AVAV AeroVironment Inc

Item 8.01 Other Events

On June 10, 2019, the Company purchased 100% of the issued and outstanding units of Pulse Aerospace pursuant to the terms of a Unit Purchase Agreement (the “Purchase Agreement”) of the same date by and among the Company, each of the unit holders of Pulse Aerospace (collectively, the “Sellers”), and Shareholder Representative Services LLC, a Colorado limited liability company, as the representative of the Sellers.  Pulse Aerospace develops, manufactures, markets and sells rotor-based unmanned aerial vehicles capable of vertical take-off and landing.  Upon closing of the transactions contemplated by the Purchase Agreement, Pulse Aerospace became a wholly owned subsidiary of the Company.

Pursuant to the Purchase Agreement, at closing, the Company paid $20,650,000 in cash, less a $250,000 retention to cover any post-closing indemnification claims, and less a $1,250,000 holdback amount for breaches related to the sellers’ fundamental representations that exceed or are not covered by the obtained representation and warranty insurance policy or breaches of certain special indemnities under the Purchase Agreement, which such retention and holdback are to be released to Sellers, less any amounts paid or reserved, 18 months after the closing of the transactions contemplated by the Purchase Agreement in accordance with the terms of the Purchase Agreement.  The closing cash consideration included the payoff of the outstanding indebtedness of Pulse Aerospace as of the closing date.  In addition to the consideration paid at closing, the Sellers may receive up to a maximum of $5,000,000 in additional cash consideration, which amount has been placed into escrow, if specific research and development milestones are achieved by December 10, 2021. The purchase price paid by the Company is subject to certain pre- and post-closing adjustments as set forth in the Purchase Agreement.

The parties to the Purchase Agreement have made representations, warranties and covenants that are customary for a transaction of this type, including, among others, restrictions on the Sellers from engaging in certain competitive activities, as well as mutual indemnification obligations between the parties. To supplement certain indemnifications provided by the Sellers, the Company obtained a standard representation and warranty insurance policy.