Engaged Capital Sends Letter to Chairman and Chief Executive Officer of AeroVironment, Inc.

NEWPORT BEACH, Calif.--(BUSINESS WIRE)--

Engaged Capital, an investment firm specializing in enhancing the value of small and mid-cap North American equities, today sent a letter to Chairman and Chief Executive Officer of AeroVironment, Inc. ("AVAV" or the "Company") AVAV.

The full text of the letter follows:

September 24, 2015

Timothy E. Conver
Chairman and Chief Executive Officer
AeroVironment, Inc.
181 W. Huntington Drive, Suite 202
Monrovia, CA 91016

Mr. Conver:

As you know, last year Engaged Capital LLC (together with its affiliates, "Engaged Capital" or "we") submitted a non-binding shareholder proposal seeking a shareholder vote regarding the declassification of AeroVironment's ("AVAV" or the "Company") Board of Directors ("Board"). Our proposal received overwhelming support with over 70% of the votes cast in its favor and over 92% support when excluding insiders from the calculation.

Given such a ringing endorsement from the Company's independent shareholders, on June 29, 2015, we wrote a letter urging the Board to:

• Provide shareholders the opportunity to vote on a binding declassification proposal at the 2015 Annual Meeting of Stockholders (the "2015 Annual Meeting");
• Ensure that all shares over which directors and officers of AVAV have voting control are voted in favor of the declassification proposal;
• Provide that directors up for election at the 2015 Annual Meeting run for one-year terms contingent upon passage of the binding declassification proposal; and
• Actively and vigorously solicit proxies from retail shareholders to support the declassification proposal due to the shareholder-unfriendly provision in the Company's Amended and Restated Certificate of Incorporation which requires a burdensome supermajority vote of two-thirds of the outstanding common stock to pass the proposal

We were pleased to the see that the Company's 2015 Proxy Statement (the "2015 Proxy"), includes a binding declassification proposal and that this proposal was unanimously endorsed by the Board. However, we were disappointed to learn that the Board's declassification proposal, if approved by two-thirds of the Company's outstanding shares, would not begin until 2016, rather than this year. We see no legitimate reason for this delay given the strong shareholder support for it and the stated unanimous endorsement by the full Board. If the proposal passes, we call on you to begin the declassification now.

Further, we were quite troubled by some of the language in the 2015 Proxy, specifically with regard to a lack of commitment on your part to support the declassification proposal as Chairman of the Board and as an owner of approximately 10% of the outstanding shares of the Company. We read on page 63 of the 2015 Proxy that "the board of directors unanimously recommends that stockholders vote "FOR" Item 3 [declassification proposal]," yet, on the very same page, we read that you, Mr. Conver and your affiliates "have not yet determined how they will vote their respective shares on this proposal as stockholders of the company."

In addition, on page 27, under a section of the 2015 Proxy titled Commitment to Good Corporate Governance, the following statement is written:

"Members of the board of directors, the executive officers and many employees of the company are stockholders and like all other stockholders are expected to vote their shares according to their best judgment, which may not be in accordance with the board of director's voting recommendations."

This conflicting disclosure confounds us. It is inexplicable to us that the directors of the Company would willfully disregard their own advice to shareholders when voting their personal shares. How could directors of the Company unanimously support the declassification proposal, but at the same time vote against it with their own shares? Language in the 2015 Proxy seems to indicate that such disingenuous behavior is perfectly acceptable. In our view, this raises serious questions as to whether the Company's proxy statement makes false and misleading disclosure by asserting that the Board unanimously supports the declassification proposal while directors in fact are considering voting against it.

Once again we feel the need to call upon you to vote all the shares under your influence and control, consistent with your own recommendation to shareholders, in favor of the declassification proposal. Further, we strongly encourage the Board to invest what would be an insignificant amount of money to properly solicit support for the proposal from retail investors to ensure its passage on October 2.

We look forward to the 2015 Annual Meeting in October and trust that this day will mark a key step forward for improved corporate governance at AVAV.

Sincerely,

Glenn W. Welling
Engaged Capital, LLC

About Engaged Capital:

Engaged Capital, LLC ("Engaged Capital") was established in 2012 by a group of professionals with significant experience in activist investing in North America and was seeded by Grosvenor Capital Management, L.P., one of the oldest and largest global alternative investment managers. Engaged Capital is a limited liability company owned by its principals and formed to create long-term shareholder value by bringing an owner's perspective to the managements and boards of undervalued public companies. Engaged Capital manages both a long-only and long/short North American equity fund. Engaged Capital's efforts and resources are dedicated to a single investment style, "Constructive Activism" with a focus on delivering superior, long-term, risk-adjusted returns for investors. Engaged Capital is based in Newport Beach, California.

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