PlainSite :: MARTIN EBERHARD v. ELON MUSK, Superior Court of California, County of San Mateo Case No. CIV484400 Document 47: First Paper Fee Paid

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No ou me N TD OH HE WD i Yosef Peretz (SBN 209288) s at EE i Te WD Emily Knoles (SBN 241671) N MATEO OGUNTY Genevieve Guertin (SBN 262479) PERETZ & ASSOCIATES Battery Street, Suite 202 San Francisco, California 94111 Telephone: (415) 732-3777 Facsimile: (415) 732-3791

Attomeys for Plaintiff MARTIN EBERHARD SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN MATEO MARTIN EBERHARD, Fi led Bs F OK Civil Case No. CIV-484400 DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT VS. OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION ELON MUSK; TESLA MOTORS, INC.; TO STRIKE PORTIONS OF Plaintiff, and DOES 1-20, inclusive, PLAINTIFE’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION Defendants.

Date: July 29, 2009 Time: 9:00 a.m.

Dep.: 11 Judge: Hon. John L. Grandsaert

I, Martin Eberhard, declare:

1. I am the Plaintiff in this action. I have personal knowledge of the matters set forth herein and if called upon to testify, I could and would do so competently.

2. This declaration is given in support of the Plaintiff's Opposition to Defendants’ Special Motion to Strike Portions of Plaintiff's Complaint as a Strategic Lawsuit Against Public Participation (“Motion”).

I. The Formation of the Idea of a Lithium-ion Powered Sport Car

3. I hold a bachelor degree in Computer Engineering from the University of Illinois at Urbana Champaign, which I completed and obtained in 1982. I hold a Masters DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION ~l-

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Degree in Electrical Engineering from the University of Illinois, which I completed in late 1983 and obtained in early 1984.

4. I am a technological entrepreneur by profession. In the 1990s I was one of the founders of two different technological start-up companies: Network Computing Devices, Inc. and NuvoMedia, Inc. After the successful sale of NuvoMedia, Inc. to Gemstar/TV Guide in 2000, I took on the role of President of Engineering at Packet Design that I held until 2002.

5. Beginning in January 2002, inspired by ever-rising gas prices and the increasing threat of global warming, I enlisted my long time business partner Marc Tarpenning (“Tarpenning”) to join me in searching for an alternative to gasoline-powered cars.

6. We spent approximately 18 months in technical research during which I came to the conclusion that electric cars were indeed the most efficient, least polluting alternative to gasoline-powered cars. We then researched the causes for the failure of electric vehicles in the past and analyzed the benefits and shortcomings of electric cars in comparison to other alternative-fuel vehicles.

7. As early as November 2002, I contacted Tom Gage, the CEO of AC Propulsion, Inc. (“ACP”), to discuss alternative-fuel vehicles. ACP is a small drive-systems company that experimented with alternative-fuel vehicles. ACP produced a very limited number of electric car roadsters named the Tzero that operated on lead-acid batteries. Only 3 Tzero roadsters were ever made by ACP, and at that time, I offered to pay the company $100,000 to $120,000 to make me the fourth Tzero, provided that this car would be built and operate on lithium-ion batteries.

8. ACP suffered from financial difficulties, and after several meetings and discussions, I agreed to invest a total of $250,000 in the company: about $100,000 to pay for a Tzero for me, and about $150,000 as an investment in ACP, for which I would receive stocks in the company. My investment in ACP was designed specifically to fund the development of a prototype lithium-ion battery pack for a Tzero that ACP owned and for the Tzero that would be built for me.

9. ACP was never able to build and deliver my Tzero. By December 2002, it became clear to me that ACP would never produce a significant number of electric vehicles, and that no other companies seemed poised to do so. J therefore realized that if I ever wanted a lithium-ion battery operated roadster, I would have to build it myself. DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION

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10. At that same timeframe, the established car companies were in the process of forcing a modification of the California Air Resources Board’s Zero-Emissions Mandate such that they would no longer be obliged to sell electric vehicles. Tarpenning and I saw this as an opportunity to start an electric car company.

11. Instead of focusing on an affordable but lower-quality electric car model, we decided to focus on the creation of a fully-electric sport car with high performance that would hopefully serve as a springboard to an affordable and high-quality electric car for every American. With less constraint on price, we conceived a completely new drivetrain for the electric car, powered by commodity lithium-ion batteries like those used in consumer electronics.

I The Founding of Tesla Motors

12. Tarpenning and I originally founded our electric car venture in the beginning of 2003 and funded it ourselves from its inception until April 2004. During this time, neither Tarpenning nor I had any income from this venture and we devoted our entire time to the formation and conceptualization of the lithium-ion operated electric car roadster (“Roadster”).

13. I decided to name Tesla Motors after Nikola Tesla — one of the most important scientists and innovators of the modern age in the area of electrical engineering — during a trip to Disneyland I took with my wife on January 25, 2003.

14. Tarpenning purchased the domain name “teslamostors.com” on April 23, 2003.

15. Defendant TESLA MOTORS, INC. (“Tesla Motors”) was incorporated on July 1, 2003. A true and correct copy of Tesla Motors’ Certificate of Incorporation is attached hereto as Exhibit “2”.

16. I served as Tesla Motors’ Chief Executive Officer (“CEO”) from its formation, and Tarpenning was the President, Vice President of Engineering and Tesla Motors’ Chief Financial Officer (‘CFO”).. The Board of Directors of Tesla Motors (“BoD”) was formed in July 2003 and consisted of Tarpenning and me, Laurie Yoler (“Yoler’”), who served on the board until about 2008, and Bernard Tse, who served on the board until approximately August | 2006.

17. Tesla Motors was a fully functioning venture from its formation. The company moved to its first office on Oak Grove Street, Palo Alto in August 2003, and had official phone and fax numbers, a website, email addresses, formal legal representation that was provided by DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION

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Mark White (“White”) of White & Lee LLP, and a bank account at City National Bank in Palo Alto.!

18. Jan Wright (“Wright”) joined Tesla Motors on or about January 20, 2004, and he left the company in early January 2005. During his tenure at Tesla Motors, Wright was the Chief Operating Officer (“COO”).

19. In December 2003, Tarpenning and J began searching for venture capitalists to help fund Tesla Motors and to get the Roadster into production. In conjunction with that search, J wrote the company’s first business plan that was first published on February 19, 2004 and is entitled Confidential Business Plan Version 1.0 (“BP 1.0’). A true and correct copy of BP 1.0 is attached hereto as Exhibit “3”.

20. BP 1.0 provided a thorough backdrop for the direction and future of Tesla Motors, including the following concepts that were later adopted by Tesla Motors as it grew from a two-person operation to a internationally-recognized car company over the course of the last 7 years:

a. Plans for product development and specifications for a fully electric roadster (pages 9 through 11 of the plan); b. A model that included the manufacturing of the chassis and body of the Roadster by Lotus Engineering (“Lotus”), with ACP providing technology for powertrain components, and Tesla Motors assembling the car and developing the battery components (page 17 of the plan); ” c. A four-step funding plan labeled as Series A through D funding (page 21 of the plan); and

’ The operations of Tesla Motors stands in opposite to the allegations made by Defendant ELON MUSK (“Musk”) in his blog, “In the Beginning” (“ITB”), which was published on June 22, 2009, wherein he asserts that Tesla Motors did not have a formal office when I first met him and that all I had was essentially a business plan and a unfunded corporation. A true and correct copy of the ITB is attached as Exhibit 128 to the Declaration of Joshua Katz in Support of Plaintiff's Opposition to Defendants’ Special Motion to Strike Portions of the Complaint (“PE 128”).

* In ITB Musk asserts that my business plan was to merely commercialize ACP’s Tzero when we first met. However, as stated in BP 1.0, my original plan was to create a new electric commercial vehicle based on my idea to use lithium-ion batteries, drivetrain technology based on and derived from ACP’s drivetrain technology, and a derivative of the Lotus Elise chassis. [See PE 128.]

DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS?’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION

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d. Organization consisting of a management team, information technology team, digital engineering team, vehicle engineering team, manufacturing team, sales and marketing team, and support team (page 22 of the plan).

21. BP 1.0 states that Tarpenning and I founded Tesla Motors (page 6 of the plan), and outlined possible future directions, including the possibility of moving down market to build a four-seat coupe or compact wagon, and eventually low-price alternatives once Tesla Motors had established enough volume in sales (page 12 of the plan). This direction was based on my original idea — ultimately adopted by Tesla Motors — to first build a highly desirable electric car that will open the door to the production of an affordable family car.°

22. After meeting with several prospective venture capitalists — which showed a genuine interest to invest in Tesla Motors — in the winter of 2003 and spring of 2004, on March 31, 2004, I wrote an email to Defendant ELON MUSK (“Musk”) informing him that Tesla Motors was an investor in ACP and funded its research into lithium-ion battery packs for electric cars. I told Musk that Tarpenning and I were the founders of Tesla Motors, and asked if he might be interested in investing in the company. I told Musk that Tesla Motors was going to build high-performance electric cars based on a derivative of the ACP drivetrain and based ona derivative of the Lotus Elise chassis. Musk responded positively to my email that same day. A true and correct copy of the email to Musk and his response to that email is attached hereto as Exhibit “4”.

23. Tesla Motors and Musk quickly reached an agreement upon which Musk would lead the first group of outside investors in Tesla Motors. The first round of investors also included Tarpenning and me, two venture capitalist firms from Silicon Valley and some of my friends and family members.

24. Between 2004 and 2007, I oversaw the growth of Tesla Motors from a team of two to a company of 280 people with the expertise necessary to run a mass-production car

> In the Declaration of Elon Musk in Support of Defendants’ Special Motion to Strike (“Musk Declaration”), Musk mistakenly asserts that the model of following the roadster with a lowercost family car was a change to our initial program, although this issue is specifically covered in BP 1.0. Id. at (6.

* In ITB Musk asserts that he requested through ACP to meet me. However, Musk never contacted me in the five weeks between receiving the February 24, 2004 email from ACP mentioning my name and the day I wrote Musk on March 31, 2004. [See PE 128.] DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION

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company, spanning four countries. I had also led the development of the Roadster from its inception and design through the safety and performance testing that validated the Roadster’s ability to achieve 0-60 miles per hour in less than four seconds, as well as its break-through of an almost 250-mile range per charge. During this time J devoted my entire workday time to Tesla Motors, often spending as much as 60 to 80 hours per week working for the company. Iu. The Acknowledgment of Tarpenning and I as Tesla Motors’ Founders

25. On April 23, 2004, Tesla Motors closed on an investment round called Series A Preferred Stock Financing (“Series A”). The Index of Documents for Series A state in two separate places that I am a Founder of Tesla Motors. Musk is not named as a Founder of Tesla Motors in this index and Tarpenning, Wright, and J are the only individuals named as Founders in the Series A documents. A true and correct copy of the cover page and Index of Documents to Series A is attached hereto as Exhibit “5”.

26. As part of the closing of Series A funding, on April 23, 2004, Musk signed an agreement entitled Right of First Refusal and Co-Sale Agreement that states in the following signature pages that I am a Founder of Tesla Motors. Musk is not named as a Founder of Tesla Motors in this agreement. A true and correct copy of the Right of First Refusal and Co-Sale Agreement from Series A is attached hereto as Exhibit “6”,

27. Jt was further determined at the closing of Series A that Musk will join the BoD as the Chairman of the BoD in addition to the previously appointed BoD members, and that I will maintain the CEO position and Tarpenning the positions of Vice President of Engineering and CFO.

28. On April 23, 2004, White, as counsel for Tesla Motors, sent an opinion letter in connection with Series A. In this letter, which was sent to purchasers of Tesla Motors’ stock, including Musk, White refers to me as a Founder. Musk is not referred to as a Founder of

> Musk asserts in ITB that he “convinced” John B. Straubel (“Straubel”) to join Tesla Motors soon after he provided funding [in Series A]. This assertion is over-simplified because I was the one to propose to Musk that Tesla Motors hires Straubel. On May 3 and 4, 2004, Musk and I discussed the hiring of Straubel as an employee of Tesla Motors via email. Musk told me that he initially wanted to hire Straubel for a company that he owns, Space Exploration Technologies - SpaceX (“SpaceX”), but he agreed with me that Straubel would be a better fit at Tesla Motors instead. A true and correct copy of this email thread is attached hereto as Exhibit “8”, Straubel was first hired as a salaried Drive-train Engineer on or about May 17, 2004 and was later promoted by me to the position of Chief Technology Officer (“CTO”). DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION

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Tesla Motors in this letter. A true and correct copy of this opinion letter is attached hereto as Exhibit “7”.

29. On February 14, 2005, Tesla Motors closed on an investment round called the | Series B Preferred Stock Financing (“Series B”). There is one section referring to me as a_ Founder of Tesla Motors in the Index of Documents. Musk is not named as a Founder of Tesla Motors in this index. A true and correct copy of the cover page and Index of Documents to Series B is attached hereto as Exhibit “9”.

30. ‘As part of Series B, the Right of First Refusal and Co-sale Agreement from Series A was amended and restated. Musk signed the Amended and Restated Right of First Refusal and Co-sale Agreement on February 14, 2005. I am specifically named as a founder in this agreement and in the following signature pages. Musk is not named as a Founder in this agreement and Tarpenning and I are the only persons named as Founder in Series B documents. A true and correct copy of this agreement is attached hereto as Exhibit “10”.

31. On February 14, 2005, Tesla Motors’ counsel, White, prepared an opinion letter in connection with the Series B agreements that was sent to all the investors, including Musk. |In this letter, White states that Iam a Founder of Tesla Motors. Musk is not referred to as a Founder of Tesla Motors in this letter. A true and correct copy of this letter is attached hereto as Exhibit “11”.

32. Both Series A and Series B were drafted by Musk’s then attorneys and not by Tesla Motors attorneys, White & Lee LLP.

33. On April 4, 2006, and well after Wright left Tesla Motors, I wrote an email to Musk, informing him that Wright referred to himself as the founder of Tesla Motors. Musk responded by email that it was probably time to send Wright a “cease and desist letter” because Wright may pass as a member of the founding team of Tesla Motors but he is certainly not a founder of the company. A true and correct copy of this email exchange is attached hereto as Exhibit “12”.°

34. On May 10, 2006, in anticipation of closing on an investment round to be called the Series C Preferred Stock Financing (“Series C”), a Second Amended and Restated

° Nonetheless, Musk asserts in ITB that he, Straubel, Tarpenning, Wright and me should be considered “members of the founding team” of Tesla Motors and he does not acknowledge the distinction between this term and the founder of the company. [See PE 128.] DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION

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Investor’s Rights Agreement was executed. The term “Founder” is defined in Section 1.1(h) of this agreement as a list of persons only containing Tarpenning and me. Musk is not included in the list of persons defined as Founder in this agreement. Musk signed this agreement on May 10, 2006. A true and correct copy of this agreement is attached hereto as Exhibit “13”.

35. On May 18, 2006, Musk wrote me an email concerning his desire to have the press release for the Series C investments portray him as co-leader of the investment rounds. Attached to that email was a draft version of the press release with corrections made by Musk. In the press release draft, Musk added a biography stating that he is the founder and CEO of SpaceX, and a co-founder of PayPal. He states in the biography that he provided early funding for Tesla Motors and also serves as Chairman of the Board of Directors for the company. The paragraph entitled “About Tesla Motors” states that Tarpenning and I founded Tesla. Musk made no corrections or comments regarding the paragraph “About Tesla Motors.” A true and

correct copy of this email from Musk and Musk’s attached draft version of the press release with his corrections is attached hereto as Exhibit “14”.

_ 36. On May 24, 2006 Tesla Motors closed the Series C funding. An Amendment Agreement was executed on May 24, 2006. The Amendment Agreement states that Tarpenning and I are the Founders of Tesla Motors. Musk is not mentioned as the Founder of Tesla Motors in this agreement. Musk signed this agreement on May 24, 2006. A true and correct copy of the Series C Amendment Agreement is attached hereto as Exhibit “15”.

37. On July 16, 2006, Musk wrote me an email stating that he would appreciate being part of the interviews for the major media and that it “pisses [him] off’ being referred to as “an early investor” about as much as it would annoy me to be called “an early employee.” I believe that Musk’s anger stemmed from the fact that he was the first major investor in Tesla Motors at that time. I also believe that he used the above analogy because he recognized my status as Tesla Motors’ founder and recognized why it would be insulting to be referred to in any other way. A true and correct copy of this email from Musk is attached hereto as Exhibit “16”,

38. On July 18, 2006, Musk wrote an email to Mike Harrigan (“Harrigan”), member of the Media Relations Team at Tesla Motors. In this email, Musk told Harrigan that the portrayal of his (Musk’s) role to date as “an early investor” is outrageous and incredibly insulting. Musk said such a portrayal would be like somebody calling me “an early employee.”

DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION

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Musk stated that apart from leading investment, his influence on the car itself runs from “the headlights to the styling of the doorsill to the trunk.” Musk never mentioned in this email that he is a founder of Tesla Motors or that his involvement was greater than the headlights and styling of minor parts of the Roadster. A true and correct copy of this email from Musk is attached hereto as Exhibit “17”.’

39. On July 20, 2006, Musk wrote an email to PCG Campbell (“PCGC”), Tesla Motors’ public relations agents at the time, stating that he was “incredibly insulted and embarrassed by the NY Times article, where [he was] not merely unmentioned, but where [I am] actually referred to as the chairman.” Musk threatened to end Tesla Motors’ relationship with PCGC as a result of this purportedly offensive description. Musk went on further to state “Please ensure that the NYT publishes a correction as soon as possible.” Musk never stated in this email that he should be referred to as the founder of Tesla Motors. A true and correct copy of this email from Musk is attached hereto as Exhibit “18”.

40. Onor about April 12, 2007, Tesla Motors finalized a Confidential Business Plan Version 4.6 (“BP 4.6”) in anticipation of the Series D Preferred Stock Financing (“Series D”) investment round. Page 6 of BP 4.6 states that I am a founder of Tesla Motors. A true and correct copy of excerpts of BP 4.6 is attached hereto as Exhibit “19”.

41. On May 9, 2007 Tesla Motors closed on Series D. As a part of Series D, a Third Amended and Restated Investors’ Rights Agreement was executed. In Section 1.1(h) of this agreement, the term “Founder” is defined as a list of persons containing only Tarpenning and me. Musk in not mentioned as a Founder in this agreement. Musk signed this agreement on May 9, 2007. A true and correct copy of this agreement is attached hereto as Exhibit “20”. IV. Musk and the Rest of the BoD Members were fully Aware of Increased Costs and Delays in the Roadster Program

42. During the design process of the Roadster, Musk took a persistent and distracting interest in random details of lesser importance, compared to the critical and difficult development of the battery system, traction motor, power electronics, transmission, and the

” In ITB, however, Musk describes his participation in the company as spending considerable time on the details of the product and particularly the body styling of the Roadster. [See, PE 128.]

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difficult task of finding suppliers for each and all of the approximately 500 components installed in the car.

43. Asa result of wasting valuable resources and time on research on such items as installing electronic door latches rather than conventional door latches, headlights and the styling of the doorsill, there were increased delays and expenses in the Roadster’s production that added to the delays and cost increases caused by other factors,

44. —_ | routinely expressed concern about the additional risk and cost to Musk, but he insisted on expanding the scope of the Roadster program almost every time.

45. Musk involvement in the operations of the company increased as a result of his increasing financial interest at Tesla Motors. Furthermore, with the increase in his financial investment in the company, Musk had, and exercised, the privilege to appoint members to the BoD. In winter 2006 and spring 2007, the BoD was comprised of seven members, three of whom served at the pleasure of Musk, including his brother, Kimbal Musk. After the closure of Series D, Musk’s representation on the BoD increased to 6 out of the 7 members on the board, with me being the only person not serving at his pleasure.’

46. I never received any complaint, critique, or negative review of my performance from anyone in the company during my time as CEO and as President of Technology of the company. In fact, I was complimented for my work repeatedly, even by Musk. For example, on June 5, 2006, Musk wrote me an email to tell me that he was planning on speaking with BoD member Jim Marver (“Marver’”) about granting me more stocks with Tesla Motors as recognition of my contribution to the company. A true and correct copy of this email is attached here to as Exhibit “21”. Additionally, on May 23, 2007, Musk wrote me an email || where he said that the number of great product people in the world is tiny and he thinks I am one of them. A true and correct copy of this email is attached hereto as Exhibit “22”.

47. The BoD held meetings on a monthly basis. At BoD meetings, members of the different teams at Tesla Motors made presentations to the BoD and were available for questioning. I never told anyone at Tesla Motors to conceal information from the BoD, to limit information to the BoD, to withhold information from the BoD, or to alter information to the BoD. I never concealed, limited, withheld or altered information from the BoD myself.

® Yoler was appointed to the original BoD, however due to his close relationship with Yoler, Musk decided to leave her on the BoD as his representative.

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48, Tesla Motors, from its inception, was based on a business model of collaboration between ACP, Lotus and Tesla Motors to piece together all the necessary components for the Roadster. To secure funding for the program, it was necessary to estimate the cost of producing and manufacturing the Roadsters. As in other volume manufacturing businesses, the plan had always been to drive down costs as production increased. Tesla |Motors’ first business plan, BP 1.0, estimated a $49,000 production cost per car, with a detailed breakdown of specific costs (page 39 of the plan).

49, On April 15, 2004, I wrote Tesla Motors’ Confidential Business Plan version 1.7 CBP 1.7”). BP 1.7 estimated the production cost of the Roadster at $50,740 (page 45 of plan). A true and correct copy of excerpts from BP 1.7 is hereto attached as exhibit “23.” -50. Early on, Musk interjected his ideas into the design process of the Roadster. The initial concept for the Roadster included using the original body materials and chassis of the Lotus Elise because they were lightweight and had undergone significant mandated tests, such as impact tests, that will greatly reduce the cost of the Roadster. Musk was insistent on using carbon-fiber body panels for the Roadster, although I was hesitant to using this material because of its complexity. Must was so confident in carbon fiber that he wrote me an email where he stated, “you could make the body panels for at least 500 cars worth per year if you bought the sort of oven we have at SpaceX! . . . If someone tells you this is hard, they are full of shit. You can make high quality composites in the oven in your home. Once you’ve made a few of these things, you realize that there is nothing magical about glue and string [emphasis added].” A true and correct copy of this email is attached hereto as Exhibit “24”.

51. It turned out that the change to carbon fiber dramatically increased the cost of the Roadster and was one of the two critical path issues (along with the transmission) that delayed the production of the car in 2007.

52. As early as 2005, it became apparent that Tesla Motors required an experienced CFO to handle the complex financial situation involved with running a startup automobile company. On November 28, 2005, Tarpenning emailed Musk to inform him that Tesla Motors was close to needing a full-time CFO. Tarpenning told Musk what his ideal CFO candidate would be and asked Musk for guidance on hiring a CFO at the company. It took the BoD

° Nonetheless, | have never estimated the cost of producing the Roadster at $25,000 as stated by Musk in ITB.

-ll-

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almost two years to find a replacement for Tarpenning and it was only after he resigned his CFO position, that the BoD replaced Tarpenning with another CFO. A true and correct copy of this email is attached hereto as Exhibit “25”.

53. The BoD was involved in approving costs from the very beginning. Beginning after the Series C investment, all Purchase Order (“PO”) requests totaling more that $500,000 required approval by the BoD. For example, on July 24, 2007, Tesla Motors’ General Counsel, Craig Harding (“Harding”), sent an email to the BoD requesting approval for a PO for over $500,000 for HVAC controllers required for Roadster production.’° The request originated from the manufacturing department and Musk approved Harding’s request. A true and correct copy of Harding’s email and Musk’s response is attached hereto as Exhibit “26”.

34. On July 18, 2006, Musk and I exchanged emails regarding the pricing of the Roadster. I informed Musk that J was nervous about him telling people that the production price will be around $85,000 due to impending changes and uncertainty about the Roadster’s transmission. Tesla Motors was contracting with Magna International (“Magna”), a respected Transmission manufacturing company, to build a customized transmission for the Roadster. The value of this contract was approximately $5 million and was approved by the BoD. A true and correct copy of this email thread is attached hereto as Exhibit “27”.

55. Changes and uncertainty with regard to the transmission were largely due to the fact that the Roadster required a different transmission than any transmission in production. Unlike most manual transmissions, an electric vehicle’s transmission requires a parking lock to prevent the vehicle from rolling. Tesla Motors was also less desirable to established manufacturing suppliers. Tesla Motors was not in the position to place orders for transmissions in the volume that is customary in the automotive business and is measured in the hundred thousands of a single model of transmission for a single customer. Since Tesla Motors would order only a few hundred transmissions in the first year, and perhaps a few thousand in the following years, the supplier would make little profit from the relationship, and

'? HVAC (heating, ventilation and air-conditioning) controllers are computerized systems for climate control.

DECLARATION OF PLAINTIFF MARTIN EBERHARD JN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION

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@ ob would need to recover engineering and tooling costs over a much smaller number of produced transmissions."

56. Musk understood in 2006 that Tesla Motors was having serious issues getting the Roadster into production. For example, on October 25, 2006, Musk told me via email that “as things stood, Tesla Motors will be hard pressed to actually deliver 2007 model year Roadsters in 2007.” A true and correct copy of this email is attached hereto as Exhibit “28”.

57. Musk was not the only member of the BoD who knew that the Roadsters were going to be costlier than anticipated. As far back as August 8, 2006, Musk sent an email to John Woolard of Vantage Point Investments, Marver, and me, where he predicted that Roadsters with the same options as Signature 100 Collector’s Edition cars would probably cost more than $100,000. * A true and correct copy of Musk’s email is attached hereto as Exhibit “29”,

58. On November 27, 2006, I emailed Musk to tell him that “I stay up at night worrying about simply getting the [Roadster] into production sometime in 2007.” At that time, however, Musk was focused on the appearance of the dashboard of the Roadster. I told Musk that I could not worry about a dashboard upgrade when there were more pressing issues. | specifically stated that the issues included “everything from serious cost problems to supplier problems (transmission, air conditioning, etc.) to our own design immaturity to Lotus’s stability.” Musk did not respond to the many serious problems I had outlined; instead, his sole response was that he just needed to hear that the [dashboard issue] would be addressed after Start of Production (“SOP”). A true and correct copy of my email and Musk’s response is attached hereto as Exhibit “30”.

59. On November 28, 2006, Musk forwarded an email to me that he originally sent to Marver on the subject of costs and pricing. Musk told Marver that he was comfortable with how Tarpenning and I understood vehicle costs and price derivations. A true and correct copy of this email is attached hereto as Exhibit “31”.

'! Tn another attempt to re-write history, Musk claims in ITB that I insisted on a two speed transmission while Straubel and Musk wanted to use a single speed one; Musk forgets to acknowledge the original plan was to use a single speed transmission as outlined in BP 1.0. [See, Exhibit “3” and PE 128.]

" This title for the first production of Tesla Roadsters was later replaced by the title in use as of today, the Founder’s Series.

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60. To attract investors for the Series D funding round, Tesla Motors revised and updated its business plan that was ultimately published as BP 4.6. BP 4.6 was many months in the making and involved the compilation and work of many people on the company. Parts of . BP 4.6 were authored by various executives in the company with Darrel Siry (“Siry’”), then Tesla Motors’ Vice President of Global Sales, Marketing and Service serving as the primary editor and consolidator of this plan. This plan was ultimately approved by me, the BoD and Musk himself.

61. On December 27, 2006, Siry sent an email to Tesla Motors’ executive team regarding the creation of BP 4.6 and attached.an outline detailing the point-person or department at the company would be responsible for which segment in the plan. This outline demonstrates that I was responsible for the Executive Summary, and Siry and Malcolm Powell (“Powell”), then Vice President of Vehicle Integration, were responsible for the Tesla Motors’ Roadster section. The outline does not name an individual responsible for the Finance Section, although I believe that Tarpenning wrote this section, and he did that without my involvement or my influence to skew the data one way or the other. A true and correct copy of this email and the attached outline are attached hereto as Exhibit “32”.

62. The BP 4.6 revisions required numerous modifications. On January 2, 2007, for : example, Powell sent an email to marketing consultant Dottie Hall, Siry, and me to inform us that he had modified the and first table in the draft business plan. A true and correct copy of this email is attached hereto as Exhibit “33”.

63. On or about January 12, 2007, Simon Wood (“Wood”), the Director of Engineering at Lotus, met with Musk on the status of the Roadster program. Musk flew to Lotus offices in England for this meeting without me and communicated directly with Lotus’ executive team on the Roadster program. At that meeting, Wood gave a PowerPoint presentation to Musk highlighting Lotus’ concerns regarding the increasing risks for production delays and cost increases in the program. The presentation slides clearly demonstrated to Musk that Tesla Motors was behind schedule and was short on the components needed to move ahead with the production of the Roadster. Wood sent me the

slides for the presentation via email after that meeting. A true and correct copy of the email

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@ ee and the above PowerPoint presentation is attached hereto as Exhibit “34”. The presentation outlines the following issues regarding the program:

a. At the time of the presentation, Tesla Motors was missing 27% of parts needed to build validation prototypes (“VPs”) of the Roadster; '* b. Data suggested that there would be significant production slips, including delay in SOP; c. Unless Engineering Change Order (“ECO”) release performance is improved, this problem would re-occur at subsequent phases of the project; d. Lotus was worried about the volume of “concerns” in the system, specifically 846 at that time, with only 94 concerns closed;’® and e. The target for eliminating “concerns” suggested by Tesla Motors — was not achievable.

64. | Musk was not the only member of the BoD who was aware of delays and costs increases of the Roadster. On January 24, 2007, Musk wrote an email to the BoD in response to an email from Marver regarding financing of the company. Musk mentioned delays in delivery and the risk of more such delays. Marver’s email also confirms that BP 4.6 would be released to investment bankers as part Series D after it was received and approved by the BoD. A true and correct copy of this email thread is attached hereto as Exhibit “35”.

65. Beginning with the first days of the company and including the years 2006 and 2007, at almost every monthly board meeting that I recall, the BoD was given presentations on the status of the Roadster and the finances of the company that included the estimate and actual costs of the Roadster program. These presentations were given by the person in charge of those issues with Tarpenning or the controller of the company, Josie Co, giving the financial

'3 Musk, however, asserts in ITB that he and the BoD were under the impression that Tesla Motors’ only significant problem was with the transmission.

'4 VPs are the second generation of prototypes of a car, succeeding the first generation Engineering Prototypes (“EPs”). VPs are much closer in design to the final production car and so enable more refined testing and validation of the car.

'S ECO release performance refers to the time it takes to begin part production once the engineering phase is complete.

'6 Ty this context, concerns are a synonym for problems; “closing a concern” is identical to “resolving a problem.” DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION

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@ eo presentation and Powel and Tom Colson, then VP Of Manufacturing (“Colson”), giving the technical presentation. I have never instructed any presenter what to say at the BoD meetings and I have never instructed any person at the company to hide or conceal any information about the Roaster program. Furthermore, for each BoD meeting, a Board Meeting Packet was distributed to all the BoD members; the financial records of the company were often included in these packets.

66. Tesla Motors sent potential investors preliminary versions of portions of BP 4.6 in order to attract investments. For example, on February 2, 2007, Tarpenning sent an email to Vipul Tandon at Soros Fund Management with an attachment of Tesla Motors’ preliminary versions of the executive summary and finance section from the business plan to be used for Series D funding. A true and correct copy of this email and the attached preliminary summary and finance section are attached hereto as Exhibit “36”.

67. | Tarpenning’s financial section was based on his best estimate on the costs and expenses of the Roadster program and ultimately was included in the final version of BP 4.6. On February 6, 2007, I emailed Marko Maschek of 3i Investments (“Maschek”), my personal assistant Alina Dini (“Dini”), and Tarpenning to tell them that I would send Maschek a copy of BP 4.6 as soon as I had BoD approval for such. In this email, I stated that Tarpenning was . getting the financial section in order for the business plan and that I would send Maschek the financial numbers soon. A true and correct copy of this email is attached hereto as Exhibit “37”.

68. The BoD had the final say on the business plan to be used for attracting new investors to Tesla Motors for Series D and it approved BP 4.6 for that purpose. On February 6, 2007, I wrote Musk an email to ask his advice on having a lawyer review the business plan. Musk replied that for big investment rounds, legal counsel usually reviews the plan, but any changes are up to the BoD. A tre and correct copy of this email and Musk’s response is attached hereto as Exhibit “38”.

69. On February 25, 2007, while Tesla Motors was in the process of revising the business plan, Musk and I discussed the delays and costs of Tesla Motors’ contract for transmissions from Magna. A true and correct copy of this email thread is attached hereto as Exhibit “39”, DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION

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70. On March 2, 2007, Musk, fully aware of the costs associated with the Roadster, wrote me an email asking if Tesla Motors should increase the base price of the Roadster to $95,000 because he was worried about the profit margins of the sale of the car. A true and correct copy of this email is attached hereto as Exhibit “40”.

71. On March 15, 2007, I sent Musk an email with a PowerPoint presentation of Tesla Motors’ Transmission Project. The PowerPoint presentation states that there were cost and timing risks resulting from problems with the transmission program. A true and correct copy of this email is attached hereto as Exhibit “41”.

72. On April 20, 2007, Musk wrote an email to Harding to talk about Magna transmission expenditures and stated that the Magna issue needed to be decided if there would be a “production slip.” A true and correct copy of this email is attached hereto as Exhibit “42”.

73. On April 21, 2007, Musk wrote me an email asking to meet with a group about the costs associated with the cells and batteries, by which he acknowledges that these components make up a significant portion of the cost of a Roadster. This meeting indeed took place thereafter. A true and correct copy of this email is attached hereto as Exhibit “43”. 74, On April 23, 2007, BoD members Simon Rothman (“Rothman”) and Marver expressed reluctance in emails to authorize a PO for transmissions from Magna without first having a cash flow projection. Musk responded that Tesla Motors should move forward and that delaying the PO would only cause harm. A true and correct copy of this email thread is attached hereto as Exhibit “44”,

75. On April 24, 2007, Tarpenning sent an email to Musk and Marver with an attachment of cash flow projections for 2007. Musk replied to Tarpenning’s email by showing concerns for the rising expenditures. A true and correct copy of this email, Musk’s response, and the attached cash flow projections spreadsheet document are hereto attached as Exhibit “45”.

76. On April 25, 2007, Musk wrote an email in which he stated that Tesla Motors needed another two rounds of funding beyond Series D because Tesla Motors would need between $70 million to $80 million to make it to March or April of 2008.!? Musk was responding to Marver, who wrote to the BoD with financial advice. Marver stated in his email

'? This email contrasts Musk allegation in ITB that Series D was the last round of funding before the Roadster production and profitability.

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@ oe that he is hopeful Tesla Motors would ship Roadster in October 2007, which serves as an acknowledgement that the BoD knew well that the shipping target of September 2007 in BP 4.6 was indeed only a target. Marver further cautioned the BoD on potential delivery delays, feature slip or weak capital markets that could occur. A true and correct copy of this email thread is attached hereto as Exhibit “46”.

77... Based on the increasing concerns about the cost of production, on the On April 26, 2007, Musk asked me in an email when I thought we should increase the price of the Roadster because again he was worried about our margins. A true and correct copy of this email is attached hereto as Exhibit “47”.

78. In this context, on April 27, 2007, Siry proposed a strategy that included a base price increase of the Roadster from $92,000 to $98,000 in an email sent to Musk and me, stating. Siry stated that the reason for the increase in price were increase in costs, and primarily because of the change in the exchange rate of the British Pound. Musk responded positively via email to Siry’s plan. A true and correct copy of this email and Musk’s response is attached hereto as Exhibit “48”.

79. Shortly after closing the Series D round, the BoD created six new subcommittees. These subcommittees had free access to Tesla Motors staff at every level and free access to Tesla Motors’ financial records. The subcommittees reported progress at every BoD meeting. The new subcommittees were:

a. The Audit Subcommittee, led by BoD member Steve Westly (“Westly”) and Musk; b. The Operations Subcommittee, led by BoD member Antonio Gracias and Musk; c. The Tesla Stores Subcommittee, which focused on store designs, and was led by Kimbal Musk and Yoler; d. The Government Affairs Subcommittee Committee, led by Westly and Yoler.

e. The CEO Search Subcommittee, led by Musk, BoD member Ira Ehrenpreis (“Ehrenpreis”) and me; and f. The CFO Search Subcommittee, led by Musk, Ehrenpreis and me.

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80. On May 8, 2007, I received an email from Glyn Owen (“Owen”), the General Manager of Tesla Motors Ltd., Tesla Motors’ UK subsidiary. Owen informed me of the details from a meeting between Musk and Lotus, including Owen, Wood, and Lotus CEO Mike Kimberly, which occurred on May 3, 2007. According to both Owen and Wood, Musk was aware of the costs and risks highlighted by Lotus. Musk was also made aware of the risk to the SOP timing and the risk of additional costs for potentially failing to make use of reserved build-slots as a result of Tesla Motors’ delays. Wood specifically noted in his email that “He [Musk] understood the risk to SOP timing & appeared to accept the likely risk of additional cost for resource support & Possible (sic) missed build slots.”!® Nonetheless, as Wood notes, Musk “greatest concern remains the poor quality of the interior whish (sic) he views as totally unsuitable for the car.” A true and correct copy of this email and the attached PowerPoint presentation from Lotus is attached hereto as Exhibit “49”.

81. | After Musk met with Lotus and was made aware of the scheduling slippage, the SOP was redefined to include only the delivery of a pre-production “durability” car to Musk in order to allow the company to “claim” that it had started production at that time, but the actual SOP date for building production Roadsters for customers was pushed up to an uncertain date, once all of the problems in the the pre-production cars are sorted out. See, Exhibit 49 above.

82. On June 5, 2007, Dini sent the BoD members a board meeting packet for a board meeting to be held on June 6, 2007. A true and correct copy of this email and the attached board meeting packet is attached hereto as Exhibit “50”.

83. The packet for the June 6, 2007 board meeting included the following items: a. Board Meeting Agenda for the meeting on June 6, 2007; b. Harding’s official minutes from a board meeting held on April 25, 2007; c. A presentation on the Roadster production status made by Powell; and d. A presentation from Tarpenning concerning finances of the company.

84. According to Harding’s minutes from the April 25, 2007 board meeting, the BoD discussed the search for a new CEO and Tarpenning’s discussion about the financial status of Tesla Motors at that meeting, which were topics that were routinely discussed by the

'8 Tn his blog, ITB, Musk accuses me of causing Tesla Motor to be liable for the $4M penalty imposed by Lotus for the lost of the production slots wherein he was fully aware that the risk of losing those slots was imposed by he requests for additional resources. [See, PE 128.] DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION

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BoD. Similarly, the June 6, 2007 board meeting agenda includes a discussion about the engagement of the firm Russell Reynolds (“Reynolds”) to find a new CEO, the hiring of a temporary CFO and the engagement of Reynolds to accomplish this task.

85. During my tenure as the CEO, the same type of board packets, including financial and manufacturing updates, were given to the BoD members after each board meeting.

86. On June 19, 2007, I gave a presentation at Tesla Motors and sent everybody at the company, which I believe included its executive staff and Musk, an email with an attachment of the slides from my presentation. I highlighted in my presentation that Tesla Motors had failed to pass another stage, or “gateway”, for our Final Approval with Lotus that would affect the delay of production of the Roadster. I specified nine reasons for our Final Approval failure, and I urged everyone at Tesla Motors that “A Lot is at Stake,” including the lexistence of Tesla Motors, and I included the phrase, “Your jobs and mine.” A true and correct copy of this email and my attached slides from my presentation on June 19, 2007 are attached hereto as Exhibit “S1”.

87. On July 16, 2007, Dini sent me the Board packet for a July 18, 2007 board meeting. A true and correct copy of this email and the attached packet is attached hereto as Exhibit “52”. The packet included the following documents:

a. A Board Meeting Agenda, which included information about the CFO search and temporary CFO that was hired Dan Saccani (“Saccani”), as well as the search for a new CEO; b. A presentation of Powell on engineering and manufacturing that included an update on production; c. Financial reports, predicting a shortage of cash by the end of that year, 2007; | and d. Harding’s official minutes from the June 6, 2007 Board meeting with all directors present.

88. Notably, Powell’s presentation for the July 18, 2007 board meeting projected production delays of several weeks in the production of the Roadster due to transmission problems that render the entire production schedule tentative except for the delivery of Musk’s car.

DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF'S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION

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89. Saccani was hired as the temporary CFO soon after Tarpenning resigned as CFO on June 7, 2007. On July 23, 2007, Saccani sent an email to the Executive Staff with an attached weekly finance report. A true and correct copy of the email and attached report is attached hereto as Exhibit “53”.

90. In Saccani’s first presentation to the BoD during the July 18, 2007 meeting, he presented slides clearly showing the issues of critical path delays, especially the transmission problems. Saccani’s presentation projected that the PTS, otherwise known as “pass to sale”, was for delivery of Roadsters in September in 2007.'? However, the delivery schedule of the -Roadster had already redefined to only include Musk’s Roadster and the delivery of the Roadster to the customers had been pushed back to a later date. A true and correct copy of the slides presented by Saccani is attached hereto as Exhibit “54”.

91. On July 31, 2007, Sacanni sent an email to board member Steve Westly explaining that the first fifty Roadsters. would each cost $110,000 to produce, and that plans | would be developed to determine means of reducing costs. Westly responded that this news was better than anticipated and expressed his confidence that costs could be driven down with higher volumes. A true a correct copy of this email and Westly’s response is attached hereto as Exhibit “55”.

92. On August 2, 2007, Saccani asked me if he needed board approval to cut a PO for 227 cars at a cost of $4 million in order to resolve issues with Lotus arising from missing parts and production slips. The high cost of this PO was due in large part to Tesla Motors’ delay issues that Lotus presented to Musk in January and May of 2007. I told Saccani he needed BoD approval for this expense. A true and correct copy of this email and my response is attached hereto as Exhibit “56”.

93. On August 7, 2007, Saccani sent an email with an attached preview of the finances for the month of May 2007 to Westly, BoD member Ira Ehrenpreis (“Ehrenpreis”),

|’? Musk claims in ITB that I represented to him that Tesla Motors would deliver Roadsters in September of 2007. However, as demonstrated by his visits with Lotus in January and May of 2007, Musk already knew by the time of Saccani’s first BoD presentation that delivery meant only Musk’s. vehicle and that the commercial production of Roadsters will be delayed. [See, PE 128.]

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@ oe and me. He told us that he was still in the process of updating the financial plan. A true and correct copy of this email is attached hereto as Exhibit “57”.

94. On August 16, 2007, Tarpenning sent Colson, Vice President of Vehicle Integration, Malcolm Smith, and me an email with attached slides for a detailed breakdown of costs prepared in November 2006. Tarpenning stated that the numbers from the slides were the numbers used in preparing Plan 4.6 for the Series D fund raising. These numbers and the slides themselves were presented to the BoD. A true and correct copy of this email and the attached slides are attached hereto as Exhibit “58”. The BoD was presented with the following information: a) a detailed breakdown part by part of gaps in production costs versus targeted costs; b) a statement that the Roadster’s Bill of Material (“BOM”) was still not fully defined;”” c) a statement that the Arena System did not accurately define product costs; and d) logistical and operational requirements had yet to be defined.

95. Musk led a discussion concerning cash flow and margins during the July 18, 2007 board meetirig. During this same meeting, Powell led a discussion of the Roadster, including projected production dates. Harding prepared the official Board minutes for the July | 18, 2007 board meeting and sent them as an attachment to the BoD on July 30, 2007. A true and correct copy of this email and the attached minutes is attached hereto as Exhibit “59”.

96. The highly open and documented discussions on the costs and delays in the | | production of the Roadster as demonstrated by the unfiltered disclosures made to the BoD by | various members of the Tesla Motors’ team and Lotus in May through July 2007 were typical |to the operation of the company in my tenure as its CEO. As I emphasized before, I never attempted to conceal any material information from the BoD or unduly influenced any of the company’s employees to engage in such conduct. I promoted open communications between the BoD members directly with employees of the company.

97. Timothy Watkins (“Watkins”), a managing partner at Valor Equity Group, a Tesla investor, was asked in July 2007 to assist the company with supply chain issues relating to the Roadster upon my request. The scope of Watkins’ services inherently included the tracking of costs of the components of the Roadster; an issue that needed to be streamlined as

?0 BOM is synonymous with cost of the components used for production.

*] The Arena System was an in-house accounting system used by Tesla Motors to track costs of production.

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@ @ the company faced actual production. The assistance of Watkins was provided during my tenure as the CEO and directly resulted from the transparent and open discussions at the BoD level on costs and productions issues as demonstrated above.

V. My Separation from Tesla Motors

98. I brought up the idea of searching for a new CEO at a dinner with Musk the evening before the January 2007 BoD meeting. I did so because the company was becoming too complex for a CEO of my experience to handle. I wanted Tesla Motors to hire a CEO with more automotive industry experience to handle day-to-day operations so that I could focus more on the design aspect of bringing the vision of a commercially viable electric vehicle to fruition.

99. On February 5, 2007, Musk sent an email to Hau Thai-Tang (“Thai-Tang”) stating that Tesla Motors was beginning its CEO search in earnest and asking Thai-Tang his opinion on using headhunters to find a CEO. A true and correct copy of this email is attached hereto as Exhibit “61”.

100. On June 13, 2007, Musk wrote me an email stating that “he would be happy to correct the perception that I was fired from Tesla.” He states that “the objective fact is that I brought up the idea of searching for a new CEO months prior to my resignation as CEO.” A true and correct copy of this email is attached hereto as Exhibit “62”.

101. On August 12, 2007, during a Special Board Meeting via teleconference, I resigned as CEO of Tesla Motors and I accepted the position of President of Technology of Tesla Motors. A true and correct copy of the minutes of this meeting, taken by Harding, and the email sent to me by Harding with his minutes attached are attached hereto as Exhibit “63”. VI. The Production of Roadster Nos. 1 and 2

102. On January 17, 2007, I received a letter and certificate for my reservation of car number 2. Musk and I signed the certificate. A true and correct copy of this letter and certificate is attached hereto as Exhibit “64”.

103. Musk and IJ decided ourselves who would get car number | and car number 2. On July 6, 2007, Musk and I sent emails to each other concerning who would be car number one and car number two. After some discussion, Musk agreed that I could have the first car. As a token of my appreciation for his financial contributions to the company, I then said that he DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION

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could have the first car.” A true and correct copy of this email thread is attached hereto as Exhibit “65”.

VII. Musk Intentionally Defamed Me

104. On or around January 12, 2008, Musk and Ze’ev Drori (“Drori”), then CEO of Tesla Motors, sent an. email to employees, customers, and investors of Tesla Motors whereby he claimed that the recent changes at Tesla Motors were made to create a culture of accountability. Musk and Drori further stated that, “a lack of such accountability leads to missed deadlines and continuous delays. This accountability starts at the top and permeates throughout the entire organization. As such we have made some changes at every level.” I received a copy of this email because I was an owner of a car at that time. A true and correct copy of this email is hereto attached as Exhibit “60”.

105. On or about June, 2008, I was banned from accessing and posting on “owner’s forum” of the Tesla Motors Club website, www.teslamotorsclub.com,. a service that is available to all Roadster owners. J was reinstated by the company on or about June 23, 2008.

106. On March 29, 2005, Musk sent Straubel and me an email stating that he originally came to California to do a Ph.D. at Stanford. Musk elaborated further that he did not care about the degree but had no money for a lab and no legal right to stay in the United States, so the program seemed a safe bet for him.”? A true and correct copy of this email is attached hereto as Exhibit “66”.

107. On June 4, 2009, and after I filed this action, I was asked to bring my car for a power train upgrade which I was promised on the date I first received my car on July 19, 2008. I brought the car for an upgrade the next day, June 5, 2009, and I was told that about half of the cars that needed an upgrade had already went through it, although I was the person to receive the second produced Roadster.

*2 In ITB, Musk incorrectly asserts that the reason he received the first Roadster was because the BoD established that the cars would be delivered in the same order of payment made. The wiring of payments for Roadster by Musk and me happened well after our discussion on who shall get the first produced Roadster. [See, PE 128.]

33 Tn contrast to this statement, in ITB and various other occasions, Musk stated that he was interested to join a PhD program at Stanford University as a result of his longstanding interest in electric cars.

DECLARATION OF PLAINTIFF MARTIN. EBERHARD IN. SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO.STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A ° STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION , ~24-

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DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF'S OPPOSITION TO DEFENDANTS’ SPECLAL MOTION TO STRIKE PORTIONS OF PLAINTIFF'S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION

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FIRST; The name of the corporation is Tesla Motors, Inc. (the "Corporation", SECOND: The address of the Corporation's registered office in the State of Delaware is 615 South DuPont Highway, City of Dover, County of Kent, State of Delaware 19901. National Corporate Research, Ltd, is the Corporation's registered agent at that address, THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware. FOURTH: — The Corporation shall have authority to issue 20,000,000 shares of Common Stock, with a par value of $0.001 per share, FIFTH: The name and mailing address of the sole incorporator is Robert M. Esq., cfo White & Lee LLP, 545 Middlefield Road, Suite 250, Menlo Park, California 94025, SIXTH: No director shall be personally Liable to the Corporation or any of its Stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal or modification of this Article Sixth by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification with respect to acts or omissions occurring Prior to such repeal or niodification, Robert M. Dang, Incorporator Frcdigik 2

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EXHIBIT 3

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Confidential Business Plan Thursday, February 19, 2004 Version 1.0 .

Copy Number: O | Distributed to:

Date:

845 Oak Grove Avenue, Suite 204 Menlo Park, CA 94025 Tel: (650) 329-1100 Fax: (650) 329-1188 ) Email: info@teslamotors.com

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Proprietary Notice This document contains CONFIDENTIAL INFORMATION about business, technology, and plans of TESLA MOTORS INC. and constitutes a TRADE SECRET. This information is COMMERCIALLY SENSITIVE and shall not be reproduced, disclosed or supplied, in whole or in part, to any third party without prior written consent from TESLA MOTORS INC.

Basic Information Tesla Motors is incorporated in the State of Delaware.

Address: Tesla Motors Inc.

845 Oak Grove Avenue, Suite 204 Menlo Park, CA 94025 Tel: (650) 329-1100 Fax: (650) 329-1188 email: info@teslamotors.com Principals: Chairman and CEO: Martin Eberhard (eberhard@teslamotors.com) President and CFO: Marc Tarpenning (marc@teslamotors.com) Coo: Tan Wright Gian@teslamotors.com) Board of Directors: Martin Eberhard Marc Tarpenning Bernard Tse Laurie Yoler Legal Representation: Mark White White and Lee, LLC 750 Menlo Avenue, Suite 380 Menlo Park, CA 94025

(650) 470-4000 Bank Contact: JoAnn Gast City National Bank One Palo Alto Square 3000 El Camino Real, Suite 100 Palo Alto, CA 94306

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Proprietary & Confidential Table of Contents

EXECUTIVE SUMMARY 1

THE TESLA ROADSTER........cscceceeceeseseecesesersceeesseesseecsecacsecsensesucseeseeecessecesseadsecsessesecnasesseacsaceeseseaceeseeasenaeasearaaeaenes 3 WHY A SPORTSCAR? .....esesessecessesescosesesenseneseseresessnseasseeaesenensossucesesseaesesssscnsecensescesscesseeusersesseessnserensresessssssssesenseees 3 WHAT PROBLEM ARE WE SOLVING? ......cssscssescossrcessssssestsseesscssssesunsessnssussesasueesesssesceaseacesesnesseacensacssesenasenneseesees 4 THE CUSTOMER .......scsscssesecererssecseseeseseseecesetsccessessesecesonsecsecensesesseasseeseacissesaeseesescessesasccsessesseseceneenenseesseaeneanenseesss 4 THE SALES CHANNEL .....csccsssssssceccsccsesccssssstrsssssescseesssacusensssesteansasssvansatseseusvegacscesesancasenacancascanseeseeneesesezsesensenasanes 4 EV HISTORY ou... esssessessseseotecsersssssesenscsesecscsessecrssssosssersscsetersesesseaasisassnsesessesesseacerensasacanseeseetsseceudaessoneasaneasssesesonsess 4 EV TECHNOLOGY ....ceccesscsssesssssserscssnsssarcsescssancsseeserseeasaesarcaresdeseeraceensececeesasedseesassssetcasesgasssussasseusaeseaaessensseaasonss 5 THE OPPORTUNITY ....sescsssssscssepssssssesesecensesssssasasssnsansessesssonsavoasacaseraconeesssastaedsoessaseusasaeessesseussauseussaseusssenesasaneseasenes 5 TECHNOLOGY ACQUISITION AND DEVELOPMENT .........ssccssssssssossonsuscssssessnessocsensncesasscecesessacesusessaagessensoaeransenarenes 5 FINANCE .....eesssesescessscesececssceesssecsneesessnsescesssecsusseesessstassenaeseaeesassenacesuenseesasecausasaeeseneugeouscstesseceatseceeserscsesarseresersets 6 EXIT STRATEGY ....ccssssssssesssssesssotsoesasscesescesssaseeescseaesssescsessasseseesesaesoeecensesaeseasessenascecsecssoesonsaaecsoessscecsaseusesasanesones 6 TESLA MOTORS FOUNDERS ........seccsssscessccesssecsscessscenscesssecsssseceaeesssseenesnsassesesaassseaeosessceesessautussnsecseceaesececaeraneeseneses 6 TESLA MOTORS MISSION & THE TESLA ROADSTER 7 TECHNOLOGY .......ccscccsscescsseesceeassecenecsescssenscsnsessscsnenesensseseessnecssscsusenseacseecesennsesssesscecsaceseseseeeecasecenaeanseneseesseeasesete 9 Electric PerfOr mance ......scssecsecsessscesessssscscsssesenenesccsseseecseesenacscoesensececessstecsenenescsdeneonsesecseesesieanmeoniessnenseseeneasees 9 Traction Motor and Power Electr Onics...cecscscccssssscssssssessvsssnscsssessssactecsvecsecsssausesensusesecsesecesenscessensoesesereneneseates 9 Batteries and Battery Life ..c.ccscccceveccsessvsssssvscssseseustsoesaeensecsecssacesssesssansuacsasssassaceaaeaceradeesaeessnaesaeeeasegeesessenenezeass 9 Automotive DeSIQH ........cceceeccccecvsseenecennetetecene nessaeeesecee ceseoseaeeetoaeanecsegseecncessaaessenssegeeeeesaseeeesassensneeaseageeseseeeseseee 10 DESIGN PRINCIPLES ......cscscesssccecessscecessassesecseecessccesccevesecsecessscessacensecsesssscucsststsuenasneccecesassseneseeeeseeseenseseseeseesassees 10 SPECIFICATIONS OF THE TESLA ROADSTER......esscsscsssssscsssesssessecensesscesneseenesnecesseenscsasseecneesensesaaterssseeneesssessevasones 11 DUWMNCHSIONS ..ceaccccccccanccecssccescensasenscessesusetscenassceanseanseacesaeecsaeensecaausaansesesseasseesasseasesssaseaeecaeeenaeseaseaneonenaesnseaaeres Il POV FOV ONCE aces ccnssnsevnnsenseeesesseeatscensenssensunsasssnecaessesuesssscsescessessecusecsassonscansuncecacasesnesssenasessestssarsaeaasersuaeenetee Il EV Technology ..ececcsccessscscesesssescantasecescssensusssassesassesacencnssasensasessseessesscosceeesenauassansaneagenscaenaesassacasenaeeseeeasneseataes I] DYEV CLV. cceveccccsccnctceessccncesueseeeneesseensasansuacesaeenaesacesseaseseaeensecsaesaeecenseseecuseseneeaaeeceataeacecsaesusaseqeradeesseseenaqeaene I] Chassis arid SUSPernsina ......ccsccsessscsscsesseecsccscsssenseessesessusccnecnsessuseceaeeeeesieeecasceseseesaeaceesresaesentereneaeetensensesasasaces Il PMUI OS .ecccescssescccssesvacssccnsescessnsesassnsnecscstensecesenaeacsecsseuesassaeaaenseasacsdceaeeascesceaseasececaaeeessetaeeaanecsenete eeeesaeaeeeeaees 12 FUTURE DIRECTIONS .......cssccossssesecceccssnsansesseeneecssssssenetesacsnsecseessssenseesseeeeeaesaunsenseesneesadsaseneeeadcnsesssassansasseassaceagtes 12 NOTES... ccsescsssesesescsssssnssssceessesssessensteceusacessessssseqeeessessassenssasesseusssssueaessesseusensacssaesacessessatensenuasassssseonsteeecensesatee 13 KEY ALLIANCES 15 AC PROPULSION, INC.u......cccscscssececessssecssccsessesesossecuecesecsvccsessececseresessesccusaraucasacsesneneseavasessvessacsestsavaesssccavansaraceess 17 LOTUS ENGINEERING ......ccscccsscesssecsessscesecosnseseesessasssaesesscoueeseessusesaeessecensesaneacecnacessedaeassenaentecssaussasecasensseaceaseesoas 17 OPERATING PLAN i9 SCHEDULE ....ccccscsssecsotecessecssseesesessececcesstessesetncneuecssconcuacacsancessusesseestecsorsnsesuesssseenecensteeseeensnsennesatanseeesseseceneeseeseds 21 SOries-A FUrrdivagcececccccccccecsecssecnessssnseacerscnsescenesensetatessesnseanenevasdessecessceecansesoeeaaesoeesceanespesscenaeouaneeesseensneneensets 21 S@ries-B FUNGING. ....ccccccscsecssesscssssssseesseesseessessesessnecssecesseseaetensessaseceecesessesuseessessescaseesesecsusensessesseatseaseaneeserenes al Series-C FUrndireg ...ccccccccccessscssssuecsesscssssessessscesessssensessesesscecenssnassesassassessesseaseacuaavaseagenesceneesaesseaeeeasseaserseacnenses 21 Sevies-D PuUrrdinag .uc.cseccseccessscesecsscsssccsssseusecsvscscescsenseseesesssecguseseessseneceeseseneateeanenseccaesaesseesteacecaesasenseasassendensess 21 ORGANIZATION. ....00ccccssssersssssccecssesssscceseasenarecanssescsessececseneseusssaaesssseeesaesauceseseseasaueeeeanaasseosaaenaneasesaeoecenoneceseaees 22 MANA CMEN ae eescccesscccsecsnscesssecencenacsaccnsscsaesasensesaecssecsacesaecaasseasensesessesanensecuesesenesussessaeassaesoesbedeesaveasesaesaesasens 22 Trefortmation Technology .......sssccsseecssencessssseesseseesesesaeeessconseseaseseesesasseceseesaseaseseraseasensseesesensesassaserseanevesesesees 22 Digital ENQin@er ing... ceececsscsecessssesseeesesensescessesesaseeeecessessscssessessenseeseaeeseseesecasscesecss esas taseesscnensnentednesssessecess 22 Vehicle Eragineer ivag.....cscceccscccsssesssssseesssesensessesensesssesesssedecesessseassesesesesecacaeaeasarassnseeascaesessecsranatessaensasseneesees 22 Meri actur ing... seeceeeccsscvecnecsscsensvscucesesccesussenansecencuceasasseeasacaseaeasageasaceecseaereverseraessssssasetsesesscseeeseueasassenseeeeees 22 Sales & Marketing oo... ceececcececssesscsssesesseeceecsesenensveceeessceseeeasaceeraraceesasneceravsdsaeeesssdevevsussssusssosesceeseseseasasaseasaseess 22 SUP OOP Eos. seeceeececeeeeceesescsenenseseeseansncenencssesaesensesessesevssaeeneesesesacusesesaseasseneceesuceacececascueenadseseaceenecsessseduansesseasae# 22 MARKETING AND SALES 23 MARKET SIZE .u.csssssscsecsoccsccnssensescecenscassssssonssasaececeseccuecsecsenceaneasanessessnaceesseseeaeeassonenessanesaussessecesssessusussasansenenesetes 25 THE CUSTOMER ue.sssssssssscssessssssssascsnsessssssscessessvecsuecsuscsasesasssssessascassesucssuecusecensssasssuecasesuansesuseasecunecsacceaecessersacees® 25 Government TACCHLIVES ......cscccceccesisccsecsncesecenscasessecuonssacenseessevouseessengeescenseeasesseaeseaaseseeneadsssaeseseeasenseessnesermeedss 25 MARKET LOCALITY ........ccsccsssseccessrcscsececsscesssessusecassesnsneaacasessssesnacessusesaceseuencesceseeseessssasenecusaaasanesseeavectassesereseans 26 PUBLICITY ......ccscceccssssssscceccscesscaccesssstaesensouccecsonsecassucesssauececessensseeeuausecsesosansnaanaceaeescosegetenssavsnaesesecssesscusasasessessees 27 Copyright © 2004 Tesla Motors Inc.

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bavocecesseucssensasssesesescsssnscessusensvsavassusousatsentseracnenseassensescesscoroscnsassesssseatasseocenssanseesenerseassensaceseesenes 27 suesescneossccorencosensssadcaecessssasisressseusssoccarsesssusessssossessteecacoseasaseneasucesensatererensacseseresacseneesesssersseseserensesaesssnensseees 28 COMPETITION 29 ELECTRIC CARS ....cssssccssesersssseesensenseseneuetseserstorcossseseasantessoee sssansesrsecessosecsereseacesceasstseearsuentonsacessesenessasesenensessseases 31 Electric Cars TOMY ...cecsccccsesccsecsssesevsescsensesessessesseesecssensenssassssaesasescasesessasssesaasssesssacsasesensescenseceassnesssaeaeseagens 32 Electric Sportscars TOGA) ...0.ccccsccsssssvsesssssecssessnesessssessesessnesenesseacasseassesseesenseeseedetensasenseasatensesacasanseteneeasianees 33 GASOLINE SPORTSCARS.....ccsssssecescssnenessecsesaesacseenecseeseessesacsesscsasesesesseseesessoesuessssneaueaeesseseessessesgeesaueeneaseseescesestenses 34 Usable Performance ..cccccccsesccccssscsessscessssssssseseussassessaessssesscasnssessassussassesussssssasssssesaesssessusanecaesseaacssaeseesssaseneees 34 NOTES .o..ccessescessssssesseseeeesescessseasesnseneusseseussasesssseeseseesquseesssaceussesssusesetassssaseasousesgenseuseseeseasenesadg caesoagugeseuanenenesseeens 35 FINANCIALS 37 KEY ASSUMPTIONS ........cccccssssssccecesscnsercansessesacscnesacsneesecessaecsesenectsesseaseessuceeesssenssenecesstaaeesssssensseesensnetacsseesasseszeeses 39 Drive Train & Power Electr nics... ccccsssesssessssnesscsessesescacessscecessecoesatscaesseceseasaceceesecansenseeteecaeantesaeseeesestenes 39 Automotive Design and Engint@evirng ........cccccsccecceeceeesesesaeeecosescesesceassseoceneccsceesereseeessecseaceeeacnaeessaeseeeeteesensass 39 Factory TOL g oo... sesssesessescecsessssesescecsessseeessessesscoessssasueveesessenenscaessssnenesesveaestasssapuessesseceeaeceessaeasessesatieasas 39 Tesla Motors Technology. ..cccccseccsesssssscssessesssccssssscseseessrssceasnseeeccecenessosaneesseacsevaseesenseteseaneeseaesaseesaaeeseenaeeeeses 39 Cost Of GOOdS SOL. .cecccesccesseseressncevsssessssenecscecsnsesecssssasesaasessessesrecueeseesacerssssecsesaessnaecaacauasenseaensecasessecasesenass 39 Expense ASSUMPUIONS ...cssccsecsessvsnrssescsiensnsnsnveessesuseusesesetenseseseeee sss eens eNdeaesesaegseeseaenesuseaaetesasaecerssasaranseeeseseesas 40 Reventie ASSUIMPUIONS. 0.0... cecsessssecnctsesvesenevesessveveacsesesesesesecsscesesesesssesesevessuessseseacsessatsssessseseueeaessarsesesaeessaeasaseas 40 ROAD TO PROFITABILITY ........scssccsssssssesessescssssseuscesesassecesussnsaccoseseesesseausoassesessesessescsessessescuesssessseassaesaceusessssesessaee 40 Income Statement SUMMAVrY ........cscecceeseeeseeceeenseneeenceeceseceteeessacenscesnenesuaeeeenseeessnasestsneseseeecnseeesepeeseeteanensnsengee 40 Cash Flow Statement SUIMIMAYPY vo cccccccccccscscccessssccenesevensennneeasseeneuesesessereasceeueeteneeessesceasersesegeaseaserssscaneeensresens 41 MAJOR RISKS FACTORG......ccssssscscsossseecconsecsccessenasesensncecessasaseessaansessnscaseaecsesseceesessuasecsedeseuensgucessusoaaeeecssseseseessetes 41 Automotive Aesigys COStS 02... ccccsccscecssesssseseteetsesensessecescesesecsecatessaesecsessesenssaneaecseeenssesaecnenaesacsaseaenenseeateceeseraeees 4] Timeline coeccescccccsscsessssssescesesasenessesseeescseasssesesseaseesasseaneese sossessessanaceseesnenasovsessenssnee teres nsesseeeeserenesseensaeaneteacee 41 Liability INSUrance....cccccccceccssessssesevsessesscsscessecensesessesescessvseeaseaeasessesenenessceceaceassasesseseceesaneesseeseseesaaesssecsenenseess 4] NOTES ....scsscsscssesescessscecsseconsosscsessnsessscessencenscsuseesessneaassasanssuseassussuassasussassussessensessaseessancaescaaeceeeaecesensecaseaeeseaesecees Al FUNDING PROPOSAL 43 SERIES-A FUNDING .....ssccsessssssserssssensescssossnsanssessesssnseeesasessassanssenssetsarscedssesssascnensrssosessdsensteseenseaaesasedsseseneaseeneataes 45 Mil eStONCS ..scccccceeeesscssessesesseessenessessasesensoessassessenssceseaseneesesseeassneassesssessecesseceaceatsnsesaeeesatesaneassqeasenssusaesissensensens 45 Eequity SUructure oss ceecssecsesssessvsncessccsencetonsecscessesenssecsseeensacuesesassnseseacseseausesssususssusessssesesessessaesaesesasescensseseseees 45 ADDITIONAL FUNDING ROUNDS .......scsssssssessessssssessensesssesssnssseascocesesseasoassessseseosssaseesenestsseracenscogenscenasesacanevaneenares 45 THE COMPANY 47 MANAGEMENT TEAM ......cccssssecstessccesctencesrencnssscensceeecanssnscensessssesstesseenssessensesasensesscssaesscsessenacesseceseueeausssacssseseasenss 49 Martin Eberhard (CEO) ...ecccsscscsssscsssssesscssessescsssssssssssassssssssesecsesenecesssasssasssessaecenseseseasssesestensceeeeeseaseseeceesenees 49 Marc Tarperrririg (President) 0. .ccscccccsscscssvscscsevessessssessessssessssssesssassusssessssssesssssesssassesesssacseensseasestsaesseuseesssnsss 49 Tarn Wright (COO) ..cccsecssessescscccsscsessvsvenensseeesecusessseesacsesessusuceseesseseseaesessesseassnasseseesesassesescetesssasseneesaseaseesses 49 BOARD OF DIRECTORS. ......csssscessssssessesssssccesessescesssssssnsassoccneeseescsesseasessessessssqusncoasatesesatscssseseccesusssesassccsecssaneesess 50 Martin Eberhard (CRaivnava) occceccscssssssssessvscsnseensesssesssaeassssssssscasssssussesasssucsssscaesssesacesessssonsusessusesserasaces 50 Mare Tar penviineg o.cccccsccccccssccsssscsssssssssssscssscessesscsnecsscnesenscseaeacaceessasesesusecesesassssnessseseeesesseseseeaaseesesasaesereeeeseess 50 Dr, Bernard TSC ..ccccsccccessssssensecssvensesnssevensnesesesesssensosenesauacssseuesssasacsesesssesssseasscssnesseesesesssaesenssecseaeseseeesesenenseets 50 Laurie VOU ..ccccscccseccecsscsscssnvesescesessaeessscacesssuaaesaesaressssssavssseeunscssensususeesssssesssssssesatsssgsansessasesacevsacesasenssaseatess 50 APPENDIX A: THE 2157 CENTURY ELECTRIC CAR 51 ENERGY EFFICIENCY .......ctcssscessceccstssotecsnneocenessnesssscsssessescevetssuessesersasensustesesonssvsesenereatseeaessaeceasscscsasseseasseneaseses 53 Gasoline COVS ....scesecsssesscesssesnsesesesensseseatsesesesessssaescsensueseasesssesssesasesssessucsesssessssssssvavssesesaseeassseeeseacsessseassesesases 53 EBD id COPS veescecessesesscssscsesssctesseeseseveoscusecscussessucnsesesessarscussssqssesessssseseseseseseseacsussusasssasasseassecsessaaseseseussensensies 53 Electric CVS... scesessesssecsseseneesessnssassesevevecsesensuaesecsacssesssscasasssesessssssastsssausssasasasausessssassesecaeassasceeessasseseasseseaeases 54 Hydrogen Fuel Cell COrs......cccsscscsssscsescesssssssessssssnsssenseetsecessesessessssssssssssssscssasasseacesassnssscsesesassssesseseeeeseseessos 54 COMPAPISOM. ..sccseccvsssesescesenesssessessssasesessessssasecsssguessussssossosecanenasesenessosecuavencasnscesesenensisarsesesuuasesessacsesesessensansess j4 EMISSIONS .....ccsccsssssesecesseesscessercsscessseaessasesecesaesnsssnsessassensonsesesessenseeasueassesseessevsesesesssessesseaseesensesseusesesesasscessesensanes 55 THE TRUE MULTI-FUEL CAR... .cssscsssssesssscceessestessessssassuscascassscesasessaccestensessescesceesstesceatsccesesasscetsessessecasessssessasess 56 PERFORMANCE .....scsssessercscesoesscssccosssessescnessssoesscnessessecsesscsessessenecasesesaasesaeaeseaseanseesseseessessaestsaeseesssessseeesesseessecanes 57 CONVENIENCE ....cssossssscsesrsesensesesecaceessencousnsscenscuesecessusenssssssesesavssnseasescosecssessensessesersesecasorseesscosecenseesaseeseacasesaesees 60 THE DESIRABLE ELECTRIC CAR uo. ..ccscccscsecessecatcssncsscsncesscscceeensecsscesstsestenssessecsssssesesessesesencesscascesersssestscaveotsnsenenes 60

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eesnessesenesseneacansneauenvasseseesseussscacssocsenussssenssanestsosssseususessusssossasssaasessusdaesesasecsnsorsdssussessosenssensensssssssensessesessens 61 APPENDIX B: USABLE PERFORMANCE 63

APPENDIX C: THE LOTUS ELISE AS A BASIS FOR THE TESLA ROADSTER ROAD AND TRACK TEST RESULTS NOTES APPENDIX D: NOTES FOR THE AC-150 GEN 2 ELECTRIC PROPULSION SYSTEM APPENDIX E: HYDROGEN FUEL CELL ARTICLES owoueeonecsecasoasenancepceceseoece woececonosecooseeesoooes

APPENDIX F: 2002 U.S. CAR SALES

67 71 75 77 79

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Executive Summary

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* A selling price less than half that of the cheapest competitive sportscar.

pean,

Yes, it’s electric. No, it is not a dream waiting for battery or drivetrain technology to be developed, or for some new fuel/power distribution infrastructure to be deployed. It uses commodity lithium-ion batteries that are already manufactured in the millions per year.

You can drive one today. An impressive proof-of-concept car has been built to demonstrate the performance of this battery and drivetrain technology. The Tesla Roadster will be a production sportscar based on this prototype. Using outsourced design and manufacturing, the company will break even selling about 300 cars per year. Why a sportscar?

Every electric car so far has been designed and marketed as a commuter car. Such cars must compete against high-volume cars made by Honda, Toyota, etc. The problem is that with the low sales volumes of a new car company, there is no way to compete on price with these giants, regardless of technology. Happily we don’t need to compete on price; we can compete on outright performance. Electric motors can produce high power over a very wide (13,500 rpm) range. No gearshift, clutch, or torque converter is needed; the resulting performance in a well-designed sportscar is astonishing. Customers for such a car are less sensitive to price, so long as it meets their standards for style, quality, and (especially for an electric car) driving distance. The Tesla Roadster is a disruptive technology — completely off the usual performance-energy efficiency curve, offering among the quickest acceleration and the absolute highest energy efficiency at the same time.

: @ACPitzero Disruptive |)“ “ic ead cue] vest Roadster | Technology Sa - xiParsthe ‘Carrera GT at bili fw iS , P bars SK: Laiviborghini Murcielago Performance ihe os we Ne j_"« J) [@Dodge Viper SRT-10 reduces mileage - 3 os to me ic

rsche $11 Turbo Coupe Ferrari Maranetlo Chevrolet Corvette 206 >4Lotus Esprit v8 5 Panoz Esperante © Nissan 350Z Toyota Celica Nissan Maxima % Ford Taurus ay © Toyota Camry O Subaru Legacy = Honda Civic VX VW Jetta Diesel Acceleration from 0 to 60 mph ( Sec.)

0.0 0.2 1.2 1.4 | A Honda FOX (fualceily 4 0.6 0.8 1.0 Well-to-Wheel Energy Efficiency (km/ilJ) (1 Honda Insight (hirid)

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Sine. Proprietary & Confidential What Problem Are We Solving?

& nergy efficiency: We will reduce (not incrementally, but dramatically) the total energy consumed to drive a given distance. It follows that total emissions will also be reduced.

a Energy source: We will enable the efficient use of whatever fuel source is strategically attractive: imported oil, domestic natural gas, nuclear, even domestic coal; or renewables such as solar or wind power. Battery electric vehicles are the ultimate multi-fuel vehicle, and the distribution grid is already in place.

2 Performance: This is what makes the technology disruptive: we achieve the highest acceleration performance of any available car, in the same vehicle that has the highest energy efficiency. All without sacrificing range or handling.

# Economies: We are building a business: solving these technical problems at a price that is attractive to customers and profitable for us.

The Custemer Three groups of people will buy the Tesla Roadster. It will appeal to those who simply want to drive a highperformance car because it will outperform just about every car on the road. The Tesla Roadster will also appeal to those who care about oi! consumption (for economic, political or environmental reasons), because it has the lowest energy consumption of any car on the road. And of course, the Tesla Roadster will appeal to technology aficionados, who want a unique, high-tech car.

These groups overlap — many drivers enjoy performance, but are not happy about high energy consumption. Until now, such drivers have had two choices: either compromise on their concerns about energy consumption and buy a sportscar, or compromise on their driving pleasure and drive a low-performance economy-car like a RAV-4 EV or a Prius.

We can offer these enthusiasts all the performance they want, but in the vehicle with the lowest energy consumption on the road: better acceleration than a Lamborghini Gallardo, much better fuel economy than a Toyota Prius, at the price of a basic Porsche 911.

The Sales Channel A large fraction of our target customers live in a small number of locations, allowing us to launch sales of the Tesla Roadster through a limited number of existing high-end dealerships where many sportscars are sold, such as Silicon Valley, Los Angeles and New York.

In 2002, over 33,000 sports cars (not luxury sedans) sold for more than $70,000 in the US. We intend to carve out a zero-emissions segment from this high-performance market. We believe that we can sell enough electric sports cars into this segment to develop the necessary relationships and component purchasing volumes that will make a significantly lower-priced second model possible, should that prove to be the best strategy. EV History The California Zero Emissions Mandate required all car companies to produce a limited number of zeroemissions vehicles by 2003. As a result of this mandate, every major company produced one or two electric cars, beginning in 1997. The typical range of these cars was 60 miles; on most, the battery pack lasted only 25,000 to 40,000 miles; they all had poor performance. Despite their limitations, the demand for these cars exceeded their production.

The Zero Emissions Mandate was repealed in March of 2003, and every single car company immediately cancelled its EV program. Those customers that leased their electric cars (e.g. EV1’s) had their leases terminated and were forced to return the cars. Today, the only electric cars available in the US are “Neighborhood Electric Vehicles” — little more than glorified golf carts.

The federal government is now subsidizing auto makers to develop hydrogen-powered fuel cell cars hoping they will be the long-term solution to pollution and dependence on foreign oil. Even the most optimistic proponents of this technology admit that it will be at least ten years before the first of these cars is available to the public. There are, however, very good reasons to believe that hydrogen-based fuel cell cars will never reduce pollution or reduce dependence on foreign oil.

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EV Technology As justification for quitting the EV business, the auto makers pointed out that battery technology had stagnated — that the fundamental problems of weight, range, and battery lifespan could not be overcome. This is certainly true for lead-acid batteries, which were the core of most EVs sold. The range of such a car cannot be more than 80 miles, even with over a thousand pounds of lead-acid batteries that must be replaced every 25,000 to 40,000 miles. The auto makers are right: these limitations render even the best performing EV unappealing. But great advances in battery technology were happening elsewhere — no consumer-electronics device was ever powered by lead-acid batteries. In particular, consider laptop computers and cordless drills — two applications where weight, energy density, power and cycle life are very important. It’s unlikely that anyone ever considered using lead-acid batteries for these. CE devices have forced the evolution and re-invention of advanced battery technologies: NiCad batteries, Nickel Metal Hydride batteries, and now Lithium Ion (Li-ion) batteries offering better and better charge characteristics, storage density, and lifespan — far surpassing the best lead-acid battery. It is not only possible but surprisingly advantageous to use many small commodity Li-ion batteries to power an electric car. This is not simple, but the technology has been developed and works exceptionally well. With these batteries, a car has already been built that has over 300 miles range, sub-4-second 0 to 60 mph acceleration and an expected battery life of over 100,000 miles. This car weighs about 500 pounds less than it did when it had lead-acid batteries and a limited 60 mile range.

The motor-controller-charger design is also important. Past EVs offered a spectrum of motor and controller technology. The best was the General Motors EV1, with its 3-phase AC motor and high-efficiency regenerative braking. The most primitive had basic DC motors with limited or no regenerative braking. But every one of these vehicles suffered from requiring an external charger. Worse, there were three competing charger technologies used. This means that if you were lucky enough to find a public charging station, the odds were against it matching your own car’s connector!

The Tesla Roadster will use the most modern high-current 3-phase, 4-pole (brushless) AC induction motor technology with a patented controller that cleverly re-uses its expensive components to serve as a high-rate charger. No external charger is required; charging requires only a standard 120V or 240V electric outlet. Suddenly it is possible to make a desirable electric sports car: very quick, long range, ultra-low maintenance. The Opportunity A rare window of opportunity opened when the auto industry abandoned electric cars, investing instead in fuel cell research programs.

Because of the size of the commitment to fuel cell'research and the publicity around that commitment, we have perhaps five to ten years to develop the electric sportscar market without significant competition. Carefully selected partnerships with EV and sportscar technology companies will allow us to put the Tesla Roadster into production in less than three years.

Technology Acquisition and Development Tesla Motors will acquire its key drivetrain technology through a perpetual license from AC Propulsion Inc., a company that has developed and sold EV motors and controllers for the last ten years. This license purchase will close simultaneously with the completion of this funding round for Tesla Motors.

AC Propulsion has developed advanced motor, controller, and integrated charging technology that are extremely well suited to a high-performance sports car. Along the way, they built three high-end electric sports cars called “tzeros.” Tesla Motor’s Martin Eberhard funded AC Propulsion to develop lithium-ion technology for cars, and to convert AC Propulsion’s own tzero to lithium-ion. This prototype exceeded all expectations, accelerating from 0 to 60 mph in 3.6 seconds, finishing a quarter-mile in 12.0 seconds, and demonstrating a real highway range of over 300 miles. Although the tzero itself will never be a sellable car (since it has no airbags, its lights don’t meet DOT requirements, it has racing seatbelts, etc.), it neatly proves the concept for Tesla Motors. Tesla Motors will refine the technology acquired from AC Propulsion in several ways: First, we will redesign the analog and digital electronics to reduce manufacturing costs. Second, we will redesign all aspects of the user Copyright © 2004 Tesla Motors Inc. Page 5

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The rest of the Tesla Roadster’s-design — everything except the electric drivetrain, related controls, and user interface — will be outsourced to Lotus Engineering, which specializes in designing cars with very fast time-tomarket and with low tooling and parts costs.

Finance We expect the technology license and outsourced design and engineering fees to be approximately $9.1M. We have allocated $1.5M for factory tooling expenses, and expect approximately $2.5m in salaries and related costs for the Tesla Motors engineers.

We estimate that the low volume cost of an assembled Tesla Roadster will be $49K, including $5K for shipping and taxes, and including a $3K reserve for warranty and insurance. Batteries dominate the cost at $18K per car. However, we should enjoy volume discounts on these commodity batteries and costs should decline as production grows above 100 cars per year. It will take approximately $23K to fabricate the rest of the car — chassis, body components, drivetrain, and electronics. These costs are similar to industry estimates for the small volume Lotus Elise.

With a $79,999 MSRP, our price to the dealers will be $64K, giving us $15K of gross margin. We project breakeven when we sell 300 cars per year. By 2007, selling 400 cars per year, total revenue will be $27M with a 32% average gross margin, resulting in projected before tax income of $4M. We believe that there might be significantly higher demand than our sales forecast have projected, but we have chosen conservative sales numbers for the business model.

We expect to spend a significant portion of our income developing follow-on models of cars, though it is premature to estimate the costs associated with this development.

Tesla Motors intends immediately to raise $7M in its Series-A round, and plans to raise an additional $18M in three subsequent rounds of funding through 2006, when we will be profitable.

Exit Strategy We may develop such a lead on the rest of the auto industry that an IPO is the best exit strategy. However, a more likely scenario is that after investing in fuel cell research for five years, some car makers will realize that electric cars are in fact the right approach. If we build our company and our brand well, one or more of these auto companies will find that acquiring Tesla Motors is the fastest way for them to enter the electric car market. Tesia Motors Founders Martin Eberhard and Marc Tarpenning founded NuvoMedia together in 1997. They created the market for electronic books with the launch of the Rocket eBook and the necessary infrastructure to sell and deliver electronic content securely over the Internet the next year.

With no previous experience in publishing, they staffed their company with publishing industry professionals as well as the engineers needed to design the technology. NuvoMedia succeeded in getting every major US publisher (and most German publishers) to make their books available in electronic form, including their recent releases and current best-sellers. This changed the landscape of the publishing industry, bringing value to previously-ignored electronic distribution rights. NuvoMedia facilitated re-negotiation of contracts between authors and publishers to clarify ownership of these rights, reflected in all publishing contracts today. They partnered with major Internet-based bookstores, including BarnesAndNoble.com in the US and BOL in Europe, to sell content for the Rocket eBook in new Electronic Books departments. They distributed the hardware through Barnes and Noble stores, Levenger’s catalog, and other distribution channels. They located very lowcost suppliers in China, Taiwan, and Japan for key components of the Rocket eBook, and qualified a highquality, low-cost manufacturer in Taiwan to build the hardware.

As CEO, Martin raised $27 million in three rounds between 1997 and 1999. He negotiated the sale of the company to Gemstar/TV Guide International in 2000 for $187 million.

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Tesia Motors Mission & the Tesla Roadster

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Tesla Motors Mission Tesla Motors sells high-performance, highly efficient electric sportscars. Our customers delight in them because our cars are beautiful, a joy to drive, quicker than almost every other sports car, and yet they are the most energy-efficient cars on the road. As a result, we are changing the way the world sees electric cars, and sportscars: redefining both with disruptive technology and design integrity. The Tesla Roadster The Tesla Roadster is a quick 2-seater convertible sportscar with a battery-electric drivetrain. The one-line definition is: Like a Lotus Elise but with higher performance and much higher efficiency. Technology Electric Performance A gasoline engine produces very little torque at low rpm’s and only delivers reasonable torque in a narrow rpm range. On the other hand, an electric motor has high torque at zero rpm, and delivers almost constant torque up to about 6,000 rpm, and continues to deliver high power beyond 13,500 rpm. This means that an electric car can be very fast without any transmission or clutch at all, and the performance of the car is available to a driver without special driving skills.

With a gasoline engine, performance comes with a big penalty — if you want a car that has the ability to accelerate quickly, you need a high-horsepower engine, and you will get poor gas mileage even when you are not driving it hard. On the other hand, doubling the horsepower of an electric motor from 100 hp to 200 hp only adds about 25 pounds, and the efficiency is, if anything, improved. It is therefore quite easy to build an electric car that is both highly efficient and also very fast.

At one end of the spectrum, the Tesla Roadster has higher efficiency and lower total emissions than the best of the most efficient cars. At the other end of the spectrum, the Tesla Roadster accelerates at least as well as the best sportscars, but is six times as efficient and produces one tenth the pollution.’ Traction Motor and Power Electronics Getting this kind of performance and efficiency from an electric motor requires careful design. In our case, we are using a high-frequency design four-pole induction motor with inverter-controlled magnetic flux. It has a copper rotor for efficiency and forced air cooling.

The Power Electronics Unit (PEU) that controls the traction motor is a pulse-width-modulated, voltage-fed, IGBT inverter with current mode, sine-modulated controls. The PEU includes integral battery charging circuitry, and provides 13.5V for accessories, and interfaces for contro] pedals and dashboard instruments. The motor and PEU have been designed from the ground up as a tightly integrated system that delivers up to 165kW (225 hp) motor output, yet maximizes vehicle driving range with high efficiency over a broad operating range and comprehensive energy recovery through regenerative braking.” Batteries and Battery Life The Tesla Roadster is built using consumer-grade lithium-ion batteries. The most common form factor for the lithium-ion battery is the “18650” cell, which is 18mm in diameter and 65 mm long. There are a whole range of batteries available in this form factor, ranging in capacity from 1200 mAh to 2400 mAh. The Tesla Roadster uses 6,800 of these 18650 cells, organized as 100 blocks of 68 batteries each. (A block of batteries is 68 batteries in parallel.)

The Tesla Roadster requires a discharge rate of 500A for full-power acceleration. Thus, each battery must be able to deliver 500/68 = about 7.5A. This is almost a 4C discharge for a 2000 mAh battery, or about 3C for a 2400 mAh battery.

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A lithium-ion battery is defined as being at the end of its life when it has lost 20% of its capacity, though the battery in fact will continue to function for some time beyond that point. The lifespan of these batteries is specified in terms of the number of 1C charge-discharge cycles, from completely empty to completely full and back to empty. Behavior with any other charge-discharge cycle is not specified, though it is well known that lithium-ion batteries last significantly longer if they are not discharged to empty (or nearly empty), and not charged to completely full. Currently, the lifespan of 2000 mAh batteries are between 300 and 500 cycles, depending on manufacturer.

The normal charge-discharge pattern for an electric car is quite different than this simplified model in several ways. Firstly, they will never charge faster than 1/4C. Secondly, they will normally not be fully-discharged. Thirdly, we will give the owners the option of charging only to 90%, allowing them to top off only when they plan a long trip. Fourthly, the discharge pattern is complex, with an average discharge rate of about 1/4C for freeway driving, but with up to 6 seconds of 4C discharge when the driver steps on it. It is not clear what impact this pattern will have on battery life, but early data collected on the AC Propulsion tzero suggests that the batteries will last significantly longer than the specified lifespan. We will assume that the observed lifespan of the batteries in the Tesla Roadster will be exactly the specified lifespan. A full charge of the car will allow it to travel 300 miles. 400 such drives (and thus, 400 chargedischarge cycles) will therefore last for 120,000 miles.

The average voltage (over the discharge cycle) of these lithium-ion cells is 3.6V. The total energy stored in 6,800 of these 2000 mAh cells is 3.7V x 2.000A x 6,800 = 50,320 Wh, or 50 KWh. The car consumes about 160 WH/mi (which is 100 WH/km), so this battery pack will go about 314 miles when new. If we are able to use 2,200 mAh batteries, then the range will be extended to 345 miles.

Automotive Design A car must be light weight and very rigid to get high efficiency and high performance at the same time. The Tesla Roadster is designed by Lotus Engineering, and is based on the Lotus Elise, because the Elise is the lightest and stiffest car on the road. (The gasoline-powered US version of the Elise weighs a mere 1,980 pounds.) Lotus achieved this weight and performance through an innovative bonded-aluminum chassis, a minimalist philosophy that encouraged multiple uses for every component, and fanatical attention to weight. And yet, the Elise is an affordable car, and the engineering and tooling expenses were kept to a minimum. ° Design Principles Design a performance car. Performance means handling and acceleration; it means high g-forces without instability. It means useable performance, as a road car rather than a race car, and at road speeds (below 100 mph.)

Design for efficiency. This is an efficient car, but performance is optimized over efficiency. We consider rolling resistance when choosing tires, but without compromising handling or performance. We minimize drag coefficient, but not so as to cause aerodynamic lift, or to make the car ugly. Efficiency is reflected not just in the raw fuel consumption numbers, but also in the use of space, and the use of one part to do several jobs. Design a manufacturable car for the forecasted volumes. Cars come off the production line with a minimum amount of labor and a high degree of uniformity. Quality is evident not only in the finished car r but i in the production environment as well.

Design for reliability: Other than tires, the car should need no routine servicing for 100,000 miles. This implies, for example, silicone rubber wiper blades, synthetic brake fluid, and friction brakes that are not much used in normal driving.

Maximize safety: All high voltage wiring and connectors are protected from casual contact, and visually identified as dangerous. Batteries are protected from collision damage. The current expectations for automated driver assistance in high performance cars are met: ABS, traction control, yaw stability control. Of course all the NHTSA and DOT requirements for crash safety are met, and the car has driver and passenger airbags. Page 10 Copyright © 2004 Tesia Motors Inc.

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Proprietary & Confidential Aesthetics matter: The car is beautiful, in the classic sense: it will still be beautiful in 10 years. It does not look like an electric car, a golf cart, or an economy car. It may look somewhat like an Elise. It has a muscular presence, a sense of purpose (to go fast, to grip the road) and of clean, minimalist design (no frills). Minimize the weight. This is the controlling principle, and will be the biggest design challenge. Weight reduction is a virtuous cycle: reducing the drivetrain weight, for example, allows the chassis supporting it to be lighter, which allows lighter suspension components, lighter brakes, etc.

Move complexity from mechanical systems into software and electronics. One of the benefits of electric cars is that there are very many conventional parts which can simply be left out. We will emphasize, celebrate and make best use of the resulting simplicity. But we will add complexity where it enhances user experience or safety, and where the complexity is in electronics and software. For example, GPS and stability control. Simplify serviceability: Mechanical service (brakes, shocks, suspension bushes and joints, CV joints, hub bearings) should be similar to the Elise. High voltage wiring should be labeled and protected, and not field - serviceable. Electronic assemblies including the high voltage motor controller will be (easily) field replaceable but not field serviceable. Battery packs will be field replaceable.

Build an intuitive user interface. Take the BMW i-drive as a counter-example. The sense we want to create is definitely high-tech, but also accessible, friendly, useful, and consistent. One shouldn’t have to read the manual to operate the car, nor should any special training be necessary.

Specifications of the Tesla Roadster Dimensions 5 Wheel Base: 90.6 in.

8 Track: Front-57.0 in. / Rear-59.0 in.

a Length: 149.0 in.

a Width: 67.7 in.

a Height: 45.2 in.

4s Weight 2150 Ibs Performance a Acceleration: 0-60 mph 3.9 sec. max # Range 300 miles at 60 mph 8 Baittery life 120,000 miles or 10 years, if operated with a specified regimen EV Technology 8 Motor: 165k'W (225 hp) 3-phase AC (brushless) induction motor # Power Electronics: Integrated inverter/charger ® Batteries: 50kWh Lithium-Ion pack constructed from consumer-grade “18650” cells 5 Recharge: any standard 120V or 240V outlet, with automatic charge current selection based on the capacity of the outlet Drivetrain 8 One motor, geared down to drive a differential which drives the rear wheels through driveshafts with constant-velocity joints.

a Transmission: single speed, no clutch or torque converter. Reverse is achieved by reversing the motor and limiting its speed and torque a The differential is a limited-slip type # Overall gear ratio is about 9:1 Chassis and Suspension 2 Suspension: all independent with upper and lower “A” arms a Wheels: magnesium alloy, sizes tod. No spare wheel 8 Tires: sizes thd, type thd, possibly a DOT-legal competition tire Copyright © 2004 Tesla Motors Inc. Page 11

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o Current (sub-calibration: thrust) o Battery voltage o “Fuel” gauge o Speedometer (sub-calibration: rpm) Roof: fabric convertible with optional removable hardtop @ @ G B86 5 a B & Future Directions Although it’s very clear that the best market entry strategy is the high performance sportscar, there is some choice about follow-on products.

Of course the North American car market will change over the next 2 years anyway... it may be that SUVs go out of fashion, and the station wagon type vehicles that are so popular in Europe (Audi, VW, BMW, Mercedes...) take their place, for example. In some ways it will be better to do intensive market research after the Tesla Roadster is launched, as not only will the world look different then, but the existence of the Tesla Roadster will itself change the market perceptions.

We will have some degrees of freedom: we could increase margins by moving up market. The Tesla Roadster is priced at the bottom of the range of very high performance sportscars, but outperforms almost all of them in handling and acceleration. This performance is achieved in part by keeping the weight very low. As a result the car is quite Spartan. A more expensive model could be produced with more of the soft furnishings found in Ferraris and Lamborghinis: more of a touring car than a sports racer. We could trade off some performance for this. We could also add a 2-speed transmission to allow very high top speed.

Meanwhile we could retain the “highest performance” crown in the Tesla Roadster by incrementally increasing the power. It’s possible that improvements in batteries by then will allow this with no weight increase. Rather than increasing margins, we could increase sales volume by moving down market. A 4 seat coupe could be built still with outstanding performance for its class, or a relatively compact wagon (Audi A6 Avant class)., Range will be reduced as drag will be higher than the Tesla Roadster. Battery capacity will probably have +9 OL increased to compensate, but there will remain the issue of charge time.

The charge time is not really a limitation of the batteries or the on-board charger, but of the current available at a typical home. Anything over 80A at 240V may require an electrical service upgrade. 80A with the existing 50kwH battery pack takes four and a half hours for a full recharge; if the battery capacity were increased to 100kwH it will take 9 hours.

Building a large SUV is of course possible too. Electric motors scale up in power very nicely: a 50% power increase implies only a small weight and cost increase. But the battery cost and charge time are limiting factors. Finally, once we are in volume production, we will be able significantly to reduce component and manufacturing costs, allowing us to contemplate lower priced alternative follow-on cars while retaining good margins. Page 12 Copyright © 2004 Tesla Motors Inc.

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Notes

" See Appendix A, The 21" Century Electric Car for a detailed discussion of well-to-wheel efficiency of various vehicles, and of the performance of these vehicles.

? See Appendix D, Application Notes for the AC-150 Gen 2 Electric Propulsion System by AC Propulsion, Inc. This appendix describes their 150 kW system, from which the 165 kW system is closely derived.

* See Appendix C, The Lotus Elise

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Key Alliances

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Key Alliances AC Propuision, Inc AC Propulsion, Inc (www.acpropulsion.com) will provide key motor, power electronics, and battery management technology to Tesla Motors. Tesla Motors has cultivated a very friendly relationship with AC Propulsion, and has negotiated a mutually-beneficial cross-license agreement that will give Tesla Motors access to AC Propulsion’s technology.

The general terms of the license with AC Propulsion are as follows:

AC Propulsion will:

# Grant Tesla Motors a perpetual, non-exclusive, “most-favored nation” license to its technology s Transfer complete documentation to Tesla Motors for its motor, Power Electronics Unit (PEU), Battery Management system, and all dashboard electronics a — Provide consulting services to Tesla Motors at a preferred rate of $85/hour, for a minimum of 3530 hours per year for two years. Consulting services will include participation in cost reduction and manufacturability programs for the motor, PEU, etc. Also included will be design reviews and conversion of a stock Elise into a prototype Tesla Roadster.

Tesla Motors will:

a Pay AC Propulsion a $500K license fee, partially up front, and partially upon complete document transfer # Pay AC Propulsion a minimum of $300K per year consulting fees for two years a Pay AC Propulsion 0.25% of MSRP for every car shipped that is based on AC Propulsion technology

* — Allow AC Propulsion to purchase cost-reduced motors and PEUs at “most favored nation” pricing Lotus Engineering Lotus Engineering (www. lotuscars.co.uk) will be the primary contractor for vehicle design and integration. They will be responsible for:

s Designing the Roadster, based on their Elise, and re-using existing parts where possible « Integrating the EV drivetrain into the car a Engineering all new components 8 Safety testing the car a All government approvals (DOT, NHSTA) 1 Tooling for all components that are not part of the EV drivetrain Estimates from Lotus Engineering for this work are about $8M for all engineering work and $1M for all tooling work. (This is soft-tooling, appropriate for building up to 2,000 cars. Hard tooling — appropriate for up to 50K cars — would cost about $7M) In addition to design and engineering, Tesla Motors will probably engage Lotus to actually manufacture the Tesla Roadster — either in its Hethel, England plant or in the (currently idle) Elise plant in Malaysia, at the factory of Lotus’s parent company, Proton.

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Operating Plan

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Proprietary & Confidential Operating Plan Schedule For each funding round, we will complete the following milestones. The milestones are in rough chronological order.

Series-A Funding Contracts signed with Lotus Engineering and AC Propulsion Tesla Roadster fully specified with input from Lotus Engineering Tesla Roadster design underway at Lotus Engineering AC Propuision tzero-based prototype for testing AC Propulsion licensing and technology transfer complete Cost reduction and manufacturability work on ACP technology underway Dashboard electronics fully specified Information Technology (back-end) systems fully specified Lotus Elise-based handmade prototype of Tesla Roadster available for limited testing Motor manufacturer identified Contract signed with motor manufacturer Dashboard electronics engineering underway Series-B Funding moHgmwe~agsesesr &® = @ &@ ep RBs First article motor delivered First article PEU delivered First article dashboard electronics delivered Marketing plan completed Dealers identified, contracts signed Testing of all systems underway Tesla Roadster design complete First article Tesla Roadster operational Support and training operation fully designed Support documentation early revision available Support site (for dealers) in beta-test Manufacturing site in beta-test Web site running Public relations campaigned started DOT and NHSTA certification completed Series-C Funding B a a a @ Roadster, motor, PEU, and dashboard production ready Support production ready Manufacturing production ready Build of small number of Roadsters in inventory Major public relations campaign underway Other marketing operations launched Deposits received for product launch Series-D Funding Inventory builds Product launch Marketing and sales events On-going operations Copyright © 2004 Tesla Motors Inc.

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Festa Motorsn Proprietary & Confidential Organization Management We will have a small management team of approximately 5 people, including a controller and office assistant. se, Information Technology A small] team of 2 to 3 people is responsible for development of back-end systems. Production machines will be hosted offsite and website design will be contracted out. These systems support: Sales & Marketing programs Dealer and sales inquiries Support services for our manufacturers Support services for the dealers Support services for customers Data collection from vendors and dealers for failure analysis a 2 = a a a Digital Engineering This group develops in-car electronics and software and consists of 4 engineers. These systems provide: # Battery control and monitoring & Dashboard displays and electronics = Diagnostic devices for service and data logging Vehicle Engineering This team of 2 engineers is responsible for:

# Relationship with Lotus Engineering and AC Propulsion ® Roadster automotive and usability design & Vehicle manufacturability { Manufacturing Our manufacturing team is small at 3 people and is responsible for: e Relationships with contract manufacturers <S? ‘4 2 Qualifying vendors yh oe s Factory version control cK A ® Factory quality monitoring =P Sales & Marketing This group of 4 people handles:

« Dealer network :

# Government incentives and regulations concerning electric cars « Public relations, trade shows, and other publicity = Marketing materials including pages for website Support The support group of 2 people provides:

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Marketing and Sales

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alo gs Marketing and Saies ot ay Ks oo Market Size ie so More than 33,300 expensive sportscars (with price tags above $75,000) were sla in the ssn in 2002.' While it would be unreasonable to assume that every one of the buyers of these cars would buy a Tesla Roadster, anecdotal evidence suggests that there is a significant overlap between those who would buy one of these sportscars and those who would prefer an environmentally friendly alternative. The Tesla Roadster is the first car that will let them have the best of both worlds.

The Customer Three groups of people will buy the Tesla Roadster. It will appeal to those who simply want to drive a highperformance car because it will outperform just about every car on the road. The Tesla Roadster will also appeal to those who care about oil consumption (for economic, political or environmental reasons), because it has the lowest energy consumption of any car on the road. And of course, the Tesla Roadster will appeal to technology aficionados, who want a unique, high-tech car.

These groups overlap —- many drivers enjoy performance, but are not happy about high energy consumption. Until now, such drivers have had two choices: either compromise on their oil consumption and buy a sportscar, or compromise on their driving pleasure and drive a low-performance economy-car like a RAV-4 EV or a Prius. This dichotomy is demonstrated by the fact that the average household income of a Prius driver is over $100K? and the household income of a GM EV1 “owner” was over $200K.? Also, hybrids and electric economy cars are popular with Hollywood stars, many of whom have traded in their exotic sportspars for these low-impact vehicles.* We can offer these enthusiasts all the performance they want, but in the vehicle with the lowest energy consumption on the road: better acceleration than a Lamborghini Gallardo, much better fuel economy than a Toyota Prius, at the price of a basic Porsche 911.° Government Incentives Various federal, state, and local agencies offer incentives for our customers. These incentives not only save money, but make driving electric cars very convenient. Some of the more interesting incentives in California are:

A one-time income tax credit is available for 10% of the vehicle price, up to $4,000 The car is exempt from “luxury” federal excise sales tax The car is exempt from the “luxury vehicle” depreciation schedule A reduced rate is available for electricity to charge cars (about 8 cents/kWh in Southern California)’ The Clean Air Vehicle Decal gives unrestricted access to carpool lanes Free public parking and charging are available in special “reserved” parking spaces Free “front row” parking is available at LAX Free parking is allowed in metered spaces in LA, San Jose, Santa Monica, Sacramento Hb 8 @ eB @8@ & @ @ Copyright © 2004 Tesla Motors Inc. Page 25

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Inc.

Proprietary & Confidential

Market Locality

The market for exotic sportscars is highly localized in the USA, dominated by the California market. The following chart shows the number of dealerships for new sportscars in each state with at least 8 dealerships.*

@ Ferrari , @ Lamborghini GLotus “| Panoz

Porsche | Saleen S7 %

Within California, these sportscar dealerships are mostly clustered around the San Francisco Bay Area and Los Angeles County. In New York and New Jersey (which can be considered to be one market), they are clustered near New York City.

Los Angeles is ranked as the most ozone-polluted city in the country, and 8 of the worst 25 cities are in California. The New York/New Jersey metropolitan area comes in as the 20" worst area, with Houston coming in 5", Dallas-Fort Worth coming in 16", and the Philadelphia area coming in as the 14” worst area. Poor air quality motivates people to consider zero emissions vehicles, and motivates the government to provide significant incentives to drive zero emissions vehicles.

These data suggest that we should launch the Tesla Roadster in California through one dealership in the San Francisco Bay Area (probably in Silicon Valley) and one in Los Angeles County (probably near Beverly Hills). Our third city should probably be New York City (covering New Jersey as well), with Miami as a possible fourth. )

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Proprietary & Confidential Publicity We do not plan a grand advertising program, because this is not an efficient way to reach our customers. Instead, we will concentrate our efforts on getting good publicity in the media that our target customers watch, hear, and read.

Fortunately, the combined performance, efficiency, and cleanliness of the Tesla Roadster lend themselves to very positive press coverage. With no PR strategy or budget, AC Propulsion has garnered widespread positive press for the tzero, even though it has never been available to purchase. With a deliberate, well-funded PR campaign, the Tesla Roadster will quickly become a media darling.

The environmental lobby has put a lot of stock into the promise of fuel cell cars, and the press has followed their development with many articles and TV spots. President Bush has allocated $1.2B for development, and Governor Schwarzenegger promised hydrogen refueling stations along California’s interstates.!° However, it is now becoming clear that if fuel cell cars ever will become feasible, it will not happen for at least 25 years.’ “We simply can't bank on hydrogen alone to cut our dependence on Middle East oil or fix the global warming problem,” said Antonia Herzog at the Natural Resources Defense Council, pointing out that Americans will buy 450 million new cars and trucks before the hydrogen car is available.’ ¢ As fuel cell cars fail to become available, the environmental lobby will increasingly call for alternatives, creating excellent press opportunities for the Tesla Roadster.

Sales Strategy Tesla Motors plans to sell a few hundred Tesla Roadsters in the first year, and will be profitable if it sells more than 300 cars per year. With this few cars, we only need a small number of dealers — so long as they are in the right places.

Exotic car dealerships often sell a variety of different brands of cars. For example, Silicon Valley Auto Group (formerly Los Gatos Ferrari) sells new Aston Martin, Rolls Royce, Lotus, Saleen, and Morgan cars, as well as pre-owned Ferraris and Lamborghinis. Such dealerships attract serious sportscar buyers, and also have highlyskilled mechanics that are capable of servicing the diverse cars that they sell.

This class of dealership is well suited to sell and service the Tesla Roadster. We will initially offer the Tesla Roadster for sale through a small number of these sportscar dealerships, starting in Los Angeles, Silicon Valley, and perhaps New York. By offering a 20% ($16,000) margin to the dealership, they will be motivated to sell the Tesla Roadster alongside their other brands.

Tesla Motors will train the sales and service personnel at its authorized dealerships to ensure safety and reliability, and will work closely with them to diagnose and correct any problems that occur with the cars. We will keep a very small inventory of cars in each dealership for show and sales. We plan to take deposits and build to order for most sales.'? Our website and marketing collateral will direct all sales inquiries to the nearest authorized dealership.

Tesla Motors will branch out to dealerships in other cities as it develops the skill and experience to properly support them. In the fullness of time, we will sell cars internationally, perhaps starting in Japan or in Europe. p iy 0¢ yp LAY uno pood th Copyright © 2004 Tesla Motors inc. Page 27

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Proprietary & Confidential Notes (

" Source: Auto News, September, 2003, total of just these sports cars: Acura NSX, Aston Martin, BMW Z8, Dodge Viper, Ferrari, Jaguar XK, Lamborghini, Maserati, Mercedes Benz SL Coupe Roadster, Porsche Carrera. See appendix F.

? Source: Danny Clements, VP Sales, Toyota in BusinessWeek, Online, March 23, 2003

* Source: GM study cited at http://www. hfmgv.org/exhibits/pic/2002/02.oct.html 4 Including Cameron Diaz, Leonardo DiCaprio, Larry David, Don Cheadle, Meryl Streep, David Duchovny, David Hyde Pierce, Patricia Arquette, Jackson Browne, Ted Danson, Jeff Goldblum, Donna Mills, Rob Reiner, James Taylor, Richard Dreyfuss, Bonnie Raitt, Tom Hanks, Ed Begley Jr., Tony Shalhoub (USA Today, March 20, 2003) ° See Appendix A: The 21 Century Electric Car

* For an up-to-the-minute list of various government incentives for ZEVs, visit www.zevinfo.com. ” This makes the cost to drive the Tesla Roadster about $16 per 1,000 miles. A 28 mpg gasoline car would cost about $60 to drive the same distance.

® Source: manufacturer’s websites, February 2004 ° State of the Air 2002, American Lung Association '° Hydrogen fuels Schwarzenegger vision for future by Miguel Bustillo and Gary Polakovic Los Angeles Times, January 25, 2004 "' Reuters , Feb 4 2004 5:50PM, as well as an article in The New York Times on February 6, 2004: Report Questions Bush Plan for Hydrogen-Fueled Cars by Matthew L. Wald (Appendix E) 7 ” ibid "? Lotus has taken over 2,000 US deposits for the Elise, according to dealer reports (cf www.pistonheads.com) Page 28 Copyright © 2004 Tesla Motors Inc.

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‘Competition

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0 © (Fosia Proprietary & Confidential Ine.

Competition Electric Cars The California Zero Emissions Mandate required all car companies to produce a limited number of zeroemissions vehicles by 2003. As a result of this mandate, every major company produced one or two electric cars, beginning in 1997. None had a range of more than 100 miles (60 miles was typical); on most, the battery pack lasted only 25,000 to 40,000 miles; they all had poor performance. Despite their limitations, the demand for these cars exceeded their production.

Through pressure from the auto ff industry, the Zero Emissions Mandate was repealed in March | of 2003. Every single car Se 0 a OE el company immediately cancelled — eo ‘ . Ce a ya * its EV program. Those : i customers who leased their electric cars (e.g. EV1’s) had their leases terminated and were forced to return the cars so that they could be crushed.

Today, the only electric cars available in the US are “Neighborhood Electric Vehicles” — little more than glorified golf carts.

"i te

The federal government is now subsidizing auto makers to develop hydrogen-powered fuel cell cars hoping they will be the long-term solution to pollution " ° oon and dependence on foreign oil. Crushed EV1’s at GM’s Desert Proving Grounds in Mesa, AZ. Even the most optimistic — December, 2003 proponents of this technology admit that it will be at least ten years before the first of these cars is available to the public. There are, however, very good reasons to believe that hydrogen-based fuel cell cars will never reduce pollution or reduce dependence on foreign oil.’

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Electric Cars Today

All electric cars available today are very small “commuter cars” or “neighborhood electric vehicles.” Following is a representative sampling of the available electric cars.

Commuter Cars Corporation, www.commutercars.com, says it will someday sell the “Tango,” an ultra-narrow commuter car with one seat in front and one in back. They claim a remarkable 4 seconds for 0-60 acceleration, and a range of 60 miles.

Feel Good Cars, www.feelgoodcars.com, may someday produce the “Zenn,” a tiny commuter car limited to 25 mph and 30 miles range.

GEM, www.gemcars.com, makes a line of “Neighborhood Electric Vehicles” that resemble golf carts, limited to 25 mph and 30 miles range. GEM is owned by DaimlerChrysler.

Reva India, www.revaindia.com, recently spun off from Californiabased Amerigon to sell the tiny Reva car in India. It is limited to 40 mph and a 50 mile range.

Solectria, www.solectria.com, has stopped producing the modest electric sedan called the Solectria Force and several other electric vehicle conversions. Today, the only vehicles they produce are vans and school busses. Solectria primarily produces components for electric vehicles.

, Wespeste

THINK, www.think.no, was sold by Ford Motor Company to Nordic investors in 2003. They continue to sell the tiny THINK City in Scandinavia. It has a top speed of 55 mph and a range of 50 miles.

ae cl ee

ZAP! Cars, www.zapworld.com, markets a variety of electric scooters, bikes,

and neighborhood electric vehicles, most of which it imports from overseas. All their cars are limited to 25 mph and have very limited ranges.

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Electric Sportscars Today

While no electric sportscars are made today, there are hints that other startup companies are exploring the idea. Following are a few examples; no doubt more will materialize over time. None of these cars is serious competition to the Tesla Roadster.

NuAge Electric (www-.nuageelectric.net) recently merged with SMI Products, Inc. (OTCBB:SMIP) Nu Age Electric is a private Nevada Corporation formed to acquire the North American “exclusive rights” to license and operate NuPow'r LLC Power Service Stations (dealerships) in the USA, Canada and Mexico. NuPow'r LLC is a separate private Nevada corporation owned by Chaz Haba of Van Nuys, California. (Mir. Haba was founder of the now defunct Planet Electric.) Their website describes products from neighborhood electric vehicles, go-carts, and ATVs to minibikes, scooters, and even lawn mowers.

Zhaocheng Electric, Anhui Province, China, in conjunction with Qirui Automobile Co. of Shanghai, has announced develépment of a lead-acid electric “sports car” called the ZC 7050 A. This car has a top speed of 50 mph and a range of 170 miles. It is not clear that this car will go into production.

Zytek Automotive, the West Midlands, UK (www.zytek.co.uk) is a company that produces mostly race car components. They produced one relatively low performance twin-motor Lotus Elise conversion as a demonstration of their electric car technology and a demonstration of an electrically-converted Smart car. They appear to have no plans to put these cars in production, concentrating their electric car efforts instead on contracts with major car companies (e.g. General Motors’s parallel hybrid truck) to develop hybrid cars.

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Gasoline Sportscars Proprietary & Confidential The Tesla Roadster out-accelerates almost every car made, including fantasy cars that cost hundreds of thousands of dollars. But it is also the most efficient car on the road, consuming one fourth the energy of any other fast sportscar. The following table summarizes the acceleration, price, and fuel consumption of the fastest sportscars available.” ?

C12 S Roadster GT Lam hini L-147/148 Mu SRT-10 S7 Porsche 911 Turbo Cou Ferrari 575M Maranello Lam hini L-140/141 Gallardo Chevrolet Corvette Z06 Ferrari 360 Modena Lotus V8 NSX Panoz Porsche 911 Usable Performance 3.6 3.8 3.8 3.9 3.9 4.2 42 42 46 46 48 4.9 4.9 5.0 000 $440,000 5,000 000 $118,400 17,890 165,000 385 143,860 500 765 950 600

24 24 13 20 18 22 16 16 28 16 22 24 23 26 Driver’s enjoyment comes from usable performance, not from theoretical specifications. For a street car, this means that acceleration below 100 mph is much more interesting than a stratospheric top speed. (For example, the top speed of the Porsche Carrera GT is said to be 205 mph. Note that California Vehicle Code‘ provides special punishments for driving in excess of 100 mph that include license suspension, vehicle impoundment, and jail.)

With no clutch, no gearshift, and with constant torque from zero to 6,000 rpm and plenty of power all the way to 13,000 rpm, the Tesla Roadster’s performance is extremely usable. Its awesome power is instantly available when launching from stop, when powering out of a curve, or whenever the driver wants to move. The Tesla Roadster has no transmission (since the motor directly drives the differential), which means that its top speed is limited to 100 mph. We made this design decision because it increases usable performance, while decreasing complexity and cost. On the street, the Tesla Roadster will blow away every single exotic sportscar (even those with top speeds above 200 mph) like the AC Propulsion tzero has done, race after race. See Jan Wright’s comments in Appendix B, Usable Performance, for a driver’s impression of an electric sportscar.

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Notes

"See Appendix A: The 21" Century Electric Car

? In most cases, the performance and cost of each car is from the respective manufacturer’s website. (In a few cases, the price is not mentioned, and the prices are from various web sellers of the cars.) All gasoline mileage numbers are from www.fueleconomy.gov. All production cars are 2004 model year.

* For the electric cars, mpg is calculated based on actual well-to-wheel energy consumption

4 Section 22348(b) ° See www.acpropulsion.com for videos and photos of the tzero beating a variety of exotic sportscars.

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Financials

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Drive Train & Power Electronics We have acquired a perpetual, non-exclusive license to motor, power electronics, and battery charging technology from AC Propulsion.’ However we will devote significant engineering time and factory NREs to make this technology mass producible and cost effective. AC Propulsion License fees plus consulting time are approximately $1.1M.

Automotive Design and Engineering We will fully outsource the automotive design and engineering to Lotus Engineering.” We have allocated approximately $8M for design and engineering fees, including necessary work to acquire government certification (DOT and NHSTA). The Lotus Elise provides an excellent starting point for the Tesla Roadster, and Lotus Engineering has expressed interest in a design that includes many of their stock components. This strategy reduces our tooling and production costs, reduces risk, and allows for quick development. Using this strategy, we will complete design, engineering and tooling in approximately two years from start. Factory Tooling For low volume “soft” tooling (under 2,000 cars) we expect to spend approximately $1M in factory NRE and other tooling expenses for the car, plus an additional $500K for NRE and tooling expenses associated with the drivetrain and dashboard electronics.

Tesla Motors Technology We will develop significant technology from commercializing the EV drivetrain and battery technology, developing onboard and dashboard computers, and building innovative back-end technologies to reduce service costs and road failures. Approximately 30% of company payroll is devoted to these activities. Cost of Goods Soid

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Inc. Proprietary & Confidential + j=. A Expense Assumptions

4,700 000 $102,000 $102,000 500 180 $240,000 40,000 $80,000 $740,000 $760,000 000 $0 $0 $0 800,000 800,000 1,100,000 $150,000 5,000 000 000 121,749 31,000 53,200 Revenue Assumptions Globalsaies sid ST 2008 T2006 2007 Tota S Sold) 0 0 165 400 TotalRevenue; $0 $0] $11,055,000} $27,525,000

Road to profitability We estimate that the low volume cost of an assembled Tesla Roadster will be $49K, including a guess of $5K for shipping and taxes, and including a $3K reserve for warranty and insurance (see Major Risk Factors below). Batteries dominate the cost at $18K per car. However, we should enjoy volume discounts on these commodity batteries and costs should decline as production grows above 100 cars per year. It will take approximately $23K to fabricate the rest of the car — chassis, body components, drivetrain, and electronics. These costs are similar to industry estimates for the small volume Lotus Elise.

We expect to spend a significant portion of our income developing follow-on models of cars, though it is premature to estimate the costs associated with this development.

In our model, we have made the simplifying assumption that we must pay 100% of the COGS at the beginning of production and will not receive any sales dollars until 90 days after production has started. In reality, we expect to have better terms with our suppliers, and have a deposit system for our sales, so we hope cash flow requirements may be better than projected.

Income Statement Summary SE 97 805,000 519,649 $7,359,200 $4,746,800 $4,746,800 519,649 7,359 1,776,800 058 823 7,321,089 1,738,985 098,825 2

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Proprietary & Confidential Tesla Metorsn Cash Flow Statement Summary $9,519,649 151 15,658,800 294,800 $9,519,649 $8,151,200 $4,603,800 15,010,750 000,000 000,000 524,417 411,327 845,342 116,167

Major Risks Factors Although confident that our key assumptions are correct, there are risks for any project. Here are major risks from the financial perspective that we have identified.

Automotive design costs We have allocated $8M for design fees based on preliminary conservations with Lotus Engineering. Within a few weeks from start of contract with Lotus we will have much better cost and time estimates, including COGS for the Roadster. These numbers may change our future capital requirements or change our gross margins if we maintain the same sale price point.

Timeline Based on our preliminary discussions with Lotus Engineering, our two-year timeline appears to be in line with their 19-month engineering and tooling estimate. However, if we are unable to come to market within two years for some reason, we will require additional funding or a change in our expense plans. Early in the engagement with Lotus, we will have more accurate time estimates.

Liability Insurance We are currently engaged in a process to determine insurance options for the company. There are few small car companies in existence; therefore a standard insurance model and insurance product does not exist. We may have to be quite creative on this front, either by finding a way to fit into the existing insurance market or by partnering with a larger firm (such as our manufacturing partner).

Notes

The AC Propulsion agreement will take affect upon closing of Series-A funding. See Key Alliances section for details of this agreement.

? See Key Alliances section for details of the agreement with Lotus Engineering.

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Funding Proposal

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Milestones The proceeds for Series-A funding will be used to achieve the following milestones: Engineering staff hired Tesla Roadster fully specified Roadster design underway with Lotus Engineering AC Propulsion tzero-based prototype for testing Lotus Elise-based handmade prototype of Tesla Roadster available for testing Licensing and technology transfer with AC Propulsion complete Cost reduction and manufacturability work on ACP technology underway Identified and in contract with motor manufacturer Dashboard electronics fully specified Dashboard electronics engineering underway mB 8 &© 8B & @ = g sg @ Equity Structure Tesla Motors Inc. is a Delaware Corporation with the following equity structure: r ~ gant . “gon 150,000 1.5% 10,150,000 100.0% In addition, there are 2,000,000 shares set-aside for an Employee Stock Option Plan for employees. No shares have been allocated from this pool at this time.

There is a small debt of $25K to the founders that will éonvert to equity at the Series-A price. It is the intent of _ the principals to participate in Series-A funding.

Additional Funding Rounds The Tesla Motors business plan includes a total of four rounds of funding. The approximate amounts, dates, and purpose are as follows:

-Mar. n 31-Dec-04| $8,000,000] Final 000,000} Final & I -06 000] Product nch

Please refer to the Financials section for additional details.

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The Company

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Prior to founding NuvoMedia, Mr. Eberhard was Vice President of Electronics at Belfort Memory International, co-founder and Chief Engineer of Network Computing Devices, Inc., and developed high-volume terminals for Wyse Technology Inc. Mr. Eberhard has a Master’s Degree in Electrical Engineering from the University of Illinois in Champaign, Illinois.

Marc Tarpenning (Président) Marc Tarpenning brings 21 years of engineering management experience to Tesla Motors. co-founder and Vice President of Engineering at NuvoMedia Inc, and staffed a team of 20 people, including hardware, firmware, software, and support engineers. He led the development of the Rocket eBook and the necessary Internet infrastructure to securely sell valuable content over the Internet.

Mr. Tarpenning has managed and developed software and firmware products for many companies, including Belfort Memory International, NEC, Seagate, Textron, and Bechtel. He has a B.A. on Computer Science from the University-of California, Berkeley.

lan Wright (COO) Ian Wright has a fairly broad experience in engineering design and executive management (mostly in startup companies), spanning optical transmission and switching, core routers and ATM switches, and even radio station and recording studio equipment. He has built strong engineering teams and led them to build very complex system-level products.

Most recently he was CTO and Senior Vice President of Engineering at Altamar Networks, a division of Ditech Communications (recently sold to JOSU). Altamar was formed by Jan and two other executives to build the world’s most scaleable core optical switch; it was also the first to integrate a long haul/ultra long haul Dense Wavelength Division Multiplexing transmission system (160 channels over a single fibre, each at 10Gbit/s, reaching up to 6,000km without regeneration.) Ian led the acquisition of two other startups (Atmosphere Networks in Silicon Valley (2000) and Mlotron in the U-K. (2001)) in order to build Altamar to critical mass. Including acquisition costs, the product was delivered for $72m (less than half what competing startups spent) in a little over 2 years.

Mr. Wright’s interest in things automotive spans several decades and includes successful experience in building and driving racing cars at an amateur level.

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Bernard Tse earned B.S., M.S. and PhD degrees, all in Electrical Engineering, from the University of Illinois. Dr. Tse brings volume manufacturing experience, with an emphasis on purchasing and manufacturing in Asia to the Tesla Motors board.

Laurie Yoler Laurie Yoler is Vice President, Marketing and Business Development at Precision I/O, Inc. Ms. Yoler was VP of Marketing and Business Development for Packet Design LLC for two years before Precision I/O was spun out in March of 2003. She was previously a senior director at Sun Microsystems where she held a number of corporate development, business development, marketing and sales management positions, including three years based in Geneva, Switzerland as the sales director for financial markets for Europe, Middle East, and Africa. While in Europe, she was selected as a member of the EU Financial Issues Working Group. Prior to Sun, Ms. Yoler was the director of product development and management at Visa, where she designed and implemented new banking products and provided consulting in risk management to banks across the US. Before joining Visa, Ms. Yoler was a manager in the advanced technology practices of Andersen Consulting (aow Accenture) and Coopers & Lybrand (now PricewaterhouseCoopers). She previously served on the board of directors of Interactive Investor (acquired by AMP) and the technical advisory board of Index Ventures. She currently serves on the Board of the Palo Alto Junior Museum and Zoo, and volunteers-for Villa Montalvo and-the Mountain Winery.

Ms. Yoler graduated summa cum laude from Washington State University with a B.A. in management information systems. She also completed a year abroad in the international business program at the University of Copenhagen and executive management programs at Kellogg and INSEAD. , Ms. Yoler brings critical business planning and marketing expertise to the Tesla Motors board. Page 50 Copyright © 2004 Tesla Motors Inc.

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Appendix A: The 21* Century Electric Car

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Proprietary & Confidential The 21° Century Electric Car New Technology Justifies a Re-Examination Martin Eberhard, Marc Tarpenning, and Jan Wright Tesla Motors Inc.

Friday, February 20, 2004 The Electric Car, once the “zero emissions vehicle” darling of the environmental lobby, is now maligned as merely an “emissions elsewhere vehicle,” since the electricity to charge its batteries must be generated in (probably conventional) electrical generation plants that do indeed make emissions. This is a reasonable point, but when we work through the numbers, electric cars are significantly more efficient and less polluting than all alternatives, In this paper, we will work through the numbers for an existing prototype electric car (the AC Propulsion tzero) and the related and forthcoming Tesla Roadster that both use commodity lithium-ion batteries instead of the usual lead-acid batteries. Not only do these cars have extremely high “well-to-wheel” energy efficiency and extremely low emissions, they also have superior performance and convenience.

Energy Efficiency To compute the well-to-wheel energy efficiency of a car, we must start with the energy content of the source fuel (e.g. crude oil) as it comes from the ground. We then track the energy content of this fuel as it is converted to its final fuel product (e.g. gasoline), and subtract the energy needed to transport the fuel to the car. Finally, we use the fuel efficiency of the car itself (e.g. its advertised mpg) to complete the equation. All fuels can be described in terms of the energy per unit of mass. In this paper, we will express the energy content of fuels in terms of mega-joules per kilogram (MJ/kg). Well-to-wheel efficiency is then expressed in terms of kilometers driven per mega-joule of source fuel consumed.

Gasoline Cars The well-to-wheel energy efficiency. of a normal gasoline-powered car is calculated this way: gasoline’s energy content is 46.7MJ/kg', or 34.3 MJ/1 The production and transportation to the gas station is 81.7% efficient’, meaning that 18.3% of the energy content of the crude oil is lost to production and transportation. Thus, 34.3 / 81.7% = 42 mega-joules worth of crude oil are needed to produce one liter of gasoline. The most efficient ordinary gasoline car made was the 1993 Honda Civic VX, which was EPA certified at 51 mpg for combined city and highway driving’. Converting this to metric, this car would go 21.7 kilometers per liter of gasoline. This means that it required 21.7 / 42 = 0.52 kilometers per mega-joule. Keep in mind that the Honda Civic VX got about twice the gas mileage of typical cars — count on around 0.28 km/MJ for a car like a Toyota Camry”.

Hybrid Cars All hybrid cars available today have no provision to charge their batteries except by using their gasoline engines. This means that they may be considered, from a pollution and energy efficiency perspective, to be nothing more than somewhat more efficient gasoline cars. If the EPA-certified gas mileage for such a car is 51 mpg, this is exactly the same as an ordinary gasoline car that gets 51 mpg. (Ifa hybrid car could recharge its batteries by plugging in when at home, and if its batteries held enough charge for a meaningful drive, this would not be true.) The best hybrid car today is the 2004 Honda Insight, which gets 63 mpg for combined city and highway driving®. Using similar math as the Civic VX above, this vehicle’s well-to-wheel energy efficiency is 0.64 km/MI. Copyright © 2004 Tesla Motors Inc. Page 53

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Natural gas recovery is 97.5% efficient, and processing is also 97.5% efficient.® Electricity is then transported over the electric grid, which has an average efficiency of 92%”, giving us a “well to electric outlet” efficiency of 60% x 92% x 97.5% x 97.5% = 52.5%.

The energy cycle (charging and then discharging) of lithium-ion batteries in an electric car with a well-designed charger is about 86% efficient’®. This means that for every 100 mega-joules of electricity used to charge such a battery, only 86 mega-joules of electricity are available from the battery to power the car’s motor. Well-designed electric cars use about 100 watt-hours (0.36 mega-joules) of electricity from the battery to go a kilometer," or 2.78 km/MJ. The “electrical outlet to wheels” energy efficiency of our lithium-ion car is therefore 2.78 x 86% = 2.39 kin/MJ.

Thus, the well-to-wheel energy efficiency of such an electric car is 2.39 x 52.5% = 1.25 km/MJ, or double the efficiency of the best hybrid car available.

Hydrogen Fuel Cell Cars Hydrogen does not exist in nature except as part of more complex compounds such as natural gas (CH,) or water (HO). The most efficient way to produce large quantities of hydrogen today is by reforming natural gas. For new plants, the well-to-tank efficiency of hydrogen produced from natural gas, including generation, transportation, compression, is estimated to be between 52% and 61% efficient. 12 ah The upper limit Ge efficiency for a PEM fuel cell is 50%'*. The output of the fuel cell is electricity for turning a drive motor, and we can assume the same 2.78 km/MJ vehicle efficiency as with the electric car. With these numbers, we can calculate the well-to-wheel energy efficiency for our hydrogen fuel cell car: 2.78 x 50% x 61% = 0.85 km/MJ.

This is impressive when compared to a gasoline car, though it is 32% worse than our electric car. But real fuel cell cars do not perform nearly this well. The best fuel cell car measured by the EPA is the Honda FCX, which gets about 49 miles per kilogram of hydrogen, which equals 80.5 kilometers per kilogram. We know that the energy content of hydrogen is 141.9 MJ/kg"*, so we can calculate the vehicle efficiency to be 80.5 / 141.9 = 0.57 km/MI. (Clearly, the Honda fuel cell is nowhere near the theoretical 50% efficiency assumed above.) When we calculate the well-to-wheel energy efficiency of this Honda experimental car, we get 0.57 x 61% = 0.35 km/MJ, not even as good as the ordinary diesel VW Jetta, let alone the gasoline-powered Honda Civic VX and the Honda Insight hybrid car.

However, some proponents of hydrogen fuel cells argue that it would be better to produce hydrogen through electrolysis of water. The well-to-tank efficiency of hydrogen made through electrolysis is only about 22%,'° and the well-to-wheel energy efficiency of our theoretical fuel cell car would be 2.78 x 50% x 22% = 0.30 km/MJ, and the well-to-wheel energy efficiency of the Honda FCX would be 0.57 x 22% = 0.12 km/Mf, even less efficient than 2 Porsche Turbo.

Even with the $1.2 billion US government initiative to reduce U.S. dependence on foreign oil by developing hydrogen-powered fuel cells, a recent report by a panel at the National Academy of Sciences shows that Americans should not hold their breath waiting for the cars to arrive in showrooms.

"In the best-case scenario, the transition to a hydrogen economy would take many decades, and any reductions in oil imports and carbon dioxide emissions are likely to be minor during the next 25 years," said the academy.” Comparison The following table shows the well-to-wheel energy efficiency of several types of high-efficiency cars, including the AC Propulsion tzero prototype and an estimate for the efficiency of the slightly heavier Tesla Roadster. sHenhy aves Lewes Page 54 Copyright © 2004 Tesla Motors Inc.

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Proprietary & Confidential Technology | Example Car | Source Fuel|.Well-to-Station| Vehicle | Vehicle. ~| 'Well:to-Wheel ws POOP LEE a eficieney a Milage: ||: Effidiefioy “7 efficiency: ~!

Natural Gas Engine — |Honda CNG Natural Gas 86.0%135 mpg 0.37 km/MJ} 0.32 km/MJ Hydrogen Fuel Cell Honda FCX Natural Gas 61.0%164 m/kg 0.57. km/MJ]. _°, .0.35 km/MJ Diesel Engine VW Jetta Diesel__|Crude Oil 90.1%|50 mpg 0.53 km/MJ] ‘0.48 km/MJ Gasoline Engine Honda Civic VX {Crude Oil 81.7%|51 mpg 0.63 km/MJ 0.51 kni/Mu Hybrid (Gas/Electric) [Honda Insight Crude Oil 81.7%|63 mpg 0.78 km/MJ} 064 -krii/MJ Electric Tesla Roadster _|Natural Gas 52.5%|100 Whikm 2.38 km/MJ 4:25 km/MJ Electric ACP tzero Natural Gas §2.5%} 100 Whikm 2.38 km/MJ] | 1:25 Km/MJ

Well:to.WheellEne

0 0 0 : T = Honda Honda VW Jetta Honda Honda Tesla ACP tzero CNG FOX Diesel Civic VX Insight Roadster Emissions

Burning fuel produces a variety of emissions, from sulfur and lead to unburned hydrocarbons to carbon dioxide and water. Through the years, we have improved the emissions of both cars and power plants by reformulating the fuels to eliminate sulfur and metals, and by improving combustion and post-combustion scrubbing to eliminate unburned hydrocarbons. In the end, an ideal engine or power plant will only emit carbon dioxide and water. Water is fine, but carbon dioxide is the greenhouse gas that cannot be avoided.

We can compute the well-to-wheel carbon dioxide emissions for a given vehicle in a similar way to how we computed efficiency, since we know the carbon content of the source fuel. With perfect combustion, all of the carbon in the source fuel will eventually become carbon dioxide. Assuming perfect combustion, we can calculate the “CO, content” of any source fuel. Crude oil has a CO, content of 0.07164 grams per watt-hour, and natural gas has a CO, content of 0.05184 grams per watt-hour.”®

With these numbers, we can calculate the well-to-wheel emissions of the various vehicles, based on the carbon content of the source fuel and the energy efficiency of the vehicles:

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@ Car.” Gas ‘Honda CNG Natural Gas 14.4 sn Fuel Cell [Honda FCX Natural Gas 14.4 VW Jetta Diesel {Crude Oil 19.9 Honda Civic VX Oil 19.9 Gas/Electric) |Honda Crude Oil 49.9 Tesla Roadster Natural Gas 14.4 45 . Mel Carbon: DioxideEmissions, . | 40 35 30 g/km 25 20 Honda HondaFCX VW Jetta Honda Honda Tesla ACP tzero CNG Diesel Civic VX Insight Roadster

Again, the electric car shines — from the perspective of CO, emissions, it is three times better than the hybrid car, and nearly four times better than the hydrogen fuel cell car.

The True Muiti-Fuel Car The beauty of powering cars with electricity from the grid is that we can generate the electricity any way we want without changing the cars. As we have seen, we can generate electricity with our choice of fossil fuels. We can also use nuclear fuel, or we can generate it with any of a number of “green” sources, such as hydroelectric, geothermal, wind, solar, or biomass. Electricity is the universal currency of energy, and we already have a comprehensive distribution system for it.

Proponents of hydrogen fuel cell cars regularly compare the forecasted best efficiency of hydrogen production and conversion — in futuristic plants and fuel cells that have never been built — to the efficiency of the average existing electric generation plant — including all those 25% to 30% efficient power plants that were built in the 1950s. This is not a fair comparison — if we are willing to build all new hydrogen production plants to power a hydrogen car future, then we should be just as willing to build new electric generators to power an electric car future. We have assumed 60% efficient best-of-breed electric generators, but not science-fiction electric generators.

However, natural gas accounts for only 14.9% of the US electricity generation; the rest is a mix of coal, nuclear and others. The average well-to-outlet efficiency of US electric generation, including all the old, inefficient power plants, is about 41%.”° With this efficiency, our electric car has a well-to-wheel energy efficiency of 0.99 km/MJ, still the most efficient car on the road.

Of course, fuel cell cars are also multi-fuel cars, since hydrogen can be produced from water using electricity from any source. But this is a very inefficient way to use electricity. Consider the following chart: Page 56 Copyright © 2004 Tesla Motors Inc.

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j Elect

cto: Motor Efficiency

|H20 Electrolysis}: \.H, Compressor | 70% efficient | "| 90% efficient. |

| A Fuel Geil | | "| 40% efficient |:

It is obvious that when we start with electricity (however it may be produced), it is hard to beat the 86% efficiency of the currently-available lithium-ion batteries. Even when we assume extremely high efficiencies for electrolysis, compression, and the fuel cell, the fuel cell car requires more than three times as much electricity from the grid to drive the same distance.

Performance

The vision of replacing many of the cars on the road with clean commuter vehicles has caused most producers of electric cars to build low-end cars with as low a price as possible. But even if a solid argument could be made that electric cars will ultimately be cheaper than equivalent gasoline cars, they will certainly not be cheaper until their sales volume approaches that of a typical gasoline car — many thousands per year at least.

Until an electric car manufacturer achieves high enough sales to approach a gasoline car manufacturer’s volume efficiencies, electric cars will need to compete on other grounds besides price. Aside from the obvious emissions advantage, there is another way that an electric car can vastly outperform a gasoline car — in a word, torque. A gasoline engine has very little torque at low rpm’s and only delivers reasonable horsepower in a narrow rpm range. On the other hand, an electric motor has high torque at zero rpm, and delivers almost constant torque up to about 6,000 rpm, and continues to deliver high power beyond 13,500 rpm. This means that an electric car can be very fast without any transmission or clutch at all, and the performance of the car is available to a driver without special driving skills.

At one end of the spectrum, the electric car has higher efficiency and lower total emissions than the best of the most efficient cars. At the other end of the spectrum, the electric car accelerates at least as well as the best sportscars, but is six times as efficient and produces one tenth the pollution. The chart on the following page compares our electric cars with several high-performance cars and with several high-efficiency cars.

Page 78

Gas Gas/Electric Fuel Cell

Porsche Turbo Ferrari 550 Maranello Corvette

Honda VX Jetia Diesel

Honda

Honda FCX

Proprietary & Confidential

: to! 60:

Sec

14 -

nphiAc

10 Te 8

ON fA QD

ACP tzero

Porsche Turbo

Tesla Roadster

FerrariS50 Chevrofet Honda Civic VW Jetta Maranello Corvette VX Diesel

Honda CNG

Honda Insight

Honda FCX

— Scpatnn —

Porsche Ferrari550 Chevrolet Honda Civic VW Jetta

Honda CNG

Honda Honda FCX

ACP tzero Tesla Roadster Turbo Maranello Corvette VX Diesel Insight 140 120 100 80 gikm 60 40 20 0 ACP tzero Tesla Porsche Ferrari550 Chevrolet Honda Civic VW Jetta HondaCNG Honda Honda FCX Roadster Turbo Maranello Corvette Vx Diesel Insight Page 58 Copyright © 2004 Tesla Motors Inc.

Page 79

Proprietary & Confidential

When we plot well-to-wheel energy efficiency against acceleration, almost all cars fall along a curve that shows exactly what we expect: the more performance you want, the worse the mileage you will get.

But there are two cars that are way off the curve — the AC Propulsion tzero and the Tesla Roadster. These cars are clearly based on a disruptive technology — they offer great acceleration and the highest energy efficiency at the same time.

\O.Panoz Esperante

+ Nissan 350Z

. Toyota Celica ' | Nissan Maxima X% Ford Taurus

Honda FCX (fuely

| 2 Honda Insight,(Hiy!

i he

eae ° : 15

Acceleration from 0 to 60 mph ( Sec.)

0.8 1.0 Well-to-Wheei Energy Efficiency (km/MJ)

Page 80

Lithium-ion batteries (such as those in most laptop computers) have three times the amount of charge than the same size lead-acid batteries, and at the same time weigh substantially less. Additionally, lithium-ion batteries will last at least 100,000 miles, while lead acid batteries need to be replaced about every 25,000 miles. The original AC Propulsion tzero had lead-acid batteries, and (like the EV1”") had a range of about 80 miles. However, this same car, converted to lithium-ion batteries, now has a range of 300 miles, and weighs 500 pounds less.

Electric cars like the EV1 gained notoriety for their short driving ranges. In contrast, a typical gasoline car can go more than 300 miles on a tank of gas. The main reason that we want to have 300-mile range on our gasoline cars is not primarily because we want to drive 300 miles in a day, but rather because we don’t want to go to the gas station every day — a tank of gas should go about a week. From this perspective at least, the 80-mile range of the electric car might be enough for a commuter car.

But 80 miles is not enough for anything but the most basic commute. It is not uncommon to drive significantly more than 80 miles in a day — often leaving directly from work and without any planning ahead. (For example, a drive from Silicon Valley to the Pebble Beach golf course is about 90 miles each direction.) Making matters worse, the more fun a car is to drive, the more it will get driven. A sportscar enthusiast would find 80-mile range to be restrictive in the extreme.

250 to 350 miles is an acceptable range even for a sportscar enthusiast. The only way that such an electric sportscar will fall short is in its inability to take long trips, since there aren’t any recharging stations along the highways, and since it takes time to charge batteries.

Until we develop a charging infrastructure (even one that only consists of simple 240-volt electrical outlets in convenient places), electric cars are best suited for local driving — 250 miles from home, limited by the battery charge.” This is pretty much how sportscars are driven anyway: when it’s time to take a long trip, take your other car.

Electric cars are mechanically much simpler than both gasoline cars and fuel-cell cars. There is no motor oil, no filters, no radiator fluid, no clutches, and no pumps. The motor has one moving part, compared to the dozens in an engine, and the only gears are in the differential. Due to regenerative braking, even the friction brakes will see little wear. A well-designed electric car should only need tire service for the first 100,000 miles. The Desirable Electric Car It is now possible build an exceedingly quick lithium-ion powered electric sportscar that looks good, handles well, and is a joy to drive, for a lower price than most existing high-performance sportscars. And yet, this car will be the most fuel-efficient and lowest pollution car on the road. You can have it all. Page 60 Copyright © 2004 Tesla Motors Inc.

Page 81

Proprietary & Confidential tesla Metersx Notes

" Well-to-Wheel Studies, Heating Values, and the Energy Conservation Principle, 29 October 2003, Ulf Bossel 2 Density of gasoline from Pocket Ref, 3" Edition, 2002, Thomas Glover, Page 660 ? Exhaust Emissions From Natural Gas Vehicles by NyLund & Lawson, page 27, and also Well-to-Tank Energy Use and Greenhouse Gas Emissions of Transportation Fuels - North American Analysis, June 2001, by General Motors Corporation, Argonne National Laboratory, BP, ExxonMobil, and Shell. Vol. 3, Page 59 “EPA mileage numbers from www.fuelefficiency.gov > EPA mileage numbers from www.fuelefficiency.gov ° EPA mileage numbers from www.fuelefficiency.gov ” General Electric "H System" Combined cycle generator, model MS7001H/90014, as installed in Cardiff, Wales, in Tokyo; Japan, and in Scriba, New York.

® Well-to-Tank Energy Use and Greenhouse Gas Emissions of Transportation Fuels - North American Analysis, June 2001, by General Motors Corporation, Argonne National Laboratory, BP, ExxonMobil, and Shell. Vol. 3, Page 42 ? ibid, Page 33 The AC Propulsion lithium-ion tzero efficiency was confirmed by the judges at the 2003 Challenge Bibendum. "' The GM EV1 consumed 162 WH/km, measured “electrical outlet-to-wheels.” (www.gmev.com/specs/specs.htm). The AC PRopulsion tzero consumes 100 WH/km, measured “battery-towheels.” (www.acpropulsion.com/EAASV_101803.pdf) ? Well-to-Tank Energy Use and Greenhouse Gas Emissions of Transportation Fuels - North American Analysis, June 2001, by General Motors Corporation, Argonne National Laboratory, BP, ExxonMobil, and Shell. Vol. 3, Page 59 8 Efficiency of Hydrogen Fuel Cell, Diesel-SOFC-Hybrid and Battery Electric Vehicles, 20 October 2003, Ulf Bossel

* EPA mileage numbers from www.fuelefficiency.gov ' Well-to-Wheel Studies, Heating Values, and the Energy Conservation Principle, 29 October 2003, Ulf Bossel © Well-to-Tank Energy Use and Greenhouse Gas Emissions of Transportation Fuels - North American Analysis, June 2001, by General Motors Corporation, Argonne National Laboratory, BP, ExxonMobil, and Shell. Voi. 3, Page 59 ” Reuters, February 4, 2004, 5:50 PM '8 http://bioenergy.ornl. gov/papers/misc/energy_conv.html ° Well-to-Tank Energy Use and Greenhouse Gas Emissions of Transportation Fuels - North American Analysis, June 2001, by General Motors Corporation, Argonne National Laboratory, BP, ExxonMobil, and Shell. Vol. 3, Page 44 ibid, Page 59 ?1General Motors EV1 specifications from www.gmev.com/specs/specs.htm *2 Most RV campsites have suitable 240-volt outlets, and can be used for charging on the road today. See, for - example, www.koa.com.

Page 82

Proprietary & Confidential

Appendix B: Usable Performance

Page 83

What does this mean for performance?

Well, it wouldn’t matter if you were driving a bus or something that does 0-60 in 19 seconds. But in the rarified air of sub 4 second acceleration, it makes a huge difference. Fractional-second delays become not just noticeable but annoying and distracting, and start to impinge quite seriously on performance.

Think about the launch technique in a gas-powered race car. You need a bit of warning, to start with. If the engine is idling, it will just stall if you Joad it at all. First you have to rev it up to a speed where it will make some power, and then engage the clutch at just the right moment. In that time, the Tesla Roadster has already gone a car length or more. Race engines don’t have much flywheel, but road engines do — it takes a while for the engine to spin up. This time is not measured in acceleration tests, but is real.

Then there’s the question of when to erigage the clutch. Too soon, and the engine stalls since it can’t produce enough torque to keep the wheels spinning. Too late, and the power just goes into smoking the tires which don’t actually generate much traction in that state. If you get it just right, the tires spin for a while, then “hook up” just at the point where the engine is making enough power to accelerate from there. It takes practice to get this right. Even if you do, it’s not optimum. It would be better not to spin the tires at all, but to keep them at the optimum slip rate (about 2 mph faster than road speed). This would generate the best traction and acceleration. This is exactly what the Tesla Roadster does. Perfect launch, every time, no warning or technique required. Of course, there are ways to automate some of this: automatic transmissions, paddle shifters, software launch control. All just automate what the driver would do if he were good enough. None come close to the zero delay, zero shift time, precise slip control of the Tesla.

In racing, you keep the engine in the power band (between 7 and 9 thousand rpm, for instance). That way, there’s always power available when you need it. One of the techniques that racing drivers learn is how to downshift while braking into turns, without upsetting the car. Of course, race engines are only expected to do 500 miles between rebuilds, and generally, we don’t drive this way on the road. Instead, we tend to use the highest gear that engine will tolerate happily. From that state, if you suddenly want real power, it’s a case of dropping from 6” to 2"! while the engine spins up, and engaging the clutch at precisely the right instant. With the Tesla Roadster? Just nail it, You get instant torque and traction control, keeping the tires in the optimum slip regime. It’s like always being in the right gear without having to think about it, without wearing out the engine or making a lot of noise.

Subjectively, it’s very confidence-boosting. Power and engine braking are always instantly available, it’s easy to “throttle steer,” and you are never caught napping. It makes the power delivery much more like steering — imagine if you had to shift steering ratios and wait for a power steering pump to spin up before getting the steering response you wanted! , The first time I drove the AC Propulsion tzero, I was immediately struck by the way the power didn’t fade as the car accelerated — it felt like a racecar in first gear, but a first gear that just kept going and going, all the way to 100 mph. The second revelation was how quickly I came just to expect the power or engine braking to be there when I wanted it — not even to think about downshifting. The power control had become as simple and instinctive as basic steering control. Thirdly, at the end of the run, I was amazed at how smooth, precise, and easy the speed control was at parking speeds. After all, I’m still in the same gear I was just using to do 100 mph, and there’s not even a clutch! How can this be? But it is.

Page 84

Proprietary & Confidential

Appendix C: The Lotus Elise as a Basis for the Tesla Roadster

Page 85

Proprietary & Confidential Inc.

The Lotus Elise as the Basis for the Tesia Roadster

Lotus founder Colin Chapman was a brilliant engineer and a very innovative designer. His design philosophy is perfectly represented in the Elise, though it was not conceived until years after his death.

That philosophy - high performance with high efficiency, achieved through low weight and innovative design — is as applicable to Tesla Motors now as it was to Lotus in 1975. The following is extracted from “Definitions and Philosophy of Lotus’ Engineering Policy” April 1975: !

1. A Lotus provides its owner with prestigious efficient transport. Prestige is given by exclusivity and racing heritage. The designer gives it efficiency by light weight, effective use of economic material and the maximum return for fuel burned in the engine; and in cornering power.

2. \Where a Lotus manufactured part is not essential to meet (1), use a mass produced part from the motor industry.

6. The most elegantly effective and traditionally Lotus solution is the one with the least number of parts, effectively deployed.

In 2004, we have the opportunity to apply disruptive drivetrain technology to this philosophy: with Li-ion batteries and the Tesla Motors motor and controller, we can for the first time achieve the highest outright performance and the highest outright efficiency in the same car. Also, we can reduce the number of parts dramatically, and improve the handling by lowering the center of mass (most of the drivetrain mass is in the batteries rather than a gasoline engine: the batteries can be distributed for optimum chassis dynamics.) No doubt Mr. Chapman would have approved.

The Elise is generally recognized as the world’s best-handling sportscar, lacking only the power to accelerate out of turns (see R&T test results below’). It has an innovative extruded aluminum alloy, adhesive-bonded chassis weighing only 70kg, but with extremely high torsional rigidity and excellent crashworthiness.

An example of the design philosophy (and design integrity) is the bare alloy extrusion visible inside the cockpit. In other cars, this sort of thing is a styling feature, adding weight and complexity.

In the Elise the chassis extrusion itself is made a styling feature.

Page 86

As an example, look at the Elise compared with the Ferrari 360 Modena (representative of the best of conventional sportscar design). The Ferrari weighs 3370 Ibs; the Elise 1900. To achieve roughly similar performance on the racetrack (faster on some segments, slower on others — see below), the Ferrari has a very expensive and complex 3.6-liter V8 producing 395 hp at 8500 rpm; the Elise has a simple 1.8-liter 4-cylinder engine producing 122 hp at 5600 rpm. And the Ferrari costs about 4 times as much.

The Tesla Roadster will definitely solve the “lack of power to accelerate out of turns” problem, and will even improve on the Elise handling due to a lower centre of mass. If Road and Track were to re-run the same test with the Tesla Roadster, they would find it to be fastest through every segment.

Page 87

Road and Track Test Results Great Grip! — The Results

Proprietary & Confidential

lilustrations by Tim Barker June 2002

The Results

Two sections of Buttonwillow Raceway Park's East Loop were chosen for analysis: An increasing-radius hairpin and a quick right/left that tests a car's transitional composure and lateral

grip. The track is run clockwise. Only the best segment times for each car are reported.

Note that for the Hairpin Turn analysis below, the speed at the

end of the straight (6 )is taken at the braking point leading into the Transition Segment.

The Hairpin of Buttonwillow’s East Loop is made tricky by a left-hand kink that occurs in the braking zone immediately preceding the increasing-radius right-hander. Exit speeds are largely influenced by vehicle power.

‘ ree ae Click on the image above to see an enlarged version of the Hairpin Turn.

wre a

Mitsubishi Chevrolet Ferrari Lancer Porsche Porsche Map BMW M3 Corvette 360 Lotus Mazda Evolution Boxster 911 Key Coupe Zz06 Modena _ Elise MP3 VII s Turbo

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Page 88

Proprietary & Confidential

Speed atEndof 6 94.5 102.2 100.7 85.7 77.6 92.0 82.7 100.6 Straight, mph

BRYAN HERINS GOMER -

BMW M3 Chevrolet Ferrari360 ‘Lotus Mazda Mitsubishi Porsche Porsche Coupe Corvette Modena Elise MPS Lancer BoxsterS 911 I'd like to ZO6 It is quick, The The car Evolution Oncethe Turbo see it IT don’t feel though it brakes are picksup WII car starts It hasa have a like I can doesn’t have easy to some This is one to lot of little more brake as an modulate understeer place to understeer, power and grip late as I overwhelming before and a little me where it is locked it's a fast coming off want to amount of turning in. wheelspin. it still feels in that car. There the corner going into power. The Thefront I would like a mode and I is a lot of where I the corner. tight tucks in like to see front- can't understeer can really Itturnsin suspension nicely. a little wheel- balance it through put some fairly well. gives youa have more ride drivecar.I the way! __ the hairpin ofthat M Itis a lot of tot of enough and pick up want, and onpower fun feedback, griptogo damping that power power down to accelerating faster ifI control. understeer. coming the off the had more off.

ground. corner. power.

Transition Segment

The Transition Segment requires the driver to compromise the ideal line in the right-hander to get the car up properly for the more important left turn.

Click on the image above to see an enlarged version of the The Transition Segment.

TRANS GEOMENT...

Mitsubishi Chevrolet Ferrari Lancer Porsche Porsche Map BMW M3 Corvette 360 Lotus Mazda Evoiution Boxster 911 Key Coupe Z06 Modena Elise MPS VII Ss Turbo

gets

Corner Entry 2 61.6 66.0 63.4 58.9 53.9 63.3 60.9 67.4 Speed, mph

Page 89

Proprietary & Confidential Apex Speed 2, 4 43.6 47.5 48.3 50.0 47.0 47,0 47.7 40.1 mph

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BMW M3 Chevrolet Ferrari Lotus Elise Mazda MP3 Mitsubishi Porsche Porsche

Coupe Corvette 360 Icancarry alot Once the car Lancer Boxster S 911 Todrive 206 Modena __ of speed into the foadsdownand Evolution The car Turbo this car The The car’s corner, but once I I try to build VIE carries Definitely hard, I steering suspension start to scrub it speed, ithasno The same some a car have to has a gives you off, I don’thave problem thing that understeer that’s | accept the positive feedback enough powerto accommodating. helps the on power, loose on fact it turn-in early and pull It has more grip carto have whichisa entry and needs to and nice itis more through.</SPAN< than power. positive nice then has be feedback. reactive to td> turn-in also tendency too much sideways. The driver makes it when I am understeer It is suspension input. good for coming off on exit.

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soft. next.

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Mitsubishi Chevrolet Ferrari Lancer Porsche Porsche BMW M3 Cervette 360 Lotus Mazda Evolution Boxster 911 Coupe 206 Modena Elise MP3 VII s Turbo

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sec

By on

Transition 10.020 9.687 9.656 9.595 Segment Time, sec

Specifications

Page 90

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Chevrolet . Lancer BMW M3 Corvette Ferrari 360 Lotus Mazda Evolution Porsche Porsche Coupe Z06 Modena Elise* MP3 VIt* BoxsterS 911 Turbo

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inline-4 flat-6

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Horsepower 333 bhp @ 405 bhp @ 395 bhp 122 bhp 40 bhp @ 276bhp@ 250bhp@ 415 bhp @

(SAE) 7900 rpm = 6000 rpm 8500 rpm @5600 6000rpm 6500 rpm 6250 rpm 6000 rpm rpm

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Proprietary & Confidential

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Proprietary & Confidential Tne.

Ele ae Pee Meo

Tire model Pilot Sport Eagle F1 P Zero Potenza P Zero AVS Sport SP Sport P Zero Supercar Asimmetrico RE04 Asimmetric Asimmetric ° 0

225/45ZR- P265/40ZR 215/45R-18 175/55R- 205/45ZR- 235/45ZR- 225/40ZR- 225/40ZR- 18f255/ -1791Yf, 89Yf,275/ 16 80Vf, 17 88W 17 93W 18 f,265/ 18 f, 295/

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Suspension, MacPherso upper & upper upper & MacPherson MacPherson

MacPherso MacPherson

f/r n struts, lower A- lower A- lower A- — struts, coil struts, coil n struts, struts, coil coil arms, arms, coil arms, coil springs, springs, coil springs, springs, transverse springs, springs, anti-roll anti-roll bar/ springs, anti-roll anti-roll composite anti-roll bar/ anti-roll bar/ multitink, anti-roll f & bar/ bar/ leaf upper & barf&r trapezoidal- coil springs, r multilink, multilink, springs, lower A- link, coil anti-roll bar coil springs, coil anti-roll arms, toe springs, anti-roll bar springs, barf&r links, coil anti-roll bar anti-roll springs, bar anti-roll bar

*European pricing and specifications.

Notes

' Colin Chapman — The Man and his Cars , 1986, Gerard Crombac, page 359

* Road and Track, June 2002

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Proprietary & Confidential Inc.

Appendix D: Notes for the AC-150 Gen 2 Electric Propulsion System

Note: The Tesla Roadster will use a modified version of the AC Propulsion AC-150 system that produces 165 kilowatts of power. All physical dimensions remain the same, but all torque and power figures are 110% of those listed in this specification.

Page 93

Application Notes for the AC-150 Gen 2 Electric Propulsion System

AC Propulsion, Inc. drive systems are covered by U.S. and foreign patents issued and pending. The AC-150 system incorporates AC Propulsion’s Reductive™ Integrated Battery Charger Patent No. 5,341,075 and Patent Numbers 5,355,070 5,642,010 and 6,018,224 and other patents pending.

Specifications are subject to change without notice.

phone (909) 592-5399 fax (909) 394-4598 (\ www.acpropulsion.com

9-19-03

AC PROPULSION, INC.

441 Borrego Court San Dimas, California 91773

Page 94

Contents

page Important Safety Precautions 3 System Description and Specifications 4 AC-150 Torque, Power & Efficiency Curves 6 Drive System Application Notes 7 Gear Reduction 7 Propulsion Battery 7 Regenerative Braking 7 Cooling Air Considerations 8 PEU Mounting 8 Power Electronics Unit 9 Automatic Battery Contactor Operation 10 Operating Modes 10 Motor 11 Insulated Coupling 12 Mechanical Interface Drawings 13 PEU 13 Motor 14 Motor Coupling Drawing 16

AC-150 Application Notes 2 AC Propulsion, Inc.

Page 95

e IMPORTANT SAFETY PRECAUTIONS DANGER - VOLTAGES UP TO 450V ARE PRESENT IN THIS SYSTEM. FAILURE TO OBSERVE SAFE INSTALLATION, OPERATION AND SERVICE CAN RESULT IN DEATH OR INJURY AND EQUIPMENT DAMAGE.

This system is to be installed and serviced by qualified technicians only, who are trained in the safe installation and handling of high voltage and high power devices.

Extra care must be taken when working with dc voltages because of the tendency to continue to arc once an arc has started. A high power dc source such as a vehicle battery can cause electrical explosions.

The Power Electronics Unit (PEU) cover is removable. Do not remove cover until battery connector J3 has been disengaged and enough time has passed to allow internal capacitors to discharge. An internal discharge circuit normally does this within a few minutes. Always check that dangerous voltages are not present with a voltmeter before working on equipment. There is no cover electrical interlock, but there is provision for locking the cover latches. PEU chassis must be electrically grounded to vehicle chassis via connector J7 before connecting battery connector J3.

High voltage may be present on PEU J8 and J10 connector contacts.

The propulsion battery (or other de source) must be electrically isolated from vehicle chassis. In grid connected mode (battery recharge or discharge), the propulsion battery, motor lines, motor chassis and motor shaft are electrically live with respect to chassis. They are connected to the utility power lines through the PEU. The vehicle chassis and PEU chassis are connected to earth ground through the utility power cord. The motor mount and shaft must be insulated from the vehicle chassis. Insulated motor mounting hardware is included with the motor and drawings showing a recommended insulated motor coupling are included in this document. Operator or service personnel must never come in contact with the motor aluminum housing. Care must be used in matching battery recharge power and voltage to the particular battery being used. Too high power or voltage can cause battery failure and/or explosive or toxic chemical generation.

Never allow the voltage applied to the PEU J3 connector to go above 450V (for example by using external batiery charging apparatus). Doing so may cause. extensive damage to the PEU. The PEU and motor are not designed to tolerate direct water splash or extreme dirty or dusty environment. Suitable protection must be provided in the vehicle installation. Do not operate if PEU or motor are wet.

The AC-150 motor has maximum speed rating of 12,000 rom. The controller has an electronic speed limit of 12,000 rpm, however it is possible to exceed this speed if the motor is driven mechanically, such as when down shifting a multi-speed gearbox. Exceeding this motor speed limit can cause catastrophic failure and loss of control of the vehicle.

Do not connect or operate the system if any cable or insulation is damaged. Recharge cords and power outlets should meet the normal electrical codes.

AC-150 Application Notes 3 AC Propulsion, Inc.

Page 96

SYSTEM DESCRIPTION & SPECIFICATIONS

Introducing the AC-150 Integrated Electric Drive / Recharge System - a ground-breaking product that features High Performance, High Efficiency and Unparalleled charging convenience all in a safe and reliable package.

‘The AC-150 system includes a power electronics unit and an AC-induction traction motor that combine to provide high performance, high efficiency, and rapid, convenient charging capabilities for electric and hybrid vehicle applications. These components have been designed from the ground up as a tightly integrated system to deliver up to 150 kW (200 hp) motor output, yet maximize vehicle driving range with high efficiency over a broad operating range and comprehensive energy recovery through regenerative braking. Both power electronics and motor are forced-air cooled to provide exceptional ease of installation and maintenance while reducing cost.

The AC-150 embodies patented control and construction techniques that allow the power electronics and motor windings to be re-configured as a high-rate Reductive™ battery charger. By using motor drive componenis, the Reductive Charger reduces vehicle cost and weight. By allowing safe charging from existing 110V to 240V outlets at rates as high as 20 kW, the Reductive™ Charger reduces infrastructure installation requirements and costs, and its innovative bi-directional power capability opens a new world of capabilities including self contained vehicle battery diagnostics, standby or standalone power generation, vehicle to vehicle

(V2V) charge transfer and vehicle to grid power functions (V2G).

Two companion products have been developed to work with the AC-150 drive system. The Vehicle Management System (VMS) and Batt-Opt battery management system were designed to integrate important vehicle functions and driver controls. The VMS incorporates charge controls, data displays for charge parameters, vehicle and battery energy status, and control/display of the Batt-Opt modules. See page 7 to see how these systems interface.

Features Advanced. Drive Control Circuitry

* "Glass smooth" torque under all load and speed conditions + Natural and transparent driving feel « Driver adjustable regenerative braking

* Traction control

* Integral power distribution and fusing for battery optimizer, cabin PTC heater and hybrid / fuel cell APU.

integrated Bidirectional Reductive™ Charger Charge from any power source between 100 and 250 VAC, 50 or 60 Hz.

Charge rate controllable from 200W up to 20kW (with 240 V line) Unity power factor, sine wave current draw GFI outlet compatible Automatic mode switching (recharge mode activated when charge power is connected) Controlled battery discharge into power line for battery diagnostics and conditioning with automatic disconnect if line voltage drops out or changes beyond normal range.

UPS mode for backup power and energy transfer to other electric vehicles. +e * * * AC-150 Application Notes 4 AC Propulsion, Inc.

Page 97

Dimensions: 186 x 313 x 760 mm (excluding blower) Total weight: 30 kg (incl blower) Cooling: Forced-air with pwm speed control Power connectors: Aircraft-style circular Control connectors: AMP waterproof automotive Control inputs: Ground-referenced signals for key switch, accelerator pedal, regenerative sensitivity, forward, neutral, and reverse; and RS-232 for recharge/discharge control and cabin heat. Optional CAN bus.

Instrumentation outputs: RS-232 for battery voltage, Inverter, hybrid and accessory currents, inverter temp, motor temp, motor rpm, motor direction, line voltage, line current, battery isolation, and 12V bus voltage Aux Power supply current rating: 100 A @ 13.5 V (up to 30A allocated for cooling blowers) Motor Four-pole induction, high frequency design with inverter-controlled magnetic flux. Dimensions: 245mm dia x 350 mm long (excluding blower and cable) Total weight: 50 kg (incl blower) Maximum rpm: 12,000 Insulation: Class H, double-insulated Cooling: Forced-air with pwm speed control Sensors: Winding temp, tachometer AC-150 Application Notes 5 AC Propulsion, Inc.

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AC-150 ELECTRE PROPULSDN SYSTEM

MAXMUM TORQUE & POW ER vs. RPM

250 ah im} 1 (uF

Dataw thVin= 336 Vdc

12,000

—, Low ervoltage has bss avaiabk pow er 200 175 150 .

. etd” 125 Oo a ° ¢ 100 , o 75 Fi 50 + at = l= SHAFT POWER kW ) o” jamS—TORQUE W-n) 25 sooH t 0 2,000 4,000 6,000 8,000 10,000 MOTOR RPM 160- AC-150 efficiency map sombined moter and inverter S346¥ input {12,006 rpm mex} z :

a 3g 07, ~ ed 2 ty < OD fe NS a 9g S=—Sase Q t 1 I q | T TL T T d 4000 2600 3000 4000 5000 6000 8000 sooo 10000 11000 Speed, rpm AC-150 Application Notes 6 AC Propulsion, Inc.

Page 99

b. Current- The drive system will require up to 525 amps from the battery at full power and can return up to 200 amps during regenerative braking.

c. Isolation — For safety and charge system requirements, the propulsion battery must be isolated from chassis.

c. Although the PEU has an internal fuse for the battery power, it is strongly recommended that the propulsion battery pack have over-current protection to protect the batteries and battery pack wiring in the event of an external short circuit. As a minimum, one fuse rated for at least 400 amps and 500 VDC should be used. Two fuses (separating the battery pack into 3 sections) is even safer.

Regenerative Braking This powerful feature greatly increases vehicle efficiency by the conversion of vehicle kinetic energy to electric energy to charge the battery during braking. An additional benefit is the virtual elimination of mechanical brake wear. A very simple and elegant control strategy can be used with the accelerator peda! signal only. Referring to the diagram below, regen. braking begins when the vehicle is moving and the accel pedal is less than 30% depressed. At approx. 30%, the motor torque is zero. More than 30% depression commands positive (accelerating) torque and less than 30% commands negative (decelerating) torque. Regen torque is proportional to accelerator position, so as the accelerator is lifted, more regen torque is applied. The regen torque fades away to zero as the vehicle speed decreases to zero. This gives smooth continuous control with one foot and the mechanical brake is seldom needed. The PEU has an input that controls the regen torque gain (0 to 5V signal). A dashboard mounted potentiometer may be used for the driver to set the desired sensitivity of regen braking. An optional PEU input accepts a brake pedal signal (0 to 5V) which subtracts from the accelerator signal. The PEU has a control circuit which limits regen brake torque when the battery is too full to absorb regen power so that the battery does not exceed a preset voltage limit (normally 405V).

AC-150 Application Notes 7 AC Propuision, Inc.

Page 100

Cooling Air Considerations

Both PEU and motor are air cooled, each unit having its own variable speed blower. Traction inverter temperature controls the PEU blower and motor winding temperature controls the motor blower. The installation should provide outside air for the blower inlets and allow heated exhaust air to escape the vehicle. Avoid blower ingestion of exhaust air.

Avoid turning the system off if the motor temperature is above 100°C. With the system on, the

motor cooling blower continues to run until temperature drops to <100°C . This will prevent heat ‘soak into the encoder electronics in the motor.

PEU Mounting

Preferred Orientation of the PEU in the vehicle is horizontal as shown on the picture on the following page. Contactors inside the PEU best withstand shock and vibration in this orientation. Four vibration isolation mounts are supplied with the system and should be used for supporting the PEU. The PEU should be located as close as is reasonably possible to the motor to minimize motor cable length.

AC-150 Application Notes 8 AC Propulsion, Inc. |

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No ou me N TD OH HE WD 10 i 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Yosef Peretz (SBN 209288) s at EE i Te WD Emily Knoles (SBN 241671) N MATEO OGUNTY Genevieve Guertin (SBN 262479) PERETZ & ASSOCIATES 22 Battery Street, Suite 202 San Francisco, California 94111 Telephone: (415) 732-3777 Facsimile: (415) 732-3791 Attomeys for Plaintiff MARTIN EBERHARD SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN MATEO MARTIN EBERHARD, Fi led Bs F OK Civil Case No. CIV-484400 DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT VS. OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION ELON MUSK; TESLA MOTORS, INC.; TO STRIKE PORTIONS OF Plaintiff, and DOES 1-20, inclusive, PLAINTIFE’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION Defendants. Date: July 29, 2009 Time: 9:00 a.m. Dep.: 11 Judge: Hon. John L. Grandsaert I, Martin Eberhard, declare: 1. I am the Plaintiff in this action. I have personal knowledge of the matters set forth herein and if called upon to testify, I could and would do so competently. 2. This declaration is given in support of the Plaintiff's Opposition to Defendants’ Special Motion to Strike Portions of Plaintiff's Complaint as a Strategic Lawsuit Against Public Participation (“Motion”). I. The Formation of the Idea of a Lithium-ion Powered Sport Car 3. I hold a bachelor degree in Computer Engineering from the University of Illinois at Urbana Champaign, which I completed and obtained in 1982. I hold a Masters DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION ~l-

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br WwW WN oO ~a nN HD NM 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Degree in Electrical Engineering from the University of Illinois, which I completed in late 1983 and obtained in early 1984. 4. I am a technological entrepreneur by profession. In the 1990s I was one of the founders of two different technological start-up companies: Network Computing Devices, Inc. and NuvoMedia, Inc. After the successful sale of NuvoMedia, Inc. to Gemstar/TV Guide in 2000, I took on the role of President of Engineering at Packet Design that I held until 2002. 5. Beginning in January 2002, inspired by ever-rising gas prices and the increasing threat of global warming, I enlisted my long time business partner Marc Tarpenning (“Tarpenning”) to join me in searching for an alternative to gasoline-powered cars. 6. We spent approximately 18 months in technical research during which I came to the conclusion that electric cars were indeed the most efficient, least polluting alternative to gasoline-powered cars. We then researched the causes for the failure of electric vehicles in the past and analyzed the benefits and shortcomings of electric cars in comparison to other alternative-fuel vehicles. 7. As early as November 2002, I contacted Tom Gage, the CEO of AC Propulsion, Inc. (“ACP”), to discuss alternative-fuel vehicles. ACP is a small drive-systems company that experimented with alternative-fuel vehicles. ACP produced a very limited number of electric car roadsters named the Tzero that operated on lead-acid batteries. Only 3 Tzero roadsters were ever made by ACP, and at that time, I offered to pay the company $100,000 to $120,000 to make me the fourth Tzero, provided that this car would be built and operate on lithium-ion batteries. 8. ACP suffered from financial difficulties, and after several meetings and discussions, I agreed to invest a total of $250,000 in the company: about $100,000 to pay for a Tzero for me, and about $150,000 as an investment in ACP, for which I would receive stocks in the company. My investment in ACP was designed specifically to fund the development of a prototype lithium-ion battery pack for a Tzero that ACP owned and for the Tzero that would be built for me. 9. ACP was never able to build and deliver my Tzero. By December 2002, it became clear to me that ACP would never produce a significant number of electric vehicles, and that no other companies seemed poised to do so. J therefore realized that if I ever wanted a lithium-ion battery operated roadster, I would have to build it myself. DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION -2-

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oO eo ND OH FP WD YP = wo wo PPO HO NH HN HN NH NHN HF HF KF KF OF OP OFS Sl oN DN UO FF WD NYO K§ DBD COC BH INT Dn BR WO PO KS GS 10. At that same timeframe, the established car companies were in the process of forcing a modification of the California Air Resources Board’s Zero-Emissions Mandate such that they would no longer be obliged to sell electric vehicles. Tarpenning and I saw this as an opportunity to start an electric car company. 11. Instead of focusing on an affordable but lower-quality electric car model, we decided to focus on the creation of a fully-electric sport car with high performance that would hopefully serve as a springboard to an affordable and high-quality electric car for every American. With less constraint on price, we conceived a completely new drivetrain for the electric car, powered by commodity lithium-ion batteries like those used in consumer electronics. I The Founding of Tesla Motors 12. Tarpenning and I originally founded our electric car venture in the beginning of 2003 and funded it ourselves from its inception until April 2004. During this time, neither Tarpenning nor I had any income from this venture and we devoted our entire time to the formation and conceptualization of the lithium-ion operated electric car roadster (“Roadster”). 13. I decided to name Tesla Motors after Nikola Tesla — one of the most important scientists and innovators of the modern age in the area of electrical engineering — during a trip to Disneyland I took with my wife on January 25, 2003. 14. Tarpenning purchased the domain name “teslamostors.com” on April 23, 2003. 15. Defendant TESLA MOTORS, INC. (“Tesla Motors”) was incorporated on July 1, 2003. A true and correct copy of Tesla Motors’ Certificate of Incorporation is attached hereto as Exhibit “2”. 16. I served as Tesla Motors’ Chief Executive Officer (“CEO”) from its formation, and Tarpenning was the President, Vice President of Engineering and Tesla Motors’ Chief Financial Officer (‘CFO”).. The Board of Directors of Tesla Motors (“BoD”) was formed in July 2003 and consisted of Tarpenning and me, Laurie Yoler (“Yoler’”), who served on the board until about 2008, and Bernard Tse, who served on the board until approximately August | 2006. 17. Tesla Motors was a fully functioning venture from its formation. The company moved to its first office on Oak Grove Street, Palo Alto in August 2003, and had official phone and fax numbers, a website, email addresses, formal legal representation that was provided by DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION -3-

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Oo eo nN Dn HH Se WW NO = NH wo WO NO HO NO WN NO NO Se HF Fe HF Fe Fe ee eS S| oH AI Nn Wn FF WD NY F|K§ FCO HO BN DB AH SP WO LPO KF OS Mark White (“White”) of White & Lee LLP, and a bank account at City National Bank in Palo Alto.! 18. Jan Wright (“Wright”) joined Tesla Motors on or about January 20, 2004, and he left the company in early January 2005. During his tenure at Tesla Motors, Wright was the Chief Operating Officer (“COO”). 19. In December 2003, Tarpenning and J began searching for venture capitalists to help fund Tesla Motors and to get the Roadster into production. In conjunction with that search, J wrote the company’s first business plan that was first published on February 19, 2004 and is entitled Confidential Business Plan Version 1.0 (“BP 1.0’). A true and correct copy of BP 1.0 is attached hereto as Exhibit “3”. 20. BP 1.0 provided a thorough backdrop for the direction and future of Tesla Motors, including the following concepts that were later adopted by Tesla Motors as it grew from a two-person operation to a internationally-recognized car company over the course of the last 7 years: a. Plans for product development and specifications for a fully electric roadster (pages 9 through 11 of the plan); b. A model that included the manufacturing of the chassis and body of the Roadster by Lotus Engineering (“Lotus”), with ACP providing technology for powertrain components, and Tesla Motors assembling the car and developing the battery components (page 17 of the plan); ” c. A four-step funding plan labeled as Series A through D funding (page 21 of the plan); and ’ The operations of Tesla Motors stands in opposite to the allegations made by Defendant ELON MUSK (“Musk”) in his blog, “In the Beginning” (“ITB”), which was published on June 22, 2009, wherein he asserts that Tesla Motors did not have a formal office when I first met him and that all I had was essentially a business plan and a unfunded corporation. A true and correct copy of the ITB is attached as Exhibit 128 to the Declaration of Joshua Katz in Support of Plaintiff's Opposition to Defendants’ Special Motion to Strike Portions of the Complaint (“PE 128”). * In ITB Musk asserts that my business plan was to merely commercialize ACP’s Tzero when we first met. However, as stated in BP 1.0, my original plan was to create a new electric commercial vehicle based on my idea to use lithium-ion batteries, drivetrain technology based on and derived from ACP’s drivetrain technology, and a derivative of the Lotus Elise chassis. [See PE 128.] DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS?’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION -4-

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oO SoS NN DN OO S&S WD NO — NO NO NO NYO NH NH NY NO NO RB Be ee ee ee oo ~ nN wN > wo N — S Oo. 6 ~ aN an > we NO RR oS d. Organization consisting of a management team, information technology team, digital engineering team, vehicle engineering team, manufacturing team, sales and marketing team, and support team (page 22 of the plan). 21. BP 1.0 states that Tarpenning and I founded Tesla Motors (page 6 of the plan), and outlined possible future directions, including the possibility of moving down market to build a four-seat coupe or compact wagon, and eventually low-price alternatives once Tesla Motors had established enough volume in sales (page 12 of the plan). This direction was based on my original idea — ultimately adopted by Tesla Motors — to first build a highly desirable electric car that will open the door to the production of an affordable family car.° 22. After meeting with several prospective venture capitalists — which showed a genuine interest to invest in Tesla Motors — in the winter of 2003 and spring of 2004, on March 31, 2004, I wrote an email to Defendant ELON MUSK (“Musk”) informing him that Tesla Motors was an investor in ACP and funded its research into lithium-ion battery packs for electric cars. I told Musk that Tarpenning and I were the founders of Tesla Motors, and asked if he might be interested in investing in the company. I told Musk that Tesla Motors was going to build high-performance electric cars based on a derivative of the ACP drivetrain and based ona derivative of the Lotus Elise chassis. Musk responded positively to my email that same day. A true and correct copy of the email to Musk and his response to that email is attached hereto as Exhibit “4”. 23. Tesla Motors and Musk quickly reached an agreement upon which Musk would lead the first group of outside investors in Tesla Motors. The first round of investors also included Tarpenning and me, two venture capitalist firms from Silicon Valley and some of my friends and family members. 24. Between 2004 and 2007, I oversaw the growth of Tesla Motors from a team of two to a company of 280 people with the expertise necessary to run a mass-production car > In the Declaration of Elon Musk in Support of Defendants’ Special Motion to Strike (“Musk Declaration”), Musk mistakenly asserts that the model of following the roadster with a lower- cost family car was a change to our initial program, although this issue is specifically covered in BP 1.0. Id. at (6. * In ITB Musk asserts that he requested through ACP to meet me. However, Musk never contacted me in the five weeks between receiving the February 24, 2004 email from ACP mentioning my name and the day I wrote Musk on March 31, 2004. [See PE 128.] DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION -5-

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So FN DH A SP WY YP = be NH RF & Ys NY NY NY NY NY NY NY NO Ke YF Se BRB Se Se oo nN HN On Ff WD NY KY DS BO Oo INQ DH On Se W company, spanning four countries. I had also led the development of the Roadster from its inception and design through the safety and performance testing that validated the Roadster’s ability to achieve 0-60 miles per hour in less than four seconds, as well as its break-through of an almost 250-mile range per charge. During this time J devoted my entire workday time to Tesla Motors, often spending as much as 60 to 80 hours per week working for the company. Iu. The Acknowledgment of Tarpenning and I as Tesla Motors’ Founders 25. On April 23, 2004, Tesla Motors closed on an investment round called Series A Preferred Stock Financing (“Series A”). The Index of Documents for Series A state in two separate places that I am a Founder of Tesla Motors. Musk is not named as a Founder of Tesla Motors in this index and Tarpenning, Wright, and J are the only individuals named as Founders in the Series A documents. A true and correct copy of the cover page and Index of Documents to Series A is attached hereto as Exhibit “5”. 26. As part of the closing of Series A funding, on April 23, 2004, Musk signed an agreement entitled Right of First Refusal and Co-Sale Agreement that states in the following signature pages that I am a Founder of Tesla Motors. Musk is not named as a Founder of Tesla Motors in this agreement. A true and correct copy of the Right of First Refusal and Co-Sale Agreement from Series A is attached hereto as Exhibit “6”, 27. Jt was further determined at the closing of Series A that Musk will join the BoD as the Chairman of the BoD in addition to the previously appointed BoD members, and that I will maintain the CEO position and Tarpenning the positions of Vice President of Engineering and CFO. 28. On April 23, 2004, White, as counsel for Tesla Motors, sent an opinion letter in connection with Series A. In this letter, which was sent to purchasers of Tesla Motors’ stock, including Musk, White refers to me as a Founder. Musk is not referred to as a Founder of > Musk asserts in ITB that he “convinced” John B. Straubel (“Straubel”) to join Tesla Motors soon after he provided funding [in Series A]. This assertion is over-simplified because I was the one to propose to Musk that Tesla Motors hires Straubel. On May 3 and 4, 2004, Musk and I discussed the hiring of Straubel as an employee of Tesla Motors via email. Musk told me that he initially wanted to hire Straubel for a company that he owns, Space Exploration Technologies - SpaceX (“SpaceX”), but he agreed with me that Straubel would be a better fit at Tesla Motors instead. A true and correct copy of this email thread is attached hereto as Exhibit “8”, Straubel was first hired as a salaried Drive-train Engineer on or about May 17, 2004 and was later promoted by me to the position of Chief Technology Officer (“CTO”). DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION -6-

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o a JN DBD Oo FP WY HO N NO NY NY NY NY NY NYO NO FF FF Fe Fe FPF FeO ee OO ee oe Qa nN TO UN FSF WN FF Oo GO fF ND OH FSF WY NY KK OS Tesla Motors in this letter. A true and correct copy of this opinion letter is attached hereto as Exhibit “7”. 29. On February 14, 2005, Tesla Motors closed on an investment round called the | Series B Preferred Stock Financing (“Series B”). There is one section referring to me as a_ Founder of Tesla Motors in the Index of Documents. Musk is not named as a Founder of Tesla Motors in this index. A true and correct copy of the cover page and Index of Documents to Series B is attached hereto as Exhibit “9”. 30. ‘As part of Series B, the Right of First Refusal and Co-sale Agreement from Series A was amended and restated. Musk signed the Amended and Restated Right of First Refusal and Co-sale Agreement on February 14, 2005. I am specifically named as a founder in this agreement and in the following signature pages. Musk is not named as a Founder in this agreement and Tarpenning and I are the only persons named as Founder in Series B documents. A true and correct copy of this agreement is attached hereto as Exhibit “10”. 31. On February 14, 2005, Tesla Motors’ counsel, White, prepared an opinion letter in connection with the Series B agreements that was sent to all the investors, including Musk. |In this letter, White states that Iam a Founder of Tesla Motors. Musk is not referred to as a Founder of Tesla Motors in this letter. A true and correct copy of this letter is attached hereto as Exhibit “11”. 32. Both Series A and Series B were drafted by Musk’s then attorneys and not by Tesla Motors attorneys, White & Lee LLP. 33. On April 4, 2006, and well after Wright left Tesla Motors, I wrote an email to Musk, informing him that Wright referred to himself as the founder of Tesla Motors. Musk responded by email that it was probably time to send Wright a “cease and desist letter” because Wright may pass as a member of the founding team of Tesla Motors but he is certainly not a founder of the company. A true and correct copy of this email exchange is attached hereto as Exhibit “12”.° 34. On May 10, 2006, in anticipation of closing on an investment round to be called the Series C Preferred Stock Financing (“Series C”), a Second Amended and Restated ° Nonetheless, Musk asserts in ITB that he, Straubel, Tarpenning, Wright and me should be considered “members of the founding team” of Tesla Motors and he does not acknowledge the distinction between this term and the founder of the company. [See PE 128.] DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION -7-

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Oo © SN DH HO FF WD NO NO NO WN WD HN HN NY HN NO RHR Ree ee ee Be oH XN WB OO SP WO NO KFY§ OD OO CO NHN NDB A BP WD NO &* OC Investor’s Rights Agreement was executed. The term “Founder” is defined in Section 1.1(h) of this agreement as a list of persons only containing Tarpenning and me. Musk is not included in the list of persons defined as Founder in this agreement. Musk signed this agreement on May 10, 2006. A true and correct copy of this agreement is attached hereto as Exhibit “13”. 35. On May 18, 2006, Musk wrote me an email concerning his desire to have the press release for the Series C investments portray him as co-leader of the investment rounds. Attached to that email was a draft version of the press release with corrections made by Musk. In the press release draft, Musk added a biography stating that he is the founder and CEO of SpaceX, and a co-founder of PayPal. He states in the biography that he provided early funding for Tesla Motors and also serves as Chairman of the Board of Directors for the company. The paragraph entitled “About Tesla Motors” states that Tarpenning and I founded Tesla. Musk made no corrections or comments regarding the paragraph “About Tesla Motors.” A true and correct copy of this email from Musk and Musk’s attached draft version of the press release with his corrections is attached hereto as Exhibit “14”. _ 36. On May 24, 2006 Tesla Motors closed the Series C funding. An Amendment Agreement was executed on May 24, 2006. The Amendment Agreement states that Tarpenning and I are the Founders of Tesla Motors. Musk is not mentioned as the Founder of Tesla Motors in this agreement. Musk signed this agreement on May 24, 2006. A true and correct copy of the Series C Amendment Agreement is attached hereto as Exhibit “15”. 37. On July 16, 2006, Musk wrote me an email stating that he would appreciate being part of the interviews for the major media and that it “pisses [him] off’ being referred to as “an early investor” about as much as it would annoy me to be called “an early employee.” I believe that Musk’s anger stemmed from the fact that he was the first major investor in Tesla Motors at that time. I also believe that he used the above analogy because he recognized my status as Tesla Motors’ founder and recognized why it would be insulting to be referred to in any other way. A true and correct copy of this email from Musk is attached hereto as Exhibit “16”, 38. On July 18, 2006, Musk wrote an email to Mike Harrigan (“Harrigan”), member of the Media Relations Team at Tesla Motors. In this email, Musk told Harrigan that the portrayal of his (Musk’s) role to date as “an early investor” is outrageous and incredibly insulting. Musk said such a portrayal would be like somebody calling me “an early employee.” DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION -8-

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Oo 6©® ND OO F&F WH NO Re —=>_ — — No = & BO NH KN DO KN YY NR RB Re RO Re Re N WA FF WH NYO KY OD CGC S&H HN DB UA HB W 27 | 28 Musk stated that apart from leading investment, his influence on the car itself runs from “the headlights to the styling of the doorsill to the trunk.” Musk never mentioned in this email that he is a founder of Tesla Motors or that his involvement was greater than the headlights and styling of minor parts of the Roadster. A true and correct copy of this email from Musk is attached hereto as Exhibit “17”.’ 39. On July 20, 2006, Musk wrote an email to PCG Campbell (“PCGC”), Tesla Motors’ public relations agents at the time, stating that he was “incredibly insulted and embarrassed by the NY Times article, where [he was] not merely unmentioned, but where [I am] actually referred to as the chairman.” Musk threatened to end Tesla Motors’ relationship with PCGC as a result of this purportedly offensive description. Musk went on further to state “Please ensure that the NYT publishes a correction as soon as possible.” Musk never stated in this email that he should be referred to as the founder of Tesla Motors. A true and correct copy of this email from Musk is attached hereto as Exhibit “18”. 40. Onor about April 12, 2007, Tesla Motors finalized a Confidential Business Plan Version 4.6 (“BP 4.6”) in anticipation of the Series D Preferred Stock Financing (“Series D”) investment round. Page 6 of BP 4.6 states that I am a founder of Tesla Motors. A true and correct copy of excerpts of BP 4.6 is attached hereto as Exhibit “19”. 41. On May 9, 2007 Tesla Motors closed on Series D. As a part of Series D, a Third Amended and Restated Investors’ Rights Agreement was executed. In Section 1.1(h) of this agreement, the term “Founder” is defined as a list of persons containing only Tarpenning and me. Musk in not mentioned as a Founder in this agreement. Musk signed this agreement on May 9, 2007. A true and correct copy of this agreement is attached hereto as Exhibit “20”. IV. Musk and the Rest of the BoD Members were fully Aware of Increased Costs and Delays in the Roadster Program 42. During the design process of the Roadster, Musk took a persistent and distracting interest in random details of lesser importance, compared to the critical and difficult development of the battery system, traction motor, power electronics, transmission, and the ” In ITB, however, Musk describes his participation in the company as spending considerable time on the details of the product and particularly the body styling of the Roadster. [See, PE 128.] DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION -9-

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oO Oo NHN NHN OH Fe WD HO —= em ob -& © NH NO NO NY NY NY NV NO NO YF F| KF KF OO FEFeOOO rele ao NN HNO AN SP WY NYY KH ODO OO OYN NRO OB Oh difficult task of finding suppliers for each and all of the approximately 500 components installed in the car. 43. Asa result of wasting valuable resources and time on research on such items as installing electronic door latches rather than conventional door latches, headlights and the styling of the doorsill, there were increased delays and expenses in the Roadster’s production that added to the delays and cost increases caused by other factors, 44. —_ | routinely expressed concern about the additional risk and cost to Musk, but he insisted on expanding the scope of the Roadster program almost every time. 45. Musk involvement in the operations of the company increased as a result of his increasing financial interest at Tesla Motors. Furthermore, with the increase in his financial investment in the company, Musk had, and exercised, the privilege to appoint members to the BoD. In winter 2006 and spring 2007, the BoD was comprised of seven members, three of whom served at the pleasure of Musk, including his brother, Kimbal Musk. After the closure of Series D, Musk’s representation on the BoD increased to 6 out of the 7 members on the board, with me being the only person not serving at his pleasure.’ 46. I never received any complaint, critique, or negative review of my performance from anyone in the company during my time as CEO and as President of Technology of the company. In fact, I was complimented for my work repeatedly, even by Musk. For example, on June 5, 2006, Musk wrote me an email to tell me that he was planning on speaking with BoD member Jim Marver (“Marver’”) about granting me more stocks with Tesla Motors as recognition of my contribution to the company. A true and correct copy of this email is attached here to as Exhibit “21”. Additionally, on May 23, 2007, Musk wrote me an email || where he said that the number of great product people in the world is tiny and he thinks I am one of them. A true and correct copy of this email is attached hereto as Exhibit “22”. 47. The BoD held meetings on a monthly basis. At BoD meetings, members of the different teams at Tesla Motors made presentations to the BoD and were available for questioning. I never told anyone at Tesla Motors to conceal information from the BoD, to limit information to the BoD, to withhold information from the BoD, or to alter information to the BoD. I never concealed, limited, withheld or altered information from the BoD myself. ® Yoler was appointed to the original BoD, however due to his close relationship with Yoler, Musk decided to leave her on the BoD as his representative. DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION -10-

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— Oo Fe IN HN FF YW WNW —_=_— —_ — no FF & nN NY VY KY NY NY KN NY NO Re Re Re RE Rl Re oo YN NWN On BP WD NY KH Do CO Se HTD HR A BB WwW 48, Tesla Motors, from its inception, was based on a business model of collaboration between ACP, Lotus and Tesla Motors to piece together all the necessary components for the Roadster. To secure funding for the program, it was necessary to estimate the cost of producing and manufacturing the Roadsters. As in other volume manufacturing businesses, the plan had always been to drive down costs as production increased. Tesla |Motors’ first business plan, BP 1.0, estimated a $49,000 production cost per car, with a detailed breakdown of specific costs (page 39 of the plan). 49, On April 15, 2004, I wrote Tesla Motors’ Confidential Business Plan version 1.7 CBP 1.7”). BP 1.7 estimated the production cost of the Roadster at $50,740 (page 45 of plan). A true and correct copy of excerpts from BP 1.7 is hereto attached as exhibit “23.” -50. Early on, Musk interjected his ideas into the design process of the Roadster. The initial concept for the Roadster included using the original body materials and chassis of the Lotus Elise because they were lightweight and had undergone significant mandated tests, such as impact tests, that will greatly reduce the cost of the Roadster. Musk was insistent on using carbon-fiber body panels for the Roadster, although I was hesitant to using this material because of its complexity. Must was so confident in carbon fiber that he wrote me an email where he stated, “you could make the body panels for at least 500 cars worth per year if you bought the sort of oven we have at SpaceX! . . . If someone tells you this is hard, they are full of shit. You can make high quality composites in the oven in your home. Once you’ve made a few of these things, you realize that there is nothing magical about glue and string [emphasis added].” A true and correct copy of this email is attached hereto as Exhibit “24”. 51. It turned out that the change to carbon fiber dramatically increased the cost of the Roadster and was one of the two critical path issues (along with the transmission) that delayed the production of the car in 2007. 52. As early as 2005, it became apparent that Tesla Motors required an experienced CFO to handle the complex financial situation involved with running a startup automobile company. On November 28, 2005, Tarpenning emailed Musk to inform him that Tesla Motors was close to needing a full-time CFO. Tarpenning told Musk what his ideal CFO candidate would be and asked Musk for guidance on hiring a CFO at the company. It took the BoD ° Nonetheless, | have never estimated the cost of producing the Roadster at $25,000 as stated by Musk in ITB. DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION : -ll-

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oOo FF NN HD Oo FP W NO — Oo — — ped NO = No NY NY NY NYO NY NY NY NO KH KF Fe Fe Re Se Be ao ND On Ff WHY NY —|§ DBD Oo wo NN HD Nn SP WW almost two years to find a replacement for Tarpenning and it was only after he resigned his CFO position, that the BoD replaced Tarpenning with another CFO. A true and correct copy of this email is attached hereto as Exhibit “25”. 53. The BoD was involved in approving costs from the very beginning. Beginning after the Series C investment, all Purchase Order (“PO”) requests totaling more that $500,000 required approval by the BoD. For example, on July 24, 2007, Tesla Motors’ General Counsel, Craig Harding (“Harding”), sent an email to the BoD requesting approval for a PO for over $500,000 for HVAC controllers required for Roadster production.’° The request originated from the manufacturing department and Musk approved Harding’s request. A true and correct copy of Harding’s email and Musk’s response is attached hereto as Exhibit “26”. 34. On July 18, 2006, Musk and I exchanged emails regarding the pricing of the Roadster. I informed Musk that J was nervous about him telling people that the production price will be around $85,000 due to impending changes and uncertainty about the Roadster’s transmission. Tesla Motors was contracting with Magna International (“Magna”), a respected Transmission manufacturing company, to build a customized transmission for the Roadster. The value of this contract was approximately $5 million and was approved by the BoD. A true and correct copy of this email thread is attached hereto as Exhibit “27”. 55. Changes and uncertainty with regard to the transmission were largely due to the fact that the Roadster required a different transmission than any transmission in production. Unlike most manual transmissions, an electric vehicle’s transmission requires a parking lock to prevent the vehicle from rolling. Tesla Motors was also less desirable to established manufacturing suppliers. Tesla Motors was not in the position to place orders for transmissions in the volume that is customary in the automotive business and is measured in the hundred thousands of a single model of transmission for a single customer. Since Tesla Motors would order only a few hundred transmissions in the first year, and perhaps a few thousand in the following years, the supplier would make little profit from the relationship, and '? HVAC (heating, ventilation and air-conditioning) controllers are computerized systems for climate control. DECLARATION OF PLAINTIFF MARTIN EBERHARD JN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION -12-

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No oOo fe NI HD OD Se W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 @ ob would need to recover engineering and tooling costs over a much smaller number of produced transmissions." 56. Musk understood in 2006 that Tesla Motors was having serious issues getting the Roadster into production. For example, on October 25, 2006, Musk told me via email that “as things stood, Tesla Motors will be hard pressed to actually deliver 2007 model year Roadsters in 2007.” A true and correct copy of this email is attached hereto as Exhibit “28”. 57. Musk was not the only member of the BoD who knew that the Roadsters were going to be costlier than anticipated. As far back as August 8, 2006, Musk sent an email to John Woolard of Vantage Point Investments, Marver, and me, where he predicted that Roadsters with the same options as Signature 100 Collector’s Edition cars would probably cost more than $100,000. * A true and correct copy of Musk’s email is attached hereto as Exhibit “29”, 58. On November 27, 2006, I emailed Musk to tell him that “I stay up at night worrying about simply getting the [Roadster] into production sometime in 2007.” At that time, however, Musk was focused on the appearance of the dashboard of the Roadster. I told Musk that I could not worry about a dashboard upgrade when there were more pressing issues. | specifically stated that the issues included “everything from serious cost problems to supplier problems (transmission, air conditioning, etc.) to our own design immaturity to Lotus’s stability.” Musk did not respond to the many serious problems I had outlined; instead, his sole response was that he just needed to hear that the [dashboard issue] would be addressed after Start of Production (“SOP”). A true and correct copy of my email and Musk’s response is attached hereto as Exhibit “30”. 59. On November 28, 2006, Musk forwarded an email to me that he originally sent to Marver on the subject of costs and pricing. Musk told Marver that he was comfortable with how Tarpenning and I understood vehicle costs and price derivations. A true and correct copy of this email is attached hereto as Exhibit “31”. '! Tn another attempt to re-write history, Musk claims in ITB that I insisted on a two speed transmission while Straubel and Musk wanted to use a single speed one; Musk forgets to acknowledge the original plan was to use a single speed transmission as outlined in BP 1.0. [See, Exhibit “3” and PE 128.] " This title for the first production of Tesla Roadsters was later replaced by the title in use as of today, the Founder’s Series. DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION -13-

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oOo oe NHN NHN UO FP WH NY wo wo wp PO bP HN NH HN NO KF KF KF KF KS oS US| Ol S| lhc El ao Ss DN HW SP WD NY SH Oo Oo OOUlASTDOUNDNOCOUANM UU PUlULUwGULULDN DCU CUD @ eo 60. To attract investors for the Series D funding round, Tesla Motors revised and updated its business plan that was ultimately published as BP 4.6. BP 4.6 was many months in the making and involved the compilation and work of many people on the company. Parts of . BP 4.6 were authored by various executives in the company with Darrel Siry (“Siry’”), then Tesla Motors’ Vice President of Global Sales, Marketing and Service serving as the primary editor and consolidator of this plan. This plan was ultimately approved by me, the BoD and Musk himself. 61. On December 27, 2006, Siry sent an email to Tesla Motors’ executive team regarding the creation of BP 4.6 and attached.an outline detailing the point-person or department at the company would be responsible for which segment in the plan. This outline demonstrates that I was responsible for the Executive Summary, and Siry and Malcolm Powell (“Powell”), then Vice President of Vehicle Integration, were responsible for the Tesla Motors’ Roadster section. The outline does not name an individual responsible for the Finance Section, although I believe that Tarpenning wrote this section, and he did that without my involvement or my influence to skew the data one way or the other. A true and correct copy of this email and the attached outline are attached hereto as Exhibit “32”. 62. The BP 4.6 revisions required numerous modifications. On January 2, 2007, for : example, Powell sent an email to marketing consultant Dottie Hall, Siry, and me to inform us that he had modified the and first table in the draft business plan. A true and correct copy of this email is attached hereto as Exhibit “33”. 63. On or about January 12, 2007, Simon Wood (“Wood”), the Director of Engineering at Lotus, met with Musk on the status of the Roadster program. Musk flew to Lotus offices in England for this meeting without me and communicated directly with Lotus’ executive team on the Roadster program. At that meeting, Wood gave a PowerPoint presentation to Musk highlighting Lotus’ concerns regarding the increasing risks for production delays and cost increases in the program. The presentation slides clearly demonstrated to Musk that Tesla Motors was behind schedule and was short on the components needed to move ahead with the production of the Roadster. Wood sent me the slides for the presentation via email after that meeting. A true and correct copy of the email DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION -14-

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o eo N DH HA FF WY YN ND pO BRO KO KR KR DRO RO Rm eee ee ea se ee So ND OO FF WD NY KK DOD BO FN DAH FP WY NYO KF O&O @ ee and the above PowerPoint presentation is attached hereto as Exhibit “34”. The presentation outlines the following issues regarding the program: a. At the time of the presentation, Tesla Motors was missing 27% of parts needed to build validation prototypes (“VPs”) of the Roadster; '* b. Data suggested that there would be significant production slips, including delay in SOP; c. Unless Engineering Change Order (“ECO”) release performance is improved, this problem would re-occur at subsequent phases of the project; d. Lotus was worried about the volume of “concerns” in the system, specifically 846 at that time, with only 94 concerns closed;’® and e. The target for eliminating “concerns” suggested by Tesla Motors — was not achievable. 64. | Musk was not the only member of the BoD who was aware of delays and costs increases of the Roadster. On January 24, 2007, Musk wrote an email to the BoD in response to an email from Marver regarding financing of the company. Musk mentioned delays in delivery and the risk of more such delays. Marver’s email also confirms that BP 4.6 would be released to investment bankers as part Series D after it was received and approved by the BoD. A true and correct copy of this email thread is attached hereto as Exhibit “35”. 65. Beginning with the first days of the company and including the years 2006 and 2007, at almost every monthly board meeting that I recall, the BoD was given presentations on the status of the Roadster and the finances of the company that included the estimate and actual costs of the Roadster program. These presentations were given by the person in charge of those issues with Tarpenning or the controller of the company, Josie Co, giving the financial '3 Musk, however, asserts in ITB that he and the BoD were under the impression that Tesla Motors’ only significant problem was with the transmission. '4 VPs are the second generation of prototypes of a car, succeeding the first generation Engineering Prototypes (“EPs”). VPs are much closer in design to the final production car and so enable more refined testing and validation of the car. 'S ECO release performance refers to the time it takes to begin part production once the engineering phase is complete. '6 Ty this context, concerns are a synonym for problems; “closing a concern” is identical to “resolving a problem.” DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION -15-

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— Oo wo NH NYO WN WN NH NO NO KF FF KF KF FOF OO ee OOS me “ao sa HN ON FF WH HN SK§ DOD Oo MO HN DH AH FR WD NY FS BS Co oe NDA WwW Bw Ww @ eo presentation and Powel and Tom Colson, then VP Of Manufacturing (“Colson”), giving the technical presentation. I have never instructed any presenter what to say at the BoD meetings and I have never instructed any person at the company to hide or conceal any information about the Roaster program. Furthermore, for each BoD meeting, a Board Meeting Packet was distributed to all the BoD members; the financial records of the company were often included in these packets. 66. Tesla Motors sent potential investors preliminary versions of portions of BP 4.6 in order to attract investments. For example, on February 2, 2007, Tarpenning sent an email to Vipul Tandon at Soros Fund Management with an attachment of Tesla Motors’ preliminary versions of the executive summary and finance section from the business plan to be used for Series D funding. A true and correct copy of this email and the attached preliminary summary and finance section are attached hereto as Exhibit “36”. 67. | Tarpenning’s financial section was based on his best estimate on the costs and expenses of the Roadster program and ultimately was included in the final version of BP 4.6. On February 6, 2007, I emailed Marko Maschek of 3i Investments (“Maschek”), my personal assistant Alina Dini (“Dini”), and Tarpenning to tell them that I would send Maschek a copy of BP 4.6 as soon as I had BoD approval for such. In this email, I stated that Tarpenning was . getting the financial section in order for the business plan and that I would send Maschek the financial numbers soon. A true and correct copy of this email is attached hereto as Exhibit “37”. 68. The BoD had the final say on the business plan to be used for attracting new investors to Tesla Motors for Series D and it approved BP 4.6 for that purpose. On February 6, 2007, I wrote Musk an email to ask his advice on having a lawyer review the business plan. Musk replied that for big investment rounds, legal counsel usually reviews the plan, but any changes are up to the BoD. A tre and correct copy of this email and Musk’s response is attached hereto as Exhibit “38”. 69. On February 25, 2007, while Tesla Motors was in the process of revising the business plan, Musk and I discussed the delays and costs of Tesla Motors’ contract for transmissions from Magna. A true and correct copy of this email thread is attached hereto as Exhibit “39”, DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION -16-

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oO eS NN DB OH FF WY NO DO NO DN BPO NHN KN KR KR RO Rm ee ee eee eo HN DB WO FP WO NY YK DB OO OH ID DB WH BP WD PO KK CO @ eo 70. On March 2, 2007, Musk, fully aware of the costs associated with the Roadster, wrote me an email asking if Tesla Motors should increase the base price of the Roadster to $95,000 because he was worried about the profit margins of the sale of the car. A true and correct copy of this email is attached hereto as Exhibit “40”. 71. On March 15, 2007, I sent Musk an email with a PowerPoint presentation of Tesla Motors’ Transmission Project. The PowerPoint presentation states that there were cost and timing risks resulting from problems with the transmission program. A true and correct copy of this email is attached hereto as Exhibit “41”. 72. On April 20, 2007, Musk wrote an email to Harding to talk about Magna transmission expenditures and stated that the Magna issue needed to be decided if there would be a “production slip.” A true and correct copy of this email is attached hereto as Exhibit “42”. 73. On April 21, 2007, Musk wrote me an email asking to meet with a group about the costs associated with the cells and batteries, by which he acknowledges that these components make up a significant portion of the cost of a Roadster. This meeting indeed took place thereafter. A true and correct copy of this email is attached hereto as Exhibit “43”. 74, On April 23, 2007, BoD members Simon Rothman (“Rothman”) and Marver expressed reluctance in emails to authorize a PO for transmissions from Magna without first having a cash flow projection. Musk responded that Tesla Motors should move forward and that delaying the PO would only cause harm. A true and correct copy of this email thread is attached hereto as Exhibit “44”, 75. On April 24, 2007, Tarpenning sent an email to Musk and Marver with an attachment of cash flow projections for 2007. Musk replied to Tarpenning’s email by showing concerns for the rising expenditures. A true and correct copy of this email, Musk’s response, and the attached cash flow projections spreadsheet document are hereto attached as Exhibit “45”. 76. On April 25, 2007, Musk wrote an email in which he stated that Tesla Motors needed another two rounds of funding beyond Series D because Tesla Motors would need between $70 million to $80 million to make it to March or April of 2008.!? Musk was responding to Marver, who wrote to the BoD with financial advice. Marver stated in his email '? This email contrasts Musk allegation in ITB that Series D was the last round of funding before the Roadster production and profitability. DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION -17-

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— Oo fo N DH WN. F&F WO WN NO NO NO NO NO NO NY NY NO KF F FF FF FE FOO Ee OO SS So XN DBD nH F&F WH NYO KY DT GO SF NI DH A F&F WO NY KY OS @ oe that he is hopeful Tesla Motors would ship Roadster in October 2007, which serves as an acknowledgement that the BoD knew well that the shipping target of September 2007 in BP 4.6 was indeed only a target. Marver further cautioned the BoD on potential delivery delays, feature slip or weak capital markets that could occur. A true and correct copy of this email thread is attached hereto as Exhibit “46”. 77... Based on the increasing concerns about the cost of production, on the On April 26, 2007, Musk asked me in an email when I thought we should increase the price of the Roadster because again he was worried about our margins. A true and correct copy of this email is attached hereto as Exhibit “47”. 78. In this context, on April 27, 2007, Siry proposed a strategy that included a base price increase of the Roadster from $92,000 to $98,000 in an email sent to Musk and me, stating. Siry stated that the reason for the increase in price were increase in costs, and primarily because of the change in the exchange rate of the British Pound. Musk responded positively via email to Siry’s plan. A true and correct copy of this email and Musk’s response is attached hereto as Exhibit “48”. 79. Shortly after closing the Series D round, the BoD created six new subcommittees. These subcommittees had free access to Tesla Motors staff at every level and free access to Tesla Motors’ financial records. The subcommittees reported progress at every BoD meeting. The new subcommittees were: a. The Audit Subcommittee, led by BoD member Steve Westly (“Westly”) and Musk; b. The Operations Subcommittee, led by BoD member Antonio Gracias and Musk; c. The Tesla Stores Subcommittee, which focused on store designs, and was led by Kimbal Musk and Yoler; d. The Government Affairs Subcommittee Committee, led by Westly and Yoler. e. The CEO Search Subcommittee, led by Musk, BoD member Ira Ehrenpreis (“Ehrenpreis”) and me; and f. The CFO Search Subcommittee, led by Musk, Ehrenpreis and me. DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION -18-

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oOo fo NN DH OO SF WY NO NO NO No No DO NO NO No NO —= —=- — — — —_ —_> — = ao NY Dn On F&F WY NY KY FT Oo Fe HN DH TO F&F WY NY | OS 80. On May 8, 2007, I received an email from Glyn Owen (“Owen”), the General Manager of Tesla Motors Ltd., Tesla Motors’ UK subsidiary. Owen informed me of the details from a meeting between Musk and Lotus, including Owen, Wood, and Lotus CEO Mike Kimberly, which occurred on May 3, 2007. According to both Owen and Wood, Musk was aware of the costs and risks highlighted by Lotus. Musk was also made aware of the risk to the SOP timing and the risk of additional costs for potentially failing to make use of reserved build-slots as a result of Tesla Motors’ delays. Wood specifically noted in his email that “He [Musk] understood the risk to SOP timing & appeared to accept the likely risk of additional cost for resource support & Possible (sic) missed build slots.”!® Nonetheless, as Wood notes, Musk “greatest concern remains the poor quality of the interior whish (sic) he views as totally unsuitable for the car.” A true and correct copy of this email and the attached PowerPoint presentation from Lotus is attached hereto as Exhibit “49”. 81. | After Musk met with Lotus and was made aware of the scheduling slippage, the SOP was redefined to include only the delivery of a pre-production “durability” car to Musk in order to allow the company to “claim” that it had started production at that time, but the actual SOP date for building production Roadsters for customers was pushed up to an uncertain date, once all of the problems in the the pre-production cars are sorted out. See, Exhibit 49 above. 82. On June 5, 2007, Dini sent the BoD members a board meeting packet for a board meeting to be held on June 6, 2007. A true and correct copy of this email and the attached board meeting packet is attached hereto as Exhibit “50”. 83. The packet for the June 6, 2007 board meeting included the following items: a. Board Meeting Agenda for the meeting on June 6, 2007; b. Harding’s official minutes from a board meeting held on April 25, 2007; c. A presentation on the Roadster production status made by Powell; and d. A presentation from Tarpenning concerning finances of the company. 84. According to Harding’s minutes from the April 25, 2007 board meeting, the BoD discussed the search for a new CEO and Tarpenning’s discussion about the financial status of Tesla Motors at that meeting, which were topics that were routinely discussed by the '8 Tn his blog, ITB, Musk accuses me of causing Tesla Motor to be liable for the $4M penalty imposed by Lotus for the lost of the production slots wherein he was fully aware that the risk of losing those slots was imposed by he requests for additional resources. [See, PE 128.] DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION -19-

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Oo eo ND OH FR WH NHN eK NO NO NO NO NO NO NO NO DN mw Re Re oy nN Dn NH FBP WwW NY KF TD ODO fF HI DD A BP WOW NO &-& O&O BoD. Similarly, the June 6, 2007 board meeting agenda includes a discussion about the engagement of the firm Russell Reynolds (“Reynolds”) to find a new CEO, the hiring of a temporary CFO and the engagement of Reynolds to accomplish this task. 85. During my tenure as the CEO, the same type of board packets, including financial and manufacturing updates, were given to the BoD members after each board meeting. 86. On June 19, 2007, I gave a presentation at Tesla Motors and sent everybody at the company, which I believe included its executive staff and Musk, an email with an attachment of the slides from my presentation. I highlighted in my presentation that Tesla Motors had failed to pass another stage, or “gateway”, for our Final Approval with Lotus that would affect the delay of production of the Roadster. I specified nine reasons for our Final Approval failure, and I urged everyone at Tesla Motors that “A Lot is at Stake,” including the lexistence of Tesla Motors, and I included the phrase, “Your jobs and mine.” A true and correct copy of this email and my attached slides from my presentation on June 19, 2007 are attached hereto as Exhibit “S1”. 87. On July 16, 2007, Dini sent me the Board packet for a July 18, 2007 board meeting. A true and correct copy of this email and the attached packet is attached hereto as Exhibit “52”. The packet included the following documents: a. A Board Meeting Agenda, which included information about the CFO search and temporary CFO that was hired Dan Saccani (“Saccani”), as well as the search for a new CEO; b. A presentation of Powell on engineering and manufacturing that included an update on production; c. Financial reports, predicting a shortage of cash by the end of that year, 2007; | and d. Harding’s official minutes from the June 6, 2007 Board meeting with all directors present. 88. Notably, Powell’s presentation for the July 18, 2007 board meeting projected production delays of several weeks in the production of the Roadster due to transmission problems that render the entire production schedule tentative except for the delivery of Musk’s car. DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF'S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION -20-

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o 6&6 NN DH OO Be | Ne dO N NO nN No NO NO bo do — — — ee pe — SS ee pe a HN Hn YH FF WY NY KSK&§ CG DO FB NY DH WT BR WH WHO BF OC @ oe 89. Saccani was hired as the temporary CFO soon after Tarpenning resigned as CFO on June 7, 2007. On July 23, 2007, Saccani sent an email to the Executive Staff with an attached weekly finance report. A true and correct copy of the email and attached report is attached hereto as Exhibit “53”. 90. In Saccani’s first presentation to the BoD during the July 18, 2007 meeting, he presented slides clearly showing the issues of critical path delays, especially the transmission problems. Saccani’s presentation projected that the PTS, otherwise known as “pass to sale”, was for delivery of Roadsters in September in 2007.'? However, the delivery schedule of the -Roadster had already redefined to only include Musk’s Roadster and the delivery of the Roadster to the customers had been pushed back to a later date. A true and correct copy of the slides presented by Saccani is attached hereto as Exhibit “54”. 91. On July 31, 2007, Sacanni sent an email to board member Steve Westly explaining that the first fifty Roadsters. would each cost $110,000 to produce, and that plans | would be developed to determine means of reducing costs. Westly responded that this news was better than anticipated and expressed his confidence that costs could be driven down with higher volumes. A true a correct copy of this email and Westly’s response is attached hereto as Exhibit “55”. 92. On August 2, 2007, Saccani asked me if he needed board approval to cut a PO for 227 cars at a cost of $4 million in order to resolve issues with Lotus arising from missing parts and production slips. The high cost of this PO was due in large part to Tesla Motors’ delay issues that Lotus presented to Musk in January and May of 2007. I told Saccani he needed BoD approval for this expense. A true and correct copy of this email and my response is attached hereto as Exhibit “56”. 93. On August 7, 2007, Saccani sent an email with an attached preview of the finances for the month of May 2007 to Westly, BoD member Ira Ehrenpreis (“Ehrenpreis”), |’? Musk claims in ITB that I represented to him that Tesla Motors would deliver Roadsters in September of 2007. However, as demonstrated by his visits with Lotus in January and May of 2007, Musk already knew by the time of Saccani’s first BoD presentation that delivery meant only Musk’s. vehicle and that the commercial production of Roadsters will be delayed. [See, PE 128.] DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION -21-

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oO fo AN HN nH FP WW NYO NO NO NO NBO WH HN NV NO NO FF KF KF KF FS OS OO SF lS lhl ony DA A BF Yb NHN KF Ss BD ew WD HW FF WN SF OO @ oe and me. He told us that he was still in the process of updating the financial plan. A true and correct copy of this email is attached hereto as Exhibit “57”. 94. On August 16, 2007, Tarpenning sent Colson, Vice President of Vehicle Integration, Malcolm Smith, and me an email with attached slides for a detailed breakdown of costs prepared in November 2006. Tarpenning stated that the numbers from the slides were the numbers used in preparing Plan 4.6 for the Series D fund raising. These numbers and the slides themselves were presented to the BoD. A true and correct copy of this email and the attached slides are attached hereto as Exhibit “58”. The BoD was presented with the following information: a) a detailed breakdown part by part of gaps in production costs versus targeted costs; b) a statement that the Roadster’s Bill of Material (“BOM”) was still not fully defined;”” c) a statement that the Arena System did not accurately define product costs; and d) logistical and operational requirements had yet to be defined. 95. Musk led a discussion concerning cash flow and margins during the July 18, 2007 board meetirig. During this same meeting, Powell led a discussion of the Roadster, including projected production dates. Harding prepared the official Board minutes for the July | 18, 2007 board meeting and sent them as an attachment to the BoD on July 30, 2007. A true and correct copy of this email and the attached minutes is attached hereto as Exhibit “59”. 96. The highly open and documented discussions on the costs and delays in the | | production of the Roadster as demonstrated by the unfiltered disclosures made to the BoD by | various members of the Tesla Motors’ team and Lotus in May through July 2007 were typical |to the operation of the company in my tenure as its CEO. As I emphasized before, I never attempted to conceal any material information from the BoD or unduly influenced any of the company’s employees to engage in such conduct. I promoted open communications between the BoD members directly with employees of the company. 97. Timothy Watkins (“Watkins”), a managing partner at Valor Equity Group, a Tesla investor, was asked in July 2007 to assist the company with supply chain issues relating to the Roadster upon my request. The scope of Watkins’ services inherently included the tracking of costs of the components of the Roadster; an issue that needed to be streamlined as ?0 BOM is synonymous with cost of the components used for production. *] The Arena System was an in-house accounting system used by Tesla Motors to track costs of production. DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION -22 -

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oO Co SN ND OO & WD NO No po PO NO HN WV NV WN NO | HF FF HF FF OF SEU Sell ll o nN ND WN FP WHO NYO KY DBD Oo fF ND DB A SFP WO NO KY OC @ @ the company faced actual production. The assistance of Watkins was provided during my tenure as the CEO and directly resulted from the transparent and open discussions at the BoD level on costs and productions issues as demonstrated above. V. My Separation from Tesla Motors 98. I brought up the idea of searching for a new CEO at a dinner with Musk the evening before the January 2007 BoD meeting. I did so because the company was becoming too complex for a CEO of my experience to handle. I wanted Tesla Motors to hire a CEO with more automotive industry experience to handle day-to-day operations so that I could focus more on the design aspect of bringing the vision of a commercially viable electric vehicle to fruition. 99. On February 5, 2007, Musk sent an email to Hau Thai-Tang (“Thai-Tang”) stating that Tesla Motors was beginning its CEO search in earnest and asking Thai-Tang his opinion on using headhunters to find a CEO. A true and correct copy of this email is attached hereto as Exhibit “61”. 100. On June 13, 2007, Musk wrote me an email stating that “he would be happy to correct the perception that I was fired from Tesla.” He states that “the objective fact is that I brought up the idea of searching for a new CEO months prior to my resignation as CEO.” A true and correct copy of this email is attached hereto as Exhibit “62”. 101. On August 12, 2007, during a Special Board Meeting via teleconference, I resigned as CEO of Tesla Motors and I accepted the position of President of Technology of Tesla Motors. A true and correct copy of the minutes of this meeting, taken by Harding, and the email sent to me by Harding with his minutes attached are attached hereto as Exhibit “63”. VI. The Production of Roadster Nos. 1 and 2 102. On January 17, 2007, I received a letter and certificate for my reservation of car number 2. Musk and I signed the certificate. A true and correct copy of this letter and certificate is attached hereto as Exhibit “64”. 103. Musk and IJ decided ourselves who would get car number | and car number 2. On July 6, 2007, Musk and I sent emails to each other concerning who would be car number one and car number two. After some discussion, Musk agreed that I could have the first car. As a token of my appreciation for his financial contributions to the company, I then said that he DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION -23-

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Oo foe SN HD nH FSF YH HO — N N dN N No N N N N — —_ — — — _ —_ —_ —_ — could have the first car.” A true and correct copy of this email thread is attached hereto as Exhibit “65”. VII. Musk Intentionally Defamed Me 104. On or around January 12, 2008, Musk and Ze’ev Drori (“Drori”), then CEO of Tesla Motors, sent an. email to employees, customers, and investors of Tesla Motors whereby he claimed that the recent changes at Tesla Motors were made to create a culture of accountability. Musk and Drori further stated that, “a lack of such accountability leads to missed deadlines and continuous delays. This accountability starts at the top and permeates throughout the entire organization. As such we have made some changes at every level.” I received a copy of this email because I was an owner of a car at that time. A true and correct copy of this email is hereto attached as Exhibit “60”. 105. On or about June, 2008, I was banned from accessing and posting on “owner’s forum” of the Tesla Motors Club website, www.teslamotorsclub.com,. a service that is available to all Roadster owners. J was reinstated by the company on or about June 23, 2008. 106. On March 29, 2005, Musk sent Straubel and me an email stating that he originally came to California to do a Ph.D. at Stanford. Musk elaborated further that he did not care about the degree but had no money for a lab and no legal right to stay in the United States, so the program seemed a safe bet for him.”? A true and correct copy of this email is attached hereto as Exhibit “66”. 107. On June 4, 2009, and after I filed this action, I was asked to bring my car for a power train upgrade which I was promised on the date I first received my car on July 19, 2008. I brought the car for an upgrade the next day, June 5, 2009, and I was told that about half of the cars that needed an upgrade had already went through it, although I was the person to receive the second produced Roadster. *2 In ITB, Musk incorrectly asserts that the reason he received the first Roadster was because the BoD established that the cars would be delivered in the same order of payment made. The wiring of payments for Roadster by Musk and me happened well after our discussion on who shall get the first produced Roadster. [See, PE 128.] 33 Tn contrast to this statement, in ITB and various other occasions, Musk stated that he was interested to join a PhD program at Stanford University as a result of his longstanding interest in electric cars. DECLARATION OF PLAINTIFF MARTIN. EBERHARD IN. SUPPORT OF PLAINTIFF’S OPPOSITION TO DEFENDANTS’ SPECIAL MOTION TO.STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A ° STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION , ~24-

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@ UG:UL FUnp S| yazssuey any I declare under penalty of perjury under the Jaws of the State of Califomia that the foregoing is true and correct. Executed this 15th day of July 2009 at Ingolstadt, Germany. fed, oF ND HY Bw VQ 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF'S OPPOSITION TO DEFENDANTS’ SPECLAL MOTION TO STRIKE PORTIONS OF PLAINTIFF'S COMPLAINT AS A STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION LBLECELGL PI ZLEaad 8 WELIATY TELOZELETOL xXVA 2O:2T 8003/9T/L0 600 Py

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EXHIBIT | |2

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Stata of Delawara © Secretary of State Division of Corporations Delivered 06:32 PM 07/01/2003 FILED 06:25 PM 07/01/2003 SRV 030436066 — 3677166 FILE CERTIFICATE OF INCORPORATION OF TESLA MOTORS, INC. FIRST; The name of the corporation is Tesla Motors, Inc. (the "Corporation", SECOND: The address of the Corporation's registered office in the State of Delaware is 615 South DuPont Highway, City of Dover, County of Kent, State of Delaware 19901. National Corporate Research, Ltd, is the Corporation's registered agent at that address, THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware. FOURTH: — The Corporation shall have authority to issue 20,000,000 shares of Common Stock, with a par value of $0.001 per share, FIFTH: The name and mailing address of the sole incorporator is Robert M. Esq., cfo White & Lee LLP, 545 Middlefield Road, Suite 250, Menlo Park, California 94025, SIXTH: No director shall be personally Liable to the Corporation or any of its Stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal or modification of this Article Sixth by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification with respect to acts or omissions occurring Prior to such repeal or niodification, Robert M. Dang, Incorporator Frcdigik 2

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EXHIBIT 3

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Confidential Business Plan Thursday, February 19, 2004 Version 1.0 . Copy Number: O | Distributed to: Date: 845 Oak Grove Avenue, Suite 204 Menlo Park, CA 94025 Tel: (650) 329-1100 Fax: (650) 329-1188 ) Email: info@teslamotors.com

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Proprietary & Confidential Notice This business plan is neither an offer to sell, nor a solicitation of offers to buy securities. An offering is made only by the Private Placement Memorandum. Copies of the Private Placement Memorandum may be obtained only from Tesla Motors Inc. or such dealers and brokers as may offer these securities in compliance with applicable securities laws. Proprietary Notice This document contains CONFIDENTIAL INFORMATION about business, technology, and plans of TESLA MOTORS INC. and constitutes a TRADE SECRET. This information is COMMERCIALLY SENSITIVE and shall not be reproduced, disclosed or supplied, in whole or in part, to any third party without prior written consent from TESLA MOTORS INC. Basic Information Tesla Motors is incorporated in the State of Delaware. Address: Tesla Motors Inc. 845 Oak Grove Avenue, Suite 204 Menlo Park, CA 94025 Tel: (650) 329-1100 Fax: (650) 329-1188 email: info@teslamotors.com Principals: Chairman and CEO: Martin Eberhard (eberhard@teslamotors.com) President and CFO: Marc Tarpenning (marc@teslamotors.com) Coo: Tan Wright Gian@teslamotors.com) Board of Directors: Martin Eberhard Marc Tarpenning Bernard Tse Laurie Yoler Legal Representation: Mark White White and Lee, LLC 750 Menlo Avenue, Suite 380 Menlo Park, CA 94025 (650) 470-4000 Bank Contact: JoAnn Gast City National Bank One Palo Alto Square 3000 El Camino Real, Suite 100 Palo Alto, CA 94306 (650) 812-8306 Copyright © 2004 Tesia Motors Inc.

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1 Proprietary & Confidential Table of Contents EXECUTIVE SUMMARY 1 THE TESLA ROADSTER........cscceceeceeseseecesesersceeesseesseecsecacsecsensesucseeseeecessecesseadsecsessesecnasesseacsaceeseseaceeseeasenaeasearaaeaenes 3 WHY A SPORTSCAR? .....esesessecessesescosesesenseneseseresessnseasseeaesenensossucesesseaesesssscnsecensescesscesseeusersesseessnserensresessssssssesenseees 3 WHAT PROBLEM ARE WE SOLVING? ......cssscssescossrcessssssestsseesscssssesunsessnssussesasueesesssesceaseacesesnesseacensacssesenasenneseesees 4 THE CUSTOMER .......scsscssesecererssecseseeseseseecesetsccessessesecesonsecsecensesesseasseeseacissesaeseesescessesasccsessesseseceneenenseesseaeneanenseesss 4 THE SALES CHANNEL .....csccsssssssceccsccsesccssssstrsssssescseesssacusensssesteansasssvansatseseusvegacscesesancasenacancascanseeseeneesesezsesensenasanes 4 EV HISTORY ou... esssessessseseotecsersssssesenscsesecscsessecrssssosssersscsetersesesseaasisassnsesessesesseacerensasacanseeseetsseceudaessoneasaneasssesesonsess 4 EV TECHNOLOGY ....ceccesscsssesssssserscssnsssarcsescssancsseeserseeasaesarcaresdeseeraceensececeesasedseesassssetcasesgasssussasseusaeseaaessensseaasonss 5 THE OPPORTUNITY ....sescsssssscssepssssssesesecensesssssasasssnsansessesssonsavoasacaseraconeesssastaedsoessaseusasaeessesseussauseussaseusssenesasaneseasenes 5 TECHNOLOGY ACQUISITION AND DEVELOPMENT .........ssccssssssssossonsuscssssessnessocsensncesasscecesessacesusessaagessensoaeransenarenes 5 FINANCE .....eesssesescessscesececssceesssecsneesessnsescesssecsusseesessstassenaeseaeesassenacesuenseesasecausasaeeseneugeouscstesseceatseceeserscsesarseresersets 6 EXIT STRATEGY ....ccssssssssesssssesssotsoesasscesescesssaseeescseaesssescsessasseseesesaesoeecensesaeseasessenascecsecssoesonsaaecsoessscecsaseusesasanesones 6 TESLA MOTORS FOUNDERS ........seccsssscessccesssecsscessscenscesssecsssseceaeesssseenesnsassesesaassseaeosessceesessautussnsecseceaesececaeraneeseneses 6 TESLA MOTORS MISSION & THE TESLA ROADSTER 7 TECHNOLOGY .......ccscccsscescsseesceeassecenecsescssenscsnsessscsnenesensseseessnecssscsusenseacseecesennsesssesscecsaceseseseeeecasecenaeanseneseesseeasesete 9 Electric PerfOr mance ......scssecsecsessscesessssscscsssesenenesccsseseecseesenacscoesensececessstecsenenescsdeneonsesecseesesieanmeoniessnenseseeneasees 9 Traction Motor and Power Electr Onics...cecscscccssssscssssssessvsssnscsssessssactecsvecsecsssausesensusesecsesecesenscessensoesesereneneseates 9 Batteries and Battery Life ..c.ccscccceveccsessvsssssvscssseseustsoesaeensecsecssacesssesssansuacsasssassaceaaeaceradeesaeessnaesaeeeasegeesessenenezeass 9 Automotive DeSIQH ........cceceeccccecvsseenecennetetecene nessaeeesecee ceseoseaeeetoaeanecsegseecncessaaessenssegeeeeesaseeeesassensneeaseageeseseeeseseee 10 DESIGN PRINCIPLES ......cscscesssccecessscecessassesecseecessccesccevesecsecessscessacensecsesssscucsststsuenasneccecesassseneseeeeseeseenseseseeseesassees 10 SPECIFICATIONS OF THE TESLA ROADSTER......esscsscsssssscsssesssessecensesscesneseenesnecesseenscsasseecneesensesaaterssseeneesssessevasones 11 DUWMNCHSIONS ..ceaccccccccanccecssccescensasenscessesusetscenassceanseanseacesaeecsaeensecaausaansesesseasseesasseasesssaseaeecaeeenaeseaseaneonenaesnseaaeres Il POV FOV ONCE aces ccnssnsevnnsenseeesesseeatscensenssensunsasssnecaessesuesssscsescessessecusecsassonscansuncecacasesnesssenasessestssarsaeaasersuaeenetee Il EV Technology ..ececcsccessscscesesssescantasecescssensusssassesassesacencnssasensasessseessesscosceeesenauassansaneagenscaenaesassacasenaeeseeeasneseataes I] DYEV CLV. cceveccccsccnctceessccncesueseeeneesseensasansuacesaeenaesacesseaseseaeensecsaesaeecenseseecuseseneeaaeeceataeacecsaesusaseqeradeesseseenaqeaene I] Chassis arid SUSPernsina ......ccsccsessscsscsesseecsccscsssenseessesessusccnecnsessuseceaeeeeesieeecasceseseesaeaceesresaesentereneaeetensensesasasaces Il PMUI OS .ecccescssescccssesvacssccnsescessnsesassnsnecscstensecesenaeacsecsseuesassaeaaenseasacsdceaeeascesceaseasececaaeeessetaeeaanecsenete eeeesaeaeeeeaees 12 FUTURE DIRECTIONS .......cssccossssesecceccssnsansesseeneecssssssenetesacsnsecseessssenseesseeeeeaesaunsenseesneesadsaseneeeadcnsesssassansasseassaceagtes 12 NOTES... ccsescsssesesescsssssnssssceessesssessensteceusacessessssseqeeessessassenssasesseusssssueaessesseusensacssaesacessessatensenuasassssseonsteeecensesatee 13 KEY ALLIANCES 15 AC PROPULSION, INC.u......cccscscssececessssecssccsessesesossecuecesecsvccsessececseresessesccusaraucasacsesneneseavasessvessacsestsavaesssccavansaraceess 17 LOTUS ENGINEERING ......ccscccsscesssecsessscesecosnseseesessasssaesesscoueeseessusesaeessecensesaneacecnacessedaeassenaentecssaussasecasensseaceaseesoas 17 OPERATING PLAN i9 SCHEDULE ....ccccscsssecsotecessecssseesesessececcesstessesetncneuecssconcuacacsancessusesseestecsorsnsesuesssseenecensteeseeensnsennesatanseeesseseceneeseeseds 21 SOries-A FUrrdivagcececccccccccecsecssecnessssnseacerscnsescenesensetatessesnseanenevasdessecessceecansesoeeaaesoeesceanespesscenaeouaneeesseensneneensets 21 S@ries-B FUNGING. ....ccccccscsecssesscssssssseesseesseessessesessnecssecesseseaetensessaseceecesessesuseessessescaseesesecsusensessesseatseaseaneeserenes al Series-C FUrndireg ...ccccccccccessscssssuecsesscssssessessscesessssensessesesscecenssnassesassassessesseaseacuaavaseagenesceneesaesseaeeeasseaserseacnenses 21 Sevies-D PuUrrdinag .uc.cseccseccessscesecsscsssccsssseusecsvscscescsenseseesesssecguseseessseneceeseseneateeanenseccaesaesseesteacecaesasenseasassendensess 21 ORGANIZATION. ....00ccccssssersssssccecssesssscceseasenarecanssescsessececseneseusssaaesssseeesaesauceseseseasaueeeeanaasseosaaenaneasesaeoecenoneceseaees 22 MANA CMEN ae eescccesscccsecsnscesssecencenacsaccnsscsaesasensesaecssecsacesaecaasseasensesessesanensecuesesenesussessaeassaesoesbedeesaveasesaesaesasens 22 Trefortmation Technology .......sssccsseecssencessssseesseseesesesaeeessconseseaseseesesasseceseesaseaseseraseasensseesesensesassaserseanevesesesees 22 Digital ENQin@er ing... ceececsscsecessssesseeesesensescessesesaseeeecessessscssessessenseeseaeeseseesecasscesecss esas taseesscnensnentednesssessecess 22 Vehicle Eragineer ivag.....cscceccscccsssesssssseesssesensessesensesssesesssedecesessseassesesesesecacaeaeasarassnseeascaesessecsranatessaensasseneesees 22 Meri actur ing... seeceeeccsscvecnecsscsensvscucesesccesussenansecencuceasasseeasacaseaeasageasaceecseaereverseraessssssasetsesesscseeeseueasassenseeeeees 22 Sales & Marketing oo... ceececcececssesscsssesesseeceecsesenensveceeessceseeeasaceeraraceesasneceravsdsaeeesssdevevsussssusssosesceeseseseasasaseasaseess 22 SUP OOP Eos. seeceeececeeeeceesescsenenseseeseansncenencssesaesensesessesevssaeeneesesesacusesesaseasseneceesuceacececascueenadseseaceenecsessseduansesseasae# 22 MARKETING AND SALES 23 MARKET SIZE .u.csssssscsecsoccsccnssensescecenscassssssonssasaececeseccuecsecsenceaneasanessessnaceesseseeaeeassonenessanesaussessecesssessusussasansenenesetes 25 THE CUSTOMER ue.sssssssssscssessssssssascsnsessssssscessessvecsuecsuscsasesasssssessascassesucssuecusecensssasssuecasesuansesuseasecunecsacceaecessersacees® 25 Government TACCHLIVES ......cscccceccesisccsecsncesecenscasessecuonssacenseessevouseessengeescenseeasesseaeseaaseseeneadsssaeseseeasenseessnesermeedss 25 MARKET LOCALITY ........ccsccsssseccessrcscsececsscesssessusecassesnsneaacasessssesnacessusesaceseuencesceseeseessssasenecusaaasanesseeavectassesereseans 26 PUBLICITY ......ccscceccssssssscceccscesscaccesssstaesensouccecsonsecassucesssauececessensseeeuausecsesosansnaanaceaeescosegetenssavsnaesesecssesscusasasessessees 27 Copyright © 2004 Tesla Motors Inc.

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Proprietary & Confidential bavocecesseucssensasssesesescsssnscessusensvsavassusousatsentseracnenseassensescesscoroscnsassesssseatasseocenssanseesenerseassensaceseesenes 27 suesescneossccorencosensssadcaecessssasisressseusssoccarsesssusessssossessteecacoseasaseneasucesensatererensacseseresacseneesesssersseseserensesaesssnensseees 28 COMPETITION 29 ELECTRIC CARS ....cssssccssesersssseesensenseseneuetseserstorcossseseasantessoee sssansesrsecessosecsereseacesceasstseearsuentonsacessesenessasesenensessseases 31 Electric Cars TOMY ...cecsccccsesccsecsssesevsescsensesessessesseesecssensenssassssaesasescasesessasssesaasssesssacsasesensescenseceassnesssaeaeseagens 32 Electric Sportscars TOGA) ...0.ccccsccsssssvsesssssecssessnesessssessesessnesenesseacasseassesseesenseeseedetensasenseasatensesacasanseteneeasianees 33 GASOLINE SPORTSCARS.....ccsssssecescssnenessecsesaesacseenecseeseessesacsesscsasesesesseseesessoesuessssneaueaeesseseessessesgeesaueeneaseseescesestenses 34 Usable Performance ..cccccccsesccccssscsessscessssssssseseussassessaessssesscasnssessassussassesussssssasssssesaesssessusanecaesseaacssaeseesssaseneees 34 NOTES .o..ccessescessssssesseseeeesescessseasesnseneusseseussasesssseeseseesquseesssaceussesssusesetassssaseasousesgenseuseseeseasenesadg caesoagugeseuanenenesseeens 35 FINANCIALS 37 KEY ASSUMPTIONS ........cccccssssssccecesscnsercansessesacscnesacsneesecessaecsesenectsesseaseessuceeesssenssenecesstaaeesssssensseesensnetacsseesasseszeeses 39 Drive Train & Power Electr nics... ccccsssesssessssnesscsessesescacessscecessecoesatscaesseceseasaceceesecansenseeteecaeantesaeseeesestenes 39 Automotive Design and Engint@evirng ........cccccsccecceeceeesesesaeeecosescesesceassseoceneccsceesereseeessecseaceeeacnaeessaeseeeeteesensass 39 Factory TOL g oo... sesssesessescecsessssesescecsessseeessessesscoessssasueveesessenenscaessssnenesesveaestasssapuessesseceeaeceessaeasessesatieasas 39 Tesla Motors Technology. ..cccccseccsesssssscssessesssccssssscseseessrssceasnseeeccecenessosaneesseacsevaseesenseteseaneeseaesaseesaaeeseenaeeeeses 39 Cost Of GOOdS SOL. .cecccesccesseseressncevsssessssenecscecsnsesecssssasesaasessessesrecueeseesacerssssecsesaessnaecaacauasenseaensecasessecasesenass 39 Expense ASSUMPUIONS ...cssccsecsessvsnrssescsiensnsnsnveessesuseusesesetenseseseeee sss eens eNdeaesesaegseeseaenesuseaaetesasaecerssasaranseeeseseesas 40 Reventie ASSUIMPUIONS. 0.0... cecsessssecnctsesvesenevesessveveacsesesesesesecsscesesesesssesesevessuessseseacsessatsssessseseueeaessarsesesaeessaeasaseas 40 ROAD TO PROFITABILITY ........scssccsssssssesessescssssseuscesesassecesussnsaccoseseesesseausoassesessesessescsessessescuesssessseassaesaceusessssesessaee 40 Income Statement SUMMAVrY ........cscecceeseeeseeceeenseneeenceeceseceteeessacenscesnenesuaeeeenseeessnasestsneseseeecnseeesepeeseeteanensnsengee 40 Cash Flow Statement SUIMIMAYPY vo cccccccccccscscccessssccenesevensennneeasseeneuesesessereasceeueeteneeessesceasersesegeaseaserssscaneeensresens 41 MAJOR RISKS FACTORG......ccssssscscsossseecconsecsccessenasesensncecessasaseessaansessnscaseaecsesseceesessuasecsedeseuensgucessusoaaeeecssseseseessetes 41 Automotive Aesigys COStS 02... ccccsccscecssesssseseteetsesensessecescesesecsecatessaesecsessesenssaneaecseeenssesaecnenaesacsaseaenenseeateceeseraeees 4] Timeline coeccescccccsscsessssssescesesasenessesseeescseasssesesseaseesasseaneese sossessessanaceseesnenasovsessenssnee teres nsesseeeeserenesseensaeaneteacee 41 Liability INSUrance....cccccccceccssessssesevsessesscsscessecensesessesescessvseeaseaeasessesenenessceceaceassasesseseceesaneesseeseseesaaesssecsenenseess 4] NOTES ....scsscsscssesescessscecsseconsosscsessnsessscessencenscsuseesessneaassasanssuseassussuassasussassussessensessaseessancaescaaeceeeaecesensecaseaeeseaesecees Al FUNDING PROPOSAL 43 SERIES-A FUNDING .....ssccsessssssserssssensescssossnsanssessesssnseeesasessassanssenssetsarscedssesssascnensrssosessdsensteseenseaaesasedsseseneaseeneataes 45 Mil eStONCS ..scccccceeeesscssessesesseessenessessasesensoessassessenssceseaseneesesseeassneassesssessecesseceaceatsnsesaeeesatesaneassqeasenssusaesissensensens 45 Eequity SUructure oss ceecssecsesssessvsncessccsencetonsecscessesenssecsseeensacuesesassnseseacseseausesssususssusessssesesessessaesaesesasescensseseseees 45 ADDITIONAL FUNDING ROUNDS .......scsssssssessessssssessensesssesssnssseascocesesseasoassessseseosssaseesenestsseracenscogenscenasesacanevaneenares 45 THE COMPANY 47 MANAGEMENT TEAM ......cccssssecstessccesctencesrencnssscensceeecanssnscensessssesstesseenssessensesasensesscssaesscsessenacesseceseueeausssacssseseasenss 49 Martin Eberhard (CEO) ...ecccsscscsssscsssssesscssessescsssssssssssassssssssesecsesenecesssasssasssessaecenseseseasssesestensceeeeeseaseseeceesenees 49 Marc Tarperrririg (President) 0. .ccscccccsscscssvscscsevessessssessessssessssssesssassusssessssssesssssesssassesesssacseensseasestsaesseuseesssnsss 49 Tarn Wright (COO) ..cccsecssessescscccsscsessvsvenensseeesecusessseesacsesessusuceseesseseseaesessesseassnasseseesesassesescetesssasseneesaseaseesses 49 BOARD OF DIRECTORS. ......csssscessssssessesssssccesessescesssssssnsassoccneeseescsesseasessessessssqusncoasatesesatscssseseccesusssesassccsecssaneesess 50 Martin Eberhard (CRaivnava) occceccscssssssssessvscsnseensesssesssaeassssssssscasssssussesasssucsssscaesssesacesessssonsusessusesserasaces 50 Mare Tar penviineg o.cccccsccccccssccsssscsssssssssssscssscessesscsnecsscnesenscseaeacaceessasesesusecesesassssnessseseeesesseseseeaaseesesasaesereeeeseess 50 Dr, Bernard TSC ..ccccsccccessssssensecssvensesnssevensnesesesesssensosenesauacssseuesssasacsesesssesssseasscssnesseesesesssaesenssecseaeseseeesesenenseets 50 Laurie VOU ..ccccscccseccecsscsscssnvesescesessaeessscacesssuaaesaesaressssssavssseeunscssensususeesssssesssssssesatsssgsansessasesacevsacesasenssaseatess 50 APPENDIX A: THE 2157 CENTURY ELECTRIC CAR 51 ENERGY EFFICIENCY .......ctcssscessceccstssotecsnneocenessnesssscsssessescevetssuessesersasensustesesonssvsesenereatseeaessaeceasscscsasseseasseneaseses 53 Gasoline COVS ....scesecsssesscesssesnsesesesensseseatsesesesessssaescsensueseasesssesssesasesssessucsesssessssssssvavssesesaseeassseeeseacsessseassesesases 53 EBD id COPS veescecessesesscssscsesssctesseeseseveoscusecscussessucnsesesessarscussssqssesessssseseseseseseseacsussusasssasasseassecsessaaseseseussensensies 53 Electric CVS... scesessesssecsseseneesessnssassesevevecsesensuaesecsacssesssscasasssesessssssastsssausssasasasausessssassesecaeassasceeessasseseasseseaeases 54 Hydrogen Fuel Cell COrs......cccsscscsssscsescesssssssessssssnsssenseetsecessesessessssssssssssssscssasasseacesassnssscsesesassssesseseeeeseseessos 54 COMPAPISOM. ..sccseccvsssesescesenesssessessssasesessessssasecsssguessussssossosecanenasesenessosecuavencasnscesesenensisarsesesuuasesessacsesesessensansess j4 EMISSIONS .....ccsccsssssesecesseesscessercsscessseaessasesecesaesnsssnsessassensonsesesessenseeasueassesseessevsesesesssessesseaseesensesseusesesesasscessesensanes 55 THE TRUE MULTI-FUEL CAR... .cssscsssssesssscceessestessessssassuscascassscesasessaccestensessescesceesstesceatsccesesasscetsessessecasessssessasess 56 PERFORMANCE .....scsssessercscesoesscssccosssessescnessssoesscnessessecsesscsessessenecasesesaasesaeaeseaseanseesseseessessaestsaeseesssessseeesesseessecanes 57 CONVENIENCE ....cssossssscsesrsesensesesecaceessencousnsscenscuesecessusenssssssesesavssnseasescosecssessensessesersesecasorseesscosecenseesaseeseacasesaesees 60 THE DESIRABLE ELECTRIC CAR uo. ..ccscccscsecessecatcssncsscsncesscscceeensecsscesstsestenssessecsssssesesessesesencesscascesersssestscaveotsnsenenes 60 Copyright © 2004 Tesla Motors Inc. ~~

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Proprietary & Confidential eesnessesenesseneacansneauenvasseseesseussscacssocsenussssenssanestsosssseususessusssossasssaasessusdaesesasecsnsorsdssussessosenssensensssssssensessesessens 61 APPENDIX B: USABLE PERFORMANCE 63 APPENDIX C: THE LOTUS ELISE AS A BASIS FOR THE TESLA ROADSTER ROAD AND TRACK TEST RESULTS NOTES APPENDIX D: NOTES FOR THE AC-150 GEN 2 ELECTRIC PROPULSION SYSTEM APPENDIX E: HYDROGEN FUEL CELL ARTICLES owoueeonecsecasoasenancepceceseoece woececonosecooseeesoooes APPENDIX F: 2002 U.S. CAR SALES Copyright © 2004 Tesla Motors Inc. 67 71 75 77 79 81

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ee Proprietary & Confidential Festa Meters Executive Summary Tesla Motors will build high-performance electric sports cars. This sounds impossible — both the idea of building cars in the first place, and further, the idea of building a high performance electric car. But key technologies have recently been developed that make electric cars suddenly very attractive, and the international business climate makes it now possible to build a “fab-less” car company — a car company without a factory. The Tesia Roadster 0-60 mph in less than 3.9 seconds World-class handling 100 mpg equivalent Zero tailpipe emissions " 300 mile range = Zero maintenance for 100,000 miles (other than tires). * A selling price less than half that of the cheapest competitive sportscar. pean, Yes, it’s electric. No, it is not a dream waiting for battery or drivetrain technology to be developed, or for some new fuel/power distribution infrastructure to be deployed. It uses commodity lithium-ion batteries that are already manufactured in the millions per year. You can drive one today. An impressive proof-of-concept car has been built to demonstrate the performance of this battery and drivetrain technology. The Tesla Roadster will be a production sportscar based on this prototype. Using outsourced design and manufacturing, the company will break even selling about 300 cars per year. Why a sportscar? Every electric car so far has been designed and marketed as a commuter car. Such cars must compete against high-volume cars made by Honda, Toyota, etc. The problem is that with the low sales volumes of a new car company, there is no way to compete on price with these giants, regardless of technology. Happily we don’t need to compete on price; we can compete on outright performance. Electric motors can produce high power over a very wide (13,500 rpm) range. No gearshift, clutch, or torque converter is needed; the resulting performance in a well-designed sportscar is astonishing. Customers for such a car are less sensitive to price, so long as it meets their standards for style, quality, and (especially for an electric car) driving distance. The Tesla Roadster is a disruptive technology — completely off the usual performance-energy efficiency curve, offering among the quickest acceleration and the absolute highest energy efficiency at the same time. : @ACPitzero Disruptive |)“ “ic ead cue] vest Roadster | Technology Sa - xiParsthe ‘Carrera GT at bili fw iS , P bars SK: Laiviborghini Murcielago Performance ihe os we Ne j_"« J) [@Dodge Viper SRT-10 reduces mileage - 3 os to me ic rsche $11 Turbo Coupe Ferrari Maranetlo Chevrolet Corvette 206 >4Lotus Esprit v8 5 Panoz Esperante © Nissan 350Z Toyota Celica Nissan Maxima % Ford Taurus ay © Toyota Camry O Subaru Legacy = Honda Civic VX VW Jetta Diesel Acceleration from 0 to 60 mph ( Sec.) 14 0.0 0.2 1.2 1.4 | A Honda FOX (fualceily 4 0.6 0.8 1.0 Well-to-Wheel Energy Efficiency (km/ilJ) (1 Honda Insight (hirid) Copyright © 2004 Tesia Motors Inc. - Page 3

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Sine. Proprietary & Confidential What Problem Are We Solving? & nergy efficiency: We will reduce (not incrementally, but dramatically) the total energy consumed to drive a given distance. It follows that total emissions will also be reduced. a Energy source: We will enable the efficient use of whatever fuel source is strategically attractive: imported oil, domestic natural gas, nuclear, even domestic coal; or renewables such as solar or wind power. Battery electric vehicles are the ultimate multi-fuel vehicle, and the distribution grid is already in place. 2 Performance: This is what makes the technology disruptive: we achieve the highest acceleration performance of any available car, in the same vehicle that has the highest energy efficiency. All without sacrificing range or handling. # Economies: We are building a business: solving these technical problems at a price that is attractive to customers and profitable for us. The Custemer Three groups of people will buy the Tesla Roadster. It will appeal to those who simply want to drive a high- performance car because it will outperform just about every car on the road. The Tesla Roadster will also appeal to those who care about oi! consumption (for economic, political or environmental reasons), because it has the lowest energy consumption of any car on the road. And of course, the Tesla Roadster will appeal to technology aficionados, who want a unique, high-tech car. These groups overlap — many drivers enjoy performance, but are not happy about high energy consumption. Until now, such drivers have had two choices: either compromise on their concerns about energy consumption and buy a sportscar, or compromise on their driving pleasure and drive a low-performance economy-car like a RAV-4 EV or a Prius. We can offer these enthusiasts all the performance they want, but in the vehicle with the lowest energy consumption on the road: better acceleration than a Lamborghini Gallardo, much better fuel economy than a Toyota Prius, at the price of a basic Porsche 911. The Sales Channel A large fraction of our target customers live in a small number of locations, allowing us to launch sales of the Tesla Roadster through a limited number of existing high-end dealerships where many sportscars are sold, such as Silicon Valley, Los Angeles and New York. In 2002, over 33,000 sports cars (not luxury sedans) sold for more than $70,000 in the US. We intend to carve out a zero-emissions segment from this high-performance market. We believe that we can sell enough electric sports cars into this segment to develop the necessary relationships and component purchasing volumes that will make a significantly lower-priced second model possible, should that prove to be the best strategy. EV History The California Zero Emissions Mandate required all car companies to produce a limited number of zero- emissions vehicles by 2003. As a result of this mandate, every major company produced one or two electric cars, beginning in 1997. The typical range of these cars was 60 miles; on most, the battery pack lasted only 25,000 to 40,000 miles; they all had poor performance. Despite their limitations, the demand for these cars exceeded their production. The Zero Emissions Mandate was repealed in March of 2003, and every single car company immediately cancelled its EV program. Those customers that leased their electric cars (e.g. EV1’s) had their leases terminated and were forced to return the cars. Today, the only electric cars available in the US are “Neighborhood Electric Vehicles” — little more than glorified golf carts. The federal government is now subsidizing auto makers to develop hydrogen-powered fuel cell cars hoping they will be the long-term solution to pollution and dependence on foreign oil. Even the most optimistic proponents of this technology admit that it will be at least ten years before the first of these cars is available to the public. There are, however, very good reasons to believe that hydrogen-based fuel cell cars will never reduce pollution or reduce dependence on foreign oil. Page 4 Copyright © 2004 Tesla Motors Inc.

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@ e-_—, Proprietary & Confidential Inc. EV Technology As justification for quitting the EV business, the auto makers pointed out that battery technology had stagnated — that the fundamental problems of weight, range, and battery lifespan could not be overcome. This is certainly true for lead-acid batteries, which were the core of most EVs sold. The range of such a car cannot be more than 80 miles, even with over a thousand pounds of lead-acid batteries that must be replaced every 25,000 to 40,000 miles. The auto makers are right: these limitations render even the best performing EV unappealing. But great advances in battery technology were happening elsewhere — no consumer-electronics device was ever powered by lead-acid batteries. In particular, consider laptop computers and cordless drills — two applications where weight, energy density, power and cycle life are very important. It’s unlikely that anyone ever considered using lead-acid batteries for these. CE devices have forced the evolution and re-invention of advanced battery technologies: NiCad batteries, Nickel Metal Hydride batteries, and now Lithium Ion (Li-ion) batteries offering better and better charge characteristics, storage density, and lifespan — far surpassing the best lead-acid battery. It is not only possible but surprisingly advantageous to use many small commodity Li-ion batteries to power an electric car. This is not simple, but the technology has been developed and works exceptionally well. With these batteries, a car has already been built that has over 300 miles range, sub-4-second 0 to 60 mph acceleration and an expected battery life of over 100,000 miles. This car weighs about 500 pounds less than it did when it had lead-acid batteries and a limited 60 mile range. The motor-controller-charger design is also important. Past EVs offered a spectrum of motor and controller technology. The best was the General Motors EV1, with its 3-phase AC motor and high-efficiency regenerative braking. The most primitive had basic DC motors with limited or no regenerative braking. But every one of these vehicles suffered from requiring an external charger. Worse, there were three competing charger technologies used. This means that if you were lucky enough to find a public charging station, the odds were against it matching your own car’s connector! The Tesla Roadster will use the most modern high-current 3-phase, 4-pole (brushless) AC induction motor technology with a patented controller that cleverly re-uses its expensive components to serve as a high-rate charger. No external charger is required; charging requires only a standard 120V or 240V electric outlet. Suddenly it is possible to make a desirable electric sports car: very quick, long range, ultra-low maintenance. The Opportunity A rare window of opportunity opened when the auto industry abandoned electric cars, investing instead in fuel cell research programs. Because of the size of the commitment to fuel cell'research and the publicity around that commitment, we have perhaps five to ten years to develop the electric sportscar market without significant competition. Carefully selected partnerships with EV and sportscar technology companies will allow us to put the Tesla Roadster into production in less than three years. Technology Acquisition and Development Tesla Motors will acquire its key drivetrain technology through a perpetual license from AC Propulsion Inc., a company that has developed and sold EV motors and controllers for the last ten years. This license purchase will close simultaneously with the completion of this funding round for Tesla Motors. AC Propulsion has developed advanced motor, controller, and integrated charging technology that are extremely well suited to a high-performance sports car. Along the way, they built three high-end electric sports cars called “tzeros.” Tesla Motor’s Martin Eberhard funded AC Propulsion to develop lithium-ion technology for cars, and to convert AC Propulsion’s own tzero to lithium-ion. This prototype exceeded all expectations, accelerating from 0 to 60 mph in 3.6 seconds, finishing a quarter-mile in 12.0 seconds, and demonstrating a real highway range of over 300 miles. Although the tzero itself will never be a sellable car (since it has no airbags, its lights don’t meet DOT requirements, it has racing seatbelts, etc.), it neatly proves the concept for Tesla Motors. Tesla Motors will refine the technology acquired from AC Propulsion in several ways: First, we will redesign the analog and digital electronics to reduce manufacturing costs. Second, we will redesign all aspects of the user Copyright © 2004 Tesla Motors Inc. Page 5

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Festa Motersic Proprietary & Confidential interface so that its operation is easy and obvious to a non-technical driver. Third, we will build the necessary tooling to manufacture the motor and electronics efficiently and with high quality. Fourth, the drivetrain will meet DOT and NHTSA standards. The rest of the Tesla Roadster’s-design — everything except the electric drivetrain, related controls, and user interface — will be outsourced to Lotus Engineering, which specializes in designing cars with very fast time-to- market and with low tooling and parts costs. Finance We expect the technology license and outsourced design and engineering fees to be approximately $9.1M. We have allocated $1.5M for factory tooling expenses, and expect approximately $2.5m in salaries and related costs for the Tesla Motors engineers. We estimate that the low volume cost of an assembled Tesla Roadster will be $49K, including $5K for shipping and taxes, and including a $3K reserve for warranty and insurance. Batteries dominate the cost at $18K per car. However, we should enjoy volume discounts on these commodity batteries and costs should decline as production grows above 100 cars per year. It will take approximately $23K to fabricate the rest of the car — chassis, body components, drivetrain, and electronics. These costs are similar to industry estimates for the small volume Lotus Elise. With a $79,999 MSRP, our price to the dealers will be $64K, giving us $15K of gross margin. We project breakeven when we sell 300 cars per year. By 2007, selling 400 cars per year, total revenue will be $27M with a 32% average gross margin, resulting in projected before tax income of $4M. We believe that there might be significantly higher demand than our sales forecast have projected, but we have chosen conservative sales numbers for the business model. We expect to spend a significant portion of our income developing follow-on models of cars, though it is premature to estimate the costs associated with this development. Tesla Motors intends immediately to raise $7M in its Series-A round, and plans to raise an additional $18M in three subsequent rounds of funding through 2006, when we will be profitable. Exit Strategy We may develop such a lead on the rest of the auto industry that an IPO is the best exit strategy. However, a more likely scenario is that after investing in fuel cell research for five years, some car makers will realize that electric cars are in fact the right approach. If we build our company and our brand well, one or more of these auto companies will find that acquiring Tesla Motors is the fastest way for them to enter the electric car market. Tesia Motors Founders Martin Eberhard and Marc Tarpenning founded NuvoMedia together in 1997. They created the market for electronic books with the launch of the Rocket eBook and the necessary infrastructure to sell and deliver electronic content securely over the Internet the next year. With no previous experience in publishing, they staffed their company with publishing industry professionals as well as the engineers needed to design the technology. NuvoMedia succeeded in getting every major US publisher (and most German publishers) to make their books available in electronic form, including their recent releases and current best-sellers. This changed the landscape of the publishing industry, bringing value to previously-ignored electronic distribution rights. NuvoMedia facilitated re-negotiation of contracts between authors and publishers to clarify ownership of these rights, reflected in all publishing contracts today. They partnered with major Internet-based bookstores, including BarnesAndNoble.com in the US and BOL in Europe, to sell content for the Rocket eBook in new Electronic Books departments. They distributed the hardware through Barnes and Noble stores, Levenger’s catalog, and other distribution channels. They located very low- cost suppliers in China, Taiwan, and Japan for key components of the Rocket eBook, and qualified a high- quality, low-cost manufacturer in Taiwan to build the hardware. As CEO, Martin raised $27 million in three rounds between 1997 and 1999. He negotiated the sale of the company to Gemstar/TV Guide International in 2000 for $187 million. Page 6 Copyright © 2004 Tesla Motors Inc.

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Proprietary & Confidential “Tesla Meters.< Inc. Tesla Motors Mission Tesla Motors sells high-performance, highly efficient electric sportscars. Our customers delight in them because our cars are beautiful, a joy to drive, quicker than almost every other sports car, and yet they are the most energy-efficient cars on the road. As a result, we are changing the way the world sees electric cars, and sportscars: redefining both with disruptive technology and design integrity. The Tesla Roadster The Tesla Roadster is a quick 2-seater convertible sportscar with a battery-electric drivetrain. The one-line definition is: Like a Lotus Elise but with higher performance and much higher efficiency. Technology Electric Performance A gasoline engine produces very little torque at low rpm’s and only delivers reasonable torque in a narrow rpm range. On the other hand, an electric motor has high torque at zero rpm, and delivers almost constant torque up to about 6,000 rpm, and continues to deliver high power beyond 13,500 rpm. This means that an electric car can be very fast without any transmission or clutch at all, and the performance of the car is available to a driver without special driving skills. With a gasoline engine, performance comes with a big penalty — if you want a car that has the ability to accelerate quickly, you need a high-horsepower engine, and you will get poor gas mileage even when you are not driving it hard. On the other hand, doubling the horsepower of an electric motor from 100 hp to 200 hp only adds about 25 pounds, and the efficiency is, if anything, improved. It is therefore quite easy to build an electric car that is both highly efficient and also very fast. At one end of the spectrum, the Tesla Roadster has higher efficiency and lower total emissions than the best of the most efficient cars. At the other end of the spectrum, the Tesla Roadster accelerates at least as well as the best sportscars, but is six times as efficient and produces one tenth the pollution.’ Traction Motor and Power Electronics Getting this kind of performance and efficiency from an electric motor requires careful design. In our case, we are using a high-frequency design four-pole induction motor with inverter-controlled magnetic flux. It has a copper rotor for efficiency and forced air cooling. The Power Electronics Unit (PEU) that controls the traction motor is a pulse-width-modulated, voltage-fed, IGBT inverter with current mode, sine-modulated controls. The PEU includes integral battery charging circuitry, and provides 13.5V for accessories, and interfaces for contro] pedals and dashboard instruments. The motor and PEU have been designed from the ground up as a tightly integrated system that delivers up to 165kW (225 hp) motor output, yet maximizes vehicle driving range with high efficiency over a broad operating range and comprehensive energy recovery through regenerative braking.” Batteries and Battery Life The Tesla Roadster is built using consumer-grade lithium-ion batteries. The most common form factor for the lithium-ion battery is the “18650” cell, which is 18mm in diameter and 65 mm long. There are a whole range of batteries available in this form factor, ranging in capacity from 1200 mAh to 2400 mAh. The Tesla Roadster uses 6,800 of these 18650 cells, organized as 100 blocks of 68 batteries each. (A block of batteries is 68 batteries in parallel.) The Tesla Roadster requires a discharge rate of 500A for full-power acceleration. Thus, each battery must be able to deliver 500/68 = about 7.5A. This is almost a 4C discharge for a 2000 mAh battery, or about 3C for a 2400 mAh battery. Copyright © 2004 Tesla Motors Inc. Page 9

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Testa Meters. Proprietary & Confidential Currently, the 18650 batteries that are larger than 2000 mAh cannot discharge faster than 2C, and have shorter life than the 2000 mAh batteries, though this may change before we go into production. For now, we assume that we must use 2000 mAh cells, some of which are rated for 4C discharge. A lithium-ion battery is defined as being at the end of its life when it has lost 20% of its capacity, though the battery in fact will continue to function for some time beyond that point. The lifespan of these batteries is specified in terms of the number of 1C charge-discharge cycles, from completely empty to completely full and back to empty. Behavior with any other charge-discharge cycle is not specified, though it is well known that lithium-ion batteries last significantly longer if they are not discharged to empty (or nearly empty), and not charged to completely full. Currently, the lifespan of 2000 mAh batteries are between 300 and 500 cycles, depending on manufacturer. The normal charge-discharge pattern for an electric car is quite different than this simplified model in several ways. Firstly, they will never charge faster than 1/4C. Secondly, they will normally not be fully-discharged. Thirdly, we will give the owners the option of charging only to 90%, allowing them to top off only when they plan a long trip. Fourthly, the discharge pattern is complex, with an average discharge rate of about 1/4C for freeway driving, but with up to 6 seconds of 4C discharge when the driver steps on it. It is not clear what impact this pattern will have on battery life, but early data collected on the AC Propulsion tzero suggests that the batteries will last significantly longer than the specified lifespan. We will assume that the observed lifespan of the batteries in the Tesla Roadster will be exactly the specified lifespan. A full charge of the car will allow it to travel 300 miles. 400 such drives (and thus, 400 charge- discharge cycles) will therefore last for 120,000 miles. The average voltage (over the discharge cycle) of these lithium-ion cells is 3.6V. The total energy stored in 6,800 of these 2000 mAh cells is 3.7V x 2.000A x 6,800 = 50,320 Wh, or 50 KWh. The car consumes about 160 WH/mi (which is 100 WH/km), so this battery pack will go about 314 miles when new. If we are able to use 2,200 mAh batteries, then the range will be extended to 345 miles. Automotive Design A car must be light weight and very rigid to get high efficiency and high performance at the same time. The Tesla Roadster is designed by Lotus Engineering, and is based on the Lotus Elise, because the Elise is the lightest and stiffest car on the road. (The gasoline-powered US version of the Elise weighs a mere 1,980 pounds.) Lotus achieved this weight and performance through an innovative bonded-aluminum chassis, a minimalist philosophy that encouraged multiple uses for every component, and fanatical attention to weight. And yet, the Elise is an affordable car, and the engineering and tooling expenses were kept to a minimum. ° Design Principles Design a performance car. Performance means handling and acceleration; it means high g-forces without instability. It means useable performance, as a road car rather than a race car, and at road speeds (below 100 mph.) Design for efficiency. This is an efficient car, but performance is optimized over efficiency. We consider rolling resistance when choosing tires, but without compromising handling or performance. We minimize drag coefficient, but not so as to cause aerodynamic lift, or to make the car ugly. Efficiency is reflected not just in the raw fuel consumption numbers, but also in the use of space, and the use of one part to do several jobs. Design a manufacturable car for the forecasted volumes. Cars come off the production line with a minimum amount of labor and a high degree of uniformity. Quality is evident not only in the finished car r but i in the production environment as well. Design for reliability: Other than tires, the car should need no routine servicing for 100,000 miles. This implies, for example, silicone rubber wiper blades, synthetic brake fluid, and friction brakes that are not much used in normal driving. Maximize safety: All high voltage wiring and connectors are protected from casual contact, and visually identified as dangerous. Batteries are protected from collision damage. The current expectations for automated driver assistance in high performance cars are met: ABS, traction control, yaw stability control. Of course all the NHTSA and DOT requirements for crash safety are met, and the car has driver and passenger airbags. Page 10 Copyright © 2004 Tesia Motors Inc.

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Se - Proprietary & Confidential Aesthetics matter: The car is beautiful, in the classic sense: it will still be beautiful in 10 years. It does not look like an electric car, a golf cart, or an economy car. It may look somewhat like an Elise. It has a muscular presence, a sense of purpose (to go fast, to grip the road) and of clean, minimalist design (no frills). Minimize the weight. This is the controlling principle, and will be the biggest design challenge. Weight reduction is a virtuous cycle: reducing the drivetrain weight, for example, allows the chassis supporting it to be lighter, which allows lighter suspension components, lighter brakes, etc. Move complexity from mechanical systems into software and electronics. One of the benefits of electric cars is that there are very many conventional parts which can simply be left out. We will emphasize, celebrate and make best use of the resulting simplicity. But we will add complexity where it enhances user experience or safety, and where the complexity is in electronics and software. For example, GPS and stability control. Simplify serviceability: Mechanical service (brakes, shocks, suspension bushes and joints, CV joints, hub bearings) should be similar to the Elise. High voltage wiring should be labeled and protected, and not field - serviceable. Electronic assemblies including the high voltage motor controller will be (easily) field replaceable but not field serviceable. Battery packs will be field replaceable. Build an intuitive user interface. Take the BMW i-drive as a counter-example. The sense we want to create is definitely high-tech, but also accessible, friendly, useful, and consistent. One shouldn’t have to read the manual to operate the car, nor should any special training be necessary. Specifications of the Tesla Roadster Dimensions 5 Wheel Base: 90.6 in. 8 Track: Front-57.0 in. / Rear-59.0 in. a Length: 149.0 in. a Width: 67.7 in. a Height: 45.2 in. 4s Weight 2150 Ibs Performance a Acceleration: 0-60 mph 3.9 sec. max # Range 300 miles at 60 mph 8 Baittery life 120,000 miles or 10 years, if operated with a specified regimen EV Technology 8 Motor: 165k'W (225 hp) 3-phase AC (brushless) induction motor # Power Electronics: Integrated inverter/charger ® Batteries: 50kWh Lithium-Ion pack constructed from consumer-grade “18650” cells 5 Recharge: any standard 120V or 240V outlet, with automatic charge current selection based on the capacity of the outlet Drivetrain 8 One motor, geared down to drive a differential which drives the rear wheels through driveshafts with constant-velocity joints. a Transmission: single speed, no clutch or torque converter. Reverse is achieved by reversing the motor and limiting its speed and torque a The differential is a limited-slip type # Overall gear ratio is about 9:1 Chassis and Suspension 2 Suspension: all independent with upper and lower “A” arms a Wheels: magnesium alloy, sizes tod. No spare wheel 8 Tires: sizes thd, type thd, possibly a DOT-legal competition tire Copyright © 2004 Tesla Motors Inc. Page 11

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inc. Proprietary & Confidential Features Air Conditioning GPS, including “will I get there?” in real time, and for trip planning, including recharge locations Radio and CD player Immobilizer Power windows Central locking HID headlights LED lights for all other lighting Main analog instruments: o Current (sub-calibration: thrust) o Battery voltage o “Fuel” gauge o Speedometer (sub-calibration: rpm) Roof: fabric convertible with optional removable hardtop @ @ G B86 5 a B & Future Directions Although it’s very clear that the best market entry strategy is the high performance sportscar, there is some choice about follow-on products. Of course the North American car market will change over the next 2 years anyway... it may be that SUVs go out of fashion, and the station wagon type vehicles that are so popular in Europe (Audi, VW, BMW, Mercedes...) take their place, for example. In some ways it will be better to do intensive market research after the Tesla Roadster is launched, as not only will the world look different then, but the existence of the Tesla Roadster will itself change the market perceptions. We will have some degrees of freedom: we could increase margins by moving up market. The Tesla Roadster is priced at the bottom of the range of very high performance sportscars, but outperforms almost all of them in handling and acceleration. This performance is achieved in part by keeping the weight very low. As a result the car is quite Spartan. A more expensive model could be produced with more of the soft furnishings found in Ferraris and Lamborghinis: more of a touring car than a sports racer. We could trade off some performance for this. We could also add a 2-speed transmission to allow very high top speed. Meanwhile we could retain the “highest performance” crown in the Tesla Roadster by incrementally increasing the power. It’s possible that improvements in batteries by then will allow this with no weight increase. Rather than increasing margins, we could increase sales volume by moving down market. A 4 seat coupe could be built still with outstanding performance for its class, or a relatively compact wagon (Audi A6 Avant class)., Range will be reduced as drag will be higher than the Tesla Roadster. Battery capacity will probably have +9 OL increased to compensate, but there will remain the issue of charge time. The charge time is not really a limitation of the batteries or the on-board charger, but of the current available at a typical home. Anything over 80A at 240V may require an electrical service upgrade. 80A with the existing 50kwH battery pack takes four and a half hours for a full recharge; if the battery capacity were increased to 100kwH it will take 9 hours. Building a large SUV is of course possible too. Electric motors scale up in power very nicely: a 50% power increase implies only a small weight and cost increase. But the battery cost and charge time are limiting factors. Finally, once we are in volume production, we will be able significantly to reduce component and manufacturing costs, allowing us to contemplate lower priced alternative follow-on cars while retaining good margins. Page 12 Copyright © 2004 Tesla Motors Inc.

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Proprietary & Confidential Notes " See Appendix A, The 21" Century Electric Car for a detailed discussion of well-to-wheel efficiency of various vehicles, and of the performance of these vehicles. ? See Appendix D, Application Notes for the AC-150 Gen 2 Electric Propulsion System by AC Propulsion, Inc. This appendix describes their 150 kW system, from which the 165 kW system is closely derived. * See Appendix C, The Lotus Elise Copyright © 2004 Tesla Motors Inc. Page 13

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ee Proprietary & Confidential l Festa Meters Sta- Inc. Key Alliances AC Propuision, Inc AC Propulsion, Inc (www.acpropulsion.com) will provide key motor, power electronics, and battery management technology to Tesla Motors. Tesla Motors has cultivated a very friendly relationship with AC Propulsion, and has negotiated a mutually-beneficial cross-license agreement that will give Tesla Motors access to AC Propulsion’s technology. The general terms of the license with AC Propulsion are as follows: AC Propulsion will: # Grant Tesla Motors a perpetual, non-exclusive, “most-favored nation” license to its technology s Transfer complete documentation to Tesla Motors for its motor, Power Electronics Unit (PEU), Battery Management system, and all dashboard electronics a — Provide consulting services to Tesla Motors at a preferred rate of $85/hour, for a minimum of 3530 hours per year for two years. Consulting services will include participation in cost reduction and manufacturability programs for the motor, PEU, etc. Also included will be design reviews and conversion of a stock Elise into a prototype Tesla Roadster. Tesla Motors will: a Pay AC Propulsion a $500K license fee, partially up front, and partially upon complete document transfer # Pay AC Propulsion a minimum of $300K per year consulting fees for two years a Pay AC Propulsion 0.25% of MSRP for every car shipped that is based on AC Propulsion technology * — Allow AC Propulsion to purchase cost-reduced motors and PEUs at “most favored nation” pricing Lotus Engineering Lotus Engineering (www. lotuscars.co.uk) will be the primary contractor for vehicle design and integration. They will be responsible for: s Designing the Roadster, based on their Elise, and re-using existing parts where possible « Integrating the EV drivetrain into the car a Engineering all new components 8 Safety testing the car a All government approvals (DOT, NHSTA) 1 Tooling for all components that are not part of the EV drivetrain Estimates from Lotus Engineering for this work are about $8M for all engineering work and $1M for all tooling work. (This is soft-tooling, appropriate for building up to 2,000 cars. Hard tooling — appropriate for up to 50K cars — would cost about $7M) In addition to design and engineering, Tesla Motors will probably engage Lotus to actually manufacture the Tesla Roadster — either in its Hethel, England plant or in the (currently idle) Elise plant in Malaysia, at the factory of Lotus’s parent company, Proton. Copyright © 2004 Tesla Motors Inc. Page 17

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Proprietary & Confidential Operating Plan Schedule For each funding round, we will complete the following milestones. The milestones are in rough chronological order. Series-A Funding Contracts signed with Lotus Engineering and AC Propulsion Tesla Roadster fully specified with input from Lotus Engineering Tesla Roadster design underway at Lotus Engineering AC Propuision tzero-based prototype for testing AC Propulsion licensing and technology transfer complete Cost reduction and manufacturability work on ACP technology underway Dashboard electronics fully specified Information Technology (back-end) systems fully specified Lotus Elise-based handmade prototype of Tesla Roadster available for limited testing Motor manufacturer identified Contract signed with motor manufacturer Dashboard electronics engineering underway Series-B Funding moHgmwe~agsesesr &® = @ &@ ep RBs First article motor delivered First article PEU delivered First article dashboard electronics delivered Marketing plan completed Dealers identified, contracts signed Testing of all systems underway Tesla Roadster design complete First article Tesla Roadster operational Support and training operation fully designed Support documentation early revision available Support site (for dealers) in beta-test Manufacturing site in beta-test Web site running Public relations campaigned started DOT and NHSTA certification completed Series-C Funding B a a a @ Roadster, motor, PEU, and dashboard production ready Support production ready Manufacturing production ready Build of small number of Roadsters in inventory Major public relations campaign underway Other marketing operations launched Deposits received for product launch Series-D Funding Inventory builds Product launch Marketing and sales events On-going operations Copyright © 2004 Tesla Motors Inc. Page 21

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@ eo ..—, Proprietary & Confidential Thc. alo gs Marketing and Saies ot ay Ks oo Market Size ie so More than 33,300 expensive sportscars (with price tags above $75,000) were sla in the ssn in 2002.' While it would be unreasonable to assume that every one of the buyers of these cars would buy a Tesla Roadster, anecdotal evidence suggests that there is a significant overlap between those who would buy one of these sportscars and those who would prefer an environmentally friendly alternative. The Tesla Roadster is the first car that will let them have the best of both worlds. The Customer Three groups of people will buy the Tesla Roadster. It will appeal to those who simply want to drive a high- performance car because it will outperform just about every car on the road. The Tesla Roadster will also appeal to those who care about oil consumption (for economic, political or environmental reasons), because it has the lowest energy consumption of any car on the road. And of course, the Tesla Roadster will appeal to technology aficionados, who want a unique, high-tech car. These groups overlap —- many drivers enjoy performance, but are not happy about high energy consumption. Until now, such drivers have had two choices: either compromise on their oil consumption and buy a sportscar, or compromise on their driving pleasure and drive a low-performance economy-car like a RAV-4 EV or a Prius. This dichotomy is demonstrated by the fact that the average household income of a Prius driver is over $100K? and the household income of a GM EV1 “owner” was over $200K.? Also, hybrids and electric economy cars are popular with Hollywood stars, many of whom have traded in their exotic sportspars for these low-impact vehicles.* We can offer these enthusiasts all the performance they want, but in the vehicle with the lowest energy consumption on the road: better acceleration than a Lamborghini Gallardo, much better fuel economy than a Toyota Prius, at the price of a basic Porsche 911.° Government Incentives Various federal, state, and local agencies offer incentives for our customers. These incentives not only save money, but make driving electric cars very convenient. Some of the more interesting incentives in California are: A one-time income tax credit is available for 10% of the vehicle price, up to $4,000 The car is exempt from “luxury” federal excise sales tax The car is exempt from the “luxury vehicle” depreciation schedule A reduced rate is available for electricity to charge cars (about 8 cents/kWh in Southern California)’ The Clean Air Vehicle Decal gives unrestricted access to carpool lanes Free public parking and charging are available in special “reserved” parking spaces Free “front row” parking is available at LAX Free parking is allowed in metered spaces in LA, San Jose, Santa Monica, Sacramento Hb 8 @ eB @8@ & @ @ Copyright © 2004 Tesla Motors Inc. Page 25

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Inc. Proprietary & Confidential Market Locality The market for exotic sportscars is highly localized in the USA, dominated by the California market. The following chart shows the number of dealerships for new sportscars in each state with at least 8 dealerships.* @ Ferrari , @ Lamborghini GLotus “| Panoz Porsche | Saleen S7 % hs Within California, these sportscar dealerships are mostly clustered around the San Francisco Bay Area and Los Angeles County. In New York and New Jersey (which can be considered to be one market), they are clustered near New York City. Los Angeles is ranked as the most ozone-polluted city in the country, and 8 of the worst 25 cities are in California. The New York/New Jersey metropolitan area comes in as the 20" worst area, with Houston coming in 5", Dallas-Fort Worth coming in 16", and the Philadelphia area coming in as the 14” worst area. Poor air quality motivates people to consider zero emissions vehicles, and motivates the government to provide significant incentives to drive zero emissions vehicles. These data suggest that we should launch the Tesla Roadster in California through one dealership in the San Francisco Bay Area (probably in Silicon Valley) and one in Los Angeles County (probably near Beverly Hills). Our third city should probably be New York City (covering New Jersey as well), with Miami as a possible fourth. ) Page 26 Copyright © 2004 Tesla Motors Inc.

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s, ae Proprietary & Confidential Publicity We do not plan a grand advertising program, because this is not an efficient way to reach our customers. Instead, we will concentrate our efforts on getting good publicity in the media that our target customers watch, hear, and read. Fortunately, the combined performance, efficiency, and cleanliness of the Tesla Roadster lend themselves to very positive press coverage. With no PR strategy or budget, AC Propulsion has garnered widespread positive press for the tzero, even though it has never been available to purchase. With a deliberate, well-funded PR campaign, the Tesla Roadster will quickly become a media darling. The environmental lobby has put a lot of stock into the promise of fuel cell cars, and the press has followed their development with many articles and TV spots. President Bush has allocated $1.2B for development, and Governor Schwarzenegger promised hydrogen refueling stations along California’s interstates.!° However, it is now becoming clear that if fuel cell cars ever will become feasible, it will not happen for at least 25 years.’ “We simply can't bank on hydrogen alone to cut our dependence on Middle East oil or fix the global warming problem,” said Antonia Herzog at the Natural Resources Defense Council, pointing out that Americans will buy 450 million new cars and trucks before the hydrogen car is available.’ ¢ As fuel cell cars fail to become available, the environmental lobby will increasingly call for alternatives, creating excellent press opportunities for the Tesla Roadster. Sales Strategy Tesla Motors plans to sell a few hundred Tesla Roadsters in the first year, and will be profitable if it sells more than 300 cars per year. With this few cars, we only need a small number of dealers — so long as they are in the right places. Exotic car dealerships often sell a variety of different brands of cars. For example, Silicon Valley Auto Group (formerly Los Gatos Ferrari) sells new Aston Martin, Rolls Royce, Lotus, Saleen, and Morgan cars, as well as pre-owned Ferraris and Lamborghinis. Such dealerships attract serious sportscar buyers, and also have highly- skilled mechanics that are capable of servicing the diverse cars that they sell. This class of dealership is well suited to sell and service the Tesla Roadster. We will initially offer the Tesla Roadster for sale through a small number of these sportscar dealerships, starting in Los Angeles, Silicon Valley, and perhaps New York. By offering a 20% ($16,000) margin to the dealership, they will be motivated to sell the Tesla Roadster alongside their other brands. Tesla Motors will train the sales and service personnel at its authorized dealerships to ensure safety and reliability, and will work closely with them to diagnose and correct any problems that occur with the cars. We will keep a very small inventory of cars in each dealership for show and sales. We plan to take deposits and build to order for most sales.'? Our website and marketing collateral will direct all sales inquiries to the nearest authorized dealership. Tesla Motors will branch out to dealerships in other cities as it develops the skill and experience to properly support them. In the fullness of time, we will sell cars internationally, perhaps starting in Japan or in Europe. p iy 0¢ yp LAY uno pood th Copyright © 2004 Tesla Motors inc. Page 27

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Proprietary & Confidential Notes ( " Source: Auto News, September, 2003, total of just these sports cars: Acura NSX, Aston Martin, BMW Z8, Dodge Viper, Ferrari, Jaguar XK, Lamborghini, Maserati, Mercedes Benz SL Coupe Roadster, Porsche Carrera. See appendix F. ? Source: Danny Clements, VP Sales, Toyota in BusinessWeek, Online, March 23, 2003 * Source: GM study cited at http://www. hfmgv.org/exhibits/pic/2002/02.oct.html 4 Including Cameron Diaz, Leonardo DiCaprio, Larry David, Don Cheadle, Meryl Streep, David Duchovny, David Hyde Pierce, Patricia Arquette, Jackson Browne, Ted Danson, Jeff Goldblum, Donna Mills, Rob Reiner, James Taylor, Richard Dreyfuss, Bonnie Raitt, Tom Hanks, Ed Begley Jr., Tony Shalhoub (USA Today, March 20, 2003) ° See Appendix A: The 21 Century Electric Car * For an up-to-the-minute list of various government incentives for ZEVs, visit www.zevinfo.com. ” This makes the cost to drive the Tesla Roadster about $16 per 1,000 miles. A 28 mpg gasoline car would cost about $60 to drive the same distance. ® Source: manufacturer’s websites, February 2004 ° State of the Air 2002, American Lung Association '° Hydrogen fuels Schwarzenegger vision for future by Miguel Bustillo and Gary Polakovic Los Angeles Times, January 25, 2004 "' Reuters , Feb 4 2004 5:50PM, as well as an article in The New York Times on February 6, 2004: Report Questions Bush Plan for Hydrogen-Fueled Cars by Matthew L. Wald (Appendix E) 7 ” ibid "? Lotus has taken over 2,000 US deposits for the Elise, according to dealer reports (cf www.pistonheads.com) Page 28 Copyright © 2004 Tesla Motors Inc.

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0 © (Fosia Proprietary & Confidential Ine. Competition Electric Cars The California Zero Emissions Mandate required all car companies to produce a limited number of zero- emissions vehicles by 2003. As a result of this mandate, every major company produced one or two electric cars, beginning in 1997. None had a range of more than 100 miles (60 miles was typical); on most, the battery pack lasted only 25,000 to 40,000 miles; they all had poor performance. Despite their limitations, the demand for these cars exceeded their production. Through pressure from the auto ff industry, the Zero Emissions Mandate was repealed in March | of 2003. Every single car Se 0 a OE el company immediately cancelled — eo ‘ . Ce a ya * its EV program. Those : i customers who leased their electric cars (e.g. EV1’s) had their leases terminated and were forced to return the cars so that they could be crushed. Today, the only electric cars available in the US are “Neighborhood Electric Vehicles” — little more than glorified golf carts. "i te The federal government is now subsidizing auto makers to develop hydrogen-powered fuel cell cars hoping they will be the long-term solution to pollution " ° oon and dependence on foreign oil. Crushed EV1’s at GM’s Desert Proving Grounds in Mesa, AZ. Even the most optimistic — December, 2003 proponents of this technology admit that it will be at least ten years before the first of these cars is available to the public. There are, however, very good reasons to believe that hydrogen-based fuel cell cars will never reduce pollution or reduce dependence on foreign oil.’ Copyright © 2004 Tesla Motors Inc. Page 31

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I Festa-Meters.c Proprietary & Confidential Electric Cars Today All electric cars available today are very small “commuter cars” or “neighborhood electric vehicles.” Following is a representative sampling of the available electric cars. Commuter Cars Corporation, www.commutercars.com, says it will someday sell the “Tango,” an ultra-narrow commuter car with one seat in front and one in back. They claim a remarkable 4 seconds for 0-60 acceleration, and a range of 60 miles. Feel Good Cars, www.feelgoodcars.com, may someday produce the “Zenn,” a tiny commuter car limited to 25 mph and 30 miles range. GEM, www.gemcars.com, makes a line of “Neighborhood Electric Vehicles” that resemble golf carts, limited to 25 mph and 30 miles range. GEM is owned by DaimlerChrysler. Reva India, www.revaindia.com, recently spun off from California- based Amerigon to sell the tiny Reva car in India. It is limited to 40 mph and a 50 mile range. Solectria, www.solectria.com, has stopped producing the modest electric sedan called the Solectria Force and several other electric vehicle conversions. Today, the only vehicles they produce are vans and school busses. Solectria primarily produces components for electric vehicles. , Wespeste THINK, www.think.no, was sold by Ford Motor Company to Nordic investors in 2003. They continue to sell the tiny THINK City in Scandinavia. It has a top speed of 55 mph and a range of 50 miles. ae cl ee ZAP! Cars, www.zapworld.com, markets a variety of electric scooters, bikes, and neighborhood electric vehicles, most of which it imports from overseas. All their cars are limited to 25 mph and have very limited ranges. Page 32 Copyright © 2004 Tesla Motors Inc.

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Proprietary & Confidential Electric Sportscars Today While no electric sportscars are made today, there are hints that other startup companies are exploring the idea. Following are a few examples; no doubt more will materialize over time. None of these cars is serious competition to the Tesla Roadster. NuAge Electric (www-.nuageelectric.net) recently merged with SMI Products, Inc. (OTCBB:SMIP) Nu Age Electric is a private Nevada Corporation formed to acquire the North American “exclusive rights” to license and operate NuPow'r LLC Power Service Stations (dealerships) in the USA, Canada and Mexico. NuPow'r LLC is a separate private Nevada corporation owned by Chaz Haba of Van Nuys, California. (Mir. Haba was founder of the now defunct Planet Electric.) Their website describes products from neighborhood electric vehicles, go-carts, and ATVs to mini- bikes, scooters, and even lawn mowers. Zhaocheng Electric, Anhui Province, China, in conjunction with Qirui Automobile Co. of Shanghai, has announced develépment of a lead-acid electric “sports car” called the ZC 7050 A. This car has a top speed of 50 mph and a range of 170 miles. It is not clear that this car will go into production. Zytek Automotive, the West Midlands, UK (www.zytek.co.uk) is a company that produces mostly race car components. They produced one relatively low performance twin-motor Lotus Elise conversion as a demonstration of their electric car technology and a demonstration of an electrically-converted Smart car. They appear to have no plans to put these cars in production, concentrating their electric car efforts instead on contracts with major car companies (e.g. General Motors’s parallel hybrid truck) to develop hybrid cars. Copyright © 2004 Tesla Motors Inc. Page 33

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Inc. Gasoline Sportscars Proprietary & Confidential The Tesla Roadster out-accelerates almost every car made, including fantasy cars that cost hundreds of thousands of dollars. But it is also the most efficient car on the road, consuming one fourth the energy of any other fast sportscar. The following table summarizes the acceleration, price, and fuel consumption of the fastest sportscars available.” ? C12 S Roadster GT Lam hini L-147/148 Mu SRT-10 S7 Porsche 911 Turbo Cou Ferrari 575M Maranello Lam hini L-140/141 Gallardo Chevrolet Corvette Z06 Ferrari 360 Modena Lotus V8 NSX Panoz Porsche 911 Usable Performance 3.6 3.8 3.8 3.9 3.9 4.2 42 42 46 46 48 4.9 4.9 5.0 000 $440,000 5,000 000 $118,400 17,890 165,000 385 143,860 500 765 950 600 24 24 13 20 18 22 16 16 28 16 22 24 23 26 Driver’s enjoyment comes from usable performance, not from theoretical specifications. For a street car, this means that acceleration below 100 mph is much more interesting than a stratospheric top speed. (For example, the top speed of the Porsche Carrera GT is said to be 205 mph. Note that California Vehicle Code‘ provides special punishments for driving in excess of 100 mph that include license suspension, vehicle impoundment, and jail.) With no clutch, no gearshift, and with constant torque from zero to 6,000 rpm and plenty of power all the way to 13,000 rpm, the Tesla Roadster’s performance is extremely usable. Its awesome power is instantly available when launching from stop, when powering out of a curve, or whenever the driver wants to move. The Tesla Roadster has no transmission (since the motor directly drives the differential), which means that its top speed is limited to 100 mph. We made this design decision because it increases usable performance, while decreasing complexity and cost. On the street, the Tesla Roadster will blow away every single exotic sportscar (even those with top speeds above 200 mph) like the AC Propulsion tzero has done, race after race. See Jan Wright’s comments in Appendix B, Usable Performance, for a driver’s impression of an electric sportscar. Page 34 Copyright © 2004 Tesla Motors Inc.

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. u inc. Proprietary & Confidential Notes "See Appendix A: The 21" Century Electric Car ? In most cases, the performance and cost of each car is from the respective manufacturer’s website. (In a few cases, the price is not mentioned, and the prices are from various web sellers of the cars.) All gasoline mileage numbers are from www.fueleconomy.gov. All production cars are 2004 model year. * For the electric cars, mpg is calculated based on actual well-to-wheel energy consumption 4 Section 22348(b) ° See www.acpropulsion.com for videos and photos of the tzero beating a variety of exotic sportscars. Copyright © 2004 Tesla Motors Inc. Page 35 —

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@ @ \ Proprietary & Confidential Festa Meters Financials Key Assumptions Our business model assumes that it is possible to build a “fab-less” car company and to produce a DOT certified electric car in approximately two years, while developing significant intellectual property in the electric car industry. To accomplish this, we will outsource production and automotive design, and license basic EV technology. We will then commercialize the basic EV technology for manufacturability and develop the required onboard, back-end and process related technology required to build a truly world-class sportscar and car company. Drive Train & Power Electronics We have acquired a perpetual, non-exclusive license to motor, power electronics, and battery charging technology from AC Propulsion.’ However we will devote significant engineering time and factory NREs to make this technology mass producible and cost effective. AC Propulsion License fees plus consulting time are approximately $1.1M. Automotive Design and Engineering We will fully outsource the automotive design and engineering to Lotus Engineering.” We have allocated approximately $8M for design and engineering fees, including necessary work to acquire government certification (DOT and NHSTA). The Lotus Elise provides an excellent starting point for the Tesla Roadster, and Lotus Engineering has expressed interest in a design that includes many of their stock components. This strategy reduces our tooling and production costs, reduces risk, and allows for quick development. Using this strategy, we will complete design, engineering and tooling in approximately two years from start. Factory Tooling For low volume “soft” tooling (under 2,000 cars) we expect to spend approximately $1M in factory NRE and other tooling expenses for the car, plus an additional $500K for NRE and tooling expenses associated with the drivetrain and dashboard electronics. Tesla Motors Technology We will develop significant technology from commercializing the EV drivetrain and battery technology, developing onboard and dashboard computers, and building innovative back-end technologies to reduce service costs and road failures. Approximately 30% of company payroll is devoted to these activities. Cost of Goods Soid $16,000 000 1,000 000 000 Copyright © 2004 Tesla Motors Inc. Page 39

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Inc. Proprietary & Confidential + j=. A Expense Assumptions 4,700 000 $102,000 $102,000 500 180 $240,000 40,000 $80,000 $740,000 $760,000 000 $0 $0 $0 800,000 800,000 1,100,000 $150,000 5,000 000 000 121,749 31,000 53,200 Revenue Assumptions Globalsaies sid ST 2008 T2006 2007 Tota S Sold) 0 0 165 400 TotalRevenue; $0 $0] $11,055,000} $27,525,000 Road to profitability We estimate that the low volume cost of an assembled Tesla Roadster will be $49K, including a guess of $5K for shipping and taxes, and including a $3K reserve for warranty and insurance (see Major Risk Factors below). Batteries dominate the cost at $18K per car. However, we should enjoy volume discounts on these commodity batteries and costs should decline as production grows above 100 cars per year. It will take approximately $23K to fabricate the rest of the car — chassis, body components, drivetrain, and electronics. These costs are similar to industry estimates for the small volume Lotus Elise. With a $79,999 MSRP, our price to the dealers will be $64K, giving us $15K of gross margin. We project breakeven when we sell 300 cars per year. By 2007, selling 400 cars per year, total revenue will be $27M with a 32% average gross margin, resulting in projected before tax income of $4M. We believe that there might be significantly higher demand than our sales forecast have projected, but we have chosen conservative sales numbers for the business model. We expect to spend a significant portion of our income developing follow-on models of cars, though it is premature to estimate the costs associated with this development. In our model, we have made the simplifying assumption that we must pay 100% of the COGS at the beginning of production and will not receive any sales dollars until 90 days after production has started. In reality, we expect to have better terms with our suppliers, and have a deposit system for our sales, so we hope cash flow requirements may be better than projected. Income Statement Summary SE 97 805,000 519,649 $7,359,200 $4,746,800 $4,746,800 519,649 7,359 1,776,800 058 823 7,321,089 1,738,985 098,825 2 Page 40 . Copyright © 2004 Tesla Motors Inc.

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Proprietary & Confidential Tesla Metorsn Cash Flow Statement Summary $9,519,649 151 15,658,800 294,800 $9,519,649 $8,151,200 $4,603,800 15,010,750 000,000 000,000 524,417 411,327 845,342 116,167 Major Risks Factors Although confident that our key assumptions are correct, there are risks for any project. Here are major risks from the financial perspective that we have identified. Automotive design costs We have allocated $8M for design fees based on preliminary conservations with Lotus Engineering. Within a few weeks from start of contract with Lotus we will have much better cost and time estimates, including COGS for the Roadster. These numbers may change our future capital requirements or change our gross margins if we maintain the same sale price point. Timeline Based on our preliminary discussions with Lotus Engineering, our two-year timeline appears to be in line with their 19-month engineering and tooling estimate. However, if we are unable to come to market within two years for some reason, we will require additional funding or a change in our expense plans. Early in the engagement with Lotus, we will have more accurate time estimates. Liability Insurance We are currently engaged in a process to determine insurance options for the company. There are few small car companies in existence; therefore a standard insurance model and insurance product does not exist. We may have to be quite creative on this front, either by finding a way to fit into the existing insurance market or by partnering with a larger firm (such as our manufacturing partner). Notes The AC Propulsion agreement will take affect upon closing of Series-A funding. See Key Alliances section for details of this agreement. ? See Key Alliances section for details of the agreement with Lotus Engineering. Copyright © 2004 Tesla Motors Inc. Page 41

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Proprietary & Confidential testa Metersi Funding Proposal Series-A Funding We project that Tesla Motors will need approximately $25M from inception through to profitability. For Series- A, we will raise approximately $7M in Q1°04. Milestones The proceeds for Series-A funding will be used to achieve the following milestones: Engineering staff hired Tesla Roadster fully specified Roadster design underway with Lotus Engineering AC Propulsion tzero-based prototype for testing Lotus Elise-based handmade prototype of Tesla Roadster available for testing Licensing and technology transfer with AC Propulsion complete Cost reduction and manufacturability work on ACP technology underway Identified and in contract with motor manufacturer Dashboard electronics fully specified Dashboard electronics engineering underway mB 8 &© 8B & @ = g sg @ Equity Structure Tesla Motors Inc. is a Delaware Corporation with the following equity structure: r ~ gant . “gon 150,000 1.5% 10,150,000 100.0% In addition, there are 2,000,000 shares set-aside for an Employee Stock Option Plan for employees. No shares have been allocated from this pool at this time. There is a small debt of $25K to the founders that will éonvert to equity at the Series-A price. It is the intent of _ the principals to participate in Series-A funding. Additional Funding Rounds The Tesla Motors business plan includes a total of four rounds of funding. The approximate amounts, dates, and purpose are as follows: -Mar. n 31-Dec-04| $8,000,000] Final 000,000} Final & I -06 000] Product nch Please refer to the Financials section for additional details. Copyright © 2004 Tesla Motors Inc. Page 45

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Proprietary & Confidential The Company Management Team Martin Eberhard (CEO) Martin Eberhard brings 20 years of start-up, management, and development experience to Tesla Motors. He was a co-founder of two successful start-ups, serving as Chief Engineer at one, and CEO at the next. Together with Marc Tarpenning, he founded NuvoMedia in 1997. NuvoMedia created the market for electronic books with the 1998 launch of the Rocket eBook and the necessary infrastructure to sell and deliver electronic content securely over the Internet. As CEO of NuvoMedia, Mr. Eberhard raised $27 million in three rounds between 1997 and 1999. In 2000, he negotiated the sale of the company to Gemstar/TV Guide International for $187 million. Prior to founding NuvoMedia, Mr. Eberhard was Vice President of Electronics at Belfort Memory International, co-founder and Chief Engineer of Network Computing Devices, Inc., and developed high-volume terminals for Wyse Technology Inc. Mr. Eberhard has a Master’s Degree in Electrical Engineering from the University of Illinois in Champaign, Illinois. Marc Tarpenning (Président) Marc Tarpenning brings 21 years of engineering management experience to Tesla Motors. co-founder and Vice President of Engineering at NuvoMedia Inc, and staffed a team of 20 people, including hardware, firmware, software, and support engineers. He led the development of the Rocket eBook and the necessary Internet infrastructure to securely sell valuable content over the Internet. Mr. Tarpenning has managed and developed software and firmware products for many companies, including Belfort Memory International, NEC, Seagate, Textron, and Bechtel. He has a B.A. on Computer Science from the University-of California, Berkeley. lan Wright (COO) Ian Wright has a fairly broad experience in engineering design and executive management (mostly in startup companies), spanning optical transmission and switching, core routers and ATM switches, and even radio station and recording studio equipment. He has built strong engineering teams and led them to build very complex system-level products. Most recently he was CTO and Senior Vice President of Engineering at Altamar Networks, a division of Ditech Communications (recently sold to JOSU). Altamar was formed by Jan and two other executives to build the world’s most scaleable core optical switch; it was also the first to integrate a long haul/ultra long haul Dense Wavelength Division Multiplexing transmission system (160 channels over a single fibre, each at 10Gbit/s, reaching up to 6,000km without regeneration.) Ian led the acquisition of two other startups (Atmosphere Networks in Silicon Valley (2000) and Mlotron in the U-K. (2001)) in order to build Altamar to critical mass. Including acquisition costs, the product was delivered for $72m (less than half what competing startups spent) in a little over 2 years. Mr. Wright’s interest in things automotive spans several decades and includes successful experience in building and driving racing cars at an amateur level. Copyright © 2004 Tesla Motors Inc. Page 49

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Proprietary & Confidential Board of Directors Martin Eberhard (Chairman) (See Management Team) Marc Tarpenning (See Management Team) Dr. Bernard Tse Bernard Tse was founder and CEO of Wyse Technology, a manufacturer of display and computer products in San Jose, CA, from 1981 to 1990. He started the Company in 1981 with $600K from David Jackson of Altos Computers and $1M from Kleiner, Perkins, Cuafield & Byers of San Francisco, and led the Company to an Initial Public Offering on NASDAQ in 1984 and an original listing on the NYSE in 1988. The amount of operating capital that he raised for Wyse Technology, both privately and publicly, was in excess of $350M. When he left the Company in 1990, the Company had revenue of $500M and employed 5,000 Worldwide. Wyse Technology was one of the first companies in the computer business to operate manufacturing facilities in Asia, with staffing of over 4,000 in its Taiwan and Hong Kong factories. Since 1990, Dr. Tse has been an independent investor. Bernard Tse earned B.S., M.S. and PhD degrees, all in Electrical Engineering, from the University of Illinois. Dr. Tse brings volume manufacturing experience, with an emphasis on purchasing and manufacturing in Asia to the Tesla Motors board. Laurie Yoler Laurie Yoler is Vice President, Marketing and Business Development at Precision I/O, Inc. Ms. Yoler was VP of Marketing and Business Development for Packet Design LLC for two years before Precision I/O was spun out in March of 2003. She was previously a senior director at Sun Microsystems where she held a number of corporate development, business development, marketing and sales management positions, including three years based in Geneva, Switzerland as the sales director for financial markets for Europe, Middle East, and Africa. While in Europe, she was selected as a member of the EU Financial Issues Working Group. Prior to Sun, Ms. Yoler was the director of product development and management at Visa, where she designed and implemented new banking products and provided consulting in risk management to banks across the US. Before joining Visa, Ms. Yoler was a manager in the advanced technology practices of Andersen Consulting (aow Accenture) and Coopers & Lybrand (now PricewaterhouseCoopers). She previously served on the board of directors of Interactive Investor (acquired by AMP) and the technical advisory board of Index Ventures. She currently serves on the Board of the Palo Alto Junior Museum and Zoo, and volunteers-for Villa Montalvo and-the Mountain Winery. Ms. Yoler graduated summa cum laude from Washington State University with a B.A. in management information systems. She also completed a year abroad in the international business program at the University of Copenhagen and executive management programs at Kellogg and INSEAD. , Ms. Yoler brings critical business planning and marketing expertise to the Tesla Motors board. Page 50 Copyright © 2004 Tesla Motors Inc.

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Proprietary & Confidential The 21° Century Electric Car New Technology Justifies a Re-Examination Martin Eberhard, Marc Tarpenning, and Jan Wright Tesla Motors Inc. Friday, February 20, 2004 The Electric Car, once the “zero emissions vehicle” darling of the environmental lobby, is now maligned as merely an “emissions elsewhere vehicle,” since the electricity to charge its batteries must be generated in (probably conventional) electrical generation plants that do indeed make emissions. This is a reasonable point, but when we work through the numbers, electric cars are significantly more efficient and less polluting than all alternatives, In this paper, we will work through the numbers for an existing prototype electric car (the AC Propulsion tzero) and the related and forthcoming Tesla Roadster that both use commodity lithium-ion batteries instead of the usual lead-acid batteries. Not only do these cars have extremely high “well-to-wheel” energy efficiency and extremely low emissions, they also have superior performance and convenience. Energy Efficiency To compute the well-to-wheel energy efficiency of a car, we must start with the energy content of the source fuel (e.g. crude oil) as it comes from the ground. We then track the energy content of this fuel as it is converted to its final fuel product (e.g. gasoline), and subtract the energy needed to transport the fuel to the car. Finally, we use the fuel efficiency of the car itself (e.g. its advertised mpg) to complete the equation. All fuels can be described in terms of the energy per unit of mass. In this paper, we will express the energy content of fuels in terms of mega-joules per kilogram (MJ/kg). Well-to-wheel efficiency is then expressed in terms of kilometers driven per mega-joule of source fuel consumed. Gasoline Cars The well-to-wheel energy efficiency. of a normal gasoline-powered car is calculated this way: gasoline’s energy content is 46.7MJ/kg', or 34.3 MJ/1 The production and transportation to the gas station is 81.7% efficient’, meaning that 18.3% of the energy content of the crude oil is lost to production and transportation. Thus, 34.3 / 81.7% = 42 mega-joules worth of crude oil are needed to produce one liter of gasoline. The most efficient ordinary gasoline car made was the 1993 Honda Civic VX, which was EPA certified at 51 mpg for combined city and highway driving’. Converting this to metric, this car would go 21.7 kilometers per liter of gasoline. This means that it required 21.7 / 42 = 0.52 kilometers per mega-joule. Keep in mind that the Honda Civic VX got about twice the gas mileage of typical cars — count on around 0.28 km/MJ for a car like a Toyota Camry”. Hybrid Cars All hybrid cars available today have no provision to charge their batteries except by using their gasoline engines. This means that they may be considered, from a pollution and energy efficiency perspective, to be nothing more than somewhat more efficient gasoline cars. If the EPA-certified gas mileage for such a car is 51 mpg, this is exactly the same as an ordinary gasoline car that gets 51 mpg. (Ifa hybrid car could recharge its batteries by plugging in when at home, and if its batteries held enough charge for a meaningful drive, this would not be true.) The best hybrid car today is the 2004 Honda Insight, which gets 63 mpg for combined city and highway driving®. Using similar math as the Civic VX above, this vehicle’s well-to-wheel energy efficiency is 0.64 km/MI. Copyright © 2004 Tesla Motors Inc. Page 53

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Tact Inc. Proprietary & Confidential Electric Cars For an electric car, the well-to-wheel energy efficiency is computed this way: The most efficient way to make bulk electricity is with a “combined cycle” natural gas-fired electric generator. (A combined cycle generator combusts the gas in a high-efficiency gas turbine, and uses the waste heat of this turbine to make steam, which turns a second turbine — both turbines turning electric generators.) The best of these generators today is the General Electric “H-System” generator, which is 60% efficient’, meaning that 40% of the energy content of the natural gas is wasted in generation. Natural gas recovery is 97.5% efficient, and processing is also 97.5% efficient.® Electricity is then transported over the electric grid, which has an average efficiency of 92%”, giving us a “well to electric outlet” efficiency of 60% x 92% x 97.5% x 97.5% = 52.5%. The energy cycle (charging and then discharging) of lithium-ion batteries in an electric car with a well-designed charger is about 86% efficient’®. This means that for every 100 mega-joules of electricity used to charge such a battery, only 86 mega-joules of electricity are available from the battery to power the car’s motor. Well-designed electric cars use about 100 watt-hours (0.36 mega-joules) of electricity from the battery to go a kilometer," or 2.78 km/MJ. The “electrical outlet to wheels” energy efficiency of our lithium-ion car is therefore 2.78 x 86% = 2.39 kin/MJ. Thus, the well-to-wheel energy efficiency of such an electric car is 2.39 x 52.5% = 1.25 km/MJ, or double the efficiency of the best hybrid car available. Hydrogen Fuel Cell Cars Hydrogen does not exist in nature except as part of more complex compounds such as natural gas (CH,) or water (HO). The most efficient way to produce large quantities of hydrogen today is by reforming natural gas. For new plants, the well-to-tank efficiency of hydrogen produced from natural gas, including generation, transportation, compression, is estimated to be between 52% and 61% efficient. 12 ah The upper limit Ge efficiency for a PEM fuel cell is 50%'*. The output of the fuel cell is electricity for turning a drive motor, and we can assume the same 2.78 km/MJ vehicle efficiency as with the electric car. With these numbers, we can calculate the well-to-wheel energy efficiency for our hydrogen fuel cell car: 2.78 x 50% x 61% = 0.85 km/MJ. This is impressive when compared to a gasoline car, though it is 32% worse than our electric car. But real fuel cell cars do not perform nearly this well. The best fuel cell car measured by the EPA is the Honda FCX, which gets about 49 miles per kilogram of hydrogen, which equals 80.5 kilometers per kilogram. We know that the energy content of hydrogen is 141.9 MJ/kg"*, so we can calculate the vehicle efficiency to be 80.5 / 141.9 = 0.57 km/MI. (Clearly, the Honda fuel cell is nowhere near the theoretical 50% efficiency assumed above.) When we calculate the well-to-wheel energy efficiency of this Honda experimental car, we get 0.57 x 61% = 0.35 km/MJ, not even as good as the ordinary diesel VW Jetta, let alone the gasoline-powered Honda Civic VX and the Honda Insight hybrid car. However, some proponents of hydrogen fuel cells argue that it would be better to produce hydrogen through electrolysis of water. The well-to-tank efficiency of hydrogen made through electrolysis is only about 22%,'° and the well-to-wheel energy efficiency of our theoretical fuel cell car would be 2.78 x 50% x 22% = 0.30 km/MJ, and the well-to-wheel energy efficiency of the Honda FCX would be 0.57 x 22% = 0.12 km/Mf, even less efficient than 2 Porsche Turbo. Even with the $1.2 billion US government initiative to reduce U.S. dependence on foreign oil by developing hydrogen-powered fuel cells, a recent report by a panel at the National Academy of Sciences shows that Americans should not hold their breath waiting for the cars to arrive in showrooms. "In the best-case scenario, the transition to a hydrogen economy would take many decades, and any reductions in oil imports and carbon dioxide emissions are likely to be minor during the next 25 years," said the academy.” Comparison The following table shows the well-to-wheel energy efficiency of several types of high-efficiency cars, including the AC Propulsion tzero prototype and an estimate for the efficiency of the slightly heavier Tesla Roadster. sHenhy aves Lewes Page 54 Copyright © 2004 Tesla Motors Inc.

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Proprietary & Confidential Technology | Example Car | Source Fuel|.Well-to-Station| Vehicle | Vehicle. ~| 'Well:to-Wheel ws POOP LEE a eficieney a Milage: ||: Effidiefioy “7 efficiency: ~! Natural Gas Engine — |Honda CNG Natural Gas 86.0%135 mpg 0.37 km/MJ} 0.32 km/MJ Hydrogen Fuel Cell Honda FCX Natural Gas 61.0%164 m/kg 0.57. km/MJ]. _°, .0.35 km/MJ Diesel Engine VW Jetta Diesel__|Crude Oil 90.1%|50 mpg 0.53 km/MJ] ‘0.48 km/MJ Gasoline Engine Honda Civic VX {Crude Oil 81.7%|51 mpg 0.63 km/MJ 0.51 kni/Mu Hybrid (Gas/Electric) [Honda Insight Crude Oil 81.7%|63 mpg 0.78 km/MJ} 064 -krii/MJ Electric Tesla Roadster _|Natural Gas 52.5%|100 Whikm 2.38 km/MJ 4:25 km/MJ Electric ACP tzero Natural Gas §2.5%} 100 Whikm 2.38 km/MJ] | 1:25 Km/MJ Well:to.WheellEne 0 0 0 : T = Honda Honda VW Jetta Honda Honda Tesla ACP tzero CNG FOX Diesel Civic VX Insight Roadster Emissions Burning fuel produces a variety of emissions, from sulfur and lead to unburned hydrocarbons to carbon dioxide and water. Through the years, we have improved the emissions of both cars and power plants by reformulating the fuels to eliminate sulfur and metals, and by improving combustion and post-combustion scrubbing to eliminate unburned hydrocarbons. In the end, an ideal engine or power plant will only emit carbon dioxide and water. Water is fine, but carbon dioxide is the greenhouse gas that cannot be avoided. We can compute the well-to-wheel carbon dioxide emissions for a given vehicle in a similar way to how we computed efficiency, since we know the carbon content of the source fuel. With perfect combustion, all of the carbon in the source fuel will eventually become carbon dioxide. Assuming perfect combustion, we can calculate the “CO, content” of any source fuel. Crude oil has a CO, content of 0.07164 grams per watt-hour, and natural gas has a CO, content of 0.05184 grams per watt-hour.”® With these numbers, we can calculate the well-to-wheel emissions of the various vehicles, based on the carbon content of the source fuel and the energy efficiency of the vehicles: Copyright © 2004 Tesla Motors Inc. Page 55

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Proprietary & Confidential @ Car.” Gas ‘Honda CNG Natural Gas 14.4 sn Fuel Cell [Honda FCX Natural Gas 14.4 VW Jetta Diesel {Crude Oil 19.9 Honda Civic VX Oil 19.9 Gas/Electric) |Honda Crude Oil 49.9 Tesla Roadster Natural Gas 14.4 45 . Mel Carbon: DioxideEmissions, . | 40 35 30 g/km 25 20 Honda HondaFCX VW Jetta Honda Honda Tesla ACP tzero CNG Diesel Civic VX Insight Roadster Again, the electric car shines — from the perspective of CO, emissions, it is three times better than the hybrid car, and nearly four times better than the hydrogen fuel cell car. The True Muiti-Fuel Car The beauty of powering cars with electricity from the grid is that we can generate the electricity any way we want without changing the cars. As we have seen, we can generate electricity with our choice of fossil fuels. We can also use nuclear fuel, or we can generate it with any of a number of “green” sources, such as hydroelectric, geothermal, wind, solar, or biomass. Electricity is the universal currency of energy, and we already have a comprehensive distribution system for it. Proponents of hydrogen fuel cell cars regularly compare the forecasted best efficiency of hydrogen production and conversion — in futuristic plants and fuel cells that have never been built — to the efficiency of the average existing electric generation plant — including all those 25% to 30% efficient power plants that were built in the 1950s. This is not a fair comparison — if we are willing to build all new hydrogen production plants to power a hydrogen car future, then we should be just as willing to build new electric generators to power an electric car future. We have assumed 60% efficient best-of-breed electric generators, but not science-fiction electric generators. However, natural gas accounts for only 14.9% of the US electricity generation; the rest is a mix of coal, nuclear and others. The average well-to-outlet efficiency of US electric generation, including all the old, inefficient power plants, is about 41%.”° With this efficiency, our electric car has a well-to-wheel energy efficiency of 0.99 km/MJ, still the most efficient car on the road. Of course, fuel cell cars are also multi-fuel cars, since hydrogen can be produced from water using electricity from any source. But this is a very inefficient way to use electricity. Consider the following chart: Page 56 Copyright © 2004 Tesla Motors Inc.

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ene Proprietary & Confidential j Elect cto: Motor Efficiency |H20 Electrolysis}: \.H, Compressor | 70% efficient | "| 90% efficient. | | A Fuel Geil | | "| 40% efficient |: It is obvious that when we start with electricity (however it may be produced), it is hard to beat the 86% efficiency of the currently-available lithium-ion batteries. Even when we assume extremely high efficiencies for electrolysis, compression, and the fuel cell, the fuel cell car requires more than three times as much electricity from the grid to drive the same distance. Performance The vision of replacing many of the cars on the road with clean commuter vehicles has caused most producers of electric cars to build low-end cars with as low a price as possible. But even if a solid argument could be made that electric cars will ultimately be cheaper than equivalent gasoline cars, they will certainly not be cheaper until their sales volume approaches that of a typical gasoline car — many thousands per year at least. Until an electric car manufacturer achieves high enough sales to approach a gasoline car manufacturer’s volume efficiencies, electric cars will need to compete on other grounds besides price. Aside from the obvious emissions advantage, there is another way that an electric car can vastly outperform a gasoline car — in a word, torque. A gasoline engine has very little torque at low rpm’s and only delivers reasonable horsepower in a narrow rpm range. On the other hand, an electric motor has high torque at zero rpm, and delivers almost constant torque up to about 6,000 rpm, and continues to deliver high power beyond 13,500 rpm. This means that an electric car can be very fast without any transmission or clutch at all, and the performance of the car is available to a driver without special driving skills. With a gasoline engine, performance comes with a big penalty — if you want a car that has the ability to accelerate quickly, you need a high-horsepower engine, and you will get poor gas mileage even when you are not driving it hard. On the other hand, doubling the horsepower of an electric motor from 100 hp to 200 hp only adds about 25 pounds, and the efficiency is, if anything, improved. It is therefore quite easy to build an electric car that is both highly efficient and also very fast: At one end of the spectrum, the electric car has higher efficiency and lower total emissions than the best of the most efficient cars. At the other end of the spectrum, the electric car accelerates at least as well as the best sportscars, but is six times as efficient and produces one tenth the pollution. The chart on the following page compares our electric cars with several high-performance cars and with several high-efficiency cars. Copyright © 2004 Tesla Motors Inc. Page 57

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Gas Gas/Electric Fuel Cell Porsche Turbo Ferrari 550 Maranello Corvette Honda VX Jetia Diesel Honda Honda Honda FCX Proprietary & Confidential : to! 60: Sec 18 16

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Proprietary & Confidential When we plot well-to-wheel energy efficiency against acceleration, almost all cars fall along a curve that shows exactly what we expect: the more performance you want, the worse the mileage you will get. But there are two cars that are way off the curve — the AC Propulsion tzero and the Tesla Roadster. These cars are clearly based on a disruptive technology — they offer great acceleration and the highest energy efficiency at the same time. 8 \O.Panoz Esperante e + Nissan 350Z . Toyota Celica ' | Nissan Maxima X% Ford Taurus © Toyota Camry ca Subaru Legacy | = Honda Civic VX VW Jetta Diesel’ ” 1 © Honda CNG (nati! Honda FCX (fuely | 2 Honda Insight,(Hiy! i he eae ° : 15 Be Acceleration from 0 to 60 mph ( Sec.) a 0.8 1.0 Well-to-Wheei Energy Efficiency (km/MJ) Copyright © 2004 Tesla Motors Inc. Page 59

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Proprietary & Confidential Convenience The fundamental convenience tradeoff with electric cars is the advantage of starting every day with a “full tank” (and never visiting a gas station) versus inconvenient refueling on the road. While it is wonderful never to visit a gas station, this would be a bad tradeoff if the driving range was too short. Lithium-ion batteries (such as those in most laptop computers) have three times the amount of charge than the same size lead-acid batteries, and at the same time weigh substantially less. Additionally, lithium-ion batteries will last at least 100,000 miles, while lead acid batteries need to be replaced about every 25,000 miles. The original AC Propulsion tzero had lead-acid batteries, and (like the EV1”") had a range of about 80 miles. However, this same car, converted to lithium-ion batteries, now has a range of 300 miles, and weighs 500 pounds less. Electric cars like the EV1 gained notoriety for their short driving ranges. In contrast, a typical gasoline car can go more than 300 miles on a tank of gas. The main reason that we want to have 300-mile range on our gasoline cars is not primarily because we want to drive 300 miles in a day, but rather because we don’t want to go to the gas station every day — a tank of gas should go about a week. From this perspective at least, the 80-mile range of the electric car might be enough for a commuter car. But 80 miles is not enough for anything but the most basic commute. It is not uncommon to drive significantly more than 80 miles in a day — often leaving directly from work and without any planning ahead. (For example, a drive from Silicon Valley to the Pebble Beach golf course is about 90 miles each direction.) Making matters worse, the more fun a car is to drive, the more it will get driven. A sportscar enthusiast would find 80-mile range to be restrictive in the extreme. 250 to 350 miles is an acceptable range even for a sportscar enthusiast. The only way that such an electric sportscar will fall short is in its inability to take long trips, since there aren’t any recharging stations along the highways, and since it takes time to charge batteries. Until we develop a charging infrastructure (even one that only consists of simple 240-volt electrical outlets in convenient places), electric cars are best suited for local driving — 250 miles from home, limited by the battery charge.” This is pretty much how sportscars are driven anyway: when it’s time to take a long trip, take your other car. Electric cars are mechanically much simpler than both gasoline cars and fuel-cell cars. There is no motor oil, no filters, no radiator fluid, no clutches, and no pumps. The motor has one moving part, compared to the dozens in an engine, and the only gears are in the differential. Due to regenerative braking, even the friction brakes will see little wear. A well-designed electric car should only need tire service for the first 100,000 miles. The Desirable Electric Car It is now possible build an exceedingly quick lithium-ion powered electric sportscar that looks good, handles well, and is a joy to drive, for a lower price than most existing high-performance sportscars. And yet, this car will be the most fuel-efficient and lowest pollution car on the road. You can have it all. Page 60 Copyright © 2004 Tesla Motors Inc.

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Proprietary & Confidential tesla Metersx Notes " Well-to-Wheel Studies, Heating Values, and the Energy Conservation Principle, 29 October 2003, Ulf Bossel 2 Density of gasoline from Pocket Ref, 3" Edition, 2002, Thomas Glover, Page 660 ? Exhaust Emissions From Natural Gas Vehicles by NyLund & Lawson, page 27, and also Well-to-Tank Energy Use and Greenhouse Gas Emissions of Transportation Fuels - North American Analysis, June 2001, by General Motors Corporation, Argonne National Laboratory, BP, ExxonMobil, and Shell. Vol. 3, Page 59 “EPA mileage numbers from www.fuelefficiency.gov > EPA mileage numbers from www.fuelefficiency.gov ° EPA mileage numbers from www.fuelefficiency.gov ” General Electric "H System" Combined cycle generator, model MS7001H/90014, as installed in Cardiff, Wales, in Tokyo; Japan, and in Scriba, New York. ® Well-to-Tank Energy Use and Greenhouse Gas Emissions of Transportation Fuels - North American Analysis, June 2001, by General Motors Corporation, Argonne National Laboratory, BP, ExxonMobil, and Shell. Vol. 3, Page 42 ? ibid, Page 33 The AC Propulsion lithium-ion tzero efficiency was confirmed by the judges at the 2003 Challenge Bibendum. "' The GM EV1 consumed 162 WH/km, measured “electrical outlet-to-wheels.” (www.gmev.com/specs/specs.htm). The AC PRopulsion tzero consumes 100 WH/km, measured “battery-to- wheels.” (www.acpropulsion.com/EAASV_101803.pdf) ? Well-to-Tank Energy Use and Greenhouse Gas Emissions of Transportation Fuels - North American Analysis, June 2001, by General Motors Corporation, Argonne National Laboratory, BP, ExxonMobil, and Shell. Vol. 3, Page 59 8 Efficiency of Hydrogen Fuel Cell, Diesel-SOFC-Hybrid and Battery Electric Vehicles, 20 October 2003, Ulf Bossel * EPA mileage numbers from www.fuelefficiency.gov ' Well-to-Wheel Studies, Heating Values, and the Energy Conservation Principle, 29 October 2003, Ulf Bossel © Well-to-Tank Energy Use and Greenhouse Gas Emissions of Transportation Fuels - North American Analysis, June 2001, by General Motors Corporation, Argonne National Laboratory, BP, ExxonMobil, and Shell. Voi. 3, Page 59 ” Reuters, February 4, 2004, 5:50 PM '8 http://bioenergy.ornl. gov/papers/misc/energy_conv.html ° Well-to-Tank Energy Use and Greenhouse Gas Emissions of Transportation Fuels - North American Analysis, June 2001, by General Motors Corporation, Argonne National Laboratory, BP, ExxonMobil, and Shell. Vol. 3, Page 44 ibid, Page 59 ?1General Motors EV1 specifications from www.gmev.com/specs/specs.htm *2 Most RV campsites have suitable 240-volt outlets, and can be used for charging on the road today. See, for - example, www.koa.com. Copyright © 2004 Tesia Motors Inc. Page 61

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“Ne Proprietary & Confidential l Tesla Metersn Useable Performance A Driver's Reflections on Driving an Electric Sportscar lan Wright Wednesday, February 11, 2004 No clutch. No gears. Constant torque from zero to 6,000 rpm, strong power all the way to 13,000 rpm. Very linear and precise control of motor torque (when driving and braking) with no delays from driver input to torque changes. What does this mean for performance? Well, it wouldn’t matter if you were driving a bus or something that does 0-60 in 19 seconds. But in the rarified air of sub 4 second acceleration, it makes a huge difference. Fractional-second delays become not just noticeable but annoying and distracting, and start to impinge quite seriously on performance. Think about the launch technique in a gas-powered race car. You need a bit of warning, to start with. If the engine is idling, it will just stall if you Joad it at all. First you have to rev it up to a speed where it will make some power, and then engage the clutch at just the right moment. In that time, the Tesla Roadster has already gone a car length or more. Race engines don’t have much flywheel, but road engines do — it takes a while for the engine to spin up. This time is not measured in acceleration tests, but is real. Then there’s the question of when to erigage the clutch. Too soon, and the engine stalls since it can’t produce enough torque to keep the wheels spinning. Too late, and the power just goes into smoking the tires which don’t actually generate much traction in that state. If you get it just right, the tires spin for a while, then “hook up” just at the point where the engine is making enough power to accelerate from there. It takes practice to get this right. Even if you do, it’s not optimum. It would be better not to spin the tires at all, but to keep them at the optimum slip rate (about 2 mph faster than road speed). This would generate the best traction and acceleration. This is exactly what the Tesla Roadster does. Perfect launch, every time, no warning or technique required. Of course, there are ways to automate some of this: automatic transmissions, paddle shifters, software launch control. All just automate what the driver would do if he were good enough. None come close to the zero delay, zero shift time, precise slip control of the Tesla. In racing, you keep the engine in the power band (between 7 and 9 thousand rpm, for instance). That way, there’s always power available when you need it. One of the techniques that racing drivers learn is how to downshift while braking into turns, without upsetting the car. Of course, race engines are only expected to do 500 miles between rebuilds, and generally, we don’t drive this way on the road. Instead, we tend to use the highest gear that engine will tolerate happily. From that state, if you suddenly want real power, it’s a case of dropping from 6” to 2"! while the engine spins up, and engaging the clutch at precisely the right instant. With the Tesla Roadster? Just nail it, You get instant torque and traction control, keeping the tires in the optimum slip regime. It’s like always being in the right gear without having to think about it, without wearing out the engine or making a lot of noise. Subjectively, it’s very confidence-boosting. Power and engine braking are always instantly available, it’s easy to “throttle steer,” and you are never caught napping. It makes the power delivery much more like steering — imagine if you had to shift steering ratios and wait for a power steering pump to spin up before getting the steering response you wanted! , The first time I drove the AC Propulsion tzero, I was immediately struck by the way the power didn’t fade as the car accelerated — it felt like a racecar in first gear, but a first gear that just kept going and going, all the way to 100 mph. The second revelation was how quickly I came just to expect the power or engine braking to be there when I wanted it — not even to think about downshifting. The power control had become as simple and instinctive as basic steering control. Thirdly, at the end of the run, I was amazed at how smooth, precise, and easy the speed control was at parking speeds. After all, I’m still in the same gear I was just using to do 100 mph, and there’s not even a clutch! How can this be? But it is. Copyright © 2004 Tesla Motors Inc. Page 65

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Proprietary & Confidential Inc. The Lotus Elise as the Basis for the Tesia Roadster Lotus founder Colin Chapman was a brilliant engineer and a very innovative designer. His design philosophy is perfectly represented in the Elise, though it was not conceived until years after his death. That philosophy - high performance with high efficiency, achieved through low weight and innovative design — is as applicable to Tesla Motors now as it was to Lotus in 1975. The following is extracted from “Definitions and Philosophy of Lotus’ Engineering Policy” April 1975: ! 1. A Lotus provides its owner with prestigious efficient transport. Prestige is given by exclusivity and racing heritage. The designer gives it efficiency by light weight, effective use of economic material and the maximum return for fuel burned in the engine; and in cornering power. 2. \Where a Lotus manufactured part is not essential to meet (1), use a mass produced part from the motor industry. 6. The most elegantly effective and traditionally Lotus solution is the one with the least number of parts, effectively deployed. In 2004, we have the opportunity to apply disruptive drivetrain technology to this philosophy: with Li-ion batteries and the Tesla Motors motor and controller, we can for the first time achieve the highest outright performance and the highest outright efficiency in the same car. Also, we can reduce the number of parts dramatically, and improve the handling by lowering the center of mass (most of the drivetrain mass is in the batteries rather than a gasoline engine: the batteries can be distributed for optimum chassis dynamics.) No doubt Mr. Chapman would have approved. The Elise is generally recognized as the world’s best-handling sportscar, lacking only the power to accelerate out of turns (see R&T test results below’). It has an innovative extruded aluminum alloy, adhesive-bonded chassis weighing only 70kg, but with extremely high torsional rigidity and excellent crashworthiness. An example of the design philosophy (and design integrity) is the bare alloy extrusion visible inside the cockpit. In other cars, this sort of thing is a styling feature, adding weight and complexity. In the Elise the chassis extrusion itself is made a styling feature. Copyright © 2004 Tesla Motors Inc. . Page 69

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Pt SD Inc, Proprietary & Confidential In contrast to all other sportscars, the Elise is the result of a minimalist design approach: less is more. Because the weight is kept low, it’s not necessary to use power steering, for example. This results both in even lower weight, and in improved steering feedback, which is an essential part of the driving experience. One of the reasons the Elise handles so well is that the driver is given very direct and accurate feedback about how the car is gripping the road, both through the wheel and through the suspension. It’s far more effective than “video game steering”, where the only feedback the driver gets is the view through the windscreen — the sort of thing found in heavy, mushy cars. As an example, look at the Elise compared with the Ferrari 360 Modena (representative of the best of conventional sportscar design). The Ferrari weighs 3370 Ibs; the Elise 1900. To achieve roughly similar performance on the racetrack (faster on some segments, slower on others — see below), the Ferrari has a very expensive and complex 3.6-liter V8 producing 395 hp at 8500 rpm; the Elise has a simple 1.8-liter 4-cylinder engine producing 122 hp at 5600 rpm. And the Ferrari costs about 4 times as much. The Tesla Roadster will definitely solve the “lack of power to accelerate out of turns” problem, and will even improve on the Elise handling due to a lower centre of mass. If Road and Track were to re-run the same test with the Tesla Roadster, they would find it to be fastest through every segment. Page 70 Copyright © 2004 Tesla Motors Inc.

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a Road and Track Test Results Great Grip! — The Results Proprietary & Confidential lilustrations by Tim Barker June 2002 The Results Two sections of Buttonwillow Raceway Park's East Loop were chosen for analysis: An increasing-radius hairpin and a quick right/left that tests a car's transitional composure and lateral grip. The track is run clockwise. Only the best segment times for each car are reported. Note that for the Hairpin Turn analysis below, the speed at the end of the straight (6 )is taken at the braking point leading into the Transition Segment. The Hairpin of Buttonwillow’s East Loop is made tricky by a left-hand kink that occurs in the braking zone immediately preceding the increasing-radius right-hander. Exit speeds are largely influenced by vehicle power. ‘ ree ae Click on the image above to see an enlarged version of the Hairpin Turn. wre a Mitsubishi Chevrolet Ferrari Lancer Porsche Porsche Map BMW M3 Corvette 360 Lotus Mazda Evolution Boxster 911 Key Coupe Zz06 Modena _ Elise MP3 VII s Turbo Corner Entry 2 50.4 Speed, mph Te EET ERE MC SERIE SUS To jApex'Speed; FPaknae aM noe Apex Lateral 4 1.08 Acceleration, g Copyright © 2004 Tesla Motors Inc. Page 71

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Proprietary & Confidential Speed atEndof 6 94.5 102.2 100.7 85.7 77.6 92.0 82.7 100.6 Straight, mph BRYAN HERINS GOMER - BMW M3 Chevrolet Ferrari360 ‘Lotus Mazda Mitsubishi Porsche Porsche Coupe Corvette Modena Elise MPS Lancer BoxsterS 911 I'd like to ZO6 It is quick, The The car Evolution Oncethe Turbo see it IT don’t feel though it brakes are picksup WII car starts It hasa have a like I can doesn’t have easy to some This is one to lot of little more brake as an modulate understeer place to understeer, power and grip late as I overwhelming before and a little me where it is locked it's a fast coming off want to amount of turning in. wheelspin. it still feels in that car. There the corner going into power. The Thefront I would like a mode and I is a lot of where I the corner. tight tucks in like to see front- can't understeer can really Itturnsin suspension nicely. a little wheel- balance it through put some fairly well. gives youa have more ride drivecar.I the way! __ the hairpin ofthat M Itis a lot of tot of enough and pick up want, and on- power fun feedback, griptogo damping that power power down to accelerating faster ifI control. understeer. coming the off the had more off. ground. corner. power. Transition Segment The Transition Segment requires the driver to compromise the ideal line in the right-hander to get the car up properly for the more important left turn. Click on the image above to see an enlarged version of the The Transition Segment. TRANS GEOMENT... Mitsubishi Chevrolet Ferrari Lancer Porsche Porsche Map BMW M3 Corvette 360 Lotus Mazda Evoiution Boxster 911 Key Coupe Z06 Modena Elise MPS VII Ss Turbo gets Corner Entry 2 61.6 66.0 63.4 58.9 53.9 63.3 60.9 67.4 Speed, mph Page 72 Copyright © 2004 Tesla Motors Inc.

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Proprietary & Confidential Apex Speed 2, 4 43.6 47.5 48.3 50.0 47.0 47,0 47.7 40.1 mph aaa 18) dB é i ee Boel ; 7 x i ae se siegseeler auth ee Corner Exit 6 58.5 » . . . 59.8 61.7 Speed) mF mph BMW M3 Chevrolet Ferrari Lotus Elise Mazda MP3 Mitsubishi Porsche Porsche Coupe Corvette 360 Icancarry alot Once the car Lancer Boxster S 911 Todrive 206 Modena __ of speed into the foadsdownand Evolution The car Turbo this car The The car’s corner, but once I I try to build VIE carries Definitely hard, I steering suspension start to scrub it speed, ithasno The same some a car have to has a gives you off, I don’thave problem thing that understeer that’s | accept the positive feedback enough powerto accommodating. helps the on power, loose on fact it turn-in early and pull It has more grip carto have whichisa entry and needs to and nice itis more through. turn-in also tendency too much sideways. The driver makes it when I am understeer It is suspension input. good for coming off on exit. almosta has a lot transitioning the rally style of from one corner. of driving, movement direction and feels back to the soft. next. Performance Mitsubishi Chevrolet Ferrari Lancer Porsche Porsche BMW M3 Cervette 360 Lotus Mazda Evolution Boxster 911 Coupe 206 Modena Elise MP3 VII s Turbo ‘Hairpin 11.785 11.115 11.016 © 11.605 12. 642 11.591 11.741 11.267 Segment Time, sec By on Transition 10.020 9.687 9.656 9.595 Segment Time, sec Specifications Copyright © 2004 Tesla Motors Inc. Page 73

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‘ . Mitsubishi Chevrolet . Lancer BMW M3 Corvette Ferrari 360 Lotus Mazda Evolution Porsche Porsche Coupe Z06 Modena Elise* MP3 VIt* BoxsterS 911 Turbo ira tes ste 2865 ib 3260 Ib Reger PORT 3 3260 Ib 3370 Ib 1900 Ib cat Be/44ae sa Ni Test weight agar elontils’ rive 4 usar: me, : 3 102.3 in. 90.6in. 102.8 in. 103.3 in. 95.2 in. 92.5 in. Engine type dohc 4- dohc. 5- he 4- twin-turb valve/cyl valve/cyl valve/cy! V- valve/cyl valve/cyl ddohc4-_ . valve/cyl dohe 4- intine-6 V-8 8 inline-4 inline-4 valve/cyl flat-6 valve/cyl inline-4 flat-6 PRLS be ST TAAT NOT RSET ao RT PETIA AR RTO EH TCA TO gOUE MOO zee.. +) ak zoreey. SoOU ee Get st Tye ih He = Pe Bee The Te Se ae Ce ab : 3 i bd Perel a BERS 3, ae abe sh aerial: Pe ce ESE, reba tak, Horsepower 333 bhp @ 405 bhp @ 395 bhp 122 bhp 40 bhp @ 276bhp@ 250bhp@ 415 bhp @ (SAE) 7900 rpm = 6000 rpm 8500 rpm @5600 6000rpm 6500 rpm 6250 rpm 6000 rpm rpm ” Ae! a | i * ay we i " . nh i 3 HEFEED Transmissio 6-sp 6-sp 6-sp manual 5-s 5-sp 5-sp manual 6-sp 6-sp n manuai manual (progressive manual manual manual manual are ialeer aluminum/ fiberglass unit steel aluminum / space frame aluminum . space frame alloy alloy iS8x8iJf, 17x91/2 18x71/2f, 16x5 17x7 17x8 18x71/2 18x8f, 18 18x93 r f,18x1i0 18x91/2r i/2f,17 f,18xQ9r xilir Page 74 — Copyright © 2004 Tesla Motors Inc. Proprietary & Confidential i

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© © ry Proprietary & Confidential Tne. Ele ae Pee Meo Tire model Pilot Sport Eagle F1 P Zero Potenza P Zero AVS Sport SP Sport P Zero Supercar Asimmetrico RE04 Asimmetric Asimmetric ° 0 225/45ZR- P265/40ZR 215/45R-18 175/55R- 205/45ZR- 235/45ZR- 225/40ZR- 225/40ZR- 18f255/ -1791Yf, 89Yf,275/ 16 80Vf, 17 88W 17 93W 18 f,265/ 18 f, 295/ 40ZR-18 r P295/ 40R-18 99Y 225/ 45R- 35ZR-18 r 30ZR-18 r 35ZR-18 r 17 90Vr 91Yr wth: Suspension, MacPherso upper & upper upper & MacPherson MacPherson MacPherso MacPherson f/r n struts, lower A- lower A- lower A- — struts, coil struts, coil n struts, struts, coil coil arms, arms, coil arms, coil springs, springs, coil springs, springs, transverse springs, springs, anti-roll anti-roll bar/ springs, anti-roll anti-roll composite anti-roll bar/ anti-roll bar/ multitink, anti-roll f & bar/ bar/ leaf upper & barf&r trapezoidal- coil springs, r multilink, multilink, springs, lower A- link, coil anti-roll bar coil springs, coil anti-roll arms, toe springs, anti-roll bar springs, barf&r links, coil anti-roll bar anti-roll springs, bar anti-roll bar *European pricing and specifications. Notes ' Colin Chapman — The Man and his Cars , 1986, Gerard Crombac, page 359 * Road and Track, June 2002 Copyright © 2004 Tesla Motors Inc. Page 75

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Ne Proprietary & Confidential Inc. Appendix D: Notes for the AC-150 Gen 2 Electric Propulsion System Note: The Tesla Roadster will use a modified version of the AC Propulsion AC-150 system that produces 165 kilowatts of power. All physical dimensions remain the same, but all torque and power figures are 110% of those listed in this specification. Copyright © 2004 Tesla Motors Inc. Page 77

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~e Application Notes for the AC-150 Gen 2 Electric Propulsion System Copyright © 1992 - 2003 AC Propulsion, Inc. All rights reserved. Contents of this publication may not be reproduced in any form without the written permission of AC Propulsion, Inc. AC Propulsion, Inc. drive systems are covered by U.S. and foreign patents issued and pending. The AC-150 system incorporates AC Propulsion’s Reductive™ Integrated Battery Charger Patent No. 5,341,075 and Patent Numbers 5,355,070 5,642,010 and 6,018,224 and other patents pending. Specifications are subject to change without notice. phone (909) 592-5399 fax (909) 394-4598 (\ www.acpropulsion.com 9-19-03 AC PROPULSION, INC. 441 Borrego Court San Dimas, California 91773

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Contents page Important Safety Precautions 3 System Description and Specifications 4 AC-150 Torque, Power & Efficiency Curves 6 Drive System Application Notes 7 Gear Reduction 7 Propulsion Battery 7 Regenerative Braking 7 Cooling Air Considerations 8 PEU Mounting 8 Power Electronics Unit 9 Automatic Battery Contactor Operation 10 Operating Modes 10 Motor 11 Insulated Coupling 12 Mechanical Interface Drawings 13 PEU 13 Motor 14 Motor Coupling Drawing 16 AC-150 Application Notes 2 AC Propulsion, Inc.

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e IMPORTANT SAFETY PRECAUTIONS DANGER - VOLTAGES UP TO 450V ARE PRESENT IN THIS SYSTEM. FAILURE TO OBSERVE SAFE INSTALLATION, OPERATION AND SERVICE CAN RESULT IN DEATH OR INJURY AND EQUIPMENT DAMAGE. This system is to be installed and serviced by qualified technicians only, who are trained in the safe installation and handling of high voltage and high power devices. Extra care must be taken when working with dc voltages because of the tendency to continue to arc once an arc has started. A high power dc source such as a vehicle battery can cause electrical explosions. The Power Electronics Unit (PEU) cover is removable. Do not remove cover until battery connector J3 has been disengaged and enough time has passed to allow internal capacitors to discharge. An internal discharge circuit normally does this within a few minutes. Always check that dangerous voltages are not present with a voltmeter before working on equipment. There is no cover electrical interlock, but there is provision for locking the cover latches. PEU chassis must be electrically grounded to vehicle chassis via connector J7 before connecting battery connector J3. High voltage may be present on PEU J8 and J10 connector contacts. The propulsion battery (or other de source) must be electrically isolated from vehicle chassis. In grid connected mode (battery recharge or discharge), the propulsion battery, motor lines, motor chassis and motor shaft are electrically live with respect to chassis. They are connected to the utility power lines through the PEU. The vehicle chassis and PEU chassis are connected to earth ground through the utility power cord. The motor mount and shaft must be insulated from the vehicle chassis. Insulated motor mounting hardware is included with the motor and drawings showing a recommended insulated motor coupling are included in this document. Operator or service personnel must never come in contact with the motor aluminum housing. Care must be used in matching battery recharge power and voltage to the particular battery being used. Too high power or voltage can cause battery failure and/or explosive or toxic chemical generation. Never allow the voltage applied to the PEU J3 connector to go above 450V (for example by using external batiery charging apparatus). Doing so may cause. extensive damage to the PEU. The PEU and motor are not designed to tolerate direct water splash or extreme dirty or dusty environment. Suitable protection must be provided in the vehicle installation. Do not operate if PEU or motor are wet. The AC-150 motor has maximum speed rating of 12,000 rom. The controller has an electronic speed limit of 12,000 rpm, however it is possible to exceed this speed if the motor is driven mechanically, such as when down shifting a multi-speed gearbox. Exceeding this motor speed limit can cause catastrophic failure and loss of control of the vehicle. Do not connect or operate the system if any cable or insulation is damaged. Recharge cords and power outlets should meet the normal electrical codes. AC-150 Application Notes 3 AC Propulsion, Inc.

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SYSTEM DESCRIPTION & SPECIFICATIONS Introducing the AC-150 Integrated Electric Drive / Recharge System - a ground-breaking product that features High Performance, High Efficiency and Unparalleled charging convenience all in a safe and reliable package. ‘The AC-150 system includes a power electronics unit and an AC-induction traction motor that combine to provide high performance, high efficiency, and rapid, convenient charging capabilities for electric and hybrid vehicle applications. These components have been designed from the ground up as a tightly integrated system to deliver up to 150 kW (200 hp) motor output, yet maximize vehicle driving range with high efficiency over a broad operating range and comprehensive energy recovery through regenerative braking. Both power electronics and motor are forced-air cooled to provide exceptional ease of installation and maintenance while reducing cost. The AC-150 embodies patented control and construction techniques that allow the power electronics and motor windings to be re-configured as a high-rate Reductive™ battery charger. By using motor drive componenis, the Reductive Charger reduces vehicle cost and weight. By allowing safe charging from existing 110V to 240V outlets at rates as high as 20 kW, the Reductive™ Charger reduces infrastructure installation requirements and costs, and its innovative bi-directional power capability opens a new world of capabilities including self contained vehicle battery diagnostics, standby or standalone power generation, vehicle to vehicle (V2V) charge transfer and vehicle to grid power functions (V2G). Two companion products have been developed to work with the AC-150 drive system. The Vehicle Management System (VMS) and Batt-Opt battery management system were designed to integrate important vehicle functions and driver controls. The VMS incorporates charge controls, data displays for charge parameters, vehicle and battery energy status, and control/display of the Batt-Opt modules. See page 7 to see how these systems interface. Features Advanced. Drive Control Circuitry * "Glass smooth" torque under all load and speed conditions + Natural and transparent driving feel « Driver adjustable regenerative braking * Traction control * Integral power distribution and fusing for battery optimizer, cabin PTC heater and hybrid / fuel cell APU. integrated Bidirectional Reductive™ Charger Charge from any power source between 100 and 250 VAC, 50 or 60 Hz. Charge rate controllable from 200W up to 20kW (with 240 V line) Unity power factor, sine wave current draw GFI outlet compatible Automatic mode switching (recharge mode activated when charge power is connected) Controlled battery discharge into power line for battery diagnostics and conditioning with automatic disconnect if line voltage drops out or changes beyond normal range. UPS mode for backup power and energy transfer to other electric vehicles. +e * * * AC-150 Application Notes 4 AC Propulsion, Inc.

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Features - continued Designed-in Safety x Protection against over-current, over-voltage and over-temperature conditions. Battery floats with respect to vehicle chassis Double insulated motor Zero motor back-EMF when excitation removed Interlocks prevent accidental operation e* €F & Operating Performance Input Voltage 336-360 V nominal 240 V min, 450 V max Input Current 580 Adc max (drive) -200 Adc max (regeneration) Torque 220 Nm max, 0-5,000 rpm (drive) 115 Nm max (regeneration) Power 150 kW max, 7,000-8,000 rpm 50 kW continuous at 8,000 rom (torque and power at 336V DC input) Efficiency: 91% peak (50 kW, 9000 rpm) 86% road load (8 kW, 8500 rpm) >93% recharge (240V line, 10 kW) Power Electronics Unit Pulse-width-modulated, voltage fed, {GBT inverter with current mode, sine-modulated controls; battery charging circuitry; auxiliary 13.5V power supply; and interfaces for control pedals and dash instruments. Environmentally rugged forced air-cooled design. Dimensions: 186 x 313 x 760 mm (excluding blower) Total weight: 30 kg (incl blower) Cooling: Forced-air with pwm speed control Power connectors: Aircraft-style circular Control connectors: AMP waterproof automotive Control inputs: Ground-referenced signals for key switch, accelerator pedal, regenerative sensitivity, forward, neutral, and reverse; and RS-232 for recharge/discharge control and cabin heat. Optional CAN bus. Instrumentation outputs: RS-232 for battery voltage, Inverter, hybrid and accessory currents, inverter temp, motor temp, motor rpm, motor direction, line voltage, line current, battery isolation, and 12V bus voltage Aux Power supply current rating: 100 A @ 13.5 V (up to 30A allocated for cooling blowers) Motor Four-pole induction, high frequency design with inverter-controlled magnetic flux. Dimensions: 245mm dia x 350 mm long (excluding blower and cable) Total weight: 50 kg (incl blower) Maximum rpm: 12,000 Insulation: Class H, double-insulated Cooling: Forced-air with pwm speed control Sensors: Winding temp, tachometer AC-150 Application Notes 5 AC Propulsion, Inc.

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AC-150 ELECTRE PROPULSDN SYSTEM MAXMUM TORQUE & POW ER vs. RPM 250 ah im} 1 (uF , Dataw thVin= 336 Vdc 12,000 —, Low ervoltage has bss avaiabk pow er 200 175 150 . . etd” 125 Oo a ° ¢ 100 , o 75 Fi 50 + at = l= SHAFT POWER kW ) o” jamS—TORQUE W-n) 25 so- oH t 0 2,000 4,000 6,000 8,000 10,000 MOTOR RPM 160- AC-150 efficiency map sombined moter and inverter S346¥ input {12,006 rpm mex} z : a 3g 07, ~ ed 2 ty < OD fe NS a 9g S=—Sase Q t 1 I q | T TL T T d 4000 2600 3000 4000 5000 6000 8000 sooo 10000 11000 Speed, rpm AC-150 Application Notes 6 AC Propulsion, Inc.

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“Ne DRIVE SYSTEM APPLICATION NOTES Gear Reduction The AC-150 motor is not supplied with a gear reduction unit, although in most applications, one is required. As an aid in matching the drive system to vehicle requirements, the graph on page 6 shows the maximum available motor torque (and thus power which is the product of speed and torque) versus motor rpm for the AC-150 system. For a conventional passenger car in the 2500 to 3500 pound range, a direct drive single speed gear reduction unit is usuallly suitable to match the motor to the drive wheels. A single speed gear unit is lighter and more efficient than a multispeed transmission. For example, a motor /wheel ratio of 9.6:1 will provide outstanding acceleration and a top speed above 80 mph. As a general guideline, the continuous motor running torque should not exceed 1/3 of the maximum available torque. High peak torque is available for brief periods such as vehicle acceleration or hill climbs. Note that from 0 to about 6000 rpm, accelerator position, motor currents and motor torque are all approximately proportional. Battery current is approximately proportional to output power, not motor current. So at low motor speeds, battery current will be low because output power is low, even though the motor may be running at maximum current and will eventually overheat. Therefore when high power is required for extended periods, it is better to gear the motor to run at higher rpm. Propulsion Battery a. Voltage - 336 VDC nominal is recommended (28 12V batteries for example). This is the minimum voltage required for compatibility of the integrated charger with a 240 Vrms recharge line. Maximum recharge voltage is 450 VDC. Battery recharge voltage and current limits are set by charge control commands to the PEU. In drive mode, PEU begins power limiting as voltage drops below about 270 VDC and goes to zero power available at 240 VDC. b. Current- The drive system will require up to 525 amps from the battery at full power and can return up to 200 amps during regenerative braking. c. Isolation — For safety and charge system requirements, the propulsion battery must be isolated from chassis. c. Although the PEU has an internal fuse for the battery power, it is strongly recommended that the propulsion battery pack have over-current protection to protect the batteries and battery pack wiring in the event of an external short circuit. As a minimum, one fuse rated for at least 400 amps and 500 VDC should be used. Two fuses (separating the battery pack into 3 sections) is even safer. Regenerative Braking This powerful feature greatly increases vehicle efficiency by the conversion of vehicle kinetic energy to electric energy to charge the battery during braking. An additional benefit is the virtual elimination of mechanical brake wear. A very simple and elegant control strategy can be used with the accelerator peda! signal only. Referring to the diagram below, regen. braking begins when the vehicle is moving and the accel pedal is less than 30% depressed. At approx. 30%, the motor torque is zero. More than 30% depression commands positive (accelerating) torque and less than 30% commands negative (decelerating) torque. Regen torque is proportional to accelerator position, so as the accelerator is lifted, more regen torque is applied. The regen torque fades away to zero as the vehicle speed decreases to zero. This gives smooth continuous control with one foot and the mechanical brake is seldom needed. The PEU has an input that controls the regen torque gain (0 to 5V signal). A dashboard mounted potentiometer may be used for the driver to set the desired sensitivity of regen braking. An optional PEU input accepts a brake pedal signal (0 to 5V) which subtracts from the accelerator signal. The PEU has a control circuit which limits regen brake torque when the battery is too full to absorb regen power so that the battery does not exceed a preset voltage limit (normally 405V). AC-150 Application Notes 7 AC Propuision, Inc.

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Cooling Air Considerations Both PEU and motor are air cooled, each unit having its own variable speed blower. Traction inverter temperature controls the PEU blower and motor winding temperature controls the motor blower. The installation should provide outside air for the blower inlets and allow heated exhaust air to escape the vehicle. Avoid blower ingestion of exhaust air. Avoid turning the system off if the motor temperature is above 100°C. With the system on, the motor cooling blower continues to run until temperature drops to <100°C . This will prevent heat ‘soak into the encoder electronics in the motor. PEU Mounting Preferred Orientation of the PEU in the vehicle is horizontal as shown on the picture on the following page. Contactors inside the PEU best withstand shock and vibration in this orientation. Four vibration isolation mounts are supplied with the system and should be used for supporting the PEU. The PEU should be located as close as is reasonably possible to the motor to minimize motor cable length. AC-150 Application Notes 8 AC Propulsion, Inc. | a0

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