10th) anniversary of the date of its execution. The
Board of Directors of the Company may at any time suspend, amend or terminate the Plan without
further action on the part of the stockholders of the Company, provided that, except as set forth
in Section 13 above, no amendment may be adopted without further approval of the stockholders of
the Company which will:

     (a) increase the number of shares which are to be reserved for options under the Plan;

     (b) decrease the minimum option price;

     (c) extend the maximum term of an option;

     (d) change the designation of the class eligible to receive options.

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     In the event the Plan is terminated by the Board of Directors or is terminated by expiration
of its term as specified above, no option may be granted after such termination. The amendment or
termination of the Plan shall not, without the consent of the option holder, affect the option
holder’s rights under an option theretofore granted to him.

15. TIME OF GRANTING OF OPTIONS:

     The granting of an option pursuant to the Plan shall take place at the time of the Board of
Directors’ action, as described herein; provided, however, that if the appropriate resolutions of
the Board of Directors indicate that an option is to be granted as of and at some future date, the
date of grant shall be such future date.

16. PRIVILEGES OF STOCK OWNERSHIP; PURCHASE FOR INVESTMENT:

     The holder of an option shall not be entitled to the privilege of stock ownership as to any
shares of stock not actually issued and delivered to him. Upon the exercise of an option, unless
there is in effect at that time under the Securities Act of 1933 a registration statement relating
to the stock issuable upon exercise thereof and available for delivery to him a prospectus meeting
the requirements of Section 10(a) of said Act, the option holder shall, if requested by the
Company, represent and warrant in writing, in form and substance satisfactory to the Company, that
the shares purchased are being acquired for investment and without any view to the distribution
thereof and shall agree in writing to the imposition of legends on the stock certificates setting
forth any restrictions upon disposition under applicable securities laws. No shares shall be
purchased upon the exercise of any option unless and until any then applicable requirements of the
Securities and Exchange Commission, the California Commissioner of Corporations, or other
regulatory agencies having jurisdiction, and of any securities exchanges upon which stock of the
Company may be listed, shall have been fully complied with.

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17. EFFECTIVE DATE OF THE PLAN:

     This Plan shall become effective and options may be granted hereunder upon its adoption by the
Company’s Board of Directors. This Plan may be submitted for approval to the stock-holders of the
Company at any time before or after its adoption by the Board of Directors. Notwithstanding any
such approvals, however, this Plan shall not be effective until such time as a permit authorizing
its implementation has been obtained from the California Commissioner of Corporations.

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