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Yosef Peretz (SBN 209288) s at i i Te WD
Emily Knoles (SBN 241671) N MATEO OGUNTY
Genevieve Guertin (SBN 262479)
PERETZ & ASSOCIATES
22 Battery Street, Suite San Francisco, California Telephone: (415) 732-Facsimile: (415) 732-
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-
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,
Time: 9:00 a.m.
Dep.:
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
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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,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, 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 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
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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
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
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
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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.
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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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,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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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
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@ 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
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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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@ ed
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.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.
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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@ 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
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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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@ 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
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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
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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
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-Page 25 @ 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
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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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-reduces mileage - 3 os to me rf
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 : is :
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
a 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, 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.’
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 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.
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 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.
4,700 000 $102,000 $102,500 180 $240,000 40,$80,000 $740,000 $760,000 $0 $0 $800,000 800,1,100,000 $150,5,000 000 121,749 31,000 53,Revenue Assumptions
Globalsaies sid ST 2008 T2006 Tota S Sold) 0 a) 165 TotalRevenue; $0 $0] $11,055,000} $27,525,
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
97 805,519,649 $7,359,200 $4,746,800 $4,746,519,649 7,359 1,776,800 823 7,321,089 1,738,985 098,
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
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
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.
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.
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 Key Coupe Zz06 Modena _ Elise MP3 VII s Turbo
Corner Entry 2 50.
Speed, mph
Te EET ERE MC SERIE SUS To
jApex'Speed;
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BPERVANINERTAISICOMMENT ON
BMW M3 Chevrolet Ferrari360 ‘Lotus Mazda Mitsubishi Porsche Porsche
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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 Key Coupe Z06 Modena Elise MPS VII Ss Turbo
é : ee Boel
; 7 ; E ae se siegseeler auth ee
Corner Exit 6 58.5 » . . . 59.8 61.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 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.
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.
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 Coupe 206 Modena Elise MP3 VII s Turbo
PRLS be ST TAAT NOT RSET ao RT PETIA AR RTO EH TCA
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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
” Ae! ro ‘ i 4 * ay we i
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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
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aluminum/ fiberglass
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space
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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
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bar anti-roll bar
*European pricing and specifications.
Notes
12,
—, Low ervoltage has bss avaiabk pow er
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,MOTOR RPM
160-
AC-150 efficiency map
sombined moter and inverter
S346¥ input
{12,006 rpm mex}
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:
a
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4000 2600 3000 4000 5000 6000 8000 sooo 10000 Speed, rpm
AC-150 Application Notes 6 AC Propulsion, Inc.Page 91 “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 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 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 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.Page 92 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. |
a0Page 93 POWER ELECTRONICS UNIT
A de contactor is in series with propulsion battery connector. When the battery is not connected
or open-circuited, the contactor is open. The contactor logic and drive circuit operates when
battery voltage is present. When battery presense is detected and when battery voltage is within
allowable limits, a PEU capacitor pre-charge sequence is initiated. When pre-charge completion
is detected, the contactor will close (the PEU turn on signal should be off during pre-charge or
else pre-charge will not complete).
The contactor will open. and PEU capacitor active discharge will begin if one of the following
occcurs:
e the battery connector is removed
e the battery becomes open-circuit
e battery voltage is out of normal range (<193 or >460)
Operating Modes
Drive Mode — Forward, Neutral or Reverse. Neutral is default state at turn on. APS also tums
on. Traction inverter is only enabled in forward or reverse. This mode is normally activated with
vehicle key switch “ON” position.
Auxiliary Mode - APS 12V power supply only is on. This mode is normaily activated with
vehicle key switch “ACCES? position or Emergency On signal.
Charge or Discharge Mode (Grid Connected) - This mode is entered automatically whenever
the utility power line is connected to the PEU. It will over-ride Drive Mode preventing driveaway
while power line is applied. (Warning — If vehicle is plugged in but line voltage is not present,
Drive Mode will not be inhibited. A method to prevent driveaway for this condition is to use a
switch activated by the mechanical insertion of vehicle charge connector, with the switch
connected to the PEU Seat Switch input). User specified line current, battery current and battery
voltage limits are set via serial data bus. The PEU has internal contactors to auto-disconnect
from the power line if the line goes down. Charge algorithm is constant current to be specified
battery current or line current limit (whichever is lower) until the battery voltage limit is reached,
then transition to constant voltage.
AC-150 Application Notes 10 AC Propulsion, Inc.Page 95 Noe
i
A iar a 2 of
RI Pa THOT NCES a OS
The AC-150 motor is custom designed for automotive application to maximize power/weight ratio
and efficiency over a broad range of speed and power. It is a three-phase induction motor, with
a four pole winding. The patented copper rotor construction allows extremely high power density
and high efficiency. The air-cooled design provides for simplified installation and maintenance as
well as weight savings and cost reduction. The motor houses a winding temperature sensor and
an encoder that provides speed and direction information to the PEU. A variable speed blower is
provided which is driven from the PEU.: A power cable and a signal cable are attached to the
motor.
The motor should be electrically isolated from vehicle chassis for proper operation of the recharge
system and to minimize electrical noise injection into the vehicle chassis in drive mode. Isolated
motor mounting hardware is provided with the drive system. An insulated motor shaft-to-gear
input shaft coupling is also required as described below. Appendix B has dimensions for
fabricating the motor to gearbox adapter plate.
AC-150 Application Notes 11 AC Propulsion, Inc.Page 96 insulated Coupling
A special motor shaft-to-gear input shaft coupling is required. Input and output sides are
electrically insulated for proper operation. This is not included with the AC-150 system since it
usually is application specific. An approved coupling is available in whole or in part from AC
Propulsion. The coupling assembly drawing is shown in Appendix A. Fabrication drawings are
available upon request. The motor side has female splines to match the motor shaft and o-ring.
Typically the gear reduction side also has a female spline | to match in gear input shaft.
Use high temperature automotive grease to lubricate, the métor and transmission splines and
o-ring. The motor shaft uses an o-ring seal to the female spline to retain grease. The, coupling is
typically clamped to the gearbox input shaft. :
FO
” an ut
AC-150 Application Notes 12 AC Propulsion, Inc.Page 97 cr soJON voreoyddy ost-OV
‘ouy ‘uors—ndolg OV
AIR EXHAUST CNEAR & FAR SIDES?
KEEP THIS AREA CLEAR.
PEYER CABLE
12 BA, ce fN
SHIELD SHOULD D MAINTAIN CONTACT
WITH COPPER PAIN
98 DA Uap AX
|
|
GO
td HAN:
COOLING BLOWER
. BLOWER AIR Inet AREA MUST BE AT LEAST £5 INCHES FRIM
ANY EXTERNAL SURF:
yp
SEE Dwi [02000 FOR RECDOENDED
al
NOT EXCEED 25 LBS AND
WEIGHT OF KOTOR JS 50 kg
ZL. CABLE
3 Dm, & Mh
BEND RADIUS
MOTOR TO REDUCTICN GEAR
ADAPTER PLATE HOLE PATTERN. iantaie SHA’
ITH REDUCTION GEAR SHAFT WITHIN 002 INCHES.
Fart J TURE.
cent ER OF GRAVITY OF COUPLING SHALL
NOT BE HORE THAN 1.0 INCH FROW END OF MOTOR SHAFT.
NOTES UNLESS DTHERWISE SPECIFIED
aR DLET
BZ
'T SMALL EE ALIGNED
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10-32 X .75 SCREW, LOCK WASHER, FLAT WASHER 8 PLACES
DRILL 199 DIA HOLE 8 PL IN FIBERGLASS SHROUD
_I seraat ee ADAPTER PLATE TO SUIT INSTALLATION. —
6375 THe ALUR RECOMMENDED?
103013 KOTOR INSULATING PLATE
E O-RING (@ RTOD3/4 IN °A’ POSITION INSTALLED AT FACTORY E
aa7s pap £500 1D, 689 O/ 4 IN “8° POSITION, INSTALLED aT NOIDR INSTALLATION
4 MOUNTING STUDS ZT BERGLASS. ‘SHROUD ALUN MOTOR HOUSING
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@
BOND TEFLON TUBE TO ITEM 1 WITH
DEXTER EPOXI-PATCH
OR EQUIV. AFTER EPOXY
SETS, TRIM LEFT END
FLUSH & DRILL .
DIA HOLE AT BOTH ENDS.
VENT TUBE DETAIL a
SCALE: 2:
=
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MOTOR SHAFT
TRANSMISSION NS
SHAFT
SECTION A-A, EXPLODED VIEW
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GROOVE
&
TORQUE ITEM le TO 19 FT-LBS.
3. LUBRICATE MOTOR SPLINES WITH HIGH-TEMP BEARING GREASE BEFORE ASSEMBLY
2. GLUE TWO COUPLING HUB/COUPLING NUB SUB-ASSEMBLIES TO ITEM 1 (PHENOLIC
PLATE) WITH DEXTER EPOXI-PATCH OR EQUIVALENT
BE DONE AT THE SAME TIME AS BONDING THE VENT TUBE.
GENEROUSLY TO BOTH BONDING SURFACES AND WIPE AWAY EXCESS ADHESIVE
AFTER ASSEMBLY.
I. PRESS ITEM 3 INTO ITEM 2 BEFORE ASSEMBLY («8 PLACES),
DEGREASE & USE LOCTITE 290 WHEN ASSEMBLING ITEM 6.
TORQUE ITEM 6 TO 20 FI-LBS
NOTES
THIS SHOULD
APPLY ADHESIVE
SAND SURFACES BEFORE APPLYING ADHESIVE
CONFIDENTIAL
COPYRIGHT AC _PROPULSION,INC.
VENT TUBE
SEE ASSY DETAIL.
REV A 12-13-02 CHG VENT TUBE
mi
SHES, ALLOY STL,1/4-28x.
=
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075 O.D. TEFLON TUBE
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125 FLAT STL.WASHER,.063_ THK,
SHCS. ALLOY STL,1/4-28x.
COUPLING O-RING SLEEVE
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SAH DOdAS, CALIFORNIA
30% losses for water make-up and electrolysis: factor 0.10% losses for compression of hydrogen: factor 0.10% losses for distribution of gaseous hydrogen: factor 0.3% losses for hydrogen transfer: factor 0.50% for conversion to electricity in fuel cells: factor 0.10% parasitic losses for the hydrogen fuel cell system: factor 0.10% electric losses in the drive-train between battery and wheels: factor 0.
The "power-plant-to-wheel” efficiency of a fuel cell vehicle operated on compressed
gaseous hydrogen will be in the vicinity of 22%.
Using liquefied hydrogen does not improve the situation as the following numbers
show:
30% losses for water make-up and electrolysis: factor 0.35% losses for compression of hydrogen: factor 0.6% losses for distribution of gaseous hydrogen: factor 0.1% losses for hydrogen transfer: factor 0.50% for conversion to electricity in fuel cells: factor 0.10% parasitic losses for the hydrogen fuel cell system: factor 0.10% electric losses in the drive-train between battery and wheels: factor 0.
The "power plant-to-wheel" efficiency of a fuel cell vehicle operated on liquid
hydrogen will be in the vicinity of 17%.
These numbers are ceriainly better than the drive cycle efficiency of yesterday's cars,
but they compete with the high efficiency of modern clean Diesel passenger cars and
commercial hybrid vehicles. Advanced Diesel-fuelled passenger vehicles now reach
HHV drive cycle efficiencies of over 25%.
It is not the intent of this summary to present a precise analysis of all possible options
of hydrogen use for transportation, but the results suggests that the numbers used in
support of hydrogen programs should be checked carefully and corrected.
Finally, it might be useful to note that much higher efficiencies are obtained for hybrid
electric cars with Diesel-fuelled solid oxide fuel cells as range extender (see "Solid
Oxide Fuel Cells for Transportation, www.efcf.com/reports).
One obtains for a battery-SOFC hybrid vehicle and Diesel fuel:Page 105 12% losses between oil well and filling station: factor 0.
50% HHV efficiency of SOFC with internal reforming and Diesel fuel: factor 0.5% parasitic losses for the SOFC system: factor 0.
10% electric losses in the drive-train between battery and wheels: factor 0.
20% losses for battery charging and discharging: factor 0.
10% bonus for regenerative braking: factor 1.
With these numbers the well-to-wheel efficiency of a hybrid electric car with SOFC
range extender operated on Diesel fuel becomes 33%. Also, instead of Diesel from
fossil resources a variety of natural or synthetic liquid, biomass-derived hydrocarbons
(methanol, ethanol, bio-diesel etc.) can be used. The high well-to-wheel efficiency
suggests that some thought should be given to this option, in particular, as this clean
solution can be implemented within the existing fuel infrastructure.
Even more attractive are electric cars as suggested by the following number:
10% losses between power plants and homes: factor 0.
8% losses in small home-based AC/DC battery chargers: factor 0.20% losses for battery charging and discharging: factor 0.10% losses in the drive-train between battery and wheels: factor 0.10% bonus for regenerative braking: factor 1.
With these numbers the power-plant-to-wheel or wind-farm-to-wheel efficiency of an
electric car with regenerative braking becomes 66%. This number indicates that the
best option for local driving could be the electric commuting car with limited battery
capacity for local runs. This might imply the introduction of a new mobility concept,
but it does not require the creation of a hydrogen infrastructure. Family cars for
longer trips would most likely become battery hybrids. Fuel cells or clean and efficient
IC engine operated on biofuels could serve as range extender. But pure’ hydrogen is
unlikely to be used for this purpose because of the known storage problems the
synthetic fuel is not suited for long distance travel. Biofuels are more likely to provide
the energy for range extension. The vision would suggest electric power for local and
synthetic liquid hydrocarbons for distant travel.
Statements claiming hydrogen fuel cell vehicles to be the one-and-only or the best
solutions for the future transportation applications certainly need further validation.
With respect to atmospheric pollution the two alternative options presented. above are
as benign as hydrogen fuel cells. However, both promise to have a much higher
overall efficiency and economy. This is one of the mandates for the outgoing fossil
fuel era and for a future Renewable Energy Economy. The consumer has a choice.
About the Author
Ulf Bossel has earned his Diploma Degree in Mechanical Engineering at the Swiss Federal Institute of
Technology (ETH) in Zurich and his Ph.D. at the University of California in Berkeley. He has served
many years in the area of renewable energy and energy conservation. As an independent consultant
he does not have to bend his back for salary or research contracts, but is free to voice his opinion in
the ongoing energy discussion as advocate of physics and honesty.Page 106 nn
Che New Mork Gimes @ ®
Washington
Report Questions Bush Plan for Hydrogen-Fueled Cars
By MATTHEW L. WALD °
Published: February 6,
From: Elon Musk [ -
Sent: Wednesday, March 31, 2004 5:09 PM
To:
Cc:
Martin Eberhard
Marc Tarpenning; Mary Beth Brown
Subject: RE: Fast, efficient electric cars _
Sure, Friday this week or Friday next would work. Mary Beth (copied above) controls my calendar.
- driving performance and efficiency.
From: Martin Eberhard [rr Sa
Sent: Wednesday, March 31, 2004 10:31 AM
To: Elon Musk
Ce: Marc Tarpenning
Subject: Fast, efficient electric cars
Dear Elon,
Tom Gage, of AC Propulsion, tells me that you are interested in high-performance electric cars, and have
looked at his plans for making an electric version of the Toyota Scion. We at Tesla Motors are investors in
AC Propulsion and funded their research into li-ion battery packs for cars.
Tesla Motors is a newly-formed: company that will make very high-performance electric cars based on a
derivative of the AC Propulsion drivetrain and li-ion battery system, and also based on the chassis of the
Lotus Elise. ,
We would love to talk to you about Tesla Motors, particularly if you might be interested in investing in the
company. | believe that you have driven AC Propulsion's tzero car. If so, you already know that a high-
performance electric car can be made. We would like to convince you that we can do so profitably, creating
a company with very high potential for growth, and at the same time breaking the compromise between
Marc Tarpenning and | are the founders of Tesla Motors. | doubt you would remember, but we both met
you once at a Mars Society meeting at Stanford, where we heard you speak. In those days, Marc and |
were running NuvoMedia, the company we founded that created the Rocket eBook and by extension, the
whole ebook market. As you may have read, we eventually sold that company to Gemstar/TV Guide.
~ Can we meet with you in the next few weeks to discuss Tesla Motors? We would be delighted to come to
your office to present our business to you.
Best Regards,
Martin
Martin Eberhard, CEO
Tesla Motors Inc.
845 Oak Grove Ave,
Suite 204 ;
Menlo Park, CA (650) 329-
eberhard@teslamotors.com
T/912009Page 114 EXHIBIT / 5Page 115 |Page 116 "TESLA MOTORS, INC.
SERIES A. PREFERRED STOCK FINANCING
First Closing
April 23,
Second Closing
April 30, 2004Page 117 TESLA MOTORS, INC.
‘SERIES A PREFERRED STOCK FINANCING
First Closing
April 23,
_ Second Closing
April 30,
INDEX OF DOCUMENTS
A. MATTERS COMPLETED PRIOR TO THE FIRST CLOSING.
1.
Action by Unanimous. Written Consent of the Board of Directors
of Tesla Motors, Inc. (the “Company”), dated April 22, 2004,
approving, among other things, the amendment and restatement of
the Company’s Certificate of Incorporation and authorizing the
sale and issuance of Series A Preferred Stock .......0..ccccccccccccceseceeccceecese
Action by Written Consent of the Shareholders of the Company,
dated April 22, 2004, approving the Amended and Restated
Certificate of Incorporation........ccsecscssesessccscersseccscscssscerseseseceseseesesssneees
Amended and Restated Certificate of Incorporation of the |
Company as filed with the Delaware Secretary of State on April
23, 2004. coeccccssssvesssssssssssssvececscsesssessesesssssssesessassavsissesessssssitssssestesecsessseees
B. DOCUMENTS DELIVERED AT THE FIRST CLOSING.
4.
Series A Preferred Stock Purchase Agreement, dated April 23,
2004 (“Purchase Agreement”), by and among the Company and
the purchasers of Series A Preferred Stock of the Company listed
on Exhibit.A thereto (the “Purchasers”). ....0......cccccccccseseseeceececseeeeceeeee
Document
Number
eseeeecerenennees 4Page 118 Document
Number
5. Schedule of Exceptions to Series A Stock Purchase Agreement..........ccccscse a 6. Investors’ Rights Agreement, dated April 23, 2004, by and among
the Company amd the Purchasers ........sscsssssessssssesecssesssssecsecececsessaessesseesessesevecsaseaens 7. Voting Agreement, dated April 23, 2004, by and among the
Company, the Purchasers, and Martin Eberhard, Marc Tarpenning
and Jan Wright (the “Founders”)..........cccessssssssssscssssssssessessssessesersecsesecseaseesave vessseesaes 8. Right of First Refusal and Co-Sale Agreement, dated April 23,
2004, by and among the Company, the Purchasers, and the
FOUNGETS...... ce ssesesseessssssscceccsesesesesnsstscsshessenssuscssscsscsescaracavauersasaeseanevsssesasarsasecasenssees 9. Compliance Certificate, dated April 23, 2004 casesasearsanesasnssesasvesonesansoneenesacensessesnesensD)
10. Legal Opinion of White & Lee, LLP, dated April 23, 2004. seccstistueeeee eatevseeeeecees 11. Certificate of Good Standing of the Company issued by the .
Delaware Secretary of State on April 23, 2004. oo... ccc cecceseseceesseneneceescneeeas 42. Certificate of Good Standing of the Company issued by the
California Secretary of State on April 23, 2004. . ooo. ccececeeceesesceceeceeecseeeees PURCHASE AND SALE AT THE FIRST CLOSING.
13. Evidence of payment in full delivered by the Purchasers to the
Company for the purchase of Series A Preferred Stock. ......00.0..... oe eseseessenonseesees 14. Copies of Series A Preferred Stock Certificates No. A-1 through
NO. An3. oeeccscescsscesssesssesecsescseseseocsaceecevsgceacsesessessaesesecsesssceseseeecerscecsrdessaesacaseceeseaeas Documents DELIVERED AT THE SECOND CLOSING.
15.. “Additional signature pages to the Series A Preferred Stock
Purchase Agreement, dated April 23, 2004 (“Purchase
Agreement”), by and among the Company and the purchasers of
Series A Preferred Stock of the Company listed on Exhibit A
thereto (the “Purchasers”). se deesectaseaseseanisessasststsssneesecsenesssesesesnsneseeseessseserstaaesenseeseess
DocumentPage 119 Number
16. Additional signature pages to the Investors’ Rights Agreement,
dated April 23, 2004, by and among the Company and the
PUTChaSE€TS .......ccecescesseseeecesseeees at teessnecesscneensnseesessansusscassceaeeteatsesasasaensseassttececeseseses
17. Additional signature pages to the Voting Agreement, dated April
23, 2004, by and among the Company, the Purchasers, and Martin
Eberhard, Mare Tarpenning and Ian Wright (the “Fouriders”).....cc.ccsesseesseseccccoees
_ PURCHASE AND SALE AT THE SECOND CLOSING.
18. Evidence of payment in full delivered by the Purchasers to the
Company for the purchase of Series A Preferred Stock. -cesseecccccsescsesceseeceseeeecccccc
19. Copies of Series A Preferred Stock Certificates No. A-4 through
NO. AW16. ssssssessssccesseceesesenssssssssssnssnnnnsersssssenssrsssssrtstannstastttisiutevessciseueeeeeeceeseessee
SECURITIES LAWS COMPLIANCE.
20. Notice of Transaction Pursuant to California Corporations Code -
Section 25102(f), as filed with the California Commissioner of
Corporations. 0.0.0.0... eee ee eeeeceesecessceeneeeeeseceeeeeceeeereeeiesesec beeeeceeeeee 20Page 120 EXHIBIT 6Page 121 EXHIBIT
(RIE. RAN) 80000 SERIES
[RECYCLED @) 10% P.c.w.Page 122 TESLA MOTORS, INC.
RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT
' This Right of First Refusal and Co-Sale Agreement (the “Agreement”) is made and
entered into as of April 23, 2004 by and among Martin Eberhard, Marc Tarpenning and Jan
Wright (the “Founders”), Tesla Motors, Inc., a Delaware corporation (the “Company”), and the
holders of at least 1,000,000 shares of Series A Preferred Stock of the Company (or the Common
Stock issued upon conversion thereof) (subject to adjustment for stock splits, stock dividends,
reclassifications or the like) listed on Exhibit A to this Agreement (each an “Investor").
RECITALS
The Company and the Investors have entered into a Series A Preferred Stock Purchase
Agreement (the “Purchase Agreement”) of even date herewith pursuant to which the Company
desires to sell to the Investors and the Investors desire to purchase from the Company shares of
the Company’s Series A Preferred Stock. A condition to the Investors’ obligations under the
Purchase Agreement is that the Company, the Founders and the Investors enter into this
Agreement in order to provide the Investors the opportunity to. purchase and/or participate, upon
the terms and conditions set forth in this Agreement, in subsequent sales by the Founders of
shares of the Company’s Common Stock. The Company and the Founders desire to induce the
Investors to purchase shares of Series A Preferred Stock pursuant to the Purchase Agreement by
agreeing to the terms and conditions set forth below.
AGREEMENT
The parties agree as follows:
1. Sales by Founders.
1.1 . Notice of Sales; Assignment of Company Right of First Refusal.
{a) Should any Founder (or a Permitted Transferee, as defined below)
propose to accept one or more bona fide offers (collectively, a “Purchase Offer”) from any
persons fo purchase shares of the Company’s Common Stock (the “Shares”) from such Founder
(other than as set forth in Section 1.5 of this Agreement), such Founder shall promptly deliver a
notice (the “Notice”) to the Company and each Investor stating the terms and conditions of such.
Purchase Offer including, without limitation, the number of Shares proposed to be sold or
transferred, the nature of such sale or transfer, the consideration to be paid, and the name and
address of each prospective purchaser or transferee.
(b) | The Company agrees that in the event that the Company declines to
exercise in full the right of first refusal set forth in Section 5 of the Vesting Stock Purchase
Agreement between such Founder and the Company, as amended, as well as in its Bylaws (the
“Right of First Refusal”), the Company will provide each Investor with notice of such
' determination at least fifteen (15) days prior to the end of the period in which the Right of First
-2026392.02Page 123 Refusal expires under such Vesting Stock Purchase Agreement, as amended, or the Company’s
Bylaws, as applicable. Each Investor shall then have the right to submit, prior to the end of such
petiod, notice of its irrevocable commitment to exercise such Right of First Refusal within thirty
(30) days after receipt of the Company’s notice, as the Company’s assignee on a pro rata basis,
based upon the number of Conversion Shares (as defined below) held by such Investor relative to
the aggregate number of Conversion Shares held by all Investors. Upon expiration or exercise, of
the Right of First Refusal, the Company will provide notice to all Investors as to whether or not
the Right of First Refusal has been or will be exercised by the Company or the Investors. If any
Investors do not exercise their right of first refusal, the Shares that would otherwise be allocated
to such non-exercising Investors shall be allocated to each exercising Investor on a pro-rata basis
(based upon the number of Conversion Shares held by such Investor relative to the aggregate
number of Conversion Shares held by all such exercising Investors), provided that the Right of
First Refusal must be exercised, if at all, prior to the expiration of such thirty-day period.
12 Co-Sale Right. To the extent that the Right of First Refusal is not
exercised by the Company or the Investors, each Investor shall have the right (the “Co-Sale
Right”), exercisable upon written notice to the Company within fifteen (15) business days after
the expiration of the Right of First Refusal to participate in such Founder’s sale of Shares
pursuant to the specified terms and conditions of such Purchase Offer. To the extent an Investor
exercises such Co-Sale Right in accordance with the terms and conditions set forth below, the -
number of Shares which such Founder may sell pursuant to such Purchase Offer shall be
correspondingly reduced, The Co-Sale Right of each Investor shall be subject to the following
terms and conditions:
1.5 Permitted Transactions. The provisions of Section 1 of this Agreement
shall not pertain or apply to:
(a) Any repurchase of Common Stock by the Company;
(b) Any transfer to a Founder’s ancestors, descendants or spouse or to
a trust for their benefit; or
{c) any sale or transfer by a Founder of up to 5% of the total number of
shares of Common Stock held by such Founder on the date of this Agreement;
provided, in each case, that (i) the Founder(s) shall inform the Investors of such pledge,
transfer or gift prior to effecting it, and (ii) the pledgee, transferee or donee (each a “Permitted
Transferee”) shall furnish the Investors with a written agreement to be bound by and comply with
all provisions of this Agreement applicable to the Founders. ;
; 1.6 Assignment of Rights. The rights of the Investors set forth in this
_ Section 1 may be assigned (but only with all related obligations) only to a transferee or assignee
of at least ten percent (10%) of an Investor’s Conversion Shares set forth on Exhibit A (or all of
such Investor’s Conversion Shares if such Investor holds less than ten percent (10%) of such
amount) provided that (a) the Company is, within a reasonable time after such transfer, furnished
with written notice of the name and address of such transferee or assignee and the securities with
respect to which such rights are being assigned, and (b) such transferee agrees in writing to be
bound by the provisions of this Agreement, and (c) such transferee is not an actual or potential
competitor of the Company, as determined in good faith by the Company’s Board of Directors.
Notwithstanding the foregoing, any Investor may transfer its rights set forth in this Section without regard to the minimum number of Conversion Shares described in the first sentence of
this Section 1.6 if the transferee is a constituent partner or member of such Investor or an entity
controlling, controlled by or under common control with such Investor.
2. Transfer Restrictions.
2.1 Prohibited Transfers. Any attempt by a Founder to transfer Shares in
violation of Section 1 of this Agreement shall be void and the Company agrees it will not effect
2026392.02 ~3-Page 125 such a transfer nor will it treat any alleged transferee as the holder of such shares without the
written consent of the holders of a majority of the Conversion Shares.
2.2 Legended Certificates. Each certificate representing shares of the
Common Stock of the Company now or hereafter owned by the Founders or issued to any
Permitted Transferee pursuant to Section 1.5 shall bear the following legend:
“THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE
TERMS AND CONDITIONS OF A CERTAIN RIGHT OF FIRST REFUSAL —
AND CO-SALE AGREEMENT BY AND BETWEEN THE STOCKHOLDER,
THE CORPORATION AND CERTAIN HOLDERS OF COMMON AND
PREFERRED STOCK OF THE CORPORATION. COPIES OF SUCH
_ AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE
SECRETARY OF THE CORPORATION.” :
3. Termination.
3.1 ‘Termination Events. This Agreement shall terminate upon the earliest to
occur of any one of the following events (and shall not apply to any transfer by a Founder in
connection with any such event):
(a) The liquidation, dissolution or indefinite cessation of the business.
operations ofthe Company;
(b) The execution by the Company of a general assignment for the
benefit of creditors or the appointment of a receiver or trustee to take possession of the property
and assets of the Company; or
(c) A firm commitment underwritten public offering by the Company
of shares of its Common Stock pursuant to a registration statement on Form S-1 under the
Securities Act of 1933, as amended, in which the pre-public offering market capitalization of the
Company is at least $75,000,000 (as determined by multiplying all capital stock of the Company
on a fully diluted basis prior to the public offering by the price per share offered to the public as
of the closing date of the public offering) and which results in agerepate cash proceeds to the
Company of at least $7,500,000 (net of underwriting discounts and commissions).
3.2 Removal of Legend. At any time after the termination of this Agreement
in accordance with Section 3.1, any holder of a stock certificate legended. pursuant to Section 2.may susrender such certificate to the Company for removal of such legend, and the Company will
duly reissue a new certificate without the legend.
4, Miscellaneous,
4.1 Successors and Assigns. Except as otherwise provided herein, this
Agreement and the rights and obligations of the parties hereunder shall inure to the benefit of,
and be binding upon, the parties’ respective successors, assigns and legal representatives.
2026392.02 / - AePage 126 4.2 Amendments and Waivers. Any term of this Agreement may be
amended or waived only with the written consent of the Company, holders of at least a majority
of the Series A Preferred.Stock, and holders of a majority of the Founders’ shares (or their
respective successors and assigns) voting together as a class. Notwithstanding the foregoing, this
Agreement may be amended with only the written consent of the Company for the sole purpose
of including additional purchasers of Series A Preferred Stock as “Investors.” Any amendment
"or waiver effected in accordance with this Section 4.2 shall be binding upon the Company, the
holders of Series A Preferred Stock and any holder of Founders’ Shares, and each of their -
respective successors and assigns.
4.3 Notices. Any notice required or permitted by this Agreement shall be in
writing and shall be deemed sufficient on the date of delivery, when delivered personally or by
overnight courier or sent by telegram or fax, or forty-eight (48) hours after being deposited in the
U.S. mail, as certified or registered mail, with postage prepaid, and addressed to the party to be
notified at such party’s address or fax number as set forth below on the Signature page or on
Exhibit A hereto, or as subsequently modified by written notice,
4.4 Severability. If one or more provisions of this Agreement are held to be,
unenforceable under applicable law, the parties agree to renegotiate such provision in good faith.
In the event that the parties cannot reach a mutually agreeable and enforceable replacement for
such provision, then (a) such provision shall be excluded from this Agreement, (b) the balance of
the Agreement shall be interpreted as if such provision were so excluded and (c) the balance of
the Agreement shall be enforceable in accordance with its terms.
4.5 Governing Law. This Agreement and all acts and transactions pursuant
hereto and the rights and obligations of the parties hereto shall be governed, construed and
interpreted in accordance with the laws of the State of California, without giving effect to
principles of conflicts of law.
4.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which together shall constitute
one and the same instrument. a
4.7 ‘Titles and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or interpreting this
Agreement.
4.8 Entire Agreement. This Agreement, and any exhibits hereto, constitute
the full and entire understanding and agreement between the parties with regard to the subjects
hereof and no party shall be liable or bound to any other in any manner by any oral or written
representations, warranties, covenants and agreements except as specifically set forth herein and
therein. Each party expressly represents and warrants that it is not relying on any oral or written
Tepresentations, warranties, covenants or agreements outside of this Agreement.
[Signature Page Follows]
2026392.02 5Page 127 cence ABERRROG 2OEBB Frome Spacey eee
Se
; ie paties have exccued this Right of Fist Refisal and Co-Sale Agreement as of the date first
TESLA MOTORS, INC.
By. (Print name)
By:
Tile <&oO Tide:
FOUNDERS:
Martin Ebechant ———
SIGNATURE PAGE TO RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT
PAGE A2*RCVD AT 42512004 9:08:00 PH [Pace Daylight Tne] SVRsSVCSO 0" DRIS:G657 * CSID-3104446552 * DURATION (num-s3):09-
MO6MSIB2 Th Panag. FoePage 128 A
veces Amr’anOd 2086 FromSpacdk STNNABBBBeen hewn
____The parties have exeonted this Right of First Refizsal end Co-Sele Agreement as of the date first
Written above,
COMPANY: INVESTORS:
TESLA MOTORS, INC. Flen Mosk
. (Pant name)
By:
= VENA
Tite: : Title:
FOUNDERS:
Mextin Eberhard
Mare Tarpenning
Tan Wright
SIGNATURE PAGE TO RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT
PAGE 9112* ROVD AT 4/23/2004 9:08:00 PM [Pactic Daylight Time] SVRSVCSO‘HD * DAES: 6657 * CSHD-3104146552 * DURATION (rim-ss):03-16Page 129 ~Alpr..21.0% 05: 58p...... Tarpennine¢/Schillinger 1.650.369. S116 ee
The parties have executed this Right of First Refusal and Co-Sale Agreement as of the
date first written above.
COMPANY: INVESTORS:
TESLA MOTORS, INC. . AAR. TARP Eazy
(Print name)
By:
Bb: ZA =
Title: Title:
FOUNDERS:
Martin Eberhard
ZO
Tan Wright
SIGNATURE PAGE TO RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENTPage 130 EXHIBIT A
INVESTORS
FIRST CLOSING:
Name/Address/Fax No. No. of Shares
Elon Reeve Musk 12,880,
,
°
SECOND CLOSING:
Compass Technology Partners, L.P. 1,013,
1550 EI Camino Real Suite Menlo Park, CA 94025-
2026392.02Page 131 EXHIBIT 7Page 132 EXHIBIT 7Page 133 Silicon Valley Office Pacific Northwest Office
545 Middlefield Road, Suite 250 805 SW Broadway, Sulte Menlo Park, California 94025 : Portland, Oregon 97205-Telephone: 650/470-4000 ; Telephone: 503/4-19-Facsimile: 650/470-4099 : , Facsimile: 503/419-htip:Avww.whiteandlee.com http://www. whiteandies.com
Writer's Direct Dial Number
(650) 470-: April23,
To the Purchasers of Series A Preferred Stock
OF Tesla Motors, Inc. Listed
on Exhibit A to the Series A Preferred
Stock Purchase Agreement
Ladies and Gentlemen:
We have acted as counsel for Tesla Motors, Inc., a Delaware corporation (the “Company”), in connection
with the sale by the Company to you of up to 15,213,000 shares of the Company’s Series A Preferred Stock (the
“Shares”) pursuant to the Series A Preferred Stock Purchase Agreement {the “Stock Purchase Aprecment”) dated as
of April 25, 2004 among the Company and the persons Hsted on Exhibit A attached thereto (the Purchasers”), and
the execution and delivery by the Company of ihe Investors’ Rights Agreement (the “Investars' Rights Agreement”)
the Right of First Refusal and CoSale Agreement (the “Co-Sale Agreement”) and the Voting Agreement (the
"Yoting Apreement") each dated April2.6, 2004. This opinion is given to you pursuant to Section 4.5 of the Stock
Purchase Agreement in-connection with the Closing of the sale of the Shares. The Stock Purchase Agreement, the
Investors’ Rights Agreement, the Co-Sale Agreement and the Voting Agreement are referred to herein collectively as
the “Transaction Documents,” Unless defined herein, capitalized terms have the meaning given them in the
Transaction Documents.
In rendering this opinion, we have examined and relied on the following documents (all of which are dated
the same date as this opinion, unless otherwise specifically noted:
A. The Purchase Agreement, including its Exhibits and Schedules;
B. ‘The Investors’ Rights Agreement, by and among the Company and the Purchasers.
Cc. The Right of First Refusal and Co-Sale Agreement, by and among the Company, the
Purchasers, and Martin Eberhard, Marc Tarpenning and Jan Wright (collectively, the
* Founders”),
D. Voting Agreement, by and arnong the Company, the Purchasers, and the Founders.
E. A copy of the Amended and Restated Certificate of Incorporation of the Company (the
“Restated Certificate”), certified by the Delaware Secretary of State on April 2.3, 2004;
PF. A copy of the Bylaws of the Company (the “Bylaws”);Page 134 To the Purchasers of Series A Preferred
Stock of Tesla Motors, Inc. Listed
on Exhibit A to the Series A Preferred Stock
Purchase Apreement
Apri] 2.3 Page G. A copy of a resolution of the Board of Directors and the written consent of stockholders
H,
of the Company, authorizing the exccution and delivery of, and consummation of the
transactions contemplated in, the Purchase Agreement, as presented to us by the
management of the Company; and
A Management Certificate (the “Management Certificate"), dated April 2.5, 2004,
executed by Martin Eberhard as Chief Executive Officer of the Company,
For the purposes of:this opinion, (i) the documents identified in paragraphs A through E above are
collectively referred to as the “Transaction Documents”; and (ii) the documents identified in paragraphs A through
H above, inclusive, are collectively referred to as the “Documents”,
REDACTED
From: Elon Musk’ im]
Sent: Tuesday, May 04, 2004 10:56 AM
To: Martin Eberhard
Subject: RE: Scott, JB
Worth drilling into that.
My only concern with JB was his involvement with Rosen on a hydrogen powered high endurance airplane. That
doesn't make a lot of sense. The pain of dealing with H2 and the volumetric inefficiency with associated
drag penalty make it a poor second cousin to high energy density hydrocarbons (when you're in the atmosphere).
It does make a great rocket upper stage in vacuum, though.
From: Martin Eberhard !
Sent: Tuesday, May 04, 2004 10:52 AM
To: Elon Musk
Subject: Re: Scott, JB
Harold Rosen is on our list of references to check for JB. We're waiting for him to return our call.
On the scary-negative side, JB listed Amory Lovins as a reference. Don't know if you know this fellow
(Rocky Mountain Institute; Hypercar, etc.), but my impression is that he is completely full of shit, and
makes his money promoting fuel cells for cars and the like, knowing full well that they will not work.
JB did qualify his reference to Lovins, however: "I'm sure you know of the Hypercar project, for better
or worse."
me
---- Original Message —---
From: Elon Musk
To: Martin Eberhard
Sent: Tuesday, May 04, 2004 10:33 AM -
Subject: RE: Scott, JB
Yeah, | wasn't thinking there. When you mentioned his name, it occurred to me he was an obvious choice
for Tesla. My impression is that JB thinks very clearly and, unlike most people, is not filled with
wrongheaded ideas. .
JB probably also knows a lot of other people that would be great for Tesla, so he should be a good source
for leads. | suggest talking with Harold Rosen as well.
To point out an obvious recruiting source of fresh talent, there must be a huge number of quality people
with hardware experience from all the college solar electric vehicle contests. Tesla should be able to _
attract the cream of the crop.
From: Martin Eberhard
Sent: Monday, May 03, 2004 5:26 PM
To: Elon Musk
Subject: Scott, JB
Hi Elon,
A couple of things:
We're going to have dinner with Scott on Wednesday at his place, after a couple of other
meetings in the area. I'm just a bit hesitant about opening up to him, because of his BTO
business - I'm sure there will be some conflict of interest. Advice?
Also - you have met a fellow that we are seriously considering to hire: JB Straubel. His
references so far check out strongly, and we think he.is our power electronics engineer. What
do you know about him?
Best,
me -Page 141 EXHIBIT 9Page 142 EXHIBIT 9Page 143 tt,
%
TESLA MOTORS, INC.
SERIES B PREFERRED STOCK FINANCING
First Closing
February 14,
Second Closing
May'15, 2005 _.
Third Closing -
June 9,
INDEX OF DOCUMENTS
A. MATTERS COMPLETED PRIOR TO THE FIRST CLOSING.
1.
_ Action by Unanimous Written Consent of the Board of Directors
of Tesla Motors, Inc. (the “Company”), dated February 9, 2005,
approving, among other things, the amendment and restatement of
the Company’s Certificate of Incorporation and authorizing the
sale and issuance of Series B Preferred Stock ...0........cccccccesccceeeeecceeesee
Action by Written Consent of the Stockholders of. the Company,
dated February 9, 2005, approving the Amended and Restated -
~ Certificate of Incorporation .........c.cccsessssessssscssssssssssecestesscrsececscececsessnees
Amended and Restated Certificate of Incorporation of the
Company as filed with the Delaware Secretary of State on
February 14, 2005 ...cccssssssssssssscssssssssssssssssssssssssssvssssesssssessssssesssssssesseseees
B.° DOCUMENTS DELIVERED AT THE FIRST CLOSING.
A
Te
Cawsne ae ad Oennl- we be oe ou re crete a 4n4 Gab... 1A
Scrics B Preferred OwWenR Purchase A Ag_rcement, dated rouiuary i,
2005 (“Purchase Agreement”), by and among the Company and
the purchasers of Series B Preferred Stock of the Company listed
on Exhibit A thereto (the “Purchasers”)
Document
NumberPage 144 on
15.
Document
Number
5. Schedule of Exceptions to Series B Stock Purchase Agreement......eccsseesssecssesese oo)
6. Amended and Restated Investors’ Rights Agreement, dated .
February 14, 2005, by and among the Company and the Purchasers....e.ss-sesecssssess 7. Amended and Restated Voting Agreement, dated F ebruary 14,
2005, by and among the Company, the Purchasers, and’ Martin
Eberhard and Marc Tarpenning (the “Founders”) ...0...:.c.cccssssssssescscsssosseeseecoeeeeceeseee8. Amended and Restated Right of First Refusal and Co-Sale
Agreement, dated February 14, 2005, by and among the Company,
the Purchasers, and the Founders. ........ccsccscsssssesscsoseseceee sevessacenessseneressessseossecesssensens 8 -
9. Compliance Certificate, dated February 14, 2005......... sescsssecessuseceasessecseusecaneessnecees 10. Legal Opinion of White & Lee, LLP, dated February 14, 2005......ccccceseseees Seasese PURCHASE AND SALE AT THE FIRST CLOSING.
1]. Evidence of payment in full delivered by the Purchasers to the
Company for the purchase of Series B Preferred Stock .....ceccsssssssscssesesceseseccsccosee 12. Copies of Series B Preferred Stock Certificates No. PB-1 through
NO. PB-4 oo. escssessscstsccsesesessesssscsnsscsesecevstereseeeceessescaesens esssessacceseeneerecacasseasusetsessseass SECURITIES LAWS COMPLIANCE.
13. Notice of Sale of Securities Pursuant to Regulation D, as filed with
_ the Securities and Exchange Commission on February 17, 2005 one eeeeeecetesseesens 14, Notice of Exempt Security Transaction under §25102.1(d), as filed
with the California Commissioner of Corporations on F ebruary 18, °
ZOOS. o.eessscseeescesessecteatscessecseeveeseececsees devecesseseeeseseeterssesseesssseceseseesesssssestssececuceneacerss
.. MATTERS COMPLETED PRIOR TO THE SECOND CLOSING.
Action by Unanimous Written Consent of the Board of Directors
of the Company, dated April 14, 2005, approving, among other
things, the First Amendment to the Purchase Agreement to extend
the Series B fimamcing 0... eescssssssssesssssssssesesseseesuesssusssssssstucsececeseseceseseceeeeseseeees 15Page 145 ae
Document
Number
16. Action by Written Consent of the Stockholders of the Company,
dated April 14, 2005, approving the First Amendment to the
Purchase Agreement to extend the Series B financing ............ceeeceseccgeceeceeeserereee 17. First Amendment to the Purchase Agreement, by and among the
Company and a majority in interest of the Series B stockhiolders............:sssse DOCUMENTS DELIVERED AT THE SECOND CLOSING.
18. Signature pages to the Purchase Agreement, delivered in
connection with the Second Closing ......... ssssssstsenssssceeecncsessersesesseeccesnsenenseesee 19, Signature pages to the Amended and Restated Investors’ Rights
Agreement, delivered in connection with the Second Closing... sessecsseerseeee 20. Signature pages to the Amended and Restated Voting Agreement,
delivered in connection with the Second Closing ...........::cscssssccseseeeeesesseersneeseecees 21. Signature pages to the Amended and Restated Right of First
Refusal and Co-Sale Agreement, delivered in connection with the
Second Closing.......... ‘vesvereeee snteseeseessseccsesesonsceeteacsscesusoceseeenceeseccsaeecersaeesseseeseerarseeues PURCHASE AND SALE AT THE SECOND CLOSING.
22. ~ Evidence of payment in full delivered by the Purchasers to the
Company for the purchase of Series B Preferred Stock, in
connection with the Second Closing ...........cccsessssesseeseessesessesecscecesscealessessuecsenes 23. Copies of Series B Preferred Stock Certificates No. PB-5 through
NO. PB-12 von. esesecseeecoeeee sessesseenececessesessscensescsesesveduarsnencescacetssessseeuensenecassassseecersuses SECURITIES LAWS COMPLIANCE.
24. Notice of Sale of Securities Pursuant to Regulation D, as filed with
the Securities and Exchange Commission on May 31, 2005 oo... cesses ensaneee 25. Notice of Exempt Security Transaction under §25102.1(d), as filed
with the California Conimissioner of Corporations on May 31,
LOOS, ..ccccccsscsssestesseenscsstessseseesscesceseeessestecressesusasssescecasaccsssessassssassoseseesesceceseesenseases 25Page 146 “)
MATTERS COMPLETED PRIOR TO THE THIRD CLOSING.
26. Action by Unanimous Written ‘Consent of the Board of Directors |
of the Company, dated June 9, 2005, approving, among other
things, the Second Amendment to the Purchase Agreement to
extend the Series B financing ............csccecssseesscsecesssnsesssatsncenesssecsensens
27. Action by Written Consent of the Stockholders of the Company,
dated June 9, 2005, approving the Second Amendment to the
Purchase Agreement to extend the Series B financing............sesssssse
28. | Second Amendment to the Purchase Agreement, by and among the
Company and a majority in interest of the Series B stockholders.........
DOCUMENTS DELIVERED AT THE THIRD CLOSING.
29. Signature pages to the Purchase Agreement, delivered in
connection with the Third Closing ...0........cessssscssscecssserssssssseccsscasecsens
30. . Signature pages to the Amended and Restated Investors’ Rights
Agreement, delivered in connection with the Third Closing.............++
31. Signature pages’ to the Amended and Restated Voting Agreement,
delivered i in connection with the Third Closing... .
32. Signature. pages to the Amended and Restated Right of First
Refusal and Co-Sale Agreement, delivered in connection with the
Third Closing........ccscssesserseerteeeees sseveveeseeeessceseansesesscereeeerentes aecevseseseees
PURCHASE AND SALE AT THE THIRD CLOSING.
33. | Evidence of payment in full delivered by the Purchasers to the
Company for the purchase of Series. B Preferred Stock, in
connection with the Third Closing .........ccsssccsssesscssssesssssesessssessessensecsers
34. Copies of Series B Preferred Stock Certificates No. PB-13 and No.
Document
NumberPage 147 Document
Number
L. SECURITIES LAWS COMPLIANCE.
35. Notice of Sale of Securities Pursuant to Regulation D, as filed with .
the Securities and Exchange Commission on June 16, 2005 .............:.0000- “seteeseces
36. Notice of Exempt Security Transaction under §25 102.1(d), as filed
with the California Commissioner of Corporations on June 16,
QLOOS ...ecsccsreeccscesscecssccencsocestscesacssscnsesassetersaeseesessessssessesansece sesteseseceterseneeeseeeateernensess
37. Notice of Sale of Securities Pursuant to Regulation D, as filed with
the Virginia State Corporation Commission on June 17, 2005 ......cccscsssssessseeneeees 37Page 148 EXHIBIT 10Page 149Page 150 TESLA MOTORS, INC.
FIRST AMENDED AND RESTATED
RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT
This First Amended and Restated Right of First Refusal and Co-Sale Agreement (the
“Agreement”) is made and entered into as of February {4 , 2005 by and among Martin Eberhard
and Mare Tarpenning (the “Founders”), Tesla Motors, Inc., a Delaware corporation (the
“Company”), and the holders of at least 1,000,000 shares of Series A Preferred Stock listed on
Exhibit A to this Agreement (the “Series A Stockholders”) and the holders of at least 1,000,shares of Series B Preferred Stock of the Company (or the Common Stock issued upon
conversion thereof) (subject to adjustment for stock splits, stock dividends, reclassifications or
the like) listed.on Exhibit B to this Agreement (each an “Investor”). Collectively, the Series A
Stockholders and the Investors are referred to as the “Major Holders”.
RECITALS
A. The Company and the Series A Stockholders previously entered into a Right of
First Refusal and Co-Sale Agreement dated April 23, 2004 (the “Prior Agreement”), and such
parties now wish to amend and restate the Prior Agreement in its entirety, and replace it with this
Agreement which shall heretofore constitute the entire agreement of the parties with respect to
the specific subject matter hereof, and supercede in its entirety the Prior Agreement, and all other
agreements or understandings between or among the parties hereto with respect to such specific
~ subject matter. °
B. The Company and the Investors have entered into a Series B Preferred Stock
_ Purchase Agreement (the “Purchase Agreement”) of even date herewith pursuant to which the
Company desires to sell to the Investors and the Investors desire to purchase from the Company
shares of the Company’s Series B Preferred Stock. A condition to the Investors’ obligations
under the Purchase Agreement is that the Company, the Founders, the Series A Stockholders an
the Investors enter into this Agreement in order to provide the Investors the opportunity to
purchase and/or participate, upon the terms and conditions set forth in this Agreement, in
subsequent sales by the Founders of shares of the Company’s Common Stock. The Company,
the Founders and the Series A Stockholders desire to induce the Investors to purchase shares of
Series B Preferred Stock pursuant to the Purchase Agreement by agreeing to the terms and
conditions set forth below.
AGREEMENT
The parties agree as foliows:
1. Sales by Founders.Page 151 1.1 Notice of Sales; Assignment of Company Right of First Refusal.
(a) Should any Founder (or a Permitted Transferee, as defined below)
propose to accept one or more bona fide offers (collectively, a “Purchase Offer”) from any
persons to purchase shares of the Company’s Common Stock (the “Shares”) from such Founder
(other than as set forth in Section 1.5 of this Agreement), such Founder shall promptly deliver a
notice (the “Notice”) to the Company and each Major Holder stating the terms and conditions of
such Purchase Offer including, without limitation, the number of Shares proposed to be sold or
transferred, the nature of such sale or transfer; the consideration to be paid, and the name and
address of each prospective purchaser or transferee. +
(b) The Company agrees that in the event that the Company declines.
to exercise in full the right of first refusal set forth in Section 5 of the Vesting Stock Purchase
Agreement between such Founder and the Company, as amended, as well as in its Bylaws (the
“Right of First Refusal”), the Company will provide each Major Holder with notice of such
determination at least fifteen (15) days prior to the end of the period in which the Right of First
Refusal expires under such Vesting Stock Purchase Agreement, as amended, or the Company’s
Bylaws, as applicable. Each Major Holder shall then have the right to submit, prior to the end of
such period, notice of its irrevocable commitment to exercise such Right of First Refusal within
thirty (30) days after receipt of the Company’s notice, as the Company’s assignee on a pro rata
basis, based upon the number of Conversion Shares (as defined below) held by such Major
Holder relative to the aggregate number of Conversion Shares held by all Major Holders. Upon
expiration or exercise of the Right of First Refusal, the Company will provide notice to all Major
Holders as to whether or not the Right of First Refusal has been or will be exercised by the
Company or the Major Holders. If any Major Holders do not exercise their right of first refusal,
the Shares that would otherwise be allocated to such non-exercising Major Holders shall be -
allocated to each exercising Major Holder on a pro-rata basis (based upon the number of
Conversion Shares held by such Major Holder relative to the aggregate number of Conversion
Shares held by all such exercising Major Holders), provided that the Right of First Refusal must
be exercised, if at all, prior to the expiration of such thirty-day period.
1.2 Co-Sale Right. To the extent that the Right of First Refusal is not
exercised by the Company or the Major Holders, each Major Holder shall have the right (the
“Co-Sale Right”), exercisable upon written notice to the Company within fifteen (15) business
days after the expiration of the Right of First Refusal to participate in such Founder’s sale of
Shares pursuant to the specified terms and conditions of such Purchase Offer. To the extent an
Major Holder r exercises such Co-Sale Right in accordance with the terms and conditions set
forth below, the number of Shares which such Founder may sell pursuant to such Purchase Offer
shall be correspondingly reduced.. The Co-Sale Right of each Major Holder shall be subject to
the following terms and conditions:
(a) Calculation of Shares. Each Major Holder may sell all or any
part of that number of shares of Common Stock of the Company issued or issuable upon
conversion of Preferred Stock, or ‘Common Stock received in connection with any stock
dividend, stock split or other reclassification thereof (the “Conversion Shares”) equal to the
product obtained by multiplying (i) the aggregate number of Shares covered by the Purchase
-2-Page 152 Offer by (ii) a fraction, the numerator of which is the number of Conversion Shares at the time
owned by such Major Holder and the denominator of which is the sum of (A) the total number of
Conversion Shares at the time owned by all Major Holders participating in such sale plus (B) the
total number of Shares at the time owned by such Founder, including shares transferred by such
_ Founder to Permitted Transferees (as defined below) i in accordance with this Agreement.
(b) Delivery of Certificates. | Each Major Holder may effect its
participation i in the sale by delivering to the selling Founder for transfer to the prospective
purchaser one or more certificates, properly endorsed for transfer, which represent the
Conversion Shares which such Major Holder elects to sell.
1.3 Transfer. The stock certificate or certificates which the Major Holder
delivers to the selling Founder pursuant to Section 1.2 shall be delivered by such Founder to the °
prospective ‘purchaser in consummation of the sale pursuant to the terms and conditions specified
in the Notice, and such Founder shall promptly thereafter remit to such Major Holder that
portion of the sale proceeds to which such Investor is entitled by reason of its participation in
such sale. To the extent that any prospective purchaser or purchasers prohibits such assignment .
or otherwise refuses to purchase Conversion Shares from an Investor exercising its Co-Sale
Right hereunder, the selling Founder or Founders shall not sell to such prospective purchaser or
purchasers any Shares unless and until, simultaneously with such sale, the selling Founder or
Founders shall purchase such Conversion Shares from such Major Holder for the same
consideration and on the same terms and conditions as the proposed transfer described in the
Notice (which terms and conditions shall be no less favorable than those governing the sale to
the purchaser by the Founder or Founders).
1.4 No Adverse Effect. The exercise or non-exercise of the rights of the
Major Holders hereunder to participate in one or more sales of Shares made by a Founder shall
not adversely affect their rights to participate in subsequent sales of Shares by a Founder.
1.5 Permitted Transactions. The provisions of Section 1 of this Agreement
shall not pertain or apply to:
(a) Any repurchase of Common Stock by the Company;
(b) Any transfer to a Founder’s ancestors, descendants or spouse or to
a trust for their benefit; or
(c) any sale or transfer by a Founder of up to 5% of the total number
of shares of Common Stock held by such Founder on the date of this Agreement;
provided, in each case, that (i) the Founder(s) shall inform the Major Holders of such
~ pledge, transfer or gift prior to effecting it, and (ii) the pledgee, transferee or donee (each a
“Pennitted Transferee”) shall furnish the Major Holders with a written agreement to be bound t by
and comply with all provisions of this Agreement applicable to the Founders.
1.6 Assignment of Rights, The rights of the Major Holders set forth in this
Section 1 may be assigned (but only with all related obligations) only to a transferee or assignee
-3-Page 153 of at least ten percent (10%) of an Major Holder’s Conversion Shares set forth on Exhibit A (or
all of such Major Holder’s Conversion Shares if such Investor holds less than ten percent (10%)
of such amount) provided that (a) the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or assignee and the
securities with respect to which such rights are being assigned, and (b) such transferee agrees in
writing to be bound by the provisions of this Agreement, and (c) such transferee is not an actual
or potential competitor of the Company, as determined in good faith by the Company’s Board of
Directors. Notwithstanding the foregoing, any Investor may transfer its rights set forth in this
Section 1 without regard to the minimum number of Conversion Shares described in the first
sentence of this Section 1.6 if the transferee is a constituent partner or member of such Major
Holder or an entity controlling, controlled by or under common control with such Major Holder.
2. Transfer Restrictions.
2.1 Prohibited Transfers. Any attempt by a Founder to transfer Shares in
violation of Section 1 of this Agreement shall be void and the Company agrees it will not effect
such a transfer nor will it treat any alleged transferee as the holder of such shares without the
written consent of the holders of a majority of the Conversion Shares. :
2.2 . Legended Certificates. Each certificate representing shares of the
Common Stock of the Company now or hereafter owned by the Founders or issued to any
Permitted Transferee pursuant to Section 1.5 shall bear the following legend:
- “THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE
' SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE
TERMS AND CONDITIONS OF A CERTAIN RIGHT OF FIRST REFUSAL
AND CO-SALE AGREEMENT BY AND BETWEEN THE STOCKHOLDER,
"THE CORPORATION AND CERTAIN HOLDERS OF COMMON AND
PREFERRED STOCK OF THE CORPORATION. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE
' SECRETARY OF THE CORPORATION.”
3. Termination.
3.1 ‘Termination Events. This Agreement shall terminate upon the earliest to
occur of any one of the following events (and shall not apply to any transfer by a Founder in
connection with any such event):
(a) The liquidation, dissolution or indefinite cessation of the business
operations of the Company; . .
(b) The execution by the Company of a general assignment for the
benefit of creditors or the appointment of a receiver or trustee to take possession of the property
and assets of the Company; or
(c) A firm commitment underwritten public offering by the Company
of shares of its Common Stock pursuant to a registration statement on Form S-1 under the —
~4-Page 154 a,
Securities Act of 1933, as amended, in which the pre-public offering market capitalization of the
Company is at least $75,000,000 (as determined by multiplying all capital stock of the Company
on a fully diluted basis prior to the public offering by the price per share offered to the public as
of the closing date of the public offering) and which results in aggregate cash proceeds to the
Company of at least $7,500,000 (net of underwriting discounts and commissions).
3.2 Removalof Legend. At any time after the termination of this Agreement
in accordance with Section 3.1, any holder of a stock certificate legended pursuant to Section 2.may surrender such certificate to the Company for removal of such legend, and tle Company
will duly reissue a new certificate without the legend.
4. Miscellaneous.
4.1 Successors and Assigns. Except as otherwise provided herein, this
Agreement and the rights and obligations of the parties hereunder shall inure to the benefit of,
and be binding upon, the parties’ respective successors, assigns and legal representatives.
4.2 Amendments and Waivers. Any term of this Agreement may be
amended or waived only with the written consent of the Company, holders of at least a majority
of the Series A Preferred Stock, holders of at least a majority of the Series B Preferred Stock and
holders of a majority of the Founders’ shares (or their respective successors and assigns) voting
together as a class. Notwithstanding the foregoing, this Agreement may be amended with only
the written consent of the Company for the sole purpose of including additional purchasers of
Series B Preferred Stock as “Investors.”? Any amendment or waiver effected in accordance with
this Section 4.2 shall be’binding upon the Company, the Series A Stockholders, the Investors and
any holder of Founders’ Shares, and each of their respective successors and assigns.
4.3 _ Notices. Any notice required or permitted by this Agreement shall be in
writing and shall be deemed sufficient on the date of delivery, when delivered personally or by
overnight courier or sent by telegram or fax, or forty-eight (48) hours after being deposited in the
U.S. mail, as certified or registered mail, with postage prepaid, and addressed to the party to be
notified at such party’s address or fax number as set forth below on the signature page oron -
Exhibit A hereto, or as subsequently modified by written notice.
4.4 Severability. If one or more provisions of this Agreement are held to be_
“unenforceable under applicable law, the parties agree to renegotiate such provision in good faith.
In the event that the parties cannot reach a mutually agreeable and enforceable replacement for
such provision, then (a) such provision shall be excluded from this Agreement, (b) the balance of
the Agreement shall be interpreted as if such provision were so excluded and (c) the balance of
the Agreement shall be enforceable in accordance with its terms.
4.5 Governing Law. This Agreement and all acts and transactions pursuant
hereto and the rights and obligations of the parties hereto shall be governed, construed and
interpreted in accordance with the laws of the State of California, without giving effect to
principles of conflicts of law.Page 155 um,
4.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which together shall constitute
one and the same instrument.
4.7 Titles and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or interpreting this
Agreement. ,
. 48 Entire Agreement. This Agreement, and any exhibits hereto, constitute
the full and entire understanding and agreement between the parties with regard to the subjects
hereof and no party shall be liable or bound to any other in any manner by any oral or written
representations, warranties, covenants and agreements except as specifically set forth herein and
therein. Each party expressly represents and warrants that it is not relying on any oral or written
representations, warranties, covenants or agreements outside of this Agreement.
[Signature Page Follows]Page 156 The parties have executed this First Amended and Restated Right of First Refusal and
Co-Sale Agreement as of the date first written above.
COMPANY:
TESLA MOTORS, INC.
By: =
By:
INVESTORS:
(Print name)
Title: CEO Title:
FOUNDERS: SERIES A STOCKHOLDERS:
Martin Eberhard (Print name)
By:
Lig 2 |
-Marc ‘Patpensiing Title:
‘SIGNATURE PAGE TO FIRST AMENDED AND RESTATED RIGHT OF FIRST
REFUSAL AND CO-SALE AGREEMENTPage 157 The parties have executed this First Amended and Restated Right of First Refusal and
Co-Sale Agreement as of the date first written above.
Marc Tarpenning
_ COMPANY: INVESTORS:
TESLA MOTORS, INC. . Eton Mosk.
. (Print name)
” VAX
By: Wh
Title: Title:
FOUNDERS: ' SERIES A STOCKHOLDERS:
Elon Mw su.
Martin Eberhard (Print name)
Title:
SIGNATURE PAGE TO FIRST AMENDED AND RESTATED RIGHT OF FIRST
REFUSAL AND CO-SALE AGREEMENTPage 158 The parties have executed this First Amended and Restated Right of First Refusal and
Co-Sale Agreement as of the date first written above.
COMPANY: INVESTORS:
TESLA MOTORS, INC. MAT GARR”
. _ (Print name)
By: -
- By: id Ae —
i
Title: oo Title:
FOUNDERS: SERIES A STOCKHOLDERS:
AF Z AS MARTIU Lanny
———~Mertie-E¥etmt (Print name) :
By eZ 1L N
a Mare Tarpenning Title:
SIGNATURE PAGE TO FIRST AMENDED AND RESTATED RIGHT OF FIRST
REFUSAL AND CO-SALE AGREEMENTPage 159 REDACTED -
EXHIBIT A
SERIES A STOCKHOLDERS
Name/Address/Fax No.
’ Elon Reeve Musk
Fax:
Compass Venture Partners I, L.P.
1550 El Camino Real Suite Menlo Park, CA 94025-4111Page 160 REDACTED
EXHIBIT B
INVESTORS
Name/Address/Fax No.
Elon Reeve Musk
Fax: |
Valor Equity Partners L.P.
225 W. Washington St., Suite ‘Chicago, IL
TVEST, LLC .
9020 Stony Pt. Pkwy
Suite
Richmond, VA
-2-Page 161 EXHIBIT {1Page 162 EXHIBIT / 74Page 163 545 Middlefield Road, Suite Menlo Park. California Telephone: 650/470-Facsimile: 650/470-http/www.whiteandlee.com
if
Corporate, Technology
Silicon Valley Office
[lier et
‘and International Law
Pacific Northwest Olfice
805 SW Broaclway, Suite
Portland. Oregon 97205-Telephone: 503/419-Facsimile: 503/419-
hitp:/Avww.whiteandlee.com
Writer's Direct Dial Number
(650) 470-February 14,
To the Purchasers of Series B Preferred Stock
Of Tesla Motors, Inc. Listed
on Exhibit A to the Series B Preferred
Stock Purchase Agreement
Ladies and Gentlemen:
We have acted as counsel for Tesla Motors, Inc., a Delaware corporation (the “Company”), in connection
with the sale by the Company to you of up to 13,513,513 shares of the Company’s Series B Preferred Stock (the
“Shares”) pursuant to the Series B Preferred Stock Purchase Agreement (the “Stock Purchase Agreement”) dated as
of February 14, 2005 among the Company and the persons listed on-Exhibit A attached thereto (the “Purchasers”),
and the execution and delivery by the Company of the Amended and Restated Investors’ Rights Agreement (the
“Inyestors’ Rights Agreement”) the Amended and Restated Right of First Refusal and Co-Sale Agreement (the
“Co-Sale Agreement”) and the Amended and Restated Voting Agreement:(the "Voting Agreement") each dated
February 14, 2005. This opinion is given to you pursuant to Section 4.5 of the Stock Purchase Agreement in
connection with the Closing of the sale of the Shares. The Stock Purchase Agreement, the Investors’ Rights
Agreement, the Co-Sale- Agreement and the Voting Agreement are referred to herein collectively as the
“Transaction Documents.” Unless defined herein, capitalized terms have the meaning given them in the Transaction
Documents. ,
In rendering this opinion, we have examined and relied on the following documents (all of which are dated
the same date as this opinion, unless otherwise specifically noted:
oy on
A. The Purchase Agreement, including its Exhibits and Schedules;
B. The Investors’ Rights Agreement, by and among the Company and the Purchasers.
Cc. The Right of First Refusal and Co-Sale Agreement, by and among the Company, certain ~
° of the Purchasers, and Martin Eberhard and Marc Tarpenning (collectively, the
“Founders”).
D. Voting Agreement, by and among the Company, the Purchasers, and the Founders.
E. A copy of the Amended and Restated Certificate of Incorporation of the Company (the
“Restated Certificate”), certified by the Delaware Secretary of State on February 14,
2005;
F. A copy of the Bylaws of the Company (the “Bylaws”);Page 164 om,
Mergare
To the Purchasers of Series B Preferred
Stock of Tesla Motors, Inc. Listed
on Exhibit A to the Series B Preferred Stock
Purchase Agreement
February 14,
Page
H.
A copy of a resolution of the Board of Directors and the written consent of stockholders
of the Company, authorizing the execution and delivery of, and consummation of the
transactions contemplated in, the Purchase Agreement, as presented to us by the -
management of the Company; and .
A. Management Certificate (the “Management Certificate”), dated Febmary 14, 2005,
executed by Marc Tarpenning as Chief Financial Officer of the Company.
For the purposes of this opinion, (i) the documents identified in paragraphs A through E above are
collectively referred to as the “Transaction Documents”; and (ii) the documents identified in paragraphs A through
H above, inclusive, are collectively referred to as the “Documents”.
In rendering this opinion letter, we have assumed, without independent investigation, the following, and
this opinion is qualified accordingly:
@
Gi)
(iii)
(iv)
(v)
(vi)
(vii):
(viii)
the genuineness of the signatures of all persons signing the Documents, other than those persons:
signing on behalf of the Company who have signed in our presence;
the authority of all persons signing the Documents other than those persons signing on behalf of
the Company;
the authenticity of all documents submitted to us as originals;
the conformity to authentic original documents of all documents submitted to us as certified,
conformed or photostatic copies;
the accuracy and completeness of all factual matters, representations, warranties and recitals set
forth in the Documents;
the parties to the Transaction Documents (other than the Company) have all necessary power and
authority to execute, deliver, accept and perform their respective obligations under the
Transaction Documents to which they are parties; oO
all necessary action has been taken by all of the parties to the Transaction Documents (other than -~ -
' .the Company) so‘as.to cause each of them to be bound by the Transaction Documents to which
they are parties under the terms of their respective governing documents and the laws of their
respective jurisdictions of formation; and
with respect to those Documents which provide that they are to be construed and enforced in
accordance with the laws of a particular state, such provisions would be enforced by a court
having jurisdiction over those Documents and the parties to those Documents.
The opinions expressed herein are limited to the laws of the state of Califomia, the corporate laws of the
state of Delaware and the federal laws of the United States, and we express no opinion as to the effect on the matters -
covered by this letter of the laws of any other jurisdiction. This opinion is qualified accordingly.Page 165 To the Purchasers of Series B Preferred
Stock of Tesla Motors, Inc. Listed
ov Exhibit A to the Series B Preferred Stock
’ Purchase Agreement
February 14, Page
To the extent that any opinion given in this opinion letter is dependent on factual information or is
expressed in terms of our knowledge or awareness, we have relied exclusively on the assumptions stated above and
the relevant factual representations set forth in the Management Certificate. We have not undertaken to
independently verify any such factual information, assumptions or factual representations. Furthermore, our
knowledge is limited to the conscious awareness of facts or information by (i) the attorney executing this opinion
letter on behalf of our firm; (ii) any attomey of this-firm who has been actively involved in (a) negotiating the terms
and conditions of or negotiating the Transaction Documents, or (b) preparing this opinion letter; and (iii) the
attorney of this firm who is primarily responsible for providing the response for a particular issue or confirmation
addressed in this opinion Ietter.
Based upon and subject to the foregoing and except as set forth in the Stock Purchase Agreement or the
Schedule of Exceptions thereto, we are of the opinion that:
(a) The Company is a corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, and has all corporate power and authority necessary to own its properties and to
conduct its business as, to our knowledge, it is presently conducted. The Company is qualified to do business as a
foreign corporation in the State of California. .
(b) The Company has the requisite corporate power and authority to execute, deliver and perform its
obligations under the Transaction Documents.
(c) All corporate action on the part of the Company, its directors and stockholders necessary for the
. authorization, execution, delivery and performance of the obligations under the Transaction Documents by the
Company has been taken.
(d) The authorized capital stock of the Company consists of 43,000,000 shares of Common Stock, par
value $0.001 per share, 8,925,000 of which are issued and outstanding pridr to the Closing, 28,726,513 shares of
Preferred Stock, of which 15,213,000 shares have been designated Series A Preferred: Stock, all of which are issued
and outstanding immediately prior to the Closing, and of which 13,513,513 shares have been designated Series B
Preferred Stock, none of which are issued and outstanding immediately prior to’ the Closing. All of such issued and
outstanding shares are duly authorized and validly issued, and to our knowledge, fully paid and nonassessable. The
Company has reserved 5,500,000 shares of Common Stock for issuance under the Company’s 2003 Stock Option
Plan. To our knowledge, except as described in the Transaction Documents or in the Schedule of Exceptions, there
are no other presently outstanding preemptive rights, options, warrants, conversion privileges or rights to purchase
from the Company any of the authorized but unissued stock of the Company other than (i) the conversion privileges
of the Company’s Preferred Stock, (ii) any: options that may have been’granted under the 2003 Stock Option Pian _
and (iii) the rights of first refusal set forth in Section 2.3 of the Investors’ Rights Agreement.
(e) The Transaction Documents each constitute valid and binding obligations of the Company, ,
enforceable against the Company in accordance with their terms. Each of the Transaction Documents has been duly
executed and delivered by the Company.Page 166 smc
To the Purchasers of Series B Preferred
Stock of Tesla Motors, Inc. Listed
on Exhibit A to. the Series B Preferred Stock
Purchase Agreement
February (4,
Page 4 .
(f) The Shares to-be issued on the date hereof, when issued in compliance with the provisions of the
Stock Purchase. Agreement, will be duly authorized, validly issued, fully paid and nonassessable. The Common
Stock issuable upon conversion of such Shares has been duly and validly reserved for issuance and, when and if
issued upon conversion in accordance with the Restated Certificate, will be validly issued, fully paid and
nonassessable. ‘ -
(zg) The execution, delivery and performance of the Transaction Documents will not, as of the
Closing, result in (i) a violation of the Company’s Restated Certificate or Bylaws, (ii) a material violation of any
statute, rule or regulation of United States federal, Delaware corporate or California law applicable to the Company,
(iii) a violation of any judgment or order specifically identified on the Schedule of Exceptions, if any, or (iv) a
default by the Company under any Contractual Obligation, as defined in Exhibit A hereto. . .
(bh) ‘No consent, approval or authorization of or designation, declaration or filing with, any United
States federal, Delaware corporate or California governmental authority onthe part of the Company is required in
connection with the valid execution, delivery and performance of the Transaction Documents, or the offer, sale or
issuance of the Shares (and the Common Stock issuable upon conversion thereof), except the notice filing required
by Section 25102(f) or 25102.1 of the California Corporate Securities Law of 1968, as amended.
Gj) . Based in part upon. the representations made by you in the Stock Purchase Agreement, the offer,
sale and issuance.of the Shares to be issued in conformity with the terms of the Stock Purchase Agreement and the
issuance of the Common Stock, if any, to be issued upon conversion thereof, constitute transactions exempt from
the registration requirements of Section 5 of the Securities Act and exempt from the qualification requirements of
the California Corporate Securities Law of 1968, as. amended.
Gj) To our knowledge and except as set forth on the Schedule of Exceptions, there is no action, suit,
proceeding or investigation pending or threatened against the Company that (i) questions the validity of the
Transaction Documents or the right of the Company to enter into the Transaction Documents or (ii) if determined
adversely, would be likely to result in a material adverse change in the financial condition or business of the
Company. : - .
The opinions expressed above are rendered as of the date of this letter, and we have no continuing
obligation to inform you of any changes in law or fact occurring subsequent to the date of this opinion letter or of
facts of which we become aware after the date of this opinion letter. :
. - This-opinion ‘is. for. the'sole benefit of the Purchasers and may not be relied on by any other party without .
our prior written consent: — cS .
Best Regards,
WHITE & LEE LLP
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Marc Tarpenning I VP Electrical Engineering I n I
1050 Bing street, San Carlos, CA 94070 I tel ' I fax
TESLA MOTORS
The content of this message is the proprietary and confidential property of Tesla Motors,
and should be treated as such. I If you are not the intended recipient and have received
this message in error, please delete this message from your computer system and notify me
immediately by reply e-mail. I Any unauthorized use or distribution of the content of this
message is prohibited. ,
Martin Eberhard I CEO I . . -com> I Bing Street, San Carlos, CA y4au/u 1 tel . IL fax
TESLA MOTORS
The content of this message is the proprietary and confidential property of Tesla Motors,
and should be treated as such. I If you are not the intended recipient and have received
this message in error, please delete this message from your computer system and notify me
immediately by reply e-mail. I Any unauthorized use or distribution of the content of this
message is prohibited.Page 171 This email has been scanned by the MessageLabs Email Security System.
For more information. please visit http: //www.messagelabs.com/emailPage 172 Printed on Recycled Paper
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EXHIBIT 13Page 173Page 174 EXHIBIT E
SECOND AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
bere
FfPage 175 Nemec
TESLA MOTORS, INC.
SECOND AMENDED AND RESTATED
INVESTORS’ RIGHTS AGREEMENT»Page 176 ns
TESLA MOTORS, INC.
SECOND AMENDED AND RESTATED
INVESTORS’ RIGHTS AGREEMENT
This Second Amended and Restated Investors’ Rights Agreement (the “Agreement”) is-
made as of the 10" day of May, 2006, by and among Tesla Motors, Inc., a Delaware corporation
(the “Company”), the Series A stockholders listed on Exhibit A hereto (the “Series A
Stockholders”), the Series B stockholders listed on Exhibit _B hereto (the “Series B
Stockholders”) and the investors listed on Exhibit C hereto (each of which is herein referred to as .
an “Investor”, and collectively, the “Investors”). .
RECITALS
_.4A. The Company, the Series A Stockholders and the Series B Stockholders
previously entered into a First Amended and Restated Investors’ Rights Agreement dated
February 14, 2005 (the “Prior Agreement”), and such parties now wish to amend and restate the
Prior Agreement in its entirety, and replace it with this Agreement which shall heretofore
constitute the entire agreement of the parties with respect to the specific subject matter hereof,
and supercede in its entirety the Prior Agreement, and all other agreements or understandings
between or among the parties hereto with respect to such specific subject matter.
B. The Company and the Investors have entered into a Series C Preferred Stock
Purchase Agreement (the “Purchase Agreement”) of even date herewith pursuant to which the
Company desires to sell to the Investors and the Investors desire to purchase from the Company
shares of the Company’s Series C Preferred Stock. A condition to the Investors’ obligations
under the Purchase Agreement is that the Company, the Series A Stockholders, the Series B
Stockholders and thé Investors amend and restate the Prior Agreement and enter into this
Agreement, which shall supercede the Prior Agreement in all respects in order to provide the
Investors, the Series A Stockholders and the Series B Stockholders with (i) certain rights to
register shares of the Company’s Common Stock issuable upon convetsion of the Preferred
Stock held by the Investors, the Series A Stockholders and the Series B Stockholders, (ii) certain
rights to receive or inspect information pertaining to the Company, and (iii) a right of first offer
with respect to certain issuances by the Company of its securities. The Company, the Series A
Stockholders, the Series B Stockholders. and the Investors each desire to induce the Investors to
purchase shares of Series C Preferred Stock pursuant to the Purchase Agreement by agreeing to
the terms and conditions set forth herein.
AGREEMENT
The parties hereby agree as follows:Page 177 ~
l. Registration Rights. The Company, the Series A Stockholders, the Series B
Stockholders and the Investors covenant and agree as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The terms “register,” “registered,” and “registration” refer to a
registration effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act of 1933, as amended (the “Securities Act”), -and the
declaration or ordering of effectiveness of such registration statement or document;
(b) The term “Registrable Securities” means (i) the shares.of Common
Stock issuable or issued upon conversion of the Series A Preferred Stock, the Series B Preferred
Stock and the Series C Preferred Stock and (ii) any other shares of Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to, or in exchange for or
in replacement of, the shares listed in (i); provided, however, that thé foregoing definition shall
exclude in all cases any Registrable Securities sold by a person in a transaction in which his or
her rights under this Agreement are not assigned. Notwithstanding the foregoing, Common
Stock or other securities shall only be treated as Registrable Securities if and so long as they
have not been sold to or through a broker or dealer or underwriter in a public distribution or a
public securities transaction;
(c) The number of shares of “Registrable Securities then outstanding”
shall be determined by the number of shares of Common Stock outstanding which are, and the
number of shares of Common Stock issuable pursuant to then exercisable or convertible
securities which are, Registrable Securities;
(d) ~ The term “Holder” means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with Section 1.12 of this
Agreement;
‘(c) The term “Form S-3” means such form under the Securities Act as
in effect on the date hereof or any successor form under the Securities Act that permits
significant incorporation by reference of the Company’s subsequent public filings under the
Securities Exchange Act of 1934;
(fp The term “SEC” means the Securities and Exchange Commission;
and
(g) The term “Qualified IPO” means a firm commitment underwritten
public offering by the Company of shares of its Common Stock pursuant to-a registration
statement on Form S-1 under the Securities Act, in which the pre-public offering market
capitalization of the Company is at least $250,000,000 (as determined by multiplying all
outstanding capital stock of the Company immediately prior to the public offering by the price
per share offered to the public as of the closing of the public offering) and which results in
aggregate cash proceeds to the Company of $50,000,000 (net of underwriting discounts and
commissions);Page 178 (h) The term “Founder” means holders of the Company’s Registrable
Securities listed on Exhibit D.
1.2 Request for Registration.
(a) If the Company shall receive at any time after the earlier of (i) the
third anniversary of the date hereof, or (ii) six (6) months after the effective date of the first
registration statement for a public offering of securities of the Company (other than a registration
statement relating either to the sale of securities to employees of the Company pursuant to a
stock option, stock purchase or similar plan or an SEC Rule 145 transaction), a written request
from the Holders of a majority of the Registrable Securities then outstanding that the Company
file a registration statement under the Securities Act covering the registration of Registrable
Securities; _with an anticipated aggregate offering price of at least $10,000,000, then the
Company shall, within ten (10) days of the receipt thereof, give written notice of such request to
all Holders and shall, subject to the limitations of subsection 1.2(b), use its best efforts to effect
as soon as practicable, and in any event within 60 days of the receipt of such request, the
registration under the Securities Act of all Registrable Securities which the Holders request to be
registered within twenty (20) days of the mailing of such notice by the Company in accordance
with Section 3.3.
(b) If the Holders initiating the registration request. hereunder
(‘Initiating Holders”) intend to distribute the Registrable Securities covered by their request by
means of an underwriting, they shall so advise the Company as a part of their request made
pursuant to this Section 1.2 and the Company shall include such information in the written notice
referred to in subsection 1.2(a). The underwriter will be selected by a majority in interest of the
Initiating Holders and shall be reasonably acceptable to the Company. In such event, the right of
any Holder to include his Registrable Securities in such registration shall be conditioned upon
such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable
Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the
. Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the Company as
provided in subsection 1.5(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting. Notwithstanding any other provision
of this Section 1.2, if the underwriter advises the Initiating Holders in writing that marketing
factors require a limitation of the number of shares to be underwritten, then the Initiating Holders
shall so advise all Holders of Registrable Securities which would otherwise be underwritten
pursuant hereto, and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities of the Company
owned by each Holder; provided, however, that the number of shares of Registrable Securities to
be included in such underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 1.2, a certificate signed by
the President of the Company stating that in the good faith judgment of the Board of Directors ofPage 179 oo,
eae
the Company, it would be seriously detrimental to the Company and its stockholders for such
Tegistration statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing for a period of not
- more than 120 days after receipt of the request of the Initiating Holders; provided, however, that
the Company may not utilize this right more than once in any twelve-month period and provided
. further that the Company shall not register any securities for the account of itself or any other
stockholder during such {20-day period (other than a registration relating solely to the sale of
securities of participants in a Company stock plan, a. registration relating to a corporate
reorganization or transaction under Rule 145 of the Securities Act, a registration on any form
that does not include substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities, or a registration in which
the only Common Stock being registered is Common Stock issuable upon conversion of debt
securities that are also being registered).
(d) In addition, the Company shall not be obligated to effect, or to take
any action to effect, any registration pursuant to this Section 1.2:
. (i) After the Company has effected two (2) registrations
pursuant to this Section 1.2 and such registration has been declared or ordered effective;
(ii) During the period starting with the date sixty (60) days
prior to the Company’s good faith estimate of the date of filing of, and ending on a date one
hundred eighty (180) days after the effective date of, a registration subject to Section 1.3 hereof;
provided that the Company is actively employing in good faith all reasonable efforts to cause
such registration statement to become effective; or
(iii) If the Initiating Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3 pursuant to a request
made pursuant to Section 1.4 below.
13 Company Registration. If (but without any obligation to do so) the
Company proposes to register (including for this purpose a registration effected by the Company
for stockholders other than the Holders) any of its stock under the Securities Act in connection
with the public offering of such securities solely for cash (other than a registration relating solely
to the sale of securities to participants in a Company stock plan or a transaction covered by Rule
145 under the Securities Act, a registration in which the only stock being registered is Common
Stock issuable upon conversion of debt securities which are also being registered, or any
registration on any form which does-not include substantially the same information as would be
required to be included in a registration ‘Statement covering the sale of the Registrable
Securities), the Company shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within twenty (20) days after
mailing of such notice by the Company in accordance with Section 3.3, the Company shall,
subject to the provisions of Section 1.8, cause to be registered under the Securities Act all of the
Registrable Securities that each such Holder has requested to be registered.
; 14 Form S-3 Registration. In case the Company shall receive from any
Holder or Holders of not less than twenty percent (20%) of the Registrable Securities thenPage 180 outstanding a written request or requests that the Company effect a registration on Form S-3 and
any related qualification or compliance with respect to all or a part of the Registrable Securities
owned by such Holder or Holders, the Company will:
(a) _ promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders; and .
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Holder’s or Holders? Registrable Securities as are
Specified in such request, together with all or such portion of the Registrable Securities of any
other Holder or Holders joining in such request as are specified in a written request given within
15 days after receipt of such written notice from the Company; provided, however, that the
Company shall not be obligated to effect any such registration, qualification or compliance,
’ pursuant to this Section 1.4: (i) if Form S-3 is not available for such offering by the Holders; (ii)
if the Holders, together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such other securities (if
any) at an aggregate price to the public (net of any underwriters’ discounts or commissions) of
less than $1,000,000; (iii) if the Company shall furnish to the Holders a certificate signed by the
‘President of the Company stating that in the good faith judgment of the Board of Directors of the
‘Company, it would be seriously detrimental to the Company and its stockholders for such Form
S-3 Registration to be effected at such time, in which event the Company shall have the right to
‘defer the filing of the Form S-3 registration statement for a period of not more than 120 days
after receipt of the request of the Holder or Holders under this Section 1.4; provided, however,
that the Company shall not utilize this right more than twice in any twelve month period and
provided further that the Company shall not register any securities for the account of itself or any
other stockholder during such 120-day period (other than a registration relating solely to the sale
of securities of participants in a Company stock plan, a registration relating to a corporate
reorganization or transaction under Rule 145 of the Securities Act, a registration on any form
that does not include substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities, or a registration in which
the only Common Stock being registered is Common Stock issuable upon conversion of debt
securities that are also being registered); or -(iv) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so requested to be registered as
soon as practicable after receipt of the request or requests of the Holders. Registrations effected
pursuant to this Section 1.4 shall not be counted as demands for registration or registrations
effected pursuant to Sections 1.2 or 1.3, respectively.
15 Qbligations of the Company. Whenever required under this Section 1 to
effect the registration of any Registrable Securities, the Company shall, as expeditiously as
reasonably possible:Page 181 (a) Prepare and file with the SEC a registration statement with respect
to such Registrable Securities and use its best efforts to cause such registration statement to
become effective, and, upon the request of the Holders of a majority of the Registrable Securities
registered thereunder, keep such registration statement effective for up to one hundred twenty
(120) days. The Company shall not be required to file, cause to become effective or maintain the
effectiveness of any registration statement that contemplates a distribution of securities on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act.
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such registration
statement as may be necessary to comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the Securities Act,
and such other documents as they may reasonably request in order to facilitate the disposition of
Registrable Securities owned by them. .
(d) — Use its best efforts to register and qualify the securities covered by
such registration statement under such other securities or Blue Sky laws of such jurisdictions as
shall be reasonably requested by the Holders, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to file a general
consent to service of process in any such states or jurisdictions.
(e) _ In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary form, with the
managing underwriter of such offering. Each Holder participating in. such underwriting shall
also enter into and perform its obligations under such an agreement. ue
63) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is required to be delivered
under the Securities Act of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an -untrue statement of a
material fact or omits to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances then existing, such
obligation te continue for one hundred twenty (120) days.
Ag) Cause all such Registrable Securities registered pursuant hereunder
to be listed on each securities exchange on which similar securities issued by the Company are
then listed.
(h) __ Provide a transfer agent and registrar for all Registrable Securities
registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each
case not later than the effective date of such registration.
(i) Use its best efforts to fumish, at the request of any Holder
requesting registration of Registrable Securities pursuant to this Section 1, on the date that suchPage 182 Registrable Securities are delivered to the underwriters for sale in connection with a registration
pursuant to this Section 1, if such securities are beirig sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the registration statement with
respect to such securities becomes effective, (i) an opinion, dated such date, of the counsel
representing the. Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders requesting registration of Registrable Securities and (ii) a
letter dated such date, from the independent certified public accountants of the-Company, in
form and substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities.
1.6 Furnish Information. It shall be a condition precedent to the obligations
of the Company to take any action pursuant to this Section 1 with respect to the Registrable’
Securities of any selling Holder that such Holder shall furnish to the Company such information
regarding itself, the Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder’s Registrable
‘Securities. The Company shall have no obligation with respect to any registration requested
‘ pursuant to Section 1.2 or Section 1.4 of this Agreement if, as a result of the application of the
preceding sentence,.the number of shares or the anticipated aggregate offering price of the
Registrable Securities to be included in the registration does not equal or exceed the number of
shares or the anticipated aggregate offering price required to originally trigger the Company’s
obligation to initiate such registration as specified in subsection [.2(a) or subsection 1.4(b)(2),
whichever is applicable.
1.7 Expenses of Registration.
(a) Demand Registration. All-expenses other than underwriting
discounts and commissions incurred in connection with registrations, filings or qualifications
pursuant to Section 1.2, including (without limitation) all registration, filing and qualification
fees, printers’ and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders selected by them with
the approval of the Company, which approval shall not be unreasonably withheld, shall be borne
by the Company; provided, however, that the Company shall not be required to pay for any
expenses of any registration proceeding begun pursuant to Section 1.2 if the registration request
is subsequently withdrawn at’ the request of the Holders. of a majority of the Registrable.
Securities to be registered (in which case all participating Holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit their right-to one
demand registration pursuant to Section 1.2; provided further, however, that if at the time of such
withdrawal, the Holders have learned of a material adverse change in the condition, business, or
prospects of the Company from that known to the Holders at the time of their request and have.
withdrawn the request with reasonable promptness following disclosure by the Company of such
material adverse change, then the Holders shall not be required to. pay any of such expenses and
shall retain their rights pursuant to Section 1.2.Page 183 (b) Company Registration. All expenses other than underwriting
discounts and commissions incurred in connection with registrations, filings or qualifications of
Registrable Securities pursuant to Section 1.3 for each Holder (which right may be assigned as
provided in Section 1.12), including (without limitation) all registration, filing, and qualification
fees, printers’ and accounting fees, fees and disbursements of counsel for the Company and the
reasonable fees and disbursements of one counsel for the selling Holder or Holders selected by
them with the approval of the Company, which approval shall not’ be unreasonably withheld,
shall be borne by the Company.
(c) Registration on Form S-3. All expenses other than underwriting
discounts and commissions incurred in connection with a registration requested pursuant to
Section 1.4, including (without limitation) all registration, filing, qualification, printers’ and
accounting fees and the reasonable fees and disbursements of one counsel for the selling Holder
or Holders selected by them with the approval of the Company, which approval shall not be
unreasonably withheld, and counsel for the Company, shall be borne by the Company.
1.8 Underwriting Requirements. In connection with any offering involving
an underwriting of shares of the Company’s capital stock, the Company shall not be required
under Section 1.3 to include any of the Holders’ securities in such underwriting unless they
accept the terms of the underwriting as agreed upon between the Company and the underwriters -
selected by it (or by other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not jeopardize the success of
the offering by the Company. If the total amount of securities, including Registrable Securities,
requested by stockholders to be included in such offering exceeds the amount of securities sold
other than by the Company that the underwriters determine in their sole discretion is compatible
with the success of the offering, then the Company shall be required to include in the offering
only that number of such securities, including Registrable Securities, which the underwriters
determine in their sole discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling stockholders according to the total amount
of securities entitled to be included therein owned by each selling stockholder or in such other
proportions as shall mutually be agreed to by such selling stockholders) but in no event shall (i)
the amount of securities of the selling Holders included in the offering be reduced below thirty
percent (30%) of the total amount of securities included in such offering, unless such offering is
' the initial public offering of the Company’s securities, in which case, the selling stockholders
may be excluded if the underwriters make the determination described above and no other
stockholder’s securities are included or (ii) any securities held by a Founder be included if any
securities held by any selling Holder are excluded. For purposes of the preceding parenthetical
conceming apportionment, for any selling stockholder which is a holder of Registrable Securities
and which is a partnership or corporation, the partners, retired partners and stockholders of such
holder, or the estates and family members of any such partners and retired partners and any trusts
for the benefit of any of the foregoing persons shall be deemed to be a single “selling
stockholder,” and any pro-rata reduction with respect to such “selling stockholder” shall be
based upon the aggregate amount of shares carrying registration rights owned by all entities.and
individuals included in such “selling stockholder,” as defined in this sentence.Page 184 1.9 Delay of Registration. No Holder shall have any right to obtain or seek
an injunction restraining: or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or implementation of this Section
1.
1.10 Indemnification. In the event any Registrable Securities are included in a
registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Securities Act) for such Holder
and each person, if-any, who controls such Holder or underwriter within the meaning of the
Securities Act or the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
against any losses, claims, damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon
any of the following statements, omissions or violations (collectively a “Violation”): (i) any
untrue statement or alleged untrue statement of a material fact contained in such registration
Statement, including any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company ofthe Securities. Act, the
Exchange Act, any state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law; and the Company will pay to each such
Holder, underwriter or controlling person, as incurred, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained in this subsection
1.10(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable to any Holder, underwriter or
controlling person for any such loss, claim, damage, liability, or action to the extent that it arises
out of or is based upon a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by any such Holder,
underwriter or controlling person.
1.15 Termination of Registration Rights. No Holder shall be entitled to
exercise any right provided for in this Section 1 after the earlier of (i) five (5) years following the
consummation of a Qualified IPO, (ii) such time as Rule 144 or another similar exemption under
the Securities Act is available for the sale of all of such Holder’s shares during a three (3) month
period without registration, except if such Holder holds at least two percent (2%) of the
outstanding voting stock of the Company.
2. Covenants of the Company.
2.1 Delivery’of Financial Statements. The Company shall deliver to each
. Major Investor, .as defined in Section 2.3 below:
(a) as soon as practicable, but in any event within ninety (90) days
after the end of each fiscal year of the Company, an income statement for such fiscal year, a
balance sheet of the Company and statement of stockholder’s equity as of the end of such year,
and a statement of cash flows for such year, such year-end financial reports to be in reasonable
detail, prepared in accordance with generally accepted accounting principles (“GAAP”), and
audited and certified by an independent public accounting firm of nationally recognized standing
(b) as soon as practicable, but in any event within thirty (30) days after
the end of each of the first three (3) quarters of each fiscal year of the Company, an unaudited -
profit or loss statement, a statement of cash flows for such fiscal quarter and an unaudited
balance sheet as of the end of such fiscal quarter; and
(c) as soon as practicable, but in any event thirty (30) days prior to the
end of each fiscal year, a budget and business plan for the next fiscal year, prepared on a
monthly basis,
2.2 Inspection. The Company shall permit each Major Investor, as defined in
Section 2.3 below, at such Major Investor’s expense, to visit and inspect the Company’s
properties, to examine its books of account and records and to discuss the Company’s affairs,
finances and accounts with its officers, all at such reasonable times as may be requested by the
Major Investor; provided, however, that the Company shall not be obligated pursuant to this
13.Page 189 recat?
Wage
~,
Sus
Section 2.2 to provide access to any information which it reasonably considers to be a trade
secret or similar confidential information.
2.3. Right of First Offer. Subject to the terms-and conditions specified in this
Section 2.3, the Company hereby grants to each Major Investor (as hereinafter defined) a right of
first offer with respect to future sales by the Company of its Shares (as hereinafter defined). For
purposes of this Section 2.3, a “Major Investor” shall mean any person who holds at least
1,000,000 shares of the Series A Preferred Stock, 1,000,000 shares of the Series B Preferred
Stock or 1,000,000 shares of the Series C Preferred Stock (or the Common Stock issued upon
conversion thereof) issued pursuant to the Purchase Agreement, Series A .Stock Purchase
Agreement or the Series B Stock Purchase Agreement (subject to adjustment for stock splits,
stock dividends, reclassifications or the like). For purposes of this Section 2.3, a-Major Investor
includes any general partners and affiliates of a Major Investor. A Major Investor who chooses
to exercise the right of first offer may designate as purchasers under such right itself or its
partners or affiliates in such proportions as it deems appropriate. ,
Each time the Company proposes to offer any shares of, or securities convertible
‘into or exercisable for any shares of, any class of its capital stock (“Shares”), the Company shall
first make an offering of such Shares to each Major Investor in accordance with the following
provisions: .
(a) | The Company shall deliver a notice by certified mail (“Notice”) to
the Major Investors stating (i) its bona fide intention to offer such Shares; (ii) the number of such
Shares to be offered, and (iii) the price and terms, if any, upon which it proposes to offer such
Sharés. ,
(b) Within 15 calendar days after delivery of the Notice, the Major
Investor may elect to purchase-or obtain, at the price and on the terms specified in the Notice, up
to that portion of such Shares which equals the proportion that the number of shares of Common
Stock issued and held, or issuable upon conversion and exercise of all convertible or exercisable
securities then held, by such Major Investor bears to the total number of shares of Common
Stock then outstanding (assuming full conversion and exercise of all convertible or exercisable
securities). Such purchase shall be completed at the same closing as that of any third party
purchasers or at an additional closing thereunder. The Company shall promptly, in writing,
inform each Major Investor that purchases all the shares available to it (each, a “Fully-Exercising
Investor”) of any other Major Investor’s failure to do likewise. During the ten (10)-day period
commencing after receipt of such information, each Fully-Exercising Investor shall be entitled to
obtain that portion of the Shares for which Major Investors were entitled to subscribe but which
were not subscribed for by the Major Investors that is equal to the proportion that the number of
shares of Common Stock issued and held, or issuable upon conversion and exercise of all
convertible or exercisable securities then held, by such Fully-Exercising Investor bears to the
total number of shares of Common Stock then outstanding (assuming full conversion and
exercise of all convertible or exercisable securities).
(c) The Company may, during the 45-day period following the
expiration of the period provided in subsection 2.3(b) hereof, offer the remaining unsubscribed
portion of the Shares to any person or persons at a price not less than, and upon terms no more
14.Page 190 _ except as expressly provided in this Agreement.
2.6 Employee Agreements. Unless otherwise approved by the. Board of
Directors of the Company, all future employees of the Company who shall purchase, or receive
options to purchase, shares'of the Company’s Common Stock following the daté hereof shalt be
required to execute stock purchase or option agreements providing for (i) vesting of shares over
a four-year period with the first 25% of such shares vesting following twelve (12) months of
continued employment or services, and the remaining shares vesting in equal monthly
installments over the following 36 months thereafter and (ii) a 180-day lockup period in
‘connection with the Company’s initial public offering. The Company shall retain a right of first
refusal on transfers until the Company’s initial public offering and the right to repurchase
unvested shares at cost.
2.7 Directors _and_ Officers Insurance. Unless otherwise unanimously
approved by the Company’s Board of Directors, the Company. shall purchase and’ maintain
Directors and Officers Insurance of not less than $1,000,000; provided that such Directors and
Officers Insurance coverage immediately prior to the first firm commitment underwritten public
offering by the Company of shares of its common stock pursuant to an effective registration
Statement under the Securities Act shall be increased to at least $10,000,000.
2.8 Termination of Covenants.
(a) The covenants set forth in Sections 2.1 through 2.7 shall terminate
as to each Holder and be of no further force or effect upon the consummation of a Qualified IPO.
(b) -The covenants set forth in Sections 2.1 and 2.2 shall terminate as
to each Holder and be of no further force or effect when the Company first becomes subject to
-the periodic reporting requirements of Sections 13 or 15(d) of the Exchange Act, if this occurs
earlier than a Qualified IPO.
3. Miscellaneous.
3.1 Successors_and_ Assigns. Except as otherwise provided in this
Agreement, the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective permitted successors and assigns of the parties (including transferees
of any of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or any
Common Stock issued upon conversion thereof). Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their respective successors
and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement,
. 3.2 Amendments and Waivers. Any term of this Agreement may be
amended or waived only with the written consent of the Company and the holders of at least
two-thirds of the Registrable Securities then outstanding. Any amendment or waiver effécted in
accordance with this paragraph shall be binding upon each party to the Agreement, whether or
not such party has signed such amendment or waiver, each future holder of all such Registrable
Securities, and the Company. Notwithstanding the above, the parties agree that additional
purchasers of the Company’s Series C Preferred Stock shall be treated as Investors hereunder
16.Page 191 upon such party's execution of a supplemental signature page to this Agreement and the addition
of such person's name to Schedule A hereto, without need for additional signatures from the
Company, the Series A Stockholders, the Series B Stockholders and the other Investors.
3.3 Notices. Unless otherwise provided, any notice required or permitted by
this Agreement shall be in writing and shall be deemed sufficient upon delivery, when delivered
personally or by overnight courier or sent by telegram or fax, or forty-eight (48) hours after
being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, and
addressed to the party to be notified at such party’s address or fax number as set forth on the
respective Exhibits hereto or as subsequently modified by written notice.
3.4 Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, the parties agree to renegotiate such provision in good faith.
In the event that the parties cannot reach a mutually agreeable and enforceable replacement for
such provision, then (a) such provision shall be excluded from this Agreement, (b) the balance of
the Agreement shall be interpreted as if such provision were so excluded and (c) the balance of
the Agreement shall be enforceable in accordance with its terms.
3.5 Governing Law. This Agreement and all acts and transactions pursuant
hereto shall be governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of laws.
3.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
3.7. Titles and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or interpreting this
Agreement. ,
3.8 Aggregation of Stock. All shares of the Preferred Stock held or acquired
by affiliated entities or persons shall be aggregated together for the purpose of determining the
availability of any rights under this Agreement. ‘
3.9 Entire Agreement. This Agreement, and any Exhibits hereto, constitute
the full and entire understanding and agreement between the parties with regard to the subjects
hereof and no party shall be liable or bound to any other in any manner by any oral or written
representations, warranties, covenants and agreements except as specifically set forth herein and
therein. Each party expressly represents and warrants that it is not relying on any oral or written
representations, warranties, covenants or agreements outside of this Agreement.
3.10 --Termination of Prior Agreement. Upon the effectiveness of this
Agreement, the Prior Agreement shall terminate ard be of no further force and effect, and shall
be superseded and replaced in its entirety by this Agreement.
17.Page 192 [Signature Page Follows]
18.Page 193 The parties have executed this Secorid Amended and Restated Investors’ Rights
Agreement as of the date first above written.
COMPANY:
TESLA MOTORS, INC,
vtin Eber barn.
(print)
oe (print)
: Title: :
_ SERIES A STOCKHOLDERS:
ee
S
" SERIES B STOCKHOLDERS:
‘By:
, (ptint}Page 194 The partiés have executed this Second Aniendéd and Restated Investors’ Rights
Agreement as of the date first above written,
COMPANY:
TESL-A-MOTORS, INC.
By
‘Name:
(print)
‘Titles.
Addtese..
INVESTOR:
Mamet Lom Wasik.
| print)
SERIES A STOCKHOLDERS:
(pat)
Titles. “pyisee:
Title: “fushe <.Page 195 The parties have executed this Second Amended and Restated Investors” Rights
Agreement as of the date first ahove written. ,
CoMmany:
TESLA MOTORS, INC.
SERIES B STOCKHOLDERS:Page 196 ' REDACTED
EXHIBIT A
SERIES A STOCKHOLDERS
Name/Address/Fax No.
Elon Musk Revocable Trust dated July 22,
Fax:
Martin Eberhard
Fax:
Marc Tarpenning
Fax:
SDL Ventures, LLC .
2800 Sand Hill Road
Menlo Park, CA Fax: (650) 854-
Tan Wright
Fax:
Fax:
Pax .
2Gn.
Fax:Page 197 REDACTED
Fax: -
Bax: 2.
Fax:
Fax:
Fax: ‘
Fax:
Fax:
Compass Venture Partners II, L-P.
1550 El Camino Real Suite Menlo Park, CA 94025-4111Page 198 REDACTED
_EXUIBIT B
SERIES B STOCKHOLDERS
Name/Address/Fax No.
From: Elon Musk °
Sent: Thursday, May 18, 2006 12:24 PM
To: eberhar
Subject: RE: [Fwd: press release]
| don't think we need to mention Valor and certainly not Compass, who has invested a pittance. Given
that | have invested significantly more than all other Series C investors combined, excluding VantagePoint, it is
more accurate to say that this round is being led by both VantagePoint and me.
Your second quote paragraph is extremely long — I'm not sure it is needed in the press release. Quotes are
usually two or three sentences long.
From: Martin Eberhard [mailto i]
Sent: Thursday, May 18, 2006 8:24 AM
To: Elon Musk
Subject: [Fwd: press release] .
Pres release attached.
Martin Eberhard | CEO| im! 1050 Bing Street, San Carlos, CA
94070 | tel fax € a
TESLA MOTORS
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TAL2ONGPage 205 TES LA MOTORS
Tesla Motors Secures $40 Million Investment Round Led
| by VantagePoint Venture Partners_and Elon Musk
Additional Series C Investors in Electric Sportscar Company Include
PayPat Founder Elon Musk, JP Morgan Bay roa Equity Fundand Draper
Fisher Jurveston,;
SAN CARLOS, California — (May 8, 2006) — Tesla Motors today ap@dunced the completion of a
$40 Million Series C round of financing to fund final DOT compliggStesting, initial production,
and launch of its first Peano. a high end lon electric Car gp nta emoint Venture Partners;
we had a unique oppo
technology with outstandi Q
just when the geativeti.
including airbags, front crumple zones, side impact protection, 2-1/2 mph bumpers: Tesla will sell
cars only when they pass the Federal Motor Vehicle Safety Standard (FMVSS).
About Tesla Motors
Tesla Motors was founded on June 1, 2003 by Martin Eberhard and Marc Tarpenning. The
company currently employs 70 people, including a team in California, a team in the United
Kingdom, and a team in Taiwan. The background and experience of the employee base mirrors
the vehicle itself. Key employees have been drawn from the electronics, automobile and Internet
industries. Including this round, Tesla has raised approximately a total of $60M. In addition to the
anonymous. These individuals have invested in Tesla Motors becausg@jMre
About VantagePoint Venture Partners
VantagePoint Venture Partners is among the leadi
$2.8 billion of capital under management. The Fir
companies and is organized around deep expertise an cae
interest: CleanTech, Communications, Healthcare, Semi
VantagePoint is a multi-stage investor, im,
development. The Firm supports each o
Allbusiness.com, Datran Media, and Inte
tors, and Software/internet.
usinesses at all stages of
liability of access to space. Mr. Musk is
pany’s Chairman and CEO. Prior to
pa 5 Million venture capital fund whose goal is to deliver market-
vestors while generating significant social returns to the
wHOlio companies. The Fund invests in the economic strengths of the
Bay Area, focusing on ¥gewth companies in the technology, healthcare and consumer goods and
services sectors. The und makes investments primarily in private, mid-to-late stage companies
located in or near low-to-moderate income neighborhoods of the 10-county Bay Area. Visit
Www.vpvp.com for more information.
Tesla Motors, Inc. | 1050 Bing Street | San Carlos, CA 94070 | www.teslamotors.com | 650.413.4000Page 207 ‘About Draper Fisher Jurveston |
Draper Fisher Jurvetson is the only venture capital firm with global presence through a network of
affiliated funds, with offices in more than 30 cities around the world and more than $3 billion in
capital commitments. DF J's mission is to identify, provide capital for, and serve extraordinary
‘entrepreneurs anywhere who want to change the world. Over the past twenty years, DFJ has
been proud to back approximately 300 companies across a myriad of sectors including such
industry changing catalysts as Hotmail (acquired by MFST), Baidu (BID), Skype (acquired by
EBAY), United Online (UNTD), Overture (acquired by YHOO), Interwaff OV), 411 (acquired
by YHOO), Parametric (PMTC), and Digidesign (acquired by AVID Phe DFJ website is
www.dfj.com.
%
ATLA TA
650.413.
Tesla Motors, Inc. | 1050 Bing Street | San Carlos, CA 94070 | www.teslamotors.com | 650.413.4000 |Page 208 EXHIBIT 15Page 209 EXHIBIT 15Page 210 TESLA MOTORS, INC.
SERIES C PREFERRED
STOCK FINANCING
Initial Closing
May 24,
INDEX OF DOCUMENTS
A. MATTERS COMPLETED PRIOR TO CLOSING.
1.
Action by Unanimous Writterr Consent of the Board of Directors
of Tesla Motors, Inc. (the “Company”), dated May 24, 2006,
approving, among other things, the authorization of the sale and
issuance of Series C Preferred Stock
Action by Written Consent of the Stockholders of the Company,
dated May 24, 2006, authorizing the sale and issuance of Series C .
Preferred Stock
Action by Unanimous Written Consent of the Board of Directors
of the Company, dated.May 24, 2006, approving the election of the
Series C Board of Directors representative
Third Amended and Restated Certificate of Incorporation of the
Company as filed with the Delaware Secretary of State on May 10,
B. DOCUMENTS DELIVERED AT CLOSING.
5.
Series C Preferred Stock Purchase Agreement, dated May 24, (the “Purchase Agreement”), by and among the Company and the
Purchasers set forth of schedule A thereto
Schedule of Exceptions to the Purchase Agreement
Amendment Agreement, dated May 24, 2006, by and among the
Company, Martin Eberhard, Marc Tarpenning and those listed on
Exhibits A, B, C, & D thereto... ceecccesscceseesseessrsenserseessensesenesnesseees
Document
NumberPage 211 om,
10.
11.
12.
13.
14.
15.
16.
17.
18.
Document
Number
Legal Opinion of White & Lee, LLP, dated May 24, 2006. .......cccccccccssescssececeseeseeee Certificate of Good Standing of the Company issued by the .
Delaware Secretary of State on- May 22, 2006. .......ssssessscessssssssssessecetscvecsnecaeesuae Certificate of Good Standing of the Company issued by the
California Secretary of State on May 24, 2006.0... ecsssssceceesccescecessesseesseceeses Management Rights Agreement, dated May 24, 2006, by and
among VantagePoint Venture Partners VI (Q), L.P., VantagePoint
Venture Partners IV, L.P., VantagePoint Venture Partners IV
Principals Fund, L.P, VantagePoint CleanTech Partners, L.P. and
the Company... ee eeescceseeceeteceneceececeeeceeeseessesenesescanessarcasensescsseeseceeeseaseeveceesses Side Letter Agreement, dated May 24, 2006, by and among
VantagePoint Venture Partners VI (Q), L.P., VantagePoint Venture
‘Partners [V, L.P., VantagePoint Venture Partners IV Principals
Fund, L.P, VantagePoint CleanTech Partners, L.P. and the
COmMpany oo. esececescceccec cee eeeecacseseavesssssassneseucescasusacesesessesesescecsansessuacsesussceceaeeacasens Indemnification Agreement, dated May 24, 2006, by and between
the Company and Jim Marver........ecscesscscsecesceeseseesesssseecsscsesesssssesesesnacavacseavenees Bay Area Equity Fund I, L:P. Management Rights Letter, dated
May 24, 2006 2... eee cece cece eee e cece cece eecee cee ceseeecsseeeeeuessneceeceenecgecnaess Bay Area Equity Fund I, LP. Regulatory Side Letter, dated
May 24, 2006. ...... 2 ccc ccceecc eee elec ccc ee nec ec sees essecceeccuccvseeseeceveversceueneseess JP Morgan Bay Area Equity Fund I, L.P. Double Bottom Line
Letter, dated May 26, 2006.........2:. ccc ceccecceecccceecescsesetseeceasceseusesteseeeens TAO, LLC Management Rights Letter, dated May 30, 2006.....0.0...00...eeeeeeee 18 -
PURCHASE AND SALE AT CLOSING.
17.
Evidence of cancellation of Secured Convertible Promissory
Notes, dated March 30, 2006, by and between Tesla Motors, Inc.
and VantagePoint Venture Partners VI (Q), L.P., VantagePoint
Venture Partners IV, L.P. and VantagePoint Venture Partners IV
Principals Fund, U.P... eeceesecceseecseeeeceeeeee cee cececeeseaeeceseeesssecsacceeesssseedPage 212 £o™,
om
Document
Number
20. Copies of Series C Preferred Stock Certificates No. 3 through
: NO. 33 .ccccssessssesesseceesvessceseesnssassneasecseseessesessssesssucsessssassassausassusasssssesesacansassessvesecsese SECURITIES LAWS COMPLIANCE.
21. Notice of Sale of Securities pursuant to Regulation D, Section 4(6)
and/or uniform Limited offering exemption, filed with SEC,
Secretary of State of California, Secretary of State of Illinois, and
Secretary of State of Connecticut on May 25, 2006............... ase scecceecgeeseseeed
22. Amendment to Notice of Sale of Securities pursuant to Regulation
D, Section 4(6) and/or uniform Limited offering exemption, filed
with SEC, Secretaty of State of California, Secretary of State of
Illinois, and Secretary of State of Connecticut on June 27, 2006.........0.00.0. 20 22Page 213 AMENDMENT AGREEMENT
This Amendment Agreement is made this 24" day of May 2006 by and among Tesla
“Motors, Inc., a Delaware corporation (the “Company”), the investors listed on Exhibit A attached
hereto (individually an “Investor” and collectively the “Investors”), the holders of shares of Series -
A Preferred Stock in the Company listed on Exhibit B (individually a “Series A Stockholder” and
collectively the “Series A_Stockholders”), the holders of shares of Series B Preferred Stock in the
Company listed on Exhibit C (individually a “Series B Stockholder” and collectively the “Series B
Stockholders”), Elon Musk Revocable Trust dated July 22, 2003 (the “Musk Trust”), the holders of
shares of Common Stock in the Company listed on Exhibit D (individually a “Common Holder”
and collectively the “Common Holders”), and Martin Eberhard and Marc Tarpenning (the
Founders”). ,
RECITALS
A. The Company entered into the following agreements on May 10, 2006, in connection
with the sale of its Series C Preferred Stock to the Musk Trust:
@ Second Amended, and Restated Investors’ Rights Agreement by and among,
the Company, the Musk Trust, the Series B Stockholders, and the Series A
Stockholders (the “Investors’ Rights Agreement”), as attached hereto as
Exhibit E.
(ii) | Second Amended and Restated Voting Agreement by and among the
Company, the Musk Trust, the Series B Stockholders, the Series A
Stockholders, and the Common Holders (the “Voting Agreemen ”), as
attached hereto as Exhibit F.
(iii) Second Amended and Restated Right of First Refusal and Co-Sale
Agreement by and among the Company, the Founders, the Musk. Trust,
certain Series B Stockholders, and certain Series A Stockholders (the “Right
of First Refusal and Co-Sale Agreement”, as attached hereto as Exhibit G; the
Investors’ Rights Agreement, the Voting Agreement and the Right of First
Refusal and Co-Sale Agreement are hereinafter collectively referred to as the
“Transaction Agreements”).
B. The Company and the Investors are entering into a Series C Preferred Stock
Purchase Agreement (the “Puichase Agreement”) pursuant to which the Company has agreed to sell
and issue to the Investors an aggregate of up to 24,669,604 shares of Series C Preferred Stock. The
shares of Series C Preferred Stock to be issued to the Investors pursuant to the Purchase Agreement
is hereinafter referred to as the “Stock”. - :
c. A closing condition io the Investors’ obligations under Purchase Agreement is that
the parties enter into this Amendment Agreement.Page 214 AGREEMENT
NOW THEREFORE, in consideration for the foregoing and the promises and
covenants contained herein and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereby agree as follows:
1.
The Investors’ Rights Agreement. Sections 2.7 and 3.2 of the Investors’ Rights
Agreement are hereby deleted in their entirety and replaced with the following:
“2.7 Directors and Officers Insurance. Unless otherwise unanimously approved
by the Company’s Board of Directors, the Company shall purchase and maintain
Directors and Officers Insurance acceptable to VantagePoint Venture Partners of not
less than $1,000,000; provided that such Directors and Officers Insurance coverage
immediately prior to the first firm commitment underwritten public offering by the
Company of shares of its common stock pursuant to an effective registration
statement under the Securities Act shall be increased to at least $10,000,000.”
“3.2 Amendments and Waivers. Any term of this Agreement may be amended
or waived only with the written consent of the Company and the holders of at least
two-thirds of the Registrable Securities then outstanding. .Any amendment or waiver
effected in accordance with this paragraph ‘shall be binding upon each party to the
Agreement, whether or not such party has signed such amendment or waiver, each
future holder of all such Registrable Securities, and the Company. Notwithstanding
the above, the parties agree that additional purchasers of the Company’s Series C
Preferred Stock pursuant to the Series C Preferred Stock Purchase Agreement dated
May 24", 2006 shall be treated as Investors hereunder upon such party's execution of
a supplemental signature page to this Agreement and the addition of such person's
name to Schedule A hereto, without need for additional signatures from the
Company, the Series A Stockholders, the Series B Stockholders and the other
Investors.”
The Voting Agreement. Sections 1.1(b) and 4.3 of the Voting Agreement are
hereby deleted in their entirety and replaced with the following:
“(b) With regard to the one member (the “Series C Director”) to be elected by the
holders of a majority of the then issued and outstanding shares of Series C Preferred
Stock (the “Series C Preferred Majority”), pursuant to Article IV (B) Section 5 of the
Company's Restated Certificate, one director designated by VantagePoint Venture
_ Partners. The Series C Director shall initially be Jim Marver.”
“4.3 - Amendments and Waivers. Any term hereof may be amended or waived
only with the written consent of the Company, the Series A and B Preferred
Majority, the Series C Preferred Majority and the Common Majority.
Notwithstanding the foregoing, the provisions of Section 1.1(b) and this second
sentence of this section 4.3 may be amended and the observance of any term thereof
may be waived (either generally or in a particular instance and either retroactively or
prospectively) only with the written consent of the Vantage Point Venture Partners.
Provided further, this Agreement may be amended with only the written consent ofPage 215 the Company for the sole purpose of including additional purchasers of Series C
Preferred Stock pursuant to the Series C Preferred Stock Purchase Agreement dated
_ May 24", 2006 as “Investors.” Any amendment or waiver effected in accordance
with this Section 4.3 shall be binding upon the Company, any Investor and any
Common Holder, and each of their respective successors and assigns.” -
The Right of First Refusal and Co-Sale Agreement. Section 4.2 of the Right of .
First Refusal and Co-Sale Agreement is hereby deleted in its entirety and replaced
with the following:
“4.2 Amendments and Waivers. Any term of this Agreement may be amended
or waived only with the written consent of the Company, holders of at least a
majority of the Series A Preferred Stock, holders of at least a majority of the Series B
Preferred Stock, holders of at least a majority of the Series C Preferred Stock and
holders of a majority of the Founders’ shares (or their respective successors and
assigns) voting together as a class. Notwithstanding the foregoing, this Agreement
may be amended with only the written consent of the Company for the sole purpose
of including additional purchasers of Series C Preferred Stock pursuant to the Series
C Preferred Stock Purchase Agreement dated May 24", 2006 as “Investors.” Any
amendment or waiver effected in accordance with this Section 4.2 shall be binding
upon the Company, the Series A Stockholders, the Series B Stockholders, the
Investors and any holder of Founders’ Shares, and each of their respective successors
and assigns.”
Governing Law. This Amendment Agreement shall be governed in all respects by
the laws of the State of California without application of principles of conflicts of
law.
Counterparts. This Amendment Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together shall
constitute one instrument.
Effect_of Amendment. Except as amended as set forth above, the Transaction
Agreements shall continue in full force and effect and are hereby ratified and
affirmed in all respects. By executing this Amendment Agreement:
(i) Each Investor shall become a party to the Investors’ Rights Agreement, as
amended hereby and as ‘such agreement may be further amended in
accordance with its terms, and be bound by its terms and conditions as an
Investor (as such term is defined in the Investors’ Rights Agreement);
(ii) Each Investor shall become a party to the Voting Agreement, as amended
hereby and as such agreement may be further amended in accordance with its
terms, and be bound by its terms and conditions as a Series C Stockholder (as
such term is defined in the Voting Agreement); and
(iii) Bach Investor who purchases 1,000,000 or more shares of Stock shall become
a party to the Right of First Refusal and Co-Sale Agreement, as amended
hereby and as such agreement may be further amended in accordance with its.Page 216 eel
terms, and be bound by its terms and conditions as an Investor (as such term
is defined in the Right of First Refusal and Co-Sale Agreement).
[Signature Page Follows]Page 217 The parties have executed this Amendment Agreement as of the date Grst writen above.
COMPANY:
TESLA MOTORS, INC.
we LAWL Nn
Title:
COMMON HOLDERS:
(Print Name)
By:
Title:
~~
SERIES B STOCKHOLDERS:
(Print Name)
By:
Title:
FOUNDERS:
| ABD LX
Mastin’ Eberhard
_ arc Tarferfing
INVESTOR:
(Print name)
By:
Title:
_ SERIES A STOCKHOLDERS:
(Pout name)
By:
Title:
ELON MUSK REVOCABLE TRUST
DATED JULY 22, 2003:
‘Punt Name)
By:
Title:Page 218 The parties have executed this Amendment Agreement as of the date first written above. _
COMPANY:
TESLA MOTORS, INC.
By:
SERIES A STOCKHOLDERS:
loa Musk. Rewacable tet clcited Tir 22,2083,
_ Print name)
By: YL
Title: _“Trogtee.
ELON MUSK REVOCABLE TRUST
DATED JULY 22, 2003:
Tloa Music.
(Print Name)
By: ; [ y L
Tifle: —Tanstee.Page 219 ‘By:
The patties have executed this Amendment Agreement as of the date first written above.
INVESTOR:
VantagePoint Venture Partners:IV (Q), LP.
By: VantagePoint Venture Associates IV, LLG,
‘Name:___ dames’ D. Marver
Title: Managing Member
‘VantagePoint Venture Batters IV, L:P.
By: ‘VantagePoint Ventice:Associates TV, LL,
Tis: General Rariphs
‘By: !
Name; A
Title: = Manan Meniber
TearneST D, ‘Marve
TURE PARTNERS
SUHE-F () :
By yi Walt elite Aasoiates iv > LLC,
its General Partner:
Same, _ Jatfies D: Manver
“Title: Managing Member
VANTAGEPOINT? VENTURE PARTNERS
Address. 1002 Baveiiey
CAN. DBI EA"
TUE aay EYPage 220 The parties ‘have executed this Amendment Agreementias of the date first wiitten:above.
INVESTOR:
VantagePoint CleanTech-Partners, L:P;
By: VantagePoint. CleanTech Associates, LLG.
Tts General
By:.
Name:
__varnes'D. Marver
‘Title: Managing Meniber.
Address: vant EPOINT VENTURE PARTNERS
inch cE ITE 300°
Marc TarpenningPage 224 wo
By:
The ‘parties have executed this Amendment Agreement as of the date first written above.
INVESTOR:
Draper Fisher J; d VII, L.P.
SV
Name: John Fisher
Title: Managing Director
Draper Fishe erg VIN, LLC
By:
Name: John Fisher
‘Title: Managing Member
Name: Timothy C. Draper.
Title: General PartnerPage 225 The parties have executed this Amendment Agreement as of the date first written above,
COMPANY:
TESLA MOTORS, INC.
By:
Title:
COMMON HOLDERS:
(Print Name)
By:
Title:
SERIES B STOCKHOLDERS:
(Print Name)
By:
Title:
FOUNDERS:
Martin Eberhard
Marc Tarpenning
INVESTOR:
Title: ~“Tyuste e.
SERIES A STOCKHOLDERS:
, Print namic)
By:
Title:
‘SERIES C STOCKHOLDERS:
(Print Name)
By:
Title:Page 226 \,
, Tide:
The parties have executed this Amendment Agreement as of the date first written above.
COMPANY:
TESLA MOTORS, INC.
By:
‘COMMON HOLDERS:
(Print Name)
By:
Title:
SERIES B STOCKHOLDERS:
(Print Name)
By:
Tide:
By: -
FOUNDERS:
Martin Eberhard
Mare Tarpenning
INVESTOR: |
Paige)
By. “Zi .voo- J- OvGeunee
SERIES A STOCKHOLDERS:
(rint name)
By
Title:
ELON MUSK REVOCABLE TRUST
DATED JULY 22, 2003:
(Print Name)
Title:Page 227 The parties bave executed this Amendment Agreement as of the date first written above.
COMPANY: . . INVESTOR:
TESLA MOTORS, INC. NAAT CR ertano |
(Print name)
By: _ 22 ZL
: By: — :
Title: . Title: _Jer€
COMMON HOLDERS: / , SERIES A STOCKHOLDERS:
(Print Name) . (Print name)
By: By:
Title: Title: .
SERIES B STOCKHOLDERS: — ELON MUSK REVOCABLE TRUST
: DATED JULY 22, 2003;
(Print Name) | . (Print Name)
By: By:
Title: Title:
FOUNDERS:
Martin Eberhard
Marc TarpenningPage 228 The parties have executed this Amendment Agreement as of the date first written above.
COMPANY:
TESLA MOTORS, INC.
By:
Title:
COMMON HOLDERS:
(Print Name)
By:
Title:
SERIES B STOCKHOLDERS:
(Print Name)
By:
Title:
FOUNDERS:
Martin Eberhard
Marc Tarpenning
*_ INVESTOR:
Gemini Consulting LLC
“—
By: | 0 Lan
Title:
SERIES A STOCKHOLDERS:
(Print name)
By:
Title:
ELON MUSK REVOCABLE TRUST
: DATED JULY 22, 2003:
(Print Name)
By:
Title:Page 229 The parties have executed this Amendment Agreement as of the date first written above.
COMPANY:
TESLA MOTORS, INC.
By:
Title:
COMMON HOLDERS:
(Print Name)
By:
yy Title:
SERIES B STOCKHOLDERS:
(Print Name)
By:
Title:
FOUNDERS:
Martin Eberhard
Marc Tarpenning
INVESTOR: »
Vilor VC, LLC
(Print name)
a |
Tite: Abas S frees LY ere g Mike
/
. SERIES A STOCKHOLDERS:
(Print name)
By:
Title:
ELON MUSK REVOCABLE TRUST
DATED JULY 22, 2003:
(Print Name) -
By:
Title:Page 230 "Nee
The patties have executed this Amendment Agreement as. bf the date first written above.
INVESTOR;
Bay Area Equity Fund J, LP, - o
By: Bay Area Equity Fund Managers I, L.L.C.
By: tethawl Lh. Madea
Name: MH iti C. Pek Sef
Title: avagiwe DieettonPage 231 a
The parties have executed this Amendment Agreement as of the date first written above.
COMPANY:
TESLA MOTORS, INC. °
By:
Title:
COMMON HOLDERS:
(Print Name)
By.
Title:
SERIES B STOCKHOLDERS:
| (Print Name)
By:
By:
Title:
FOUNDERS:
Martin Eberhard
- ‘Mare Tarpenning
INVESTOR:
Vike Hai Cepi tay Lue
SERIES A STOCKHOLDERS:
(Print name)
By:
Title:
ELON MUSK REVOCABLE TRUST
DATED JULY 22, 2003:
(Print Name)
Title:Page 232 The parties have executed this Amendment Agreement as of the date first written above.
COME ; ERS6 INVESTOR: oo TA Taste, ude fhe. .
TESLA MOTORS, INC. GEES KOR LVinds “TeusT dated Febraany Ee, (Print game)
By: , ; : pb . .
— ” By: _ AP fo
Title: Title: _ Tastee,
COMMON HOLDERS: SERIES A STOCKHOLDERS:
(Print Name) (Print name)
By: -By:
Title: __ Title:
SERIES B STOCKHOLDERS: "ELON MUSK REVOCABLE TRUST
' DATED JULY 22, 2003:
(Print Name) (Print Name)
By: By:
Title: : Title:
FOUNDERS:
Martin Eberhard
Marc TarpenningPage 233 The parties have executed this Amendment Agreement as of the date first written above.
COMPANY:
TESLA MOTORS, INC.
By:
Title:
COMMON HOLDERS:
(Print Name)
By:
Title: -
SERIES B STOCKHOLDERS:
(Print Name)
By:
Title:
FOUNDERS:
Martin Eberhard
Marc Tarpenning
INVESTOR:
Josepn Wauzam Lee Trosr ‘Darter ‘tof /
(Print name)
By: fot __- Trust EE
Title: “Jevs ree
SERIES A STOCKHOLDERS:
(Print name)
By:
Title:
ELON MUSK REVOCABLE TRUST
DATED JULY 22, 2003:
(Print Name)
By:
Title:Page 234 The parties have executed this Amendment Agreement as of the date fixst written above.
COMPANY: : INVESTOR: - Garcia Le
‘TESLA MOTORS, INC. Laney c 4: yon trneg.,
(Print naffe) CO
By: .
By:
Title: _ | Title: On -Gor_
COMMON HOLDERS: SERIES 4 STOCKHOLDERS:
(Print Name) (Print name)
By: By:
Title: __. Title:
SERIES B STOCKHOLDERS: ELON MUSK REVOCABLE TRUST
DATED JULY 22, 2003:
(Print Name) (Print Name)
By: . By:
Title: Tide:
FOUNDERS:
Martin Eberhard
Marc TarpenningPage 235 _ The parties have executed this Amendment Agreement as of the date first written above.
COMPANY:
TESLA MOTORS, INC.
By:
Title:
COMMON HOLDERS:
(Print Name)
By:
Title:
SERIES B STOCKHOLDERS:
(Print Name)
By:
Title:
FOUNDERS:
Martin Eberhard
Mare Tarpenning
INVESTOR:
TAO, LLC. .
o AlbsP
Title: Maw ages
SERIES A STOCKHOLDERS:
”
(Print name)
By:
Title:
ELON MUSK REVOCABLE TRUST
DATED JULY 22,2003: |
(Print Name)
By:
Title:Page 236 ’ TESLA MOTORS, INC,
By:
Se
Title:
a re ree
COMMON HOLDERS:
(Print Name)
’ By:
ee
Title:
Se
SERINS B STOCKROLDERS:
(Print Name)
By:
Seat
Title: ‘
FOUNDERS:
Martin Eberhard
Meso Texpenaing
INVESTOR:
c Fie Zerpeate
(Printname) THRO ME - “TRUS Fae
By:
Tide: _“TRgs¢ TES
SERIES A. STOCKHOLDERS:
(Print nae)
By:
Sa
Title;
Se
ELQN MUSK REVOCABLE TRUST
DATED JOLY 22, 2003:
Wa
@cint Name)Page 237 Seareeae
The parties have executed this Amendment Agreement as of the date first written above.
COMPANY:
TESLA MOTORS, INC.
By:
Title:
COMMON HOLDERS:
(Print Name)
By:
Title:
SERIES B STOCKHOLDERS:
(Print Name)
By:
‘By:
Title: -
FOUNDERS:
Martin Eberhard
Marc Tarpenning
INVESTOR: .
Lyng ery Rive
(rift name)
oe
SERIES A STOCKHOLDERS:
(Print name)
By:
Title:
ELON MUSK REVOCABLE TRUST
DATED JULY 22, 2003:
(Print Name)
_
Title:Page 238 etn,
' By:
-By:
The parties have executed this Amendment Agreement as of the date first written above.
COMPANY:
TESLA MOTORS, INC.
Title:
‘COMMON HOLDERS:
(Print Name)
By:
Title:
- SERIES B STOCKHOLDERS:
(Print Name)
Title:
FOUNDERS:
Martin Eberhard
Marc Tarpenning
INVESTOR:
Pet ec Reve
(Print name)
y Lifhre
ao fF
Title:
' SERIES A STOCKHOLDERS:
(Print name)
By:
Title:
_ ELON MUSK REVOCABLE TRUST
DATED JULY 22, 2003:
(Print Name)
By:
Title:Page 239 sos
f ‘
i
The parties have executed this Amendment Agreement as of thé date first written above.
COMPANY:
TESLA MOTORS, INC.
By:
Title:
COMMON HOLDERS:
(Print Name)
By:
- “Title: :
SERIES B STOCKEOLDERS:
* @rint Name)
By:
Title:
FOUNDERS:
Martin Eberhard
Marc Tarpenning
INVESTOR:
PACE ae SEQVOTA
(Print
By:
Title:-Lon Yai gavog lu
Manager ~ Manager
SERIES A STOCKHOLDERS:
(Print Names)
By:
Title:Page 240 On
The parties have executed this Amendment Agreement as of the date first written above.
COMPANY:
TESLA MOTORS, INC.
By:
Title:Page 241 )
The parties have executed this Amendment Agreement as of the date first written above.
COMPANY:
TESLA MOTORS, INC.
By:
Title:
COMMON HOLDERS:
(Print Name)
By:
Title: -
SERIES B STOCKHOLDERS:
(Print Name)
By:
Title:
FOUNDERS:
Martin Eberhard
Mare Tarpenning
INVESTOR:
MARC TTARPENATA Co
_ rint name)
Title:
SERIES A STOCKHOLDERS:
(Print name) .
By:
Title:
ELON MUSK REVOCABLE TRUST
DATED JULY 22, 2003:
(Print Name)
By:
Title:Page 242 fo.
o™
tr
The parties have executed this Amendment Agreement as of the date first Written above.
COMPANY:
" ‘TESLA MOTORS, INC.
Title:
COMMON HOLDERS:
(Pxint Name)
By:
Title:
‘SERIES B STOCKHOLDERS:
(Print Namie)
By:
Title:
FOUNDERS:
Martin Eberhard
Marc Tarpenning
INVESTOR:
User B. Tesseleron
(Print name)
"By:
Title:
SERIES A STOCKHOLDERS:
(Print name) -
By:
” Title:
ELON MUSK REVOCABLE TRUST
DATED JULY 22, 2003:
(Print Name)
By:
Title:Page 243 w ™,
. By:
The parties have executed this Amendment Agreement as of the date first written above.
COMPANY:
TESLA MOTORS, INC.
By:
Title:
COMMON HOLDERS:
(Print Name)
Title:-
_ SERYES B STOCKHOLDERS:
(Print Name)
By:
Title:
FOUNDERS:
Martin Eberhard
Mare Tarpenning
INVESTOR:
Ablor Cwrcly Dues, uP
Title: Anfato J.
fobnio Te Gonens con fh
pb ee ety Mh ae, fd Lie Ns
SERIES A STOCKHOLDERS:
(Print name)
By:
Title:
ELON MUSK REVOCABLE TRUST
DATED JULY 22, 2003:
(Print Name)
By:
Title:Page 244 ‘By:
. By:
' The parties have executed this Amendment Agreement as of the date first written above.
COMPANY:
TESLA MOTORS, INC.
Title:
COMMON HOLDERS:
(Print Name)’
Title:
SERIES B STOCKHOLDERS:
(Print Name)
By:
Title:
FOUNDERS:
Martin Eberhard
Marc Tarpenning
INVESTOR:
(Print name)
By:
Title:
SERIES A. STOCKHOLDERS:
(Print name)
By:
Tide:
ELON MUSK REVOCABLE TRUST
DATED JULY 22, 2003:
. (Print Name)
By:
Title:
Vertical Fund 1, LLP
By: 6 ¥articat GrousPage 245 The patties have executed this Amendment Agreement as of the date first written above.
COMPANY:
TESLA MOTORS, INC.
By:
Title:
COMMON HOLDERS:
(Print Name)
By:
Title:
SERIES B STOCKHOLDERS:
(Print Name)
By:
Title:
FOUNDERS: |
Martin Eberhard
More Taxpenning |
INVESTOR:
Miaca ACQUISITHON faire
(Print namic)
By:
Title: Cop [ CFO
SERIES A STOCKHOLDERS:
(Print name)
By:
Title: -
ELON MUSK REVOCABLE TRUST
(Print Name)
By:
Title:Page 246 EXHIBIT A
INVESTORS
VantagePoint Venture Partners IV (Q), L-P.
VantagePoint Venture Partners IV, Le.
VantagePoint Venture Partners [V Principals Fund, L.P.
VantagePoint CleanTech Partners, L.P.
Amphitheatre LLC (Sergey Bria)
Chris Byme
Compass Venture Partners II, L.P.
Draper Fisher Jurvetson Fund VIII, L.P.
Draper Fisher Jurvetson Partners VIII, LLC
Draper Associates, L:P.
The Dale Djerassi Revocable Trust
Michael Dubilier
Martin Eberhard
Gemini Consulting, LLC
-Valor VC, LLC
Bay Area Equity Fund I, L.P. (JP Morgan)
Kite Hill Capital LLC
GREG KOURI LIVING TRUST, dated February 2, Joseph William Lee Trust dated 10/11/
Garcia, LLC (Larry Page) .
Tao, LLC (Nicholas Pritzker Capital Management, LLC)
Tyrone Farrar Pike Separate Property Trust
Lyndon Rive
Peter Rive
Pacific Sequoia Holding LLC (Jeff Skoll)
Jeffrey B. Straube]
Marc Tarpenning
The Mark B. Templeton Revocable Trust
Valor Equity Partners LP.
The Vertical Fund II, L.P.
Mineral Acquisition Partners, Inc.Page 247 REDACTED
EXHIBIT B
SERIES A STOCKHOLDERS
Name/Address/Fax No.
Elon Musk Revocable Trust dated July 22, -4e
raxit
Martin Eberhard
~
Fax:
Marc Tarpenning
Fax: {
SDL Ventures, LLC
2800 Sand Hill Read
Menlo Park, CA Fax: (650) 854-
Jan Wright
Fax: +
Rob Ferber
~
Fax: °
Severo Ornstein & Laura Gould
Fax:
Laurie Yoler
Fax:
Rill and Karen Mogpridge
Fax:
Rainer & Susan Eberhard
Fax:
Eric & Cheryl Eberhard
a
Fax:Page 248 REDACTED
Nancy Eilerts
ti
Fax:
Carolyn Howk
Fax:
PDoue Klein
Fax: ,
Tom and Tristan Colson
Fax:
Compass Venture Partners II, L-P.
1550 El Camino Real Suite Menlo Park, CA 94025-4111Page 249 _,
.
REDACTED -
EXHIBIT C
SERIES B STOCKHOLDERS
Name/Address/Fax No.
Elon Musk Revocable Trust dated July 22,
ae
c Fax:
Martin Eberhard
Fax:
Kimbal Musk
Fax
Marc Tarpenning
Valor Equity Partners L.P.
225 W. Washington St., Suite Chicago, IL
Compass Venture Partners I, LP
1550 El Camino Real, Suite Menlo Park, CA
Jeffrey B Straubel
Malcolm Smith
Thomas E. Colson
Tristan Colson
f
Douglas H. Klein
TVEST, LLC
9020 Stony Pt. Pkwy
Suite
Richmond, VA 23235Page 250 REDACTED
EXHIBIT D
COMMON HOLDERS
Name/Address/Fax No.
Martin Eberhard
Fax:
Marc Tarnenning
Fax:
Bernard Tse
Laurie Yoler
r
Fax:
Tan Wright
or
Fax: (
Kimbat Musk
Fax: °
Robert R. Ferber, Jr.
Fax:
Simon Rothman
Ray cay wen.Page 251 EXHIBIT 16Page 252 EXHIBIT 16Page 253 REDACTED
From: Elon Musk [c
Sent: Sunday, July 16, 2006 11:44 rin
To:
Subject: Interviews this week
As we talked about, I'd appreciate being part of the interviews this week for at least the
major media. It pisses me off being referred to as "an early investor" about as much it
would annoy you to be called "an early employee".
This email has been scanned by the MessageLabs Email Security System.
For more information please visit http://www. messagelabs.com/emailPage 254 EXHIBIT |j(
iwPage 255 EXHIBIT [1/
sfPage 256 REDACTED
soocn Original Messane-----
From: mharrigant .
Sent: Tuesday, July 18, 2006 1:52 PM
To: dsmith( fm; ssmith'! m; kstriewski@ : kehin
supject: Elon
To Everyone Who is Involved in Tesla Media Relations:
Unlike many wealthy folks who prefer to remain in the background, Elon Musk really wants
to take an active role in promoting Tesla Motors.
Please take this into account when talking to any media about Tesla.
Elon wants to do interviews with publications whenever possible and he has a lot to say
about Tesla and the ideals we represent.
This is important: we need to ensure that our messaging doesn't portray him as merely "an
early investor". Elon currently owns half the company, lead or co-lead all three
investment rounds, and (more importantly) is an active Chairman who has helped shape the
company and the product from the very beginning. Flons interest in electric vehicles pre-
dates Tesla by at least 10 years and he is active in many environmental protection
organizations. ,
It is an important part of our credibility as a company that we have the backing of such
an influential person as Elon. Let's be sure to leverage this as much as possible.
Mike Harrigan
St ene Original Message
Subject: RE: speeches at Siag1NN event
From: "Elon Musk" « m>
Date: Tue, July 18, 2006 11:10 am
To: mharrigan€t t
Mike, to be clear, I would like to talk with every major publication within reason. The
way that my role has been portrayed to date, where I am referred to merely as "an early
investor" is outrageous. That would be like Martin being called "an early employee".
Apart from me leading the Series A & B and co-leading the Series C, my influence on the
car itself runs from the headlights to the styling to the door sill to the trunk, and my
strong interest in electric transport predates Tesla by a decade. Martin should certainly
be the front & center guy, but the portrayal of my role to date has been incredibly
insulting. ,
I'm not blaming you or others at Tesla -- the media is difficult to control. However, we
need to make a serious effort to correct this perception.
From: mharrigan( ere (0 |
Sent: Tue 7/18/2006 10:54 AM
To: Elon Musk
Subject: RE: speeches at Sigl00 event
I agree and I'm cc'ing Martin on this regarding your thoughts on his speech. He still
needs to keep it brief (5-6 minutes).
‘
We have 6 foot high posters at each display area (areas for powertrain, styling, safety,
handling, etc.) and have trained employees at each station to discuss. Also we have a
2Page 257 @ REDACTED ®
massive FAQ that the employees have studied to answer questions (but we are not handing
these out to customers). In the press kit is a reduced FAQ along with several press
releases, bios, photos, etc. We made a decision to not hand out collateral to customer
because it's expensive and usually ends up on the floor of an event. Instead we'll be
doing email followup. .
I'm getting a current copy of the confirmed press and will forward it to you when I get
it. Martin has interviewed with NYT and WSJ in the past two days. NYT is running an
article tomorrow AM. WSJ, LA Times will run articles on Thursday AM.
Mike
> Sounds good. I will just talk off the cuff for 5 mins about why I
decided to fund Tesla and my long term view of the company, along the
lines of my quote in the press release (low cost family vehicles!).
I do think it is really important that Martin thoroughly sell the
awesome nature of the Tesla Roadster during his talk, particularly to
ustomers.
The press cares about the back story, but for customers it is all
about getting them to buy. It sounds odd to us who are immersed in
it, but a lot of people will have completely wrong ideas about
everything from battery disposal to handling to crash safety. Do we
have descriptive posters and/or brochures describing the features and
addressing FAQ?
>
> Do we have a final press list? For example, the one I saw last week
> didn't have NYT and WSJ confirmed. If they are still not confirmed, I
VVVVVaAVV VY VV
> can call some of the people I know over there and try to get them to
attend.
From: mharrigan€
Sent: Tue 7/18/2006 8:11 AM
To: eberhardé@: 7 Elon Musk
Ce: gretchen@
Subject: speeches at’Sigl00 event
Martin and Elon,
It is important for the two of you to give brief speeches at both the
media event (6:30PM) and the main event. I think the speeches can be
similar for both events with perhaps a bit more detail for the media.
If either of you want help writing your remarks or want someone to
review them please feel free to call on me or BWR.
Presentation Overview
MEDIA EVENT:
The Roadsters will be hidden during introductions.
6:30 I will be doing the welcome and introducing Elon.
6:35 Elon will talk for 3-5 minutes and then introduce Martin. Elon,
it's your speech but I think it would be great to talk about what made
VVMNVVVVV VV VV VV VV VV VV VV VV VV VV OV
> you believe in the concept of Tesla and the future you see for the
company.
> When you introduce Martin you should mention his background and how
> you met.
>Page 258 >
VVVVVYV
>
>
>
6:40 Martin will talk about events leading to the formation of Tesla
and the events over the past three years. Martin then moves into a
brief description of the Tesla Roadster capabilities (mileage,
performance,
etc.) and "introduces" the roadster.
6:45 The Roadsters glide out from behind the scrim to the amazement of
the crowd ;-) (Alternately we may decide to cover the cars and pull
the covers off at this point). People gather around the cars. Martin
welcomes everyone to take rides, photograph the cars and visit the
museum displays.
>
>
>
VVVVVVVV VV VV VV VV VV VV VV VV VV
6:45 ~ 7:00 The black car takes people for rides. The red car is ;
static for people to get in, open up, photograph, etc. Tesla employees
are manning their display stations to answer questions.
7:00 - The rides stop and we gather everyone for a final Q&A and
thank-you.
Press event is over by 7:30.
MAIN EVENT
We will start the presentation at 9:15 (approximate). Gretchen will
introduce Elon. Elon can give much the same talk but slanted more for
customer and less for press. Elon introduces Martin. Martin gives the
same talk except that he doesn't “introduce" the Roadsters since they
have been out taking people for rides already. Instead he encourages
everyone to enjoy the evening and circulate among the displays to
‘learn more about the car and technology.
During the presentation the cars will not be circulating, the display
areas will be darkened, and the stage area lit up. Also the videos on
the scrims will change to static Tesla logos. The entire presentation
should last no longer than 15 minutes (or less!).
Mike
This email has been scanned by the MessageLabs Email Security System.
For more information please visit http://www.messagelabs.com/email
This email has been scanned by the MessageLabs Email Security System.
For more information please visit http://www.messagelabs.com/email
This email has been scanned by the MessageLabs Email Security System.
For more information please visit http://www.messagelabs.com/emailPage 259 co
=
-
a
<
Pd
luPage 260 EXHIBIT 18Page 261 REDACTED
From: Elon Musk [i
Sent: Thursday, July 20, 2006 3:45 PM
To: dsmith@; 4, ssmith: Cc: Martin Eberhard; Mike narrigan
Subject: RE: Elon
Tesla in the NY
Times “0-60 i... ;
I was incredibly insulted and embarrassed by the NY Times article, where I am
not merely unmentioned, but where Martin is actually referred to as the chairman.
If anything like this happens again, please consider the PCGC relationship with Tesla to
end immediately upon publication of such a piece. Please ensure that the NYT publishes a
correction as soon as possible.
oa Original Messaqe-----
From: mharrigan@
Sent: Tuesday, July 18, 2006 1:52 PM
To: dsmith@y +; ssmith@y * kstriewski kchinft -
<
Subjecc: Elon
To Everyone Who is Involved in Tesla Media Relations:
Unlike many wealthy folks who prefer to remain in the background, Elon Musk really wants
to take an active role in promoting Tesla Motors.
Please take this into account when talking to any media about Tesla.
Elon wants to do interviews with publications whenever possible and he has a lot to say
about Tesla and the ideals we represent.
This is important: we need to ensure that our messaging doesn't portray him as merely "an
early investor". Elon currently owns half the company, lead or co-lead all three
investment rounds, and (more importantly) is an active Chairman who has helped shape the
company and the product from the very beginning. Elons interest in electric vehicles pre-
dates Tesla by at least 10 years and he is active in Many environmental protection
organizations.
It is an important part of our credibility as a company that we have the backing of such
an influential person as Elon. Let's be sure to leverage this as much as possible.
Mike Harrigan
Mn ene nn Original Message
Subject: RE: speeches at $iql00 event
From: "Elon Musk" < m>
Date: Tue, July 18, 2006 11:10 am
To: mharrigan@
Mike, to be clear, I would like to talk with every major publication within reason. The
way that my role has been portrayed to date, where I am referred to merely as "an early
investor" is outrageous. That would be like Martin being called "an early employee".
Apart from me leading the Series A & B and co-leading the Series C, my influence on the
1Page 262 @ REDACTED @
car itself runs from the headlights to the styling to the door sill to the trunk, and my
strong interest in electric transport predates Tesla by a decade. Martin should certainly
be the front & center guy, but the portrayal of my role to date has been incredibly
insulting. /
I'm not blaming you or others at Tesla -- the media is difficult to control. However, we
need to make a serious effort to correct this perception.
From: mharrigan@ 3.com]
Sent: Tue 7/18/2uu6 10:54 AM
To: Elon Musk
Subject: RE: speeches at Sigl00 event
I agree and I'm cc'ing Martin on this regarding your thoughts on his speech. He still
needs to keep it brief (5-6 minutes).
We have 6 foot high posters at each display area (areas for powertrain, styling, safety,
handling, etc.) and have trained employees at each station to discuss. Also we have a
massive FAQ that the employees have studied to answer questions (but we are not handing
these out to customers). In the press kit is a reduced FAQ along with several press
releases, bios, photos, etc. We made a decision to not hand out collateral to customer
because it's expensive and usually ends up on the floor of an event. Instead we'll be
doing email followup.
I'm getting a current copy of the confirmed press and will forward it to you when I get
it. Martin has interviewed with NYT and WSJ in the past two days. NYT is running an’
article tomorrow AM. WSJ, LA Times will run articles on Thursday AM.
Mike
Sounds good. I will just talk off the cuff for 5 mins about why I
decided to fund Tesla and my long term view of the company, along the
lines of my quote in the press release (low cost family vehicles!).
Ido think it is really important that Martin thoroughly sell the
awesome nature of the Tesla Roadster during his talk, particularly to
ustomers.
The press cares about the back story, but for customers it is all
about getting them to buy. It sounds odd to us who are immersed in
it, but a lot of people will have completely wrong ideas about
everything from battery disposal to handling to crash safety. Do we
have descriptive posters and/or brochures describing the features and
addressing FAQ?
>
VVVVVaAVVVV VV
> Do we have a final press list? For example, the one I saw last week
> didn't have NYT and WSJ confirmed. If they are still not confirmed, I
> can call some of the people I know over there and try to get them to
attend.
From: mharrigan@ Sos som]
Sent: Tue 7/18/2uve 8:LLl AM
To: eberhardé ? Elon Musk
Cc: gretchen@
Subject: speeches at siguuy event
Martin and Elon,
VVVVVVVV VV VV VVPage 263 VVVVVVVVV VV VV VV VV
v
It is important for the two of you to give brief speeches at both the
media event (6:30PM) and the main event. I think the speeches can be
similar for both events with perhaps a bit more detail for the media.
If either of you want help writing your remarks or want someone to
review them please feel free to call on me or BWR.
Presentation Overview
MEDIA EVENT:
The Roadsters will be hidden during introductions.
6:30 I will be doing the welcome and introducing Elon.
6:35 Elon will talk for 3-5 minutes and then introduce Martin. Elon,
it's your speech but I think it would be great to talk about what made
you believe in the concept of Tesla and the future you see for the
company.
VVVVVVVMVV VV
>
>
>
When you introduce Martin you should mention his background and how
you met.
6:40 Martin will talk about events leading to the formation of Tesla
and the events over the past three years. Martin then moves into a
brief description of the Tesla Roadster capabilities (mileage,
performance,
etc.) and "introduces" the roadster.
6:45 The Roadsters glide out from behind the scrim to the amazement of
the crowd ;-) (Alternately we may decide to cover the cars and pull
the covers off at this point). People gather around the cars. Martin
welcomes everyone to take rides, photograph the cars and visit the
museum displays.
>
>
>
VVVVVVVVVV VV VV VV VV VV VV VV VV VV
6:45 ~ 7:00 The black car takes people for rides. The red car is
static for people to get in, open up, photograph, etc. Tesla employees
are manning their display stations to answer questions.
7:00 - The rides stop and we gather everyone for a final Q&A and
thank-you.
Press event is over by 7:30.
MAIN EVENT
We will start the presentation at 9:15 (approximate). Gretchen will
introduce Elon. Elon can give much the same talk but slanted more for
customer and less for press. Elon introduces Martin. Martin gives the
same talk except that he doesn't "introduce" the Roadsters since they
have been out taking people for rides already. Instead he encourages
everyone to enjoy the evening and circulate among the displays to
learn more about the car and technology.
During the presentation the cars will not be circulating, the display
areas will be darkened, and the stage area lit up. Also the videos on
the scrims will change to static Tesla logos. The entire presentation
should last no longer than 15 minutes (or less!).
Mike
This email has been scanned by the MessageLabs Email Security System.
3Page 264 2 For more information please visit http://www.messagelabs.com/email
>
>
This email has been scanned by the MessageLabs Email Security System.
For more information please visit http://www.messagelabs.com/email
This email has been scanned by the MessageLabs Email Security System.
For more information please visit http://www.messagelabs.com/emailPage 265 EXHIBIT 19Page 266 EXHIBIT 19Page 267 Proprietary and Confidential
TESLA MOTORS
Confidential Business Plan
Version 4.12 April
Copy Number:
Distributed to:
Date:
Tesla Motors Inc.
1050 Bing Street
San Carlos, CA Tel: (650) 413-Fax: (650) 413-
Page1iofTere! A AAANT ARG 2007 Tesia Motors Inc.Page 268 &
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.
1050 Bing Street
San Carlos, CA Tel: (650) 413-Fax: (650) 413-
EXe@ cutive SUMIMALPY .......c:cccecceeeeesseeeceeeenssesssanseesssssseseeeessssenceeeesesssenscaceoessssensnasseseaesseaseenenss INTFOCUCING TeSla MOtOIS....cccccscsassssseesesessccscceceeseesseeeeeeeeeenersensesannenseeadaduuscessasenauecensuscenseess What Problems Are We SOWING? ........cccccssecssccssssecsscssssevecseesereussaussncavscesacseceucauuusuaessseneusanasensasareecense Tesla’s Difference ..........ceeccccssesssessessssssscssesscssssesscssssanecsssesesaussssseeeeseessesacsecsacessnesseass eesensevesseesseee Tesla’s Design Principles.............cecccecccecececececessesenseseessessecnseessecseeesssesssasstessnegusensceseassaeerssersenseseaee
The Tesla CuStoOmer......c.sccsecccccceececeee eee eeeeeeennensnenseececeeeeeeceeeeeceseneeeaneccaseeenseneeeuasesetessanqeanes Existing Green Car Buyers ..0.........ecccceccccececeeeeeeceeeesaeseeaeeeesssaeescnaaseecsseeeeeceuacecsensacecesseeecseneeceesteeesens Total Cost of Ownership Perspective .............cccccsccccssesessssssetescssecsevsecseceaecsecseensecsaesaeseeasecescanesueseenseess Convergence of the Right and Left... ccscccscccssssesesessesesssscesecssssersarsssessesasessessseseusassansasseeseneaesaess The Evolution of the Tesla CUStOMED .............ccccccccccceeecaceeteeeseecenssaceeecueeeecauseeesesececuseaeseeceeeeseersesenenee Affluent Progressive CUStOMESS .........ccsscsseccesecesesenaeecssessaeseeecsecsuarseuceeucenesaesacecenesensuneseterecesengenerenseaes Market Potential ...............:sccssccecsesseesseeseeeeseeeseeesneesesesaessaassaeesecesncessocseseueseseaeesseeeneesseesesaas Traditional APPro@ch..........eccccecscesssceseecessaseeseessnsecssecssneecsaeesecesseeccseeensuaesaucensuaeusuaesuseeeuseansseneven
Tesla Motors Approach.........e.cecscesescessesceceseceeesesceeseceaeeessesaecaseaesasaesassaesausesseseessesaeseeeesanseaseaessesses
Competing for Share in Existing SEQment ..........ccccccccssssssesscsseesssesseesseesacesenseseacseeesaecotecseeseesneaese The Expanding Market for Hybrids as a Proxy for Tesla MOtors ..........scccssccsscesssessecseeeseesseeseeseess
2 seat sports cars >$75K: A Proxy for Roadster Market Potential ..........cccccessssscssssesessseseesssneereees Creating New Markets for the Tesla ROa@dSter..........ccccssssscssesssssnsessecsseessaeseessseensaectecnseseesansaerenes Performance Luxury Sedans— A Proxy for WhiteStar Potential ..........ccccsscscecssscssesstsssresseesseeseteees International DEMANG 1.2... ssscecsessessssessesssscssessessecsesancsessesseessecsassessesenscassersssaeesanesaesausensatasinssesinseneas COnClUSION 2.0... ceececessecssneeeseecsseeecsaeeseeeeusesessassssseucaasassceusseeceesesssseossureusuasuseauaceusuuasaeesacseececenseerss
The Tesla Roadster .0........cscccccssesessssseesnsenessessenssessneneenneenesaneuessasseneessssseeeensaceneseecrsersaracaas SPecificAtions cece
General Vehicle Concept and PUrpOSG ........:c:csecceseercesesseesessasensseseesssesansaesseeseesseesesesessesaesonserssetenss TOCHNOlOGY OVEVICW «0... .eceeeeeeseeceeseceseeseeseeseeseesetacesessecessasanarsesuausessaeseesansaassgessaesansarssesanessesaneessaeeaeses DevelopMent Status 0.0... cccsscssccsssceecsesesseeeseeeeseessceseneessenessenessceesseseecsseeesensesessusseesseeeeeseeseseaseneeeaes Safety Testing Status.........ccscsccsscssssssscssecssessuessaseseeseecseceseesseseseecaeeseeseaseseeeseusaeescusaeasseeesseesensensese
WhiteEStAL ..... se eesteeessneeesseeenseeeseeeaeeeesecsaneceeesusnnesnaneaaseesasensasseenseecensueeessacesesaeesseceneneeesseneasees SPeCifiCAtions .........ccccccsscsssesssceseccsecsssecseecesessesssensecsaecnsecseecnessceseseaesessaassaesiaaseeaceaserecennsseesseese
General Vehicle Concept and Purpose ussuesesusesuessuecssesessecsnscsavessvessacessessuesseseesseeessnstecerasstsvessereneeten Technical Highlights.........0..c.ccccscsseescssesscsscssesecsessessessesesssesesseseecersersnceeeeres eesuesaseaseuveseenesaeeseessseeeneenes Performance Specifications .......ccccssssssccsscsseesssecsecstecseesseesssassesseecsueesansseesaseceecceeanenseesesseceseanenenenes REMNGQC sss esecceecesseeseecessenseeeseeesaeceeenaecsaesacessaseanseaaesuesaescessaeesaessaeasececaasssuesesesueesarenteeeesserssse
Another adjacent segment for the WhiteStar sedan can be described as the “near-performance luxury
class” segment, defined as the following: Acura TL, Audi A4, BMW 3 series, Infinity G35, Jaguar X
type, Lexus IS series, Mercedes-Benz C class, Saab 9-5, Volvo S60. Some customers in this segment
who have the financial means will be motivated to step up to the higher price point of the WhiteStar in
order to satisfy their desire to purchase a zero-emissions and zero-oil vehicle. This may be a small
portion of the total 2006 unit sales of approximately 430,000, but will still constitute a significant
contribution towards the sales goal of WhiteStar due to the large size of the market (1% share of this
market represents 4,300 units, or roughly 40% of WhiteStar sales goal for 2011).
International Demand
International markets represent a significant growth opportunity in the future for Tesla Motors.
Because the focus of the company in the coming years is domestic sales, we have not included any
international sales in our financial projections. However, it is clear that significant interest exists
overseas. Although we have made no effort to promote the Tesla Roadster internationally, we have
received over 3400 non-US leads. Canada, Great Britain, Germany and Australia represent the largest
number of international leads.
Conclusion
While traditional approaches to estimating market potential for new entrants in the automobile market
may not be appropriate for Tesla Motors, analysis of various market segment proxies illustrates the
fact that Tesla’s sales projections through 2011 are achievable or even conservative. Many factors are
converging that would indicate that the social and psychological drivers of sales for alternative fuel
vehicles will increase demand in the future. The demand for the Roadster is likely to exceed our
production capacity for several years. WhiteStar is likely to attract buyers from a broad range of
traditional market segments that desire a guilt-free or morally superior vehicle without the tradeoff of
carrying capacity and size that is a constraint with the Roadster. Achieving the sales target for
WhiteStar will require only a small share of each of these traditional market segments, including
current buyers of Hybrid vehicles. Ultimately, the true size of the market potential will only become
known once the public becomes more aware and educated about the advantages of electric vehicles
and the breakthroughs in technology that Tesla Motors brings to the marketplace.
To further achieve the low weight of the Roadster along with exceptional body strength and
appearance, all body panels are made of carbon fiber. The only exceptions are the bumpers that must
be constructed of urethane to resist 2.5 mph impact without deformity. The use of 100% carbon-fiber
body panels is rare in automobiles.
Development Status
Tesla’s NPI product development process (see “Business Practices” section) features three phases of
operational vehicles (1) mule cars, (2) engineering prototypes (EP), and (3) validation prototypes (VP).
The test phase of ten engineering
prototype cars has been underway since
summer 2006. Though largely
representative of production vehicles, the
EP vehicles are manufactured from
prototype materials and processes that
may not represent those of final
production. The EPs’ purpose is to provide
running cars that can be tested to finalize
the design of the final production version.
The EP testing regimen includes physical
fit of components, the interaction of various
systems, and initial durability and safety
testing. In one such test, called “Pave”
testing, the Roadster is driven for 1,miles over cobblestones designed to
punish the suspension components of the
Tesla Roadster.
In another test, the Roadster is driven on a frozen lake in Sweden to test its cold weather handling and
braking capabilities. Based upon the experience gained in this test, the traction control algorithms and
anti-lock braking systems are tuned and
calibrated for maximum effectiveness in
the production version of the car.
Ten validation prototypes are currently
being built, integrating fixes and needed
improvements identified in the EP
testing phase. The VPs will be used for
final durability and safety testing prior to
start of production (SOP).
The Tesla Roadster’s NPI Final
Approval gateway is planned for late
March 2007. It will be followed by
production approval in early summer,
anticipating first customer deliveries in
fourth quarter of 2007.
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Protection in Interior Im
Restraints
for the Driver from the
Vehicles
Door Locks
Frontal 0° belted
Frontal 30° belted
Frontal! 0° unbelted
Frontal 30° unbelted
Belt Assemblies
Belt
Im Protection
Resistance vehicles
Electric-Powered Vehicles: and Electric Shock Protection
Frontal 0° and 30° & roll-over
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Design Quality Confirmation Milestone
Review of the results to-date from the first stage prototype build and the test, development and
validation program. Review of the actions being undertaken to resolve the issues identified and the
status of the business case and cost targets. An exhibit from the DQC meeting held last December
regarding progress against a specific engineering deliverable “T8” (in this case, crash testing) is
reproduced below:
~,
T8 Progress - EP#8 - Initial Crash YW
* 28 km/h frontal crash (no fire) completely successfully
¢ 48 km/h O° all fire test completed successfully
¢ Roll-over (FMVSS 305) completed successfully
Cash Requirements
In 2007, Tesla Motors requires $40M to order to grow the company, bring the Roadster program into
full production and continue development of the WhiteStar program. In 2008, Tesla Motors will require
an additional $80M to bring WhiteStar into production.
2007 2008 2009 2010
Wl. TRANSACTION DOCUMENTS
A. Series D Preferred Stock Purchase Agreement, dated May 9, 2007, by and
among the Company and the Purchasers listed on Exhibit A thereto... eee
Exhibit A Schedule of Purchasers
Exhibit B ~ Fourth Amended and Restated Certificate of Incorporation
Exhibit C Stockholders of the Company Prior to and After the Closing
Exhibit Legal Opinion of Latham & Watkins LEP
| Exhibit B Indemnification Agreement
B. Schedule of Exceptions............. sreetecesecesennseseeenananssseeeeceonsesessnseacananassceeeeceasnueneeeetestee
C. Third Amended and Restated Investors’ Rights Agreement, dated May 9, 2007,
by and among the Company, the Stockholders listed on Exhibit A Exhibit B and
Exhibit C thereto and the Investors listed on Exhibit D... weeeenseeceeseesecenseeeseassacsene
D. Third Amended and Restated Right of First Refusal and Co-Sale Agreement,
dated May 9, 2007, by and among the Company, the Founders (as defined _
therein) and the Major Holders (as defined therem) oo... ccc esecees eesececesceovene
E. Third Amended and Restated Voting Agreement, dated May 9, 2007, by and
“among the Company, the Common Holders listed on Exhibit E thereto and the
Investors (as defined therein)...
THIRD AMENDED AND RESTATED
~ INVESTORS’ RIGHTS AGREEMENTPage 304 ‘TESLA MOTORS, INC.
THIRD AMENDED AND RESTATED
INVESTORS’ RIGHTS AGREEMENT
This Third Amended and Restated Investors’ Rights Agreement (the “Agreement” is
made as of the 9th day of May, 2007, by and among Tesla Motors, Inc., a Delaware corporation
(the “Company”), the Series A stockholders listed on Exhibit A hereto (the-“Series A
Stockholders”), the Series B stockholders listed on Exhibit B hereto (the “Series B
Stockholders”), the Series C stockholders listed’on Exhibit C hereto (the “Series C
Stockholders”) and the investors listed on Exhibit D hereto (each of which is herein referred to as
an “Investor”, and collectively, the “Investors”).
RECITALS
A. The Company, the Series A Stockholders, the Series B Stockholders and the .
_ Series C Stockholders previously entered into a Second Amended and Restated Investors’ Riglits -
Agreement dated May 10, 2006 (the “Prior Agreement”), and such parties now wish to amend
_and restate the Prior Agreement in its entirety, and replace it with this Agreement which shall
heretofore constitute the entire agreement of the parties with respect to the specific subject matter
hereof, and supercede in its entirety the Prior Agreement, and all other agreements or
understandings between or among the parties hereto with respect to such spécific subject matter.
. B. The Company and the Investors have entered into a Series D Preferred Stock
Purchase Agreement (the “Purchase Agreement”) of even date herewith- pursuant to which the
Company desires to sell to the Investors and the Investors desire to purchase from the Company ~
shares of the Company’s Series D Preferred Stock. A condition to the Investors’ obligations
under the Purchase Agreement is that the Company, the Series A Stockholders, the Series B
Stockholders, the Series C Stockholders and the Investors amend and restate the Prior Agreement
and enter into this Agreement, which shall supercede the Prior Agreement in all respects in order
to provide the Investors, the Series A Stockholders, the Series B Stockholders and the Series C
Stockholders with (i) certain rights to register shares of the Company’s Common Stock issuable
upon conversion of the Preferred Stock held by the Investors, the Series A Stockholders, the
Series B Stockholders, and the Series C Stockholders, (ii) certain rights to receive or inspect
information pertaining to the Company, and (iii) a right of first offer with respect to certain
- issuances by the Company of its securities. The Company, the Series A Stockholders, the Series
B Stockholders, the Series C Stockholders, and the Investors each desire to induce the Investors
to purchase shares of ‘Series D Preferred Stock pursuant to the Purchase Agreement by agreeing
to the terms and conditions set forth herein. , ,
SV\557590.7 Tesla - Series D - Investors' Rights Agreement -Page 305 AGREEMENT
the Registrable Securities then outstanding that the Comp
Registrable Securities
mailing of such notice by the Company in accordance with Sectio
If the Holders jnitiating the registration sequest hereund
Initiating Holders”) intend to distribute the Registrable Securities covered by their request’b
means of an underwriting, they shall so advise the Company as 4 part of their request ma
on 1.2 and the Company shall include such information in the written noti
pursuant to this Secti
referred to in subsection 1.2(a). The underwriter will be selected by a majority in interest of t
Initiating Holders and shall be reasonably acceptable to the Company. Ini such event, the right
le Securities in such registration shall be conditioned up
any Holder to include his Registrab
e inclusion of such Holder’s Registrable
Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of
All Holders proposing
Initiating Holders and such Holder) to the extent provided herein.
distribute their securities through such underwriting shall (together with the Company
provided in subsection 1.5(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting. Notwithstanding any other provision:
of this Section 1.2, if the underwriter advises the Initiating Holders in writing that marketing
factors require a limitation of the number of shares to bé underwritten, then ihe Initiating Hold :
shall so advise all Holders of Registrable Securities which would otherwise be underwritte
- pursuant hereto, and the number of shares of Registrable Securities that may be included. in th
“underwriting shall be allocated among all Holders thereof, including the Initiating Holders, it
proportion (as nearly as practicable) to the amount of Registrable Securities of the Company:
. owned by each Holder; provided, however, that the number of shares of Registrable Securities to
> be included in such underwriting shall not be reduced unless all other securities are first entirely.
exchided from the underwriting.
Soe tL Tawoctnre! Riohts AgreementPage 307 ! SE ie te ON
3!
gah
me m Boe arias
‘ : : #
esident of the Company stating that in the good faith judgment of the Board of Directors of the |”. -
curities of participants in a Company stock plan, a registration relating. to a corporate . he
organization or transaction under Rule 145 of the Securities Act, a registration on any form that “> 4-2.
“not include substantially the same information as would be required to be included in a.Page 308 Magri
_ Tequesting registration of Registrable Securities.
Tegarding itself, the Registrable Securities held by it, and the intended method of disposition of
‘pursuant to Section 1.2 or Section 1.4 of this Agreement if, as a result of the application of the
discounts and commissions incurred in connection with registrations, filings or qualifications
- §V\557590.7 Tesla - Series D - Investors’ Rights Agreement
(h) ' -Provide : a transfer agent and repistrar for all ‘Registrable Securities
registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each =
case not later than the effective date of such registration.
.@ Use its best efforts to furnish, at the request of any Holder
requesting registration of Registrable Securities pursuant to this Section 1, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection with a registration
' pursuant to this Section~I, if such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the registration statement with
respect to such securities becomes effective, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and substance as is
‘customarily given to underwriters in an underwritten public offering, addressed to the .
underwriters, if any, and to the Holders requesting registration of Registrable Securities and (ii) a
letter dated such date, fromi the independent certified public accountants of the Company, in form
and substance as is customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to. the underwriters, if any, and to the Holders
“1.6 Furnish Information. It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Section 1 with respect to the Registrable
Securities of any selling Holder that such Holder shall furnish to the Company such information
such securities .as shall be required to effect the registration of such Holder’s Registrable -
Securities. The Company shall have no obligation-with respect to any registration requested .
preceding sentence, the number of shares or the anticipated aggregate offering price of the
Registrable Securities to be included in the registration does not equat or exceed the number of
shares or the anticipated aggregate offering price required to originally tigger the Company’s
obligation to initiate such registration as-specified in subsection 1/2(a) or subsection 1.4(b)(2),
whichever is applicable. :
1.7 Expenses of Registration.
(a) Demand Registration. All expenses other than underwriting
pursuant to Section 1.2, including (without limitation) all registration, filing and qualification
fees, printers’ and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders selected by them with |
the approval of the Company, which approval shall not be unreasonably withheld, shall be borne. .
by the Company; provided, however, that the Company shall not be required to pay for any
expenses of any registration proceeding begun pursuant to Section 1.2 if the registration request -
is subsequently withdrawn at the request of the Holders of a majority of the Registrable *
Securities to be registered (in which case all participating Holders shall bear such expenses), «
unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one «:
demand registration pursuant to Section 1-2; provided further, however, that if at the time of such .:
withdrawal, the Holders have learned of a material adverse change in the condition, business, or -
7. -Page 309 f-. ‘spects of the Company from that known to the Holders at the time of their request and have
2withdrawn the request with reasonable promptness following disclosure by the Company of such
material adverse change, then the Holders shall not be required to pay any of such expenses and
all retain their rights pursuant to Section 1.2. ,
(b) Company Registration.’ All expenses other than underwriting
discounts and commissions incurred in connection with registrations, filings or qualifications of . °
gistrable Securities pursuant to Section 1.3 for each Holder (which right may be assigned as _
vided in Section 1.12), including (without limitation) all registration, filing, and qualification
es, printers’ and accounting fees, fees and disbursements of counsel for the Company and the
asonable fees and disbursements of one counsel for the selling Holder or Holders selected by
m with the approval of the Company, which approval shall not be unreasonably withheld, :
all be borne by the Company.
(c) Registration on Form S-3. All expenses other than underwriting
counts and commissions incurred in connection with a registration requested pursuant to
ction 1.4, including (without limitation) all registration, filing, qualification, printers’ and
ounting fees and the reasonable fees and disbursements of one counsel for the selling Holder
olders selected by them with the approval of the Company, which approval shall not be
‘easonably withheld, and counsel for the Company, shall be borne by the Company.
1.8 | Underwriting Requirements. In connection with any offering involving an
rwriting of shares of the’ Company’s capitalstock, the Company shall not be required under
on 1.3 to include any of the Holders’ securities in such underwniting unless they accept the
s of the underwriting as agreed upon between the Company and the underwriters selected by’
by other persons entitled to select the underwriters), and then only in such quantity as the
writers determine in their sole discretion will not jeopardize the success of the offering by
mpany. If the total amount of securities, including Registrable Securities, requested by-
kholders to be included in such offering exceeds the amount of securities sold other than by
mpany that the underwriters determine in their sole discretion is compatible with the
sss of the offering, then the Company shall be required to include in the offering only that .
r of‘such securities, including Registrable Securities, which the underwriters: determine in .
le discretion will not jeopardize the success of the offering (the securities so included to
ortioned pro rata among the selling stockholders according to the total amount of securities
to be included therein owned by each selling stockholder or in such other proportions as
utually be agreed to by such selling stockholders) but in no event shall (i) the amount of
ies of the selling Holders included in the offering be reduced below thirty percent (30%) of
1 amount of securities included: in such offering, unless such offering is the initial public
g of the Company’s securities, in which ¢ase, the selling stockholders ‘may be excluded if
derwriters make the determination described above and no other stockholder’s: securities ~
luded or (ii) any securities held by a Founder be included if any securities held by any
Holder are excluded. For purposes of the preceding parenthetical concerning
nment, for any selling stockholder which is a holder of Registrable Securities and which
artnership or corporation, the partners, retired partners and stockholders of such holder, or
s and family members of any such partners and retired partners and any trusts for the
f.any of the foregoing persons shall be deemed to be a single “selling stockholder,” and
.7 Tesla - Series D - Investors' Rights AgreementPage 310 Sane
any pro-rata reduction with respect to such “selling stockholder” shall be based upon the
aggregate amount. of shares carrying registration rights owned by all entities and individuals
included in such “selling stockholder,” as defined in this sentence.
\ ; .
1.9 Delay of Registration. No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result of any controversy
that might arise with respect to the interpretation or implementation of this Section 1.
1.10 Indemnification. in the event any Registrable Securities are included in a
_ registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and -
hold harmless each Holder, any underwriter (as defined in the Securities Act) for such Holder
and each person, if any, who controls such Holder or underwriter within the meaning of the
" Securities Act or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), against
_any losses, claims, damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of :
the following statements, omissions or violations (collectively a “Violation”): (i) any untrue
statement or alleged untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or any amendments or
supplements thereto, (i1) the omission or alleged omission to state therein a material fact required
- to be stated therein, or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the-Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act
or any state securities law; and the Company will pay to each such Holder, underwriter or
.” controlling person, as incurred, any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection 1.10(a) shall not
_ apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such
‘ settlement is effected without the ‘consent of the Company (which consent. shall not be
unreasonably withheld), nor shall the Company be liable to any Holder, underwriter or
controlling person for any such loss, claim, damage, liability, ot action to the extent that it arises
- out of or is based upon-a Violation which occurs:in reliance upon and in conformity with written
jnformation furnished expressly for use in connection. with such registration by any such Holder, -
underwriter or controlling person.
To the extent permitted by law, each selling Holder will, ‘severally
* but not jointly, indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who controls the
Company within the meaning of the Securities Act, any underwriter, any other Holder selling
- securities in such registration statement and any controlling person of any such underwriter or
other Holder, against any losses, claims, damages, or liabilities (joint ox several) to which any of |
‘the foregoing persons may become subject, under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each. case to the extent (and only to the’
9.
SV\557590.7 Tesla ~ Series D - Investors’ Rights AgreementPage 311 ~ “xtent) that such Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration; and each such
older will pay, as incurred, any legal or other expenses reasonably incurred by any person
tended to be indemnified pursuant'to this subsection 1.10(b), in connection with investigating
r defending ‘any such loss, claim, damage, liability, or action; provided, however, that. the
demnity agreement contained in this subsection 1.10(b) shall not apply to amounts paid in
ettlement of any such loss, claim, damage; liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably withheld; provided,
t in no event shall any indemnity under this subsection 1.10(b) exceed the net proceeds from
he offering received by such Holder, except in the case of fraud by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
0 of notice of the commencement of any action (including any governmental action), such
emnified party will, if a claim in respect thereof is to be made against any indemnifying party
der this Section 1.10, deliver to the indemnifying party a written notice of the commencement
reof and the indemnifying party shall have the right to participate in, and, to the extent the
emnifying party so desires, jointly with any other indemnifying party similarly noticed, to
ume the defense thereof with counsel mutually satisfactory to the parties; provided, however,
t an indemnified party (together with all other indemnified parties which may be represented
thout conflict by one counsel) shall have the right to retain one separate counsel, with the
asonable fees and expenses to be paid by the indemnifying party, if representation of such
emnified party by the counsel retained by the indemnifying party would be inappropriate due.
actual or potential differing interests between such indemnified party and any other party
resented by such counsel in such proceeding. The failure to deliver written notice to the
mnifying party within a reasonable time of the commencement of any such action, if
dicial to its ability to defend such-action, shall relieve such indemnifying party of any
ity to the indemnified party under this Section 1.10, but the omission so to deliver written
e to the indemnifying party will not relieve it of any liability that it may have to any
mnified party otherwise than under this Section I-10.
(d) If the indemnification provided for in this Section 1.10 is held bya. -
f competent jurisdiction to be unavailable to an indemnified party with respect to any loss,
lity, claim, damage or expense referred to therein, then the indemnifying party, in lieu of
mnifying such indemnified party hereunder, shall contribute to the amount paid or payable
uch indemnified party as a result.of such loss, liability, claim, damage, or expense in. such
ortion as is appropriate to reflect the relative fault of the indemnifying party on the one hand -
of the indemnified party on the other in connection with the statements or omissions that
in such loss, liability, claim, damage or expense as well as any other relevant equitable’
iderations; provided, that in no event shall any contribution by a Holder, when combined
y amounts paid by such Holder pursuant to subsection 1.10 (b) exceed the net proceeds
e offering received by such Holder, except in the.case of fraud by such Holder. The
é fault of the indémmifying party and of the indemnified party shall be deterinined by
ce to, among other things, whether the untrue or alleged untrue statement of a material |
the omission to state a material fact relates to information supplied by the indemnifying
‘or by the indemnified party and the parties’ relative intent, knowledge, access to
ation, and opportunity to correct or prevent such statement or omission. .
Z
10.
N557590.7 Tesla - Series D - Investors’ Rights AgreementPage 312 (e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered into in
connection with the underwritten public offering are in conflict with the foregoing provisions, the
provisions in the underwriting agreement shall control. ‘
(f) The obligations of the Company and Holders under this Section
- 1.10 shall survive the completion of any offering of Registrable Securities in a registration ~
_ -gstatement under this Section 1, and otherwise.
oo 1.11 Reports,Under Securities Exchange Act of 1934. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the Securities Act and any
other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the
Company to the public without ‘registration or pursuant to a registration on Form S-3, the
Company agrees to: ,
; (a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times. after ninety (90) days after the effective
date of the first registration statement filed by the Company for the offering. of its securities to the
general public so long as the Company remains subject to the periodic reporting requirements
under Sections 13 or 15(d) of the Exchange Act;
(b) take such action, including the voluntary registration of its
"Common Stock under Section: 12 of the Exchange Act, as is necessary to enable the Holders to -
utilize Form S-3 for the sale of their Registrable Securities, such action to be taken as soon aS"
practicable after the end of the fiscal year in which the first registration statement filed by the
Company for the offering of its securities to the general public is declared effective; —
. (c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the. Exchange Act; and
ces (d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i)-a written statement by the Company that it has complied
with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the
effective date of the first registration statement filed by the Company), the Securities Act and the’
Exchange Act (at any time after it has become: subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form $-3 (at any time after it
so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such
. other reports and documents so filed by the Company, and (iii) such other information as may be
reasonably requested. in availing any Holder of any rule or regulation of the SEC which pemmits
the selling of any such securities without registration or pursuant to.such form.
. 1.12 Assignment of Registration Rights. The rights to cause the Company to-
register Registrable Securities pursuant to this Section 1 may be assigned (but only with all
_ gelated obligations) by a Holder to (i) a transferee or assignee of at least 250,000 shares of such
securities (subject to adjustment for stock splits, stock dividends, reclassification or the like), (ii)
a transferee or assignee of all of such Registrable Securities held by such transferring Holder, if
a 11.
$V\557590.7 Tesla- Series D ~ Investors’ Rights AgreementPage 313 "3 than 250,000 shares (subject to adjustment for stock splits, stock dividends, reclassification
lor the like), (iii) a:partner, member or affiliate of the transferring, Holder, (iv) a transferee or
“assignee who is a Holder’s child, stepchild, grandchild, parent, stepparent, grandparent, spouse,
sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-
Jaw (such a relation, a Holder’s “Immediate Family Member”, which term shall include adoptive
relationships), or (v)-a transferee or assignee that is a trust for the benefit of an individual Holder
“or such Holder’s Immediate Family Member, provided the Company is, within a reasonable time
fer such transfer, furnished with written notice of the name and address of. such transferee or
ssignee and the securities with respect to which such registration rights are being assigned; and
vided, further, that such assignment shall be effective only if immediately following such
fer the further disposition of such securities by the transferee or assignee is restricted under
ie Securities Act. For the purposes of determining the number of shares of Registrable’ -' °
urities held by a transferee or assignee, the holdings of transferees and assignees of (x) a
ership who are partners or retired partners of such partnership or (y) a limited liability
pany who are members or retired members of such limited liability company (including
ediate Family Members of such partners or members who acquire Registrable Securities by
: will or intestate succession) shall be aggregated together and with the partnership or limited
‘ability company; provided that all assignees and transferees who would not qualify individually
assignment of registration rights shall have a single attorney-in-fact for the purpose of
rcising any rights, receiving notices or taking any action under Section 1.
: 1.13 Limitations on SubsequentRegistration Rights. From and after the date of
- Agreement, the Company shall not, without the prior written consent of the Holders of a
ority of the outstanding Registrable Securities, enter into any agreement with any holder or
spective holder. of any securities of the Company which would allow -such ‘holder or
spective holder (a) to include such securities in any registration filed under Section 1.2 hereef, ~~
‘under the terms of such agreement, such holder or. prospective holder may include such
utities in any such registration only to the extent that the inclusion of his securities will not .
uce the amount of the Registrable Securities of the Holders which is included or (b).to make a
and registration which could result in such registration statement being declared effective
1 to the earlier of either of the dates set forth in subsection 1.2(a) or within one hundred
wenty (120) days of the effective date of any registration effected pursuant to Section 1.2.
2.3 Right of First Offer. Subject to the terms and conditions specified in this —
the Company hereby grants to each Major Investor (as hereinafter defined) a right of
th respect to future sales by the Company of its Shares (as hereinafter defined). For
this Section’ 2.3, a “Major Investor” shall mean any person who holds at least
ares of the Series A Preferred Stock, 1,000,000 shares of the Series B Prefexred
000 shares of the Series C Preferred Stock, or 1,000,000 shares of the Series D
ed Stock (or the Common. Stock issued upon conversion thereof) issued pursuant to the.
greement, Series A Stock Purchase, Agreement, the Series B Stock Purchase
r the Series C Stock Purchase Agreement (subject to adjustment for stock splits, .
ends, reclassifications or the like). For purposes of this Section 2.3, a Major Investor
y general partners and affiliates of a Major Investor. A Major Investor who chooses
the right of first offer may designate as purchasers under such right itself or its
jliates in such proportions as it deems appropriate.
- Each time the Company proposes to offer any shares of, or securities convertible
rcisable for any shares of, any class of its capital stock (“Shares”), the Company shall
an. offering of such Shares to each Major Investor in accordance with the following
: mn C)) The Company shall deliver a notice by certified mail (“Notice”) to
Investors stating (i) its bona fide intention to offer such Shares, (ii) the number of such
e:offered, and (iii) the price and terms, if any, upon which it proposes to offer such
(b) Within 15 calendar days after delivery of the Notice, the Major
ay elect to purchase or obtain, at the price and on the terms specified in the Notice, up
ion of such Shares which equals the proportion that the number of shares of Common
‘ued and held, or issuable upon conversion and exercise of all convertible or exercisable
then held, by such Major Investor bears to the total number of shares of Common
utstanding (assuming full conversion.and exercise of all convertible or exercisable
Such purchase shall be completed at the same closing as that of any third party.
ers-or at an additional closing thereunder. . The Company shall promptly, in writing,
ich Major Investor that purchases all the shares available to it (each, a “Fully-Exercising —
’) of any other Major Investor’s failure to do likewise. During the ten-(10)-day period
cing after receipt of such information, each Fully-Exercising Investor shall be entitled to
that portion of the Shares for which Major Investors were entitled to subscribe but which
subscribed for by the Major Investors that is equal to the proportion that the number of
‘of Common Stock issued and held, or issuable upon. conversion and exercise of all
le or exercisable securities then held, by such Fully-Exercising Investor bears to the -
ber of shares of Common Stock then outstanding (assuming full conversion and
¢ of all convertible or exercisable securities).
14.
a =. me a. sete. AHH nePage 316 — (c) The Company may, during™ the 45-day period following the
expiration of the period provided in subsection 2.3(b) hereof, offer the remaining unsubscribed
portion of the Shares to any person or persons at a price not less than, and upon terms no more
favorable to the offeree than those specified in the Notice. If the Company does not enter into:an
agreement for the sale of the Shares within such period, or if such agreement is not consummated
within 60 days of the execution thereof, the right provided hereunder shall be deemed to be
revived and such Shares shall not be offered unless first reoffered to the Major Investors in
accordance herewith. ‘
a, _ (d) The right of first offer in this paragraph 2.3 shall not be applicable
'@ to the issuance or sale of Common Stock (or options therefor) to employees, consultants and
directors, pursuant to plans or agreements approved by the Board of Directors for the primary
purpose of soliciting or retaining their services, (ii) to or after consummation of a Qualified IPO,
-(iii) to the issuance of securities pursuant to -the conversion or exercise of convertible or
exercisable securities, (iv) stock splits, stock dividends or like transactions, or (v) to the issuance
of securities that, with unanimous approval of the Board of Directors of the Company, are not .
offered to any existing stockholder of the Company. In addition to the foregoing, the right of ~~
first offer in this paragraph 2.3 shall not be applicable with respect to any Major Investor and any
subsequent securities issuance, if (i) at-the time of such subsequent securities issuance, the Major
Investor is not an “accredited investor,” as that term is then defined in Rule 501(a) under the
Securities Act, and Gi) such subsequent securities issuance is otherwise being offered only to
- accredited investors. .
2.4 Qualified Small Business Stock Status. [Reserved.]
r Bs 7 25 Confidential Information and Invention Assignment Agreements. - The
oe - Company shall require all employees and consultants with access to confidential information to
execute and deliver a Confidential: Information and Invention Assignment Agreement in _
substantially the form approved by the Company’s Board-of Directors. ,
pie o ee 2.6 Employee Agreements. - Unless otherwise approved by the Board. of
Boe Directors of the Company, all future employees of the Company who ‘shall purchase, or receive
options to purchase, shares of the Company’s Common Stock following the date hereof shall be
required to execute stock purch: se or option agreements providing for (i) vesting of shares over a
four-year period with the first 25% of stich shares vesting following twelve (12) months of.
continued employment or services, and the remaining shares vesting in equal monthly
eke _ | installments over the following 36 months thereafter and (ii) a 180-day lockup period in —
2 -connection with the Company’s initial public offering. The Company shall retain a right of first
refusal on transfers until the (Company’s initial public offering and the. right to repurchase
unvested shares at cost. :
2.7 Directors and Officers Insurance. Unless otherwise unanimously approved
_ by the Company’s Board of Directors, the Company shall purchase and maintain Directors and
Officers Insurance acceptable to VantagePoint Venture Partners of not less than $1,000,000; -
provided that such Directors and Officers Insurance coverage immediately prior to the first firma
~— commitment underwritten public offering by the Company of shares. of its common stock
. . ‘15.
_ §V\5§57590.7 Tesla - Series D - Investors’ Rights AgreementPage 317 an
ay
--hrsuant to an effective registration statement under the Securities Act shall be increased to at
east $10,000,000.
2.8 Termination of Covenants.
(a) The covenants set forth in Sections 2.1 through 2.7 shall terminate
to each Holder and be of no further force or effect upon the consummation of a Qualified IPO.
(b) The covenants set forth in Sections 2.1 and 2.2 shall terminate as to
each Holder and be of no further force or effect when the Company first becomes subject to the
i periodic reporting requirements of Sections 13 or 15(d) of the ° Exchange Act, if this occurs earlier
Ethan a Qualified IPO. - .
3. Miscellaneous.
3.1 Successors and Assigns. Except as otherwise provided in this Agreement, .
terms and conditions of this Agreement shall inure to the benefit of and be binding upon the
ective permitted successors and assigns of the parties (including transferees of any of the
ies A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
ck, or any Common Stock issued upon conversion thereof). Nothing in this Agreement, ~
ress or implied, is intended to confer upon any party other than the parties hereto or their
pective successors and assigns any rights, remedies, obligations, or liabilities under or by
n of this Agreement, except as expressly provided in this Agreement.
3.2. Any term of this Agreement may be amended or waived only with the
n consent of the Company and the holders of at: least two-thirds of the Registrable
ities then outstanding. “Any-amehdment or waiver effected in accordance with this
graph shall-be binding upon each party to the Agreement, whether or not such party has
uch amendment or waiver, each future holder of all such Registrable Securities, and the
any. Notwithstanding the above, the parties agree that additional purchasers of the
any’s Series D Preferred Stock pursuant to the Series D Preferred Stock Purchase
sment dated May 9, 2007, as such may be amended. from time to time, shall be treated as
ors hereunder upon such party's execution of a supplemental signature page to this
ent and the addition of such person's name to Exhibit D hereto, without need for
al signatures from the Company, the Series A Stockholders, the Series B Stockholders,
es C Stockholders, and the other Investors.
33 Notices. Unless otherwise provided, any notice required or permitted by
reement shall be in writing and shall be deemed sufficient upon delivery, when delivered
lly or by overnight courier or sent by telegram or fax, or forty-cight'(48) hours after being -
ed in the U.S. mail, as certified or registered mail, with postage prepaid, and addressed to
to be: notified at such party’s address or fax number as set forth on the respective
ereto or aS subsequently modified by written notice.
3.4 Severability. If one or more provisions of this Agreement are held to be
able under applicable law, the parties agree to renegotiate such provision in good faith.
16.
Irenth neta TR Taerantace! Diahto AnreementPage 318 wait
' the Agreement shall be interpreted as if such provision were so exclude
~ In the eyent that the parties cannot reach a mutually agreeable-and enforceable replacement for
such provision, then (a) such provision shall be excluded from this Agreement, (b) the balance of
d and (c) the balance of
the Agreement shall be enforceable in accordance with its terms.
~ 3.5 Governing-Law. This Agreement and all acts and transactions pursuant
hereto shall be governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of laws.
3:6 Counterparts. This Agreement may be executed in two or more.
. counterparts, each of which shall be deemed an original, but all of which together shail constitute
one and the same instrument.
3.7. Titles and Subtitles. The titles and subtitles used in this Agreement are
used: for convenience only and are not to be considered in construing or interpreting this
Agreement. : , _-
3.8 Aggregation of Stock. All shares of the Preferred Stock held or acquired :
by affiliated entities. or persons shall be aggregated together for the purpose of determining the
availability of any rights under this Agreement.
3.9 Entire Agreement. "This Agreement, and any Exhibits hereto, constitute
the’ full and entire understanding and agreement between the parties with regard to the subjects
hereof and no party shall be liable or bound to any-other in any manner by any. oral or written
representations, wartanties, covenants and agreements except as specifically set forth herein and
therein. Each party expressly represents-and warrants that it is not relying on any oral or written
representations, warranties, covenants or agreements outside of this Agreement.
_. 3.1 Oo . Termination of Prior Agreement: Upon the effectiveness of this
Agreement, the Prior Agreement shall terminate and be of no further force and effect, and shall
be superseded and replaced in its entirety by this Agreement. -
[Signature Page Follows]
, . : 17.
5V\557590.7 Tesla - Series D - Investors’ Rights AgreementPage 319 REDACTED
The parties have executed this Third Amended and Restated Investors’ Rights Agreement
as of the date first written above. .
COMPANY:
TESLA Motors, INc.
Name: YY BRECHY
Title: Ceo - .
SERIES A, B, C and D STOCKHOLDERS:
Lean ~
MARTIN EBERHARD oo ,
Series A:°
Series B:
Series C: . : . . ~
Series D Stockholder
, a
a =
"ML. NING
Series A: .
SeriesBr t,t: . . .
Series C: . ,
Series D Stockhotaer
Signature Page to Third Amended & Restated Investors’ Rights AgreementPage 320 REDACTED ~
The parties have executed this Third Amended and Restated Investors’ Rights Agreement -
as of the date first written above.
_ — SERIES A, B, C and D STOCKHOLDERS:
ELON Musk REVOCABLE ST DATED JULY 22,
Name: Zlon Nese.
Title: Trego
Series A:
Series B:
Series C:
Series D Stockholder
"Signature Page to Third Amended & Restated Investors’ Rights Agreement’Page 321 REDACTED
hird Amended and Restatcd Investors’ Rights Agreement
The partics have executed this ‘T.
as of the date first written above.
. SERIES A, B, c and D STOCKHOLDERS:
Compass VENTURE PARTNERS 0 L.P,
Name: MACTHAPE - (CSch
"MANAGING DIRECTOR OF COMPASS VENTURE BANACEMENT I, LLC
Tithe:___ THE GENERAL PARTNER OF COMPASS VENTURE PARTNERS HELP
Series A:
Serles B: . 7 = . Doe -
Series Cs. : . , . . ’ “
Series D Stockholder
Signature Pageto third Amended & Restated Investors’ Rights AgreementPage 322 . REDACTED ie
The parties have executed this Third Amended and Restated Investors? Rights Agreement
as of the date first written above. ;
SERIES A and D STOCKHOLDERS:
LAGrre YoLER /”
Series A:
-YOLER-LENA LiIvinG rc
-By: Kee LE a.
Nanie: | avde Vo 2 ian . oo
Title: tmetce | oe oo
. Series D Stockholder . wey"
Signature Page to Third Amended & Restated Investors’ Rights AgreementPage 323 | REDACTED
The parties have executed this Third Amended and Restated Investors’ Rights
Agreement as of the date first written above.: .
SERIES B, C and D STOCKHOLDERS:
VALOR EQuiTy PARTNERS, LP
By: Valor Equity Management,
its General Partner =
By: . Valor Management Corp, - -
its Manager oo :
By:_.. Sn “ oo
AntoniaGracias, CEO
Series B:°
Series C: .
Series D Stockholder
VALOR VC, LLC
. a
Name: ANTONOLS GRBADK
Title:
Series C: °
Signature Page to Third Amended & Restated Investors’ Rights. AgreementPage 324 Sect Sac,
SOen
Peg
. ’ aed
prteas ei
ae i 3 eRED
Bel
reyehion:Page 325 ah
ial
s
aS
aPage 326 REDACTED
“The parties hava exeonted this ‘third Amended and Restated ape Rights Agreement
as ofthe date first written above.
\
‘SERIES C and D STOCKHOLDERS:
Bay Anta EQUITY PUNDI, LP. (J:P. MORGAN) _ .
by - c. 0)
Names, NANCY E- PFUND
Title: (of.
Serjes C:
Series D Stockhalder
Signature Page to Third Amended & Restated Investors "R hts AgreementPage 327 REDACTED
The parties have executed this Third Amended and Restated Investors’ Rights Agreement
as of the date first written above.
= SERIES C and D STOCKHOLDERS:
x
se,
iS
: DRAPER FISHER VETSON , LP.
ee
By: 4H La
‘Name: Jobo fSher Ne
; Title: Managing Director . -
Signature Page to Third Amended & Restated Investors’ Rights AgreementPage 328 REDACTED |
The parties have executed this Third Amended and Restated Investors” Rights Agreement
as of the date first written above. \
SERIES C and D STOCKHOLDERS:
PACIFIC mop ypraue .
By: |
Title: Manager
Series C:
Series D Stockholder
SERIES D STOCKHOLDERS:
THE SKOLL Vp — ;
. By:
Series D Stockholder
' ‘Tr SKOLL FUN
Name: John orfsonf
Series D Stockholder
Signature Page to Third Amended & Restated Investors’ Rights AgreementPage 329 REDACTED .
The partiés have executed this Third Amended and Restated Investors’ Rights Agreement
f the date first written above.
\
SERIES C and D STOCKHOLDERS:
: Name: Nicholas TJ. Pr itatke,
~
Title: M AM AGLS . . ~
=. Series C:
"Series D Stockholder
Signature Page to Third Amended & Restated Investors’ Rights AgreementPage 330 The parties have executed this Thitd Amended and Restated Investors’ Rights :
Agreement as of the date first written above. ‘
Finhiear eke otic tii SN Cas Mia
By:
Name: Trea Ganeniee gir
“_ aIts: Managing Member
Series D Stockholder
weit Signature Page to Third Amended & Restated Investors ’ Rights AgreementPage 331 a | :
Q s . | |
ef |
: : | | . “
a A . | |
Lg a a
a Y wy ; |
BE og a | |
—€i :
, F
sPage 332 The parties have executed this Third Amended and Restated Investors’ Ri ghts Agreement
as of the date first written above.
SERIES D SFOCKHOLDERS:
Signature Page to Third Amended & Restated Investors’ Rights AgreementPage 335 The parties | have executed this Third Amended and Restated Investors’ Rights Agreement
as of the date first written above.
SERIES D STOCKHOLDERS: =~
KENNETH ROGER JACOBS AND MARGARET LASECKE-JACOBS,
TRUSTEES OF THE 2002 JACOBS FAMILY Trust, UDT OcTOBER 30,
ny Aadonset Lisecce-Leoes ae
Name fabart Knob - bt
‘Title: rberee: oF Srenkd. Faaritt Pros
Series D Stockholder
Signature Page to Third Amended & Restated Investors’ Rights AgreementPage 336 The parties have executed this Third Amended and Restated Investors’ Rights Agreement
as of the date first written above.
SERIES D STOCKHOLDERS: _
KKONSTANTIN OTHMER-
Series D Stockholder
Signature Page to Third Amended & Restated Investors’ Rights AgreementPage 337 oN
- The parties have executed this Third Amended and Réstated Investors’ Rights
Agreement as of the date first written above,
SERIES D STOCKHOLDERS:
RICHARD Y1£E CHEN “Ae
V
Name: Richt Ye. Chea & Lug Gey Che ~ .
Title. TStees
Series D Stockholder
Signature Page to Third Amended & Restated Investors’ Rights AgreementPage 338 _ The parties have executed this Third Amended and Restated Investors’ Rights Agreement
- as of the date first written above. ;
SERTES D STOCKHOLDERS:
RYAN ScotTr
Series D Stockholder
Signature Page to Third Amended & Restated Jnvestirs " Rights AgreementPage 339 The parties have executed this Third Amended and Restated Investors? Rights Agreement
as of the date first written above.
\
SERIES D STOCKHOLDERS:
. a:
<— i . . . .
Series D Stockholder .
~
. Signature Page to Third Amended & Restated Investors’ Rights AgreementPage 340 oo eS | ;
; - The parties have executed this Third Amended and Restated Investors’ Rights Agreement
ag of the date first written above.
SERIES D STOCKHOLDERS:
Z UA
TOM O/LEARY
Series D Stoc Ider
Signature Page to Third Amended & Restated Investors’ Rights AgreementPage 341 REDACTED
ON EXHIBIT A
_ SERIES A STOCKHOLDERS
: Name/Address/F: ‘ax No. *
“ Elon Musk Revocable Trust dated July
a _ 22.
' Fax: ~ °
” Martin Eberhard oe .
Fax:.
Mare Tarnenning
J
Fax:
SDL Ventures, LLC
2800 Sand Hill Road -
Menlo Park, CA
Fax: (650) 854-2732 -
Ian Wright
Fax:
- Rob Ferber
Fax:
Severo Ornstein & Laura Gould
~ y
Fax:
Laurie Yoler
gar
men ernenn a PA Cactan Th _ Invectarc' Riohts AgreementPage 342 REDACTED
— Fax: (
Pa
Bill and Karen Moggridge
Fax:
Rainer & Susan Eberhard
t
Baan
Fax:
Eric & Cheryl Eberhard
_ Fax:
Nancy Bilerts
Fax:
s
Carolyn Howk |
Fax:
-Tom. and Tristan Colson
‘
Fax:
~: Compass Venture Partners U, L.P.
* 1550 El Camiino Real Suite Menlo Park, CA 94025-
8V\557590.7 Tesla - Series D - Investors’ Rights AgreementPage 343 REDACTED
EXHIBIT B
SERIES B STOCKHOLDERS
Name/Address/F: ‘ax No.
Elon Musk Revocal Je Trust dated July 22,
Fax:
Martin Eberhard
Fax:
Mare Tarpenning
Fax:
Valor Equity Partners L.P.
225 W. Washington St., Suite Chicago, IL
Compass Venture Partners I, LP
1550 El Camino Real, Suite 275 ~
Menlo Park, CA
‘Jeffrey B Straubel
Malcolm Smith
‘Thomas E. Colson
. Tristan ColsonPage 344 REDACTED ~
Douglas H. Klein °
-TVEST, LLC .
9020 Stony Pt. Pkwy
Suite
Richmond, VA 23235Page 345 REDACTED
' EXHIBIT C
SERIES C STOCKHOLDERS
NamelAddress/F ax No.
Elon Musk Revocable Trust dated July 22,
we eee
Fax:
VantagePoint Venture Partners IV (Q), L.P.
VantagePoint Venture Partners IV, L.P..
VantagePoint Venture Partners IV Principals
Fund, LP. °
VantagePoint CleanTech Partners, L.P.
’ Amphitheatre LLC (Sergey Brin)
Chris Byrne
Compass Venture Partners I, L.P..
Draper Fisher Jurvetson Fund VI, L.P.
Draper Fisher Jurvetson Partners VI, LLC
Draper Associates, L.P.
The Dale Djerassi Revocable Trust
Michael Dubilier .
Martin Eberhard 5. -
Gemini Consulting, LLC
Valor VC, LLC
Bay Area Equity Fund J, L.P. (JP Morgan)
Kite Hill Capital LLC
_ GREG KOURI LIVING TRUST, dated February
2, Joseph William Lee Trust dated 10/11/Garcia, LLC (Larry Page)
Tao, LLC (Nicholas Pritzker Capital
Management, LLC)
Tyrone Farrar Pike Separate Property ‘Trust
Lyndon Rive -- a
‘Peter Rive
Pacific Sequoia Holding LLC (Jeff Skoll)
Jeffrey B. Straubel
Marc Tarpenning
The Mark B. Templeton Revocable Trust
Valor Equity Partners L.P.
The Vertical Fund H, L.P.
Mineral Acquisition Partners, Inc.Page 346 EXHIBIT D
INVESTORS
Elon Musk Revocable Trust dated July 22, Technology Partners Fund VIM, LP -
VantagePoint Venture Partners IV (Q), LP.
, VantagePoint Venture Partners IV, LP.
VantagePoint Venture Partners IV Principals Fund, LP.
VantagePoint CleanTech Partners, L-P.
‘Pacific Sequoia Holdings LLC
Valor Equity Partners L.P.
‘ Bigwood Capital LLC
TAO, L.L.C.
. Bay Area Equity Fund J, L.P.
Draper Fisher Jurvetson Fund VIU, L.P. , -
Draper Fisher Jurvetson Partners VOI, LLC . ,
Draper Associates, LP. .
: Compass Venture Partners Uy, L. P.
_ The Skoll Foundation
The Skoll Fund. /
‘Tom O’Leary
Ryan Scott
. Konstantin Othmer
Richard Yie Chen‘and Lucy Leong Chen Trust *
Jon Mittelhauser
- H. Perry.Fell.
- Kenneth Roger Jacobs and Margaret Lasecke-Jacobs, Trustees of the 2002 J: acobs Family Trust, UDT
October 30, 2002” .
John Weiser
Samuel G. Perry
Yoler-LeNail Living Trust
Mare Tarpenning
Martin Eberhard .
$V\557590.7 Tesla - Series D - Investors’ Rights AgreementPage 347 REDACTED
From: Elon Musk | j
Sent: Monday, June 05, 2006 7:35 PM
To: eberhard
Subject: RE: FW: Moffett Field / Pete Worden
By the way, I'm planning on speaking with Marver about granting you more equity. If possible, | will meet with him one on
one before the next Tesla board meeting. When are you fully vested?
From: Martin Eberhard ~ .
Sent: Monday, June 05, 2006 7:31 PM
To: Elon Musk
Subject: Re: FW: Moffett Field / Pete Worden
:-) Sometimes the reporters forget to mention VantagePoint too.
Elon Musk wrote:
By the way, | don’t know if you noticed in the press how much the fact that Larry & Sergey invested (and Jeff
& Nick to a lesser degree) gets mentioned. That definitely helps credibility in the absence of a KP, Sequoia
or other big brand VC.
From: Martin Eberhard [~~ com
Sent: Monday, June 05, 2006 7:26 PM
To: Elon Musk
Subject: Re: FW: Moffett Field / Pete Worden
Yes, I gave him an earful when I had lunch a couple of days ago. He kind of squirmed in his seat.
I had quite a few conversations with him, where he told me that although they really thought Tesla
was "doing the right thing," the investment was just too risky for them.
me
Elon Musk wrote:
Check out the first paragraph. | certainly don't remember that sentiment from lon. Didn't he
recommend against a Tesla investment?
mailto:
From: Ion.Yadigaroglu [
Sent: Monday, June 05, 2006 11:10 AM
To: Elon Musk
Subject: Moffett Field / Pete Worden
Elon,
7/13/2009Page 351 REDACTED
Fax
) Cell .
This email message is for the sole use of the intended recipient(s) and may contain
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distribution is prohibited. If you are not the intended recipient, please contact the
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From: Martin Eberhard [rp > =m)
Sent: Thu 5/24/2007 7:19 AM
To: Elon Musk
Subject: Re: Lincoln
I think your idea of offering employees a bit of liquidity is good. Carolyn and I would
need to think about it for ourselves~ we generally prefer to invest instead :-) but a bit
of $ would be nice.
I know it would be a big boost for some employees. Don't we need to bring the common price
up to the preferred price to make it work?
coterie Original Message -----
From: Elon Musk
' To: Martin Eberhard
Sent: Wed May 23 23:54:45 Subject: RE: Lincoln
You're right, I should lighten up. I haven't had enough sleep for the past three days in
a row, which makes the world look darker than it is. Just spent all day at NASA (great
guys, good meetings, so can't blame them), but had to get up at the crack of dawn to make
it there in time.
Frankly, the single biggest value I see to hiring a CEO is that you can drive W* (and
future models) to be superlative. The number of great product people in the world is tiny
and I think you are one of them. The reason I pushed Simon and Mark on product issues is
to make sure that they are at least on the same wavelength as you and me. We certainly
disagree sometimes, but 90% of the time are on the same page or can get there with a short
discussion. . °
On a side note, what do you think of allocating a small piece of the next round for people
that want a bit of liquidity? This would be for you, Marc and JB mostly (me not
included), but also apply to any person with exercised options. With the typical six
month IPO lockup period and insider blackout windows, it may be 2009 before anyone gets to
sell shares. — 7 porter
we ey ee eee ee
From: Martin Eberhard [{ i
Sent: Wed 5/23/2007 11:25 PM
To: Elon Musk
Subject: Re: LincolnPage 355 Jeez lighten up! :-) I mostly agree with you. Notice that when I buy a car - even a cheap
car- I don't buy American cars. But I get my hackles up when I hear absolutes. The Focus
is interesting to me because independent, japanese~-leaning rating agencies like Consumer
Reports and JD Powers rated it up among the best cars. It was the only American car to
place in the top 10 for reliability and value, beating out even the Honda accord.
I guess my point is only that though most American cars today are crap, not every single
one is.
By the way, the Toyota Corola I rented is a total piece of crap. Pretty much all your
gripes about your rental apply to mine.
I totally agree about Ron, and my arguments with him are a lot like yours. I would like to
move him much more into a manufacturing role and find a real visionary to lead w*. Until I
do though, he is what UK have to work with.
Hire Mark and maybe I will take that role...
-coHH Original Message --~--
From: Elon Musk
To: Martin Eberhard
Sent: Wed May 23 22:24:03 Subject: Re: Lincoln
I was driving a "high end" Lincoln - didn't see what model, but I think it was similar to
what was at Fisker. However, I don't understand why you keep bringing up the price ‘
expectations issue. Do you think I don't appreciate that fit & finish will or at least
should be better in a car that is twice the price? In any event, this is not something
limited to me. It is widely acknowledged that, price range for price range, the Japanese
and German cars kick the ass of American cars in almost every way.
Anyone that isn't blind knows this, but most people I've met from the domestic car
industry are strangely myopic on this issue. They have all sorts of reasons for why the
Japanese are winning besides the fact that GM, Ford and Chrysler make shitty products.
The irony is that a huge percentage of the best "foreign" cars are manufactured right here
in the US!
Many times, I have heard Ron imply that we can't make W* look like other $50k cars,
because we have so little money left over after the battery cost. If we lean on this
erutch too hard, it will result in a crap car, which is why I've pushed back on our
estimates of drivetrain cost in luxury cars. I am‘quite confident that the real
difference in cost between our drivetrain and that of a lux gas car is not nearly as big
as we think it is. A couple of times, when this has been brought up, I've asked for a BOM
cost breakdown of a lux car, but not received anything.
Anyway, particular complaints about the Lincoln:
* The whole car looked, felt and smelled (!) cheap. At the same time, it was clear that
the designers had tried to make it seem rich, which just made the whole thing come across
like a $10 fake Rolex. ,
* Seat was too soft, had an uncomfortable weight distribution, was not contoured to
"hold' you (ie cupped) and felt weirdly small.
* Steering wheel felt too small and buttons were in the wrong place.
* Some of the center console buttons are not in intuitive place. It took me too long to
find the fan control.
* Key was too large and didn't fold into itself, so made a bulky lump in my pocket. Keys
should be small, like the little dongle that opens office doors or the Apple remote.
* Instruments looked plain and a bit depressing
* Suspension. was too soft and turning was squishy. You know I have many times asked us to
soften up the Roadster, so I'm not Mr. Hard Suspension.
That's all I can think of for now.Page 356 REDACTED
-----Original Message--—--- ,
From: Martin Eberhard . ww. om]
Sent: Wednesday, May 23, 2007 v5:08 eM vaciric stumuard Time
To: Elon Musk
Subject: Re: Lincoln
The reason I want a list of complaints is so that I can test their judgement.
Some of the suckiness of these cars comes from the fact that they are really cheap. I
don't know which model you are driving, but I bet its MSRP is half that of an equivalent
sized BMW. Example: the Fusion is only $17K. You can't touch a BMW for anything close- the
cheapest BMW is probably twice the price.
For this price, the car is a deal... Remember, for $17K, they build the whole damned
thing, and toss in about 15% dealer profit too. Does not leave much room for nice
materials or doodads.
Different pricepoint. Different customer.
Me
----- Original Message -----
From: Elon Musk
To: Martin Eberhard
Sent: Wed May 23 16:00:26 Subject: RE: Lincoln
I'm depressed just sitting in the car. Main thing I wanted to be sure of was that our
guys know that most American cars suck and how to change that...do they have good product
judgment?
----- Original Message~-~--
From: Martin Eberhard
Sent: Wednesday, May 23, 2ZUU07 03:15 PM Pacitic standard Time
To: Elon Musk
Subject: RE: Lincoln
You should write down a list of specifics that suck on the Lincoln. I usually get
depressed after the 20th sucky item...
-oocH Original Message-----
From: Elon Musk
Sent: Wednesday, May 23, 2007 12:01 PM
To: Martin Eberhard
Subject: Lincoln
I'm driving a new Lincoln rental. What an utter piece of shit. Do our guys in Detroit
recognize that American cars are almost all crap?
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visit http://www.messagelabs.com/emailPage 358 EXHIBIT 23Page 359 - EXHIBIT 23Page 360 Confidential Business Plan
Thursday, April +5, Version 1.
Copy Number:
Distributed to:
Date:
845 Oak Grove Avenue, Suite Menlo Park, CA
Tel: (650) 329-
Fax: (650) 329-
Email: info@teslamotors.comPage 361 Proprietary and Confidential
Finance
Key Assumptions
Our business model assumes that it is possible to build a “fab-less” car company and to produce a DOT,
NHSTA, and FMVSS compliant electric car in approximately two years, while developing significant
intellectual property in the electric car industry. To accomplish this, we license the basic EV technology and
outsource automotive design and production. Tesla Motors will commercialize the 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 meet government standards
(DOT, NHSTA, and FMVSS). 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.
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 Sola
From: Elon Musk’ |
Sent: Tuesday, March 29, 2005 10:21 AM
To: eberhard€
Subject: RE: Carbon Fiber
Dude, 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! The oven only cost us about $50k. The vacuum pump, storage freezer and assorted equipment cost
us another $50k. 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.
From: Elon Musk :
Sent Monday, November 28, 2005 5:01 PM
To: Mare Tarpenning
Ce: Laurie Yoler; Martin Eberhard
Subject: RE: Tesla CFO
This guy seems pratty good on paper.
| would prize financial savvy and sales skill (within the bounds of ethical conduct) over other factors. An MBA or similar sheepskin is not a requirement in my mind. | employed a CFO at one
Point that had amazing qualifications on paper, but lacked basic common sense and was a jerk. I regret not firing that guy sooner. : .
At PayPal, we went public at a terrible time with a CFO that had no public company experience, but was a really smart guy. | was on the audit committee and it worked out fine,
From: Marc Tarpenning [? a]
Sent: Monday, November 28, 2005 4:46 PM
To: Eton Musk
Ce: Laurie Yoler; Martin Eberhard
Subject: Tesla CFO
Hi Elon,
Martin and | had lunch last week with. ‘. He has been a VP of Finance of one flavor or another forthal ‘*--ars atbe..0. | 8 ood (resume attached). Although we are not
actively looking for a CFO at the moment, we are close to time when a full-time experienced CFO will be required. as after their acquisitic~ ~~ 2 and is looking at
altemative energy (and altemative transportation), and is definitely interested in Tesla.
tt is not clear the Is the right person. On the positive side, he has extensive experience with operations, projections and financial modeling. He is enthusiastic, bright, and quite Shands
on". On the negative side, he has largely been an “inward facing” finance and operations guy. In both companies, there was another, “outward facing” CFO that handled investors,
shareholders, and financing. He has not taken a company public, although obviously has experience operating within public companies,
Taking a company from pre-revenue through to an IPO would be a great next career move for him, which could be quite motivating. | don't want to miss a good candidate simply because we
were not going to look for another few months, so { want to start the CFO search in eamest. Please take a look at his resume and see what you think.
My ideal CFO candidate would have experience with:
* managing the financial transition from an R&D “Quickbooks” company to a sales and manufacturing company using more complex products
* financing inventory builds, inventory component hold times and other finance and operations of a manufacturing company
* structuring companies with multiple intemational offices, particularly to minimize VAT exposure
* building scalable financial systems early in the company’s growth
“managing an IPO
* working with investment banking and Wall Street
Standard skills:
* MBA or equivalent
* GAAP and SEC reporting
* Knowledge of Sarbanes-Oxley regulations
* Excellent verbal and written communication skills .
* Excellent analytical and organizational skills
Do you have some guidance on what (or whom) would be an ideal CFO candidate for Testa?
Regards,
mare
Marc Tarpenning
VP Electrical Engineering
Tesla Motors Inc.
1050 Bing Street
San Carlos, CA
marcat
Main:
Direct: +
Fax: +1.6..
The content of this message is the proprietary and confidential property of Tesla Motors, and should be treated as such. If you are not the
delete this message from your computer system and notify me immediately by reply e-mail. Any unauthorized use or distribution of the contentPage 368Page 369 EXHIBIT 26Page 370 REDACTED REDACTED
From: | Elon Musk _
Sent: Tuesday, July 24, 2007 1:06 PM
To: Craig Harding; BoD
Subject: Re: Tesla $500K approval
Approved.
Please continue to make the ops committee aware of any large ongoing expenditures that
cumulatively exceed $500k, even if the individual POs are less than that. Also, please
send an fyi whether something is budgeted or not.
----- Original Message -----
From: Craia Hardina - ; som>
To: BoD < 20om>
Sent: Tue Jul 24 12:33:05
Subject: Tesla $500K approval
The following is a >$500K approval required for Roadster production, and an “FYI” >$Roadster procurement, because it fits within the exceptions to the $500K approval
requirement (i.e., previously budgeted, and for calendar year 2007 Roadster production).
1. HVAC Controllers. 7 mt . . Sl
C--' - u-
1 aan
a .
-
-poue es wee Le
s
2. FYI - ESS Procurement. aH
Ae
le :
|
!
su i
is
1t _ ' “Lin
-Craig
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REDACTED
From: Elon Musk-[-— ny
Sent: Tuesday, July 18, 2006 10:43 AM
To: — eberharc n
Subject: RE: Pricing
’ Ok. Do you have an updated cost breakdown? That would help identify the range of uncertainty.
Making a low cost transmission seems like a very solvable problem. Reducing Li-lon cell cost much less so, if we
are constrained to one or two suppliers. On the other hand, we should be able to drive much better deals over
time.
From: Martin Eberhard [ ~ com]
Sent: Tue 7/18/2006 10:35 AM
To: Elon Musk
Subject: Re: Pricing
Because of the impending battery vendor change and because of uncertainty on a couple of major pieces
like the transmission, I am nervous about $85K. (On the other side, there is. nothing like price pressure to
drive costs down.)
I know what you mean about Fetish pricing. I have been more cagey than you, saying that the price will
be between $85K and $120K "Depending on changes brought on by our ongoing durability and safety
testing and also depending on options" - obviously not Fetish priced, but gives me some more wiggle
room. Let's talk tomorrow morning.
me
Martin Eberhard | CEO I ; ym | 1050 Bing Street, San Carlos, CA
94070 | tel 6 TX *
TESLA MOTORS
The content of this message is the proprietary and confidential property of Tesla Motors, and should be treated as such. | If
you are not the intended recipient and have received this message in error, please delete this message from your computer
system and notify me immediately by reply e-mail. | Any unauthorized use or distribution of the content of this message is
prohibited.
Elon Musk wrote:
I've been telling people that the production price will be around $85k. Can we
If we don't give some idea, people might think this is priced in the super car
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7/1/2009Page 375 EXHIBIT 28Page 376 EXHIBIT 28Page 377 REDACTED
From: Elon Musk [
Sent: Wednesday, October 25, 2006 10:45 PM
To: eberhard@
Subject: RE: battery program
Even as it is, we will be hard pressed to actually deliver 2007 model year Roadsters in
model year 2007. I am therefore quite sure that the right move for us in the short term
is to focus on core execution vs. try to build an auto parts supply business for a shaky
group of customers. :
For Bernie and you to say that this is not and will not become a distraction is obviously
incorrect. It is already a distraction. What the heck is JB, our CTO, doing spending
time on this when he has a dozen other problems to solve that are critical to the
Roadster?
Moroever, the distraction level will increase dramatically once we do a deal. There is a
big difference between building a battery for internal use vs. building custom batteries
as components for other companies. In the latter case, we need to apply significant Tesla
engineering resources to interface with their charging system, drive electronics, motor,
software, etc, not to mention helping solve problems that crop up when they do crash
testing. You can't just throw it over the fence and say good luck. That is not
realistic.
If their powertrain has problems and they blame our battery (which will be their first
instinct), how will we deal with that?- You know that the battery can't be looked at in
isolation -- it only works as a system with the charger, power electronics, motor and
software. If they screw up any part of that, they can screw up the battery. Exacerbating
the situation is that these guys are all thousands of miles away, forcing Tesla engineers
to spend a lot of time on planes to and living in Norway, Italy and: India.
As far as Think is concerned, it is premature to do anything until thev have actually
raised the funding to execute their business, and small deals with
verge on being more trouble than they're worth. Even if Think does get
funced, I 2r concerned: about the timing of their production start, which I believe Bernie
said was late next year, around the same time as the Roadster. There will inevitably be
teething problems in the beginning and it will be impossible to focus exclusively on
solving Roadster issues without getting slapped with a lawsuit.
The bottom line is that we are not ready to do this yet, but that's not a big deal,
because neither is the market. Even calling the market embryonic is an overstatement --
in the case of the Think guys, there may be a spark in their eye, but the sperm hasn't
even fertilized the egg :)
As I see the facts, the choice is either to sacrifice a six month first mover advantage in
a market that is like the Internet circa 1992 (but slower moving) or focus every bit of
energy on getting our product right.
From: eberhard@t som]
Sent: Tue 10/24/2006 1U:40 PM
To: Elon Musk
Subject: battery program
Elon,
I think it is a big mistake for us to let these battery opportunities go, as discussed
over and over again the last several months. Also, as discussed, I think it is possible to
do a limited number of outside programs without disrupting Telsa's car programs - I
lPage 378 actually think that if managed correctly, it would drive behavior that would benefit our
programs. .
However, it is obvious to me that I cannot change your mind on this.
Further, though others on the board disagree with you, I think there is no taste to out-
vote you —- I would not vote against you on this myself.
I am pretty sure that waiting 6 months will cause us to lose the Think guys, as well as
the motor scooter guys; their schedules will require them to find a certain answer long
before that time. It is likely that most of the other opportunities that Bernie dug up
will be similarly stale in six months.
Having Bernie, (and to some extent JB, and Kurt) spending time on writing proposals,
meeting with potential customers, planning the business, etc.
is too hard on the organization if there is no certainty that we will move forward with
the program. Tom and Malcolm have been in limbo as to their future responsibilities toward
the battery system for too long already.
So I will shut down the whole Tesla Energy effort tommorow, and ask Bernie not to bill any
more hours to Tesla. I will leave the organization as-is, with battery manufacturing group
reporting to Tom, and engineering reporting to Malcolm. The group will work *only* on
completing the Roadster pack and developing the White Star pack.
Martin
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From: Elon Musk | i]
Sent: Tuesday, August 08, 2006 1:55 PM
To: John Woolard; eberhard.
Ce: Jim Marver
Subject: — RE: tesla (electric car)
I've always been ‘clear that, although I think Tesla is very likely to be successful and
that we will deliver a great car, the money is not escrowed or otherwise secured. My
recommendation is that people buy the Sig 100 collector's edition cars, as these will
probably have the greatest value over time. Also, the first year production non-Sig cars will probably cost more than $100k for the same set of options.
----- Original Message-----
From: John Woolard Lee. .
Sent: Tuesday, August 08, 2006 07:01 AM Pacific Standard Time
To: Elon Musk; eberhard t
Ce: Jim Marver
Subject: Fw: tesla (electric car)
Not sure how to field requests like this - I need to tell him that his money is at risk
and he should wait, or we need to provide some protection. Unsure where we left it after
the last meeting. JW
Sent from my BlackBerry Wireless Handheld
7+ Original Message----~
From: Emmalyn Shaw <
To: 'Arad Rostampour' a>; John Woolard - /
Sent: Mon Aug 07 17:43:13
Subject: RE: tesla (electric car)
Arad,
I want to introduce you to John Woolard, the person in charge of our Tesla investment at
VP. He can share his thoughts wrt your issues / concerns re: being among the first purchasers of Telsa.
Best,
Emm
Emmalyn A. Shaw
Vice President
VantagePoint Venture Partners
1001 Bayhill Drive - Suite San Bruno. CA
Phone:
“Fax:
www. vpvp.com
From: Arad | !
Sent: Monday, suyust 07, 2006 LU:Lo AM
To: Emmalyn Shaw
Subject: tesla (electric car)Page 382 I hate asking you this, but want to get your helpful insight... if I were to put a
reservation in for one of these tesla electric roadsters, if you were me, would you be
concerned about the company becoming insolvent and losing my large deposit? Any other
concerns I should have (first year production, etc)? Part of me Says just get the
reservation and you can wait to see it if it's worthwhile.
Thanks,
Arad
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From: Elon Musk ! -
Sent: Monday, November 27. 2006 9:13 AM
To: eberhard¢ am
Subject: RE: FW: Please confirm Tesla Motors information
What I need to hear from you is that is will be addressed after SOP and that customers
will be informed that there will be an upgrade coming *before they receive the car*. I
have never demanded that it be done prior to production, so I don't know why you would
even raise that as a straw man.
a Original Meseane-—--~ .
From: eberhardé@t. a]
Sent: Monday, November 27, 2006 9:02 AM
To: Elon Musk
Subject: Re: FW: Please confirm Tesla Motors information
> This is a major issue and I'm deeply concerned that you do not
> recognize
it as such.
Elon,
I recognize that this is something that needs to get fixed. I just don't see a path -r-any
path at all -~- to fixing it prior to start of production without a significant cost and
schedule hit.
We have a tremendous number of difficult problems to solve just to get the car into
production - everything from serious cost problems to supplier problems (transmission, air
conditioning, etc.) to our own design immaturity to Lotus's stability. I stay up at night
worrying about simply getting the car into production sometime in 2007.
For my own sanity's sake and for the sanity of my team, I am not spending a lot of cycles
thinking about the dashboard and other items that I want to fix after SOP. We have a long
list of things to think about once we are shipping, and I will think about them when I
have free cycles to do so.
me
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E
ee)
L
Se
LuPage 387 EXHIBIT 31Page 388 REDACTED
From: Eton Musk ° ay
Sent: Tuesday, November 28, 2006 12:51 AM
To: eberhardi ; flare Tarpenning
Subject: FW: Tesla costs & pricing
From: Elon Musk
Sent: Tue 11/28/2006 12:50 AM
To: jmarve:
Subject: Tesla costs & pricing
I spoke at length with Martin & Marc earlier this evening and feel significantly more
comfortable about how well they understand the vehicle costs and how the pricing was
derived. To some degree, I think there is a difference in semantics. It is not that
Martin had no idea what the car cost when he was asked at the last board meeting, but
rather that he did not feel comfortable stating a precise number off the cuff for a
specific calendar quarter. of production. The cost decreases over time for several reasons
that Martin will drill into tomorrow.
I've asked that this cost & pricing presentation be advanced to the beginning of the board
agenda and that ample time be allowed for discussion. Also, I took pains to emphasize
that any major decisions like this need to be reviewed and approved by the board or, if
too urgent to wait, by both you and me. Until the Series C, Martin and I were in the
habit of making decisions by phone call in between board meetings and that habit has to be
broken.
Elon
/
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REDACTED
From: Darryl Siry ]
Sent: Wednesday, December 27, 2006 3:40 PM
To: Martin Eberhard; Dottie Hall; Ron Lloyd; Malcolm Powell; JB Straubel: Mike Harrigan; Gretchen
Joyce; Diarmuid O'Connell: Rick Vieth :
_ Subject: Current Business Plan Structure
The attached document represents the current structure for the revised business plan. Itis a moving target but is
fairly well formed at this point. | would expect that we will continue to add pieces and revise things for a while but |
' wanted to get everyone on the same page for now. .
I've added it to CVS in the "3.0" folder in the "Business Plan" folder that we created to house all the "new new"
Stuff we are working on for the business plan. Please use this folder for your new versions so we can better
organize things.
I've put names next to segments to reflect who is responsible for what. Please note that in addition to writing
some of the sections | will also be incorporating other people's contributions and editing for style and tone so that
the overall document is consistent and effective.
For the remainder of the afternoon & evening | will likely be completing the parts that are focused on Marketing
and Sales and | will probably start incorporating other sections by tomorrow early. morning. In order to keep things
organized | will coordinate with people via email and/or phone when | start looking to incorporate other parts (in
addition to using CVS). Please keep me in the loop as other moving parts change so | can keep things organized.
Thanks
From: Malcolm Powell!
Sent: Tuesday, January 02, 2007 1:08 AM
To: Dottie Hall
Cc: Martin; Darryl Siry
Subject: FW: draft business plan NPI_dh.doc
Good points.
Is this any better?
I've modified the chart and added a line above the first table.
Mac
From: Dottie Hall ! 1]
Sent: Thursdav. December 28, 2006 1: 02 AM
To: mac@ i; ‘Martin Eberhard’; ‘Darryl Siry'
Subject: draft business plan NPI_dh.doc
[ am including Darryl on these comments as he appears he is playing the role of primary editor and consolidator.
| think the concept of explaining this in the business plan is spot on.
| made a few suggested edits to tighten the text.
| have 2 significant comments:
~ The chart doesn't'scan real well. When | scanried the document, | assumed the green boxes with X's showed
how we are doing against those tasks. Once | read the document | understand that those boxes indicate taxes to
be completed for each of the gateways. But | had-to read the text to understand it.
- If | were an investor reading this, | woujid definitely want to know how we are progressing against the gateways.
Where will we tell them that?
Dottie
on
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From: Wood, Simon’ k]
Sent: Friday, January 12, 2007 4:30 AM
To: ‘eberhard
Subject: Presentation for Elon
Telsa slides for Elon
Musk 12....
<> Dear Martin
As requested here is a copy of the slides I am taking to present to Elon on Monday. As
you suggested I will verbally outline to him the current situation of Lotus and Proton.
I am sure you can imagine I find this a rather awkward situation where Elon has asked for
Lotus' own view of the production timing of the project. I recognise this conflicts with
the plans that your team are developing, it is none the less my personal, perhaps somewhat
pessimistic, view of where we are likely to end up. Interestingly Mac commented at the
red items review on Wednesday that the planning dates for SOP are targets to shoot for and
may not be achieved, in fact he commented that SOP could be November but we should at
least all try for something much earlier. Nothing wrong with that, we just need to
understand the implications and risk. Sorry won't be seeing you on Tuesday but have made
arrangements to meet up with Tom.
Best wishes
Simon
Simon Wood
Director Lotus Engineering
Tel:
Fax: + }
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http://www. lotussport.comPage 400 Group Lotus ple (company registration no. 606189) Lotus Cars Ltd (company registration no.
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These slides detail my personal view of the key issues on Project “Darkstar”.
They could be viewed as pessimistic, but reflect the general feeling of key Lotus
personnel involved in the project.
This view is based on:
¢ Information presented by the combined Project Team at the DQC Gateway
held on December 13" & 14" at Hethel.
¢ Lotus’ experience of many previous vehicle programmes (Lotus and OEM).
- An internal review of the programme.
The aim of these slides is to examine the current status of the Project and
describe the resulting effects on the overall programme.
Lotus is totally committed to the programme being a success. The comments
contained in these slides are our experience of the project status and likely
outcome unless extraordinary actions are put in place and maintained.
TESLA MOTORS Page 1 12/1/2007 Jon Bright
Simon Wood 12/01/
.
’
t
@
: :Page 402 Key Issues
1.
2.
3.
NO oO
Engineering Releases
Part Ordering / Part Availability
Build Phases
Test and Validation
Concerns Status / Level of Risk / Closure Rate
Summary on Timing
Suggestions for Improvement.
TESLA MOTORS
Page
42/1/2007 Jon BrightPage 403 Lotus’ View on Project Darkstar Status — January
ECO Completion, Purchase Order and Part Delivery Status - Week 1 {
500 >
| 450 +
| 400 +
350 300 +
250 -
. 200
Number of Parts
150 +
100 ~
36 _
43 _
35 _ 42
Prior to Week
'
i
'
=== Parts Received Cumulative
Lo
45 _
® ECO Planned Cumulative (BASELINE)
wentimm= FCO Actual Cumulative (COMPLETED)
CAT 1 & 2, Buy Items ONLY
ld
of ad
a
2?
of 9 CO
ase Se 2 BS 2 Oe
o
TESLA MOTORS
Page
12/1/2007 Jon BrightPage 404 1.
Engineering Releases
¢ Releases are not achieving the original plan.
¢ Tesla predict releases to be complete wk 5, however, actual release rate
is behind revised plan. Still ~20 parts with no planned ECO release date.
¢ The need to release ECO’s on time should not be at the detriment of the
quality and robustness of the release. A poor release will result in a re-
release.
¢ Parts ordering activities should follow the release curve, and with a slight
delay it is.
TESLA MOTORS Page 4 12/1/2007 Jon BrightPage 405 Lotus’ View on Project Darkstar Status — January
Progress Chart - EP Vehicle Tests Weekly Progress
10 — Planned
—— Actual
Number of Tests
n
_ A IN MAY VOAV AV AVA
25 27 29 31 38 95 37 39 41 43 45 47 49 51 1 ‘3 § 7 9 11 13 Week Number 2006-
tf Completed :
On Course : O Minor Issue G Major issue ; “| ae
——— = . ——— : ' Accumulative Progress
Test Reason For Delay ii ai
B — Planned
Top Speed Need to do this with Magna transmission a Actual
Stelvio Descent Transfer to VP phase ; Z Approx f} gg 50 Handling / Roadholding Delayed due to late arrival of PEM/trans for EP7 £ months late
Transmission Shift Transfer to VP phase 3”
E
Transmission Lock Transfer to VP phase 2 x0!
Interior Driveline/Powertrain Induced Noise No transmission available for EP7 Coastdown Test Progress in US (not to SAE spec)
Efficiency - USA On going work through VP °
Electromagnetic Compatibility Initial test has lead VP re-design , : OT
ioe 25 27 29 31 33:35 W 39 Mt 43 45 a 49 138 TH 8 Transmission Abuse Not applicable for Xtrac trans - move to VvP- Es Week Number 2006.
TESLA MOTORS Page 7 12/1/2007 Jon BrightPage 408 Lotus’ View on Project Darkstar Status — January
4. Test and Validation
Graphs show T&V is behind plan. This means that:
¢ We have a large unproven element to the design at this phase due to the @
delay. :
¢ Is it durable? Do design changes have to be made? Can we commit to
Production?
¢ Lateness in a T&V programme translates directly to a higher risk of delay to
Start of Production (SOP).
¢ Lotus requires that Darkstar must demonstrate compliance with ABS
Performance, Brake Fade, Braking Performance, High Speed Stability, PAVE :
and Durability test targets etc. prior to saleable cars. @
TESLA MOTORS Page 8 42/1/2007 Jon BrightPage 409 Lotus’ View on Project Darkstar Status — January
5. Concerns Status / Level of Risk / Closure Rate
Concerns
Active 733 Level Unassigned 4 Level Promoted 15 Level Closed 94 Level 4 .
Total 846 Unrated
Key:
Level 1; Critical - Walk home, complete loss —
of function, safety or regulatory item.
Level 2; Major — Customer or dissatisfaction,
high repair or service expense.
Level 3; Moderate — Customer dissatisfaction,
fix on next trip to dealer.
Level 4; Minor — Customer annoyance,
possible warranty repair.
Severity of
Concerns
Active Concerns
3 =
for All
Concern Defined
Containment in Place Root Defined Solution, Defined
[pata for this graph generated on: 05 Dec 2006 07:16:
TESLA MOTORS
Page
12/1/2007 Jon BrightPage 410 aa ~N oy
@
Lotus’ View on Project Darkstar Status — January
9. Concerns Status / Level of Risk / Closure Rate (cont.)
‘A concerns system is in place and appears to work
Lotus are worried about the volume of concerns (846 in system, only closed)
Lotus are also worried about Tesla’s scoring strategy. This needs to be
accurately and conventionally applied as Cat 1s and d Cat 2s need to be
closed by SoP.
The late T&V status will mean many concerns still to be discovered.
Who is responsible for driving concerns closure? The data is well
measured but actions to close appear slow.
The closure target is not achievable.
Lotus estimates a closure rate or 25/week, therefore 30 weeks, likely to
delay SoP.
TESLA MOTORS Page 10 12/1/2007 Jon BrightPage 411 Lotus’ View on Project Darkstar Status — January
Concern Status Overview
(As presented by Tesla at Gateway + Lotus Notes)
a~ Lotus note: Opening concerns at about 9 per week
/ |
—— Lotus note: Closing concerns at about 5 per week
Planned Closure dates
600 1 will be realigned with
- __s J new schedule
8 500 ——= Open Concerns
5 A\ fp —-Total Concerns | :
is Lotus note: Too steep == : — Planned Closures | |
\ J Lotus note: Timing now changes
300 J
——=>
& Cont. —
TESLA MOTORS Page 11 12/1/2007 Jon BrightPage 412 aS
je : =. AY
}
=>
Lotus’ View on Project Darkstar Status — January
q
Production Cum Volume
§ 846 Concerns, ~\ - Do = —_ c
Growing at 4/wk , :
~~ | 7 | — SOP -
Programme / Concerns Closure
oe Production
Will close AND OPEN ™~ . L
60 + Concerns During VP . , 90 7 7 ae . Pilot Series
/ . Need significant push _ _ .
30 + ~. VP Build Will close AND OPEN ~
‘ AL . Concerns During Pilot oo =
me CONCERNS
10 + °
0 4 Ht 4 EH HH HHS A FG HH
| 6 11 16 21 26 31 36 41 46
Week
Estimated production plan (target dates from Tesla)
TESLA MOTORS Page
12/1/2007 Jon BrightPage 413 Open Technical Worries;
¢ Body material — new carbon substrate of which Lotus does not have ‘in field’
experience regarding fibre show through, UV attack, paint adhesion etc. Test
plan is being developed.
¢ EMC —- recognised as an issue and test work has lead to modifications. Final
sign-off cannot be achieved until production level components are available.
¢ Transmission — resource to Magna a good decision. T&V and production plan
is not yet defined. Lotus is concerned that the sheer quantity of development
and calibration work plus lubrication over the temperature extremes for a twin
hydraulic clutch system is not fully recognised. This is a critical path item.
TESLA MOTORS . Page 13 12/1/2007 Jon BrightPage 414 Lotus’ View on Project Darkstar Status — January
Summary -
Lotus is concerned that the programme is running late, due to:
Behind schedule ECO release
Resulting part availability.
Slow progress on the T& V plan.
Slow concerns closure.
Inability to prove out Production Processes until Pilot build phase.
Transmission on critical path.
These items drive SOP readiness.
We have seen significant improvement in the situation following the DQC Gateway, and a e
more realistic understanding of what needs to be achieved. |
However, in Lotus’ opinion, Tesla are still being unduly ambitious with the programme timing
given the outstanding issues. !
Data and experience suggests an SoP date of week 48 as more realistic. On this basis :
vehicle volumes available | in 1 USA fc for r sale Prior t to > Christmas 2007 is about 28 units. .
TESLA MOTORS Page 14 12/1/2007 Jon BrightPage 415 Lotus’ View on Project Darkstar Status — January
Summary — 2: Suggestions for Improvement
Significant late change
Production
Issue Activity Suggestion Criteria.
Quality Drawings and data __|Introduce a specialist checker Resource
4 Robust Releases — —F
Volume. / rate of processing {More people Resource
. Review worksplit and co-location
. Géneral a a Processes
2 |US/UK co-operation = operation effectiveness .
Effectiveness of systems. MRP Lite being replaced by SAP __|Processes
Perceived distractions with ,
3 |Project focus growth of company, Recommend focus on Darkstar as Policy
Whitestar etc (particularly a priority
USA)
Needs an owner, drive concerns
Rate of closure Resource
system
4 |Concerns
Some yet to be found (late oy
|Progress T&V programme Resource
T&V) _
MRP Lite (Excel
5 |Business Systems spreadsheet!) limited Believe SAP due February Processes
effectiveness _
6 |T&V Programme Late Needs stronger and more Resource
experienced leadership
Needs micro-management to
7 {Transmission g Resource
TESLA MOTORS
Page
12/1/2007 Jon BrightPage 416 Lotus’ View on Project Darkstar Status — January
Summary — 3: Lotus Support
Item 1: Releases
Use 2 Lotus designers for drawing checking and processing over the next 2 eS
months. Approximate cost $70k !
Item 4: Concerns List
Lotus provide a concerns closure manager for UK concerns, for 3 months,
with supporting engineer and administrator. Approximate cost $110k
Item 6: T&V Programme
Lotus provide one part time development engineer for 5 months to support i
Tesla management of programme. Approximate cost $52k e
Item 7: Transmission
Propose a review of Magna transmission design and timing plus contract
negotiation support. 2 weeks contract support plus 1 week technical
review every month. Approximate cost $52k (assuming 4 month duration)
TESLA MOTORS Page 16 12/1/2007 Jon BrightPage 417 Lotus’ View on Project Darkstar Status — January
Summary - 4: Tesla Engineering Spend with Lotus
$300,$250,000 [~~
/ “Rioposed
$200,000 | . .
/ Predicted
$100,000 \
$50,$0 T T T T T T T T T T T TT T T T
Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Actual
Note: Excludes materials purchasing activities
TESLA MOTORS Page 17 12/1/2007 Jon BrightPage 418 fo pa
Lotus’ View on Project Darkstar Status — January
Gateway “Red Items Review” 10 January ’6 red items from DQC Gateway in December, one subsequently closed.
1. BoM Cost — Tesla business issue, not for disclosure to Lotus. RED e
2. Part Delivery Status — 70 parts not released, 55 parts missed release date but
are on order (ie not in grey delivery line). 35 Cat 2 parts still to release. Agreed
to change process to reduce time from release to ordering. Daily reporting part
by part introduced. RED
3. Programme Timing — VP car #2 scheduled for build start on 15" February.
Decision in 2 weeks time if this is achievable. Transmission durability testing
does not meet start of production requirements. RED
4. Production.BoM (“MBoM”) — Lotus to structure in IFS for production, confusion e
_ regarding need to structure Options. Review in progress. RED !
5. Overhead in Transfer Price — Agreed with Tom Colson. GREEN
6. Paint Warranty — New body material will require agreement on test plan for
_Podly quality curabiliy. RED
TESLA MOTORS Page 18 42/1/2007 Jon BrightPage 419 Lotus’ View on Project Darkstar Status — January
From: Mare Tarpenning [m
Sent: Friday, February 02, 2007 1:44 PM
To: Tandon, Vipul
Cc: Wassong, David; Martin Eberhard
Subject: Re: Follow Up
Hi Vipul,
Tve attached our preliminary versions of both the executive summary and the finance section from our business plan. I will send you a complete business plan at the end of
next week. Our Board of Directors meets on Tuesday and is likely to make some edits between now and then.
Best regards,
mare
Tandon, Vipul wrote:
Mare:
Had not heard back frém you regarding the status of the business plan and financial model, so | thought | would drop another line. We still remain very interested and anxiously
await the information so we can get started on doing some analysis of the opportunity. Thanks. .
Vipul 8 Tandon
Soros Fund Management
Principal - Private Equity
888 Seventh Avenue
New York. NY
wow, -
ew tne
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Marc Tarpenning
VP Electrical Engineering
Tesla Motors Inc.
1050 Bing Street
San Carlos, CA
USA
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delete this message from your computer system and notify me immediately by reply e-mail. Any unauthorized use or distribution of the content
7117/2009Page 427 REDACTEDPage 428 Proprietary and Confidential
REDACTED
Projected Revenue from Sales |
$1,000,$300,$800 coo
$700,$600,000 -f
$500,$400,$300,$200,$100,$
Gross Margin
Gross margin and product cost for the Roadster and WhiteStar are shown below. Product cost
includes labor, product liability insurance, warranty reserve, and home charging system.
Road to Profitability
The Roadster project becomes cash flow positive in 2008. If Tesla Motors were not investing in the
WhiteStar program, the company would be cash flow positive by the end of that year. With
continued investment in WhiteStar and additional growth, the company will not be cash flow positive
until after the successful launch of WhiteStar production in 2009.
Income Statement
Executive Summary
Tesla Motors is building a major car company by designing, manufacturing and selling electric cars that
are the first to combine high energy efficiency with great driving performance. Tesla’s first car, the Tesla
Roadster, launched in August 2006, already boasts an order backlog of more than $25 million, with
customer deposits of $30,000 to $100,000, a year before vehicles are to be delivered. This initial market
reception signals a tremendous untapped demand for highly energy efficient cars that are a joy to drive.
Tesia timed the introduction of its high performance electric cars perfectly. Oil prices continue to trend
upwards. Even more importantly, concerns about global warming and dependence on foreign oil now
resonate strongly with the American public. The success of hybrids, most notably the Toyota Prius,
demonstrates that car purchasers now value, and are willing to pay for, a reduction in oil consumption
for reasons other than fuel cost savings. As the first startup manufacturer of stylish, high performance,
zero-emissions vehicles, Tesla is uniquely positioned to tap into a wellspring of public interest that will
quickly establish it as the category leader of the future.
Electric cars surpass all other cars
in energy efficiency, by a large
margin. However previous electric
car programs suffered from two fatal
flaws: (1) they started with the
apparent philosophy that driving is a
necessary evil, resulting in spartan,
utilitarian vehicles with limited
appeal and (2) they had ranges of
60 miles or less, making them
impractical for almost all
households.
Tesla has solved these problems,
producing the first electric cars that
people love to drive. Tesla’s cars
are great looking and compete on
outright performance. The
company’s purpose-built electric
- drivetrain delivers astonishing
acceleration and unbeatable ae sea ss = A
performance without compromising the inherent efficiency of electric o cars. At the heart of this drivetrain
is Tesla’s battery technology, built up from high-volume, commodity lithium ion batteries and proprietary
technology, providing a range of up to 250 miles — a 4X improvement over previous generations of
electric cars. With Tesla vehicles, drivers can enjoy dramatically superior efficiency with range to spare.
Investment Opportunity
By 2011, Tesla Motors’ core business of electric automobile sales will generate $888M in annual
revenues, with 26% pre-tax profit ($230M) on sales of 12,600 cars per year. Additional revenue and
profit from Tesla Energy offer significant upside to these numbers.
i
Tesla has raised $60 million to date, primarily from Elon Musk and \ ith
additional funding from Draper Fisher Jurvetson, JP Morgan’s Bay Arca cyuny rund, Valor Equity
Partners, Compass Technology partners as well as a “who's who” of private investors such as Larry
Page and Sergey Brin. Tesla seeks an additional $40 million to continue the WhiteStar development
program and to fund initial production of the Tesla Roadster.
From: Marko Maschek
Sent: Tuesday, February 06, 2007 5:14 PM
To: eberhard@
Ce: Alina Dini; Mare Tarpenning
Subject: RE: Follow-up
TXS, LOOK FORWARD TO JT
-----Original Message-----
From: Martin Eberhard [rm
Sent: Tuesday, February 06, 2007 7:36 PM
To: Marko Maschek
Cc: Alina Dini; Marc Tarpenning
Subject: Re: Follow-up
Hi Marko,
You should have joined David for a test drive last weekend :-) We can atrange a test drive for you whenever you are in town, with
reasonable advance notice. Let me know, or schedule with my assistant, Alina.
Marc is swamped right now, getting the financial section in order for the business plan, but he will send you financial numbers very
soon.
T'll send you a business plan as soon as I have BOD approval.
Best,
Martin
Martin Eberhard !|CEOle . ‘m1 1050 Bing Street, San Carlos, CA 94070 I tel
TESLA MOTORS
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have received this message in error, please delete this message from your computer system and notify me immediately by reply e-mail. {| Any unauthorized use or
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Marko Maschek wrote:
martin,
i had a good call with jim marver. he mentioned you were preparing a business plan. plse send me a copy
also you promised a set of more detailed numbers.
when can i come out fora test-drive?
txs marko
--—Original Message-----
From: Martin Eberhard [
Sent: Monday, February 05, 2007 2:41 PM
To: Marko Maschek
Subject: Re: Follow-up
Hi Marko,
Some more thoughts on supposed 10-minute recharging:
There are two companies I know of claiming to be developing EVs with 10 minute recharging: ZAP and Phoenix
motorcars. Both companies plan to use batteries from Altair Nano. There are several issues around this:
7/8/2009Page 444 REDACTEDPage 445 Message
TIRANAD
@ @ Page 3 of
. REDACTED
may turn into a revenue source for Tesla.
If. (or any other battery maker) comes up with a battery technology that is better than what we are
currently using, we will switch to that technology - our battery system is chemistry-independent, But the batteries
_have to be real! : ‘
Best,
Martin
“Martin Eberhard | CEO [6 ; 11 1050 Bing Street, San Carlos, CA 94070 | tel
TESLA MOTORS
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Marko Maschek wrote:
Martin,
Appreciated your time yesterday, great story, | must admit.
Having worked in automotive electronics before becoming a VC, | teally think you have come a
very long way with a small amt of resources. I found the attached article in an old book that IPage 447 Message
7/8/
@ @ , Page 5 of
REDACTED
have kept It dates from 1996 and is part of the conference proceedings on airbag R&D. it
describes one of my three inventions. Back then we were struggling with the question of how
many carsh pattems do we need to optimally cafibrate a new car platform. | was tasked to write
an easy to use synthesis too! which would collect and analyse real crash data by using digital
signal processing algoritms ptus statistics to come up with a method for generating “artificial”
crash scenarios.
From what | have heard yesterday, | would like to discuss the opp'y with my partners. as
discussed, we are interested in building global market leaders. Tesla falls into that category.
have also asked jim marver for feedback.
The following would be helpful to have:
1. yesterday's ppt
2. a set of detailed financial forecasts and some sensitivity analysis
3. any additional information on the road certification and the state of the transmission (which
appeared to be a bottleneck)
Best marko
-—— Original Message——
From: Oanlela Boesshenz
Sent: Tuesday, January 30, 2007 2:54 PM
To: Marko Maschek
Subject: article
<>
Daniela Boesshenz
3i | 880 Winter Street, Suite 330 | Waltham, MA 02451 | USA
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From: Elon Musk _
Sent: Tuesday, February 06, 2007 1:36 PM
To: eberhard@
Subject: RE: [Fwd: Bus plan]
For big rounds, legal counsel usually reviews the plan, but any changes are up to us. | suggest that they have
explicit instructions only to provide feedback about where we are opening ourselves up to major liability. We will
then decide whether to accept their feedback or not.
By the wav.
y
REDACTED
raian eT o ee Re Aaa
wail Tees.
From: Martin Eberhard [mailto:
Sent: Tuesday, February 06, 2007 1:05 PM
Tos Elon Musk
Subject: [Fwd: Bus plan]
What do you think about having our lawyer review the business plan? Is this normal? I have actually
never done that before. I can imagine the weasily language throughout the business plan after a lawyer
gets through with it :-)
Martin
nanna === Original Message --------
Subject:Bus plan
Date:Mon, 5 Feb 2007 18:40:23 -From:Jim Marver <~ -
Tos< , "Bill Green"
Truly a wonderful piece of writing. Practically a textbook. Wondering where we’go from here. | have a fair.
number of specific comments which | can hand you on wed-since | made them directly on the plan--and some
. general ones:
~ When will counsel review?
Isn't there a lot of material that you would not want competitors to see (eg, detailed designs, costs on p 77, future
direction p81)?.
My main: concern is that there is not much on how the company is going to make money.
Separately, | spoke w Ken Goldman today and he will try to see you later this week. Off the record, he's made
lo AAnNPage 453 Bus plan @ @ _ Page 2 of
REDACTED -
progress on extricating himself, and he seems ready to strike a deal with us. | think you can make it happen this
week! Good luck.
Looking forward to seeing you Wed. Jim
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Martin Eberhard | CEO Pp n 11050 Bing Street, San Carlos, CA:
‘94070 | tel 6 oe
TESLA MOTORS
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7/8/2009Page 454 EXHIBIT 39Page 455 EXHIBIT 39Page 456 REDACTED
From: Elon Musk [ei : -
Sent: Sunday, February 25, 2007 4:32 PM
To: eberhard@ — : \lina Dini; Malcolm Powell
Subject: RE: Transmission aevelopment/tooling
Now that we are in the door with Magna and they have bought into Tesla, I suspect we have
some leverage. Things like the big w* announcement with Richardson and Bingaman should
also help us. ‘
Worth playing "medium ball", I think. Went through this a lot with SpaceX. Initially, it
is really hard to get the big companies to engage, but, once they are engaged, they fight
hard to keep the business. After the vendor program exec has made the case to work with
us to his upper management, he doesn't want report back that he lost our business.
Even though a complete bluff, perhaps we could assert that Xtrack really wants to keep our
business and wants another crack at making the transmission? The fact is we aren't using
Magna for any other part of the car, right? It should be quite credible for us to assert
that we have a viable alternative. ,
---- Original Message-----
From: Martin Eberhard [
Sent: Sunday, February 25, 20u/ U4:18 PM Pacific Standard 1me
To: alinaé mac ; Elon Musk
Subject: RE: Transmission development/tooling
Good idea - I will ask Alina to set up a call witg Mac tomorrow.
The unfortunate truth of the situation is that we don, have a lot of leverage with Magna..
Our business is tiny compared to their other deals, so we can't be too much the bad cop or
they will simply walk. .
Mac and Tom have worked very hard with Magna to keep the budget and schedule under
control, and I am happy with their work so far. They both know this is very high priority.
Me
[Message delivered by NotifyLink]
From: "Elon Musk" <:
Sent: Sun, February 25, 2007 12:08 PM
To:
Subject: RE: Transmission development /tooling
Sure, let's add whoever you think would be helpful to the conversation. We could just
call Mac from my office tomorrow.
I have a secondary concern here, which is that even an organization like Magna takes time
to spend $4.6M. If we've set an expectation of that dollar amount, the Magna exec
responsible needs to be a true long term thinker to come in Significantly below that
value. His short/medium term incentive is to take the time to spend that amount, rather
than tell his boss that he managed to come in at half and lose $2+ million in revenue.
There might be some way to use me/board as the bad cop here, tell Magna that the board
rejected the contract and that we need to figure out a smarter way to get the job done. I
wish we had enough of the right mech eng expertise on board to do this ourselves (sigh).Page 457 REDACTED
From: Martin Eberhard [mailto:eberhard@teslamotors.com]
Sent: Sun 2/25/2007 10:34 AM
To: Elon Musk
Subject: RE: Transmission development/tooling
‘Happy to talk about it today, but it would be better to have Mac in the conversation.
Me
[Message delivered by NotifyLink]
From: "Elon Musk"
Sent: Sat, February 24, 2007 12:47 AM
To:
Subject: Transmission development/tooling
I had not realized’ that the development contract with Magna alone was $4.6M, which is mind
blowing. My impression was that that was the total cost of the delay, not just the
payment to Magna. That seems like any insane amount of money for the transmission, even
for W*.
Do we have a negotiated contract? Anything that huge should be a major topic of board
conversation. Please give.me a call to talk about this a little more when you have a
moment.
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REDACTED
From: Elon Musk [ ‘ .
Sent: Friday, March 02, 2007 3:13 AM
To: . eberhard@ —
Subject: Roadster pricing
Should we increase the base price to $95k after Q1 this year? I'm a little worried about
our margins.
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From: . Martin Eberhard
Sent: Thursday, March 15, 2007 7:35 PM
To: elon@' |
Subject: magna
7/1/
Page | of 1Page 464Page 465 Where Are We?
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From: ‘Elon Musk
Sent: , . Saturday, April 21, 2007 3:55 PM
To: Martin Eberhard
Subject: . Battery discussion
I'd like to meet with Bernie, JB, Kurt and/or whatever group you think makes sense to talk
about cells and batteries for an hour prior to the Wed board meeting.
Main items. are: ,
* Overview of the status of Tesla Power
* Projections of cell cost and energy density per kg
* Projections of battery cost and energy density per kg and per
* Plans for W* pack production and possibilities for cell production
I'm not expecting high fidelity answers here, but would like to know what everyone thinks,
including dissenting opinions. This is such a huge part of our future and preys on my
mind, as I'm sure it does to you.
E
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From: Elon Musk
Sent: Monday, April 23, 2007 8:13 AM.
To: Martin Eberhard
Subject: RE: Tesla Approval Request: Magna + Albuquerque L/C
Just to be super clear before I respond to Simon and Jim's silliness, the Magna expenses
were included in our cash flow forecast? Simon and Jim also don't seem to understand the
difference between a budget and critical path cash projection. In thé former, one has the
discretion to say no, in the latter one only does harm by delay.
From: Martin Eberhard [mai
Sent: Sun 4/22/2007 12:42 pM
To: J Marver; Simon Rothman; Craig Harding; BoD
Cc: Ron Lloyd; Marc Tarpenning
Subject: RE: Tesla Approval Request: Magna + Albuquerque L/C
Board Members,
This request contains two parts. The first part is for Magna Powertrain, and provides
funding for the critical path Roadster program ~~ its transmission. This PO is as
described by Malcolm Powell in previous board meetings.
The scond piece is for a new request for an L/C from the Albuquerque developer. As Jim
suggests, Ron and Craig are working hard to minimize the financial impact to Tesla, but I
see no way to avoid having some of our money sequestered in an L/C.
Please make sure you have approved the Magna portion of this request, as without payment
to Magna, the Roadster schedule will slip. We can discuss the impact of the Albuquerque
L/C and stratagize about how we might reduce its cost at Wednesday/s board meeting.
Thank you,
Martin
From: J Marver
Sent: Sunday, April 22, 2007 12:13 PM
To: Simon Rothman; Craig Harding; BoD
Cc: Ron Lloyd
Subject: RE: Tesla Approval Request: Magna + Albuquerque L/C
I agree with Simon in that it is important to understand how this PO impacts projected
cash flow, if at all, over the next four months. If already in the projections, I'm fine
with it.
I approve the L/C but believe that the amount should be reduced by much more than percent/yr. I know you are doing the best you can on this.
For this wed's bd mtg, could we please see a detailed monthly cash flow projections
through 2008? Many thanks.
----- Original Message-----
From: Simon Rothman [ °
Sent: Friday, April 20, 2007 6:02 PM
To: Craig Harding; BoD
Ce: Ron Lloyd
Subject: Re: Tesla Approval Request: Magna + Albuquerque L/C
Hi Craig,
I approve the Magna POs if and only if they are already budgeted for.
1Page 483 @ REDACTED @
The email doesn't specifically note whether these expenses exceed our previously discussed
budget.
Simon
--- Craig Harding - 4> wrote:
VVVVVVVV VV VV VV VV VV VV VV VV VV VV VV
VVVVVVVV VV Vv
VVVVVY
Vv
Two Items which require Board approval (and which cannot wait until
the meeting on Wednesday) :
1. Magna Expenditures. Tesla has
obtained Board approval to sign the Development Agreement with Magna
Powertrain for the development and purchase of a transmission for the
Roadster. I would also like BoD approval on the underlying project
costs which are reflected in the Statement of Work. Specifically,
Tesla would like to issue 3 purchase orders for the following:
* $1.2 million for equipment and tooling to
set up a manufacturing line
* $1.0 million for 50 prototype
transmissions
* $2.518 million for transmission project
development services
Please approve Tesla incurring these project costs of $4.718 million,
and an additional $923K in Q1 of 2008.
2. Guarantee / Letter of Credit for
REDACTEDPage 484 VVVVVV VV VV VV VVV VV VV VV VV VV VV VV VV VV VV VV VV VV VY
@ REDACTED ®
RR tnt ma
“TLL or may.
Please approve by return email; thanks.
-Craig
Craig Hardina I General Counsel I
m : I 1050 Bing Street, San Carlos, CA
94070 I tel oo . 7 . TESLA MOTORS
VVVYV
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From: Elon Musk
Sent: Tuesday, April 24,2007 10:07 PM
To: Marc Tarpenning; J Marver
Ce: Martin Eberhard; Diana Everett
Subject: RE: Cash projections
We are clearly getting ahead of ourselves with all the W* expenditures and need to flatten out the expense
growth. Some of it is associated with the Roadster, but $34M in R&D and CAPEX together with employee
costs of $33M are way too high for where Tesla will be with the Roadster by end of year.
From: Marc Tarpenning
Sent: Tue 4/24/2007 9:06 PM
To: J Marver; Elon Musk
Cc: Martin Eberhard; Diana Everett
Subject: Cash projections
Jim and Elon,
Attached are the latest monthly cash flow projections for 2007, along with model projects for 2008. The Model and
the accounting estimates are very close (about $20K off at the end of 2007).
The cash flow projections are based on various new cash requirements coming in from supply chain, marketing,
and ASO, and engineering. We have another budget meeting next week and with sufficient pushing should get
some cash back to improve the end of the year number.
Subtracted from our cash balance is the unbudgeted $2.5M in “restricted cash” assumed to be needed for New
Mexico deal (will be discussed at the board meeting).
Income that is not included in this forecast is any NRE from Tesla Energy customers (likely $1M, but there will be
cost associated with a customer), nor approximately $10M in grants from the State of New Mexico. Once the
timing of those payments is finalized, they will be included.
Marc
From: Diana Everett
. Sent: Tuesday, April 24, 2007 6:14 PM
To: Marc Tarpenning
Cc: Josie Co; Dan Kaplan; Diana Everett
Subject: Cash projections for BOD
Marc,
Attached are monthly cash projections for 2007. | think the format should work for the BOD. I’m not an exact
match to 4.2 budgets, but I’m close. | am sending this to my home email so if you have any questions tonight
please feel free to call me on my cell —.
TANANGPage 488 eo | @
REDACTED
| can come to the office tomorrow moming but have to leave by 10ish.
Page 2 of
Diana
Tesla Motors, Inc.
ce hn ne mm
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Ain innanPage 489 Tesia Motors, Inc.
Estimated Statement of Cash Recelpts and Disbursements
For the year ended December 31
Unaudited
Beginning Cash Balance
“Gash Source:
Total Sources
Cash Uses
Total Uses
Not Change Iti Gash
Ending Cash Balance
ACTUAL PLAN
Q1'07 Apr-
PLAN
tday-
PLAN
dur-
REDACTED
PLAN
Jul-
+ PLAN
Aug-
PLAN
Sep-
From: Martin Eberhard -
Sent: Wednesday, April 25, 2007 7:52 AM
To:
Subject: Re: rationale
‘Turns - - + «3 wants to-invest - t. Need to make room.
sao Original Message -~---
From: Elon Musk
To: Martin Eberhard
Sent: Wed Apr 25 07:36:55 Subject: RE: rationale
There is someone I know that wants to put ir 0k
sooo Original Message-----
From: Martin Eberhard [n
Sent: Wednesday, April 25, 2007 07: 05 AM Pacific Standard Time
To: Blon Musk
Subject: ' RE: rationale
Where did the < from sig 100 customers come from? I assume you know about more of them
than I do. ;
me
From: Elon Musk
Sent: Wednesday, April 25, 2007 12:15 AM.
To: J Marver; BoD; Marc Tarpenning; Nancy Pfund; Bill Green
Subject: RE: rationale
aa Thane caer wed
we eee WUULEOSCU YY aUUuLY yous co LL. :4. We will need $70M to $80M to take us past
a March or April 2008 IPO.
ee eS oe | ;
TNS erent mae cee on wee nee ‘
| | REDACTED
Tem ne st nn enemies candi
a i
i iPage 493 From: Jim Marver
Sent: Tue 4/24/2007 6:15 PM
To: BoD; Marc Tarpenning; Nancy Pfund; Bill Green
Subject: FW: rationale
i
It is the view of many that | we should not spend these until we are
shipping Roadsters——-hopefully in October-~<
we are shipping cars.
could spend 2.5m of deposits this year.
For example, if we ship the Z>b Roadsters in the business plan, we
If we knew for a fact that private capital would
be available to us in the Fall ata good valuation, then of course we could do a more
modest round now, but Roadster delivery delays or "feature slip" or weak capital markets
2Page 494 REDACTEDPage 495 EXHIBIT 47Page 496 EXHIBIT 47°Page 497 REDACTED
From: Elon Musk
Sent: Thursday, April 26, 2007 4:50 PM
To: Martin Eberhard
Subject: Price increase
When do you think we should increase the price? I'm a little worried about our margins.
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From: Elon Musk
Sent: Friday, April 27, 2007 12:40 PM
To: Darryl Siry; Martin Eberhard
Subject: RE: Price Change Recommendation
Sounds like a great plan
----- Original Message-----
From: Darryl Siry [ Le eens
Sent: Friday, April 27, 2007 12:08 PM Pacific Standard Time
To: Elon Musk; Martin Eberhard
Subject: Price Change Recommendation
Elon/Martin,
Here is my proposal on the price increase. With your approval I'll set the plan in motion.
Proposed Strategy
* Change base price from $92,000 to $98,000 - review options pricing as well (especially
mobile charging kit and HCS, where costs have increased)
* Price change effective for orders placed on or after July 2nd (a Monday)
* Price change announced May 15th (or thereabouts) - giving 45 days notice and creating
an incentive to purchase
Communications Strategy
* Promote price change through media release and outreach, as well as Tesla Newsletter
and Website
* Communicate to existing customers to reassure that their price remains unchanged.
* Primary Reason for Price change is increased cost, largely due to exchange rates with
the British Pound. Tesla plans to earn an adequate profit margin on the cars we sell.
* Timing of communication allows for some room after range communication, which will be
filled with at least 2 notable press releases (Series D funding & Tesla Energy Contract.)
Darryl Siry
VP Marketing
Tesla Motors
tel.
cel.
IM:
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+
E
m
c
<
frPage 502 EXHIBIT 49Page 503 Message | @ ® Page 1 of
REDACTED
From: Glyn Owen
Sent: Tuesday, May 08, 2007 7:03 AM
To: Malcolm Powell; Tom Colson; Marc Tarpenning; Malcolm Smith
Ce: Martin Eberhard
Subject: FW: Elon visit 3 May
Elon spent time with us (Tim, Christian, Brian, Matt and myself) after his session with Simon and Mike K, (the
Slides from Lotus session attached). . ,
Elon’s concerns:
- PEM firmware maturity and the program effect, an e-mail string from Brian is currently in progress.
- Interior; ‘ .
~ Dashboard appearance, (looks like from $15k car). Understands may not be available for SoP and may
need retro fit plus cost — Matt co-ordinating options
- Mat boot box appearance — Mat to assess lacquer finish
~ Grab handle on screen surround — Matt to assess feasibility
- Egress area on sill lower — no action to be taken
- Tyre pressures; build to ‘comfort’ not ‘range’ setting
~ First two cars to be in USA as soon as possible, possibly air freight without ESSs to gain time, understands
there may be high levels of retro fit.
Viewed a VP in the workshop and very positive.
Aware of the ‘cost and risk’ Lotus proposal and keen to front load as much as possible to minimize the effect.
Viewed potential of old Skipton, office and understands the current office space constraints.
Best regards,
Glyn Owen
(
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this message in error, please, delete this message from your computer system and notify me immediately by reply
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-----Original Message-----
From: Wood, Simon
Sent: 04 May 2007 11:To: Kimberley, Mike J
Subject: Elon visit 3/5/
Mike, will copy to. Elon.
Notes from the discussion between Elon & MJK/SPW.
TAI2ZANGPage 504 | Message e . @ . Page 2 of
e Apologised for ZAP press release. Elon accepted but noted that Martin Eberhard is VERY sensitive about
these issues & that this reflects badly on Lotus. Suggested that MJK ring Martin.
e Production Cars No. 1 & 2 are critical & must happen on time, for Elon & Martin respectively! They intend
to use then daily to log any customer issues & local running in the environment.
- @ Cars 3 - 22 are for the company owners/investors & cars 23. onwards are for customers. If absolutely
necessary for quality or durability these could be delayed slightly.
e He understood the risk to SOP timing & appeared to accept the likely risk of additional cost for resource
support & Possible missed build slots.
e The production schedule for years 2 & 3 he was not fully aware of however he does expect peak
production running volume to be at the start of year 3. This is driven by a desire to maintain a waiting list
demand & consides with the plan to open further Tesla "shops".
e Elon was concerned to hear that the durability car has not been running again & took away an action to
ensure the robustness of the software & firmware whilst recognising that the EP cars do not represent the
latest design.
.e His greatest concern remains the poor quality of the interior whish he views as totally unsuitable for the car.
We offered 2 alternatives, the painted interior or/and the full leather trim version. Elon requested that we
should proceed with the full leather as an option & build his car with this! It was proposed: that some
renderings be produced for Elon to view. Subsequent discussion with Glyn Owen has confirmed that Matt
Windle will lead this work for Tesla to review timing & cost implications. Elon would like the ability to be
able to update early cars with this interior if there is not time to build on line.
Simon
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=== Parts Received Cumulative
= B® ECO Planned Cumulative (BASELINE)
——B— ECO Actual Cumulative (COMPLETED)
= % @ECO Revised Cumulative
wee Orders Placed Cumulative (DATES ORDERS ARE PLACED
mam = LOTUS PREDICTION
TESLA MOTORS
sla Motors Inc. Proprietary And ConfidentialPage 507 VP Build Plan vs Actual Performance
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RNIN
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—
[Test
Stelvio Descent
Transmission Shift
Transmlsslon Lock
interior DrivelinefPowertrain Induced Noise
40,000 km durability with Corrosion
Transmission Abuse
TESLA MOTORS
El] Completed
O10n Course
Minor Issue
O Major issue
Reason For Delay
Transfer to VP phase
Transfer to VP phase
Transfer to VP phase
No transmission available for EP
Delay due to continuing unreliability of electrical systems
Not applicable for Xtrac trans - move to VP
Number of Tests
— Planned
— Actual
25 27 29 31 33 35 37 39 41 43 45 47 49 51 3°95 7 Week Number 2006-
Number of Tests
¢ Late parts for SOP: 61 parts currently predicted to be available after the
“Last Material Required Date” (10% Aug ’07).
* ECO performance: Can 45 ECO’s Effective/week be achieved
consistently?
¢ Concerns: Closure plans not availabie for a high percentage of
EP and all VP concerns. |
¢ Release Process: No process to cross reference concern closure and
ECO releases.
¢ Transmission: Target first transmission available 4 weeks after SOP.
e VP durability: Critical to timing of validation and parts maturity.
Production contract orders to be raised prior to
validation activities starting.
Concern over considerable firmware failures on EP.
TESLA MOTORS la Motors Inc. Proprietary And ConfidentialPage 513 Future
Evidence suggests that ECO, parts, durability and concerns status will not
support SOP plan, but ....
4M’s- men: OK
machine: OK
materials — Tesla’s plan assumes these are OK
method: OK, dependant on successful VP phase and controlled changes
As requested, Lotus will support build to Tesla SOP plan at Tesla’s risk & with the
addition of more resource.
Risk - missed build slots (cost)
| reworks (need parts and people: timing, cost, quality)
material, (possible obsolescence: timing, cost, quality)
resource needs planning otherwise not available.
TESLA MOTORS la Motors Inc. Proprietary And ConfidentialPage 514 °
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iiPage 515 EXHIBIT 50Page 516 Page-1 of
REDACTED
From: Alina Dini
Sent: Tuesday, June 05, 2007 6:30 PM
To: BoD
Cc: Nancy Pfund; lon Yadigaroglu; Marc Tarpenning; Craig Harding
Subject: Tesla Board meeting materials
Importance: High
Board members: tte
I've attached a copy of tomorrow's board meeting packet electronically for your review.
in the future, these packets will be provided in advance of the board meeting. Since board packets are subject to
change until tomorrow moming, no need to print. I'll provide each of you a final and complete copy tomorrow
morning.
Also, our badge access installation has been delayed a week by our vendor, so don’t worry about receiving or
needing a badge for tomorrow. Board members will receive a badge at the next board meeting. .
Thank you,
Alina
Alina Dini | , om 11050 Bing Street San Carlos CA 94070 I tel
TESLA MOTORS
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and should be treated as such. If you are not the intended recipient and have received this
message in error, please delete this message from your computer system and notify me
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A IinNnaAnnNnPage 517 Board Meeting Agenda
06 June
1. Welcome new board members
a. Ira Ehrenpreis
b. Antonio Gracias
c. Simon Rothman welcomed to advisory board
Approval of May board meeting minutes
3. Presentation by Woodruff Sawyer on Product Liability Insurance
4. Employee Stock Options
a. Options valuation
b. Options grant
5. Quick Updates
a. Sales update — 441 cars as of 4Junb. Press hits — see attached
c. Facilities update — Moved into Circle Star building
d. Newest CARB ZEV Mandate action
e. OEM interest
- GM
= Daimler
= Chrysler
=» BMW
« Ford
« Volkswagen
6. ¢Roadster'stat
WhiteStar status (Ron Lloyd)
Customer Store architecture discussion
a. Intro (Mike Harrigan)
b. Cass Smith of CSS Architecture
c. Chris Barriscale of Barriscale Design
d. Pricing discussion (John Hamblin, guest)
earch rm Russell Reynolds engaged
10.CFO-discussior
a. Temporary CFO?
b. Search firm Russell Reynolds engaged
REDACTE 'p
RESOLVED FURTHER, that the terms of the above grants shall be in
accordance with the terms of the Company’s standard Stock
Option Agreement, vesting over four (4) years, with 25% of the
shares subject to the option vesting one (1) year from the vesting
commencement date, and thereafter, 1/48" of the shares subject to
the option vesting monthly for the next three (3) years; and
RESOLVED FURTHER, that all the foregoing options shall have a
per share exercise price of $0.60 per share as determined by the
Board of Directors as the fair market value (FMV) of the
Company’s Common Stock as of the date hereof; and
RESOLVED FURTHER, that the officers of the Company, each of
them with fuil authority to act without the others, are hereby
authorized and directed to execute any and all documents
necessary to permit the Company to lawfully grant such options
and issue shares of Common Stock upon exercise of such options
in compliance with the applicable blue sky laws of any state in
which such filing is necessary; and
ConfidentialPage 521 6.
10.
RESOLVED FURTHER, that the officers of the Company be, and
each of them hereby is, authorized and directed, for and on behalf
of the Company to take such action and execute such additional
documents as each may deem necessary or appropriate to carry out
the foregoing resolutions.
Company Update
Mr. Eberhard reviewed the response regarding the Company’s prior
announcements about vehicle range. Mr. Eberhard also gave an update on sales
ofthe Roadster.
Building Lease
Mr. Eberhard gave an update on the sub-sublease signed by the Company, which
was previously approved by the Board on April 6, 2007.
Tesla Energy Group Update
Mr. Bernie Tse joined the meeting. He described the process and key terms in the
proposed development and supply agreements with Think Global AS of Oslo,
Norway. Mr. Tse also discussed potential competitors of Tesla Energy Group,
and suppliers for Li-Ion cells.
O:Search::
iScussed activities relating to recruiting a chief financial officer for
WhiteStar Update
Mr. Ron Lloyd joined the meeting. Mr. Lloyd gave an overview of the design of.
the proposed WhiteStar factory in Albuquerque, and the potential production *
capacity of vehicles. Mr. Lloyd also led a discussion about lease guarantees
requested by the Landlord.
Financial Status
rpenning leds discussion on financial: statns ofthe: ompanyeeMr. Musk
dieenaed the projected WhiteStar capital expenditures, R&D expenses, and
headcount. Mr. Tarpenning led a discussion on obtaining BoD approval for all
purchase orders over $500,000. The Board discussed the merit of allowing the
Company to enter into procurement agreements for over $500,000 given certain
conditions. After discussion, it was determined that the Board will not require
the Company to obtain prior Board approval on purchase orders in excess of
$500,000, and that the Company is authorized to continue production on the vehicles as planned, provided (i) the cost of Roadster parts was in the previously
approved budget; and (ii) the items procured are for the 90 cars scheduled to be
released in 2007; and (iii) the Board receives a summary of what agreements the
company has entered.
Page 4 of 5 ConfidentialPage 522 11.
12.
13.
Series D Fundraising
Mr. Musk led a discussion on projected fundraising at the Company. Two
_ separate term sheets for Series D preferred stock were presented for consideration.
The Board considered fully the merits of each of the proposals, and the
advantages and disadvantages of the associated terms, including the size of the
round and associated representation on the Board of Directors.
After discussion, the Board agreed to accept the proposal to purchase Series D
’ preferred stock in a round led by Mr. Musk, with additional new investors
Technology Partners of Palo Alto, California, and Capricorn LLC of Palo Alto,
California, and various Signature 100 customers. Existing investors VantagePoint
Venture Partners, Draper Fisher Jurvetson, Tao, and Valor Equity Partners would
also participate. VantagePoint Venture Partners stated its intent to invest its full
pro-rata rights. Mr. Musk stated his desire to do the same, but determined that he
would reduce his investment to accommodate new investors.
Determine Time of Next Board Meeting
The next Board meeting will held on Wednesday, June 6, 2007 at 10:00 AM in
- San Carlos.
Adjournment
There being no more business before the Board, the meeting was adjourned at
2:00pm.
Respectively submitted,
Craig W. Harding
Secretary ‘
Page 5 of 5 , ConfidentialPage 523 REDACTEDPage 524 Sales Update
EQUITY i
Preferred Stock: , '
Series A, net of costs
Series B, net of costs : Tem tree ae te eee accede tee
Series C, net of costs
Common Stock
Additional paid in capital
Deferred Compensation
Retained earnings (deficit)
Net Income (loss)
Total EQUITY
Total LIABILITIES & EQUITY
The Company believes in good faith that the unaudited financial
statements herein fairly present the financial condition and results of the
start-up operations of the Company as of the dates, and for the periods,
indicated herein; provided, however, that such unaudited financial
statements are subject to certain recasting and adjustments to be
performed in connection with the audit thereof by
PricewaterhouseCooper LLP, the Company's outside accountants.
Tesla Motors, inc.
Confidential InformationPage 533 Tesla Motors Inc.
Consolidated Income Statement
For the month ended March 31, Unaudited ,
ACTUAL PLAN DIFF
31-Mar-07 31-Mar-07 31-Mar-
Operating Expense
Salaries
Benefits and Employment Taxes
Marketing Expenses
insurance
Office Expense i :
Professional Services ee renee Rent , ,
Tax and License
Telephone and Intemet
Travel and meals
Research and Development
Total Expense ; . , - REDACTED
Loss from operations for omens rem nnn |
Depreciation
Interest income, net of interest expense
State income tax
Others
Net loss (Actual)
The Company believes in good faith that the unaudited
financial statements herein fairly present the financial
condition and results of the start-up operations of the
Company as of the dates, and for the periods, indicated
herein; provided, however, that such unaudited financial
statements are subject to certain recasting and _
adjustments to be performed in connection with the audit
thereof by PricewaterhouseCooper LLP, the Company’s
outside accountants.
Tesla Motors, Inc.
Confidential InformationPage 534 REDACTEDPage 535Page 536 EXHIBIT 5/1Page 537 @ ® Page 1 of
REDACTED
From: Martin Eberhard
Sent: Tuesday, June 19, 2007 5:54 PM
To: Malcolm Powell; Everybody
Subject: RE: Slides from this morning
_ Good thing Mac keeps an eye on me!
Martin
From: Malcolm Powell
Sent: Tuesday, June 19, 2007 5:48 PM
To: Everybody
Subject: RE: Slides from this morning
Please note that there is “minor” error on slide 8 of Martin's presentation.
He is so keen to get his car that he was thinking that Start of Production (SoP) is when someone sends him his
car, ie Sept.
‘Unfortunately for all those who would like a little more time, | have to confirm that SoP has not slipped to
September.
SoP is still Week 35, commencing 27" August LMRD is still 10 Aug
The challenge is still on.
Mac
From: Martin Eberhard
Sent: Tuesday, June 19, 2007 10:22 AM
To: Everybody
Subject: Slides from this morning
| appreciate your attention this morning, and | apologise for the technical problems with the slides in the UK. |
have attached this morning's slides to this email; Alina will send an audio file of my talk in a separate email.
As | tried to emphasize this morning, this is a critical time in the Roadster program, and the fate of Tesla Motors
hangs on the successful delivery of Roadsters. Your extra effort and increased focus on a successful Roadster
launch is greatly appreciated.
Rick Wagoner said last November that now is a turning point for the automobile - that the change from intemal
combustion drive to electric drive is as significant as the change from horses to horsepower. If we succeed with
the Roadster launch, history will remember you and Tesla Motors as the drivers of this change. If not... well, think.
about Tucker and DeLorean. We are better than they were, and the Roadster is vastly superior to their cars. Let's
prove it!
With appreciation,
Martin
7/6/2009Page 538 € Page 2 of
REDACTED
Martin Eberhard! CEO| . ‘11050 Bing Street, San Carlos, CA
94070 | tel
TESLA MOTORS
The content of this message is the proprietary and confidential property of Tesla Motors, and should be treated as such. | If
you are not the intended recipient and have received this message in error, please delete this message from your computer
system and notify me immediately by reply e-mail. | Any unauthorized use or distribution of the content of this message is
prohibited.
TAI2009Page 539 THITELITI TER RTE
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TUR,Page 540 NPI Gateways
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IDQC
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Performance ReviewPage 541 Fe] Oe
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Performance ReviewPage 542Page 543 Competition
as | AC Propulsion tZero
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225 Hybrid Tech. L1X_ Hybrid Tech. Smart
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$60KPage 544 Competition
4 AC Propulsion tZero
AC Propulsion eBox
Commuter Cars Tango
Hybrid Tech. L1X
Hybrid Tech. Smart
Miles Automotive Javlon
Phoenix Motorcars
Universal Electric Cars
Venturi Fetish
Wrightspeed XZAP-X
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3.88 secPage 545 NPI Gateways
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Performance ReviewPage 546 NPI Gateways
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Concept Initiation
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nterim
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Production Approval
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Performance ReviewPage 547 NPI Gateways
Mar ’05 Cl Concept Initiation
May ‘05 oD Concept Direction
Nov ‘05 Or AN Concept Approval
Jun’06 $IDQC Interim |
Dec ‘06 DQC Design Quality Conf.
Nilay ae aN Final Approval
onl Production Approval
Start of Production (Founder's Series)
LA Launch Approval
Pass to Sales
PR Performance ReviewPage 548 NPI Gateways
Concept Initiation
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Concept Approval
Taltcta les en
sep ‘07 = Start of See aT
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PR Performance ReviewPage 549 NPI Gateways
Uiameers wal Final Approval
Failed to pass gatewayPage 550 FA Gateway
9 Reds
1. Body Quality
2. Supply Chain support for ASO _
. Marketing requirements for VP . Parts delivery plan
. High-risk supplier management
. Parts approval plan resources
. Supply Chain concerns (coordination with Lotus)
. Materials management (MBOM coordination)
. Manufacturing training & quality planPage 551 The Good News:
The gateway process is working
REDACTED
From: Dan Saccani
Sent: . ° Monday, July 23, 2007 5:55 PM
To: ExecStaff
Subject: Weekly report
Weekly Reports
7-23-07.xIs (4... :
attached is the weekly finance report. good news across the board. headcount
is now projected to be under plan, we still have not sat down with all of you on your
headcount but we have made good improvement by getting it down to 314. We will still try
for a few more. On the cash front we projected ending the month at around $49.6m but it
looks like we are coming in at a little over $51m.
Ryan or Dan will be coming by later this week to start looking at your consulting budgets
and capital budgets. so please work with them.
thanksPage 563Page 564 EXHIBIT|¥ 4Page 565Page 566 P2 Program Master Schedule 1 of
This email has been scanned by the MessageLabs Email Security System.
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1Page 571 Checked by AVG - www.avg.com
Version: 8.5.375 / Virus Database: 270.13.1/2211 - Release Date: 06/30/09 11:37:00Page 572 Testa Motors, Inc,
Estimated Statement of Cash Receipts and Disbursements
For the year ended December 31,
REDACTED
Unaudited ,
ACTUAL PLAN PLAN PLAN PLAN PLAN PLAN PLAN PLAN PLAN YTD
Q1'07 : Apr-07 May-07 Jun-07 ~ Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-Beginning Cash Balance geen .
Cash Sources
Equity Financing .
Proceeds from Option Exercise
Sales Deposits
Interest Income
TEG Income
Albuquerque Signing Bonus
Total Sources
Cash Uses
Salaries, benefit & Taxes
inventory & Misc COGs
Insurance .
* Office & facility related expense
Marketing Expenses
Professional Fees
Taxes & Licenses, (VAT refund
Travel & Meals
Research & Development
CAPEX
Expensed Equipment J
Albuquerque Restricted Cash
Accts Pay & Accris - Prepaid Expenses
Deposits
Other Expenses
Misc Expenses (oob)
Total Uses t
Net Change In Cash
Ending Cash Balance
Deal
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Bo
en eel
a Tetane “er on
_|
eosPage 573 Board Meeting Agenda
18 Jul
Please note that | have a hard-stop for this board meeting at 6:00 PM. —Martin
1. Roadster Status (See enclosed presentation by Mac)
2. WhiteStar status
a. Range-Extended EV (See enclosed discussion)
b. Opportunity with Chrysler (See enclosed discussion)
3. Tesla Energy Group status
a. Budget
b. Balance sheet, Income Statement, Head Count
c. Cash on hand
6. Legal (Craig)
Approval of June board meeting minutes
Approval of investment policy
Approval of bank signing authority for Dan Saccani, interim CFO
Approval of resolution permitting Board Members to transfer common stock
Approval of Employee Stock Options Grants
Update: New D&O insurance coverage
Update: Comp Committee Recommendation for Aug 29 Option Grant
7. CEO search ;
a. SeanchfllminusseltReynoldsengageay
a-ganoD
8. Sales & Marketing updates
a. Sales: 566 cars as of 13JulyO» Matt Damon
b. Press hits
» Motor Trend: “Silicon Valley Builds a Car’
= NPR: Day-to-Day: Governor Schwarzenegger Interview (he plugs the Roadster heavily)
« UK Sunday Times (Jay Leno’s Column): “Tesla Roadster — The Most Fun You Can Have Without Fuel”
» Business 2.0: “The 50 Who Matter Now” (both Elon and Martin made the list)
c. Awards
= IDEA Award (Sponsored by Business Week)- Mentioned in the last board meeting: We can talk publicly
about this win on July 20th
# INDEX Award: Top Nominee (winners TBD)
www.teslamotors.com 4050 Bing Street San Cartos CA 94070 te! 650.443.4000 fax 650.413.
T E 5 LA MOTO RS & 2007 Tesla Motors Inc. Proprietary and CorficentiaiPage 574 > EXHIBIT 56Page 575Page 576 8
REDACTED
From: Dan Saccani
Sent: Thursday, August 02, 2007 9:50 AM
To: Martin Eberhard
Subject: RE: Lotus PO
I will work with Craig on this. Part of this may open up a hornets nest which you-and I
should talk about. As part of the rationalization I should tell the board what the plan
purchases are and how this impacts the plan, which actually is not much of a problem, in
that we have the numbers. The problem comes in when I look at the total plan which was
based on a BOM of $76k vs. our current estimate of $110k. So our total cost of inventory
purchases for the next 6 months is going to be higher than planned.
I will put together a draft to the board and let you review before it goes out.
-aTT Original Message-----—
From: Martin Eberhard
Sent: Thursday, August 02, 2007 7:09 AM
To: Dan Saccani
Subject: Re: Lotus PO
This will require board approval. Craig can help you do this.
----- Original Message -----
From: Dan Saccani
To: Martin Eberhard; Craig Harding
Ce: Nat Jhong
Sent: Thu Aug 02 07:04:25 Subject: Lotus PO
Nat and I have come to an agreement with Lotus on how to cover the CAt 2 and 3 parts,
which will be to make a prepayment for the cars as we spoke about in the staff meeting.
the final number is going to be 8,810 pounds per car. we are going to have to cut a PO
for approximately 227 cars or $4m. This basically will replace all the individual PO's we
are now cutting Lotus for parts. what is the approval process we need to go thru to get
this done? do we have. to take this to the board? or can we do it internally ?
Please advise, we need to cut a check to Lotus by next week to get this started. This is
due to the fact we already owe them money for parts which we are not going to pay an
replace with this plan.
thanksPage 577 EXHIBIT’S|7Page 578 EXHIBIT §/7Page 579 @ . ) Page 1 of
REQACTER
From: Dan Saccani
Sent: Tuesday, August 07, 2007 1:07 PM
To: Steve Wesily; Ira Ehrenpreis; Martin Eberhard
Subject: May Financial Package
| am taking you guys up on your offer to review/preview the revised Financial Board Package. Attached is the
May close, in what ! hope is a more informative package than you have seen in the past. Please review it and let
me know if you have any questions or if you feel we are missing something. Once | get your approval on this
format I will issue the June financials to the complete board. We will be finishing the June close this week and
July hopefully late next week. So please give me your input.
FY! — the waterfall charts for this report are still based on the 4.3 plan, | will be updating the forecast on the July
package. We are still in the process of updating the plan.
Thanks
Dan
WM/D0NGPage 580 ate
REDACTED
From: Marc Tarpenning
Sent: Thursday, August 16, 2007 1:30 PM
To: Ron Lloyd ,
Cc: Malcolm Smith; Tom Colson; Martin Eberhard
Subject: FW: Product Cost for the Board Meeting
Importance: High
Attached is a more detailed breakdown of costs from Nat prepared at the end of last year. These numbers got
moved into the business plan for the April fund raising, and these were the numbers presented to the board.
Mare
From: Nat Jhong [mailto:njhong@teslamotors.com]
Sent: Monday, November 27, 2006 7:08 AM
To: eberhard@teslamotors.com; 'Marc Tarpenning'
Cc: ‘Tom Colson’; 'Mac Powell’; malcolm” “Subject: Product Cost for the Board Meeting
Importance: High
Martin and Marc,
Per Tom's suggestion, we have prepared the following slides for tomorrow's board meeting.
Please,.review and let me know if you have any suggestions or questions.
The intent is to cover only the high level (first few pages). However, if there is any interest in the sub-system level,
we may be able to go into the details, as appropriate.
Regards,
Nat
The content of this message is Tesla Motors Confidential. If you are not the intended recipient and have received
this message in error, please, delete this message from your computer system and notify me immediately by reply
e-mail. Any unauthorized use or distribution of the content is prohibited. Thank you.
71719009Page 583Page 584 Chassis, $8,090:
The projected total vehicle cost in Dec ’07 is still $15K above target.
» More focused and aggressive cost reduction measures
“Arena does not readi ily capture. accurate. -product cosis-.-—. —
From: Craig Harding
Sent: Monday, July 30, 2007 8:54 PM
To: BoD
Subject: Tesla Board Minutes - - July 18 Meeting
Attached is the draft of the minutes for the July 18 Board meeting. Same procedure
as before: you're welcome to suggest revisions, but if the minutes are fine, then
no need to respond. They will be on the agenda for approval at the August meeting.
Also, I have reprinted the minutes below in text format for those reading on a
small screen. I removed the option grant table for formatting reasons.
-Craig
Minutes of a Regular Board Meeting
of Tesla Motors, Inc.
July 18,
San Carlos, California
PLACE: 1050 Bing Street
San Carlos, California
DIRECTORS PRESENT: Elon Musk, Chairman
. Martin Eberhard
Ira Ehrenpreis
Antonio Gracias
Jim Marver
Steve Westly
Laurie Yoler
DIRECTORS ABSENT: Kimbal Musk
“OTHERS PRESENT: Nancy Pfund, JP Morgan
Tim Watkins, Valor Equity Partners
Bill Green, VantagePoint Venture Partners
Dan Saccani, Interim CFO, Tesla Motors
Malcolm Powell, VP Vehicle Integration
Craig Harding, General Counsel & Secretary, Tesla
Motors
A regular meeting of the Board of Directors (the “Board”) of Tesla Motors,
Inc., a Delaware corporation (the “Company”), was held at the above place and
date. The meeting was called to order at 3:00 PM by Mr. Martin Eberhard. Mr. Elon
Musk acted as Chairman. Mr. Craig Harding was Secretary of the meeting.
1. Expenditures
The Board members discussed expenditures for various components of the Roadster and
White Star programs, including R&D and capital expenditures. The Board also
discussed the accounting systems in place at the Company. The Board directed
Company management to reduce or eliminate expenditures for the White Star project
while the White Star project is under review.
2. Board Actions
TIVIINNGAPage 601 ® @ Page 2 of
The minutes of the Board meeting on June 7, 2007 were approved unanimously as
presented.
3. Stock Options Grants for New Employees
The Board then reviewed the proposed stock option grants for the new employees
identified below. After full discussion and upon motion duly made and seconded,
the following resolutions were adopted:
RESOLVED, that the grant of nonstatutory stock options to purchase Common Stock
pursuant to and under the terms set forth in the Company’s 2003 Equity Incentive
Plan (the “Plan”) to the individuals and in the amounts set forth below be, and
hereby are, authorized and approved:
(table omitted)
RESOLVED FURTHER, that the terms of the above grants shall be in accordance with
the terms of the Company’s standard Stock Option Agreement, vesting over four (4)
years, with 25% of the shares subject to the option vesting one (1) year from the
vesting commencement date, and thereafter, 1/48th of the shares subject to the
option vesting monthly for the next three (3) years; and
RESOLVED FURTHER, that all the foregoing options shall have a per share exercise
price of $0.70 per share as determined by the Board of Directors as the fair market
value (FMV) of the Company’s Common Stock as of the date hereof; and
RESOLVED FURTHER, that the officers of the Company, each of them with full
authority to act without the others, are hereby authorized and directed to execute
any and all documents necessary to permit the Company to lawfully grant such
options and issue shares of Common Stock upon exercise of such options in
compliance with the applicable blue sky laws of any state in which such filing is’
necessary; and
RESOLVED FURTHER, that the officers of the Company be, and each of them hereby is,
authorized and directed, for and on behalf of the Company to take such action and
execute such additional documents as each may deem necessary or appropriate to
carry out the foregoing resolutions.
4. Supply Chain and Manufacturing Update
Mr. Eberhard introduced Tim Watkins from Valor Equity Partners, who provided an
overview on supply chain and logistics-related recommendations for the Company.
Mr. Watkins described the various components of a supply chain solution for the
Company. He discussed the use of the “tracker” inventory management tool and the
migration to SAP. The Board discussed the potential use of SAP software to track
the purchase and shipment of Tesla parts and subassemblies to Lotus for assembly
into finished Tesla vehicles.
5. Roadster Update
Malcolm Powell joined the meeting and led a discussion of the Roadster, the status
of various reliability issues, durability and crash testing, and projected
production dates. Mr. Powell discussed the development activity for the
transmission at Magna Powertrain. Mr. Eberhard also gave an update on informing
the public on timing of sales of the Roadster.
Mr. Ehrenpreis inquired about marketing activity; the Board deferred discussion
about marketing (and any parallel fundraising activity) until the following
meeting.
Mr. Musk led a discussion of the financial considerations regarding the manufacture
and sale of the Roadster, including cash flow and margin. Mr. Eberhard discussed
7/1/2009Page 602 Page 3 of
cost reduction activity.
6. Tesla Energy Group
Mr. Eberhard gave a brief update on Tesla Energy Group, and the potential for
developing and constructing an automated assembly plant in Taiwan for the ESS.
7. WhiteStar Update
Mr. Eberhard discussed the merits of converting the existing White Star design to a
range-extended electric vehicle (“REEV”). Mr. Eberhard further described
conversations with Chrysler regarding a potential technical and manufacturing
partnership. Mr. Marver asked about the potential market for a REEV. Mr. Eberhard
described the engineering considerations for the internal combustion engine (“ICE”)
in the vehicle.
8. Executive Searches
The Board discussed recruitment activity for the position of chief executive
officer for the Company. Mr. Musk identified a potential candidate. The Board
authorized Mr. Musk to extend an offer and negotiate a compensation package. The
Board discussed the CFO search and potential candidates. Mr. Eberhard indicated
‘that Gretchen Joyce was leaving as Vice President of Sales and would be replaced.
9. Legal Matters
The Board reviewed and approved an investment policy for the Company. Mr. Harding
outlined for the Board the coverages for the D&O policy that became effective on
June 28, 2007. The Board approved Dan Saccani and adoped the following resolution:
WHEREAS, Marc Tarpenning, previous Chief Financial Officer of Tesla Motors, Inc.
(the “Company”) resigned from the position (but remains an employee of the Company)
effective June 12, 2007; and
WHEREAS, Dan Saccani joined the Company as a contractor to serve as acting Chief
Financial Officer on an interim basis;
RESOLVED, that the Board hereby confirms, ratifies, appoints and approves the
appointment of Dan Saccani as acting Chief Financial Officer of the Company on an
interim basis commencing on June 12, 2007;
RESOLVED FURTHER, that Mr. Saccani has agreed to perform all duties of the Chief
Financial Officer as set forth in Section 28(f) of the Bylaws of the Company; and
RESOLVED FURTHER, that Mr. Saccani is authorized to withdraw funds, initiate
payment orders and otherwise give instructions on behalf of the’ Company with
respect to its deposit and brokerage accounts;
RESOLVED FURTHER, that the officers of the Company shall be, and each of them
hereby is, authorized and directed to take such other action on behalf of the
Company in connection with the foregoing resolutions, as they deem necessary and
appropriate to carry out the purposes of the foregoing resolutions; and
RESOLVED FURTHER, that the authority and power given hereunder be deemed
retroactive and any and all actions previously taken by any officer or director of
the Company in connection with the appointment contemplated by these resolutions
are hereby adopted, ratified, confirmed and approved in all respects.
10. Sales and Marketing Update
Mr. Eberhard outlined for the Board the status of sales and marketing activity for
the Company, including potential Tesla Store locations and potential arrangements
for the serving of Tesla vehicles.
11. Determine Time of Next Board Meeting
7/1/2009Page 603 @ @ Page 4 of
The next Board meeting will held on Tuesday, August 28, 2007 at 11:00 AM in San
Carlos.
12. Adjournment
There being no more business before the Board, the meeting was adjourned at 5:00pm.
Respectively submitted,
Craig W. Harding
Secretary
7/1/2009Page 604 Minutes of a Regular Board Meeting
of Tesla Motors, Inc.
July18, San Carlos, California
PLACE: ; 1050 Bing Street
San Carlos, California
DIRECTORS PRESENT: Elon Musk, Chairman
Martin Eberhard
Ira Ehrenpreis
Antonio Gracias
Jim Marver
Steve Westly
. Laurie Yoler
DIRECTORS ABSENT: Kimbal Musk
OTHERS PRESENT: Nancy Pfund, JP Morgan
Tim Watkins, Valor Equity Partners
Bill Green, VantagePoint Venture Partners
Dan Saccani, Interim CFO, Tesla Motors
Malcolm Powell; VP Vehicle Integration
Craig Harding, General Counsel & Secretary, Tesla Motors
A regular meeting of the Board of Directors (the “Board”’) of Tesla Motors, Inc., a
Delaware corporation (the “Company”), was held at the above place and date. The meeting
was called to order at 3:00 PM by Mr. Martin Eberhard. Mr. Elon Musk acted as Chairman.
Mr. Craig Harding was Secretary of the meeting.
1.
Expenditures
The Board members discussed expenditures for various components of the
Roadster and White Star programs, including R&D and capital expenditures. The
Board also discussed the accounting systems in place at the Company. The Board
directed Company management to reduce or eliminate expenditures for the White
Star project while the White Star project is under review.
Board Actions
The minutes of the Board meeting on June 7, 2007 were approved unanimously as
written.
Stock Options Grants for New Employees
The Board then reviewed the proposed stock option grants for the new employees
identified below. After full discussion and upon motion duly made and seconded,
the following resolutions were adopted:
ConfidentialPage 605 REDACTED
te eee em ee
RIO
wo bee ereerwu, UL au ULL DENALI OF the
Company to take such action and execute such additional documents
as each may deem necessary or appropriate to carry out the
foregoing resolutions.
Supply Chain and Manufacturing Update
Mr. Eberhard introduced Tim Watkins from Valor Equity Partners, who provided
an overview on supply chain and logistics-related recommendations for the
Company. Mr. Watkins described the various components of a supply chain
solution for the Company. He discussed the use of the “tracker” inventory
management tool and the migration to SAP. The Board discussed the potential use
of SAP software to track the purchase and shipment of Tesla parts and
subassemblies to Lotus for assembly into finished Tesla vehicles.
ConfidentialPage 606 Roadster Update
Malcolm Powell joined the meeting and led a discussion of the Roadster, the status
' of various reliability issues, durability and crash testing, and projected production
dates. Mr. Powell discussed the development activity for the transmission at
Magna Powertrain. Mr. Eberhard also gave an update on informing the public on
timing of sales of the Roadster.
Mr. Ehrenpreis inquired about marketing activity; the Board deferred discussion
about marketing (and any parallel fundraising activity) until the following meeting.
Mr. Musk led a discussion of the financial considerations regarding the
manufacture and sale of the Roadster, including cash flow and margin. Mr.
Eberhard discussed cost reduction activity.
Tesla Energy Group
Mr. Eberhard gave a brief update on Tesla Energy Group, and the potential for
developing and constructing an automated assembly plant in Taiwan for the ESS.
WhiteStar Update
Mr. Eberhard discussed the merits of converting the existing White Star design to a
range-extended electric vehicle (“REEV”). Mr. Eberhard further described
conversations with Chrysler regarding a potential technical and manufacturing
partnership. Mr. Marver asked about the potential market fora REEV. Mr.
Eberhard described the engineering considerations for the internal combustion
engine (“ICE”) in the vehicle.
Executive Searches
The Board discussed recruitment activity for the position of chief executive officer
for the Company. Mr. Musk identified a potential candidate. The Board
authorized Mr. Musk to extend an offer and negotiate a compensation package.
The Board discussed the CFO search and potential candidates. Mr. Eberhard
indicated that Gretchen Joyce was leaving as Vice President of Sales and would be
replaced.
Legal Matters -
The Board reviewed and approved an investment policy for the Company. Mr.
Harding outlined for the Board the coverages for the D&O policy that became
effective on June 28, 2007. The Board approved Dan Saccani and adoped the
following resolution:
WHEREAS, Marc Tarpenning, previous Chief Financial Officer of Tesla
Motors, Inc. (the “Company”) resigned from the position (but remains an
employee of the Company) effective June 12, 2007; and
WHEREAS, Dan Saccani joined the Company as a contractor to serve as
acting Chief Financial Officer on an interim basis;
ConfidentialPage 607 10.
11.
12.
RESOLVED, that the Board hereby confirms, ratifies, appoints and approves
the appointment of Dan Saccani as acting Chief Financial Officer of the
Company on an interim basis commencing on June 12, 2007;
RESOLVED FURTHER, that Mr. Saccani has agreed to perform all duties of
the Chief Financial Officer as set forth in Section 28(f) of the Bylaws of the
Company; and
RESOLVED FURTHER, that Mr. Saccani is authorized to withdraw funds,
initiate payment orders and otherwise give instructions on behalf of the
Company with respect to its deposit and brokerage accounts;
RESOLVED FURTHER, that the officers of the Company shall be, and each
of them hereby is, authorized and directed to take such other action on
behalf of the Company in connection with the foregoing resolutions, as they
deem necessary and appropriate to carry out the purposes of the foregoing
resolutions; and
RESOLVED FURTHER, that the authority and power given hereunder be
deemed retroactive and any and all actions previously taken by any officer
or director of the Company in connection with the appointment
contemplated by these resolutions are hereby adopted, ratified, confirmed
and approved in all respects. .
Sales and Marketing Update
Mr. Eberhard outlined for the Board the status of sales and marketing activity for
the Company, including potential Tesla Store locations and potential arrangements
for the serving of Tesla vehicles.
Determine Time of Next Board Meeting
The next Board meeting will held on Tuesday, August 28, 2007 at 11:00 AM in
San Carlos.
Adjournment
There being no more business before the Board, the meeting was adjourned at
5:00pm.
Respectively submitted,
Craig W. Harding
Secretary
‘ConfidentialPage 608 EXHIBIT 60Page 609 im
EXHIBIT /
A
iPage 610 REDACTED —
wenn anenee Forwarded message —--------
From: Tesla Motors <
. Date: Sat, Jan 12, 2008 at 1:24 AM
Subject: Recent Changes at Tesla Motors
To: “eberhard@ ”
Dear Martin,
We wanted to share some quick perspectives with you about some recent changes at Tesla Motors that
you may have seen in the media.
The main focus of Tesla Motors right now is to get the Roadster on the road and in the hands of our ;
customers. One of the most important things to enable this is that we create a culture of accountability to
the commitments we make. 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.
Most importantly, we have streamlined engineéring, supply chain and manufacturing. Previously,
engineering and development of the car was spread across 4 areas in the company, making it unwieldy.
Going forward, these areas are consolidated under one organization reporting to the CTO. This will
allow these groups to work as a single team with much improved direction, coordination and
communication. We have also substantially improved leadership & focus in supply chain management,
an area critical to our success. These changes will not disrupt our efforts to complete the necessary work
to get the car on the road. On the contrary, they will improve our execution.
Tesla is a company of many extraordinary individuals. To succeed, we must continuously develop a top
performing team. Since resources are very precious, this also means that we must make hard decisions
where need be and part ways with those whose performance has not matched expectations. These
actions were taken after careful analysis by the leadership team, and not by a shotgun approach.
At the same time, we continue to look for extraordinary people, with or without automotive experience,
to join our team. If you know such people please send them our way.
While this can be a difficult process that impacts people, it is one that quickly drives positive results and
should be taken as a sign of health, not weakness, of the organization. Unmistakably our responsibilities
are to the shareholders, our customers and the faith that you have shown i in the entire Tesla team.
Ze'ev Drori
LILINNKNOPage 611 President and CEO
Tesla Motors
Elon Musk
Chairman of the Board
Tesla Motors
Bel .
Martin Eberhard
6/5/
Page 2 of 2Page 612 pk
EXHIBIT 6/1Page 613 EXHIBIT |6/1Page 614 REDACTED
From: Elon Musk |
Sent: Tuesday, February 06, 2007 12:21 PM
To: eberhard¢é
Ce: Mary Beth Brown
Subject: FW: High caliber headhunter
Fyi... I'd trust Hau's opinion on this. Will be giving Kepler a call later today. Would
you like to join? .
mao Original Message--—~--—
From: hthaitang( . _ reer y
Sent: Tuesday, February 06, 2007 11:43 AM
To: Blon Musk
Subject: Re: High caliber headhunter
Hi Elon,
I am not an expert on headhunters and have had limited contact with them.
However, Daniel Kepler is a well respected headhunter for senior automotive
executive positions. He was with another firm but is now a partner
with
Heidrick & Struggles. Below please find his contact information:
Daniel E. Kepler
Partner
Heidrick & Struggles
Sears Tower —- Suite 233 South Wacker Drive
Chicago, IL
www.heidrick.com
Good luck with your search!
Hau
On Mon, 5 Feb 2007 08:37:58 -0800, Elon Musk wrote
Hau,
We are really beginning the CEO search in earnet and I would
appreciate your opinion on headhunters. ‘Obviously, you are committed
to Ford long term, but which headhunter would you be the least
unlikely to speak with if they called? :)
VVVVVVV Vv
Elon
WOW! Homepage (http://www.wowway.com)
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REDACTED
From: Elon Musk
Sent: Wednesday, June 13, 2007 8:38 PM
To: Martin Eberhard
Subject: RE: Press inquiries
I would be happy to correct the perception that you are being fired. The objective fact
is you brought up the CEO search yourself several months ago. By the way, I did encourage
you be open about it at one point, although I did not push the issue.
-----Original Message-----
From: Martin Eberhard
Sent: Wednesday, June 13, 2007 08:32 PM Pacific Standard Time
To: Elon Musk
Subject: RE: Press inquiries
{not cc'd to the board]
If we felt that this was inevitable, then I would have prefered to plan publicity around
disclosure in advance ~- not reactively when the press is calling Tesla and asking. We were
quite explicit in the board meeting that this would be handled discretely. I am pretty
sure that this leak did in fact come from the BOD directly, by the way.
And Larry had one significant advantage over me in this regard: he was set to make $
Billions off Google, and Google was a total slam-dunk IPO by the time word got out about
their new CEO. Easy to be happy in that circumstance.
Now that I am where I am, you are right. I have little choice but to embrace this
publically. I will work with Darryl to craft an appropriate press release and write a blog
artiicle.
But a little sympathy would have gone a long way. Telsa Motors has been my life for the
last 5 years. It hurts to hear from the press that the board is firing me. (that is the
word that was used.)
Martin
From: Blon Musk
Sent: Wednesday, June 13, 2007 2:47 PM
To: Martin Eberhard; BoD
Subject: RE: Press inquiries
This isn't a big surprise, but, frankly, it is not realistic to keep this under wraps,
given that we are casting a wide net and that Tesla is so much in the public eye. If we
were an enterprise software company of the same size, no one would care.
Best strategy would be to get out in front of this and embrace it, just as Larry and
Sergey did at Google. Everyone knew they were looking for a CEO and the search took a
long time, but Google operated just fine with Larry at the helm in the interim.
soe Original Message-----
From: Martin Eberhard [mailto::
Sent: Wednesday, June 13, 2007 12:43 PM
To: BoD :
Subject: Press inquiries
Board Members,Page 618 Today we received two | from two separate, major so ganizations that heard
from "credible sources" that Tesla's board was planning to hire a new CEO to replace me. I
do not know how this information has leaked out, but it can only be the board or our
search firm, or so it seems to me.
Needless to say, having this story out in public, and having the press calling to ask
Tesla staff about my eminent ouster makes it especially difficult for me to do my job and
is, I admit, very demoralizing for me.
I would like to ask you all to treat this search as extremely confidential. I am sure that
most of already do so, but the fact of the press inquiries reamins.
Thank you for your cooperation,
Martin
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REDACTED
From: Craig Harding
Sent: Friday, August 17, 2007 3:48 PM
To: BoD
Ce: BODobservers
Subject: Tesla Minutes / Aug 12 Teleconference
Attached are the minutes from the meeting held on August 12.
Please contact Elon or me if you have any questions.
Craig
Craig Harding I General Counsel & Secretary I can
1050 Bing Street, San Carlos, CA 94070 J tel | fax é
TESLA MOTORS
The content of this message is the proprietary and confidential property of Tesla Motors, and attomey client privileged information. Any unauthorized
use or distribution of the content of this message is prohibited.
TMOINNNOPage 622 Minutes of a Special Board Meeting
DIRECTORS PRESENT:
DIRECTORS ABSENT:
OTHERS PRESENT:
of Tesla Motors, Inc.
August 12,
Elon Musk (via teleconference)
Laurie Yoler (via teleconference)
Jim Marver (via teleconference)
Ira Ehrenpreis (via teleconference)
Antonio Gracias (via teleconference)
Martin Eberhard (via teleconference)
Kimbal Musk
Steve Westly
Christopher Kaufman, Latham & Watkins
Greg Chin, Latham & Watkins
Craig Harding, General Counsel, Tesla Motors
A special meeting of the Board of Directors (the “Board”) of Tesla Motors, Inc., a
Delaware corporation (the “Company”), was held on the above date. All participants
joining via teleconference confirmed that they could hear one another.
The meeting was called to order at 6:05 PM, Pacific time by Mr. Elon Musk, who
acted as Chairman of the meeting. Mr. Craig Harding acted as Secretary. Mr. E. Musk
announced that a quorum of the Board members was present, and the meeting, having
been duly convened, was ready to proceed with business.
Upon motion duly made and seconded, the following resolutions were adopted:
APPOINTMENT OF PRESIDENT, TECHNOLOGY
WHEREAS, Mr. Eberhard indicated a desire to accept the position of
President, Technology for the Company; and
RESOLVED, that effective August 8, 2007 and following his resignation
as CEO, Martin Eberhard be and hereby is appointed President, Technology of the
Company to serve at the pleasure of the Board of Directors.
RESIGNATION OF CEO
WHEREAS, Mr. Eberhard indicated a desire to resign from the position of
Chief Executive Officer for the Company;
Page 1 of
ConfidentialPage 623 RESOLVED, that effective August 8, 2007, the Company accepts Mr.
Eberhard’s resignation as the Chief Executive Officer of the Company.
ELECTION OF CEO
WHEREAS, Mr. Michael Marks indicated a desire to serve as Chief
Executive Officer of the Company on an interim basis for the Company;
RESOLVED, that effective August 8, 2007, Michael Marks be and hereby
is appointed Chief Executive Officer of the Company to serve at the pleasure of
the Board of Directors.
GENERAL AUTHORIZING RESOLUTION
RESOLVED, that the officers of the Company, each of them with full .
authority to act without the others, are authorized and directed to do or cause to be
done any and all such further acts and things and to execute and deliver any and
all such additional documents as they may deem necessary or appropriate in order
to carry into effect the purposes and intent of the foregoing resolutions.
Adjournment
There being no more business before the Board, the meeting was adjourned at
6:15 pm, Pacific time.
Respectively submitted,
Craig Harding
Secretary
Page 2 of 2 ConfidentialPage 624 EXHIBIT 64Page 625 st
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TE
From: Elon Musk
Sent: Thursday, July 06, 2006 7:13 PM
To: eberhardr
Subject: RE: Sig100 Order Process
Ok, but | want to borrow a VP or even an EP for short bits of time. | will be selling like a madman when | have it with me.
From: Martin Eberhard [° J
Sent: Thursday, July 06, 2006 7:11 PM
To: Elon Musk
Subject: Re: Sigi00 Order Process
The scam I was considering was to give you seria] number one, and build a secret serial number zero for myself :-)
But despite my griping, I am happy to give you the first one, as I do appreciate your enabling contribution to Tesla's success.
- and you really would prefer to have a production car rather than a VP. No matter how you slice it, the production cars will
be more sorted out.
me
Martin Eberhard | CEO]. 111050 Bing Street, San Carlos, CA 94070 | tel
TESLA MOTORS
The content of this message is the proprietary and confidential property of Tesla Motors, and should be treated as such. | If you are not the intended
recipient and have received this message in error, please delete this message from your computer system and notify me immediately by reply e-mail. |
Any unauthorized use or distribution of the content of this message is prohibited.
Elon Musk wrote:
If you really want SN 1, | won't stand in your way. However, | will hold you to the deal of getting a preproduction unit to
drive as soon as reasonably possible without affecting company execution (| guess one of the VP units).
From: Martin Eberhard
Sent: Thursday, July 06, 2006 7:05 PM
To: Elon Musk
Subject: Re: Sig100 Order Process
But... but... every day of my life for the last 3 years! Counts for something! :-)
me
Elon Musk wrote:
I'm $27M in the hole... that's an expensive car :)
From: Gretchen Joyce
Sent: Thursday, July 06, 2006 12:01 PM
To: Elon Musk :
Cc: ‘Martin Eberhard’
Subject: Sigi00 Order Process
Hi Elon,
The following outlines my stab at developing a process for us to establish a production order
for those who are interested in becoming a Signature One Hundred member while not creating
a long line or chaos. Would welcome your thoughts/comments.
Best,
Gretchen
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From: Elon Musk ° ;
Sent: Tuesday, March 29, 2005 11:28 PM
To: JB Straubel
Ce: eberhard@’
Subject: RE: [Fwd: RE: Ultracapacitors|
The original reason I came out to California was to do a PhD on at Stanford on low cost,
high energy density capacitors. Actually, I didn't really care much for the degree, but I
had no money for a lab and no legal right to stay in the country, so that seemed like a
good way to solve both issues. Then the Internet came along, which seemed like a much
surer bet.
The problem with a technical challenge that involves quantum physics is that you can flail
away for years and eventually prove that it cannot be solved (at least in your lifetime).
Great thesis, bad career. ,
From: JB Straubel [ .
Sent: Tue 3/29/2005 9:34 PM
To: Elon Musk
Ce: eberhardt
Subject: RE: [Fwd: RE: Ultracapacitors]
REDACTED -
(PS -- the attached spreadsheet goes through some comparisons of energy storage in various
dielectric materials...)
s-c-H Original Message--~---
’ From: Blon Musk [mailto:
Sent: Tuesday, March 29, 2005 8:20 AM
To: JB Straubel
Cc: eberhardé
Subject: RE: [Fwd: RE: Ultracapacitors]
REDACTED
“PTO:
eeu perenenenenennes PomonaPage 636 REDACTEDPage 637 REDACTEDPage 638 REDACTEDPage 639 REDACTED
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Yosef Peretz (SBN 209288) s at i 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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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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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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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-
PDF Page 6
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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 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
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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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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
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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.
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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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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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
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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
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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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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“ao sa HN ON FF WH HN SK§ DOD Oo MO HN DH AH FR WD NY FS BS
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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
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eo HN DB WO FP WO NY YK DB OO OH ID DB WH BP WD PO KK CO
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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.
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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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
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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
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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
-20-
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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.]
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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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
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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
-23-
PDF Page 25
Oo foe SN HD nH FSF YH HO —
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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-
PDF Page 26
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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,
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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
LBLECELGL PI
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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
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
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.
PDF Page 88
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/o
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