UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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AEROVIRONMENT, INC. | ||||||||
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Dear Stockholders,
You are cordially invited to attend the annual meeting of Stockholdersstockholders of AeroVironment, Inc. on September 23, 200929, 2010 at 10:00 a.m., in the MaderaThe Monterey Room North of the Doubletree HotelCourtyard by Marriott at 924700 W. Huntington Drive, Monrovia, California 91016, for the following purposes:
Only stockholders of record at the close of business on August 7, 20096, 2010 are entitled to notice of and to vote at the annual meeting and any adjournment or postponement thereof. We will begin distributing this proxy statement, a form of proxy and our 2009 annual report on or about August 19, 2009.
Your vote is important. Whether or not you plan to attend the annual meeting in person, I urge you to complete the proxy card and return it promptly.
Thank you for your support.
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| Very truly yours, | ||
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| Timothy E. Conver Chairman, President and Chief Executive Officer |
Monrovia, California
August 19, 200920, 2010
AEROVIRONMENT, INC. NOTICE OF ANNUAL MEETING OF STOCKHOLDERS | ||
| TIME | 10:00 a.m. Pacific Time on September | |
PLACE | Courtyard by Marriott The Monrovia, California 91016 | |
ITEMS OF BUSINESS | (1) To elect | |
(2) To ratify the selection of the accounting firm of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending April 30, | ||
(3) To transact such other business as may properly come before the annual meeting or any adjournments or postponements thereof. | ||
RECORD | You can vote if you were a stockholder of the company at the close of business on August | |
MEETING ADMISSION | Registered Stockholders. Registered stockholders (or their legal representatives) attending the meeting should bring an acceptable form of identification to the meeting, such as a driver's license. Legal representatives should also bring copies of any proxy or power of attorney evidencing the legal representative's right to represent the stockholder at the meeting. | |
Beneficial Stockholders. Stockholders whose stock is held by a broker or bank (often referred to as "holding in street name") should come to the beneficial stockholders table prior to the meeting. In order to be admitted, beneficial stockholders must bring account statements or letters from their brokers or banks showing that they owned AeroVironment stock as of August | ||
VOTING BY PROXY | Registered Stockholders. To assure that your vote is recorded promptly, please vote as soon as possible, even if you plan to attend the annual meeting in person. Instructions for voting by mail are on your proxy card. If you attend the annual meeting, you may also submit your vote in person, and any previous votes that you submitted will be superseded by the vote that you cast at the annual meeting. | |
Beneficial Stockholders. If your shares are held in the name of a broker, bank or other holder of record, follow the voting instructions you receive from the holder of record to vote your shares. |
This proxy statement is issued in connection with the solicitation of a proxy on the enclosed form by the board of directors of AeroVironment, Inc. for use at our 20092010 annual meeting of stockholders. We will begin distributing this proxy statement, a form of proxy and our 20092010 annual report on or about August 19, 2009.20, 2010.
| By Order of the Board of Directors | ||
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| Timothy E. Conver, Chairman, President and Chief Executive Officer |
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON SEPTEMBER 23, 200929, 2010
This notice, the accompanying proxy statement, and our 20092010 annual report to stockholders, which includes our annual reportAnnual Report on Form 10-K for the fiscal year ended April 30, 2009,2010, are available on our website athttp://investor.avinc.com.www.avinc.com.
| PROXY STATEMENT | AeroVironment, Inc. 181 W. Huntington Dr., Suite 202 Monrovia, California 91016 | |
This proxy statement is furnished to our stockholders in connection with the solicitation of proxies by the board of directors of AeroVironment, Inc. for our 20092010 annual meeting of stockholders to be held on September 23, 2009,29, 2010, and any adjournment or postponement thereof, for the purposes set forth in the attached notice of annual meeting of stockholders. Our principal executive offices are located at 181 W. Huntington Dr., Suite 202, Monrovia, California 91016. Enclosed with this proxy statement is a copy of our 20092010 annual report, which includes our Form 10-K (without exhibits), for the fiscal year ended April 30, 2009.2010. However, the 20092010 annual report is not intended to be a part of this proxy statement or a solicitation of proxies. This proxy statement and the accompanying proxy card are first being distributed to stockholders on or about August 19, 2009.20, 2010.
Important Notice Regarding the Availability of Proxy Materials
This proxy statement and our annual report are available electronically athttp://investor.avinc.com.investor.avinc.com.
Voting Rights and Outstanding Shares
Our board of directors has fixed the close of business on August 7, 20096, 2010 as the record date for the annual meeting. Only stockholders of record on the record date are entitled to notice of and to vote at the annual meeting or any adjournments or postponements thereof, in person or by proxy. On the record date, there were 21,508,70021,782,913 shares of our common stock outstanding and entitled to vote at the annual meeting. The holders of our common stock are entitled to one vote per share on any proposal presented at the annual meeting.
Quorum and Voting Requirements
In order to conduct any business at the annual meeting, a quorum must be present in person or represented by valid proxy. The presence, in person or by proxy, of the holders of a majority of the outstanding shares of our common stock entitled to vote at the annual meeting is necessary to constitute a quorum at the annual meeting. In the election of directors, the nomineenominees who receivesreceive the highest number of affirmative votes will be elected as a director.directors. All other proposals require the affirmative vote of a majority of the votes cast at the annual meeting.
Abstentions and broker non-votes will be counted for the purpose of determining whether a quorum is present, but they will not be counted as votes cast on any matter. Generally, broker non-votes occur when shares held by a broker in "street name" for a beneficial owner are not voted with respect to a particular proposal because the broker has not received voting instructions from the beneficial owner. Because abstentions and broker non-votes will not be considered votes cast, they will have no effect on the outcome of any proposal.
Our board of directors is not aware of any business that may properly be brought before the annual meeting other than those matters described in this proxy statement. However, the enclosed proxy card gives discretionary authority to persons named on the proxy card to vote the shares in their best judgment if any matters other than those shown on the proxy card are properly brought before the annual meeting.
Proxies
You are requested to complete, sign and date the enclosed proxy card and return it in the enclosed envelope. The envelope requires no postage if mailed in the United States. Unless there are different instructions on the proxy, all shares represented by valid proxies (and not revoked before they are
voted) will be voted at the meetingFOR the election of Timothy E. Conver and Arnold L. Fishman as Class III directorsthe director nominees listed in Proposal No. 1 for a three-year term andFOR the ratification of the selection of the accounting firm of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending April 30, 2010.2011. With respect to any other business which may properly come before the annual meeting or any adjournment or postponement thereof and submitted to a vote of stockholders, proxies will be voted in accordance with the best judgment of the designated proxy holders.
To assure that your vote is recorded promptly, please vote as soon as possible, even if you plan to attend the annual meeting in person.
Revocability of Proxy
Any stockholder giving a proxy pursuant to this solicitation has the power to revoke it at any time before it is voted. Proxies may be revoked by filing with our Corporate Secretary at our principal executive offices, 181 W. Huntington Dr., Suite 202, Monrovia, California 91016, a written notice of revocation or a duly executed proxy bearing a later date. A stockholder of record at the close of business on the record date may vote in person if present at the annual meeting, whether or not he or she has previously given a proxy. Attendance at the annual meeting will not, by itself, revoke a proxy.
Solicitation of Proxies
We will bear the expense of soliciting proxies. Our directors, officers and other employees may solicit proxies in person, by telephone, by mail or by other means of communication, but such persons will not be specially compensated for such services. We may also reimburse brokers, banks, custodians, nominees and other fiduciaries for their reasonable charges and expenses in connection with the distribution of proxy materials.
Voting Results
We will announce preliminary voting results at the annual meeting. Final official results will be printedprovided in our quarterlya current report on Form 10-Q for8-K filed with the quarter ending October 31, 2009Securities and Exchange Commission within four business days of the meeting (which will be available atwww.sec.gov andwww.avinc.com).
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PROPOSAL NO. 1 ELECTION OF NOMINEES TO THE BOARD OF DIRECTORS | ||
Our board of directors consists of seven members and is divided into three classes of directors serving staggered three-year terms. Directors for each class are elected at the annual meeting of stockholders held in the year in which the term for their class expires and hold office until their resignation or removal or their successors are duly elected and qualified. In accordance with our certificate of incorporation and bylaws, our board of directors may fill existing vacancies on the board of directors by appointment.
The term of office of the Class IIII directors will expire at the annual meeting. At the recommendation of the Nominating and Corporate Governance Committee, our board of directors proposes the election of the following nominees as director, which nominees currently serve as Class IIII directors and were previously appointed by our board of directors:
Timothy E. ConverKenneth R. BakerArnold L. FishmanMurray Gell-Mann
Charles R. Holland
Both Mr. Conver and Mr. Fishman haveEach nominee has indicated theirhis willingness to serve if elected. If either Mr. Converone or Mr. Fishmanmore of these nominees become unavailable to accept nomination or election as a director, the individuals named as proxies on the enclosed proxy card will vote the shares that they represent for the election of such other persons as the board may recommend, unless the board reduces the number of directors. There are currently three Class I directors, whose terms expire at the annual meeting of stockholders in 2010, and one Class II director, whose term expires at the annual meeting of stockholders in 2011.2011, and two Class III directors, whose terms expire at the annual meeting of stockholders in 2012.
Unless otherwise instructed, the proxy holders will vote the proxies received by them for the nominees named above. If the nominees are unable or unwilling to serve as directors at the time of the annual meeting, the proxies will be voted for such other nominees as shall be designated by the then current board of directors to fill any vacancy. In no event may the proxy holders vote for the election of more than two nominees. We have no reason to believe that nominee will be unable or unwilling to serve if elected as directors.
The principal occupation and certain other information about the nominees and our executive officers are set forth on the following pages.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE"FOR" THE ELECTION OF THE NOMINEES LISTED ABOVE.
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PROPOSAL NO. 2 RATIFICATION OF SELECTION OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||
The Audit Committee of our board of directors has selected Ernst & Young LLP to serve as our independent registered public accounting firm for the fiscal year ending April 30, 2010.2011. Ernst & Young LLP served as our independent registered public accounting firm in fiscal year 2009.2010. The services provided to us by Ernst & Young LLP for the last two fiscal years are described under the caption "Audit-Related Matters -Fees Paid to Independent Auditors" below. Stockholder approval of the selection of Ernst & Young LLP as our independent registered public accounting firm is not required. Our board believes that obtaining stockholder ratification of the selection of Ernst & Young LLP is a sound governance practice. If the stockholders do not vote on an advisory basis in favor of Ernst & Young LLP, the Audit Committee will reconsider whether to hire the firm and may retain Ernst & Young LLP or hire another firm without resubmitting the matter for stockholders to approve. The Audit Committee retains the discretion at any time to appoint a different independent registered public accounting firm.
Representatives of Ernst & Young LLP are expected to be available at the annual meeting to respond to appropriate questions and to make a statement if they desire.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR THE RATIFICATION OF SELECTION OF ERNST & YOUNG LLP
AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
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EXECUTIVE OFFICERS AND DIRECTORS | ||
The following table sets forth certain information as of July 31, 20092010 about our executive officers and continuing directors, including the persons nominated for election at the annual meeting.
| Name | Age | Position (Current Class of Director) | Year Current Term as Director Expires | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Nominees for Class III Director: | |||||||||
| Timothy E. Conver(2) | 65 | President, Chief Executive Officer, Chairman and Director (Class III) | 2009 | ||||||
| Arnold L. Fishman(1)(2)(3)(4) | 64 | Director (Class III) | 2009 | ||||||
Continuing Directors: | |||||||||
| Kenneth R. Baker(1)(3) | 62 | Director (Class I) | 2010 | ||||||
| Murray Gell-Mann(3)(4) | 79 | Director (Class I) | 2010 | ||||||
| Charles R. Holland | 63 | Director (Class I) | 2010 | ||||||
| Joseph F. Alibrandi(1)(4) | 80 | Director (Class II) | 2011 | ||||||
Other Executive Officers: | |||||||||
| Stephen C. Wright | 52 | Senior Vice President of Finance and Chief Financial Officer | |||||||
| John F. Grabowsky | 62 | Executive Vice President and General Manager, Unmanned Aircraft Systems | |||||||
| Michael Bissonette | 52 | Senior Vice President and General Manager, Efficient Energy Systems | |||||||
| Cathleen S. Cline | 50 | Senior Vice President of Administration | |||||||
| Name | Age | Position (Current Class of Director) | Year Current Term as Director Expires | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Nominees for Class I Director: | |||||||||
| Kenneth R. Baker(1)(3) | 63 | Director (Class I) | 2010 | ||||||
| Murray Gell-Mann(3)(4) | 80 | Director (Class I) | 2010 | ||||||
| Charles R. Holland | 64 | Director (Class I) | 2010 | ||||||
Continuing Directors: | |||||||||
| Joseph F. Alibrandi(1)(4) | 81 | Director (Class II) | 2011 | ||||||
| Timothy E. Conver(2) | 66 | President, Chief Executive Officer, Chairman and Director (Class III) | 2012 | ||||||
| Arnold L. Fishman(1)(2)(3)(4) | 65 | Director (Class III) | 2012 | ||||||
Other Executive Officers: | |||||||||
| Jikun Kim | 46 | Senior Vice President and Chief Financial Officer | |||||||
| Tom Herring | 50 | Senior Vice President and General Manager, Unmanned Aircraft Systems | |||||||
| Michael Bissonette | 53 | Senior Vice President and General Manager, Efficient Energy Systems | |||||||
| Cathleen S. Cline | 51 | Senior Vice President of Administration | |||||||
The principal occupations and positions for at least the past five years of our directors, including the director nominees, are as follows:
Class IIII Nominees for Election to the Board of Directors for a Three-Year Term Expiring in 2012
Timothy E. Conver has served as our President since November 1990, as our Chief Executive Officer since 1994, and as a member of our board of directors since 1988. Prior to joining AeroVironment, Mr. Conver served as President of Whittaker Electronic Resources, a supplier of engineered products for military electronics and industrial instrumentation, for ten years. Mr. Conver is a graduate of the University of Montana and has an M.B.A. from the University of California, Los Angeles.
Arnold L. Fishman has served as a member of our board of directors since 1998. Mr. Fishman is the Founder of Lieberman Research Worldwide, a leading market research firm in the western United States, Interviewing Service of America, a supplier of market survey services, and Location Production Services, Inc., a firm that co-produces films and arranges specialized financial transactions in Croatia. Mr. Fishman has served as the Chairman of Lieberman Research Worldwide and Interviewing Service
of America since 1979 and 1983, respectively. Mr. Fishman has a B.S. in psychology from Brooklyn College.
Class I Directors Whose Terms Will Expire in 20102013
Kenneth R. Baker has served as a member of our board of directors since 1994. Mr. Baker has been an independent technology broker with TechBroker LLC in the areas of alternative energy and advanced transportation since 2007. Mr. Baker served as President and Chief Executive Officer of the Altarum Institute, a not-for-profit research institution from 1999 through 2007; and prior to that served in a variety of engineering, research and executive management positions with General Motors Corporation, including as program manager of its EV1 program, Vice President of Global Research and Development, and Vice President/General Manager of its Distributed Energy business venture. Mr. Baker is also a member of the board of directors of Ener1, Inc., and serves on the Board of Advisors of Gridpoint, Inc. Mr. Baker also served on the Board of Directors of Millennium Cell Inc. from 2000-2005 and again in 2008. Mr. Baker has a B.S. in mechanical engineering from Clarkson University. Mr. Baker provides a critical contribution to the board of directors reflecting his detailed knowledge of the alternative energy and advanced transportation industry, marketplace and technology.
Murray Gell-Mann has served as a member of our board of directors since 1971. Dr. Gell-Mann is a Co-Founder of the Santa Fe Institute, which is devoted to the interdisciplinary study of scientific problems related to simplicity and complexity and to adaptation and evolution, where he has served as a Distinguished Fellow since 1993. Dr. Gell-Mann is a Professor Emeritus of Theoretical Physics at the California Institute of Technology, a member of the U.S. National Academy of Sciences, a recipient of the Research Corporation Award and the Franklin Medal of the Franklin Institute and a 1969 Nobel Prize recipient for physics for his work on the theory of elementary particles. Dr. Gell-Mann is also a member of the Council on Foreign Relations and has served on the President's Science Advisory Committee and the President's Council of Advisors on Science and Technology. In addition, as one of the directors (1979 to 2002) of the John D. and Catherine T. MacArthur Foundation, Dr. Gell-Mann helped found the World Resources Institute, which conducts policy studies on global environmental problems. Dr. Gell-Mann has a B.S. in physics from Yale University and a Ph.D. in physics from Massachusetts Institute of Technology. Dr. Gell-Mann brings to the board of directors his unique perspective on and experience with cutting-edge science and research, as well as a deep knowledge of our corporate history and approach to innovation.
Charles R. Holland has served as a member of our board of directors since May 2004. General Holland retired as Commander, Headquarters U.S. Special Operations Command in November 2003 and currently serves as an independent consultant for various entities. Mr. Holland has been a consultant offor AeroVironment since February 2004. Prior to his retirement, Mr. Holland was responsible for all special operations forces of the Army, Navy and Air Force, both active duty and reserve. Mr. Holland servesentered the United States Air Force in 1968. He has commanded a squadron, two Air Force wings, served as Deputy Commanding General of the Joint Special Operations Command, and was Commander of the Special Operations Command, Pacific. Prior to commanding USSOCOM, he commanded the Air Force Special Operations and was the Vice Commander of U.S. Air Forces in Europe. Mr. Holland previously served on the board of directors of General Atomics, Inc. and currently serves on the board of directors of Protonex Technology Corporation and as an advisor to both Aerospace Integration Corp., a subsidiary of MTC Technologies,Camber Corporation, General Atomics Aeronautical Systems, and Camber Corporation.Raytheon Company. Mr. Holland has a B.S. in aeronautical engineering from the U.S. Air Force Academy, an M.S. in business management from Troy State University (W. Germany) and an M.S. in astronautical engineering from the Air Force Institute of Technology. Mr. Holland brings to the board of directors his perspective and expertise as a warfighter and senior commander. He offers critical insight into the needs and demands of our Unmanned Aircraft System (UAS) customers.
Class II Director Whose Term Will Expire in 2011
Joseph F. Alibrandi has served as a member of our board of directors since 1999. Mr. Alibrandi has served as the Chief Executive Officer of Alibrandi Associates, a money management firm, since 1999 and is the former Chairman and Chief Executive Officer of Whittaker Corporation, a leading designer and manufacturer of a broad range of fluid control devices and systems for both commercial and military aircraft, as well as various industrial applications. Mr. Alibrandi has also served as a director of BancAmerica Corporation, Burlington Northern Santa Fe Corp., Jacobs Engineering, Catellus Development Corp., as Chairman of the Board of the Federal Reserve Bank of San Francisco, the International Policy Committee of the U.S. Chamber of Commerce, the California Business Roundtable's Task Force on Education and as Co-Chairman of President Reagan's Grace Commission. Mr. Alibrandi has a B.S. in mechanical engineering from Massachusetts Institute of Technology. Mr. Alibrandi brings to the board of directors his extensive executive experience with global organizations, as well as his operational, financial and corporate governance expertise.
Class III Directors Whose Terms Will Expire in 2012
Timothy E. Conver has served as our President since November 1990, as our Chief Executive Officer since 1992, and as a member of our board of directors since 1988. Prior to joining
AeroVironment, Mr. Conver served as President of Whittaker Electronic Resources, a supplier of engineered products for military electronics and industrial instrumentation, for ten years. Mr. Conver is a graduate of the University of Montana and has an M.B.A. from the University of California, Los Angeles. Mr. Conver's knowledge of all aspects of the business and its history, combined with his drive for innovation and focus on customer needs into the future, position him well to serve as our Chairman, President and Chief Executive Officer.
Arnold L. Fishman has served as a member of our board of directors since 1998. Mr. Fishman is the Founder of Lieberman Research Worldwide, a leading market research firm in the western United States, Interviewing Service of America, a supplier of market survey services, and Location Production Services, Inc., a firm that co-produces films and arranges specialized financial transactions in Croatia. Mr. Fishman has served as the Chairman of Lieberman Research Worldwide and Interviewing Service of America since 1979 and 1983, respectively. Mr. Fishman has a B.S. in psychology from Brooklyn College. Mr. Fishman brings to the board critical insight into market behaviors and communications and their relationship to successful business decision-making.
Other Executive Officers
Stephen C. WrightJikun Kim servedwas appointed as our Vice President of Finance and Chief Financial Officer beginning in September 2002 and was named Senior Vice President and Chief Financial Officer in 2008.effective June 22, 2010, after serving as Interim Chief Financial Officer since March 31, 2010. Prior to the interim appointment Mr. Kim served as our Vice President and Controller since June 2009. Prior to joining us,AeroVironment, Mr. WrightKim served with Raytheon Company, a defense contractor, for more than eight years, most recently as the Senior Vice President of Finance and Chief Financial Officer of L-3 PrimeWave Communications,Raytheon Vision Systems. Raytheon Vision Systems is a fixed wireless equipment provider,world leader in infrared detector technology with approximately $250 million in annual revenues and 800 employees focused on design and manufacturing infrared detectors for space, tactical and airborne infrared sensors. Mr. Kim received an M.B.A. from January 2002 to August 2002Columbia Business School, an M.S. in electrical engineering from the University of California at Los Angeles and as the Vice President of Finance and Chief Financial Officer of Cellotape, a hi-tech component and label manufacturer, from May 2001 to November 2001. Prior to joining Cellotape, Mr. Wright also served as the Chief Financial Officer of both Adicom Wireless, a fixed wireless equipment provider, and Globalstar L.P., a wireless telecom service provider. Mr. Wright has a B.S. in businesselectrical Engineering from the University of California State University Northridge and an M.B.A. from San Diego State University.at Berkeley.
John F. GrabowskyTom Herring joined us in April 2003, serving initiallywas appointed as our Director of Programs from April 2003 to March 2004, as ourSenior Vice President and General Manager, Unmanned Aircraft Systems, from April 2004 to August 2006, and since September 2006effective March 8, 2010, having previously served as our Executive Vice President, Strategy for the same business from November 2008 to December 2009 and General Manager, Unmanned Aircraft Systems.then as Vice President, Business Development. Prior to joining us,the Company, Mr. Grabowsky servedHerring worked for 27 years with BAE Systems in a succession of positions of increasing responsibility, and most recently as the Vice President and General Manager of the OptoElectronicsIntegrated Solutions, a BAE Systems business unit of Teledyne Technologies Incorporated,with approximately $150 million in annual revenues and approximately 300 employees. Mr. Herring received a leading provider of sophisticated electronicsB.B.A from Hofstra University and communications products, systems engineering solutions, and aerospace products and components,an M.B.A from March 2000 to April 2003. From 1997 to 2000, he served as the Vice President of Teledyne's Broadband Communications division. Mr. Grabowsky has a B.S. in electrical engineering from LehighPepperdine University.
Michael Bissonette has served as our Senior Vice President and General Manager, Efficient Energy Systems since 2008. Previously, beginning in September 2007, he served as our Assistant General Manager, Energy Technology Center (which was consolidated with our PosiCharge business in 2008 to form Efficient Energy Systems). Before joining us, Mr. Bissonette was a Senior Director within multiple organizations at Western Digital Corporation, a designer, developer, manufacturer and seller of hard drives, from 1998 through 2007. As Senior Director for New Product Development at Western Digital Mr. Bissonette supervised all disk drive development programs for the company. Mr. Bissonette has a B.S. in electrical engineering from Clarkson University, an M.S. in electrical engineering from California State University, Long Beach and an M.B.A. from University of California, Irvine.
Cathleen S. Cline served as our Vice President of Administration beginning in 19921991 and was named Senior Vice President of Administration in 2008. Prior to joining us, Ms. Cline was the Human Resources Manager at both Whittaker Electronic Resources and the law firm of O'Melveny & Myers LLP. Ms. Cline has a B.S. in psychology and a B.S. in business management from the University of Oregon.
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THE BOARD OF DIRECTORS AND GOVERNANCE MATTERS | ||
Our business affairs are managed under the direction of our board of directors. Directors meet their responsibilities by participating in meetings of the board and board committees on which they sit, by communicating with our Chief Executive Officer and other officers, by reviewing materials provided to them and by visiting our offices and manufacturing locations.
During our fiscal year ended April 30, 2009,2010, the board of directors met fiveeight times, including four regularly scheduled meetings and onefour special meeting.meetings. Each director attended at least 75% of the aggregate of the total number of meetings of the board and the total number of meetings of committees on which he served.
We encourage, but do not require, our board members to attend the annual meeting of stockholders. Last year, two of our directors attended the annual meeting.
Governance
Our board of directors adheres to governance principles designed to assure the continued vitality of the board and excellence in the execution of its duties. In December 2006, in preparation for our initial public offering, the board adopted a set of corporate governance guidelines reflecting these principles, including the policies with respect to: (a) requiring a majority of independent directors,directors; (b) identification of directors that can best perpetuate the success of the business and represent stockholder interests through the exercise of sound judgment; and (c) regularly scheduled executive sessions, including a requirement for sessions of non-management directors, without management, at least twice per year and at least one executive session of independent directors per year. Our non-management directors and our independent directors each met twice for executive sessions during fiscal year 2009.2010.
Stockholders and other interested parties who wish to communicate with our non-management directors should send their correspondence to: AeroVironment Non-Management Directors, c/o AeroVironment Nominating and Corporate Governance Committee, AeroVironment, Inc., 181 W. Huntington Dr., Suite 202, Monrovia, California 91016.
Our corporate governance guidelines reflect our principles on corporate governance matters. These guidelines are available athttp://investor.avinc.com and are available in print to any stockholder who requests them.
Board Leadership Structure & Composition
Our Nominating and Corporate Governance Committee is responsible for leading the search for qualified individuals for election as directors to ensure the board has the right mix of skills, expertise and background. The board believes that the following attributes are key to ensuring the continued vitality of the board and excellence in the execution of its duties: personal and professional integrity, ethics and values, experience in corporate management, such as serving as an officer of a publicly held company, and practical and mature business judgment. Each of our directors has these attributes. In identifying potential director candidates, the committee and the board also focus on ensuring that the board reflects a diversity of experiences, backgrounds and individuals. Although the board does not have a formal diversity policy, pursuant to the Policy Governing Director Qualifications and Nominations, as part of its evaluation of potential director candidates and in addition to other standards the Nominating and Corporate Governance Committee may deem appropriate from time to time for the overall structure and composition of the board of directors, the Committee is to consider whether each candidate, if elected, assists in achieving a diversity of expertise and experience in
substantive matters pertaining to our business relative to other board members. The Nominating and Corporate Governance Committee also considers the independence of candidates for director nominee, including the appearance of any conflict in serving as a director, as well as experience in our industries.
Our board is composed of a diverse group of leaders in their respective fields. Many of the current directors have leadership experience at major companies with operations inside and outside the United States, as well as experience on other companies' boards, which provides an understanding of different business processes, challenges and strategies. Other directors have experience as leaders of significant academic and research institutions or the U.S. military, which brings unique perspectives to the board and provides insight into issues faced by AeroVironment.
The committee and the board believe that the above-mentioned attributes, along with the leadership skills and other experiences of its board members described under "Executive Officers and Directors" above, provide us with the perspectives and judgment necessary to guide our strategies and monitor their execution.
Under our Corporate Governance Guidelines, our board of directors annually reviews the financial and other relationships between the non-management directors and the company as part of its annual assessment of director independence. The Nominating and Corporate Governance Committee makes recommendations to the board about the independence of non-management directors, and the board determines whether those directors are independent. The board uses the definition of independence under The Nasdaq Stock Market LLC (Nasdaq) listing standards when determining whether its members are independent. Applying those standards, the board has determined that each of the following non-management directors is independent: Joseph F. Alibrandi, Kenneth R. Baker, Arnold L. Fishman and Murray Gell-Mann. The board has determined that Mr. Holland does not qualify as an independent director in view of the payments made to Mr. Holland over the last three years as a consultant to the company. As a result, Mr. Holland does not participate on any committee of the board or in executive sessions of the independent directors. Otherwise, Mr. Holland continues to participate fully in the board's activities and to provide valuable expertise and advice. Timothy E. Conver is not an independent director because he isserves as our President and Chief Executive Officer.
At present, Mr. Conver serves as our Chairman and Chief Executive Officer. Mr. Conver took on the role of Chairman upon the retirement of our founder and former Chairman, Dr. Paul MacCready, in August 2007. The board currently has four independent directors and believes that this leadership structure is effective for the company. The board does not currently have a lead independent director. The Nominating and Corporate Governance Committee conducts an annual assessment of our corporate governance structures and processes, which includes a review of our board leadership structure and whether combining or separating the roles of Chairman and Chief Executive Officer is in the best interests of our stockholders. At present, our board believes that it is in the stockholders' best interests for the Chief Executive Officer to also serve as Chairman of the Board. The board believes that the combined Chairman and Chief Executive Officer provides a single leader for the Company who is understood by our employees, customers, business partners and stockholders as providing strong leadership for the company and possesses the ability and resources to implement our complex business strategy in fast-moving emerging markets with the required agility. In addition, the board believes that Mr. Conver's interest as a significant shareholder is strongly aligned with his fiduciary duty as a director and Chairman of the company.Board.
Role in Risk Oversight
Our Board is responsible for overseeing our risk management. The board delegates many of these functions to the Audit Committee. Under its charter, the Audit Committee is responsible for discussing with management the Company's policies with respect to risk assessment and risk management. The Committee is chartered to discuss with management our significant risk exposures and the actions
management has taken to limit, monitor or control such exposures. In addition to the Audit Committee's work in overseeing risk management, our full board engages in discussions of the most significant risks that we face and how these risks are being managed.
Committees of the Board
Our board of directors has established four committees: the Audit Committee, the Compensation Committee, the Nominating and Corporate Governance Committee and the Executive Committee. Our board of directors may establish other committees to facilitate the management of our business. All of the members of each of these standing committees other than the Executive Committee meet the criteria for independence prescribed by the Securities and Exchange Commission (SEC)SEC and Nasdaq.
Membership of each committee is as follows, with committee chairpersons listed first.
| Audit Committee | Nominating and Corporate Governance Committee | ||
|---|---|---|---|
| Joseph F. Alibrandi | Murray Gell-Mann | ||
| Kenneth R. Baker | Joseph F. Alibrandi | ||
| Arnold L. Fishman | Arnold L. Fishman | ||
| Compensation Committee | Executive Committee | ||
| Arnold L. Fishman | Arnold L. Fishman | ||
| Kenneth R. Baker | Timothy E. Conver | ||
| Murray Gell-Mann |
Audit Committee. The board has determined that Mr. Alibrandi qualifies as an audit committee financial expert as defined by the rules of the SEC. Our Audit Committee's main function is to oversee our accounting and financial reporting processes, internal systems of control, independent registered public accounting firm relationships and the audits of our financial statements. This committee's responsibilities include:
The Audit Committee held four meetings in fiscal year 2009.2010. The board of directors has adopted a written charter for the Audit Committee, which is available via our website athttp://investor.avinc.com. The information contained on our website is not incorporated by reference into and does not form a part of this proxy statement.
The code of business conduct and ethics (code of conduct) is our code of ethics for directors, executive officers and employees. Any amendment to the code of conduct that applies to our directors or executive officers may be made only by the board or a board committee and will be disclosed on our website. The code of conduct is available athttp://investor.avinc.com. The Audit Committee charter and the code of conduct are also available in print to any stockholder who requests them.
Compensation Committee. Our Compensation Committee's purpose is to assist our board of directors in determining the development plans and compensation for our senior management and directors and recommend these plans to our board. The Compensation Committee of our board is comprised of three independent directors. The Compensation Committee's responsibilities with respect to executive compensation are:
In addition, the Compensation Committee is responsible for the general administration of all executive compensation plans, including:
The Compensation Committee held sixeight meetings in fiscal year 2009.2010. The board of directors has adopted a written charter for the Compensation Committee, which is available via our website athttp://investor.avinc.com. The charter is also available in print to any stockholder who requests it.
Compensation Committee Interlocks and Insider Participation
The members of our Compensation Committee in fiscal year 20092010 were Arnold F. Fishman, Kenneth R. Baker and Murray Gell-Mann. None of the members of our Compensation Committee at any time has been one of our executive officers or employees. None of our executive officers currently serves, or in the past year has served, as a member of the board of directors or Compensation Committee of any entity that has one or more executive officers serving on our board of directors or
Compensation Committee. Our entire board of directors made all compensation decisions prior to the creation of our Compensation Committee.
Nominating and Corporate Governance Committee. Our Nominating and Corporate Governance Committee's purpose is to assist our board by identifying individuals qualified to become members of our board of directors, consistent with criteria set by our board, and to develop our corporate governance principles. This committee's responsibilities include:
Our board of directors believes that it should be comprised of directors with varied, complementary backgrounds and that directors should, at a minimum, have expertise that may be useful to the company. Directors should also possess the highest personal and professional ethics and should be willing and able to devote the required amount of time to our business.
When considering candidates for directors, the Nominating and Corporate Governance Committee takes into account a number of factors, including the following:
The Nominating and Corporate Governance Committee will consider candidates for director suggested by stockholders applying the criteria for candidates described above and considering the
additional information referred to below. Stockholders wishing to suggest a candidate for director should write to the Corporate Secretary and include:
In addition, we may require any candidate to furnish such other information as may reasonably be required by us to determine the eligibility of such candidate to serve as an independent director in
accordance with our corporate governance guidelines or that could be material to a reasonable stockholder's understanding of the independence or lack of independence of such candidate.
Before nominating a sitting director for re-election at an annual meeting, the Nominating and Corporate Governance Committee will consider:
The Nominating and Corporate Governance Committee held two meetings in fiscal year 2009.2010. The board of directors has adopted a written charter for the committee, which is available via our website athttp://investor.avinc.com. The charter is also available in print to any stockholder who requests it.
Executive Committee. Our Executive Committee's purpose is to exercise the powers of the board of directors when the board is not in session, subject to specific restrictions as to powers retained by the full board of directors or delegated to other committees of the board of directors. Powers retained by the full board of directors include those relating to amendments to our certificate of incorporation and bylaws, mergers, consolidations and sales or exchanges involving substantially all of our assets.
The Executive Committee held one meeting in fiscal year 2009.2010. The board of directors has adopted a written charter for the Executive Committee, which is available via our website athttp://investor.avinc.com. The charter is also available in print to any stockholder who requests it.
| | | |
|---|---|---|
DIRECTOR COMPENSATION | ||
Compensation of Non-Employee Directors
The general policy of our board is that compensation for non-employee directors should be a mix of cash and equity-based compensation. We do not pay management directors for board service in addition to their regular employee compensation. Our Compensation Committee, which consists solely of independent directors, has the primary responsibility for reviewing and considering any revisions to director compensation. The board reviews the Compensation Committee's recommendations and determines the amount of director compensation.
Our Human Resources department and Chief Executive Officer support the Compensation Committee in setting director compensation and creating director compensation programs. In addition, the Compensation Committee is empowered to engage the services of outside advisers, experts and others to assist it directly.
To assist the Compensation Committee in its review of director compensation in January 2007 our Human Resources department engaged an outside consultantCompensia, Inc., a national compensation consulting firm, to provide director compensation data compiled from the annual reports and proxy statements of companies generally considered comparable to us as determined by the Compensation Committee.
Our board followed the recommendation of the Compensation Committee and determined non-employee director cash compensation as follows, effective January 21, 2007:follows:
| Director Responsibilities | Annual Retainer | Meeting Attendance Fee | ||||||
|---|---|---|---|---|---|---|---|---|
Board Members | $ | 30,000 | $ | 1,000 | ||||
Audit Committee Member (including Chair) | $ | — | $ | 1,000 | ||||
Chair of Audit Committee | $ | 10,000 | $ | — | ||||
Nominating and Corporate Governance Committee Member (including Chair) | $ | — | $ | 500 | ||||
Chair of Nominating and Corporate Governance Committee | $ | 3,000 | $ | — | ||||
Compensation Committee Member (including Chair) | $ | — | $ | 500 | ||||
Chair of Compensation Committee | $ | 5,000 | $ | — | ||||
| Director Responsibilities | Annual Retainer | Meeting Attendance Fee | ||||||
|---|---|---|---|---|---|---|---|---|
Board Members | $ | 30,000 | $ | 1,000 | ||||
Audit Committee Member (including Chair) | $ | — | $ | 1,000 | ||||
Chair of Audit Committee | $ | 10,000 | $ | — | ||||
Nominating and Corporate Governance Committee Member (including Chair) | $ | — | $ | 500 | ||||
Chair of Nominating and Corporate Governance Committee | $ | 3,000 | $ | — | ||||
Compensation Committee Member (including Chair) | $ | — | $ | 500 | ||||
Chair of Compensation Committee | $ | 5,000 | $ | — | ||||
In May 2010, our board followed the recommendation of the Compensation Committee to change the cash compensation for our non-employee directors to a retainer-only plan. Effective August 1, 2010, non-employee director cash compensation is as follows:
| Director Responsibilities | Annual Retainer | |||
|---|---|---|---|---|
Board Members | $ | 35,000 | ||
Chair of Audit Committee | $ | 15,000 | ||
Audit Committee Member (not including Chair) | $ | 5,000 | ||
Chair of Nominating and Corporate Governance Committee | $ | 5,000 | ||
Nominating and Corporate Governance Committee Member (not including Chair) | $ | 2,500 | ||
Chair of Compensation Committee | $ | 8,000 | ||
Compensation Committee Member (not including Chair) | $ | 4,000 | ||
Annual retainer amounts are paid in four equal annual installments at the beginning of each of our fiscal quarters if the individual is still serving as a director at such time. Meeting attendance fees are
were paid at the end of each fiscal quarter for the meetings attended during such quarter.quarter prior to August 1, 2010.
We also reimburse non-employee directors for out-of-pocket expenses incurred in connection with attending board or committee meetings.
Our current practice is to consider granting each non-employee director stock options upon their initial election or appointment to the board, and annually, as recommended by our Compensation Committee. Directors' options vest in equal annual installments over a five-year period from the date of grant. Vesting accelerates upon the director's death or disability or if the director is not nominated by the board for re-election as a director.
Fiscal Year 20092010 Non-Employee Director Compensation Table
�� The following table identifies the compensation paid during fiscal year 20092010 to each person who is currently a non-employee director. Information regarding the amounts in each column follows the table.
| Name | Fees Earned or Paid in Cash ($) | Option Awards(1) ($) | All Other Compensation ($) | Total ($) | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Joseph F. Alibrandi | 50,000 | 5,775 | — | 55,775 | |||||||||
Kenneth R. Baker | 40,500 | 5,775 | — | 46,275 | |||||||||
Arnold L. Fishman | 48,000 | 5,775 | — | 53,775 | |||||||||
Murray Gell-Mann | 42,000 | 5,775 | — | 47,775 | |||||||||
Charles R. Holland | 35,000 | 5,775 | 216,000 | (2) | 256,775 | ||||||||
| Name | Fees Earned or Paid in Cash ($) | Option Awards(1) ($) | All Other Compensation ($) | Total ($) | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Joseph F. Alibrandi | 53,000 | 23,726 | — | 76,726 | |||||||||
Kenneth R. Baker | 46,000 | 23,726 | — | 69,726 | |||||||||
Arnold L. Fishman | 54,000 | 23,726 | — | 77,726 | |||||||||
Murray Gell-Mann | 46,000 | 23,726 | — | 69,726 | |||||||||
Charles R. Holland | 38,000 | 23,726 | 222,220 | (2) | 283,946 | ||||||||
On JulyJune 22, 2009,2010, each non-employee director was awarded options to purchase 3,0003,500 shares of our common stock, at an exercise price of $31.15$24.57 per share pursuant to the recommendation of the Compensation Committee.
The non-employee members of our board who held such positions on April 30, 20092010 held the following aggregate number of unexercised options as of such date:
| Name | Number of Securities Underlying Unexercised Options | |||
|---|---|---|---|---|
Joseph F. Alibrandi | ||||
Kenneth R. Baker | ||||
Arnold L. Fishman | ||||
Murray Gell-Mann | ||||
Charles R. Holland | ||||
The following table provides a breakdown of fees earned or paid in cash during fiscal year 2009.2010.
| Name | Annual Retainers ($) | Committee Chair Retainer Fees ($) | Board Member Meeting Fees* ($) | Committee Member Meeting Fees ($) | Total Fees ($) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Joseph F. Alibrandi | 30,000 | 10,000 | 5,000 | 5,000 | 50,000 | |||||||||||
Kenneth R. Baker | 30,000 | — | 4,000 | 6,500 | 40,500 | |||||||||||
Arnold L. Fishman | 30,000 | 5,000 | 5,000 | 8,000 | 48,000 | |||||||||||
Murray Gell-Mann | 30,000 | 3,000 | 5,000 | 4,000 | 42,000 | |||||||||||
Charles R. Holland | 30,000 | — | 5,000 | — | 35,000 | |||||||||||
| Name | Annual Retainers ($) | Committee Chair Retainer Fees ($) | Board Member Meeting Fees ($) | Committee Member Meeting Fees ($) | Total Fees ($) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Joseph F. Alibrandi | 30,000 | 10,000 | 8,000 | 5,000 | 53,000 | |||||||||||
Kenneth R. Baker | 30,000 | — | 8,000 | 8,000 | 46,000 | |||||||||||
Arnold L. Fishman | 30,000 | 5,000 | 8,000 | 11,000 | 54,000 | |||||||||||
Murray Gell-Mann | 30,000 | 3,000 | 8,000 | 5,000 | 46,000 | |||||||||||
Charles R. Holland | 30,000 | — | 8,000 | — | 38,000 | |||||||||||
| | | |
|---|---|---|
EXECUTIVE COMPENSATION DISCUSSION AND ANALYSIS | ||
Compensation Committee Report
The Compensation Committee of our board of directors is primarily responsible for determining the annual salaries and other compensation of our executive officers and administering our equity compensation plans. The Compensation Committee has reviewed and discussed with management the following Compensation Discussion and Analysis of the 20092010 proxy statement. Based on its review and discussions with management, the Compensation Committee recommended to the board that the Compensation Discussion and Analysis be included in our annual report filed on Form 10-K and this proxy statement.
Compensation Committee
Arnold L. Fishman
Kenneth R. Baker
Murray Gell-Mann
This Compensation Discussion and Analysis provides information about the material components of our executive compensation program for:
Mr. Wright resigned from his position as Senior Vice President and Chief Financial Officer effective March 31, 2010. At that time, Mr. Kim, our Vice President and Controller, was appointed to act as our interim Chief Financial Officer. On June 22, 2010, Mr. Kim was appointed as our Senior Vice President and Chief Financial Officer.
Mr. Grabowsky resigned his position as Executive Vice President and General Manager, Unmanned Aircraft Systems to serve as our Chief Technology Officer. Effective March 8, 2010, Mr. Herring was appointed as our Senior Vice President and General Manager, Unmanned Aircraft Systems.
We refer to these executive officers collectively in this Compensation Discussion and Analysis as the "Named Executive Officers."
Specifically, this Compensation Discussion and Analysis provides an overview of our executive compensation philosophy, the overall objectives of our executive compensation program, and each compensation component that we provide. In addition, we explain how and why the Compensation Committee of our board of directors (the "Compensation Committee") arrived at specific compensation policies and decisions involving our executive officers during fiscal 2010.
Executive Compensation Philosophy
Our executive compensation programs areprogram is designed to support our business goals and promote both short-term and long-term growth. This section of the proxy statement explains how our compensation programs are designed and operate in practice with respect to our Named Executive Officers. Our Named Executive Officers include our Chief Executive Officer, Chief Financial Officer and three other most highly compensated executive officers during fiscal year 2009.
Compensation Philosophy
Our compensation programs are intended to provideobjectives by providing a link between the creation of stockholder value and the compensationamounts earned by our executive officers, directorsincluding the Named Executive Officers, and certain key personnel. Ourthe creation of stockholder value. Specifically, our executive compensation programs areprogram is designed to:
Methodologies for Establishing Executive Compensation Program Design
Our Compensation Committee has adoptedThe compensation of our executive officers, including the Named Executive Officers, consists of base salary, an annual cash bonus, long-term incentive compensation, and other employee benefits. We have selected these compensation components to create a generalflexible pay package that reflects the long-term nature of our business and can reward both the short-term and long-term performance of the Company and each individual executive officer.
We design each of these compensation components to attract, motivate, and retain superior talent in a very competitive market for such talent. In addition, certain compensation components serve our other important interests. For example, annual cash bonuses are designed to motivate our executive officers to attain vital short-term business goals and objectives as reflected in our annual operating plan. Long-term incentive compensation consists of equity awards that vest over a multi-year period. This design approach helps align the interests of compensating executivesour executive officers with those of stockholders in seeing long-term increases in the value of our common stock.
We offer cash compensation in the form of base salaries commensurate with the experience and expertise of the executive and competitive with median salaries paid to executives at comparable companiesannual cash bonuses that we consider to bebelieve appropriately reward our peer group. To reward executivesexecutive officers for their contributions to our business. Typically, cash bonuses are based on the level of achievement against one or more pre-established annual corporate and business segment financial performance objectives and an assessment of each individual executive officer's performance goals significantduring the year. We offer long-term incentive compensation in the form of stock options and restricted stock awards. This approach reflects our decision to use equity to incent our executive officers to focus on the company, cash incentive bonus awards are established at a level designed to ensure that when such payouts are added to the executive's base salary, the total annual cash compensation for above-average performance will exceed the average compensation level at peer group companies. In addition, togrowth of our overall enterprise value, align our executives'their compensation with our business strategies,strategy, values, and management initiatives, both short and, long term, executive officers are provided with long-term performance incentives.
Our fiscal year 2009 peer group (sometimes referredcorrespondingly, to as the "market") consists of the following companies generally considered by the Compensation Committee to be comparable to us by virtue of their industry, size and/or public company status:create value for our stockholders.
Compensation-Setting Process
The Compensation Committee maintains discretion in setting our executives' compensation. As a result, total compensation (or any particular component of compensation) received by an executive officer may differ materially from the median of the peer group. Market data, position, tenure, individual and organizational performance, retention needs and internal pay equity have been the primary factors in decisions to deviate materially from median compensation standardsis responsible for individual executives.
With the input of our Senior Vice President of Administration, our Chief Executive Officer makes recommendations to the Compensation Committee regarding base salary levels, target incentive awards, performance goals for incentive compensation and equity awards foroverseeing our executive officers. The Chief Executive Officer provides support for his recommendations by providing market datacompensation program, as well as determining and reviewing historical executive officer performance withapproving the Compensation Committee. The Compensation Committee carefully considers the recommendations of the Chief Executive Officer when making decisions on setting base salary, bonus payments under the prior fiscal year's incentiveongoing compensation plan, target amounts and performance goals for the current fiscal year's incentive compensation plan and any long-term incentive plan, and any other special adjustments or bonuses. In addition, the Compensation Committee similarly determines equity incentive awards for all employees, including each Named Executive Officer. In determining the appropriate compensation levelsarrangements for our executive officers, including the Compensation Committee meets outside the presence of such executive officers. The Compensation Committee may delegate and grant authority toNamed Executive Officers.
Generally, annual base salary adjustments for our Chief Executive Officer and/or a committee of other executive officers to grant awards under the company's equity incentive plan(s) to the company's employees holding positions below the level of Vice President.
Annual base salary increases for executive officers as well as all other employees are generally implementeddetermined within the first quarter of each calendar year. Cash incentive awardsAnnual cash bonus payouts are paidmade within 75 days of our fiscal year end in order to synchronize award determinations with the conclusion of our fiscal year and the review of fiscal year end financial results. EquityHistorically, long-term incentive awards have historically been made at the discretion of the Compensation Committee, typically on an annual basis.Committee. Compensation adjustments in connection with changes in duties and/or
other material changes in the primary assumptions forming the basis of a compensation decision will continue to be made as required by circumstances throughout ourthe fiscal year.
Role of Compensation Consultant
To assist management and the Compensation Committee in its review of executive compensation, during fiscal year 2009 we engaged Compensia, a compensation consulting firm, to aid in confirming our peer group and to provide executive compensation data compiled from the annual reports and proxy statements of such peer group companies. The results were presented to management for consideration in March 2009.
In February 2009, management engaged the same consulting firm to evaluate and make recommendations about our long-term executive incentive programs. The consulting firm was tasked with making recommendations to management regarding long-term equity and incentive plans for our executives that were consistent with our compensation objectives, industry standards and regulatory requirements. The results were then presented to management and our Compensation Committee for consideration in March 2009.
Elements of Executive Compensation
As indicated above, compensation elements for the Named Executive Officers are designed to attract, motivate and retain superior talent in a very competitive market for such talent. Certain elements of compensation serve other important interests of the company. For example, annual incentive pay is designed to motivate the Named Executive Officers to attain vital short-term company goals. Long-term incentive pay in the form of equity awards vesting over a number of years aligns the Named Executive Officers' interests with that of stockholders in seeing long-term increases in the value of company shares. The main compensation elements for the Named Executive Officers (salary, annual incentive, long-term equity incentives and other benefits and perquisites) are described in more detail below.
The Compensation Committee has chosen these elementsadopted a general approach of compensating our executive officers with base salaries commensurate with the experience and expertise of the individual executive and competitive with the median base salaries of executives at comparable companies that we consider to be our peers. To reward our executive officers for their contributions to the achievement of pre-established annual corporate and business segment financial performance objectives linked to the Company's annual operating plan, the Compensation Committee sets annual cash bonus opportunities at a level designed to ensure that, when actual bonus payouts are added to the executive officer's base salary, the total annual cash compensation for above-average performance will exceed the average total cash compensation level of executives at comparable companies that we consider to be our peers. The Compensation Committee has adopted this approach in recognition of the aggressive nature of the Company's annual operating plan.
The Compensation Committee exercises its discretion in setting the compensation of our executive officers. As a result, the total compensation (or any particular component of compensation) received by an executive officer may differ materially from the amounts paid by comparable companies that we consider to be our peers. In addition to competitive market data, in making its compensation decisions, the Compensation Committee also considers an executive officer's position, tenure with the Company, individual and organizational performance, our retention needs, and internal pay equity.
Role of Our Chief Executive Officer
Typically, our Chief Executive Officer makes recommendations to the Compensation Committee regarding the compensation of our executive officers (except with respect to his own compensation), including base salary levels, target annual cash bonus opportunities, bonus payouts under the prior fiscal year's annual bonus plan, and long-term incentive compensation levels, with the assistance of our Senior Vice President, Administration. He also provides recommendations for the corporate and business segment financial objectives and individual performance objectives used in our annual cash bonus plan. He supports his recommendations with competitive market data developed by our Human Resources Department and by reviewing historical performance of each executive officer with the Compensation Committee. Although the Compensation Committee carefully considers the recommendations of our Chief Executive Officer when determining the compensation of our executive officers, it bases its decisions on the collective judgment of its members after considering the input of its compensation consultant and any relevant supporting data.
While our Chief Executive Officer attends meetings of the Compensation Committee, the committee meets outside the presence of our Chief Executive Officer when discussing his compensation. Decisions with respect to our Chief Executive Officer's compensation are made by the Compensation Committee, subject to the approval of the independent members of our board (unless such decisions require approval by our Compensation Committee to the extent such compensation is intended to be qualified performance-based compensation for purposes of Section 162(m) of the Internal Revenue Code)
The Compensation Committee may delegate and grant authority to our Chief Executive Officer and/or a committee of executive officers to grant awards under the Company's equity incentive plan to the employees holding positions below the level of Vice President.
Role of Compensation Consultant
The Compensation Committee is authorized to retain the services of one or more executive compensation advisors, as it sees fit, in connection with the oversight of our executive compensation program. In fiscal 2010, the Compensation Committee did not independently engage an executive
compensation advisor, but relied upon the engagement of Compensia, Inc., a national compensation consulting firm, by management to provide executive compensation advisory service, including an executive officer compensation assessment and a board of directors' compensation review. Compensia, Inc. did not provide any non-compensation-related services to us during fiscal 2010.
Competitive Market Data
Each year, the Compensation Committee reviews the executive compensation practices of a group of companies in the technology sector determined to be comparable to us based on their size and public company status. The Compensation Committee uses the information derived from this review in two ways: to assist it in determining the appropriate level and reasonableness of total compensation, as well as each separate component of compensation, for our executive officers and to create a flexible packageensure that reflects the long-term naturecompensation we offer to them is competitive and fair. The fiscal 2010 peer group consisted of the following companies:
| Applied Signal Technology, Inc. Argon ST, Inc. Astronics Corporation Cbeyond, Inc. Cogent, Inc. Ducommun GenCorp | Herley Industries, Inc. iRobot Corporation KVH Industries, Inc. LMI Aerospace, Inc. NCI, Inc. Stanley, Inc. II-VI Incorporated |
Executive Compensation Program Components
The following describes each component of our businessexecutive compensation program, the rationale for each, and can reward both short and long-term performance ofhow compensation amounts are determined.
Base Salary
We use base salaries to provide our executive officers, including the company and individual.
Base Salary
Salaries are used to provideNamed Executive Officers, with a fixed amount of compensation for the executive'stheir regular work. TheTypically, the Compensation Committee reviews the base salaries of the Named Executive Officers are reviewed on an annual basis, typicallyour executive officers at the beginning of theeach calendar year, as well as at the time of a promotion or other change in responsibilities. Increases inBase salary adjustments generally go into effect within the first quarter of each calendar year. Base salary adjustments are based on an evaluation of the individual'san executive officer's position, tenure with our company, individual and organizational performance, our retention needs, and level ofinternal pay comparedequity. In addition, to peer group pay levels for similar positions. As discussed above, we targetensure that the base salaries for each of our Named Executive Officers at the market median.
Fiscal year 2009 base salaries for our Named Executive Officers were established byexecutive officers are competitive and appropriate, the Compensation Committee reviews the salaries of executives holding comparable positions at the companies in March 2008 and again in March 2009. Based on its reviewour peer group.
In light of the considerations discussed above, for fiscal year 2010, the annual base salaries of our Chief Executive Officer, Chief Financial Officer, Senior Vice President of Unmanned Aircraft Systems, Senior Vice President of Efficient Energy Systems, and Senior Vice President, Administration were, $471,095, $198,530, $207,470, $259,638, and $225,494, respectively. Our former Chief Financial Officer and former Executive Vice President of Unmanned Aircraft Systems received total base salary compensation of $291,813, and $300,019, respectively, during fiscal 2010. Mr. Wright resigned as our Senior Vice President and Chief Financial Officer effective March 31, 2010. At that time Mr. Jikun Kim was appointed to act as our interim Chief Financial Officer at his existing base salary of $229,715. On June 22, 2010, Mr. Kim was appointed as our Senior Vice President and Chief Financial Officer and his base salary was adjusted to $260,000. Mr. Grabowsky resigned as Executive Vice President and General Manager of our Unmanned Aircraft Systems business effective March 8, 2010. Mr. Herring was simultaneously appointed as Senior Vice President and General Manager of our Unmanned Aircraft Systems to replace Mr. Grabowsky and his base salary was adjusted to $260,000.
We believe that the base salaries paid to our executive officers during our fiscal year 2010 helped to achieve our executive compensation objectives, compare favorably to our peer group and, in light of our overall compensation data provided by our compensation consulting firm in March 2009 the Compensation Committee (and the Board with respect to Mr. Conver's salary) set base salaries for our executives in April 2009 to beprogram, are at or near the median salaries paid tosalary of the executives holding comparable positions at comparable companies.
| | Salary Rate Effective: | ||||||
|---|---|---|---|---|---|---|---|
| Name | May 1, 2008 | April 5, 2009 | |||||
Timothy E. Conver | $ | 450,000 | $ | 450,000 | (1) | ||
Stephen C. Wright | $ | 250,000 | $ | 290,000 | |||
John F. Grabowsky | $ | 285,000 | $ | 300,000 | |||
Michael Bissonette | $ | 196,000 | $ | 245,000 | |||
Cathleen Cline | $ | 196,000 | $ | 225,000 | |||
Annual Cash Bonuses
Executive Performance Bonus Program
The Compensation Committee believes We believe that a significant portion of overall cash compensation forof our executive officers, including ourthe Named Executive Officers, should be "at risk," i.e.,risk" (that is, contingent
upon the successful implementation of our strategy. Our Executive Performance Bonus Program provides for the granting of discretionary "at-risk"annual operating plan). We use these cash bonus awardsopportunities to motivate our executive officers to achieve our short-term financial and strategic objectives while making progress towards our longer-term growth and other goals.
Typically, at the end of the fiscal year the Compensation Committee determines whether to pay cash bonuses to our executive officers, including the Named Executive Officers, based on an evaluationits assessment of achievement against pre-determined annual corporatethe our financial results and segment financial performance targets andconsideration of each executive officer's individual performance during the fiscal year. While the decision to make bonus payouts and any amounts payable are made in the sole discretion of the Compensation Committee, in making its determinations the Compensation Committee considers input from our Chief Executive Officer, as well as its evaluation of the expected and actual performance of each executive officer, his or her individual contributions and responsibilities, and market conditions.
Setting Baseline Bonus Levels
Initially, the Compensation Committee establishes a "baseline bonus level" for each executive officer, which is expressed as a percentage of his or her base salary. In setting these baseline bonus levels, which are intended to provide a competitive level of cash compensation when we meet our annual operating plan and the individual executive officer meets his or her individual performance objectives, the Compensation Committee considers the cash compensation of executives holding comparable positions at the companies in our peer group.
Generally, the Compensation Committee sets the baseline bonus levels so that, assuming achievement of the corporate financial and individual performance objectives, the combined base salary and annual bonus opportunities for our executive officers will exceed the median total cash compensation of comparable executives at the companies in our peer group by 20% - 40%. The Compensation Committee believes that this approach is consistent with the high level of growth generally reflected in such corporate and individual performance objectives.
Establishing Performance Measures and Goals
At the beginning of each fiscal year, ourthe Compensation Committee identifies one or more corporate performance measures and establishes a specific annual performance targets and standardstarget level for each measure for purposes of calculating the amount of the maximum permissible bonus for each executive officer under our 2006 Equity Incentive Plan. In order forofficer. To ensure that any bonuses paid to the Named Executive Officers whose total compensationremuneration exceeds $1 million towill be tax-deductibledeductible by us for federal income tax purposes, the target level established by the company, the performance targets set by our Compensation Committee for each applicable fiscal year under our 2006 Equity Incentive Plancorporate performance measure must be met.
In the event that the performance target level for any fiscal yearcorporate performance measure is not met, then no bonusesbonus may be paid to any executive officers under the 2006 Equity Incentive Plan.officer. If the target levels for the applicable corporate performance targetsmeasures are met, then theour executive officers will be considered to have earned the maximum permissible bonus, subject to downward adjustment, pursuant toreduction in the discretion of the Compensation Committee's exercise ofCommittee. Pursuant to this "negative discretion.discretion," Under this negative discretion, the Compensation Committee canmay reduce (but cannot increase) the amount of the bonus payablepayout for any executive officer based on other additionalsuch factors as the Compensation Committee may determine, including, but not limited to, the achievement of otherone or more
pre-established financial and strategic or individual goals, which may be objectivequantitative or subjective, as it deems appropriate,qualitative in nature, as well as the baseline bonus levelslevel for each executive officer.
Baseline bonus levels are established by the Compensation Committee through an analysis of compensation for comparable positions within our peer group and are intended to represent a competitive level of compensation when the executive officers achieve annual established financial, strategic and individual goals. Combined salaries and bonus levels for our executive officers who meet these goals are designed to exceed the median cash compensation level at peer group companies by twenty to forty percent (20-40%). The Compensation Committee believes that this policy is consistent with the high level of growth generally reflected in such financial, strategic and individual goals.Reviewing Performance Results
At the end of the fiscal year, the Compensation Committee reviews our actual performance against the target levels set for each of the corporate performance targetmeasures established at the outsetbeginning of the year. If the performancethese target haslevels have been met, then the Compensation Committee uses its negative discretion to adjustreduce the maximum permissible bonus for each executive officer as follows:
In no event willmay an executive'sexecutive officer's annual cash bonus payout exceed thehis or her maximum permissible bonus underas established by the bonus program.Compensation Committee.
Fiscal Year 2009 Executive Performance Bonus Program2010 Bonuses
The following is a discussion of the specific factors considered in determining the bonuses forCompensation Committee designed our fiscal 2010 annual cash bonus opportunities to focus our executive officers, including the Named Executive Officers, under our Executive Performance Bonus Program for fiscal year 2009.
We designed our fiscal year 2009 Executive Performance Bonus Program to focus our executives on achieving key companyCompany financial objectives and to reward substantial achievement of these financial objectives. Tom Herring and Jikun Kim were not included in the Named Executive Officer Bonus Plan for fiscal 2010.
For fiscal year 2009,2010, the performance target set under our 2006 Equity Incentive Plan was based on anCompensation Committee:
| Named Executive Officer | Baseline Bonus Level | Percentage of Base Salary | |||||
|---|---|---|---|---|---|---|---|
Timothy E. Conver | $ | 472,500 | 99 | % | |||
Michael Bissonette | $ | 181,000 | 70 | % | |||
Cathleen Cline | $ | 112,000 | 49 | % | |||
Stephen C. Wright | $ | 232,000 | 80 | % | |||
John F. Grabowsky | $ | 300,000 | 100 | % | |||
In addition, the Compensation Committee selected several financial and strategic goals for each executive officer to be used in making the preliminary determination with respect toadjusting the baseline bonus amount portion of thehis or her maximum permissible bonus. bonus:
| Named Executive Officer | Strategic Goal Categories | |
|---|---|---|
Timothy E. Conver | Compliance; Strategic Growth Positioning; Key Program Wins; Market Share; Innovation Transition; Organizational Development; Great Place to Work | |
Michael Bissonette | Compliance; Strategic Growth Positioning; Key Program Wins; Market Share; Innovation Transition; Organizational Development; Great Place to Work | |
Cathleen Cline | Compliance; Strategic Growth Positioning; Organizational Development; Great Place to Work | |
Stephen C. Wright | Compliance; Strategic Growth Positioning; Organizational Development; Great Place to Work | |
John F. Grabowsky | Compliance; Strategic Growth Positioning; Key Program Wins; Market Share; Innovation Transition; Organizational Development; Great Place to Work |
The Compensation Committee selected the financial and strategic goals for each executive officer based on the recommendation of our Chief Executive Officer and after reviewing the Company's annual operating plan for fiscal 2010, as well as its long-term strategic plan. The Compensation Committee determined that these financial and strategic goals should enhance the development of long-term shareholderstockholder value and, therefore, that it was therefore appropriate to tie incentive compensation tobase annual bonuses on the achievement of these measures.goals.
The Compensation Committee weighted each of the specific financial measuresgoals based on its evaluation of their relative importance, and weighted the aggregate financial measures and strategic measuresgoals equally. The Compensation Committee selected the financial and strategic goals for each executive officer based on recommendationsthe recommendation of the Chief Executive Officerour CEO and after reviewing the company'sCompany's annual operating plan for fiscal year 2009 and2010, as well as its long-term strategic plan.
The Compensation Committee then implemented a sliding scale that calculated a downward adjustment to 50% of the baseline bonus amount upon 75% total achievement (financial and strategic), and an upward adjustment of 200% upon 150% total achievement. The baseline bonus amount was adjustedreduced to zero if thean executive officer did not reach at least 75% achievement based onfor both his aggregate financial and strategic goals, as shown below:
Scaled Adjustment of Baseline Bonus Amounts Based on Total Performance:
Percentage of Performance: | <75% | 75% | 100% | 150% | |||||||||
% of Baseline Bonus Amount Paid: | 0 | 50% | 100% | 200% | |||||||||
Fiscal Year 2009 Executive Bonus Decisions
Percentage of Achievement: | <75 | % | 75 | % | 100 | % | 150 | % | |||||
Percentage of Baseline Bonus Amount Paid: | 0 | 50 | % | 100 | % | 200 | % |
AtFollowing the endcompletion of fiscal 2010, the Compensation Committee determined that the Company's operating income margin for the year 2009,was 12%, exceeding the company surpassed the performance measuretarget level of 9% operating income margin. Therefore, the amount of.
Accordingly, each executive officer's annual cash bonus was determined according to theirbased on his or her level of achievement against his or her individual financial and strategic performance objectives, as determinedgoals. Mr. Wright was not eligible to receive a bonus since he was not employed by our boardus at the time of directors during the first quarter of fiscal year 2009.bonus payout.
The annual cash bonuses awardedpaid to the Named Executive Officers for fiscal year 20092010 were determined as follows:
Percentage of Achievement of Financial Goals:Goals
Named Executive Officer | Financial Measure | Performance Goal(1) | Actual Performance(1) | Percentage of Achievement | Financial Performance Weights | Weighted Total Financial Percentage of Achievement | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Conver | Revenue Growth: | 25% | 14.8% | 59.3 | % | 50 | % | 72.2 | % | |||||||
| Operating Income: | $38,287,000 | $32,553,000 | 85.0 | % | 50 | % | ||||||||||
| Wright & Cline | Revenue: | $278,081,000 | $247,662,000 | 89.1 | % | 40 | % | 86.6 | % | |||||||
| Operating Income: | $38,287,000 | $32,553,000 | 85.0 | % | 60 | % | ||||||||||
| Grabowsky | Revenue (Unmanned | $237,504,000 | $211,364,000 | 89.0 | % | 40 | % | |||||||||
| Aircraft Systems (UAS)): | ||||||||||||||||
| UAS Gross Margin(2) | $86,023,000 | $71,875,000 | 83.6 | % | 20 | % | 82.6 | % | ||||||||
| UAS Contribution Margin(3) | $55,570,000 | $42,062,000 | 75.7 | % | 40 | % | ||||||||||
| Bissonette | Revenue (Efficient Energy | $40,577,000 | $36,298,000 | 89.5 | % | 40 | % | |||||||||
| Systems (EES)): | ||||||||||||||||
| EES Gross Margin(2) | $18,055,000 | $17,781,000 | 98.5 | % | 20 | % | 94.9 | % | ||||||||
| EES Contribution Margin(3) | $3,726,0000 | $3,675,000 | 98.6 | % | 40 | % | ||||||||||
| Named Executive Officer | Financial Measure | Performance Goal(1) | Actual Performance(1) | Percentage of Achievement | Financial Performance Weights | Weighted Total Financial Percentage of Achievement | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Timothy E. Conver | Revenue: | $ | 323,727,000 | $ | 249,519,000 | 77.1 | % | 50 | % | 72.3 | % | |||||||
| Operating Income: | $ | 44,301,000 | $ | 29,881,000 | 67.4 | % | 50 | % | ||||||||||
Michael Bissonette | Revenue (Efficient Energy Systems (EES)): | $ | 48,500,000 | $ | 25,339,000 | 52.2 | % | 50 | % | 54.4 | % | |||||||
| EES Gross Margin: | $ | 23,765,000 | $ | 11,716,000 | 49.3 | % | 30 | % | ||||||||||
| Operating Income: | $ | 44,301,000 | $ | 29,881,000 | 67.4 | % | 20 | % | ||||||||||
Cathleen Cline | Revenue: | $ | 323,727,000 | $ | 249,519,000 | 77.1 | % | 50 | % | 72.3 | % | |||||||
| Operating Income: | $ | 44,301,000 | $ | 29,881,000 | 67.4 | % | 50 | % | ||||||||||
John F. Grabowsky | Revenue (Unmanned Aircraft Systems (UAS)): | $ | 275,227,000 | $ | 224,179,000 | 81.5 | % | 50 | % | 80.2 | % | |||||||
| UAS Gross Margin: | $ | 98,795,000 | $ | 85,573,000 | 86.6 | % | 30 | % | ||||||||||
| Operating Income: | $ | 44,301,000 | $ | 29,881,000 | 67.4 | % | 20 | % | ||||||||||
Strategic Goals
| Named Executive | Strategic | Percentage of | ||
|---|---|---|---|---|
| Timothy E. Conver | Mr. Conver continued his leadership and execution against | |||
Mr. | 100% | |||
Cathleen Cline | Ms. Cline has focused on organizational development and succession planning and was instrumental in the | |||
John F. Grabowsky | Mr. Grabowsky led the achievement of | |||
Discretionary Adjustment:Adjustment
The Compensation Committee then calculated final fiscal year 20092010 bonuses for the Named Executive Officers as follows, rounding to the nearest $1,000:
| Name | Baseline Bonus Amount | Financial % Achievement | Individual Strategic % Achievement | Weight | Total % Achievement | Scaled | Discretionary Increase | Total Payout % | Total Bonus Amount(1) | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Conver | $ | 450,000 | 72.2 | % | 100 | % | .5 | 86.1 | % | 72.2% | 0 | 72.2% | $ | 325,000 | ||||||||||||||
Wright | $ | 230,000 | 86.6 | % | 100 | % | .5 | 93.3 | % | 86.6% | 0 | 86.6% | $ | 199,000 | ||||||||||||||
Cline | $ | 94,000 | 86.6 | % | 100 | % | .5 | 93.3 | % | 86.6% | 0 | 86.6% | $ | 82,000 | ||||||||||||||
Grabowsky | $ | 271,000 | 82.6 | % | 100 | % | .5 | 91.3 | % | 82.6% | 0 | 82.6% | $ | 224,000 | ||||||||||||||
Bissonette | $ | 143,000 | 94.9 | % | 140 | % | .5 | 117.5 | % | 134.9% | 0 | 134.9% | $ | 193,000 | ||||||||||||||
| Named Executive Officer | Baseline Bonus Amount | Financial % Achievement | Individual Strategic % Achievement | Weight | Total % Achievement | Scaled | Discretionary Increase | Total Payout % | Total Bonus Amount | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Timothy E. Conver | $ | 472,500 | 72.3 | % | 85 | % | 50/50 | 78.6 | % | 57.3 | % | 0 | 57.3 | % | $ | 271,000 | ||||||||||||
Michael Bissonette | $ | 181,000 | 54.4 | % | 100 | % | 50/50 | 77.2 | % | 54.4 | % | 0 | 54.4 | % | $ | 98,000 | ||||||||||||
Cathleen Cline | $ | 112,000 | 72.3 | % | 85 | % | 50/50 | 78.6 | % | 57.3 | % | 0 | 57.3 | % | $ | 64,000 | ||||||||||||
John F. Grabowsky | $ | 300,000 | 80.2 | % | 85 | % | 50/50 | 82.6 | % | 65.2 | % | 0 | 65.2 | % | $ | 196,000 | ||||||||||||
(1)Fiscal 2010 Management Bonus Plan Awards
For fiscal 2010 Mr. Herring and Mr. Kim were eligible for, and were awarded, bonuses pursuant to the nearest $1,000.
Total cash compensation paid to ourCompany's Management Bonus Plan. Under the Company's Management Bonus Plan, certain employees that are not Named Executive Officers for fiscal year 2009, including both cash bonus and base salary, was consistent with the average compensation level at peer group companies as determined at the beginning of the fiscal year, except with respect to Mr. Grabowsky, whose compensation was at approximately 75% of the median compensation level. Mr. Grabowsky's total cash compensation reflects a significant base bonus amount associated with aggressive financial and strategic goals for fiscal 2009.
Long-Term Equity Incentive Awards
Executive officers are eligible to receiveearn cash bonus amounts based upon
the establishment of an individual target bonus, and achievement of financial goals. For fiscal 2010 Mr. Herring was awarded a bonus of $39,758, and Mr. Kim was awarded a bonus of $29,740.
Long-Term Incentive Compensation
We use equity awards to motivate our executives officers, including the Named Executive Officers, to increase the long-term value of our common stock and, thereby, to align the interests of our executive officers with those of our stockholders. These equity awards, which include stock options and restricted stock stock options grants and other stock awards, that are intended to promotefurther our success by aligning employee financial interests with long-term stockholder value. These stock-based incentives, which have historically consisted solelyensuring that sustainable value creation is a key factor in our executive officers' management of our business.
The size and form of these equity awards is determined by the Compensation Committee in its discretion. We use stock options grants, are based onas one of our long-term incentives because, in addition to providing our executive officers with the opportunity to develop a stock ownership stake in the our company, they result in compensation only to the extent that the market price of our common stock increases over the option term. We use restricted stock as one of our long-term incentives because it rewards our executive officers for improved stock price performance, but also encourages executive retention as these awards maintain value even during periods when there is volatility in our stock price.
In making equity awards to our executive officers, the Compensation Committee considers various factors, relatingincluding not limited to, the recommendations of our Chief Executive Officer, the role and responsibilities of the executive officer, past performance, future planned contributions, and prior option grants. Consistent with our approach for all elements of compensation, executive officer and key employee long-term stock-based incentive awards are targeted to be competitive with the market median.
Stock Options
Stock options may be issued under our 2006 Equity Incentive Plan, and provide a material incentive to employees by providing an opportunity for a larger stock ownership stake in the company. We use stock options because they provide compensation only to the extent our stock price increases over the term of the option.equity awards.
It is the policy of the company and the board of directors to provideAs noted above, the Compensation Committee withhas the discretion to determine which executive officers will receive equity awards, as towell as the issuanceamount of stock options to eligible employees. The Compensation Committee typically issues options on the date ofany such awards. Typically, the Compensation Committee meeting at which such issuances are approved,grants equity awards only on the dates of its regularly-scheduled committee meetings, without regard to the timing of the release of material information. Under our 2006 Equity Incentive Plan, the grantinformation about us. All stock options are granted with an exercise price is set atequal to the closing market price of our common stock on the date preceding the date of the grant. Stock option awards generallyGenerally, stock options vest in five equal installments on each of the first five anniversaries followingof the date of grant.
Other Compensation
Fiscal Year 2009 Option GrantsEmployee Benefit Plans
In March 2009, the Compensation Committee awarded long-term compensation to certain Named Executive Officers pursuant to the long-term incentive program described above resulting in the awards of stock options and restricted stock units identified in Fiscal 2009 Grants of Plan Based Awards table.
In determining the grants of options for each executive officer, the Compensation Committee considered the company's overall long-term incentive guidelines for all executives, which attempt to balance, in the context of the competitive market for executive talent, the benefits of incentive compensation tied to performance of the company's stock with the dilutive effect of equity compensation awards. The Compensation Committee also considered Mr. Conver's recommendations.
Fiscal Year 2009 Restricted Stock Grant
In April 2009, the Compensation Committee awarded 2,000 shares of restricted stock to Mr. Grabowsky, which restricted stock award will vest on June 30, 2010. Restricted Stock Awards were issued to Mr. Grabowsky as an additional retention incentive.
Other General Employee Compensation
We havemaintain various broad-based employee benefit plans.plans for our employees. Our executive officers, including the Named Executive Officers, participate in these plans on the same terms as other eligible employees, subject to any legalapplicable limits on the amounts that may be contributed on behalf of or paid to our executive officers under these plans.
We provide allhave established a tax-qualified Section 401(k) retirement savings plan for our salaried U.S. salaried employees who satisfy certain eligibility requirements. We intend for this plan to qualify under Section 401(a) of the opportunityInternal Revenue Code so that contributions by participants to participate in a 401(k)the plan, and income earned on plan contributions, are not taxable to participants until withdrawn from the plan. UnderPursuant to the Section 401(k) plan, for salaried employeesin the case of participants who contribute a portion of their annual base salary to the plan, we provide a matching contribution of up to 5.75% of such annual base salary. The matching contributions made to the accounts of the Named Executive Officers during fiscal 2010 are set forth in the Summary Compensation Table below.
We also maintain insurance and other benefit plans for our employees, which include medical and dental benefits, medical and dependent care flexible spending accounts, long-term disability insurance, accidental death and dismemberment insurance, and basic life insurance coverage. Except as noted in the following sentences, these benefits are provided to our executive officers on the same general terms as to all of our salaried U.S. employees. Certain employees receive higher disability insurance benefits
than other employees based on a threshold base compensation level. Our executive officers, including the Named Executive officersOfficers, receive higher life, accidental death, and dismemberment insurance benefits than our other employees.
We design our employee benefit programs to be affordable and competitive in relation to the market, as well as compliant with applicable laws and practices. We adjust our employee benefit programs as needed based upon regular monitoring of applicable laws and practices and the competitive market.
Perquisites and Personal Benefits
Perquisites andWe do not view perquisites or other personal benefits as a significant component of our executive compensation program. From time to time, however, we have provided limited perquisites to certain of our executive officers in fiscal year 2009to enhance their efficiency and to ensure that their compensation packages are disclosed in the Summary Compensation Table below.competitive. In fiscal year 2009,2010, we made available the following perquisites:
We provided our Chief Executive Officer with a company automobile and
The amounts of the perquisites and other personal benefits provided to the Named Executive Officers in fiscal 2010 are disclosed in the Summary Compensation Table below.
Post-Employment Compensation
We do not have formal employment agreements with our executive officers, nor do we provide them with post-employment payments and benefits upon their termination of employment in certain circumstances, including in connection with a change in control of the Company.
Tax and Accounting Considerations
Deductibility of PayExecutive Compensation
Generally, Section 162(m) of the Internal Revenue Code generally limits thedisallows a tax deductibilitydeduction to any publicly-held corporation for any remuneration in excess of compensation$1 million paid by a public companyin any taxable year to its Chief Executive Officerchief executive officer and certain other highly compensated executive officers toofficers. Remuneration in excess of $1 million inmay be deducted if, among other things, it qualifies as "performance-based compensation" within the yearmeaning of the Code. In this regard, the compensation becomes taxable toincome realized upon the executive. There is an exception toexercise of stock options granted under a stockholder-approved stock option plan generally will be deductible so long as the limit on deductibility for performance-based compensation that meetsoptions are granted by a committee whose members are non-employee directors and certain requirements.other conditions are satisfied.
The Internal Revenue Code and the applicable Treasury regulations offer a number of transitional exceptions to this deduction limit for compensation plans, arrangements and binding contracts in existence at the time of a company's initial public offering. The Compensation Committee believes that at the present timeCurrently, it is unlikely that the compensation paid to any Named Executive Officer in a taxable year which is subject to the deduction limit will exceed $1,000,000.
It is the current policy of the Compensation Committee to maximize, to the extent reasonably possible, the company'sCompany's ability to obtain a corporate tax deduction for compensation paid to itsthe Named
Executive Officers to the extent consistent with the best interests of the companyCompany and its stockholders. In particular, our bonus program isthe Fiscal 2010 Executive Performance Bonus Program was designed to be performance-basedprovide "performance-based compensation" and deductible under Section 162(m). However, the Compensation Committee believes that stockholder interests are best served by not restricting the committee'sCompensation Committee's discretion and flexibility in crafting compensation programs, even though such programs may result in certain non-deductible compensation expenses. Accordingly, the Compensation Committee reserves the right to approve elements of compensation for certain officers that are not fully deductible in the future in appropriate circumstances.
The Compensation Committee believes that the compensation paid to the Named Executive Officers during fiscal 2010 did not exceed the deduction limit.
Taxation of "Parachute" Payments
Sections 280G and 4999 of the Code provide that executive officers and directors who hold significant equity interests and certain other service providers may be subject to an excise tax if they receive payments or benefits in connection with a change in control of the Company that exceeds certain prescribed limits, and that we, or our successor, may forfeit a deduction on the amounts subject to this additional tax. We did not provide any executive officer, including any Named Executive Officer, with a "gross-up" or other reimbursement payment for any tax liability that he or she might owe as a result of the application of Sections 280G or 4999 during fiscal 2010 and we have not agreed and are not otherwise obligated to provide any Named Executive Officer with such a "gross-up" or other reimbursement.
Taxation of Deferred Compensation
Section 409A of the Code imposes significant additional taxes in the event that an executive officer, director, or service provider receives "deferred compensation" that does not satisfy the restrictive conditions of the provision. Although we did not have a traditional nonqualified deferred compensation plan in place for executive officers during fiscal 2010, Section 409A applies to certain equity awards and severance arrangements. To assist employees in avoiding additional taxes under Section 409A, we believe that we have structured equity awards in a manner intended to comply with, or secure an exemption from, the applicable Section 409A conditions.
Accounting for Stock-Based Compensation
We follow Financial Accounting Standards Board Accounting Standards Codification Topic 718 (formerly known as SFAS No. 123(R)), or ASC Topic 718, for our stock-based compensation awards. ASC Topic 718 requires companies to calculate the grant date "fair value" of their stock-based awards using a variety of assumptions. This calculation is performed for accounting purposes and reported in the compensation tables below, even though recipients may never realize any value from their awards. ASC Topic 718 also requires companies to recognize the compensation cost of their stock-based awards in their income statements over the period that an employee is required to render service in exchange for the award.
Risk Oversight of Compensation Programs
We have conducted a risk assessment of our compensation policies and practices for our employees, including those relating to our executive compensation program. This risk assessment included a review of our compensation programs into which employees at all levels of the organization may participate, including our executive officers. Based on our assessment, we believe that our compensation programs have been appropriately designed to attract and retain talent and properly incent our employees while ensuring that they do not encourage excessive risk taking. We believe that programs and controls are in place to ensure that our employees, including our executive officers, are not encouraged to take unnecessary risks in managing our business.
These programs and controls include:
We discussed the findings of our risk assessment with the Compensation Committee. Based upon the assessment, we believe that our compensation policies and practices do not encourage excessive or unnecessary risk taking and are not reasonably likely to have a material adverse effect on the Company.
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EXECUTIVE COMPENSATION | ||
Summary Compensation Table
The following table sets forth, information concerning all compensation paid for servicesas to us by our Named Executive Officers in all capacities for fiscal years 2007 through 2009. We define our Named Executive Officerseach person serving as our Chief Executive Officer and Chief Financial Officer during fiscal year 2009,2010, and the three most highly compensated executive officers other than the Chief Executive Officer and Chief Financial Officer who were serving as executive officers at the end of fiscal year 20092010 whose compensation exceeded $100,000.$100,000, plus two additional individuals who served as executive officers during fiscal 2010 but who were not serving in such capacity at the end of fiscal year 2010 but who are required to be included in the following table pursuant to Securities and Exchange Commission rules, or the Named Executive Officers, information concerning all compensation paid for services to us in all capacities for fiscal years 2008, 2009 and 2010.
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| Name | Year | 401(k) | Life | Auto | Total | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Mr. Conver | 2009 | $ | 12,558 | $ | 3,810 | $ | 2,675 | $ | 19,043 | |||||||
| Mr. Wright | 2009 | $ | 13,854 | $ | 690 | — | $ | 14,544 | ||||||||
| Mr. Grabowsky | 2009 | $ | 13,366 | $ | 1,980 | — | $ | 15,346 | ||||||||
| Ms. Cline | 2009 | $ | 11,906 | $ | 690 | — | $ | 12,596 | ||||||||
| Mr. Bissonette | 2009 | $ | 7,774 | $ | 690 | — | $ | 8,464 | ||||||||
| Name | Year | 401(k) | Life | Auto | Total | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mr. Conver | 2010 | $ | 10,331 | $ | 3,810 | $ | 1,845 | $ | 15,986 | |||||||
Mr. Kim | 2010 | — | $ | 312 | — | $ | 312 | |||||||||
Mr. Herring | 2010 | — | $ | 478 | — | $ | 478 | |||||||||
Mr. Bissonette | 2010 | $ | 12,933 | $ | 478 | — | $ | 13,411 | ||||||||
Ms. Cline | 2010 | $ | 13,336 | $ | 690 | — | $ | 14,026 | ||||||||
Mr. Wright | 2010 | $ | 13,713 | $ | 690 | — | $ | 14,403 | ||||||||
Mr. Grabowsky | 2010 | $ | 13,475 | $ | 1,980 | — | $ | 15,455 | ||||||||
Grants of Plan-Based Awards
The following table provides information with respect to equity and performance bonus awards granted to the Named Executive Officers during fiscal year 2009 under our Equity Incentive Plans.2010.
| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | | | | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#)(1) | | Grant Date Fair Value of Stock and Option Awards ($)(2) | ||||||||||||||||||||
| Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Exercise or Base Price of Option Awards ($/sh) | ||||||||||||||||||||
Equity Awards | |||||||||||||||||||||||||
Stephen C. Wright | 3/31/09 | — | — | — | — | 30,000 | 21.28 | 5.15 | |||||||||||||||||
John F. Grabowsky | 4/15/09 4/15/09 | — — | — — | — — | — 2,000 | 25,000 — | 23.25 — | 5.63 23.38 | |||||||||||||||||
Michael Bissonette | 7/30/08 3/31/09 | — — | — — | — — | — — | 20,000 40,000 | 32.19 21.28 | 9.33 5.15 | |||||||||||||||||
Cathleen S. Cline | 3/31/09 | — | — | — | — | 10,000 | 21.28 | 5.15 | |||||||||||||||||
Executive Performance Bonus Plan(3) | |||||||||||||||||||||||||
Timothy E. Conver | 6/22/08 | — | 450,000 | 1,350,000 | — | — | — | — | |||||||||||||||||
Stephen C. Wright | 6/22/08 | — | 230,000 | 750,000 | — | — | — | — | |||||||||||||||||
John F. Grabowsky | 6/22/08 | — | 270,750 | 855,000 | — | — | — | — | |||||||||||||||||
Michael Bissonette | 6/22/08 | — | 143,000 | 588,000 | — | — | — | — | |||||||||||||||||
Cathleen S. Cline | 6/22/08 | — | 94,080 | 588,000 | — | — | — | — | |||||||||||||||||
| | | | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | | | | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | All Other Option Awards: Number of Securities Underlying Options (#)(1) | Exercise or Base Price of Stock and Option Awards ($/sh) | Grant Date Fair Value of Stock and Option Awards ($)(2) | ||||||||||||||||||||
| Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | |||||||||||||||||||||
Equity Awards | |||||||||||||||||||||||||
Jikun Kim | 6/1/2009 | — | — | — | 6,000 | — | 28.54 | 171,240 | |||||||||||||||||
| 3/11/2010 | — | — | — | 10,000 | — | 24.67 | 246,700 | ||||||||||||||||||
Tom Herring | 3/11/2010 | — | — | — | — | 50,000 | 23.06 | 303,556 | |||||||||||||||||
| 3/11/2010 | — | — | — | 10,000 | — | 24.67 | 246,700 | ||||||||||||||||||
| |||||||||||||||||||||||||
Timothy E. Conver | 6/19/2009 | 236,250 | 472,500 | 1,427,000 | — | — | — | — | |||||||||||||||||
Jikun Kim | 6/1/2009 | 32,500 | 65,000 | 130,000 | — | — | — | — | |||||||||||||||||
Tom Herring | 5/1/2009 | 30,000 | 60,000 | 120,000 | — | — | — | — | |||||||||||||||||
Michael Bissonette | 4/29/2009 | 90,500 | 181,000 | 780,000 | — | — | — | — | |||||||||||||||||
Cathleen S. Cline | 4/29/2009 | 56,000 | 112,000 | 690,000 | — | — | — | — | |||||||||||||||||
Steven W. Wright | 4/29/2009 | 116,000 | 232,000 | 870,000 | — | — | — | — | |||||||||||||||||
John F. Grabowsky | 4/29/2009 | 150,000 | 300,000 | 900,000 | — | — | — | — | |||||||||||||||||
Outstanding Equity Awards at Fiscal Year-End 20092010
The following table provides information with respect to stock option and restricted stock awards held by each of the Named Executive Officers as of April 30, 2009.2010.
| | Option Awards(1) | Stock Awards(2) | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Number of Securities Underlying Unexercised Options | | | | | ||||||||||||||||
| | | | | Number of Shares or Units of Stock that Have not Vested (#) | Market Value of Shares or Units of Stock that Have not Vested ($) | |||||||||||||||||
| Name | Grant Date | Exercisable (#) | Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | |||||||||||||||||
Timothy E. Conver | 6/22/07 | 19,662 | 78,648 | 22.38 | 6/22/17 | — | — | |||||||||||||||
| 10/15/02 | 98,530 | 0 | 0.70 | 10/15/12 | — | — | ||||||||||||||||
Stephen C. Wright | 3/31/09 | 0 | 30,000 | 21.28 | 3/31/19 | — | — | |||||||||||||||
| 6/13/07 | 0 | 32,000 | 20.75 | 6/13/17 | — | — | ||||||||||||||||
| 6/29/04 | 0 | 7,038 | 0.78 | 6/29/14 | — | — | ||||||||||||||||
John F. Grabowsky | 4/15/09 | 0 | 25,000 | 23.25 | 4/15/19 | — | — | |||||||||||||||
| 10/20/05 | 63,340 | 42,227 | 2.13 | 10/20/15 | — | — | ||||||||||||||||
| 6/29/04 | 0 | 16,891 | 0.78 | 6/29/14 | — | — | ||||||||||||||||
| 4/15/09 | — | — | — | — | 2,000 | 47,320 | (3) | |||||||||||||||
Cathleen S. Cline | 3/31/09 | 0 | 10,000 | 21.28 | 3/31/19 | — | — | |||||||||||||||
| 6/13/07 | 3,000 | 12,000 | 20.75 | 6/13/17 | — | — | ||||||||||||||||
| 7/18/00 | 21,113 | 0 | 0.59 | 7/18/20 | — | — | ||||||||||||||||
| 6/23/98 | 35,189 | 0 | 0.59 | 6/23/18 | — | — | ||||||||||||||||
| 3/21/94 | 70,378 | 0 | 0.37 | 3/21/14 | — | — | ||||||||||||||||
| 11/30/92 | 35,189 | 0 | 0.37 | 8/31/11 | — | — | ||||||||||||||||
Michael Bissonette | 3/31/09 | 0 | 40,000 | 21.28 | 3/31/19 | — | — | |||||||||||||||
| 7/30/08 | 0 | 20,000 | 32.19 | 7/30/18 | — | — | ||||||||||||||||
| 2/28/08 | 1,400 | 5,600 | 22.15 | 2/28/18 | — | — | ||||||||||||||||
| 9/4/07 | 2,000 | 8,000 | 19.76 | 9/4/17 | — | — | ||||||||||||||||
| | Option Awards(1) | Stock Awards | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Number of Securities Underlying Unexercised Options | | | | | ||||||||||||||||
| | | | | Number of Shares or Units of Stock that Have not Vested (#) | Market Value of Shares or Units of Stock that Have not Vested ($)(3) | |||||||||||||||||
| Name | Grant Date | Exercisable (#) | Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | |||||||||||||||||
Timothy E. Conver | 6/22/07 | 39,324 | 58,986 | 22.38 | 6/22/17 | — | — | |||||||||||||||
| 10/15/02 | 98,530 | — | 0.70 | 10/15/12 | — | — | ||||||||||||||||
Jikun Kim | 6/1/09 | — | — | — | — | 6,000 | (2) | 157,080 | ||||||||||||||
| 3/11/10 | — | — | — | — | 10,000 | (4) | 261,800 | |||||||||||||||
Tom Herring | 3/11/10 | — | 50,000 | 23.06 | 3/11/20 | — | — | |||||||||||||||
| 3/11/10 | — | — | — | — | 10,000 | (4) | 261,800 | |||||||||||||||
| 12/1/08 | — | — | — | — | 3,200 | (5) | 83,776 | |||||||||||||||
Cathleen S. Cline | 3/31/09 | 2,000 | 8,000 | 21.28 | 3/31/19 | — | — | |||||||||||||||
| 6/13/07 | 6,000 | 9,000 | 20.75 | 6/13/17 | — | — | ||||||||||||||||
| 7/18/00 | 21,113 | — | 0.59 | 7/18/20 | — | — | ||||||||||||||||
| 6/23/98 | 35,189 | — | 0.59 | 6/23/18 | — | — | ||||||||||||||||
| 3/21/94 | 70,378 | — | 0.37 | 3/21/14 | — | — | ||||||||||||||||
| 11/30/92 | 35,189 | — | 0.37 | 8/31/11 | — | — | ||||||||||||||||
Michael Bissonette | 3/31/09 | 8,000 | 32,000 | 21.28 | 3/31/19 | — | — | |||||||||||||||
| 7/30/08 | 4,000 | 16,000 | 32.19 | 7/30/18 | — | — | ||||||||||||||||
| 2/28/08 | 2,800 | 4,200 | 22.15 | 2/28/18 | — | — | ||||||||||||||||
| 9/4/07 | 4,000 | 6,000 | 19.76 | 9/4/17 | — | — | ||||||||||||||||
Stephen C. Wright | 3/31/09 | 6,000 | — | 21.28 | 7/30/10 | — | — | |||||||||||||||
John F. Grabowsky | 4/15/09 | 12,500 | 12,500 | 23.25 | 4/15/19 | — | — | |||||||||||||||
| 10/20/05 | — | 21,114 | 2.13 | 10/20/15 | — | — | ||||||||||||||||
| 4/15/09 | — | — | — | — | 2,000 | (6) | 52,360 | |||||||||||||||
Option Exercises in Fiscal Year 20092010
The following table provides information on stock option exercises for each of the Named Executive Officers during fiscal year 2009.2010.
| | Option Awards | ||||||
|---|---|---|---|---|---|---|---|
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | |||||
Stephen C. Wright | 43,190 | 1,030,919 | |||||
John F. Grabowsky | 84,453 | 2,834,379 | |||||
Cathleen S. Cline | 35,189 | 1,124,436 | |||||
| | Option Awards | ||||||
|---|---|---|---|---|---|---|---|
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | |||||
Stephen C. Wright | 15,038 | 284,854 | |||||
John F. Grabowsky | 101,344 | 3,264,515 | |||||
Stock Vested in Fiscal Year 2010
The following table provides information on stock award vesting for each of the Named Executive Officers during fiscal year 2010.
| | Stock Awards | ||||||
|---|---|---|---|---|---|---|---|
| Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | |||||
Tom Herring | 800 | 23,872 | |||||
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | ||
The following table presents information regarding the beneficial ownership of our common stock as of August 7, 20091, 2010 by:
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Shares of our common stock subject to options that are currently exercisable or exercisable within 60 days of August 7, 20091, 2010 are deemed to be outstanding and to be beneficially owned by the person holding the options for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
The information presented in this table is based on 21,509,20021,770,913 shares of our common stock outstanding on August 7, 2009.1, 2010. The address of each beneficial owner listed on the table is c/o AeroVironment, Inc., 181 W. Huntington Drive, Suite 202, Monrovia, CA 91016.
| Name of Beneficial Owner | Number of Shares Beneficially Owned | Percentage of Shares Outstanding | |||||
|---|---|---|---|---|---|---|---|
5% Stockholders | |||||||
Judith MacCready(1) | 2,106,132 | 9.79 | % | ||||
FMR LLC(2) | 1,081,683 | 5.03 | % | ||||
Gilder, Gagnon, Howe & Co. LLC(3) | 1,334,470 | 6.20 | % | ||||
Executive Officers and Directors: | |||||||
Timothy E. Conver(4) | 4,469,141 | 20.65 | % | ||||
Stephen C. Wright | 5,457 | * | |||||
John F. Grabowsky(5) | 82,381 | * | |||||
Michael Bissonette(6) | 9,400 | * | |||||
Cathleen Cline(7) | 168,869 | * | |||||
Joseph F. Alibrandi(8) | 43,646 | * | |||||
Kenneth R. Baker(9) | 800 | * | |||||
Arnold L. Fishman(10) | 248,392 | 1.15 | % | ||||
Murray Gell-Mann(11) | 4,015 | * | |||||
Charles R. Holland(12) | 49,834 | * | |||||
Directors and Executive Officers as a Group (10 persons) | 5,081,935 | 23.49 | % | ||||
| Name of Beneficial Owner | Number of Shares Beneficially Owned | Percentage of Shares Outstanding | |||
|---|---|---|---|---|---|
5% Stockholders | |||||
FMR LLC(1) | 1,216,451 | 5.59% | |||
Executive Officers and Directors: | |||||
Timothy E. Conver(2) | 4,362,603 | 19.89% | |||
Jikun Kim | 16,000 | * | |||
Tom Herring | 13,698 | * | |||
Michael Bissonette(3) | 25,819 | * | |||
Cathleen Cline(4) | 173,869 | * | |||
Stephen C. Wright(5) | 5,457 | * | |||
John F. Grabowsky(6) | 22,650 | * | |||
Joseph F. Alibrandi(7) | 37,259 | * | |||
Kenneth R. Baker(8) | 1,800 | * | |||
Arnold L. Fishman(9) | 252,607 | 1.16% | |||
Murray Gell-Mann(10) | 8,230 | * | |||
Charles R. Holland(11) | 54,049 | * | |||
Directors and Executive Officers as a Group (12 persons) | 4,974,041 | 22.39% | |||
CERTAIN TRANSACTIONS AND RELATIONSHIPS | ||
Certain Transactions and Relationships
Review and Approval of Related Party Transactions. All transactions and relationships in which the company and our directors and executive officers or their immediate family members are participants are reviewed by our Audit Committee or another independent body of the board of directors, such as the independent and disinterested members of the board. As set forth in the audit committee charter, the members of the Audit Committee, all of whom are independent directors, review and approve related party transactions for which such approval is required under applicable law, including SEC and Nasdaq rules. In the course of its review and approval or ratification of a disclosable related party transaction, the Audit Committee or the independent and disinterested members of the board may consider:
Reportable Related Party Transactions. Other than the employment arrangements described elsewhere in this proxy statement and the transactions described below, since May 1, 2008,2009, there has not been, nor is there currently proposed, any transaction or series of similar transactions to which we were or will be a party in which:
On November 1, 2009, we entered into a consulting agreement with one of our directors, General (Retired) Charles R. Holland. Pursuant to this agreement, Mr. Holland performs consulting services for us on a general basis and with respect to particular individual projects assigned by us. During the fiscal year ended April 30, 2009,2010, we paid to Mr. Holland approximately $216,000$222,220 in consulting fees pursuant to the terms of this agreement.
AUDIT RELATED MATTERS | ||
Audit Committee Report
The Audit Committee of our board of directors serves as the representative of the board for general oversight of our financial accounting and reporting, systems of internal control, audit process, and monitoring compliance with laws and regulations and standards of business conduct. The Audit
Committee is made up solely of independent directors, as defined in the applicable SEC and Nasdaq rules, and operates under a written charter adopted by the board. The composition of the Audit Committee, the attributes of its members and its responsibilities, as reflected in its charter, are intended to be in accordance with applicable requirements for corporate audit committees. Management has responsibility for preparing our financial statements, as well as for our financial reporting process. Ernst & Young LLP, acting as our independent registered public accounting firm, is responsible for expressing an opinion on the conformity of our audited financial statements with generally accepted accounting principles in the United States. The Audit Committee periodically meets with Ernst & Young LLP, with and without management present, to discuss the results of their examinations, their evaluations of our internal controls and the overall quality of our financial reporting. The audit committee members are not professional accountants or auditors, and their functions are not intended to duplicate or to certify the activities of management and the independent registered public accounting firm.
In this context, the Audit Committee hereby reports as follows:
Based on the review and discussions referred to in paragraphs (1) through (3) above, the Audit Committee recommended to the board of directors, and the board has approved, that the audited financial statements be included in our annual report on Form 10-K for the fiscal year ended April 30, 2009,2010, for filing with the SEC.
Audit Committee
Joseph F. Alibrandi
Kenneth R. Baker
Arnold L. Fishman
Fees Paid to Independent Auditors
We engaged Ernst & Young LLP as our independent registered public accounting firm for the fiscal years ended April 30, 2007, 2008, 2009 and 2009,2010, and to perform procedures related to the financial statements included in our quarterly reports on Form 10-Q, beginning with the quarter ended January 27, 2007.10-Q. Our Audit Committee approved the engagement of Ernst & Young LLP. All audit work for the fiscal year ended April 30, 20092010 was performed by the full time employees of Ernst & Young LLP.
Audit Fees. Ernst & Young LLP billed us an aggregate of $618,000 in fees for audit services associated with the audit of our annual financial statements for the fiscal year ended April 30, 2009.2010. Ernst & Young LLP billed us an aggregate of $752,121$700,500 in fees for audit services associated with the audit of our annual financial statements for the fiscal year ended April 30, 2008.2009.
Audit-Related Fees. No audit-related fees were incurred for the years ended April 30, 20092010 and 2008.2009.
Tax Fees. Ernst & Young LLP billed us an aggregate of $339,401$365,000 for tax services during the fiscal year ended April 30, 20092010 and $310,941$343,333 for tax services during the fiscal year ended April 30, 2008.2009. Tax services included tax advice, planning and compliance principally in connection with the preparation of our tax returns and assistance with governmental tax audits.
All Other Fees. No other fees were incurred during the fiscal years ended April 30, 20092010 and 20082009 for services provided by Ernst & Young LLP except as described above.
Pre-Approval Policy of the Audit Committee
Our Audit Committee has established a policy that generally requires that all audit and permissible non-audit services provided by our independent registered public accounting firm be pre-approved by the Audit Committee, or a designated Audit Committee member. These services may include audit services, audit-related services, tax services and other services. All permissible non-audit services provided by our independent registered public accounting firm have been pre-approved by the Audit Committee or a designated Audit Committee member. Our Audit Committee has considered whether the provision of non-audit services is compatible with maintaining the accountants' independence and determined that it is consistent with such independence.
STOCKHOLDER PROPOSALS | ||
Stockholder Proposals for Inclusion in Next Year's Proxy Statement. Stockholders may submit proposals on matters appropriate for stockholder action at meetings of our stockholders in accordance with Rule 14a-8 promulgated under the Exchange Act. To be eligible for inclusion in the proxy statement relating to our 20102011 annual meeting of stockholders, proposals of stockholders must be received at our principal executive offices no later than April 20, 200922, 2011 (120 calendar days prior to the anniversary of the date of the proxy statement for our 20092010 annual meeting) and must otherwise satisfy the conditions established by the SEC for stockholder proposals to be included in the proxy statement for that meeting.
Stockholder Proposals for Presentation at Next Year's Annual Meeting. If a stockholder wishes to present a proposal, including a director nomination, at our 20102011 annual meeting of stockholders and the proposal is not intended to be included in our proxy statement relating to that meeting, the stockholder must give advance notice in writing to our Corporate Secretary prior to the deadline for such meeting determined in accordance with our bylaws. Our bylaws require notice with respect to the 20102011 annual meeting between May 26, 2010June 1, 2011 (120 calendar days prior to the anniversary of our 20092010 annual meeting) and June 25, 2010July 1, 2011 (90 calendar days prior to the anniversary of our 20092010 annual meeting). If a stockholder fails to give timely notice of a proposal, the stockholder will not be permitted to present the proposal to the stockholders for a vote at our 20102011 annual meeting. In addition, our bylaws include other requirements for nomination of candidates for director and proposals of other business.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE | ||
Section 16(a) of the Exchange Act requires that our executive officers and directors, and persons who own more than ten percent of a registered class of our equity securities, file reports of ownership and changes in ownership with the SEC. Executive officers, directors and greater-than-ten percent stockholders are required by SEC regulations to furnish us with all Section 16(a) forms they file. Based
solely on our review of the copies of the forms received by us and written representations from certain reporting persons that they have complied with the relevant filing requirements, we believe that, during the fiscal year ended April 30, 2009,2010, all of our executive officers, directors and greater-than-ten percent stockholders complied with all Section 16(a) filing requirements, except for the following: one Statement of Changes in Beneficial Ownership on Form 4, reporting a single grantpurchase of common stock, options on July 30, 2008, was filed late by each of Michael Bissonette; Joseph Alibrandi, Kenneth Baker, Arnold Fishman, Murray Gell-Mann and Charles Holland.Bissonette.
EQUITY COMPENSATION PLAN INFORMATION | ||
The following table provides information as of April 30, 20092010 about our common stock that may be issued, whether upon the exercise of options, warrants and rights or otherwise, under our existing equity compensation plans.
| | (a) | (b) | | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| | (c) | |||||||||
| | Number of securities to be issued upon exercise of outstanding options, warrants and rights(1) | Weighted-average exercise price of outstanding options, warrants and rights(1) | ||||||||
| Plan category | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a)) | |||||||||
Equity compensation plans approved by security holders(1) | 1,482,682 | $ | 9.01 | 3,000,847 | ||||||
Equity compensation plans not approved by security holders | — | $ | — | — | ||||||
Total | 1,482,682 | $ | 9.01 | 3,000,847 | ||||||
| | (a) | (b) | (c) | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights(1) | Weighted-average exercise price of outstanding options, warrants and rights(1) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a)) | |||||||
Equity compensation plans approved by security holders(1) | 1,285,311 | $ | 10.08 | 2,929,247 | ||||||
Equity compensation plans not approved by security holders | — | $ | — | — | ||||||
Total | 1,285,311 | $ | 10.08 | 2,929,247 | ||||||
STOCKHOLDER COMMUNICATIONS | ||
You may communicate with the Chairs of our Audit Committee, Nominating and Corporate Governance Committee or Compensation Committee, or with our independent directors as a group, by writing to any such person or group, care of the Corporate Secretary of AeroVironment, Inc., at our principal executive office, 181 W. Huntington Dr., Suite 202, Monrovia, California 91016.
Communications are distributed to the board of directors, or to any individual director, depending on the facts and circumstances described in the communication. In that regard, the board of directors has requested that certain items that are unrelated to the duties and responsibilities of the board of directors should be excluded, including the following: junk mail and mass mailings; product complaints; product inquiries; new product suggestions; resumes and other forms of job inquiries; surveys; and business solicitations or advertisements. In addition, material that is unduly hostile, threatening, illegal or similarly unsuitable will not be distributed, with the provision that any communication that is not distributed will be made available to any independent director upon request.
Householding of Annual Meeting Materials
Some brokers and other nominee record holders may be participating in the practice of "householding" proxy statements and annual reports. This means that only one copy of our proxy statement and annual report may have been sent to multiple stockholders in a stockholder's household. Additionally, you may have notified us that multiple stockholders share an address and thus you requested to receive only one copy of our proxy statement and annual report. We will promptly deliver a separate copy of either document to any stockholder who contacts our investor relations department at (626) 357-9983 × 245 or by mail addressed to Investor Relations, AeroVironment, Inc. 181 W. Huntington Drive, Suite 202, Monrovia, CA 91016, requesting such copies. If a stockholder is receiving multiple copies of our proxy statement and annual report at the stockholder's household and would like to receive a single copy of the proxy statement and annual report for a stockholder's household in the future, stockholders should contact their broker, or other nominee record holder to request mailing of a single copy of the proxy statement and annual report. Stockholders receiving multiple copies of these documents directly from us, and who would like to receive single copies in the future, should contact our investor relations department to make such a request.
ANNUAL REPORT ON FORM 10-K | ||
OUR ANNUAL REPORT ON FORM 10-K, WHICH HAS BEEN FILED WITH THE SEC FOR THE FISCAL YEAR ENDED APRIL 30, 2009,2010, WILL BE MADE AVAILABLE TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO AEROVIRONMENT, INC., ATTN: CORPORATE SECRETARY, 181 W. HUNTINGTON DRIVE, SUITE 202, MONROVIA, CA 91016.
| ON BEHALF OF THE BOARD OF DIRECTORS | ||
| ||
Timothy E. Conver, Chairman, President and Chief Executive Officer |
Monrovia, California
August 19, 200920, 2010
| ANNUAL MEETING OF STOCKHOLDERS OF AEROVIRONMENT, INC. September |
| 0 14475 AEROVIRONMENT, INC. PROXY FOR ANNUAL MEETING OF STOCKHOLDERS THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned, a stockholder of AeroVironment, Inc., a Delaware corporation (the "Company"), hereby nominates, constitutes and appoints Timothy E. Conver and |
