Quarterly Report (10-q)

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

OR

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-34756

Tesla Motors, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware		91-2197729
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

3500 Deer Creek Road Palo Alto, California		94304
(Address of principal executive offices)		(Zip Code)

[phone]

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer		x				Accelerated filer		¨
Non-accelerated filer		¨		(Do not check if a smaller reporting company)		Smaller reporting company		¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of July 30, 2015, there were 127,142,147 shares of the registrant’s Common Stock outstanding.

 

 

 

 

 

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TESLA MOTORS, INC.

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2015

INDEX

 

				Page
PART I.		FINANCIAL INFORMATION
Item 1.		Financial Statements (Unaudited)		4
		Condensed Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014		4
		Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2015 and 2014		5
		Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2015 and 2014		6
		Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014		7
		Notes to Condensed Consolidated Financial Statements		8
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3.		Quantitative and Qualitative Disclosures About Market Risk		26
Item 4.		Controls and Procedures		27
PART II.		OTHER INFORMATION
Item 1.		Legal Proceedings		28
Item 1A.		Risk Factors		28
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		48
Item 3.		Defaults Upon Senior Securities		48
Item 4.		Mine Safety Disclosures		48
Item 5.		Other Information		48
Item 6.		Exhibits		48
SIGNATURES				49

 

 

 

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Forward-Looking Statements

The discussions in this Quarterly Report on Form 10-Q contain forward-looking statements reflecting our current expectations that involve risks and uncertainties. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, future profitability, future delivery of automobiles, projected costs, expectations regarding demand and acceptance for our technologies, growth opportunities and trends in the market in which we operate, prospects, plans and objectives of management and the statements made below under the heading “Management Opportunities, Challenges and Risks.” The words “anticipates”, “believes”, “estimates”, “expects”, “intends”, “may”, “plans”, “projects”, “will”, “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q and in our other filings with the Securities and Exchange Commission. We do not assume any obligation to update any forward-looking statements.

 

 

 

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PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

Tesla Motors, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

 

		June 30,				December 31,
		2015				2014
		(unaudited)
Assets
Current assets
Cash and cash equivalents		$	1,150,673			$	1,905,713
Restricted cash and marketable securities			20,591				17,947
Accounts receivable			138,648				226,604
Inventory			1,212,279				953,675
Prepaid expenses and other current assets			106,430				94,718
Total current assets			2,628,621				3,198,657
Operating lease vehicles, net			1,120,246				766,744
Property, plant and equipment, net			2,646,017				1,829,267
Restricted cash			19,774				11,374
Other assets			53,527				43,209
Total assets		$	6,468,185			$	5,849,251
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable		$	771,637			$	777,946
Accrued liabilities			345,401				268,884
Deferred revenue			288,527				191,651
Capital lease obligations, current portion			6,113				9,532
Resale value guarantees, current portion			67,700				-
Customer deposits			272,848				257,587
Convertible senior notes and other debt			632,162				601,566
Total current liabilities			2,384,388				2,107,166
Capital lease obligations, less current portion			11,254				12,267
Deferred revenue, less current portion			334,628				292,271
Convertible senior notes and other debt, less current portion			1,988,089				1,806,518
Resale value guarantees, less current portion			725,477				487,879
Other long-term liabilities			258,142				173,244
Total liabilities			5,701,978				4,879,345
Commitments and contingencies (Note 8)
Convertible senior notes (Notes 6)			50,273				58,196
Stockholders' equity:
Preferred stock; $0.001 par value; 100,000,000 shares authorized; no shares issued and    outstanding			—				—
Common stock; $0.001 par value; 2,000,000,000 shares authorized as of    June 30, 2015 and December 31, 2014; 127,100,947 and    125,687,607 shares issued and outstanding as of June 30, 2015 and    December 31, 2014			127				126
Additional paid-in capital			2,502,679				2,345,266
Accumulated other comprehensive loss			(14,804	)			(22	)
Accumulated deficit			(1,772,068	)			(1,433,660	)
Total stockholders' equity			715,934				911,710
Total liabilities and stockholders' equity		$	6,468,185			$	5,849,251

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

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Tesla Motors, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2015				2014				2015				2014
Revenues
Automotive		$	878,090			$	727,829			$	1,771,410			$	1,316,700
Services and other			76,886				41,520				123,446				73,191
Total revenues			954,976				769,349				1,894,856				1,389,891
Cost of revenues
Automotive			666,386				519,811				1,298,131				956,065
Services and other			75,220				36,543				123,282				65,703
Total cost of revenues			741,606				556,354				1,421,413				1,021,768
Gross profit			213,370				212,995				473,443				368,123
Operating expenses
Research and development			181,712				107,717				348,866				189,262
Selling, general and administrative			201,846				134,031				397,211				251,583
Total operating expenses			383,558				241,748				746,077				440,845
Loss from operations			(170,188	)			(28,753	)			(272,634	)			(72,722	)
Interest income			247				467				431				608
Interest expense			(24,352	)			(31,238	)			(50,926	)			(43,122	)
Other income (expense), net			13,233				(1,226	)			(9,072	)			5,492
Loss before income taxes			(181,060	)			(60,750	)			(332,201	)			(109,744	)
Provision for income taxes			3,167				1,150				6,207				1,958
Net loss		$	(184,227	)		$	(61,900	)		$	(338,408	)		$	(111,702	)
Net loss per share of common stock, basic and    diluted		$	(1.45	)		$	(0.50	)		$	(2.68	)		$	(0.90	)
Weighted average shares used in computing net loss    per share of common stock, basic and diluted			126,688,755				124,250,428				126,319,756				123,863,753

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

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Tesla Motors, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(Unaudited)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2015				2014				2015				2014
Net loss		$	(184,227	)		$	(61,900	)		$	(338,408	)		$	(111,702	)
Other comprehensive loss, net of tax:
Unrealized net gain on short-term marketable    securities			4				—				208				—
Foreign currency translation adjustment			1,157				—				(14,990	)			—
Other comprehensive income (loss)			1,161				—				(14,782	)			—
Comprehensive loss		$	(183,066	)		$	(61,900	)		$	(353,190	)		$	(111,702	)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

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Tesla Motors, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

		Six Months Ended June 30,
		2015				2014
Cash Flows From Operating Activities
Net loss		$	(338,408	)		$	(111,702	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization			168,501				98,983
Stock-based compensation			86,327				72,822
Amortization of discount on convertible debt			33,712				32,102
Inventory write-downs			15,950				3,850
Fixed asset disposal			4,991				6,305
Other non-cash operating activities			6,082				3,662
Foreign currency transaction (gain) loss			16,771				(210	)
Changes in operating assets and liabilities
Accounts receivable			62,832				(47,931	)
Inventories and operating lease vehicles			(706,220	)			(458,132	)
Prepaid expenses and other current assets			(3,385	)			(24,207	)
Other assets			(8,355	)			(457	)
Accounts payable and accrued liabilities			61,261				185,711
Deferred revenue			116,812				101,259
Customer deposits			19,573				64,946
Resale value guarantee			143,216				109,232
Other long-term liabilities			29,030				20,828
Net cash provided by (used in) operating activities			(291,310	)			57,061
Cash Flows From Investing Activities
Purchases of property and equipment excluding capital leases			(831,225	)			(317,049	)
Purchases of short-term marketable securities			-				(200,268	)
Maturities of short-term marketable securities			-				189,131
Business acquisition			(12,260	)			-
(Increase) decrease in other restricted cash			(11,696	)			1,616
Net cash used in investing activities			(855,181	)			(326,570	)
Cash Flows From Financing Activities
Collateralized lease borrowing			196,535				—
Proceeds from issuance of convertible and other debt			168,246				2,300,000
Proceeds from exercise of stock options and other stock issuances			58,871				53,115
Principal payments on capital leases and other debt			(13,901	)			(5,646	)
Common stock and debt issuance costs			(5,244	)			(35,150	)
Proceeds from issuance of warrants			—				389,160
Purchase of convertible note hedges			—				(603,428	)
Net cash provided by financing activities			404,507				2,098,051
Effect of exchange rate changes on cash and cash equivalents			(13,056	)			479
Net increase (decrease) in cash and cash equivalents			(755,040	)			1,829,021
Cash and cash equivalents at beginning of period			1,905,713				845,889
Cash and cash equivalents at end of period		$	1,150,673			$	2,674,910
Supplemental noncash investing activities
Acquisition of property and equipment included in accounts payable and accrued    liabilities			265,970				63,861
Estimated fair market value of facilities under build-to-suit lease			40,468				19,213

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

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Tesla Motors, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Overview of the Company

Tesla Motors, Inc. (Tesla, we, us or our) was incorporated in the state of Delaware on July 1, 2003. We design, develop, manufacture and sell high-performance fully electric vehicles, advanced electric vehicle powertrain components, and Tesla Energy products. We have wholly-owned subsidiaries in North America, Europe and Asia. The primary purpose of these subsidiaries is to market, manufacture, sell and/or service our vehicles, and Tesla Energy products.

 

 

2. Summary of Significant Accounting Policies

Basis of Consolidation

The condensed consolidated financial statements include the accounts of Tesla and its wholly-owned subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, and reported amounts of expenses during the reporting period, including revenue recognition, residual value of operating lease vehicles, inventory valuation, warranties, fair value of financial instruments and stock-based compensation. Actual results could differ from those estimates.

Unaudited Interim Financial Statements

The accompanying condensed consolidated balance sheet as of June 30, 2015, the condensed consolidated statements of operations and condensed consolidated statements of comprehensive loss for the three and six months ended June 30, 2015 and 2014 and the condensed consolidated statements of cash flows for the three and six months ended June 30, 2015 and 2014, and other information disclosed in the related notes are unaudited. The condensed consolidated balance sheet as of December 31, 2014 was derived from our audited consolidated financial statements at that date. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes contained in our Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission.

The accompanying interim condensed consolidated financial statements and related disclosures have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the results of operations for the periods presented. The condensed consolidated results of operations for any interim period are not necessarily indicative of the results to be expected for the full year or for any other future year or interim period.

Beginning in the three months ended March 31, 2015, we changed the composition of the revenue and cost of revenue lines in our consolidated statement of operations. Automotive includes revenues related to deliveries of new Model S vehicles, including customer selected options, data connectivity, Supercharger access, sales of regulatory credits to other automotive manufacturers, amortization of revenue for cars sold with resale value guarantees, and Model S leasing revenue. Services and other consists of sales of electric vehicle powertrain components and systems to other manufacturers, maintenance and development services, Tesla Energy products, and pre-owned Tesla vehicle sales. Prior period amounts have been reclassified to conform to the current period presentation.

Beginning January 1, 2015, the functional currency of each of our foreign subsidiaries changed to their local country’s currency. This change was based on the culmination of facts and circumstances that have developed as we expanded our foreign operations over the past year. The adjustment of $10.0 million attributable to the current rate translation of non-monetary assets as of the date of the change is included in accumulated other comprehensive loss on our condensed consolidated balance sheet.

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Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board issued an accounting update which amends the existing accounting standards for revenue recognition. The new guidance provides a unified model to determine when and how revenue is recognized. Under the new model, revenue is recognized as goods or services are delivered in an amount that reflects the consideration we expect to collect. The guidance is effective for fiscal years beginning after December 15, 2017; early adoption is permitted for periods beginning after December 15, 2016. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. We have not yet selected a transition method and are currently evaluating the impact of adopting this guidance on our consolidated financial statements.

Revenue Recognition

We recognize revenues from sales of Model S, including vehicle options and accessories, vehicle service and sales of regulatory credits, such as zero emission vehicle and greenhouse gas emission credits, as well as sales of electric vehicle powertrain components and systems, such as battery packs and drive units. We recognize revenue when: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred and there are no uncertainties regarding customer acceptance; (iii) fees are fixed or determinable; and (iv) collection is reasonably assured.

Car sales include certain standard features and customer selected options and configurations that meet the definition of a deliverable under multiple-element accounting guidance, including internet connectivity, Supercharging access, and specified software updates for cars equipped with Autopilot hardware. These deliverables are valued on a stand-alone basis and we recognize their related revenue over our performance period which is generally the eight-year life of the car or, for software upgrades, as they are delivered. If we sell a deliverable separately, we use that pricing to determine its fair value; otherwise, we use our best estimated selling price by considering third party pricing of similar options, costs used to develop and deliver the service, and other information which may be available.

As of June 30, 2015, we had deferred $47.8 million, $34.6 million, $21.0 million, and $4.9 million related to the purchase of vehicle maintenance and service plans, access to our Supercharger network, Model S connectivity, and Autopilot software upgrades. As of December 31, 2014, we had deferred $39.7 million, $25.6 million, $14.4 million, and $1.5 million related to these same performance obligations.

Resale Value Guarantees and Other Financing Programs

We offer resale value guarantees or similar buy-back terms to all customers who purchase a Model S in the US, Canada and selected European and Asian markets and who finance their vehicle through one of our specified commercial banking partners. Under these program, Model S customers have the option of selling their vehicle back to us during the guarantee period of 36 to 39 months after delivery for a pre-determined resale value. Although we receive full payment for the vehicle sales price at the time of delivery, we account for transactions under the resale value guarantee program as operating leases and recognize revenue attributable to the lease on a straight-line basis over the guarantee period to automotive revenue. The amount of proceeds related to the residual value guarantee is deferred until the option expires or is exercised. We capitalize the cost of the leased vehicle and depreciate its value, less expected salvage value, to cost of automotive revenue over the same period.

At the end of the resale value guarantee period, which is the earlier of 39 months or the pay-off date of the initial loan, the resale value guarantee and any remaining deferred revenue balances are settled to automotive revenue and the net book value of the leased vehicle is expensed to costs of automotive revenue if our customer retains ownership of the car.  In cases where a customer returns the vehicle back to us between months 36 and 39, we purchase the car in the amount of the resale value guarantee and settle any remaining deferred revenue balance to automotive revenue. As of June 30, 2015, $67.7 million of the resale value guarantee liability relates to guarantees that are exercisable by customers within the next twelve months.

In the fourth quarter of 2014, we also began offering residual value guarantees in connection with automobile sales to certain bank leasing partners. As we have guaranteed the value of these vehicles and as the vehicles are leased to end-customers, we account for them as collateralized borrowings. As of June 30, 2015 and December 31, 2014, we had $179.3 million and $19.6 million of such borrowings recorded in resale value guarantee and $40.7 million and $0 million recorded in deferred revenue liability, of which a portion will be accreted to revenue and a portion may be distributed to the bank leasing partner should we repurchase the vehicles at the end of the term or should the bank sell the car to a third party and receive proceeds less than the value we have guaranteed. The maximum cash payment to re-purchase these vehicles under these arrangements at June 30, 2015, is $131.6 million. Cash received upon the sale of such cars, net of revenue recognized during the period, is classified as collateralized lease borrowing within cash flows from financing activities in our consolidated statement of cash flows.

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Account activity related to our resale value guarantee program consisted of the following for the periods presented (in thousands):

 

		Three Months Ended				Six Months Ended
		June 30, 2015				June 30, 2015
Operating Lease Vehicles
Operating lease vehicles under the resale value guarantee    program—beginning of period		$	792,711			$	684,590
Net increase in operating lease vehicles under the resale value    guarantee program			208,399				348,192
Depreciation expense recorded in cost of automotive revenues			(26,951	)			(48,993	)
Additional depreciation expense recorded in cost of    automotive revenues as a result of early cancellation of resale    value guarantee			(5,058	)			(9,455	)
Reclassifications to inventory resulting from return of vehicle under trade-in program			(6,364	)			(11,597	)
Operating lease vehicles under the resale value guarantee    program—end of period		$	962,737			$	962,737
Deferred Revenue
Deferred revenue related to the resale value guarantee    program—beginning of period		$	424,104			$	381,096
Net increase in deferred revenue including Model S deliveries with resale value    guarantee and reclassification of collateralized borrowing from long-term to short-term			118,648				210,388
Amortization of deferred revenue and short-term collateralized borrowing recorded in    automotive revenue			(54,175	)			(98,924	)
Additional revenue recorded in automotive revenue as a    result of early cancellation of resale value guarantee			(3,310	)			(4,496	)
Release of deferred revenue resulting from return of vehicle under trade-in program			(2,695	)			(5,492	)
Deferred revenue related to the resale value guarantee    program—end of period		$	482,572			$	482,572
Resale Value Guarantee
Resale value guarantee liability—beginning of period		$	606,221			$	487,879
Net increase in resale value guarantee			198,290				322,402
Reclassification from long-term to short-term collateralized borrowing			(3,743	)			(4,387	)
Additional revenue recorded in automotive revenue as a    result of early cancellation of resale value guarantee			(2,966	)			(4,036	)
Release of resale value guarantee resulting from return of vehicle under trade-in program			(4,625	)			(8,681	)
Resale value guarantee liability—end of period		$	793,177			$	793,177

Model S Leasing Program

We offer a leasing program in the United States and Canada for Model S. Qualifying customers are permitted to lease a Model S directly from Tesla for 36 months. At the end of the lease term, customers have the option of either returning the vehicle to us or purchasing it for a pre-determined residual value. We account for these leasing transactions as operating leases and recognize leasing revenues over the contractual term and record the depreciation of these vehicles to cost of automotive revenues. As of June 30, 2015 and December 31, 2014, we had deferred $19.6 million and $9.4 million of lease-related upfront payments which will be recognized on a straight-line basis over the contractual term of the individual leases. Lease revenues are recorded in automotive revenue and for the three and six months ended June 30, 2015, we recognized $9.3 million and $15.9 million. Lease revenue for the three and six months ended June 30, 2014 was $0.2 million.

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Warranties

We provide a manufacturer’s warranty on all vehicles, production powertrain components and systems sales, and we accrue warranty reserves upon delivery to the customer. Warranty reserves include management’s best estimate of the projected costs to repair or to replace items under warranty. These estimates are based on actual claims incurred to-date and an estimate of the nature, frequency and costs of future claims. These estimates are inherently uncertain and changes to our historical or projected experience may cause material changes to our warranty reserves in the future. The portion of the warranty provision expected to be incurred within 12 months is classified as current within accrued liabilities, while the remaining amount is classified as long-term within other long-term liabilities.

Accrued warranty activity consisted of the following for the periods presented (in thousands):

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2015				2014				2015				2014
Accrued warranty—beginning of period		$	155,301			$	71,932			$	129,043			$	53,183
Warranty costs incurred			(17,287	)			(9,271	)			(29,073	)			(18,571	)
Net changes in liability for pre-existing    warranties, including expirations			567				1,541				11,329				9,661
Provision for warranty			26,014				20,169				53,296				40,098
Accrued warranty—end of period		$	164,595			$	84,371			$	164,595			$	84,371

Our warranty reserves do not include projected warranty costs associated with our operating lease vehicles and vehicles sold with resale value guarantee or similar buy-back terms as such actual warranty costs are expensed as incurred. For the three and six months ended June 30, 2015, warranty costs incurred for our operating lease vehicles were $2.4 million and $4.2 million and for the three and six months ended June 30, 2014 were $1.8 million and $3.0 million. Warranty expense is recorded as a component of cost of automotive revenue.

Cost of automotive revenue during the six months ended June 30, 2015 included a $11.3 million increase to our warranty reserve to reflect the additional preventative repairs we plan to perform on customer drive units and high-voltage battery packs when brought in for warranty related service.

Inventory Valuation

We value our inventories at the lower of cost or market. Inventories are recorded at cost on a first-in, first-out basis. We record inventory write-downs when we have amounts of inventory that are in excess of our planned production or where inventory has become obsolete to our production requirements.

We also review inventory to determine whether its carrying value exceeds the net amount realizable upon the ultimate sale of the inventory. This requires us to determine the estimated selling price of our vehicles less the estimated cost to convert inventory on hand into a finished product.  Should our estimates of future selling prices or production costs change, material changes to these reserves may be required. A change in our estimates may result in a material charge to our reported financial results.

Concentration of Risk

Credit Risk

Financial instruments that potentially subject us to a concentration of credit risk consist of cash, cash equivalents, restricted cash and accounts receivable. Our cash equivalents are primarily invested in money market funds with high credit quality financial institutions in the United States. At times, these deposits and securities may be in excess of insured limits. We invest cash not required for use in operations in high credit quality securities based on our investment policy. Our investment policy provides guidelines and limits regarding credit quality, investment concentration, investment type, and maturity that we believe will provide liquidity while reducing risk of loss of capital. Our investments are currently of a short-term nature and include U.S. treasury bills.

As of June 30, 2015 and December 31, 2014, our accounts receivable were derived primarily from amounts to be received from financial institutions and leasing companies offering various financing products to our customers, sales of regulatory credits, as well as the development and sales of powertrain components and systems to automotive original equipment manufacturers (OEMs). As of June 30, 2015, we have two customers who individually account for 11% and 10% of our accounts receivable.

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Supply Risk

Although there may be multiple suppliers available, many of the components used in our vehicles are purchased by us from a single source. If these single source suppliers fail to satisfy our requirements on a timely basis at competitive prices, we could suffer manufacturing delays, a possible loss of revenues, or incur higher cost of sales, any of which could adversely affect our operating results.

Stock-Based Compensation

We use the fair value method of accounting for our stock options and restricted stock units (RSUs) granted to employees and our Employee Stock Purchase Plan (ESPP) to measure the cost of employee services received in exchange for the stock-based awards. The fair value of stock options and ESPP are estimated on the grant date and offering date using the Black-Scholes option-pricing model. The fair value of RSUs is measured on the grant date based on the closing fair market value of our common stock. The resulting cost is recognized over the service period which is generally four years for stock options and RSUs and six months for the ESPP. Stock-based compensation expense is recognized on a straight-line basis, net of estimated forfeitures.

Net Loss per Share of Common Stock

Our basic and diluted net loss per share of common stock is calculated by dividing net loss by the weighted-average shares of common stock outstanding for the period. Potentially dilutive shares, which are based on the number of shares underlying outstanding stock options and warrants as well as our convertible senior notes, are not included when their effect is antidilutive.

The following table presents the potential weighted common shares outstanding that were excluded from the computation of diluted net loss per share of common stock for the periods presented. Anti-dilutive share counts for the twelve months ended December 31, 2014 have been updated.

 

		Three Months Ended  June 30,								Six Months Ended  June 30,								Twelve Months Ended December 31,
		2015				2014				2015				2014				2014
Employee share based awards			14,339,572				13,883,882				14,396,259				14,124,057				14,729,749
Convertible senior notes			2,517,573				2,145,517				2,301,823				2,082,759				2,344,998
Warrants issued May 2013			1,177,659				626,447				858,019				533,469				921,985

Since we expect to settle the principal amount of our outstanding convertible senior notes in cash, we use the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted net income per share, if applicable. The conversion spread will have a dilutive impact on diluted net income per share of common stock when the average market price of our common stock for a given period exceeds the conversion price of $124.52, $359.87 and $359.87 per share for the convertible senior notes due 2018 (2018 Notes), convertible senior notes due 2019 (2019 Notes), and convertible senior notes due 2021 (2021 Notes).

Uncertain Tax Positions

As of June 30, 2015 and December 31, 2014, the aggregate balances of our gross unrecognized tax benefits were $57.1 million and $41.4 million. $54.1 million and $39.1 million of these aggregate balances would not give rise to changes in our effective tax rate since these tax benefits would increase a deferred tax asset which is currently offset by a full valuation allowance.

 

 

3. Balance Sheet Components

Inventory

As of June 30, 2015 and December 31, 2014, our inventory consisted of the following (in thousands):

 

		June 30,				December 31,
		2015				2014
Raw materials		$	395,171			$	392,292
Work in process			99,116				56,114
Finished goods			597,329				397,318
Service parts			120,663				107,951
Total		$	1,212,279			$	953,675

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Finished goods inventory includes vehicles in transit to fulfill customer orders, new vehicles available for immediate sale at our retail and service center locations, and pre-owned Tesla vehicles.  The increase in finished goods inventory was primarily due to customer orders that were in transit for delivery at quarter-end while there was a reduction in the new vehicles available for immediate sale.  

Property, Plant and Equipment

As of June 30, 2015 and December 31, 2014, our property, plant and equipment, net, consisted of the following (in thousands):

 

		June 30,				December 31,
		2015				2014
Machinery, equipment and office furniture		$	918,134			$	720,746
Construction in progress			1,027,256				572,125
Leasehold improvements			339,398				230,270
Tooling			340,090				295,906
Building and building improvements			243,750				154,362
Computer equipment and software			129,143				98,970
Land			52,115				49,478
			3,049,886				2,121,857
Less: Accumulated depreciation and amortization			(403,869	)			(292,590	)
Total		$	2,646,017			$	1,829,267

Construction in progress is comprised primarily of tooling and equipment related to the manufacturing of our Model S and Model X, Gigafactory construction, and capitalized interest expense. Completed assets are transferred to their respective asset class and depreciation begins when the asset is ready for its intended use. Interest expense on outstanding debt is capitalized during the period of significant capital asset construction. Capitalized interest on construction in progress is included in property, plant and equipment, and is amortized over the life of the related assets. During the three and six months ended June 30, 2015, we capitalized $12.3 million and $20.6 million of interest expense. During the three and six months ended June 30, 2014, we capitalized $2.0 million and $3.2 million of interest expense.

We are sometimes involved in construction at our leased facilities primarily related to retail stores, service centers, and certain manufacturing facilities. In accordance with Accounting Standards Codification 840, Leases, for build-to-suit lease arrangements where we are involved in the construction of structural improvements prior to the commencement of the lease or take some level of construction risk, we are considered the owner of the assets and land during the construction period. Accordingly, upon commencement of our construction activities, we record a construction in progress asset and a corresponding financing liability. Once the construction is completed, if the lease meets certain “sale-leaseback” criteria, we will remove the asset and related financial obligation from the balance sheet and treat the building lease as an operating lease. If upon completion of construction, the project does not meet the “sale-leaseback” criteria, the leased property will be treated as a capital lease and included in building and building improvements in the table above. As of June 30, 2015 and December 31, 2014, the table above includes $102.6 million and $52.4 million of build-to-suit assets. As of June 30, 2015 and December 31, 2014, corresponding financing obligations of $0.6 million and $21.0 million are recorded in accrued liabilities and $102.0 million and $31.4 million are recorded in other long-term liabilities.

 

Depreciation and amortization expense during the three and six months ended June 30, 2015 was $60.8 million and $112.9 million. Depreciation and amortization expense during the three and six months ended June 30, 2014 was $36.1 million and $65.0 million. Total property and equipment assets under capital lease as of June 30, 2015 and December 31, 2014 were $36.1 million and $33.4 million. Accumulated depreciation related to assets under capital lease as of these dates were $16.8 million and $12.8 million.

We have acquired land for the site of our Gigafactory and have incurred $206.6 million of construction costs as of June 30, 2015.

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Accrued Liabilities

As of June 30, 2015 and December 31, 2014, our accrued liabilities consisted of the following (in thousands):

 

		June 30,				December 31,
		2015				2014
Taxes payable		$	49,288			$	71,229
Accrued purchases			146,177				68,547
Payroll and related costs			66,588				54,492
Other			83,348				74,616
Total		$	345,401			$	268,884

 

 

4. Fair Value of Financial Instruments

The carrying values of our financial instruments including cash equivalents, marketable securities, accounts receivable and accounts payable approximate their fair value due to their short-term nature. As a basis for determining the fair value of certain of our assets and liabilities, we established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows: (Level I) observable inputs such as quoted prices in active markets; (Level II) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level III) unobservable inputs in which there is little or no market data which requires us to develop our own assumptions. This hierarchy requires us to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. Our financial assets that are measured at fair value on a recurring basis consist of cash equivalents and marketable securities.

All of our cash equivalents and current restricted cash, which are comprised primarily of money market funds, are classified within Level I of the fair value hierarchy because they are valued using quoted market prices or market prices for similar securities. Our restricted short-term marketable securities are classified within Level I of the fair value hierarchy.

As of June 30, 2015 and December 31, 2014, the fair value hierarchy for our financial assets that are carried at fair value was as follows (in thousands), and unrealized gains (losses) on all financial assets for all periods presented were less than $1.0 million:

 

		June 30, 2015																December 31, 2014
		Fair Value				Level I				Level II				Level III				Fair Value				Level I				Level II				Level III
Money market funds		$	349,556			$	349,556			$	—			$	—			$	1,275,346			$	1,275,346			$	—			$	—
U.S. treasury bills			16,662				16,662				—				—				16,673				16,673				—				—
Total		$	366,218			$	366,218			$	—			$	—			$	1,292,019			$	1,292,019			$	—			$	—

 

As of June 30, 2015, the estimated fair value of our 2018 Notes, 2019 Notes, and 2021 Notes was $1.44 billion (par value $659.8 million), $908.5 million (par value $920.0 million), and $1.36 billion (par value $1.38 billion). As of December 31, 2014 the estimated fair value of our 2018 Notes, 2019 Notes, and 2021 Notes was $1.22 billion (par value $659.8 million), $852.2 million (par value $920.0 million), and $1.25 billion (par value $1.38 billion). These fair values represent Level II valuations. When determining the estimated fair value of our long-term debt, we used a commonly accepted valuation methodology and market-based risk measurements that are indirectly observable, such as credit risk. As of June 30, 2015, the $114.3 million carrying value of our Warehouse Facility liability and $50 million carrying value of our Asset Backed Credit Facility approximates the fair value of these borrowings.

 

 

5. Customer Deposits

Customer deposits include cash payments from customers at the time they place an order for a vehicle and additional payments up to the point of delivery including the fair value of customer trade-in vehicles that are applicable toward their new car purchase. Customer deposit amounts and timing vary depending on the vehicle model and country of delivery. Customer deposits related to Model X currently represent fully refundable reservations. Customer deposits are included in current liabilities until refunded or until they are applied to a customer’s purchase balance at time of delivery.

As of June 30, 2015 and December 31, 2014, we held customer deposits of $272.8 million and $257.6 million.

 

 

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6. Convertible and Long-term Debt Obligations

0.25% and 1.25% Convertible Senior Notes and Bond Hedge and Warrant Transactions

In March 2014, we issued $800.0 million principal amount of 0.25% convertible senior notes due 2019 (2019 Notes) and $1.20 billion principal amount of 1.25% convertible senior notes due 2021 (2021 Notes) in a public offering. In April 2014, we issued an additional $120.0 million aggregate principal amount of 2019 Notes and $180.0 million aggregate principal amount of 2021 Notes, pursuant to the exercise in full of the overallotment options of the underwriters of our March 2014 public offering. Each $1,000 of principal of the 2019 Notes and 2021 Notes will initially be convertible into 2.7788 shares of our common stock, which is equivalent to an initial conversion price of approximately $359.87 per share, subject to adjustment upon the occurrence of specified events. The total net proceeds from these offerings, after deducting transaction costs, were approximately $905.8 million from the 2019 Notes and $1.36 billion from the 2021 Notes. We incurred $14.2 million and $21.4 million, of debt issuance costs in connection with the 2019 Notes and the 2021 Notes, which we initially recorded in other assets and are amortizing to interest expense using the effective interest method over the contractual terms of these notes. The interest rates are fixed at 0.25% and 1.25% per annum and are payable semi-annually in arrears on March 1 and September 1 of each year, commencing on September 1, 2014.

In connection with the offering of these notes in March 2014, we entered into convertible note hedge transactions whereby we have the option to purchase initially (subject to adjustment for certain specified events) a total of approximately 5.6 million shares of our common stock at a price of approximately $359.87 per share. The total cost of the convertible note hedge transactions was $524.7 million. In addition, we sold warrants whereby the holders of the warrants have the option to purchase initially (subject to adjustment for certain specified events) a total of approximately 2.2 million shares of our common stock at a price of $512.66 for the 2019 Notes and a total of approximately 3.3 million shares of our common stock at a price of $560.64 per share for 2021 Notes. We received $338.4 million in cash proceeds from the sale of these warrants. Similarly, in connection with the issuance of additional notes in April 2014, we entered into convertible note hedge transactions and paid an aggregate $78.7 million. In addition, we sold warrants to purchase (subject to adjustment for certain specified events) a total of approximately 0.3 million shares of our common stock at a price of $512.66 per share for the warrants relating to 2019 Notes, and a total of approximately 0.5 million shares of our common stock at a price of $560.64 per share for the warrants relating to 2021 Notes. We received aggregate proceeds of approximately $50.8 million from the sale of the warrants. Taken together, the purchase of the convertible note hedges and the sale of warrants are intended to reduce potential dilution and/or offset potential cash payments upon the conversion of these notes and to effectively increase the overall conversion price from $359.87 to $512.66 per share in the case of warrants relating to 2019 Notes and from $359.87 to $560.64 in the case of warrants relating to 2021 Notes. As these transactions meet certain accounting criteria, the convertible note hedges and warrants are recorded in stockholders’ equity and are not accounted for as derivatives. The net cost incurred in connection with the convertible note hedge and warrant transactions was recorded as a reduction to additional paid-in capital on the condensed consolidated balance sheet.

During the second quarter of 2015, the closing price of our common stock did not meet or exceed 130% of the applicable conversion price of our 2019 Notes and 2021 Notes on at least 20 of the last 30 consecutive trading days of the quarter; furthermore, no other conditions allowing holders of the 2019 Notes and 2021 Notes to convert have been met as of June 30, 2015. Therefore, the 2019 Notes and 2021 Notes are not convertible during the third quarter of 2015 and are classified as long-term debt. Should the closing price conditions be met in the third quarter of 2015 or a future quarter, the 2019 Notes and 2021 Notes will be convertible at their holders’ option during the immediately following quarter.

1.50% Convertible Senior Notes and Bond Hedge and Warrant Transactions

In May 2013, we issued $660.0 million aggregate principal amount of convertible senior notes due 2018 (2018 Notes) in a public offering. The net proceeds from the offering, after deducting transaction costs, were approximately $648.0 million. We incurred $12.0 million of debt issuance costs in connection with 2018 Notes which we initially recorded in other assets and are amortizing to interest expense using the effective interest method over the contractual term of 2018 Notes. Each $1,000 of principal of the 2018 Notes will initially be convertible into 8.0306 shares of our common stock, which is equivalent to an initial conversion price of approximately $124.52 per share, subject to adjustment upon the occurrence of specified events. The interest under 2018 Notes is fixed at 1.50% per annum and is payable semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 2013.

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In connection with the offering of the 2018 Notes, we entered into convertible note hedge transactions whereby we have the option to purchase initially (subject to adjustment for certain specified events) a total of approximately 5.3 million shares of our common stock at a price of approximately $124.52 per share. The cost of the convertible note hedge transactions was $177.5 million. In addition, we sold warrants whereby the holders of the warrants have the option to purchase initially (subject to adjustment for certain specified events) a total of approximately 5.3 million shares of our common stock at a price of $184.48 per share. We received $120.3 million in cash proceeds from the sale of these warrants. Taken together, the purchase of the convertible note hedges and the sale of warrants are intended to reduce potential dilution and/or offset potential cash payment upon the conversion of the 2018 Notes and to effectively increase the overall conversion price from $124.52 to $184.48 per share. As these transactions meet certain accounting criteria, the convertible note hedges and warrants are recorded in stockholders’ equity and are not accounted for as derivatives. The net cost incurred in connection with the convertible note hedge and warrant transactions was recorded as a reduction to additional paid-in capital in the condensed consolidated balance sheet.

During the second quarter of 2015, the closing price of our common stock exceeded 130% of the applicable conversion price of our 2018 Notes on at least 20 of the last 30 consecutive trading days of the quarter; therefore, holders of 2018 Notes may convert their notes during the third quarter of 2015. As such, we classified the $609.5 million carrying value of our 2018 Notes as current liabilities and classified $50.3 million, representing the difference between the aggregate principal of our 2018 Notes of $659.8 million and the carrying value of 2018 Notes, as mezzanine equity on our condensed consolidated balance sheet as of June 30, 2015. Similarly, debt issuance costs were classified as other current assets as of June 30, 2015. Should the closing price conditions be met again in the third quarter of 2015 or a future quarter, 2018 Notes will be convertible at their holders’ option during the immediately following quarter.

Convertible Senior Notes Carrying Value and Interest Expense

In accordance with accounting guidance on embedded conversion features, we valued and bifurcated the conversion option associated with the Notes from the respective host debt instrument and initially recorded the conversion option for the 2018, 2019, and 2021 Notes in stockholders’ equity. The resulting debt discounts on the 2018 Notes, 2019 Notes, and 2021 Notes are being amortized to interest expense at the effective interest rate over the contractual terms of the Notes.

 

		June 30, 2015												December 31, 2014
		2018 Notes				2019 Notes				2021 Notes				2018 Notes				2019 Notes				2021 Notes
		(in thousands, except years and percentages)
Carrying value		$	609,489			$	777,287			$	1,069,159			$	601,566			$	759,891			$	1,046,627
Unamortized discount			50,273				142,713				310,841				58,196				160,109				333,373
Principal amount		$	659,762			$	920,000			$	1,380,000			$	659,762			$	920,000			$	1,380,000
Remaining amortization period (years)			2.7				3.4				5.4
Effective interest rate on liability component			4.29	%			4.89	%			5.96	%
Carrying amount of equity component		$	82,800			$	188,100			$	369,400
If converted value in excess of par value		$	761,575			$	—			$	—

 

Warehouse line of credit

In March 2015, we entered into a loan and security agreement (the “Warehouse Facility”) for a secured asset based line of credit for a principal amount up to $100 million. In June 2015, we amended the Warehouse Facility for an additional principal amount of $50 million, for a total of up to $150 million. Obligations under the Warehouse Facility are secured by certain of our lease contracts with Tesla directly and the related leased vehicles. In connection with the Warehouse Facility, we sold the beneficial interest in such lease contracts and related vehicles to a wholly owned special purpose entity that is the borrower in the Warehouse Facility, which pledged such beneficial interest in the underlying assets to the third-party lender under the Warehouse Facility. Borrowings under the Warehouse Facility are generally limited to up to 72% of the net present value of the remaining lease payments and the residual vehicle values under eligible lease contracts. As of June 30, 2015, we have borrowed $114.3 million under the Warehouse Facility.

Interest is payable monthly on amounts borrowed under the Warehouse Facility at a variable rate of LIBOR plus 1.65% and on undrawn amounts at a rate of 0.5%.  The Warehouse facility matures in March 2017, at which time all outstanding borrowing will become due. Prior to that date, principal payments will be due in the amount that the borrowing limit decreases below our outstanding principal balance.

 

We are required to meet various covenants, including meeting certain reporting requirements, such as the completion and presentation of audited consolidated financial statements for our borrowings. As of June 30, 2015 we were in compliance with all covenants contained in the Warehouse Facility agreement.

 

 

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Asset-Based Credit Agreement

 

In June 2015, we entered into a senior secured asset-based revolving credit agreement (the “Credit Agreement”) with a syndicate of banks. The Credit Agreement provides for a senior secured asset-based revolving credit facility of up to $500.0 million (the “Credit Facility”), which we may draw upon as needed. We may increase the total commitments under the Credit Facility by up to an additional $250.0 million, subject to certain conditions, for total commitments up to $750 million. In addition, the Credit Agreement provides for a $100.0 million letter of credit sub-facility and a $40.0 million swing-line loan sub-facility. The Credit Agreement is collateralized by a pledge of certain of our accounts receivable, inventory, and equipment, and availability under the Credit Agreement is based on the value of such assets, as reduced by certain reserves.

 

Borrowed funds bear interest, at our option, at an annual rate of (a) 1% plus LIBOR or (b) the highest of (i) the federal funds rate plus 0.50%, (ii) the lenders “prime rate” or (iii) 1% plus LIBOR. The fee for undrawn amounts is 0.25% per annum. Interest is payable quarterly. The Credit Agreement terminates, and all outstanding loans become due and payable, in June 2020. As of June 30, 2015, we have borrowed $50.0 million under the Credit Facility.

 

We are required to meet various covenants, including meeting certain reporting requirements, such as the completion and presentation of audited consolidated financial statements for our borrowings. As of June 30, 2015 we were in compliance with all covenants contained in the Credit Agreement.

Interest Expense

The following table presents the aggregate amount of interest expense recognized on the Warehouse Facility, Credit Agreement, 2018 Notes, 2019 Notes, and 2021 Notes relating to the contractual interest coupon and amortization of the debt issuance costs and debt discount.

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2015				2014				2015				2014
Contractual interest coupon		$	7,741			$	7,522			$	15,048			$	11,174
Amortization of debt issuance costs			1,727				1,516				3,257				2,252
Amortization of debt discount			24,213				23,609				47,851				32,102
Total		$	33,681			$	32,647			$	66,156			$	45,528

 

 

7. Equity Incentive Plans

Performance-based Stock Option Grant

In 2014, to create incentives for continued long term success beyond the Model S program and to closely align executive pay with our stockholders’ interests in the achievement of significant milestones by our company, the Compensation Committee of our Board of Directors granted stock options to certain employees to purchase an aggregate 1,073,000 shares of our common stock. Each such grant consists of four vesting tranches with a vesting schedule based entirely on the attainment of future performance milestones, assuming continued employment and service to us through each vesting date.

·	1/4th of the shares subject to the options are scheduled to vest upon completion of the first Model X Production Vehicle;

·	1/4th of the shares subject to the options are scheduled to vest upon achieving aggregate vehicle production of 100,000 vehicles in a trailing 12-month period;

·	1/4th of the shares subject to the options are scheduled to vest upon completion of the first Gen III Production Vehicle; and

·	1/4th of the shares subject to the options are scheduled to vest upon achievement of annualized gross margin of greater than 30.0% in any three years.

As of June 30, 2015, the following performance milestone was considered probable of achievement.

·	Completion of the first Model X Production Vehicle.

For the three and six months ended June 30, 2015, we recorded stock-based compensation expense of $4.0 million and $7.7 million related to this grant. For the three and six months ended June 30, 2014, we recorded stock-based compensation expense of $3.4 million and $6.3 million related to this grant.

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2012 CEO Grant

In August 2012, our Board of Directors granted 5,274,901 stock options to our CEO (2012 CEO Grant). The 2012 CEO Grant consists of ten vesting tranches with a vesting schedule based entirely on the attainment of both performance conditions and market conditions, assuming continued employment and service to us through each vesting date.

Each of the ten vesting tranches requires a combination of one of the ten pre-determined performance milestones and an incremental increase in our market capitalization of $4.0 billion, as compared to the initial market capitalization of $3.2 billion measured at the time of the 2012 CEO Grant.

As of June 30, 2015, the market conditions for six vesting tranches and the following performance milestones were achieved and approved by our Board of Directors:

·	Successful completion of the Model X Alpha Prototype; and

·	Successful completion of the Model X Beta Prototype.

As of June 30, 2015, the following three performance milestones were considered probable of achievement:

·	Completion of the first Model X Production Vehicle;

·	Successful completion of the Model 3 Alpha Prototype; and

·	Aggregate vehicle production of 100,000 vehicles.

For the three and six months ended June 30, 2015, we recorded stock-based compensation expense of $1.3 million and $2.7 million related to this grant. For the three and six months ended June 30, 2014, we recorded stock-based compensation expense of $4.4 million and $14.4 million related to this grant.

No cash compensation has been received by our CEO for his services to the company.

Summary Stock-Based Compensation Information

The following table summarizes our stock-based compensation expense by line item in the condensed consolidated statements of operations (in thousands):

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2015				2014				2015				2014
Cost of sales		$	4,820			$	3,912			$	9,421			$	7,018
Research and development			19,912				14,822				39,704				28,367
Selling, general and administrative			18,603				17,049				37,236				37,436
Total		$	43,335			$	35,783			$	86,361			$	72,821

 

 

8. Commitments and Contingencies

Legal Proceedings

From time to time, we are subject to various legal proceedings that arise from the normal course of business activities. In addition, from time to time, third parties may assert intellectual property infringement claims against us in the form of letters and other forms of communication. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on our results of operations, prospects, cash flows, financial position and brand.

In November 2013, a putative securities class action lawsuit was filed against Tesla in U.S. District Court, Northern District of California, alleging violations of, and seeking remedies pursuant to, Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint, made claims against Tesla and our CEO, Elon Musk, sought damages and attorney’s fees on the basis of allegations that, among other things, Tesla and Mr. Musk made false and/or misleading representations and omissions, including with respect to the safety of Model S. This case was brought on behalf of a putative class consisting of certain persons who purchased Tesla’s securities between August 19, 2013 and November 17, 2013. On September 26, 2014, the trial court, upon the motion of Tesla and Mr. Musk, dismissed the complaint with prejudice, and thereafter issued a formal written order to that effect. The plaintiffs have appealed from the trial court’s order, and that appeal is pending.

 

 

 

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the related notes that appear elsewhere in this Form 10-Q.

Overview and Quarter Highlights

We design, develop, manufacture and sell high-performance fully electric vehicles, advanced electric vehicle powertrain components and energy storage products. We are currently producing and selling our second vehicle, the Model S sedan. Model S is a four door, five-passenger premium sedan that offers exceptional performance, functionality and attractive styling. We commenced deliveries of Model S in June 2012 and have delivered over 78,000 Model S vehicles through June 30, 2015. In 2014, we announced the availability of our All-Wheel Drive Model S and began delivery, starting with a performance-optimized version, in December 2014. Since then, we announced a 70 kWh Model S both with All-Wheel Drive and rear wheel drive options and an upgrade to a 90 kWh battery pack, and we discontinued the 60 kWh Model S.   In addition, we recently announced the next generation of our energy storage products, the 7 kWh and 10 kWh Powerwall for residential applications and the 100 kWh Powerpack for commercial and industrial applications.  We expect to begin production and deliveries of these products, which we will market under the Tesla Energy brand, later this year.

We are continuing to develop our Model X crossover vehicle and intend to commence customer deliveries late in the third quarter of 2015. After Model X, our goal is to begin deliveries of Model 3, a lower priced sedan designed for the mass market, in late 2017.

Our primary source of revenue is from the sale of our vehicles. During the three months ended June 30, 2015, we recognized total revenues of $955.0 million, an increase of $185.7 million over total revenues of $769.3 million for the three months ended June 30, 2014, primarily driven by growth of Model S deliveries worldwide. Gross margin for the three months ended June 30, 2015 was 22.3%, a decrease from 27.7% for the three months ended June 30, 2014.

We continue to increase our sales and service footprint worldwide and expand our Supercharging network. With the continued global expansion of our customer support and Supercharger infrastructure, selling, general and administrative expenses were $201.8 million for the three months ended June 30, 2015, compared to $134.0 million for the three months ended June 30, 2014.

Management Opportunities, Challenges and Risks

Orders, Production and Deliveries

We have broadened the appeal of Model S by introducing new variants that improve range, performance and value.  For those wanting a more affordable car, we introduced Model S 70 with a starting price of only $70,000 before incentives and fuel savings.  A new 90kWh battery pack option increases the range of our 85D by 6%, which enables almost 300 miles of range at 65 mph.  Finally, for our performance enthusiasts, the new Ludicrous mode option improves 0 to 60 mph acceleration to 2.8 seconds. In addition, we remain on track to introduce Model X late in the third quarter of this year and to begin to ramp production in the fourth quarter.  We expect that demand for our vehicles will continue to increase worldwide as more people drive and become aware of our vehicles, as we grow our customer sales and support infrastructure, and as we continue to develop our products.

We are highly confident of having combined Model S and Model X production and demand levels of 1,600 to 1,800 vehicles per week in 2016. Additionally, we are executing a plan to have the capacity to produce up to 2,000 combined Model S and Model X vehicles that we can utilize should circumstances warrant. In August 2014, we began our production ramp by transitioning to our new final assembly line and upgrading our body center. We are continuing to make further investment in production capacity during 2015, including building a new paint shop, a new body shop for Model X, and additional stamping capacity. We expect our annual production will increase over 50% each year for the next several years. In addition, scaling our deliveries entails that we will continue to have a number of customer-configured cars in-transit.  We therefore expect production to exceed deliveries, resulting in higher finished goods inventory.

During 2015, we are working to achieve significant efficiencies in Model S production and begin production of Model X with the intent of achieving a significantly faster initial production ramp than we achieved with Model S. The introduction of Model X into our existing production process will add increased complexity and may affect our ability to initially meet efficiency and delivery targets.  In the past, when we have added complexity to our production line, we have experienced unexpected delays.  These problems may occur again as we begin to simultaneously produce Model S and Model X vehicles.

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In addition to expanding our production, we expect to continue to lower the cost of manufacturing our vehicles over the next several quarters. We expect that this trend will contribute to improved gross margin over time, excluding the impact of foreign currency movements and product mix. Significant cost improvements for Model S were achieved in 2014 and 2015, including material cost reductions from both engineering and commercial actions, and manufacturing efficiencies. During our product introductions in 2014 and 2015, we incurred manufacturing inefficiencies which negatively impacted our gross margin. When we introduce Model X, we expect that both production inefficiencies and supply chain inefficiencies typical of a new product introduction will suppress Model X margins for several quarters. If we are not able to achieve the planned cost reductions from our various cost savings and process improvement initiatives or introduce Model X efficiently, our ability to reach our gross margin goals would be negatively affected in the short-term.

We expect to deliver between 50,000 and 55,000 Model S and Model X cars in 2015.  Our first priority always is to deliver great cars.  While our equipment installation and final testing of Model X has gone well to date, there are many dependencies that could influence our fourth quarter production and deliveries. We are still testing the ability of many Model X suppliers to deliver high quality production parts in quantities sufficient to meet our planned production ramp.  Since production ramps rapidly late in the fourth quarter, for example, a one-week push out of this ramp due to an issue at even a single supplier could reduce Model X production by approximately 800 units for the quarter.  Furthermore, since Model S and Model X are produced on the same general assembly line, Model X production challenges could slow Model S production.  In addition, the timing of the Model X production ramp and high total deliveries in the fourth quarter create operational challenges for our delivery organization towards the end of the year.  These dependencies add complexity in predicting our production and delivery rates with precision.  

To support our planned growth in 2016, we plan to continue expanding stores and service infrastructure worldwide, provide more timely service in areas with a high concentration of Model S customers, and continue expanding our Supercharger network. Since we now offer Model S in many countries throughout North America, Europe and Asia, our expansion will primarily occur in geographic areas in which we already have a presence. We expect our long-term sales outside of North America will be almost half of our worldwide automotive revenue. Despite initial challenges in China, we plan to continue to invest in our infrastructure there as we believe that China could be one of our largest markets within a few years. However, as compared to markets in the United States and Europe, we have relatively limited experience in China and other Asian markets; thus, we may face continuing difficulties meeting our future expansion plans in Asia.

Trends in Capital Expenditures and Operating Expenses

Our capital expenditures and operating expenses have significantly increased in the past year. As we continue to invest in the long term growth of Tesla, capital spending and operating expenses will continue to increase, but at a more moderate pace than in 2014. During 2015, capital expenditures are expected to be about $1.5 billion as we expand production capacity, complete Model X development, and continue to build the Gigafactory; expand our stores and service centers, expand our Supercharger network, and continue other product development programs, including Model 3.

Our operating expenses are expected to grow by 45% to 50% in 2015 as compared to 2014 which will be less than half the pace of growth in 2014. Our R&D expenses will continue to increase in Q3 2015 due to development, validation, and testing of Model X and will slow down beyond that. R&D expenses will start to increase again in 2016 with engineering work on Model 3 as we get closer to its launch. We expect sales, general and administrative expenses to decline over time as a percentage of revenue as we focus on increasing operational efficiency while continuing to expand our customer and corporate infrastructure. Over time, we also expect overall operating expenses to decrease as a percentage of revenue.

As of June 30, 2015 and December 31, 2014, the net book value of our Supercharger network was $139.8 million and $107.8 million and currently includes 480 locations globally. We plan to continue investing in our Supercharger network for the foreseeable future, including in North America, Europe and Asia and expect such spending to be approximately 5% of total capital spending over the next 12 months. During 2015, this investment will grow our Supercharger network by about 50%. We allocate Supercharger related expenses to cost of automotive revenues and selling, general, and administrative expenses. These costs were immaterial for all periods presented.

Customer Financing Options

We offer loans and leases in North America, Europe and Asia primarily through various financial institutions. We offer a resale value guarantee in connection with certain loans offered by financial institutions and provide this guarantee to approximately 13,600 Model S customers. We expanded this program to selected European and Asian markets during the first half of 2015. Resale value guarantees available for exercise within the next 12 months are $67.7 million and relate to 1,635 vehicles.

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Model S deliveries with the resale value guarantee do not impact our near-term cash flows and liquidity, since we receive the full amount of cash for the vehicle sales price at delivery. However, this program requires the deferral of revenues and costs into future periods as they are considered leases for accounting purposes. As these deferred revenue and costs are recognized over the residual value periods, total automotive revenue and gross margin increase.

While we do not assume any credit risk related to the customer, if a customer exercises the option to return the vehicle to us, we are exposed to liquidity risk that the resale value of vehicles under these programs may be lower than our guarantee, or the volume of vehicles returned to us may be higher than our estimates, or we may be unable to resell the used cars in a timely manner, all of which could adversely impact our cash flows. Alternatively, in cases where customers retain their vehicles past the expiration of the guarantee period, the remaining deferred revenues and costs will be recognized at no gross profit.

Based on current market demand for our cars, we estimate the resale prices for our vehicles will continue to be above our resale value guarantee amounts. Should market values of our vehicles or customer demand decrease, these estimates may be impacted materially.

We currently offer leases in the U.S. directly from Tesla Finance, our captive financing entity, as well as through a banking partner. Leasing through Tesla Finance is now available in 37 states, the District of Columbia and in 4 provinces of Canada. Through June 30, 2015, we have leased approximately 2,300 vehicles through Tesla Finance and approximately 2,100 vehicles through our banking partner. Leasing through both Tesla Finance and our banking partner exposes us to residual value risk and will adversely impact our near-term operating results by requiring the deferral of revenues and costs into future periods under lease accounting. In addition, for leases offered directly from Tesla Finance (but not for those offered through our bank partner), we will not receive the full amount of the cash for the vehicle price at delivery and will assume customer credit risk. We plan to continue expanding our leasing offerings.

The Tesla Gigafactory

We are building the Tesla Gigafactory, a facility where we intend to work together with our suppliers to integrate production of battery material, cells, modules and battery packs in one location. In June 2014, we broke ground on the Gigafactory outside of Reno, Nevada. Construction continued through the second quarter of 2015 with plans that the first products will be produced in the first quarter of 2016.

We continue to invest in construction of the building and utilities at the Gigafactory and in production equipment for battery, module and pack production. We will be responsible for the overall management of the Gigafactory and will engage with partners who have significant experience in battery cell and material production. We have partnered with Panasonic to manufacture and supply us with battery cells and we anticipate bringing on additional partners to create a fully integrated industrial complex. Although planning discussions with production and supply chain partners continue to progress, to-date we have not formalized any agreements with any other partners. Given the size and complexity of this undertaking, the cost of building and operating the Gigafactory could exceed our current expectations and the Gigafactory may take longer to bring online than we anticipate.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We base our estimates on historical experience, as appropriate, and on various other assumptions that we believe to be reasonable under the circumstances. Changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from the estimates made by our management. We evaluate our estimates and assumptions on an ongoing basis. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

For a description of our critical accounting policies and estimates, please refer to the “Critical Accounting Policies and Estimates” section of our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission (SEC). In addition, please refer to Note 2, “Summary of Significant Accounting Policies,” to our Condensed Consolidated Financial Statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q which also includes discussion of Recent Accounting Pronouncements that may impact us.

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Results of Operations

Revenues

Automotive revenue includes revenues related to deliveries of new Model S vehicles, including internet connectivity, Supercharging access, and specified software updates for cars equipped with Autopilot hardware, as well as sales of regulatory credits to other automotive manufacturers, amortization of revenue for cars sold with resale value guarantees, and Model S leasing revenue.

Services and other revenue consists of sales of electric vehicle powertrain components and systems to other manufacturers, maintenance and development services, Tesla Energy products, and pre-owned Tesla vehicles.

Automotive revenue during the three and six months ended June 30, 2015 were $878.1 million and $1.77 billion, an increase from $727.8 million and $1.32 billion during the three and six months ended June 30, 2014. The increase was primarily driven by the ramp in Model S deliveries. For the three and six months ended June 30, 2015, automotive revenue includes $69.5 million and $123.2 million from the accretion of the deferred revenues from our resale value guarantee and other similar programs, as well as Model S leasing, an increase from $29.4 million and $53.1 million during the three and six months ended June 30, 2014 as a result of a greater number of resale value guarantees.

Service and other revenue during the three and six months ended June 30, 2015 were $76.9 million and $123.4 million, an increase from $41.5 million and $73.2 million during the three and six months ended June 30, 2014, related primarily to increases in pre-owned vehicle sales, maintenance service revenue, and powertrain sales.

Cost of Revenues and Gross Profit

Cost of revenues includes direct parts, material and labor costs, manufacturing overhead, including amortized tooling costs, royalty fees, shipping and logistic costs and reserves for estimated warranty expenses. Cost of revenues also includes adjustments to warranty expense and charges to write down the carrying value of our inventory when it exceeds its estimated net realizable value and to provide for obsolete and on-hand inventory in excess of forecasted demand.

Cost of automotive revenues during the three and six months ended June 30, 2015 were $666.4 million and $1.30 billion, an increase from $519.8 million and $956.1 million for the three and six months ended June 30, 2014. The increase in cost of automotive revenues was driven primarily by increased Model S deliveries. In the three and six months ended June 30, 2015, we recognized $36.0 million and $67.4 million in cost of automotive revenues related to cars accounted for as operating leases. In the three and six months ended June 30, 2014, we recognized $19.6 million and $36.3 million in cost of automotive revenues related to cars accounted for as operating leases. For cars accounted for as leases, our warranty reserves do not include projected warranty costs as such actual warranty costs are expensed as incurred. For the three and six months ended June 30, 2015, warranty costs incurred for our lease vehicles were $2.4 million and $4.2 million. For the three and six months ended June 30, 2014, warranty costs incurred for our lease vehicles were $1.8 million and $3.0 million.

Cost of services and other revenue during the three and six months ended June 30, 2015 were $75.2 million and $123.3 million, an increase from $36.5 million and $65.7 million for the three and six months ended June 30, 2014. The increase in cost of services and other revenues was driven primarily by greater pre-owned vehicle sales and increased cost associated with powertrain sales to Daimler and maintenance services.

Gross profit for the three and six months ended June 30, 2015 was $213.4 million and $473.4 million, an increase from $213.0 million and $368.1 million during the three and six months ended June 30, 2014. Gross margin for the three and six months ended June 30, 2015 were 22.3% and 25.0%, a decrease from 27.7% and 26.5% during the three and six months ended June 30, 2014. The lower margin was primarily due to product and regional mix shift, as a greater percentage of sales were derived from vehicle models with lower average selling prices, and increased manufacturing costs related to the ramp in production of the small drive unit for dual motor Model S vehicles, obsolete inventory and lower ZEV credits revenue. This margin decrease was partially offset by an increasing amount of revenues from vehicles accounted for as leases including direct lease vehicles and those under our resale value guarantee programs which have a significantly higher gross margin and from material cost savings. Services and other gross margin was also down year over year, primarily driven by a planned price reduction for powertrain sales to Daimler.

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Research and Development Expenses

Research and development (R&D) expenses consist primarily of personnel costs for our teams in engineering and research, supply chain, quality, manufacturing engineering and manufacturing test organizations, prototyping expense, contract and professional services and amortized equipment expense. Also included in R&D expenses are development services costs that we incur, if any, prior to the finalization of agreements with our development services customers as reaching a final agreement and revenue recognition is not assured. Development services costs incurred after the finalization of an agreement are recorded in cost of revenues.

R&D expenses for the three months ended June 30, 2015 were $181.7 million, an increase from $107.7 million for the three months ended June 30, 2014. The increase in R&D expenses consisted primarily of a $25.6 million increase in expensed materials primarily to support our Model X development, and other Model S improvements, a $22.6 million increase in employee compensation expenses, a $13.1 million increase in costs related to Model X, Autopilot and dual motor powertrain engineering, design and testing activities and a $4.5 million increase in stock-based compensation expense related to increased headcount and increasing values of awards granted.

R&D expenses for the six months ended June 30, 2015 were $348.9 million, an increase from $189.3 million for the six months ended June 30, 2014. The increase in R&D expenses consisted primarily of a $65.4 million increase in expensed materials primarily to support our Model X development, Autopilot, and other Model S improvements, a $45.4 million increase in employee compensation expenses, a $23.4 million increase in costs related to Model X, Autopilot and dual motor powertrain engineering, design and testing activities, and a $10.5 million increase in stock-based compensation expense related to increased headcount and increasing values of awards granted.

Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses consist primarily of personnel and facilities costs related to our Tesla stores, marketing, sales, executive, finance, human resources, information technology and legal organizations, as well as litigation settlements and fees for professional and contract services.

SG&A expenses for the three months ended June 30, 2015 were $201.8 million, an increase from $134.0 million for the three months ended June 30, 2014. SG&A expenses increased primarily from higher headcount and costs to support an expanded retail, service and Supercharger footprint as well as the general growth of the business. The increase in our SG&A expenses consisted primarily of a $27.2 million increase in employee compensation expenses related to higher sales and marketing headcount to support sales activities worldwide and higher general and administrative headcount to support the expansion of the business, $15.6 million increase in office, information technology and facilities-related costs to support the growth of our business as well as sales and marketing activities to handle our expanding market presence, and a $16.1 million increase in professional and outside services costs.

SG&A expenses for the six months ended June 30, 2015 were $397.2 million, an increase from $251.6 million for the six months ended June 30, 2014. SG&A expenses increased primarily from higher headcount and costs to support an expanded retail, service and Supercharger footprint as well as the general growth of the business. The increase in our SG&A expenses consisted primarily of a $60.4 million increase in employee compensation expenses related to higher sales and marketing headcount to support sales activities worldwide and higher general and administrative headcount to support the expansion of the business, a $37.3 million increase in office, information technology and facilities-related costs to support the growth of our business as well as sales and marketing activities to handle our expanding market presence, and a $30.7 million increase in professional and outside services costs.

Interest Expense

Interest expense for the three and six months ended June 30, 2015 was $24.4 million and $50.9 million, as compared to $31.2 million and $43.1 million during the three and six months ended June 30, 2014. For the three months ended June 30, 2015, interest expense decreased as compared to the same period in the prior year as a result of capitalizing a greater portion of interest expense related to our capital projects. The increase in year to date interest expense from 2014 to 2015 was due to the issuance of $920.0 million aggregate principal amount of 2019 Notes and $1.38 billion aggregate principal amount of 2021 Notes during the first half of 2014.

Other Income (Expense), Net

Other income (expense), net, consists primarily of foreign exchange gains and losses related to our foreign currency-denominated assets and liabilities. We expect our foreign exchange gains and losses will vary depending upon movements in the underlying exchange rates.

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Other income (expense) was $13.2 million and ($1.2) million in the three months ended June 30, 2015 and 2014 and ($9.1) million and $5.5 million in the six months ended June 30, 2015 and 2014. Fluctuations in other income (expense) are primarily the result of gains (losses) from foreign currency exchange of $12.8 million and ($1.4) million in the three months ended June 30, 2015 and 2014 and ($8.8) million and $5.3 million in the six months ended June 30, 2015 and 2014.

Provision for Income Taxes

Our provision for income taxes for the three and six months ended June 30, 2015 was $3.2 million and $6.2 million, compared to $1.2 million and $2.0 million during the three and six months ended June 30, 214. The increases in the provision for income taxes were due primarily to the increase in taxable income in our international jurisdictions.

Liquidity and Capital Resources

As of June 30, 2015, we had $1.15 billion in principal sources of liquidity available from our cash and cash equivalents including $349.6 million of money market funds. Amounts held in foreign currencies had a U.S. dollar equivalent of $368.2 million as of June 30, 2015, and consisted primarily of Norwegian krone, Japanese yen, euro, and Chinese yuan.

Sources of cash are predominately from our deliveries of Model S, as well as customer deposits for Model S and Model X, sales of regulatory credits, sales of powertrain components, Tesla Energy products, proceeds from financing activities, and sales from service locations. We expect that our current sources of liquidity, including cash and cash equivalents, together with our current projections of cash flow from operating activities, will provide us with adequate liquidity over the next 12 months based on our current plans. These cash flows enable us to fund our ongoing operations, research and development projects for our planned Model X, Model 3, and certain other future products; purchase tooling and manufacturing equipment required to introduce Model X and to continue to ramp up production of Model S; construct our Gigafactory; and establish and expand our stores, service centers and Supercharger network. We currently anticipate making aggregate capital expenditures of about $1.5 billion during 2015.

In June 2015, we entered into a senior secured asset-based revolving credit agreement with a syndicate of banks. The Credit Agreement provides for a senior secured asset-based revolving credit facility of up to $500.0 million, which we may draw upon as needed. We may increase the total commitments under the Credit Facility by up to an additional $250.0 million, subject to certain conditions, for total commitments up to $750 million. Borrowed funds bear interest, at the Company’s option, at an annual rate of (a) 1% plus LIBOR or (b) the highest of (i) the federal funds rate plus 0.50%, (ii) the lenders “prime rate” or (iii) 1% plus LIBOR. As of June 30, 2015, we have borrowed $50.0 million under the Credit Facility.

When market conditions are favorable, we may evaluate alternatives to pursue liquidity options to fund capital intensive initiatives. Should prevailing economic, financial, business or other factors adversely affect our ability to meet our operating cash requirements, we could be required to obtain funding though traditional or alternative sources of financing. We cannot be certain that additional funds would be available to us on favorable terms when required, or at all.

Summary of Cash Flows

 

		Six Months Ended June 30,
		2015				2014
Net cash provided by (used in) operating activities		$	(291,310	)		$	57,061
Net cash used in investing activities			(855,181	)			(326,570	)
Net cash provided by financing activities			404,507				2,098,051

Cash Flows from Operating Activities

Our cash flows from operating activities are significantly affected by our cash investments to support the growth of our business in areas such as manufacturing, research and development and selling, general and administrative. Our operating cash flows are also affected by our working capital needs to support growth and fluctuations in inventory, personnel related expenditures, accounts payable and other current assets and liabilities.

Our operating cash inflows include cash from sales of our Model S, customer deposits for Model S and Model X, sales of regulatory credits, cash from the provision of development services, and sales of powertrain components and systems. These cash inflows are offset by payments we make to our suppliers for production materials and parts used in our manufacturing process, employee compensation, operating leases and interest expense on our financings.

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During the six months ended June 30, 2015 and 2014, cash provided by (used in) operating activities was ($291.3) million and $57.1 million. The decrease in operating cash flows in 2015 as compared to 2014 was due to an increase in finished goods inventory primarily due to cars in transit for customer orders and pre-owned vehicles, partially offset by proceeds from sales and marketing vehicles, as well as cash used for direct lease vehicles and higher operating expenses in R&D and SG&A.

Cash Flows from Investing Activities

Cash flows from investing activities primarily relate to capital expenditures to support our growth in operations, including investments in product manufacturing equipment and tooling and our stores, service centers and Supercharger network infrastructure. During the six months ended June 30, 2015 and 2014, cash used in investing activities was $855.2 million and $326.6 million. Cash flows from investing activities and variability between comparable periods related primarily to capital expenditures, which were $831.2 million and $317.1 million during the six months ended June 30, 2015 and 2014. Expenditures in all periods consisted primarily of purchases of capital equipment, tooling, and facilities to support our Model S and Model X manufacturing.

In 2014, we began construction of our Gigafactory facility in Nevada. Tesla’s contribution to total capital expenditures is expected to be about $2.0 billion over the next 5 years. During the six months ended June 30, 2015, we used cash of $54.6 million towards the construction of this project and expect to spend up to $300 million for the full year.

Cash Flows from Financing Activities

During the six months ended June 30, 2015 and 2014, net cash provided by financing activities was $404.5 million and $2.10 billion. Cash flows from financing activities during the six months ended June 30, 2015 consisted primarily of $196.5 million received from vehicle sales to our bank leasing partners and $163.0 million in net proceeds from our Warehouse Facility and Credit Facility. Cash flows from financing activities during the six months ended June 30, 2014 consisted primarily of $2.05 billion net proceeds from the issuance of our 2019 and 2021 Notes, including the associated hedge and warrant transactions.

0.25% and 1.25% Convertible Senior Notes and Bond Hedge and Warrant Transactions

In 2014, we issued $920.0 million principal amount of 0.25% convertible senior notes due 2019 (2019 Notes) and $1.38 billion principal amount of 1.25% convertible senior notes due 2021 (2021 Notes) in a public offering. The total net proceeds from these offerings, after deducting transaction costs, were approximately $905.8 million from 2019 Notes and $1.36 billion from 2021 Notes. The interest rates are fixed at 0.25% and 1.25% per annum for the 2019 and 2021 Notes and are payable semi-annually in arrears on March 1 and September 1 of each year, commencing on September 1, 2014.

In connection with the offering of these notes in 2014, we purchased a convertible note hedges for an aggregate $603.4 million and sold warrants for an aggregate $389.2 million. Taken together, the purchase of the convertible note hedges and the sale of warrants are intended to reduce potential dilution and/or offset potential cash payments upon the conversion of the 2019 Notes and 2021 Notes.

During the second quarter of 2015, the closing price of our common stock did not meet or exceed 130% of the applicable conversion price of our 2019 Notes and 2021 Notes on at least 20 of the last 30 consecutive trading days of the quarter; furthermore, no other conditions allowing holders of these notes to convert have been met as of June 30, 2015. Therefore, the 2019 Notes and 2021 Notes are not convertible during the third quarter of 2015 and are classified as long-term debt. Should the closing price conditions be met in the third quarter of 2015 or a future quarter, the 2019 Notes and 2021 Notes will be convertible at their holders’ option during the immediately following quarter.

1.50% Convertible Senior Notes and Bond Hedge and Warrant Transactions

In May 2013, we issued $660.0 million aggregate principal amount of 1.50% convertible senior notes due 2018 (the 2018 Notes) in a public offering. The net proceeds from the offering, after deducting transaction costs, were approximately $648.0 million. The interest under the 2018 Notes is fixed at 1.50% per annum and is payable semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 2013.

In connection with the offering of the 2018 Notes, we purchased convertible note hedges for an aggregate $177.5 million and sold warrants for an aggregate $120.3 million. Taken together, the purchase of the convertible note hedges and the sale of warrants are intended to reduce potential dilution and/or offset potential cash payments upon the conversion of the 2018 Notes.

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During the second quarter of 2015, the closing price of our common stock exceeded 130% of the applicable conversion price of our 2018 Notes on at least 20 of the last 30 consecutive trading days of the quarter; therefore, holders of 2018 Notes may convert their notes during the third quarter of 2015. Upon conversion of 2018 Notes, we will be obligated to pay cash for the principal amount of the converted notes and we may also have to deliver shares of our common stock in respect of such converted notes. Any conversion of the 2018 Notes prior to their maturity or acceleration of the repayment of the 2018 Notes could have a material adverse effect on our cash flows, business, results of operations and financial condition. Should the closing price conditions be met again in the third quarter of 2015 or a future quarter, 2018 Notes will be convertible at their holders’ option during the immediately following quarter. Under current market conditions, we do not expect the 2018 Notes will be converted in the short term.

For more information on the 2018 Notes, 2019 Notes, and 2021 Notes see Note 6 to our Condensed Consolidated Financial Statements included under Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Contractual Obligations

We are party to contractual obligations involving commitments to make payments to third parties, including certain debt financing arrangements and leases, primarily for stores, service centers, certain manufacturing and corporate offices. These also include, as part of our normal business practices, contracts with suppliers for purchases of certain raw materials, components, and services to facilitate adequate supply of these materials and services and capacity reservation contracts.

As of June 30, 2015, we have borrowed $114.3 million and $50.0 million under our Warehouse Facility and Credit Facility. The Warehouse facility matures in March 2017 and the Credit Facility matures in June 2020, at which time all outstanding borrowing will become due. Prior to that date, principal payments will be due in the amount that the borrowing limit decreases below our outstanding principal balance. To date, no principal repayments were owed. For more information on the Warehouse Facility and Credit Facility, see Note 6 to our Condensed Consolidated Financial Statements included under Part 1, Item 1 of this Quarterly Report on Form 10-Q.  

Under our arrangement with one of our bank leasing partners, we have guaranteed the bank will receive a minimum residual value at the end of the lease term for each vehicle they purchase. At the end of the lease term, if the bank sells the vehicle, we are obligated to pay the bank for any shortfall between the vehicle’s sales proceeds and the guarantee amount, or, at our option, we may elect to repurchase the vehicles by paying the full guarantee amount, which was $131.6 million as of June 30, 2015.

There have been no other material changes during the six months ended June 30, 2015 from the contractual obligations disclosed in Part II, Item 7, Contractual Obligations, of our Annual Report on Form 10-K for the year ended December 31, 2014.

Off-Balance Sheet Arrangements

During the periods presented, we did not have relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Risk

Our revenues and costs denominated in foreign currencies are not completely matched.  Accordingly, if the value of the U.S. dollar depreciates significantly against currencies where we have a net short exposure, our costs as measured in U.S. dollars as a percent of our revenues will correspondingly increase which may adversely impact our operating results. Conversely, as the value of the U.S. dollar appreciates significantly against currencies where revenues exceed expenses, our revenues as measured in U.S. dollars may be reduced.

As a result of the favorable impact from unsettled foreign currency-denominated intercompany balances and foreign currency cash holdings, related largely to our Norwegian kroner and euro balances, we recorded unrealized gains of $13.2 million on foreign exchange transactions in other income (expense), net, for the six months ended June 30, 2015.

Interest Rate Risk

We had cash and cash equivalents totaling $1.15 billion as of June 30, 2015. A significant portion of our cash and cash equivalents were invested in money market funds. Cash and cash equivalents are held for working capital purposes. We do not enter into investments for trading or speculative purposes. We believe that we do not have any material exposure to changes in the fair value as a result of changes in interest rates due to the short term nature of our cash equivalents.

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As of June 30, 2015, we had $2.96 billion aggregate principal amount of convertible senior notes outstanding and capital lease obligations of $17.4 million, all of which are fixed rate instruments. Therefore, these instruments are not subject to fluctuations in interest rates.

We pay interest on our Warehouse Facility at a rate of LIBOR plus 1.65% and our Credit Agreement at a rate of LIBOR plus 1.0%. As such, should interest rates increase significantly it could have an adverse impact on our results of operations and cash flows.  

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2015. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of June 30, 2015, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting which occurred during the period covered by this Quarterly Report on Form 10-Q, which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

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PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

Securities Litigation

In November 2013, a putative securities class action lawsuit was filed against Tesla in U.S. District Court, Northern District of California, alleging violations of, and seeking remedies pursuant to, Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint, made claims against Tesla and our CEO, Elon Musk, sought damages and attorney’s fees on the basis of allegations that, among other things, Tesla and Mr. Musk made false and/or misleading representations and omissions, including with respect to the safety of Model S. This case was brought on behalf of a putative class consisting of certain persons who purchased Tesla’s securities between August 19, 2013 and November 17, 2013. On September 26, 2014, the trial court, upon the motion of Tesla and Mr. Musk, dismissed the complaint with prejudice, and thereafter issued a formal written order to that effect. The plaintiffs have appealed from the trial court’s order, and that appeal is pending.

Other Matters

From time to time, we are subject to various other legal proceedings that arise from the normal course of business activities. In addition, from time to time, third parties may assert intellectual property infringement claims against us in the form of letters and other forms of communication. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on our results of operations, prospects, cash flows, financial position and brand.

ITEM 1A.

RISK FACTORS

You should carefully consider the risks described below together with the other information set forth in this report, which could materially affect our business, financial condition and future results. The risks described below are not the only risks facing our company. Risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and operating results.

Risks Related to Our Business and Industry

We may experience significant delays or other complications in the design, manufacture, launch and production ramp of Model X, as well as future vehicles such as Model 3, which could harm our brand, business, prospects, financial condition and operating results.

We may experience significant delays or other complications in bringing Model X and other new vehicles to market. While we expect Model X deliveries to start late in the third quarter of this year and beginning to ramp in the fourth quarter, various factors could result in delays in its introduction, including the initiation and ramp of our production capacity required to bring Model X to market, finalization of its supply chain including the capacity of our suppliers to deliver us components at the timing and volumes we require, and timely completion of regulatory approvals. In addition, since Model X shares certain production facilities with the Model S, Model S production may be impacted if the introduction and ramp of Model X is not as efficient as we plan.

We have experienced delays or other complications in connection with new vehicle models in the past, such as production ramp delays for Model S in 2012, the All-Wheel Drive Dual Motor Model S, and Model X. Any significant delay or other complication in the development, manufacture, launch and production ramp of Model X or our future vehicles, including complications associated with expanding our production capacity, supply chain or regulatory approvals, could materially damage our brand, business, prospects, financial condition and operating results.

The complexity in our business continues to grow as we introduce new products and variants.

We have limited experience simultaneously designing, testing, manufacturing, upgrading, adapting and selling our electric vehicles as well as limited experience allocating our available resources among the design and production of multiple vehicles, such as Model S, Model X and Model 3, and in particular with respect to multiple vehicle models and variants.  In the past, when we have added complexity to our production line, we have experienced unexpected delays.  Similar problems may occur in the future as we begin to simultaneously produce Model X and Model S vehicles, as well as future vehicles.  

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We may be unable to meet our production and delivery plans for Model S and Model X, both of which could harm our business and prospects.

We have significantly increased vehicle production and deliveries since the launch of Model S in 2012, and our plans call for even greater increases going forward. Our ability to further ramp-up high volume Model S production and commence and ramp production of Model X, will depend upon a number of factors, including our ability to use new manufacturing processes as planned while maintaining our desired quality levels, our suppliers’ ability to deliver sufficient volumes of quality parts to us in a timely manner, and carefully but efficiently making design and production changes to ensure consistently high quality. Certain suppliers have experienced delays in meeting our demand or have sought to renegotiate the terms of the supply arrangements, and we continue to focus on supplier capabilities and constraints. While our plans call for us to significantly increase production and deliveries of our vehicles in a short amount of time, we may be unable to do so.  Any delays or disruption in our production of Model S and Model X in line with our plans could materially damage our brand, business, prospects, financial condition and operating results.

In addition, for Model S we have introduced a number of new manufacturing technologies and techniques, such as aluminum spot welding systems. Our vehicles also have unique design features, such as a 17 inch display screen, retractable exterior door handles, and all-new dual motor and autopilot hardware introduced in Model S and falcon-wing doors and other unique features that will debut in Model X, each of which poses different manufacturing challenges.

Concurrent with the significant increase in our planned production levels, we will also need to continue to significantly increase deliveries of our vehicles. We have limited experience in delivering a high volume of vehicles, and we may face difficulties meeting our delivery and growth plans into both existing markets as well as new markets into which we expand. If we are unable to ramp up to meet our delivery goals globally to be proportionate to the production rate of our vehicles, this could result in negative publicity, damage our brand and have a material adverse effect on our business, prospects, financial condition and operating results.

Finally, detailed long-term testing of quality, reliability and durability of our vehicles is ongoing and any negative results from such testing could cause production or delivery delays, cost increases, or lower quality of our vehicles.

 

Our long-term success will be dependent upon our ability to design, build and achieve market acceptance of our vehicles, including Model S and new vehicle models such as Model X and Model 3.

There is no guarantee that Model S or our future vehicles will continue to be successfully accepted by the general public, especially in the long-term.  Although we have successfully grown demand for Model S to date and believe that we will be able to continue to do so, there is also no guarantee that future demand for Model S will meet our expectations.    

Additionally, we have limited experience in introducing new vehicles. Although we have strong initial demand for Model X, we have not yet publicly revealed its production intent design which makes it difficult to estimate its long-term demand. To the extent that we are not able to build Model X in accordance with consumer expectations, customers may cancel their reservations and our future sales could be harmed.

While we believe that there will continue to be separate and strong demand for both Model S and Model X, we have never sold multiple vehicles at the same time. Although we believe that each of our vehicles and their variants meet a distinct segment of the automotive market, if our vehicles end up competing with one another in the market, then our ability to sell each vehicle model at planned quantities or prices may be impacted.

Beyond Model X, we have announced our intent to develop Model 3, which we intend to offer at a lower price point and to produce at high volumes.  We have not yet finalized the design, engineering or material and component sourcing plans for Model 3 and we may not be able to bring this vehicle to market at the expected price point and the expected volume.  Similar to Model X, while we expect Model 3 to be an extremely popular vehicle, we do not know what long-term demand for Model 3 will be and whether it will meet our expectations. The market for vehicles in the price range we expect for Model 3 is larger, but more competitive than the markets for Model S and Model X.

Finally, we constantly innovate and introduce new vehicles and new variants containing our latest technology at a fast rate.  While we also offer additional features to our existing customer base, new potential customers may decide to delay their purchases of our vehicles in order to wait for the latest Tesla vehicle or variant, which could further limit vehicle demand.

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Problems or delays in bringing the Gigafactory online and operating it in-line with our expectations could negatively affect the production and profitability of our products, such as Model 3 or Tesla Energy products.

To lower the cost of cell production and produce cells in high volume, we intend to integrate the production of lithium-ion cells and finished battery packs for our vehicles, including Model 3, and Tesla Energy products at our new Gigafactory. We have limited experience in building a factory, and no direct experience in the production of lithium-ion cells. While planning discussions with production and supply chain partners continue to progress, other than Panasonic we have not finalized agreements with additional Gigafactory partners that will be co-located at the Gigafactory. Also, the cost and complexity of building and operating the Gigafactory could exceed our current expectations and the Gigafactory may take longer to bring online than we anticipate. If we are unable to build the Gigafactory in a timely manner to produce high volumes of quality lithium-ion cells at reasonable prices, our ability to supply battery packs to our products according to our schedule and/or at a price that allows us to sell them profitably and in the quantities we estimate could be constrained. Any such problems or delays with the Gigafactory could negatively affect our brand and harm our business, prospects, financial condition and operating results.

If our vehicles or vehicles that contain our powertrains fail to perform as expected, our ability to develop, market and sell our electric vehicles could be harmed.

Our vehicles or vehicles that contain our powertrains may contain defects in design and manufacture that may cause them not to perform as expected or that may require repair. For example, the operation of our vehicles is highly dependent on software, which is inherently complex and may contain defects and errors when first introduced or later updated. Model S issues experienced by customers include those related to the software for the 17 inch display screen, the panoramic roof and the 12 volt battery. Although we attempt to remedy any issues we observe in our vehicles as effectively and as rapidly as possible, such efforts may not be timely or up to the satisfaction of our customers.  While we have performed extensive internal testing, we currently have a limited frame of reference by which to evaluate the long-term performance of our battery packs, powertrains and vehicles. There can be no assurance that we will be able to detect and fix any defects in the vehicles prior to their sale to consumers.

Any product defects or any other failure of our vehicles to perform as expected could harm our reputation and result in adverse publicity, lost revenue, delivery delays, product recalls, product liability claims, harm to our brand and reputation, and significant warranty and other expenses, and could have a material adverse impact on our business, financial condition, operating results and prospects.  Our Model X vehicles have not yet been evaluated by NHTSA for its 5-Star Safety Ratings, and while we hope to obtain comparable ratings to those achieved by Model S, there is no assurance this will occur.

We are dependent on our suppliers, the majority of which are single source suppliers, and the inability of these suppliers to continue to deliver, or their refusal to deliver, necessary components of our vehicles in a timely manner at prices, quality levels, and volumes acceptable to us would have a material adverse effect on our financial condition and operating results.

Model S and Model X contain numerous purchased parts which we source globally from hundreds of direct suppliers, the majority of whom are currently single source suppliers for these components despite efforts to qualify and obtain components from multiple sources whenever possible. Furthermore, we do not maintain long-term agreements with a number of our suppliers.

While we believe that we may be able to establish alternate supply relationships and can obtain or engineer replacement components for our single source components, we may be unable to do so in the short term, or at all, at prices or costs that are favorable to us. In particular, while we believe that we will be able to secure alternate sources of supply for most of our single sourced components in a relatively short time frame, qualifying alternate suppliers or developing our own replacements for certain highly customized components of our vehicles may be time consuming, costly and may force us to make additional modifications to a vehicle’s design.

This limited supply chain exposes us to multiple potential sources of delivery failure or component shortages for the production of our vehicles and powertrain components. We may experience delays due to supply chain disruptions with respect to Model S, Model X, Model 3 and any other future vehicle we may produce, such as those we experienced in 2012 in connection with our slower-than-anticipated Model S ramp.  In addition, our transition from low to high volume production tooling for Model X may take longer than expected which may adversely impact our short-term financial results.

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Changes in business conditions, labor issues, wars, governmental changes, natural disasters such as the March 2011 earthquakes in Japan and other factors beyond our control or which we do not presently anticipate, could also affect our suppliers’ ability to deliver components to us on a timely basis. Furthermore, if we experience significantly increased demand, or need to replace certain existing suppliers, there can be no assurance that additional supplies of component parts will be available when required on terms that are favorable to us, at all, that any supplier would allocate sufficient supplies to us in order to meet our requirements or fill our orders in a timely manner, or that we could engineer replacement components ourselves. In the past, we have replaced certain suppliers because of their failure to provide components that met our quality control standards. The loss of any single or limited source supplier or the disruption in the supply of components from these suppliers could lead to vehicle design changes and delays in vehicle deliveries to our customers, which could hurt our relationships with our customers and result in negative publicity, damage to our brand and a material and adverse effect on our business, prospects, financial condition and operating results.

Changes in our supply chain have resulted in the past, and may result in the future, in increased cost and delay. We have also experienced cost increases from certain of our suppliers in order to meet our quality targets and development timelines as well as due to design changes that we made, and we may experience similar cost increases in the future. Additionally, we are negotiating with existing suppliers for cost reductions, seeking new and less expensive suppliers for certain parts, and attempting to redesign certain parts to make them less expensive to produce. If we are unsuccessful in our efforts to control and reduce supplier costs, our operating results will suffer. Additionally, cost reduction efforts may interrupt or harm our normal production processes, thereby harming vehicle quality or reducing  production output. Furthermore, a failure by our suppliers to provide the components in a timely manner or at the level of quality necessary to manufacture our vehicles could prevent us from fulfilling customer orders in a timely fashion which could result in negative publicity, damage our brand and have a material adverse effect on our business, prospects, financial condition and operating results. 

Finally, in October 2013, we entered into an amendment to our existing supply agreement with Panasonic Corporation in order to address our anticipated short- to medium-term lithium-ion battery cell needs. While we expect that this supply agreement, as amended, will provide us with sufficient cells for the next few years, we may not be able to meet our long-term needs, including for Model 3 and other programs we may introduce, without securing additional suppliers or other sources for cells. We have signed an agreement with Panasonic to be our partner in the Gigafactory and be responsible for, among other things, manufacturing cells from there for use in our products. If we encounter unexpected difficulties with our current suppliers, including Panasonic, and if we are unable to fill these needs from other suppliers, we could experience production delays, which could have a material adverse effect on our financial condition and operating results.

Our future growth is dependent upon consumers’ willingness to adopt electric vehicles.

Our growth is highly dependent upon the adoption by consumers of alternative fuel vehicles in general and electric vehicles in particular. If the market for electric vehicles does not develop as we expect, or develops more slowly than we expect, our business, prospects, financial condition and operating results will be harmed. The market for alternative fuel vehicles is relatively new, rapidly evolving, characterized by rapidly changing technologies, competition, evolving government regulation and industry standards, frequent new vehicle announcements and changing consumer demands and behaviors.  Factors that may influence the adoption of electric vehicles include:

•	perceptions about electric vehicle quality, safety (in particular with respect to lithium-ion battery packs), design, performance and cost;

•	perceptions about the limited range over which electric vehicles may be driven on a single battery charge;

•	the decline of an electric vehicle’s range resulting from deterioration over time in the battery’s ability to hold a charge;

•	the availability of other types of alternative fuel vehicles, including plug-in hybrid electric vehicles;

•	improvements in the fuel economy of the internal combustion engine;

•	the availability of service for electric vehicles;

•	volatility in the cost of oil and gasoline;

•	government regulations and economic incentives promoting fuel efficiency and alternate forms of energy as well as tax and other governmental incentives to purchase and operate electric vehicles; and

•	access to charging facilities, standardization of electric vehicle charging systems and consumers’ perceptions about convenience and cost to charge an electric vehicle.

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If we fail to manage future growth effectively as we rapidly grow our company, especially internationally, we may not be able to produce, market, sell and service our vehicles successfully.

Any failure to manage our growth effectively could materially and adversely affect our business, prospects, operating results and financial condition. We continue to expand our operations significantly internationally. Our future operating results depend to a large extent on our ability to manage this expansion and growth successfully. Risks that we face in undertaking this global expansion include:

•	controlling expenses and investments in anticipation of expanded operations;

•	establishing or expanding sales, service and Supercharger facilities in a timely manner;

•	adapting our products to meet local requirements in countries around the world; and

•	implementing and enhancing manufacturing, logistics and administrative infrastructure, systems and processes.

In addition, we intend to continue to hire a significant number of additional personnel, including manufacturing personnel, design personnel, engineers and service technicians. Because our vehicles are based on a different technology platform than traditional internal combustion engines, we may not be able to hire individuals with sufficient training in electric vehicles, and we will need to expend significant time and expense training the employees we do hire. Competition for individuals with experience designing, manufacturing and servicing electric vehicles is intense, and we may not be able to attract, assimilate, train or retain additional highly qualified personnel in the future, the failure of which could seriously harm our business, prospects, operating results and financial condition.

If we are unable to adequately reduce the manufacturing costs of Model S, control manufacturing costs for Model X, or otherwise control the costs associated with operating our business, our financial condition and operating results will suffer.

As we have gradually ramped production of Model S, manufacturing costs per vehicle have decreased. While we expect ongoing cost reductions to be realized by both us and our suppliers, there is no guarantee we will be able to achieve sufficient cost savings to reach our gross margin and profitability goals. We incur significant costs related to procuring the raw materials required to manufacture our vehicles, assembling vehicles and compensating our personnel. We may also incur substantial costs or cost overruns in increasing the production capability of Model S and powertrain manufacturing facilities. Furthermore, if we are unable to produce Model X pursuant to our plan due to cost overruns or other unexpected costs, we may not be able to meet our gross margin targets.

Furthermore, many of the factors that impact our operating costs are beyond our control, such as potential increases in the costs of our raw materials and components, such as lithium-ion battery cells or aluminum used to produce body panels. We may eventually elect to incur substantial marketing costs and expenses to promote our vehicles, including through the use of traditional media such as television, radio and print, even though our marketing expenses to date have been relatively limited as we have to date relied upon unconventional marketing efforts. If we are unable to keep our operating costs aligned with the level of revenues we generate, our operating results, business and prospects will be harmed.

We may fail to meet our publicly announced guidance or other expectations about our business, which would cause our stock price to decline.

We occasionally provide guidance regarding our expected financial and business performance, such as projections regarding sales and production, as well as anticipated future revenues, gross margins, profitability and cash flows. Correctly identifying key factors affecting business conditions and predicting future events is inherently an uncertain process and our guidance may not ultimately be accurate. Our guidance is based on certain assumptions such as those relating to anticipated production and sales volumes and average sales prices, supplier and commodity costs, and planned cost reductions.

Such guidance may not always be accurate or may vary from actual results due to our inability to meet our assumptions and the impact on our financial performance that could occur as a result of various risks and uncertainties If we fail to meet our guidance or if we find it necessary to revise such guidance,  investors and analysts may lose confidence in us and the market value of our common stock could be materially and adversely affected.

Our vehicles make use of lithium-ion battery cells, which have been observed to catch fire or vent smoke and flame, and such events have raised concerns, and future events may lead to additional concerns, about the batteries used in automotive applications.

The battery packs that we produce make use of lithium-ion cells. On rare occasions, lithium-ion cells can rapidly release the energy they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other lithium-ion cells.

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While we have designed the battery pack to passively contain any single cell’s release of energy without spreading to neighboring cells, we have delivered only a limited number of our vehicles and other Tesla products and have limited field experience with them. Accordingly, there can be no assurance that a field or testing failure of our vehicles or other battery packs that we produce will not occur, which could subject us to lawsuits, product recalls, or redesign efforts, all of which would be time consuming and expensive. Also, negative public perceptions regarding the suitability of lithium-ion cells for automotive applications or any future incident involving lithium-ion cells such as a vehicle or other fire, even if such incident does not involve our vehicles, could seriously harm our business.

In addition, we store a significant number of lithium-ion cells at our manufacturing facility. Any mishandling of battery cells may cause disruption to the operation of our facilities. While we have implemented safety procedures related to the handling of the cells, there can be no assurance that a safety issue or fire related to the cells would not disrupt our operations. Such damage or injury would likely lead to adverse publicity and potentially a safety recall. Moreover, any failure of a competitor’s electric vehicle may cause indirect adverse publicity for us and our electric vehicles. Such adverse publicity would negatively affect our brand and harm our business, prospects, financial condition and operating results.

We have a history of losses and have to deliver significant cost reductions to achieve sustained, long-term profitability and long-term commercial success.

We have had net losses in each quarter since our inception, except for the first quarter of 2013. As of June 30, 2015, our accumulated deficit was $772.1 million.  Even if we are able to continue to increase vehicle production and sales and ramp production and sales of Tesla Energy products, there can be no assurance that we will be profitable. In order to achieve profitability as well as long-term commercial success, we must continue to achieve our planned cost reductions, control our operational costs while producing quality vehicles, increase our production rate, and have strong demand for our vehicles as well as Tesla Energy products. Failure to do one or more of these things could prevent us from achieving sustained, long-term profitability.

Foreign currency movements relative to the U.S. dollar could harm our financial results.

Our revenues and costs denominated in foreign currencies are not completely matched. As we have increased Model S deliveries in markets outside of the United States, we have much higher revenues than costs denominated in other currencies such as the euro, Norwegian kroner, and Chinese yuan. The recent strengthening of the U.S. dollar therefore has reduced, and any further strengthening of the U.S. dollar would tend to further reduce, our revenues as measured in U.S. dollars. In addition, a portion of our costs and expenses have been, and we anticipate will continue to be, denominated in foreign currencies, including the Japanese yen. If we do not have fully offsetting revenues in these currencies and if the value of the U.S. dollar depreciates significantly against these currencies, our costs as measured in U.S. dollars as a percent of our revenues will correspondingly increase and our margins will suffer. As a result, our operating results could be adversely affected.

Our resale value guarantee and leasing programs expose us to the risk that the resale values of vehicles returned to us are lower than our estimates and may result in lower revenues, gross margin, profitability and liquidity.

We offer resale value guarantees to many of our Model S customers, under which such customers may sell their vehicles back to us at certain points in time at pre-determined resale values.  Customers can lease our vehicles through both leasing partners and Tesla Finance, our captive finance company.  The resale values of any vehicles resold or returned to us pursuant to these programs may be lower than our estimates, which are based on a limited secondary market for our vehicles.  If the volume of vehicles returned to us is higher than our estimates and we are not able to resell them timely, our cash flows and liquidity could be negatively impacted. In cases where customers retain their vehicles past the guarantee period, our gross margin will be negatively impacted as all remaining revenues and costs related to the vehicle will be recognized at no gross profit.

Because we provide a resale value guarantee to our customers, we apply lease accounting to purchases with a resale value guarantee as well as to leases held by Tesla Finance.  Under lease accounting, we recognize the associated revenues and costs of the vehicle sale over time rather than fully upfront at vehicle delivery.  As a result, these programs generate lower revenues in the period the car is delivered and higher gross margins during the period of the resale value guarantee as compared to purchases in which the resale value guarantee does not apply.  A significant uptake under these programs could therefore have an adverse impact on our near term revenues and operating results.  Moreover, unlike the resale value guarantee program or programs with leasing partners which do not impact our cash flows and liquidity at the time of vehicle delivery, under a lease held by Tesla Finance, we may receive only a very small portion of the total vehicle purchase price at the time of lease, followed by a stream of payments over the term of the lease.  To the extent we expand Tesla Finance leasing without securing external financing or business partners to support such expansion, our cash flow and liquidity could also be negatively impacted.

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If we fail to effectively manage the residual, financing and credit risks related to our direct Tesla leasing programs our business may suffer.

We offer leasing programs in the United States and Canada through our captive finance company, Tesla Finance, and in Germany through a local subsidiary. The profitability of the leasing program depends on our ability to accurately project residual values, secure adequate financing and/or business partners to fund and grow this program, and manage customer credit risk. If actual residual values of Model S vehicles are below our estimates, we may suffer lower profitability or potentially have losses. If we are unable to adequately fund our leasing program with either internal funds or external financing sources, we may be unable to grow our sales. Additionally, if we do not properly screen customers for ability to pay their leases on time, we may be exposed to excessive credit risks and associated losses. Furthermore, if our leasing business grows substantially, our business may suffer if we cannot effectively manage the greater levels of residual and credit risks resulting from growth. Finally, if we do not successfully monitor and comply with applicable national, and state and/or local financial regulations and consumer protection laws governing lease transactions, we may become subject to enforcement actions or penalties, either of which may harm our business.

Increases in costs, disruption of supply or shortage of raw materials, in particular lithium-ion cells, could harm our business.

We may experience increases in the cost or a sustained interruption in the supply or shortage of raw materials. Any such increase or supply interruption could materially and negatively impact our business, prospects, financial condition and operating results. We use various raw materials in our business including aluminum, steel, nickel and copper. The prices for these raw materials fluctuate depending on market conditions and global demand for these materials and could adversely affect our business and operating results. For instance, we are exposed to multiple risks relating to lithium-ion cells. These risks include:

•	the inability or unwillingness of current battery manufacturers to build or operate battery cell manufacturing plants to supply the numbers of lithium-ion cells we require;

•	disruption in the supply of cells due to quality issues or recalls by battery cell manufacturers;

•	an increase in the cost of raw materials used in the body of Model S; and

•	fluctuations in the value of the Japanese yen against the U.S. dollar as our battery cell purchases are currently denominated in Japanese yen.

Our business is dependent on the continued supply of battery cells for our vehicles’ battery packs as well as for the battery packs we produce for other automobile manufacturers. While we believe several sources of the battery cells are available for such battery packs, we have fully qualified only one supplier for the cells used in such battery packs and have very limited flexibility in changing cell suppliers. Any disruption in the supply of battery cells from such vendors could disrupt production of our vehicles and of the battery packs we produce for other automobile manufacturers until such time as a different supplier is fully qualified. Furthermore, fluctuations or shortages in petroleum and other economic conditions may cause us to experience significant increases in freight charges and raw material costs. Substantial increases in the prices for our raw materials or prices charged to us, such as those charged by our battery cell manufacturers, would increase our operating costs, and could reduce our margins if we cannot recoup the increased costs through increased vehicle prices. Any attempts to increase vehicle prices in response to increased raw material costs could result in cancellations of vehicle orders and reservations and therefore materially and adversely affect our brand, image, business, prospects and operating results.

Our direct sales distribution model is different from the predominant current distribution model for automobile manufacturers and subjects us to certain risks.

Our distribution model is not common in the automobile industry today, particularly in the United States. We plan to continue to sell our vehicles in company-owned Tesla stores and over the internet. While we believe our approach is vital to the success of our technology and vehicles, this distribution model subjects us to substantial risk as it requires significant expenditures and provides for slower expansion of our distribution and sales systems than may be possible by utilizing a more traditional dealer franchise system.

We have relatively limited experience distributing and selling our vehicles through our Tesla stores in international markets. Our success will depend in large part on our ability to effectively develop our own sales channels and marketing strategies. Implementing our business model is subject to numerous significant challenges, including obtaining permits and approvals from local and state authorities, and we may not be successful in addressing these challenges. We do not know whether our store strategy will continue to be successful. We may incur additional costs in order to improve or change our retail strategy.

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Other aspects of our distribution model also differ from those used by traditional automobile manufacturers. For example, we do not anticipate that we will ever carry a significant amount of vehicle inventory at our stores and customers may need to wait up to a few months from the time they place an order until the time they receive their vehicle. This type of custom manufacturing is unusual in the auto industry and it is unproven whether the average customer will be willing to wait this amount of time for such a vehicle. If customers do not embrace this ordering and retail experience, our business will be harmed.

We may become subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims.

Product liability claims could harm our business, prospects, operating results and financial condition. The automobile industry experiences significant product liability claims and we face inherent risk of exposure to claims in the event our vehicles do not perform as expected or malfunction resulting in personal injury or death. Our risks in this area are particularly pronounced given the limited number of vehicles delivered to date and limited field experience of those vehicles. A successful product liability claim against us could require us to pay a substantial monetary award. Moreover, a product liability claim could generate substantial negative publicity about our vehicles and business and would have material adverse effect on our brand, business, prospects and operating results. We self-insure against the risk of product liability claims, meaning that any product liability claims will have to be paid from company funds, not by insurance. Any lawsuit seeking significant monetary damages may have a material adverse effect on our reputation, business and financial condition.

The automotive market is highly competitive, and we may not be successful in competing in this industry. We currently face competition from new and established competitors and expect to face competition from others in the future.

The worldwide automotive market, particularly for alternative fuel vehicles, is highly competitive today and we expect it will become even more so in the future. Many established and new automobile manufacturers have entered or have announced plans to enter the alternative fuel vehicle market. Moreover, many other large OEMs have announced or are also reported to be developing electric vehicles. In addition, several manufacturers, including BMW, General Motors, Toyota and Ford, are selling hybrid vehicles, including plug-in hybrid vehicles. Most of our current and potential competitors have significantly greater financial, technical, manufacturing, marketing and other resources than we do and may be able to devote greater resources to the design, development, manufacturing, distribution, promotion, sale and support of their products. Virtually all of our competitors have more extensive customer bases and broader customer and industry relationships than we do and almost all of these companies have longer operating histories and greater name recognition than we do. Increased competition could result in lower vehicle unit sales, price reductions, revenue shortfalls, loss of customers and loss of market share, which could harm our business, prospects, financial condition and operating results.

Demand in the automobile industry is volatile, which may lead to lower vehicle unit sales and adversely affect our operating results.

Volatility of demand in the automobile industry may materially and adversely affect our business, prospects, operating results and financial condition. The markets in which we currently compete and plan to compete in the future have been subject to considerable volatility in demand in recent periods, including recent softening of the premium sedan category. Demand for automobile sales depends to a large extent on general, economic, political and social conditions in a given market and the introduction of new vehicles and technologies. As a low volume producer, we have less financial resources than more established automobile manufacturers to withstand changes in the market and disruptions in demand. As our business grows, international economic conditions and trends will impact our business, prospects and operating results as well. Demand for our vehicles may also be affected by factors directly impacting automobile price or the cost of purchasing and operating automobiles, such as sales and financing incentives, prices of raw materials and parts and components, cost of fuel and governmental regulations, including tariffs, import regulation and other taxes. Volatility in demand may lead to lower vehicle unit sales and increased inventory, which may result in further downward price pressure and adversely affect our business, prospects, financial condition and operating results. These effects may have a more pronounced impact on our business given our relatively smaller scale and financial resources as compared to many incumbent automobile manufacturers.

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If we are unable to establish and maintain confidence in our long-term business prospects among consumers, analysts and within our industry, then our financial condition, operating results, business prospects and stock price may suffer materially.

Consumers may be less likely to purchase our vehicles now if they are not convinced that our business will succeed or that our operations will continue for many years. Similarly, suppliers and other third parties will be less likely to invest time and resources in developing business relationships with us if they are not convinced that our business will succeed. Accordingly, in order to build and maintain our business, we must maintain confidence among customers, suppliers, analysts and other parties in our liquidity and long-term business prospects. Maintaining such confidence may be particularly complicated by certain factors, such as our limited operating history, unfamiliarity with our products, competition and uncertainty regarding the future of electric vehicles. Many of these factors are largely outside our control, and any negative perceptions about our long-term business prospects, even if exaggerated or unfounded, would likely harm our business and make it more difficult to raise additional funds when needed.

Our vehicles have unique servicing requirements, and we are using a different service model from the one typically used in the industry. If we are unable to address the service requirements of our existing and future customers, our business will be materially and adversely affected.

Servicing electric vehicles is different than servicing vehicles with internal combustion engines and requires specialized skills, including high voltage training and servicing techniques. If we are unable to satisfactorily service our vehicles, our ability to generate customer loyalty, grow our business and sell additional vehicles could be impaired.

We service our vehicles through our company-owned Tesla service centers, certain of our stores, and through our mobile service technicians known as the Tesla Rangers. We will need to open new standalone service centers in locations around the world and hire and train significant numbers of new employees to staff these service centers and act as Tesla Rangers in order to successfully maintain our fleet of delivered vehicles. We may have difficulties in continuing to adequately address the service requirements of our customers to their satisfaction, and may not have sufficient resources to meet these service requirements in a timely manner as the volume of vehicles we are able to deliver annually increases.

We do not expect to be able to open Tesla service centers in all the geographic areas in which our existing and potential customers may reside. In order to address the service needs of customers who are not in geographical proximity to our service centers, we plan to either transport those vehicles to the nearest Tesla store or service center for servicing or deploy our mobile Tesla Rangers to service the vehicles at the customer’s location. These special arrangements may be expensive and we may not be able to recoup the costs of providing these services to our customers. If we do not adequately address our customers’ service needs, our brand and reputation will be adversely affected, which in turn could have a material and adverse impact on our business, financial condition, operating results and prospects.

We may not succeed in maintaining and strengthening the Tesla brand, which would materially and adversely affect customer acceptance of our vehicles and components and our business, revenues and prospects.

Our business and prospects are heavily dependent on our ability to develop, maintain and strengthen the Tesla brand. Any failure to develop, maintain and strengthen our brand may materially and adversely affect our ability to sell our vehicles and Tesla Energy products. If we do not continue to establish, maintain and strengthen our brand, we may lose the opportunity to build a critical mass of customers. Promoting and positioning our brand will likely depend significantly on our ability to provide and maintain Tesla vehicles and Tesla Energy products. Additionally, any problems associated with the Toyota RAV4 EV and Mercedes-Benz B-Class EV, both of which use a Tesla powertrain, may also hurt the Tesla brand.

In addition, we expect that our ability to develop, maintain and strengthen the Tesla brand will also depend on the success of our marketing efforts. To date, we have limited experience with marketing activities as we have relied primarily on the internet, word of mouth and attendance at industry trade shows to promote our brand. The automobile industry is intensely competitive, and we may not be successful in building, maintaining and strengthening our brand. Many of our current and potential competitors, particularly large automobile manufacturers, have greater name recognition, broader customer relationships and substantially greater marketing resources than we do. If we do not develop and maintain a strong brand, our business, prospects, financial condition and operating results will be materially and adversely impacted.

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Our plan to expand our network of Tesla stores, service centers and Superchargers will require significant cash investments and management resources and may not meet our expectations with respect to additional sales of our electric vehicles. In addition, we may not be able to open stores or service centers in certain states or Superchargers in desired locations.

Our plan to expand our network of Tesla stores, service centers and Superchargers will require significant cash investments and management resources and may not meet our expectations with respect to additional sales of our vehicles. This ongoing global expansion may not have the desired effect of increasing sales and expanding our brand presence to the degree we are anticipating. We will also need to ensure we are in compliance with any regulatory requirements applicable to the sale and service of our vehicles in those jurisdictions, which could take considerable time and expense. If we experience any delays in expanding our network of Tesla stores, service centers and Superchargers, this could lead to a decrease in sales of our vehicles and could negatively impact our business, prospects, financial condition and operating results.

Furthermore, certain states and foreign jurisdictions may have permit requirements, franchise dealer laws or similar laws or regulations that may preclude or restrict our ability to open stores or sell vehicles out of such states and jurisdictions. Any such prohibition or restriction may lead to decreased sales in such jurisdictions, which could harm our business, prospects and operating results. See Risk Factor “We may face regulatory limitations on our ability to sell vehicles directly or over the internet which could materially and adversely affect our ability to sell our electric vehicles.” Additionally, we may face potential difficulties in finding suitable Supercharger sites in desired locations, negotiating leases or obtaining required permits for such locations.

We face risks associated with our international operations and expansion, including unfavorable regulatory, political, tax and labor conditions and establishing ourselves in new markets, all of which could harm our business.

We currently have international operations and subsidiaries in various countries and jurisdictions in Europe and Asia that are subject to the legal, political, regulatory and social requirements and economic conditions in these jurisdictions. Additionally, as part of our growth strategy, we will continue to expand our sales, maintenance, repair and Supercharger services internationally. We have limited experience, however, selling and servicing our vehicles internationally, as well as limited experience installing and operating Superchargers internationally.  Furthermore, international expansion requires us to make significant expenditures, including the establishment of local operating entities, hiring of local employees and establishing facilities in advance of generating any revenue. We are subject to a number of risks associated with international business activities that may increase our costs, impact our ability to sell our electric vehicles and require significant management attention. These risks include:

•	conforming our vehicles to various international regulatory and safety requirements where our vehicles are sold, or homologation;

•	difficulty in establishing, staffing and managing foreign operations;

•	difficulties attracting customers in new jurisdictions;

•	foreign government taxes, regulations and permit requirements, including foreign taxes that we may not be able to offset against taxes imposed upon us in the United States, and foreign tax and other laws limiting our ability to repatriate funds to the United States;

•	our ability to enforce our contractual rights;

•	United States and foreign government trade restrictions, customs regulations, tariffs and price or exchange controls;

•	foreign labor laws, regulations and restrictions;

•	preferences of foreign nations for domestically produced vehicles;

Additionally, as we have expanded into new international markets, we have faced challenges with ensuring that our charging equipment works successfully with the charging infrastructure in such markets, including Norway and China.  If customers experience problems with the way our charging equipment works with the local charging infrastructure, or we are unable to adapt our equipment to resolve such problems, then the viability and acceptance of our vehicles in such markets could be materially and adversely affected. If we fail to successfully address these risks, our business, prospects, operating results and financial condition could be materially harmed.

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The unavailability, reduction or elimination of, or uncertainty regarding, government and economic incentives in the U.S. and abroad could have a material adverse effect on our business, financial condition, operating results and prospects.

Any reduction or elimination of government and economic incentives may result in the diminished competitiveness of the alternative fuel vehicle industry generally or our electric vehicles in particular. We currently benefit from certain exemptions in the United States, such as the California state sales and use taxes. Similarly, government programs in Europe favor the purchase of electric vehicles, including through disincentives that discourage the use of gas-powered vehicles. In Norway, for example, the purchase of electric vehicles is not currently subject to import taxes, taxes on non-recurring vehicle fees, the 25% value added tax or the purchase taxes that apply to the purchase of gas-powered vehicles. If such government programs are reduced or eliminated, or the available benefits thereunder are exhausted earlier than anticipated, sales of our electric vehicles could be adversely affected. In addition, customers may delay taking delivery of their Tesla vehicles if they believe that certain electric vehicle incentives will be available at a later date, which may negatively affect our ability to achieve our planned delivery targets.

Our strategic relationships with third parties, such as Panasonic, are subject to various risks which could adversely affect our business and future prospects.

Our strategic relationships with third parties, such as Panasonic which supplies us with battery cells for use in Model S and Model X and is our partner in the Gigafactory, pose various risks to us, including potential loss of access to important technology and vehicle parts, potential loss of business and adverse publicity. In addition, these third parties may not perform as expected under our agreements with them, such as with respect to vehicle parts quality and timeliness, and we may have disagreements or disputes with these third parties. The occurrence of any of the foregoing could adversely affect our business, prospects, financial condition and operating results.

If we are unable to keep up with advances in electric vehicle technology, we may suffer a decline in our competitive position.

We may be unable to engineer, produce, source or integrate technology that reflects changes in electric vehicle technology, in particular battery cell technology, and, as a result, may suffer a decline in our competitive position. Any failure to keep up with advances in electric vehicle technology would result in a decline in our competitive position which would materially and adversely affect our business, prospects, operating results and financial condition.

If we are unable to attract and/or retain key employees and hire qualified management, technical, vehicle engineering and manufacturing personnel, our ability to compete could be harmed and our stock price may decline.

The loss of the services of any of our key employees could disrupt our operations, delay the development and introduction of our vehicles and services, and negatively impact our business, prospects and operating results as well as cause our stock price to decline. In particular, we are highly dependent on the services of Elon Musk, our Chief Executive Officer, Product Architect and Chairman of our Board of Directors, and JB Straubel, our Chief Technical Officer. Additionally, Deepak Ahuja, Tesla’s Chief Financial Officer, intends to retire and we may be unable to find his replacement in a timely fashion.

None of our key employees is bound by an employment agreement for any specific term and we may not be able to successfully attract and retain senior leadership necessary to grow our business. Our future success depends upon our ability to attract and retain executive officers and other key technology, sales, marketing, engineering, manufacturing and support personnel and any failure to do so could adversely impact our business, prospects, financial condition and operating results.

Key talent may leave Tesla due to various factors, such as a very competitive labor market for talented individuals with automotive experience. Currently in Northern California, there is increasing competition for talented individuals with the specialized knowledge of electric vehicles, software engineers, manufacturing engineers and other skilled employees and this competition affects both our ability to retain key employees and hire new ones. Our continued success depends upon our continued ability to hire new employees in a timely manner and retain current employees. Additionally, we compete with many mature and prosperous companies in Northern California that have far greater financial resources than we do and thus can offer current or perspective employees more lucrative incentive packages than we can. Any difficulties in retaining current employees or recruiting new ones would have an adverse effect on our performance.

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We are highly dependent on the services of Elon Musk, our Chief Executive Officer.

We are highly dependent on the services of Elon Musk, our Chief Executive Officer, Product Architect, Chairman of our Board of Directors and largest stockholder. Although Mr. Musk spends significant time with Tesla and is highly active in our management, he does not devote his full time and attention to Tesla. Mr. Musk also currently serves as Chief Executive Officer and Chief Technical Officer of Space Exploration Technologies, a developer and manufacturer of space launch vehicles, and Chairman of SolarCity, a solar  provider.  

We are subject to various environmental and safety laws and regulations that could impose substantial costs upon us and negatively impact our ability to operate our manufacturing facilities.

As an automobile manufacturer, we are subject to environmental, health and safety laws and regulations at numerous levels, including laws relating to the use, handling, storage, disposal and human exposure to hazardous materials, both in the United States and abroad. Such laws and regulations can be complex, and we expect that our business and operations will be affected by new, or future amendments to, such laws that may require us to change our operations, potentially resulting in a material adverse effect on our business. These laws can give rise to liability for administrative oversight costs, cleanup costs, property damage, bodily injury and associated fines and penalties. The costs of compliance can be significant, and violations of those laws may result in substantial fines and penalties, third party damages, suspension of production or a cessation of our operations. These expenses could have a material adverse effect on our financial condition or operating results.

Contamination at properties owned or operated by us may result in liability for us under environmental laws and regulations. We may also face unexpected delays in obtaining the necessary permits and approvals required by environmental laws in connection with our manufacturing facilities that could require significant time and financial resources and negatively impact our ability to operate these facilities, which would adversely impact our business prospects and operating results. As the owner of the Tesla Factory and surrounding land, we may be responsible under federal and state laws and regulations for the entire investigation and remediation of any environmental contamination at the Tesla Factory, whether it occurred before or after the date we purchased the property. When Tesla purchased the property, the previous owner and operator of the Tesla Factory, New United Motor Manufacturing, Inc. (NUMMI), identified environmental conditions at the Tesla Factory that could adversely affect soil and groundwater, and agreed to remediate these conditions. Although NUMMI stated that it fully documented and managed all environmental issues at the Tesla Factory, we cannot determine with certainty the truth of this statement, nor the total costs to remediate any pre-existing contamination that may eventually be found. We have reached an agreement with NUMMI under which, over a ten year period, NUMMI would pay up to $15.0 million for any governmentally required remediation activities, subject to certain conditions.  After the earlier of the ten-year anniversary of the closing and whenever the maximum amount payable by NUMMI for remediation activities has been paid, we are responsible for any and all environmental conditions at the Fremont site and we have agreed to indemnify and release NUMMI against any known or unknown claims except for NUMMI’s obligations for representations and warranties under the agreement.

Any failure by NUMMI to perform its obligations under our agreement would require us to undertake remediation activities at a potentially significant cost, and may also adversely affect the production capacity of, and our ability to operate, the Tesla Factory.

Our business may be adversely affected by union activities.

Although none of our employees is currently represented by a labor union, it is common for employees at automobile companies to belong to a union, which can result in higher employee costs and increased risk of work stoppages. Our employees may join or seek recognition to form a labor union, or we may be required to become a union signatory. Our automobile production facility in Fremont, California was purchased from NUMMI. Prior employees of NUMMI were union members and our future work force at this facility may be inclined to vote in favor of forming a labor union. We also own and operate another component manufacturing facility in Lathrop, California. Furthermore, we are directly or indirectly dependent upon companies with unionized work forces, such as parts suppliers and trucking and freight companies, and work stoppages or strikes organized by such unions could have a material adverse impact on our business, financial condition or operating results. If a work stoppage occurs, it could delay the manufacture and sale of our vehicles and Tesla Energy products and have a material adverse effect on our business, prospects, operating results or financial condition. The mere fact that our labor force could be unionized may harm our reputation in the eyes of some investors and thereby negatively affect our stock price.

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We are currently expanding and improving our information technology systems. If these implementations are not successful, our business and operations could be disrupted and our operating results could be harmed.

We are currently expanding and improving our information technology systems, including implementing new internally developed systems, to assist us in the management of our business. In particular, our volume production of multiple vehicles necessitates continued development, maintenance and improvement of our information technology systems in the U.S. and abroad, which include product data management, procurement, inventory management, production planning and execution, sales, service and logistics, dealer management, financial, tax and regulatory compliance systems. The implementation, maintenance and improvement of these systems require significant management time, support and cost. Moreover, there are inherent risks associated with developing, improving and expanding our core systems as well as implementing new systems, including the disruption of our data management, procurement, manufacturing execution, finance, supply chain and sales and service processes. These risks may affect our ability to manage our data and inventory, procure parts or supplies or manufacture, sell, deliver and service vehicles, or achieve and maintain compliance with, or realize available benefits under, tax laws and other applicable regulations.

We cannot be sure that these expanded systems or their required functionality will be effectively implemented or sufficiently maintained. If we do not successfully implement, improve or maintain these systems, our operations may be disrupted, our ability to accurately and/or timely report our financial results could be impaired, and deficiencies may arise in our internal control over financial reporting, which may impact our ability to certify our financial results. If these systems or their functionality do not operate as we expect them to, we may be required to expend significant resources to make corrections or find alternative sources for performing these functions.

We are subject to substantial regulation, which is evolving, and unfavorable changes or failure by us to comply with these regulations could substantially harm our business and operating results.

Motor vehicles are subject to substantial regulation under international, federal, state, and local laws. We have incurred, and expect to continue to incur, significant costs in complying with these regulations.

Regulations related to the electric vehicle industry and alternative energy are currently evolving and we face risks associated with changes to these regulations. In the United States, the following are examples of regulatory and statutory issues facing us:

•	the amendment or rescission of the federal law and regulations mandating increased fuel economy in the United States, referred to as the Corporate Average Fuel Economy (CAFE) standards, could reduce new business opportunities for our powertrain sales and development activities;

•	the amendment or rescission of federal greenhouse gas tailpipe emission regulations administered by EPA under the authority of the Clean Air Act could reduce new business opportunities for our powertrain sales and development activities;

•	changes to the vehicle-specific Federal Motor Vehicle Safety Standards, which govern how all motor vehicles are made within the United States, could result in costly changes to how current vehicles are produced; and

•	changes to regulations governing the export of our products could increase our delivery costs to outside the United States or force us to charge consumers in such jurisdictions a higher price for our vehicles.

In addition, as the automotive industry moves towards greater use of electronics in vehicle systems, NHTSA and other regulatory bodies may regulate these electronic systems more stringently, particularly as concerns about distracted driving increase. Such concerns could affect use of electronic systems in Model S, such as the 17 inch display screen, which could reduce the appeal of Model S or require adjustments to the display screen’s functionality.

As we are currently delivering vehicles in Europe and Asia, we are subject to laws and regulations applicable to the import, sale and service of automobiles in those regions. For example, we are required to meet vehicle-specific safety standards that are often materially different from U.S. requirements, thus resulting in additional investment into the vehicles and systems to ensure regulatory compliance. Unlike in the U.S. where we self-certify our vehicles’ compliance with standards, we must obtain advanced approval from regulatory agencies regarding the proper certification or homologation of our vehicles to enter into these markets. This process necessitates that foreign regulatory officials review and certify our vehicles prior to market entry. In addition, we must comply with regulations applicable to vehicles after they enter the market, including foreign reporting requirements and recall management systems.

To the extent U.S. or international laws change, some or all of our vehicles may not comply with any new applicable international, federal, state or local laws, which would have an adverse effect on our business. Compliance with changing regulations could be burdensome, time consuming, and expensive. To the extent compliance with new regulations is cost prohibitive, our business, prospects, financial condition and operating results will be adversely affected.

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We retain certain personal information about our customers and may be subject to various privacy and consumer protection laws.

Our collection, use, retention, security and transfer of personal information of our customers is subject to federal, state, and international laws. These laws continue to be enacted and may be inconsistent from jurisdiction to jurisdiction. Complying with changing international laws may cause us to incur substantial costs, expose us to legal liability or require us to change our business practices. Our privacy policy is posted on our website, and any failure by us or our vendor or other business partners to comply with it or with federal, state or international privacy, data protection or security laws or regulations could result in regulatory or litigation-related actions against us, legal liability, fines, damages and other costs. Although we take steps to protect the security of our customers’ personal information, we may be required to expend significant resources to comply with data breach requirements if third parties improperly obtain and use the personal information of our customers or we otherwise experience a data loss with respect to customers’ personal information. A major breach of our network security and systems could have negative consequences for our business and future prospects, including possible fines, penalties and damages, reduced customer demand for our vehicles, and harm to our reputation and brand.

We may be compelled to undertake product recalls or take other actions, which could adversely affect our brand image and financial performance.

Any product recall in the future may result in adverse publicity, damage our brand and adversely affect our business, prospects, operating results and financial condition. We previously experienced product recalls in May 2009, October 2010 and June 2013, none of which was related to our electric powertrain. In April 2009, we determined that a condition caused by insufficient torqueing of the rear inner hub flange bolt existed in some of our Tesla Roadsters, as a result of a missed process during the manufacture of the Tesla Roadster glider. In October 2010, we initiated a product recall after the 12 volt, low voltage auxiliary cable in a single vehicle chafed against the edge of a carbon fiber panel in the vehicle causing a short, smoke and possible fire behind the right front headlamp of the vehicle. In June 2013, we initiated a recall of slightly more than one thousand Model S vehicles to inspect and repair rear seat strikers that may have been compromised during the assembly process. Rear seat strikers are used to retain the rear seat backs in an upright position. Failure of this component may have resulted in collapse of the rear seat back during a crash. Finally, in January 2014, we implemented a firmware update to address issues with certain Universal Mobile Connector NEMA 14-50 adapters, which are part of the charging units and are not part of the vehicles themselves, potentially overheating during charging. In the future, we may at various times, voluntarily or involuntarily, initiate a recall if any of our vehicles, including Model S, or our electric powertrain components prove to be defective or noncompliant with applicable federal motor vehicle safety standards. Such recalls, voluntary or involuntary, involve significant expense and diversion of management attention and other resources, and could adversely affect our brand image in our target markets, as well as our business, prospects, financial condition and results of operations.

Our current and future warranty reserves may be insufficient to cover future warranty claims which could adversely affect our financial performance.

If our warranty reserves are inadequate to cover future warranty claims on our vehicles, our business, prospects, financial condition and operating results could be materially and adversely affected. Warranty reserves include management’s best estimate of the projected costs to repair or to replace items under warranty. These estimates are based on actual claims incurred to-date and an estimate of the nature, frequency and costs of future claims. These estimates are inherently uncertain and changes to our historical or projected experience may cause material changes to our warranty reserves in the future. Subject to separate limited warranties for the supplemental restraint system and battery, we provide a four year or 50,000 mile New Vehicle Limited Warranty for the purchasers of Model S. The New Vehicle Limited Warranty for Model S also covers the drive unit for eight years and the battery for a period of eight years or 125,000 miles or unlimited miles, depending on the size of the vehicle’s battery; although the battery’s charging capacity is not covered under the New Vehicle Limited Warranty or any Extended Service plan.

In addition, customers have the opportunity to purchase an Extended Service plan for the period after the end of the New Vehicle Limited Warranty for Model S and Model X to cover additional services for an additional four years or 50,000 miles, provided it is purchased within a specified period of time. The New Vehicle Limited Warranty and Extended Service plans for the Tesla Roadster, Model S and Model X are subject to certain limitations, exclusions or separate warranties, including certain wear items, such as tires, brake pads, paint and general appearance, and battery performance, and is intended to cover parts and labor to repair defects in material or workmanship in the vehicle including the body, chassis, suspension, interior, electronic systems, powertrain and brake system. We have previously provided our Tesla Roadster customers with a battery replacement option to replace the battery in their vehicles at any time after the expiration of the New Vehicle Limited Warranty but before the tenth anniversary of the purchase date of their vehicles. Additionally, in 2013, as part of our ongoing efforts to improve the customer ownership experience, we expanded the battery pack warranty and also eliminated the annual service requirement that was needed to keep the New Vehicle Limited Warranty in effect. Should this change in warranty coverage lead to an increase in warranty claims, we may need to record additional warranty reserves which would negatively affect our profitability.

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Our insurance strategy may not be adequate to protect us from all business risks.

We may be subject, in the ordinary course of business, to losses resulting from products liability, accidents, acts of God and other claims against us, for which we may have no insurance coverage. While we currently maintain general liability, automobile, property, workers’ compensation, and directors’ and officers’ insurance policies, as a general matter, we do not maintain as much insurance coverage as many other companies do, and in some cases, we do not maintain any at all. Additionally, the policies that we do have may include significant deductibles, and we cannot be certain that our insurance coverage will be sufficient to cover all future claims against us. A loss that is uninsured or which exceeds policy limits may require us to pay substantial amounts, which could adversely affect our financial condition and operating results.

Our financial results may vary significantly from period-to-period due to fluctuations in our operating costs and the seasonality of our business.

We expect our period-to-period operating results to vary based on our operating costs which we anticipate will increase significantly in future periods as we, among other things, design, develop and manufacture Model X and future products, increase the production capacity at our manufacturing facilities to produce vehicles at higher volumes, develop the Gigafactory, open new Tesla service centers with maintenance and repair capabilities, open new Supercharger locations, increase our sales and marketing activities, and increase our general and administrative functions to support our growing operations. As a result of these factors, we believe that quarter-to-quarter comparisons of our operating results, especially in the short-term, are not necessarily meaningful and that these comparisons cannot be relied upon as indicators of future performance. Moreover, our operating results may not meet expectations of equity research analysts or investors. If any of this occurs, the trading price of our stock could fall substantially, either suddenly or over time.

Unauthorized control or manipulation of our vehicles’ systems may affect the operation of our vehicles or compromise data security, which could result in loss of confidence in us and our vehicles and harm our business.

Our vehicles contain complex information technology systems. For example, subject to our customers’ ability to opt out pursuant to our privacy policy, our vehicles are designed with built-in data connectivity to accept and install periodic remote updates from us to improve or update the functionality of our vehicles. We have designed, implemented and tested security measures intended to prevent unauthorized access to our information technology networks, our vehicles and their systems. However, hackers have reportedly attempted, and may attempt in the future, to gain unauthorized access to modify, alter and use such networks, vehicles and systems to gain control of, or to change, our vehicles’ functionality, user interface and performance characteristics, or to gain access to data stored in or generated by the vehicle, such as its current geographical position, previous and stored destination address history and web browser “favorites.”  We encourage reporting of potential vulnerabilities in the security of our vehicles via our security vulnerability reporting policy, and we aim to remedy any reported and verified vulnerabilities. We have received reports of potential vulnerabilities in the past and have attempted to remedy them.  However, there can be no assurance that vulnerabilities will not be identified in the future, or that our remediation efforts are or will be successful.

Any unauthorized access to or control of our vehicles or their systems or any loss of data could result in legal claims or proceedings. In addition, regardless of their veracity, reports of unauthorized access to our vehicles, their systems or data, as well as other factors that may result in the perception that our vehicles, their systems or data are capable of being “hacked,” could negatively affect our brand and harm our business, prospects, financial condition and operating results. We have been the subject of such reports in the past.

We may need or want to raise additional funds and these funds may not be available to us when we need them. If we cannot raise additional funds when we need or want them, our operations and prospects could be negatively affected.

The design, manufacture, sale and servicing of automobiles is a capital intensive business. We expect that our principal sources of liquidity will provide us adequate liquidity based on our current plans. However, until we are consistently generating positive free cash flows, if the costs for developing and manufacturing our current or future vehicles exceed our expectations or if we incur any significant unplanned expenses or embark on or accelerate new significant strategic investments, such as the Gigafactory, we may need to raise additional funds through the issuance of equity, equity-related or debt securities or through obtaining credit from government or financial institutions. We need sufficient capital to fund our ongoing operations, continue research and development projects, including those for our planned Model 3 vehicle, establish sales and service centers, build and deploy Superchargers and to make the investments in tooling and manufacturing capital required to introduce new vehicles. We cannot be certain that additional funds will be available to us on favorable terms when required, or at all. If we cannot raise additional funds when we need them, our financial condition, results of operations, business and prospects could be materially adversely affected.

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We may face regulatory limitations on our ability to sell vehicles directly or over the internet which could materially and adversely affect our ability to sell our electric vehicles.

We sell our vehicles from our Tesla stores as well as over the internet. We may not be able to sell our vehicles through this sales model in each state in the United States as many states have laws that may be interpreted to prohibit internet sales by manufacturers to residents of the state or to impose other limitations on this sales model, including laws that prohibit manufacturers from selling vehicles directly to consumers without the use of an independent dealership or without a physical presence in the state. In certain states in which we are not able to obtain dealer licenses, we have worked with state regulators to open galleries, which are not full retail locations.

In many states, the application of state motor vehicle laws to our specific sales model is largely untested under state motor vehicle industry laws and is being determined by a fact specific analysis of numerous factors, including whether we have a physical presence or employees in the applicable state, whether we advertise or conduct other activities in the applicable state, how the sale transaction is structured, the volume of sales into the state, and whether the state in question prohibits manufacturers from acting as dealers. As a result of the fact specific and largely untested nature of these issues, and the fact that applying these laws intended for the traditional automobile distribution model to our sales model allows for some interpretation and discretion by the regulators, the manner in which the applicable authorities are applying their state laws to our distribution model continues to be difficult to predict. Laws in some states have limited our ability to obtain dealer licenses from state motor vehicle regulators and may continue to do so.

In addition, decisions by regulators permitting us to sell vehicles may be subject to challenges as to whether such decisions comply with applicable state motor vehicle industry laws. For example, vehicle dealer associations in New York, Ohio and Massachusetts have filed lawsuits to revoke dealer licenses issued to us. These lawsuits have been dismissed, and in one court decision, the Supreme Court of Massachusetts held that state franchise laws like the one in Massachusetts do not restrict a manufacturer, like Tesla, that does not use franchised dealers from selling its vehicles directly to consumers. Such results have reinforced our continuing belief that state laws were not designed to prevent our distribution model. Similar lawsuits have been filed in Georgia and Missouri. Possible additional challenges in other states, if successful, could restrict or prohibit our ability to sell our vehicles to residents in such states. In some states, there have also been regulatory and legislative efforts by vehicle dealer associations to propose bills and regulations that, if enacted, would prevent us from obtaining dealer licenses in their states given our current sales model. Such events recently occurred in New Jersey, where the Motor Vehicle Commission, at the behest of the local automobile dealer lobby, passed a new regulation which purported to invalidate our sales licenses in the state, and in Michigan, where the state’s automobile dealer association managed to add language into an unrelated bill that had the effect of impairing our right to sell vehicles through Tesla stores in Michigan. The law in New Jersey has subsequently been clarified to permit our operations, and we are evaluating legislative and litigation solutions to remedy the situation in Michigan. Other states, such as New York, Ohio and Pennsylvania, have passed legislation that clarifies our ability to operate, but at the same time limits the number of dealer licenses we can obtain or stores that we can operate.

We are also registered as both a motor vehicle manufacturer and dealer in Canada, Australia, and Japan, and have obtained licenses to sell vehicles in other places such as Hong Kong and China. Furthermore, while we have performed an analysis of the principal laws in the European Union relating to our distribution model and believe we comply with such laws, we have not performed a complete analysis in all foreign jurisdictions in which we may sell vehicles. Accordingly, there may be laws in jurisdictions we have not yet entered or laws we are unaware of in jurisdictions we have entered that may restrict our sales or other business practices. Even for those jurisdictions we have analyzed, the laws in this area can be complex, difficult to interpret and may change over time.

We may need to defend ourselves against patent or trademark infringement claims, which may be time-consuming and would cause us to incur substantial costs.

Companies, organizations or individuals, including our competitors, may hold or obtain patents, trademarks or other proprietary rights that would prevent, limit or interfere with our ability to make, use, develop, sell or market our vehicles or components, which could make it more difficult for us to operate our business. From time to time, we may receive communications from holders of patents or trademarks regarding their proprietary rights. Companies holding patents or other intellectual property rights may bring suits alleging infringement of such rights or otherwise assert their rights and urge us to take licenses. In addition, if we are determined to have infringed upon a third party’s intellectual property rights, we may be required to do one or more of the following:

•	cease selling, incorporating or using vehicles or offering goods or services that incorporate or use the challenged intellectual property;

•	pay substantial damages;

•	obtain a license from the holder of the infringed intellectual property right, which license may not be available on reasonable terms or at all;

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•	redesign our vehicles or other goods or services; or

•	establish and maintain alternative branding for our products and services.

In the event of a successful claim of infringement against us and our failure or inability to obtain a license to the infringed technology or other intellectual property right, our business, prospects, operating results and financial condition could be materially adversely affected. In addition, any litigation or claims, whether or not valid, could result in substantial costs and diversion of resources and management attention.

Our patent applications may not result in issued patents, which may have a material adverse effect on our ability to prevent others from interfering with our commercialization of our products.

The status of patents involves complex legal and factual questions and the breadth and effectiveness of patented claims is uncertain. We cannot be certain that we are the first creator of inventions covered by pending patent applications or the first to file patent applications on these inventions, nor can we be certain that our pending patent applications will result in issued patents or that any of our issued patents will afford sufficient protection against someone creating a knockoff of our products, or as a defensive portfolio against a competitor who claims that we are infringing its patents. In addition, patent applications filed in foreign countries are subject to laws, rules and procedures that differ from those of the United States, and thus we cannot be certain that foreign patent applications related to issued U.S. patents will result in issued patents in those foreign jurisdictions, or that such patent can effectively enforced. In addition, others may obtain patents that we need to license or design around, either of which would increase costs and may adversely affect our business, prospects, financial condition and operating results.

Our trademark applications in certain countries remain subject to outstanding opposition proceedings.

We have filed trade and service mark applications for our Tesla marks in various countries in which we currently sell and plan to sell our products and services. Certain of our applications are subject to outstanding opposition proceedings brought by owners or applicants alleging prior applications for or use of similar marks. If we cannot resolve these oppositions and thereby secure registered rights in these countries, the value of the marks representing our exclusive brand name in these countries will be diluted. In addition, there is a risk that the prior rights owners could in the future take actions to challenge our use of the Tesla marks in these countries. Such actions could have a severe impact on our position in these countries and may inhibit our ability to use the Tesla marks in these countries. If we were prevented from using the Tesla marks in any or all of these countries, we would need to expend significant additional financial and marketing resources on establishing an alternative brand identity in these markets.

Our facilities or operations could be damaged or adversely affected as a result of disasters or unpredictable events.

Our corporate headquarters and primary manufacturing facilities are all located in Northern California, a region known for seismic activity. If major disasters such as earthquakes, fires, floods, terrorist attacks or other events occur, or our information system or communications network breaks down or operates improperly, our headquarters and production facilities may be seriously damaged, or we may have to stop or delay production and shipment of our products. In addition, our lease for our Palo Alto facility permits the landlord to terminate the lease following a casualty event if the needed repairs are in excess of certain thresholds and we do not agree to pay for any uninsured amounts. We may incur expenses relating to such damages, which could have a material adverse impact on our business, operating results and financial condition.

Servicing our convertible senior notes and other debt facilities requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.

We incurred $660.0 million, $920.0 million and $1.38 billion, respectively, in aggregate principal amount of senior indebtedness when we issued pursuant to registered public offerings 1.50% convertible senior notes due 2018 (2018 Notes) in 2013, and 0.25% convertible senior notes due 2019 (2019 Notes) and 1.25% convertible senior notes due 2021 (2021 Notes) in 2014.  In addition, in June 2015 we entered into a senior secured asset based revolving credit agreement (the “Credit Agreement”) that allows us to borrow, under certain circumstances, up to $500 million with possible extensions to up to $750 million.  As of June 30, 2015, we had borrowed $50 million under this credit facility. Finally, during 2015 we also entered into a warehouse credit facility (the “Warehouse Facility”) for a principal amount of up to $150 million.  As of June 30, 2015, we had borrowed $114.3 million under this facility.

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Our ability to make scheduled payments of the principal when due, to make quarterly interest payments or to make payments upon conversion or to refinance the Notes, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to satisfy our obligations under the Notes and any future indebtedness we may incur and to make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as reducing or delaying investments or capital expenditures, selling assets, refinancing or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance the Notes or existing or future indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on the Notes or future indebtedness.

Pursuant to their terms, holders may convert their Notes at their option at any time prior to the final three-month period of the scheduled term of the respective Notes only under certain circumstances. For example, holders may generally convert their Notes at their option during a quarter (and only during such quarter), commencing with the fourth quarter of 2013 in the case of the 2018 Notes and the third quarter of 2014 in the case of the 2019 Notes and the 2021 Notes, if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding quarter is greater than or equal to 130% of the conversion price for such series of Notes on each applicable trading day. As a result of this conversion feature, the 2018 Notes have been convertible at their holders’ option during each quarter commencing with the fourth quarter of 2013, except the first quarter of 2014. Neither this nor any other conversion feature has been met with respect to the 2019 Notes and 2021 Notes, and consequently the 2019 Notes and 2021 have not been convertible at their holders’ option. Upon conversion of the Notes, we will be obligated to make cash payments in respect of the principal amounts thereof, and we may also have to deliver cash and, if applicable, shares of our common stock, in respect of such Notes. Any conversion of the Notes prior to their maturity, or acceleration of the repayment of the Notes or future indebtedness after any applicable notice or grace periods could have a material adverse effect on our business, results of operations and financial condition.

In addition, holders of the Notes will have the right to require us to purchase their Notes upon the occurrence of a fundamental change at a purchase price equal to 100% of the principal amount of the Notes, plus accrued and unpaid interest, if any, to, but not including, the fundamental change purchase date. However, we may not have enough available cash or be able to obtain financing at the time we are required to make purchases of Notes surrendered therefor or Notes being converted. In addition, our ability to purchase the Notes or to pay cash upon conversions of the Notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness. Our failure to purchase Notes at a time when the purchase is required by the indenture or to pay cash payable on future conversions of the Notes as required by the indenture would constitute a default under the indenture. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and purchase the Notes or make cash payments upon conversions thereof.

Our debt agreements contain covenant restrictions that may limit our ability to operate our business.

Our Credit Agreement contains, and any of our other future debt agreements may contain, covenant restrictions that limit our ability to operate our business, including restrictions on our ability to, among other things, incur additional debt or issue guarantees, create liens and make certain voluntary prepayments of specified debt.

In addition, under certain circumstances we are required to comply with a fixed charge coverage ratio. As a result of these limitations, our ability to respond to changes in business and economic conditions and to obtain additional financing, if needed, may be restricted, and we may be prevented from engaging in transactions that might otherwise be beneficial to us.  In addition, our failure to comply with our debt covenants could result in a default under our debt agreements, which could permit the holders to accelerate our obligation to repay the debt. If any of our debt is accelerated, we may not have sufficient funds available to repay the accelerated debt.  

We may still incur substantially more debt or take other actions, which would intensify the risks discussed immediately above.

We and our subsidiaries may, subject to the limitations in our Credit Agreement, incur additional debt, secure existing or future debt, recapitalize our debt or take a number of other actions that are not limited by the terms of the indenture governing the Notes that could have the effect of diminishing our ability to make payments on the Notes when due.

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The classification of our Notes may have a material effect on our reported financial results.

As described in the Risk Factor “Servicing our convertible senior notes requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt,” Notes have been historically, and may become in the future, convertible at the option of their holders prior to their scheduled terms under certain circumstances. Even if holders do not elect to convert their Notes, the Notes become convertible prior to their scheduled maturity dates, we would be required to reclassify such Notes and the related debt issuance costs as current liabilities and certain portions of our equity outside of equity to mezzanine equity, which would have an adverse impact on our reported financial results for such quarter, and could have an adverse impact on the market price of our common stock.

Risks Related to the Ownership of our Common Stock

The trading price of our common stock is likely to continue to be volatile.

The trading price of our common stock has been highly volatile and could continue to be subject to wide fluctuations in response to various factors, some of which are beyond our control. Our common stock has experienced an intra-day trading high of $291.42 per share and a low of $177.22 per share over the last 52 weeks.   The stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may seriously affect the market price of companies’ stock, including ours, regardless of actual operating performance. In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. For example, a shareholder litigation like this was filed against us in 2013. While the trial court dismissed the plaintiffs’ complaint with prejudice, this litigation (if the trial court’s order is successfully appealed) or others like it could result in substantial costs and a diversion of our management’s attention and resources.

Conversion of the Notes may dilute the ownership interest of existing stockholders, including holders who had previously converted their Notes, or may otherwise depress the price of our common stock.

The conversion of some or all of the Notes will dilute the ownership interests of existing stockholders to the extent we deliver shares upon conversion of any of the Notes. As described in the Risk Factor “Servicing our convertible senior notes requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt,” Notes have been historically, and may become in the future, convertible at the option of their holders prior to their scheduled terms under certain circumstances. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of the Notes may encourage short selling by market participants because the conversion of the Notes could be used to satisfy short positions, or anticipated conversion of the Notes into shares of our common stock could depress the price of our common stock.

The convertible note hedge and warrant transactions we entered into in connection with the issuance of Notes may affect the value of the Notes and our common stock.

In connection with each issuance of the Notes, we entered into convertible note hedge transactions with the hedge counterparties. The convertible note hedge transactions cover, subject to customary anti-dilution adjustments, the number of shares of our common stock that initially underlay the applicable Notes. The convertible note hedge transactions are expected to reduce the potential dilution and/or offset potential cash payments we are required to make in excess of the principal amount upon conversion of the applicable Notes. We also entered into warrant transactions with the hedge counterparties relating to the same number of shares of our common stock, subject to customary anti-dilution adjustments. However, the warrant transactions could separately have a dilutive effect on our common stock to the extent that the market price per share of our common stock exceeds the applicable strike price of the warrants on the applicable expiration dates.

In addition, the hedge counterparties or their affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the applicable Notes (and are likely to do so during any observation period related to a conversion of Notes). This activity could also cause or prevent an increase or a decrease in the market price of our common stock or the Notes.

We do not make any representation or prediction as to the direction or magnitude of any potential effect that the transactions described above may have on the prices of the Notes or the shares of our common stock. In addition, we do not make any representation that the hedge counterparties have engaged or will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

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Mr. Musk borrowed funds from affiliates of certain underwriters in our public offerings and/or private placements and has pledged shares of our common stock to secure these borrowings. The forced sale of these shares pursuant to a margin call could cause our stock price to decline and negatively impact our business.

Beginning in June 2011, banking institutions that are affiliated with certain underwriters of our completed public offerings of common stock and Notes made extensions of credit to Elon Musk and the Elon Musk Revocable Trust dated July 22, 2003, or the Trust, a portion of which Mr. Musk used to purchase shares of common stock in our public offering in May 2013 and private placements in June 2011 and June 2013. We are not a party to these loans, which are full recourse against Mr. Musk and the Trust and are secured by pledges of a portion of the Tesla common stock currently owned by Mr. Musk and the Trust and other shares of capital stock of unrelated entities owned by Mr. Musk and the Trust.

If the price of our common stock declines, Mr. Musk may be forced by one or more of the banking institutions to provide additional collateral for the loans or to sell shares of Tesla common stock in order to remain within the margin limitations imposed under the terms of his loans. The loans between these banking institutions on the one hand, and Mr. Musk and the Trust on the other hand, prohibit the non-pledged shares currently owned by Mr. Musk and the Trust from being pledged to secure any other loans. These factors may limit Mr. Musk’s ability to either pledge additional shares of Tesla common stock or sell shares of Tesla common stock as a means to avoid or satisfy a margin call with respect to his pledged Tesla common stock in the event of a decline in our stock price that is large enough to trigger a margin call. Any sales of common stock following a margin call that is not satisfied may cause the price of our common stock to decline further.

Anti-takeover provisions contained in our certificate of incorporation and bylaws, the provisions of Delaware law, and the terms of our convertible notes could impair a takeover attempt.

Our certificate of incorporation, bylaws, Delaware law and the terms of our Notes contain provisions which could have the effect of rendering more difficult, delaying or preventing an acquisition deemed undesirable by our board of directors. Our corporate governance documents include provisions:

•	creating a classified board of directors whose members serve staggered three-year terms;

•	authorizing “blank check” preferred stock, which could be issued by the board without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock;

•	limiting the liability of, and providing indemnification to, our directors and officers;

•	limiting the ability of our stockholders to call and bring business before special meetings;

•	requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors;

•	controlling the procedures for the conduct and scheduling of board and stockholder meetings; and

•	providing the board of directors with the express power to postpone previously scheduled annual meetings and to cancel previously scheduled special meetings.

As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation law, which prevents some stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations without approval of the holders of substantially all of our outstanding common stock.

Any provision of our certificate of incorporation or bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.

In addition, the terms of the convertible notes require us to repurchase the convertible notes in the event of a fundamental change. A takeover of our company would trigger an option of the holders of the convertible notes to require us to repurchase the convertible notes. This may have the effect of delaying or preventing a takeover of our company that would otherwise be beneficial to our stockholders or investors in the convertible notes.

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If securities or industry analysts publishing research or reports about us, our business or our market change their recommendations regarding our stock adversely or cease to publish research or reports about us, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. If any of the analysts who may cover us change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, our stock price would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.

DEFAULT UPON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.

OTHER INFORMATION

On August 4, 2015, Jerome Guillen, our Vice President, Worldwide Service and Deliveries, notified Tesla that he will be taking a leave of absence until December 31, 2015.

Recently, our Board of Directors reviewed the job responsibilities of our senior management. On August 6, 2015, the Board determined that Mr. Guillen no longer has reporting requirements under Section 16 of the Securities Exchange Act of 1934, as amended (Section 16).  On the same date, the Board also determined that Doug Field, our Vice President, Engineering, has reporting requirements under Section 16.    

ITEM 6.

EXHIBITS

See Index to Exhibits at end of report.

 

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

		Tesla Motors, Inc.
Date: August 7, 2015		/s/ Deepak Ahuja
		Deepak Ahuja
		Chief Financial Officer
		(Principal Financial Officer, Principal Accounting Officer and Duly Authorized Officer)

 

 

 

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INDEX TO EXHIBITS

 

Exhibit Number				Incorporated by Reference								Filed Herewith
		Exhibit Description		Form		File No.		Exhibit		Filing Date
10.1 **		Agreement for Tax Abatement and Incentives, dated as of May 7, 2015, by and between Tesla Motors, Inc. and the State of Nevada, acting by and through the Nevada Governor’s Office of Economic Development		—		—		—		—		X
10.2		ABL Credit Agreement, dated as of June 10, 2015, by and among Tesla Motors, Inc., Tesla Motors Netherlands B.V., certain of Tesla Motors, Inc.’s and Tesla Motors Netherlands B.V.’s direct or indirect subsidiaries from time to time party thereto, as borrowers, Wells Fargo Bank, National Association, as documentation agent, JPMorgan Chase Bank, N.A., Goldman Sachs Bank USA, Morgan Stanley Senior Funding Inc. and Bank of America, N.A., as syndication agents, the lenders from time to time party thereto, and Deutsche Bank AG New York Branch, as administrative agent and collateral agent.		8-K		001-34756		10.1		June 12, 2015
31.1		Rule 13a-14(a) / 15(d)-14(a) Certification of Principal Executive Officer		—		—		—		—		X
31.2		Rule 13a-14(a) / 15(d)-14(a) Certification of Principal Financial Officer		—		—		—		—		X
32.1*		Section 1350 Certifications		—		—		—		—		X
101.INS		XBRL Instance Document		—		—		—		—		X
101.SCH		XBRL Taxonomy Extension Schema Document		—		—		—		—		X
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document		—		—		—		—		X
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document		—		—		—		—		X
101.LAB		XBRL Taxonomy Extension Label Linkbase Document		—		—		—		—		X
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document		—		—		—		—		X

 

*	Furnished herewith

**	Confidential treatment has been requested for portions of this exhibit

 

 

50

 

Exhibit 10.1

Confidential Treatment Requested by Tesla Motors, Inc.

 

INCENTIVE AGREEMENT

A Contract between the State of Nevada

Acting by and Through the

NEVADA GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT

555 E. Washington Avenue, Suite 5400

Las Vegas, NV 89101

Authorized Representative: Steven Hill

And

TESLA MOTORS, INC.

3500 Deer Creek Road

Palo Alto, CA 94304

Authorized Representative: Deepak Ahuja

THIS INCENTIVE AGREEMENT (“Agreement”), effective October 17, 2014, setting forth contractual terms and requirements for tax abatements and incentives approved by the Nevada Governor’s Office of Economic Development (the “Office”) on November 20, 2014, is entered into by and between the Office, a political subdivision of the State of Nevada, acting pursuant to authority granted by Senate Bill No. 1 of the 28^th (2014) Special Session of the Nevada Legislature (“SB No. 1”), Assembly Bill No. 1 of the 28^th (2014) Special Session of the Nevada Legislature (“AB No. 1”) and Nevada Revised Statutes (“NRS”) Chapters 231 and 360, and Tesla Motors, Inc., a Delaware corporation duly licensed to do business in Nevada (the “State”) and designated as lead participant pursuant to the Application submitted to the Office on October 17, 2014 (the “Lead Participant”) (each a “Party” and collectively the “Parties”), for its facility located at Electric Avenue, Sparks, Nevada, within Storey County, Nevada.

ARTICLE 1.

DEFINITIONS

As used throughout this Agreement, the following definitions shall apply:

(a)	Application

Means the application submitted to the Office by the Lead Participant on October 17, 2014, pursuant to SB No. 1 and AB No. 1, requesting abatement of Property Taxes, Employer Excise Taxes and

 

 

EXECUTION VERSION

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has

been requested with respect to the omitted portions.

---

 

Confidential Treatment Requested by Tesla Motors, Inc.

 

Local Sales and Use Taxes, as well as certificates of eligibility for the Economic Development Rate Rider and two types of transferable tax credits. A copy of which is attached hereto as Exhibit A and incorporated herein.

(b)	Capital Investment

Means all costs and expenses incurred by the Participants in the Project in connection with the acquisition, construction, installation and equipping of the Project.

(c)	Certificate of Eligibility for Tax Abatements

Means the certificates granted by the Office which were approved at a meeting of the Board of the Office on November 20, 2014, which certify eligibility for the abatement of Property Taxes, Employer Excise Taxes and Local Sales and Use taxes. The Certificates of Eligibility for Tax Abatements are attached hereto as Exhibits B through E and incorporated herein.

(d)	Certificate of Eligibility for an Economic Development Rate Rider

Means the certificate granted by the Office which was approved at a meeting of the Board of the Office on November 20, 2014 which certifies eligibility for electric capacity allocation. The Certificate of Eligibility for an Economic Development Rate Rider is attached hereto as Exhibit F and incorporated herein.

(e)	Certificates of Eligibility for Transferable Tax Credits

Means the certificates granted by the Office which were approved at a meeting of the Board of the Office on November 20, 2014 which identify the amount of the available tax credits. The Certificates of Eligibility for Transferable Tax Credits are attached hereto as Exhibit G and incorporated herein.

(f)	Certificate of Transferable Tax Credits

Means a certificate of transferable tax credits issued to the Lead Participant by the Office following an SB No. 1 Audit, as described in section 13 of SB No. 1 and ARTICLE 4 herein, in an amount approved by the Office pursuant to Section 3.07 herein, and based on the SB No. 1 Audit. These credits may be applied to: (1) the excise tax on banks and payroll taxes imposed by chapters 363A and 363B of NRS, (2) the gaming license fees imposed by the provisions of NRS 463.370, (3) the general tax on insurance premiums imposed by chapter 680B of NRS, or (4) any combination of such taxes and fees.

(g)	Continuous Business Operations

Means the Lead Participant’s duty to continuously engage in the activities set forth in its Application except as excused under the Force Majeure provisions of section 6.07 of this Agreement, or by waiver approved by the Executive Director of the Office. Temporary shut-downs for retooling, refurbishment, change-over, or similar stoppages in the ordinary course of business will not be considered interruptions in the Lead Participant’s business operations.

Page 2 of 15

EXECUTION VERSION

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has

been requested with respect to the omitted portions.

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Confidential Treatment Requested by Tesla Motors, Inc.

 

 

(h)	Construction Period

Means the period of time starting on October 17, 2014 and ending on the earlier of (i) the Participants collectively making the Minimum Capital Investment and the Executive Director of the Office certifying the substantial completion of the construction of the Project, or (ii) June 30, 2024.

(i)	Eligible Personal Property

Means all tangible personal property delivered, stored, used or otherwise consumed at the Project Site by any Participant.

(j)	Eligible Real Property

Means all real property located within the Project Site.

(k)	Employer Excise Taxes

Means the taxes imposed on the wages paid by an employer pursuant to chapter 363A or 363B of NRS.

(l)	Local Sales and Use Taxes

Means only the taxes imposed pursuant to chapters 374 and 377 of NRS on the gross receipts of any retailer from the sale or use of Eligible Personal Property, specifically, the Local School Support Tax (NRS 374), Basic City-County Relief Tax (NRS 377) and Supplemental City-County Relief Tax (NRS 377), currently a total tax of 4.85%, as they are amended from time to time. The term does not include the taxes imposed by the Sales and Use Tax Act (NRS 372) or the option taxes in NRS 377A and 377B.

(m)	Minimum Capital Investment

Means Capital Investment of at least Three Billion Five Hundred Million Dollars ($3,500,000,000).

(n)	Nevada Resident

Means an employee for whom the employer maintains the following: (i) a copy of the current and valid State driver’s license of the employee or a current and valid identification card for the employee issued by the Nevada Department of Motor Vehicles, (ii) if the employee is a registered owner of one or more motor vehicles in Nevada, a copy of the current motor vehicle registration of at least one of those vehicles, (iii) proof that the employee is employed full-time and scheduled to work for an average minimum of 30 hours per week, and (iv) proof that the employee is offered coverage under a plan of health insurance provided by his or her employer either directly by the employer or through a third-party plan paid for, at least in part, by the employer (for example, health insurance provided through employer paid contributions to a fund that provides employee health insurance). Whether an employee is a Nevada Resident shall be determined, for purposes of a SB No. 1 Audit, on the last day of the period covered by such audit.

(o)	Participant

Means a business that operates within the geographic boundaries of the Project Site and that contributes to or participates in the Project and has been formally designated as a Participant by the Lead Participant using the form attached hereto as Exhibit H and incorporated herein, and approved as a Participant by the Executive Director of the Office pursuant to the order approved by the Board of the Office on November 20, 2014 (the “Order”).

Page 3 of 15

EXECUTION VERSION

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has

been requested with respect to the omitted portions.

---

 

Confidential Treatment Requested by Tesla Motors, Inc.

 

 

(p)

Project

Means improvements to and operations within the geographic boundaries of the Project Site, undertaken by the Participants engaged in the common purpose or business endeavor outlined in the Application.

(q)	Project Site

That certain site located in Storey County, Nevada, as further described on Exhibit I.

(r)	Property Taxes

Means any taxes levied by the State or Storey County, or any local government, pursuant to the provisions of chapter 361 of NRS.

(s)	Qualified Employee

Means an individual (i) employed by a Participant at the Project Site, (ii) employed full-time and scheduled to work for an average minimum of 30 hours per week, (iii) employed for at least three (3) consecutive months on the last day of the period covered by a SB No. 1 Audit, and (iv) offered coverage under a plan of health insurance provided by his or her employer, either directly by the employer or through a third-party paid for, at least in part, by the employer (for example, health insurance provided through employer paid contributions to a fund that provides employee health insurance), and approved by the Office. An individual engaged solely in the construction of the Project shall not be deemed a Qualified Employee.

ARTICLE 2.

RECITALS

The Lead Participant together with all other Participants collectively intend to make the Minimum Capital Investment and fulfill the other requirements of Section 3.08 herein;

The Lead Participant submitted the Application which contains information the Lead Participant represents to be true, and which satisfies the requirements of SB No. 1 and other applicable statutory requirements for qualification for and grant of tax abatements and incentives pursuant to SB No. 1, AB No. 1 and Chapters 231, 360, 361, 363A, 363B, 372, 374 and 377 of the NRS;

Based upon the Lead Participant’s satisfaction of the applicable statutory requirements and its representations, the Office approved, effective October 17, 2014, the Project’s eligibility for tax abatements and incentives in the amount and to the extent set forth in the Order, which is attached hereto as Exhibit J and incorporated herein;

NOW, THEREFORE, in consideration of this information, the mutual promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby mutually agree as follows:

Page 4 of 15

EXECUTION VERSION

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has

been requested with respect to the omitted portions.

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Confidential Treatment Requested by Tesla Motors, Inc.

 

 

ARTICLE 3.

INCENTIVE AGREEMENT SUMMARY OF TERMS

Section 3.01 Introduction

The terms of SB No. 1, AB No. 1, the Order and this Agreement, set forth the requirements for the tax abatements and incentives approved by the Board of the Office on November 20, 2014. Where the terms of the Application contradict this Agreement, the terms of this Agreement shall govern. A summary of tax abatements and incentives approved by the Board of the Office on November 20, 2014, and an estimate of the economic impacts and tax revenues presented to the Board of the Office are attached hereto as Exhibit K and incorporated herein. A copy of the Exemption Letter issued by the Nevada Department of Taxation (“the Department”) on December 17, 2014, is attached hereto as Exhibit L and incorporated herein (“the Local Sales and Use Tax Exemption Letter”). The Lead Participant understands and agrees that its continuing eligibility for the tax abatements and incentives granted herein is expressly conditioned upon the Lead Participant’s ongoing compliance with the terms of SB No. 1, AB No. 1, the Order, and this Agreement.

Section 3.02 Abatement of Local Sales & Use Tax (NRS CHAPTER 374)

Pursuant to NRS Chapter 374, the Office has granted the Participants an abatement of all Local Sales and Use Tax (as defined in Section 1(l) herein) for a period of time beginning on October 17, 2014 and ending on June 30, 2034, as set forth in the Local Sales and Use Tax Exemption Letter. All other sales and use taxes are not abated. See Exhibit B.

Section 3.03 Abatement of Modified Business Tax (NRS CHAPTER 363B)

Pursuant to NRS Chapter 363B, the Office has granted the Participants an abatement of all the Employer Excise Taxes imposed on the wages of employees hired by the Participants for a period of time beginning on October 17, 2014 and ending on June 30, 2024. See Exhibit C.

Section 3.04 Abatement of Personal Property Tax (NRS CHAPTER 361)

Pursuant to NRS Chapter 361, the Office has granted the Participants an abatement of all the Property Taxes imposed on Eligible Personal Property pursuant to NRS Chapter 361. This abatement shall be for a period of time beginning on October 17, 2014 and ending on June 30, 2024. See Exhibit D.

Section 3.05 Abatement of Real Property Tax (NRS CHAPTER 361)

Pursuant to NRS Chapter 361, the Office has granted the Participants an abatement of all the Property Taxes imposed against Eligible Real Property pursuant to NRS Chapter 361. This abatement shall be for a period of time beginning on October 17, 2014 and ending on June 30, 2024. See Exhibit E.

Section 3.06 Economic Development Rate Rider (NRS CHAPTER 704)

Pursuant to NRS Chapter 704, the Office, in consultation with the Public Utilities Commission of Nevada, has granted the Lead Participant a Certificate of Eligibility for an Economic Development Rate Rider for discounts to be applied for eight years on rates for up to 25 megawatts of power used by the Lead Participant within the Project Site pursuant to a contract with a term of ten (10) years. See Exhibit F. Pursuant to AB No. 1, NRS Chapters 231 and 704, and the attendant regulations for the Economic

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Development Rate Rider Program, the Lead Participant shall be eligible for a discount to the base tariff energy rate portion of its electric power bill equal to: (i) thirty percent (30%) in the first and second years of the contract, (ii) twenty percent (20%) in the third, fourth, fifth and sixth years of the contract, and (iii) ten percent (10%) in the seventh and eighth years of the contract.

Section 3.07 CHAPTER 360 – Transferable Tax Credits for Economic Development

(a) Pursuant to NRS Chapter 360, the Office has granted the Lead Participant Certificates of Eligibility for Transferable Tax Credits for up to One Hundred Ninety Five Million Dollars ($195,000,000) in transferable tax credits over a period of seven consecutive State fiscal years beginning July 1, 2015 and ending June 30, 2022. For each of those seven State fiscal years, the cumulative amount of transferable tax credits issued to the Lead Participant in Certificates of Transferable Tax Credits shall not exceed the amounts in the following schedule:

 

Year(s)	Amount
2015-2016	Forty Five Million Dollars ($45,000,000)
2015-2017	Ninety Million Dollars ($90,000,000)
2015-2018	One Hundred Thirty Five Million Dollars ($135,000,000)
2015-2019	One Hundred Eighty Million Dollars ($180,000,000)
2015-2020	One Hundred Ninety Five Million Dollars ($195,000,000)
2015-2021	One Hundred Ninety Five Million Dollars ($195,000,000)
2015-2022	One Hundred Ninety Five Million Dollars ($195,000,000)

Any credits earned in a fiscal year prior to June 30, 2022, but not issued because issuance would cause the cumulative amount of Certificates of Transferable Tax Credits issued to exceed the maximum amounts allowed in the schedule above may be carried forward for issuance to the Lead Participant in subsequent fiscal years ending on or before June 30, 2022. Each Certificate of Transferable Tax Credits issued to the Lead Participant pursuant to NRS Chapter 360 and ARTICLE 4 herein may be transferred only once, and shall expire four (4) years after the date on which the Certificate of Transferable Tax Credits is issued to the Lead Participant. Should the total amount of Certificates of Transferable Tax Credits issued to the Lead Participant amount to less than One Hundred Ninety Five Million Dollars ($195,000,000) after the Office’s issuance of a Certificate of Transferable Tax Credits related to the Lead Participant’s SB No. 1 Audit for the period ending June 30, 2022, such remainder shall not be available to the Lead Participant, and will be considered forever forgone.

(b) Pursuant to NRS Chapter 360, the Lead Participant was approved for Certificates of Eligibility for Transferable Tax Credits at a meeting of the Board of the Office on November 20, 2014. See Exhibit G.

(c) Each Certificate of Transferable Tax Credits issued pursuant to subsection (a) above shall be in a total amount equal to: (i) Twelve Thousand Five Hundred Dollars ($12,500) for each new Qualified Employee, up to a maximum of 6,000 Qualified Employees, (ii) five percent (5%) of the first One Billion Dollars ($1,000,000,000) of new Capital Investment in the State made collectively by the Participants in the Project, and (iii) two and eight tenths percent (2.8%) of the next Two Billion Five Hundred Million Dollars ($2,500,000,000) of new Capital Investment in the State made collectively by the Participants in the Project, all subject to the annual State fiscal year maximum amount described in subsection (a) above. For purposes of this subsection (c), “new” shall mean the amount resulting from subtracting the Qualified Employees or Capital Investment at the end of the period covered by the most

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recent SB No. 1 Audit certified by the Office from the Qualified Employees or Capital Investment, as applicable, at the end of the period covered by the current SB No. 1 Audit. The wages of the Qualified Employees of the Project for federal income tax purposes reported or required to be reported on Form W-2 must amount to a cumulative weighted average rate of at least Twenty Two Dollars ($22) per hour. Whether the requirement is met shall be measured on the basis of a cumulative weighted average ascertained by dividing the total wages paid by the number of hours worked in each period covered by each then-existing SB No. 1 Audit.

Section 3.08 Continuing Requirements Applicable to Lead Participant

The Lead Participant understands and agrees that its continuing eligibility for the tax abatements and incentives granted herein is expressly conditioned upon its compliance with the following requirements:

(a)	Capital Investment Requirement

Provide documentation satisfactory to the Office that the Participants in the Project collectively will make the Minimum Capital Investment in the State during the Construction Period.

(b)	Common Purpose

Provide documentation satisfactory to the Office that the Participants in the Project are engaged, and will continue to be engaged, in the common purpose or business endeavor set forth in the Application.

(c)	Place of Business

Provide documentation satisfactory to the Office that the place of business of each Participant for this Project is and continues to be located within the geographic boundaries of the Project Site.

(d)	Registration

Provide documentation satisfactory to the Office that each Participant in the Project is licensed to do business in the State and holds all other licenses or permits required by the State or Storey County to conduct the endeavor set forth in the Application at the Project Site.

(e)	Construction Employer Health Insurance

Provide documentation satisfactory to the Office that each employer engaged in the construction of the Project offers coverage under a plan of health insurance and that each employee engaged in the construction of the Project is offered coverage under the plan of health insurance provided directly by his or her employer or through a third-party paid for, at least in part, by the employer (for example, health insurance provided through employer paid contributions to a fund that provides employee health insurance).

(f)	Operations Health Insurance

Provide documentation satisfactory to the Office that the Lead Participant and each Participant in the Project offers coverage under a plan of health insurance and that each employee is offered coverage under a plan of health insurance provided directly by his or her employer or through a third-party paid for, at least in part, by the employer (for example, health insurance provided through employer paid contributions to a fund that provides employee health insurance).

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(g)	Nevada Residency Requirement

Provide documentation satisfactory to the Office that at least fifty percent (50%) of the employees engaged in construction of the Project and fifty percent (50%) of the Qualified Employees engaged at the Project are Nevada Residents, unless such requirement is waived by the Executive Director of the Office upon proof satisfactory to the Executive Director of the Office that there is an insufficient number of Nevada Residents available and qualified for such employment. Whether the requirements of this subsection (g) (the “Nevada Residency Requirement”) are met shall be measured by identifying whether each individual employee meets the standards for a Nevada Resident, and comparing the total number of Nevada Resident employees to the total number of all employees, on a cumulative basis. Once an employee has been determined to be a Nevada Resident by an SB No. Audit then that status need not be reevaluated by the auditor in subsequent SB No. 1 Audits as long as at least sixty percent (60%) of the employees were determined to be Nevada Residents in the most recent SB No. 1 Audit certified by the Office.

(h)	Continued Operations Requirement

The Lead Participant will maintain Continuous Business Operations in the State until at least June 30, 2024, and will comply with the Nevada Residency Requirement throughout the remaining term of this Agreement in any operations at the Project Site continuing from July 1, 2024 through June 30, 2034.

(i)	Continued License and Registration Requirement

The Participant agrees to maintain, until at least June 30, 2024, all licenses and permits described in Section 3.08(d). Failure to maintain the licenses and meet the licensure requirements may be considered a breach of this Agreement.

ARTICLE 4.

COMPLIANCE AUDIT

(a) Pursuant to NRS Chapter 360, beginning with the State fiscal year ending June 30, 2015 and ending with the State fiscal year ending June 30, 2034, the Lead Participant agrees to provide the Office and the Department with a full compliance audit (“SB No. 1 Audit”) of the Participants in the Project for each such State fiscal year, or shorter period approved by the Office, during this period, within sixty (60) days of the end of the State fiscal year, or shorter period approved by the Office. This SB No. 1 Audit shall: (i) show the amount of Capital Investment in the State by each Participant in the Project, which will be further categorized by depreciable-life, in the manner shown in Exhibit M, (ii) for each State fiscal year which begins during the Construction Period, show the number of employees engaged in the construction of the Project, and show the total number of construction employees and the percentage of construction employees who are Nevada Residents, in the manner shown in Exhibit N, (iii) show the number of Qualified Employees at the Project for each Participant, the average wage paid to Qualified Employees throughout the period, and show the total number of Qualified Employees and the percentage of Qualified Employees who are Nevada Residents, in the manner shown in Exhibit O, (iv) be certified by an independent certified public accountant licensed in the State who is approved by the Office and the Department and (v) give the auditor’s evaluation of the compliance of the Participants with the record

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keeping requirements of SB No. 1. The auditor may rely upon monthly audits provided to Storey County if the audits are conducted by an independent certified public accountant licensed in the State who is approved by the Office and the Department, to the extent that the Storey County audits provide information required in an SB No. 1 Audit, and provided that the Storey County audits are provided in a form agreed to by GOED and the Department. The Lead Participant further agrees to pay the cost of each SB No. 1 Audit required by this Section 4(a), and of compliance with any audit-related requirements.

(b) Within Fourteen (14) business days after receipt of a SB No. 1 Audit provided by the Lead Participant pursuant to subsection (a), and any other information required by the Office and the Department, the Office, in consultation with the Department, shall determine whether to certify the SB No. 1 Audit and make a determination of whether a Certificate of Transferable Tax Credits will be issued. If the Office and the Department determine within the fourteen (14) business days that the SB No. 1 Audit is incomplete then the Office shall notify the Lead Participant of such determination within that time period and the Lead Participant shall have Sixty (60) days to resubmit the SB No. 1 Audit with such additional information as is reasonably necessary to make it complete. Upon such resubmission the Office and the Department shall have an additional Fourteen (14) business days to determine whether to certify the SB No. 1 Audit and make a determination of whether a Certificate of Transferable Tax Credits will be issued. If the Office and the Department certify the SB No. 1 Audit and determine that all other requirements for the transferable tax credits have been met, either upon the initial submission or any subsequent resubmission, the Office shall notify the Lead Participant that the Certificate of Transferable Tax Credits will be issued in an amount calculated pursuant to Section 3.07(c) herein. Within Thirty (30) days after the receipt of the notice, the Lead Participant shall make an irrevocable declaration of the amount of transferable tax credits that will be applied to each fee or tax set forth in the definition of Certificate of Transferable Tax Credits, thereby accounting for all of the credits which will be issued. Upon receipt of the declaration, the Office shall issue to the Lead Participant a Certificate of Transferable Tax Credits in the amount approved by the Office for the fees or taxes included in the declaration.

(c) In the event that the Office, in consultation with the Department, or the Lead Participant determines that changes are needed to the SB No. 1 Audit structure, the Office, the Department and the Lead Participant will meet promptly and utilize best efforts to resolve all audit issues promptly. The Office, in consultation with the Department, will make a timely determination annually regarding whether the accounting firm selected to perform the SB No. 1 Audit has carried out its duties in accordance with the generally accepted auditing standards promulgated by the Auditing Standards Board of the American Institute of Public Accountants. In the event that the Office determines that the firm has failed to perform to such standards, the Lead Participant will work with the Office to select an alternate audit firm in a timely fashion.

(d) In the event that the Office, in consultation with the Department, determines that information, over and above what is required by the SB No. 1 Audit to fulfill the obligations of SB1 and this Agreement, should be collected and reported, the Lead Participant agrees to meet with the Office and the Department, to determine the scope of this additional information and the process through which such additional information shall be collected and reported by the Lead Participant to the Office and the Department. Such meeting must occur within thirty (30) days of the Lead Participant’s receipt of a written request by the Office or the Department for such a meeting, and Lead Participant shall provide this additional information to the Office and the Department in a timely fashion.

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(e) The audit workpapers and supporting documentation for the information audited in subsection (a) herein shall be available for confidential review by the Office and the Department. Such workpapers and documentation shall (i) constitute records and files of the Department which are confidential pursuant to NRS 360.255 and (ii) constitute documents which are subject to the confidentiality protections afforded to the Office consistent with section 6.14 of this Agreement.

ARTICLE 5.

RECAPTURE PROVISIONS

Section 5.01 Recapture of Abated Tax or Granted Incentives

(a) Recapture of Abated Taxes: In the event that the Office, in consultation with the Department, makes a determination that the Participants have: (i) failed to make the Minimum Capital Investment required in Section 3.08(a) herein, (ii) failed to either meet the Nevada Residency Requirement in Section 3.08(g) or obtain a waiver from the Executive Director of the Office excusing their failure to meet this requirement, or (iii) failed to meet the Continued Operations Requirement in Section 3.08(h), the Lead Participant shall repay all abatements described in Sections 3.01 through 3.05, inclusive, of this Agreement, with interest, in the amount determined by the Office. The Lead Participant will make repayment of such abatement granted under NRS Chapter 360 to the Department, and will make repayment of such abatements under NRS Chapter 361 to the treasurer of Storey County, and the Department and Storey County shall collect the amounts of such abatements under the procedures set forth in Title 32 of NRS.

(b) Recapture of Transferable Tax Credits: In the event that the Office, in consultation with the Department, makes a determination that: (i) the Participants have failed to make the Minimum Capital Investment required in Section 3.08(a) herein, (ii) the Participants have failed to either meet the Nevada Residency Requirement in Section 3.08(g) or obtain a waiver from the Executive Director of the Office excusing their failure to meet this requirement, (iii) the Lead Participant has submitted any false statement, representation or certification in any document submitted for the purpose of obtaining transferable tax credits, or (iv) the Lead Participant otherwise became ineligible for transferable tax credits after receiving them, then the Lead Participant shall repay to the Department or the State Gaming Control Board, as applicable, any portion of the transferable tax credits to which the Lead Participant was not entitled, in the amount(s) determined by the Office in consultation with the Department. The Department and the Gaming Control Board shall collect the amounts of such transferable tax credits under the procedures set forth in Titles 32 and 41, respectively.

(c) The Lead Participant’s duty to repay under paragraphs (a) and (b) of this section shall not begin until:

(i) The Office, following consultation with the Department, serves upon the Lead Participant a Notice of Default and Opportunity to Cure, giving the Lead Participant the right, but not the obligation, to cure any default within thirty (30) days of issuance of the notice;

(ii) The Lead Participant fails to cure the default within thirty (30) days of issuance of the notice; and,

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(iii) The Office, following consultation with the Department, issues a written determination that the Lead Participant has failed to cure the default which is the subject of the notice, and specifying the amount of tax abatements and transferable tax credits to be repaid.

(d) The Lead Participant shall make any repayments required under this Section 5.01 within sixty (60) days of the issuance of a written determination by the Office under paragraph (c) above.

(e) Any provisions of the NRS notwithstanding, the Statute of Limitations for collecting amounts owed under this section shall be tolled until July 1, 2027.

(f) Determinations of the Office under paragraph (c)(iii) of this section may be subject to appeal to the Nevada Tax Commission under the procedures set forth in NRS Title 32, or to the Gaming Control Board under the procedures set forth in NRS Title 41.

Section 5.02 Interest

Except as otherwise provided in NRS 360.232 and 360.320, the Lead Participant shall, in addition to the amount of the abatement or incentive required to be repaid pursuant to this Article 5, pay interest on the amount due in accordance with NRS 99.040 for each month, or portion thereof, from the last day of the month following the period for which the payment would have been made had the abatement or incentive not been approved, until the date of payment.

ARTICLE 6.

MISCELLANEOUS TERMS

Section 6.01 Voluntary Agreement

The Lead Participant and the Office have agreed to voluntarily execute this Agreement, with full knowledge of its legal significance, and with the express intention of implementing the legal consequences provided for herein.

Section 6.02 Notices

Any notice provided under this Agreement shall be made to the Parties as follows:

To the Office:

Governor’s Office of Economic Development

555 East Washington Boulevard

Suite 5400

Las Vegas, NV 89101

Attention: Executive Director

To the Department of Taxation:

Nevada Department of Taxation

1550 College Parkway

Carson City, NV 89706

Attention: Kathleen Douglas

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To Tesla:

Tesla Motors, Inc.

3500 Deer Creek Road

Palo Alto, CA 94304

Attention: Deepak Ahuja

Section 6.03 Entire Agreement

This Agreement incorporates all of the negotiations of the Lead Participant and the Office and is the final expression and agreement of the Parties, and shall supersede any and all prior agreements, commitments, and oral or written representations by and between the Office and the Lead Participant.

Section 6.04 Amendments or Modifications

This Agreement may not be amended, waived, or modified in any manner without the written consent of the Lead Participant and the Office.

Section 6.05 Partial Invalidity

Should any provision of this Agreement be deemed invalid, illegal, or unenforceable by a court of law, administrative agency, board, or commission of an administrative agency, such provision shall be severable from the remainder of this Agreement and the validity, legality, and enforceability of the remaining provisions will not in any way be affected or impaired thereby.

Section 6.06 Choice of Law

This Agreement is a valid enforceable agreement and shall be enforced according to its written terms under the laws of the State. The Lead Participant and the Office agree to be bound by this Agreement, and any questions of interpretation, or any actions arising based on the validity, enforcement, or interpretation of this Agreement shall be governed by the law of the State. Venue for any legal action concerning this Agreement shall lie exclusively in the First Judicial District Court, Carson City, Nevada. Both Parties consent to jurisdiction and venue in the State.

Section 6.07 Force Majeure

Neither Party shall be deemed to be in violation of this Agreement if it is prevented from performing any of its obligations hereunder due to strikes, failure of public transportation, civil or military authority, act of public enemy, accidents, fires, explosions, or acts of God, including, without limitation, earthquakes, floods, winds, or storms. In such an event the intervening cause must not be through the fault of the Party asserting such an excuse, and the excused Party is obligated to promptly perform in accordance with the terms of this Agreement after the intervening cause ceases.

Section 6.08 Authorization to Sign

The Office and the Lead Participant each represent and warrant, through their signatories, that such signatory is duly authorized to execute this Agreement and that it is binding in accordance with its terms on the Party represented by the signatory.

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Section 6.09 Counterparts

This Agreement may be executed in any number of counterparts; each of which when executed and delivered shall be an original, but all such counterparts shall constitute one and the same Agreement. Any signature page of this Agreement may be detached from any counterpart without impairing the legal effect of any signatures thereon, and may be attached to another counterpart, identical in form thereto, but having attached to it one or more additional signature pages. Facsimile, electronic signatures or signatures on a PDF via electronic mail shall be effective as originals. This Agreement shall be effective by and between the Office and the Lead Participant.

Section 6.10 Costs and Attorney Fees

Each Party shall bear its own costs and fees related to the matters set forth herein as incurred prior to the full execution of this Agreement. In the event that the Lead Participant is deemed to have breached this Agreement or failed to comply with any of its requirements, each Party agrees to bear its own costs and fees related to such breach of this Agreement, or revocation of the abatements and incentives implemented under this Agreement.

Section 6.11 Paragraph and Section Headings

Paragraph and section headings within this Agreement are of no legal force and effect, but are provided solely for convenience.

Section 6.12 Language of Agreement

The Parties agree that the Lead Participant and the Office have reviewed this Agreement, and the Agreement and any potential ambiguity shall be construed neutrally.

Section 6.13 Successors in Interest

The Lead Participant has represented that it possesses the necessary skill, expertise and ability to carry out the development of the Project pursuant to SB No. 1, the Order and this Agreement. The qualifications, experience, financial capability and expertise of the Lead Participant are of particular concern to the Office. It is because of these qualifications that the Office has entered into this Agreement. No voluntary or involuntary assignee or successor in interest to the Lead Participant shall acquire any rights or powers under this Agreement without the written consent of the Office, which shall not be unreasonably withheld. No assignee or successor in interest shall be approved by the Office unless such assignee or successor in interest is bound by the terms of this Agreement.

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Section 6.14 Confidentiality

The Lead Participant may request confidential treatment for materials provided to the Office. The Office will evaluate such requests for confidential treatment in accordance with applicable State laws and any protections subsequently authorized under State law. The Lead Participant must mark and identify any information that is the subject of a request for confidential treatment and must include with its request an explanation of why the marked materials are entitled to confidential treatment.

Section 6.15 Indemnification

The Lead Participant shall indemnify and hold harmless, to the extent that it may legally do so, the State, and its agents, servants, employees, officers and elected officials against any loss from any and every claim or demand of every kind and character for asserted claims of negligence, gross negligence, wantonness, willful misconduct or breach of any obligations and warranties hereunder committed by Lead Participant in connection with the performance of the Project or arising from the implementation of this Agreement. This indemnification and hold harmless covenant covers and includes all claims and legal defenses, present or future, which can or ever may be asserted by any person or persons, or their heirs, successors or assigns, or any other legally recognized entity, as a result of personal injuries, death, property damage, or other legal damages in connection with the performance of the Project or arising from the implementation of this Agreement.

Section 6.16 Termination of the Agreement

This Agreement shall terminate on June 30, 2034, unless terminated earlier by written agreement of the Parties.

SIGNATURE PAGE FOLLOWS

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IN WITNESS WHEREOF, the Parties have executed this Agreement effective as of the date first written above.

LEAD PARTICIPANT:

TESLA MOTORS, INC., a Delaware

corporation licensed in the State

By:	/s/ Deepak Ahuja
	Deepak Ahuja, Chief Financial Officer

THE OFFICE:

STATE OF NEVADA, acting by and through

the NEVADA GOVERNOR’S OFFICE OF

ECONOMIC DEVELOPMENT

By:	/s/ Steven D. Hill
	Steven D. Hill, Executive Director

 

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EXHIBIT A

GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT

INCENTIVE AGREEMENT

APPLICATION OF TESLA FOR INCENTIVES

 

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						GOED OFFICE USE ONLY
						MMQ        X	NQ
Application Checklist pursuant to S.B. No. 1 (2014 Special Session)						DATE RECEIVED:	10/17/2014
Lead Participant’s Name:			Tesla Motors, Inc.			INITIALS	BJM

 

For All Participants
	x	Participant letter requesting incentives (can be combined in one letter). In the letter, please discuss the following:
		•The names of Lead Participant and other Participants in the Nevada facility.
		•The abatements and incentives being requested by the Lead Participant.
		•The significance of the abatements and incentives to the decision to locate or expand in Nevada.
		•How the project will promote the economic development of the State and aid the implementation of the State Plan for Economic Development including topics such as: diversification from mining and gaming/hospitality, advancement of State targeted sectors, including manufacturing, expansion of global engagement, and innovation in core and emerging industries.
		•Where the major markets are for the product to be distributed from the Nevada facility.
		•Job growth plans for the Participants and whether hiring will be from within the state.
		•Other topics including the Lead Participant’s business history and plans for (i) community involvement, (ii) education and workforce development, (iii) environmental policy and (iv) possible future expansions in the State.
	x	A list of Participants in the Qualified project (Att: “A”).
	x	A detailed description (e.g., company deck or brochure) of the business endeavor for the Nevada facility (Att: “B”).
	x	A detailed description (e.g., surveyor drawing and legal description) of the Nevada facility location (Att: “C”).
	x	Operations Employment Schedule (Att: “D”):
		•Number of full-time employees, by position, the Participants’ intend to create.
		•Average annual wage and weekly working hours for each job position.
		•Projected number of employees based on a 1-year, 3-year, 5-year, 8-year and 10-year hiring plan.
	x	Operations Employee health insurance and benefits package/plan (Submittal).
	x	Construction Employment Schedule (Att: “E”).
	x	Construction Employee health insurance and benefits package/plan (Submittal).
	x	Capital Investment form (Att: “F”):
		•Estimated list of the real property investment the Participants’ intend to make.
		•Estimated list of the equipment the Participants’ intend to purchase.
	x	A copy of each Participants State of Nevada business license or application. (Att. “G”)
	x	If available, letters of support from the local government (e.g., city, county, school district). (Att. “H”)
	x	A recommendation letter from the local Regional Development Authority (RDA). (Att. “I”)
	x	Regional Development Authority: Economic Development Authority of Western Nevada
		RDA Contact Name:    Mike Kazmierski
The purpose of this application is to establish program eligibility and estimate incentive amounts based on the details provided. Incentives awarded are subject to the requirements of Nevada Law. If eligible, actual incentive amounts will be based on completion of an application, final approval at scheduled GOED Board meetings, and ongoing compliance with the program’s contractual terms. All information submitted as part of this application is a public record, subject however, to those portions, upon request, the Executive Director determines to be a trade secret or other confidential proprietary information of the business pursuant to NRS [cite pending].
Please e-mail application packet to [e-mail] and cc: [e-mail]

Nevada Governor’s Office of Economic Development

555 E. Washington Ave., Ste 5400 • Las Vegas, Nevada 89101 • 702.486.2700 • (Fax) 702.486.2701 • www.diversifynevada.com

Rev. 9/15/2014

 

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Application pursuant to S.B. 1 No. 1 (2014 Special Session)		Company is an / a: (check one)
Company Name:	Tesla Motors, Inc.	þ	New Business in Nevada
Date of Application:	October 17, 2014	¨	Expansion of Existing Nevada company

 

Section 1-Type of Incentives
Please check all that the company is applying for on this application:
þ	Sales & Use Tax Abatement	þ	Real Property Tax Abatement	þ	Economic Diversification District4
þ	Modified Business Tax Abatement	þ	Economic Development Rate Rider  (EDRR)1
þ	Personal Property Tax Abatement	þ	Transferable Tax Credits2,3
1 The EDRR program requires pre-approval authorization prior to application, is subject to program funding limitations, and may not be available for all applicants.
2 The transferable tax credit program requires a minimum investment of $3.5 billion over a ten year period. 3 Tesla requests up to $195,000,000.00 in transferable tax credits.
4 Formation of an Economic Diversification District can only be completed through separate application to governing body of sponsoring municipality. Checked box is for information only.

 

Section 2 - Corporate Information

COMPANY NAME (Legal name under which business will be transacted in Nevada)

FEDERAL TAX ID #

Tesla Motors, Inc.

91-2197729

CORPORATE ADDRESS TO RECEIVE DOCUMENTS

CITY / TOWN

STATE / PROVINCE

ZIP

3500 Deer Creek Road

Palo Alto

CA

94304

TELEPHONE NUMBER

WEBSITE

[phone]

http://www.teslamotors.com

COMPANY CONTACT NAME

COMPANY CONTACT TITLE

Daniel Witt

Manager, Business Development and Policy

E-MAIL ADDRESS

PREFERRED PHONE NUMBER

[e-mail]

[phone]

Has your company ever applied and been approved for incentives available by the Governor’s Office of Economic Development?

¨

Yes

þ

No

If Yes, list the program awarded, date of approval, and status of the accounts (attach separate sheet if necessary):

 

Section 3 - Nevada Facility

Type of Facility:

¨

Headquarters

¨

Service Provider

þ

Technology

þ

Distribution / Warehouse / Logistic

¨

Back Office Operations

þ

Manufacturing

þ

Research & Development / Intellectual Property

¨

Other:

PERCENT OF COMPANY’S MARKET OUTSIDE OF NEVADA

EXPECTED DATE OF NEW / EXPANDED OPERATIONS (MONTH / YEAR)

100%

Jul-2016

NAICS CODE / SIC

INDUSTRY TYPE

335912

Primary Battery Manufacturing

DESCRIPTION OF COMPANY’S NEVADA OPERATIONS (COMPANY DECK IS ACCEPTABLE)

Manufacturing of Lithium Ion battery cells and assembly of battery modules and packs for the purposes of both vehicle integration and stationary storage production.

PROPOSED / ACTUAL NEVADA ADDRESS (Must be within designated project site)

CITY / TOWN

COUNTY

ZIP

Electric Avenue

McCarran

Storey County

89434

WHAT OTHER STATES / REGIONS / CITIES ARE BEING, WERE CONSIDERED FOR YOUR COMPANY’S RELOCATION / EXPANSION / STARTUP?

Arizona, California, Oregon, New Mexico, Texas, Utah, Washington

Section 4 - Site Selection Factors

Please rate the following in order of importance to the company’s business (1 = very low; 5 = very high):

Availability of qualified workforce:

3

Utility infrastructure:

5

State and local tax structure:

5

Labor costs:

5

Utility costs:

5

State and local incentives:

5

Real estate availability:

4

Transportation infrastructure:

4

Business permitting & regulatory  structure:

5

Real estate costs:

4

Transportation costs:

3

Access to higher education resources:

3

OTHER FACTORS & RATINGS (N.A. IF INCLUDED IN PARTICIPANT LETTER)

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[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

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Confidential Treatment Requested by Tesla Motors, Inc.

 

Section 5-Real Estate & Construction (Fill in either New Operations/Startup or Expansion, not both.)
NEW OPERATIONS / STARTUP		EXPANSIONS
Part 1. ARE YOU CURRENTLY / PLANNING ON		Part 1. ARE YOU CURRENTLY LEASING SPACE IN NV?
LEASING SPACE IN NV?	No	If No, skip to Part 2. If Yes, continue below:
If No, skip to Part 2. If Yes, continue below:		What year(s)?
What year(s)?		How much space (sq. ft.)?
How much space (sq. ft.)?		Annual lease cost at current space:
Annual lease cost of space:		Due to expansion, will you lease additional space?
Do you plan on making building tenant improvements?		If No, skip to Part 3. If Yes, continue below:
If No, skip to Part 2. If Yes*, continue below:		Expanding at the current facility or a new facility?
When to make improvements (month, year)?		What year(s)?
		How much expanded space (sq. ft.)?
Part 2. ARE YOU CURRENTLY / PLANNING ON BUYING		Annual lease cost of expanded space:
OR BUILDING AN OWNER-OCCUPIED FACILITY IN NV?	Yes	Do you plan on making building tenant improvements?
If Yes*:		If No, skip to Part 3. If Yes*, continue below:
Purchase date, if buying (month, year):	N/A	When to make improvements (month, year)?
When to break ground, if building (month, year)?	Oct-2014
Estimated completion date, if building (month, year):	Oct-2017	Part 2. ARE YOU CURRENTLY OPERATING AT AN
How much space (sq. ft.)?	5.8M	OWNER-OCCUPIED BUILDING IN NV?
		If No, skip to Part 3. If Yes, continue below:
*Please complete Section 6-Capital Investment for New Operations / Startup.    (Can be replaced by a completed Capital Investment form.)
		How much space (sq. ft.)?
		Current assessed value of real property?
		Due to expansion, will you be making building improvements?
		If No, skip to Part 3. If Yes*, continue below:
		When to make improvements (month, year)?
		Part 3. DO YOU PLAN ON BUILDING OR BUYING A
		NEW FACILITY IN NV?
		If Yes*, continue below:
		Purchase date, if buying (month, year):
		When to break ground, if building (month, year)?
		Estimated completion date, if building (month, year):
		How much space (sq. ft.)?
		* Please complete Section 6-Capital Investment for Expansions below.
Section 6 - Capital Investment (Fill in either New Operations/Startup or Expansion, not both.)
NEW OPERATIONS / STARTUP		EXPANSIONS
HOW MUCH CAPITAL INVESTMENT IS PLANNED? (Breakout below):		HOW MUCH CAPITAL  INVESTMENT IS PLANNED? (Breakout below):
Land:	N/A	Land:
Building Purchase (if buying):	N/A	Building Purchase (if buying):
Building Hard Costs (if building / making improvements):	$1.1 billion	Building Hard Costs (if building / making improvements):
Equipment Cost:	$3.9 billion	Equipment Cost:
Total:	$5.0 billion	Total:
		Is the equipment purchase for replacement
		of existing equipment?
		Current assessed value of personal property in NV:
		(Must attach the most recent assessment from the County Assessor’s Office.)

2 of 4

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

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Confidential Treatment Requested by Tesla Motors, Inc.

 

Section 7a-Operations Employment (Fill in either New Operations/Startup or Expansion, not both.)
NEW OPERATIONS / STARTUP			EXPANSIONS
How many qualified employees* are intended to be hired			How many qualified employees* are intended to be hired
by the end of the allowable 10-year period?:		6,500	by the end of the allowable 10-year period?:
Average hourly wage of these employees:		$26.16 (fn1)	Average hourly wage of these new employees:
fn1: This figure represents an average hourly W-2 wage. It includes			How many full-time employees prior to expansion?:
overtime and other items included in income for federal income tax purposes.			Average hourly wage of these employees:
			Total number of employees after expansion:
* A qualified employee must be employed at the site of a qualified project, scheduled to work an average minimum of 30 hours per week, is offered coverage under a plan of health insurance provided by his or her employer, is eligible for health care coverage, and whose position is a “primary job” as set forth in NAC 360.474.
þ	OTHER COMPENSATION (Check all that are projected to apply):
þ	Overtime		¨     Merit increases
þ	PTO / Sick / Vacation		¨    COLA adjustments
þ	Bonus		¨    Tuition assistance
þ	Retirement Plan / Profit Sharing / 401(k)		¨     Other:
BRIEF DESCRIPTION OF ADDITIONAL COMPENSATION PROGRAMS AND ELIGIBILITY REQUIREMENTS (Attach a separate sheet if necessary):
Section 7b - Construction Employment
GENERAL CONTRACTOR			SUBCONTRACTORS & OTHERS
How many employees are intended to be hired			How many employees are intended to be hired
by the end of the allowable 10-year period?:		**	by the end of the allowable 10-year period?:	**
Average hourly wage of these employees:		**	Average hourly wage of these employees:	**
Each Construction Employer engaged in the construction at the Qualified project must offer a plan of health insurance to each construction employee employed at the Qualified project.
OTHER COMPENSATION (Check all that are projected to apply):			This information will vary by contractor.
¨	Overtime		¨    Merit increases
¨	PTO / Sick / Vacation		¨    COLA adjustments
¨	Bonus		¨    Tuition assistance
¨	Retirement Plan / Profit Sharing / 401(k)		¨    Other:
BRIEF DESCRIPTION OF ADDITIONAL COMPENSATION PROGRAMS AND ELIGIBILITY REQUIREMENTS (Attach a separate sheet if necessary):
	** See Addendum 3.

 

Section 8a-Operations Employee Health Insurance Benefit Program
Is health insurance for employees and an option for dependents offered?:					Yes (copy of benefit plan must be attached)		No
Package includes (check all that are projected to apply):					This information will vary by participant.
¨    Medical	¨     Vision	¨     Dental		Other:	See Attachment “J” and individual certifications.
Qualified after (check one):
¨ Upon employment	¨    Three months after hire date		¨    Six months  after hire date			Other:
COST OF HEALTH INSURANCE FOR COMPANY (annual amount per employee):				PERCENTAGE OF HEALTH INSURANCE COVERAGE:
				By Company:		By Employee:

3 of 4

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

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Confidential Treatment Requested by Tesla Motors, Inc.

 

Section 8b-Construction Employee Health Insurance Benefit Program
Is health insurance for employees and an option for dependents offered?:                                Yes (copy of benefit plan must be attached)                        No
Package includes (check all that are projected to apply):				This information will vary based on contractor. See individual certifications.
	¨    Medical	¨    Vision	¨    Dental	Other:
Qualified after (check one):
	¨    Upon employment		¨     Three months after hire  date		¨    Six months after hire date		Other:
COST OF HEALTH INSURANCE FOR COMPANY (annual amount per employee):         PERCENTAGE OF HEALTH INSURANCE COVERAGE:
						By Company:	By Employee:

 

Section 9-Certification
I, the undersigned, hereby grant to the Governor’s Office of Economic Development access to all pertinent and relevant records and documents of the aforementioned Lead Participant. I understand this requirement is necessary to qualify and to monitor for compliance of all statutory and regulatory provisions pertaining to this application.
If this application is approved, the Lead Participant will monitor and update the material information related to Participants, job creation and capital investment as needed to ensure the Lead Participant remains eligible for the incentives granted.
Being the Lead Participant, I do hereby declare that the facts herein stated are true and that all licensing and permitting requirements will be met prior to the commencement of operations:

 

Daniel Witt		/s/ Daniel Witt
Name of person authorized for signature		Signature
Manager, Business Development and Policy		October 17, 2014
Title		Date

Nevada Governor’s Office of Economic Development

555 E. Washington Ave., Ste 5400 • Las Vegas, Nevada 89101 • 702.486.2700 • (Fax) 702.486.2701 • www.diversifynevada.com

 

4 of 4

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

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	Confidential Treatment Requested by Tesla Motors, Inc. Alex Leath Partner Direct: [phone] [e-mail]

October 17, 2014

BY E-MAIL

Steve Hill

Executive Director

Nevada Governor’s Office of Economic Development

555 E. Washington Avenue

Suite 5400

Las Vegas, NV 89101

RE:	Gigafactory Lead Participant Letter Requesting Incentives

Dear Mr. Hill,

Enclosed with this letter is the application to the State of Nevada Governor’s Office of Economic Development (the “Office”), as required under Section 11 of S.B. No. 1 (2014 Special Session) (referred to herein as the “Act”), for certain incentives related to Tesla Motors, Inc’s proposed Gigafactory to be developed in Storey County, Nevada (the “Project”). The purpose of this letter is to comply with the application checklist provided by your office.

1) Participants:

The Lead Participant in the Project is Tesla Motors, Inc. (“Tesla”). Tesla is an active Nevada foreign corporation.

Panasonic Corporation has entered into an agreement with the Lead Participant to provide certain manufacturing and supply functions as well as invest in associated equipment, machinery, and other manufacturing tools at the Project. As such, Panasonic Corporation is expected to be a Participant in the Project.

Certain affiliate entities of the Lead Participant and of Panasonic Corporation, which presently exist or may be organized at a later date, will likely own certain real and personal property related to the Project and may participate in the operation of the Project. Likewise the Lead Participant and Panasonic Corporation may enter into other agreements with suppliers, vendors, customers, service providers, and related businesses for the provision of certain functions related to the Project. These additional entities may be deemed “Participants” for purposes of the Act. The Lead Participant will notify the Office as such additional entities become Participants with respect to the Project, and request a determination by the Office that said Participants are engaged in a common purpose pursuant to the Act.

 

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

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Confidential Treatment Requested by Tesla Motors, Inc.

Steve Hill

October 17, 2014

Page 2

                                             

 

 

2) Abatements and Incentives Requested:

The Lead Participant, on behalf of itself and the other Participants at the Project, for the benefit of the Lead Participant and the Project, hereby requests any and all abatements and incentives available under the Act, including, but not limited to, the following:

(i) CREDITS—Up to One Hundred Ninety Five Million ($195,000,00.00) in transferable credits against any tax imposed by chapters 363A and 363B of the Nevada Revised Statutes (“NRS”); the gaming license fees imposed by the provisions of NRS 463.370; any tax imposed by chapter 680B of NRS; or any combination of those fees and taxes.

(ii) ABATEMENTS—Abatement of the following sales and use taxes, property taxes, and employer excise taxes:

(a) SALES AND USE TAXES:

•	Local School Support Tax, NRS Chapter 374

•	Basic City-County Relief Tax, NRS Chapter 377

•	Supplemental City-County Relief Tax, NRS Chapter 377

(b) PROPERTY:

•	Taxes on real and personal property levied by Chapter 361 of NRS.

(c) EMPLOYER EXCISE TAXES:

•	Taxes imposed on the wages paid by an employer pursuant to Chapter 363B of NRS.

(iii) REIMBURSEMENT PAYMENT—Reimbursement payments to the Lead Participant in an amount equal to the sum of each of the following tax items paid to the State or Storey County, as applicable, from any Participant within the Economic Diversification District for the Project:

•	Sales Tax, NRS Chapter 372

•	Promotion of Tourism, Chapter NRS 377A

•	Infrastructure, NRS Chapter 377B

•	Tricounty Railway Commission, Local Acts including Nevada Commission for the Reconstruction of the V&T Railway Act of 1993 – Chapter 566 of the Statutes of Nevada

3) Significance of Abatements and Incentives on Decision to Locate:

The availability of abatements and incentives played a significant role in the decision of the Lead Participant to locate the Project in the State of Nevada. While many other factors played a significant role in the location decision, including workforce, availability of a suitable project site, and logistics considerations, among others, without the availability of the abatements and incentives offered by the State of Nevada and Storey County, the State would not have been a competitive option for location of the Project.

2

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

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Confidential Treatment Requested by Tesla Motors, Inc.

Steve Hill

October 17, 2014

Page 3

                                             

 

4) How the Project will Promote Economic Development of the State:

The Project is expected to have a profound impact on the economic development and the economic diversity of the State of Nevada as described in the 44 page report prepared by Applied Economics for the Office, dated September 2014. Portions of such report are summarized as follows:

The Project is expected to create a total of 6,500 jobs within the next four years with an average wage estimated at $26.16 per hour. Capital investment is expected to total nearly $5 Billion over that same period, with an additional $5 Billion in capital investment planned through the year 2028. Construction of the Project is expected to result in a one-time $2.4 Billion economic impact. Operation of the Project is expected to result in an annual impact in excess of $5 Billion at full implementation. Overall, the Project may generate in excess of $100 Billion in economic impact over the next twenty years.

This impact is more than numbers – it fits firmly within the State of Nevada’s Plan for Excellence in Economic Development (the “Plan”). The first economic development liability listed in the Plan is an “economy oriented toward consumption sectors.” The Project will serve to re-orient the State of Nevada’s economy towards production as the Project exports its finished goods out of the state and internationally. Additionally, a global consortium of suppliers and partners are likely to play significant roles in the Project. The technologically-advanced nature of the Project and its resultant products will support the State of Nevada’s innovation and technology focus as outlined in the Plan. Finally, the Project represents the top-tier of several targeted sectors. The Project will utilize and develop clean energy. It may require expansion of existing mining operations and potentially encourage the development of new ones. It will be an advanced manufacturing operation, which will also entail significant logistics operations. As such, the Project will have a significant, positive impact on several of targeted sectors described in the Plan.

5) Major Markets for Product Distribution:

The primary market for distribution of the lithium-ion batteries to be produced at the Project is the Tesla automobile manufacturing plant located in Fremont, California. Once the lithiumion batteries are installed in the Tesla automobiles, such vehicles are distributed throughout the United States and internationally. Additionally, certain other industries such as automotive manufacturers and suppliers, electric utilities, and other power generation and storage companies located throughout the United States and internationally will likely become major markets for the products produced at the Project.

3

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

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Confidential Treatment Requested by Tesla Motors, Inc.

Steve Hill

October 17, 2014

Page 4

                                             

 

 

6) Job Growth Plans:

The Project intends to include approximately 6,500 employees by the end of calendar year 2022. The job growth plan is more fully described in the enclosed Operations Employment Schedule Form. Tesla is well aware of the requirement that at least 50% of the jobs at the Project be filled by residents of the State of Nevada.

7) Business History and Plans:

Tesla is a U.S.-based, American-owned manufacturer of battery electric vehicles (“EV”), founded in 2003 and headquartered in Palo Alto, CA. Tesla, which employs more than 8,000 workers worldwide, designs and manufactures EVs, as well as EV powertrains for partners such as Toyota and Daimler (makers of the Mercedes-Benz brand) and stationary storage systems for commercial sale. Tesla successfully launched the Roadster in 2008 with its industry-leading efficiency (245 mile range on a single charge), performance (0 to 60 mph in 3.7 seconds), and design. The Tesla Model S, winner of numerous industry awards, was launched in 2012 and is built entirely at a formerly shuttered GM plant in Fremont, CA.

The Tesla Gigafactory will be the Company’s largest expansion in its history and seeks to double the world’s current manufacturing capacity of battery cells by 2020.

We look forward to working with you to on the Project.

 

Sincerely,

/s/ Alex Leath

Alex Leath

Partner

Enclosures

cc: Brad Mamer, Shante Willis

 

4

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

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Confidential Treatment Requested by Tesla Motors, Inc.

 

Other Participants

Lead Participant:	Tesla Motors, Inc.	County:	Storey County

Directions: Provide information on other Participants in the Project. A Participant means a business which operates within the geographic boundaries of a project site and which contributes to or participates in the Project. A Project is undertaken by a business or group of businesses located within the same project site and engaged in a common purpose or business endeavor.

 

Co-Participant #1 Information
COMPANY NAME (Legal name under which business will be transacted in Nevada)			FEDERAL TAX ID #
Panasonic Energy Corporation of North America			47-1994325
CORPORATE MAILING ADDRESS	CITY / TOWN	STATE / PROVINCE		ZIP
Panasonic Corporation of North America, Two Riverfront Plaza	Newark	NJ		07102-5490
NEVADA ADDRESS (Must be within designated project site)	CITY / TOWN	STATE / PROVINCE		ZIP
Electric Avenue	McCarran	NV		89434
TELEPHONE NUMBER	WEBSITE
Pending	Pending
COMPANY CONTACT NAME	COMPANY CONTACT TITLE
Stephen Weingarten	Assistant General Counsel and Assistant Secretary
E-MAIL ADDRESS	PREFERRED PHONE NUMBER
[e-mail]	[phone]
Has your company ever applied and been approved for incentives available by the Governor’s Office of Economic Development?			¨    Yes         þ    No
If Yes, list the program awarded, date of approval, and status of the accounts (attach separate sheet if necessary):
Co-Participant #2 Information
COMPANY NAME (Legal name under which business will be transacted in Nevada)			FEDERAL TAX ID #
Other Participants will be added as the Project moves forward.
CORPORATE MAILING ADDRESS	CITY / TOWN	STATE / PROVINCE		ZIP
NEVADA ADDRESS (Must be within designated project site)	CITY / TOWN ¨             ¨	STATE / PROVINCE		ZIP
TELEPHONE NUMBER	WEBSITE
COMPANY CONTACT NAME	COMPANY CONTACT TITLE
E-MAIL ADDRESS	PREFERRED PHONE NUMBER
Has your company ever applied and been approved for incentives available by the Governor’s Office of Economic Development?			¨    Yes         ¨    No
If Yes, list the program awarded, date of approval, and status of the accounts (attach separate sheet if necessary):
Co-Participant #3 Information
COMPANY NAME (Legal name under which business will be transacted in Nevada) ¨        ¨			FEDERAL TAX ID #
CORPORATE MAILING ADDRESS	CITY / TOWN	STATE / PROVINCE		ZIP
NEVADA ADDRESS (Must be within designated project site)	CITY / TOWN	STATE / PROVINCE		ZIP
TELEPHONE NUMBER	WEBSITE
COMPANY CONTACT NAME	COMPANY CONTACT TITLE
E-MAIL ADDRESS	PREFERRED PHONE NUMBER
Has your company ever applied and been approved for incentives available by the Governor’s Office of Economic Development?			¨    Yes         ¨    No
If Yes, list the program awarded, date of approval, and status of the accounts (attach separate sheet if necessary):

EXPAND AS NECESSARY FOR OTHER CO-PARTICIPANTS

 

 

Attachment “A”

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

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Confidential Treatment Requested by Tesla Motors, Inc.

 

Description of the Nevada Facility

 

Lead Participant:	Tesla Motors, Inc.	County:	Storey County

Directions: A detailed description of the Nevada facility, including a description of the common purpose or business endeavor in which the participants in the project proposed or are engaged. With pre-approval from the Office, an alternative facility description will be considered provided it includes the necessary information.

 

The Tesla Gigafactory is 5.5 million square-foot facility located in the Tahoe Reno Industrial Center which will be utilized for the manufacturing of

Lithium Ion battery cells and assembly of battery modules and packs for the purposes of both vehicle integration and stationary storage production.

At its peak, it is anticipated to produce more than 50 GWh in annual battery production, which is enough for 500,000 Tesla cars.

See Addendum 1 for a more detail description which is deemed confidential proprietary information of Tesla.

EXPAND AS NECESSARY OR CAN BE REPLACED BY SEPARATE DOCUMENT

 

 

 

 

Attachment “B”

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

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Confidential Treatment Requested by Tesla Motors, Inc.

Gigafactory Scope Narrative

The Gigafactory scope has not been developed to the point where construction manpower and spending estimates can be made for the entire project. The statements made herein reflect our understanding of the initial phases of the construction effort. Please note that Yates has not currently been contracted to manage the installation of Tesla’s proprietary process equipment so any statements regarding such installation are subject to the direction of Tesla and its manufacturing partners. As the project is further defined, estimates will be updated.

 

The Gigafactory will be constructed in multiple phases. To support the phased construction approach and ultimately the full build out, the site development effort is now underway. The building pad is under construction in preparation for structural foundations. Initial site development activities		[***]

include changes to Electric Avenue, storm retention, underground utilities and the construction of internal roads and parking lots. In support of the construction operations, site logistics development is underway consisting of temporary offices, electrical power, fencing, and security.

The initial construction phases are described as [***] and [***]. The concept layout of the Gigafactory is shown in the exhibit. [***] The placement of process manufacturing equipment will begin [***].

 

[***]	[***] structural concrete foundations will begin [***], following the construction of the building pad. Structural steel erection will follow closely behind the foundations and will continue into [***]. As structural steel progresses the building envelope; the roofing system, siding and windows, will follow. Following the building

envelope, the mechanical, electrical and process systems begin to advance and will continue to support the manufacturing equipment. As these systems come on line, Tesla’s manufacturing partners will start installing equipment in [***]. The installation and commissioning of the mechanical, electrical and process systems will continue through [***].

During the construction of [***] the site development activities will continue to progress, providing access, drainage, parking lots and utility services required for the factory’s operation.

 

 

 

 

Addendum 1.1

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

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Confidential Treatment Requested by Tesla Motors, Inc.

 

Description of the Nevada Facility’s Location

 

Lead Participant:	Tesla Motors, Inc.	County:	Storey County

Directions: A detailed description of the location of the project, including a precise description of the geographic boundaries of the project site. An acceptable description is in the form of a registered professional land surveyor drawing and legal description stamped by a Nevada licensed engineer. This description can be used for purposes related to the creation of an economic diversification district by the governing body of a participating municipality. With pre-approval from the Office, an alternative facility location description will be considered provided it includes the necessary information.

See Addendum 2.

 

EXPAND AS NECESSARY OR CAN BE REPLACED BY SEPARATE DOCUMENT

 

 

Attachment “C”

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

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Confidential Treatment Requested by Tesla Motors, Inc.

 

Form No. 1068-2	Commitment No. 121-2466598
ALTA Plain Language Commitment	Page Number: 5
	Property Address:	005-091-17, 18, 29 & 34, 005-011-22 & 24 McCarran, NV

 

SCHEDULE A

1.	Commitment Date: September 3, 2014 at 7:30 A.M.

2.	Policy or Policies to be issued:                                                          Amount

a.	ALTA 2006 Extended Coverage Owner Policy                     $To Be Determined

Proposed Insured:

Tesla Motors, Inc., a Delaware Corporation

3.	(A) The estate or interest in the land described in this Commitment is:

Fee as to Parcels 1, 3, 6, 9, 13 and 14

Easement as to Parcel 21

(B) Title to said estate or interest at the date hereof is vested in:

Tahoe-Reno Industrial Center, LLC, a Nevada limited liability company

4.	The land referred to in this Commitment is situated in the County of Storey, State of Nevada, and is described as follows:

PARCEL 1:

PARCEL 2009-6 OF RECORD OF SURVEY MAP NO. 111167, FILED IN THE OFFICE OF THE COUNTY RECORDER OF STOREY COUNTY, STATE OF NEVADA ON MAY 13, 2009, AS FILE NO. 111167, OF OFFICIAL RECORDS, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

ALL THAT CERTAIN REAL PROPERTY SITUATE WITHIN THE SOUTH ONE-HALF (1/2) OF SECTION 6, TOWNSHIP 19 NORTH, RANGE 23 EAST, MOUNT DIABLO MERIDIAN, STOREY COUNTY, STATE OF NEVADA BEING A PORTION OF PARCEL 2008-87, AS SHOWN ON THAT “RECORD OF SURVEY FOR TAHOE-RENO INDUSTRIAL CENTER, LLC”, FILED IN THE OFFICE OF THE STOREY COUNTY RECORDER, JANUARY 15, 2009, FILE NO. 110530, OFFICIAL RECORDS OF STOREY COUNTY, NEVADA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT A POINT, FROM WHICH POINT THE SOUTHWEST CORNER OF SAID SECTION 6 BEARS SOUTH 83°34’52” WEST, 2553.29 FEET;

THENCE NORTH 52°49’21” EAST, 468.75 FEET TO THE NORTH LINE OF SAID PARCEL 2008-87;

THENCE, ALONG SAID NORTH LINE, SOUTH 37°10’39” EAST, 214.33 FEET;

First American Title Insurance Company
Addendum 2	[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.
-1-

 

---

 

Confidential Treatment Requested by Tesla Motors, Inc.

 

Form No. 1068-2	Commitment No. 121-2466598
ALTA Plain Language Commitment	Page Number: 6
	Property Address:	005-091-17, 18, 29 & 34, 005-011-22 & 24 McCarran, NV

 

 

THENCE, ALONG A NON-TANGENT CURVE TO THE RIGHT, FROM A TANGENT WHICH BEARS SOUTH 26°31’44” EAST HAVING A RADIUS OF 1450.00 FEET, A CENTRAL ANGLE OF 10°38’55”, AND AN ARC LENGTH OF 269.49 FEET;

THENCE, LEAVING SAID NORTH LINE, SOUTH 52°49’21” WEST, 335.86 FEET;

THENCE NORTH 80°55’36” WEST, 156.06 FEET;

THENCE NORTH 37°10’39” WEST, 369.53 FEET TO THE POINT OF BEGINNING.

THE ABOVE METES AND BOUNDS DESCRIPTION APPEARED PREVIOUSLY IN THAT CERTAIN DOCUMENT RECORDED MAY 13, 2009, AS DOCUMENT NO. 111168 OF OFFICIAL RECORDS.

PARCEL 2:

INTENTIONALLY DELETED

PARCEL 3:

PARCEL 2009-5 OF RECORD OF SURVEY MAP NO. 111167, FILED IN THE OFFICE OF THE COUNTY RECORDER OF STOREY COUNTY, STATE OF NEVADA ON MAY 13, 2009, AS FILE NO. 111167, OF OFFICIAL RECORDS, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

ALL THAT CERTAIN REAL PROPERTY SITUATE WITHIN THE SOUTH ONE-HALF (1/2) OF SECTION 6, TOWNSHIP 19 NORTH, RANGE 23 EAST, MOUNT DIABLO MERIDIAN, STOREY COUNTY, STATE OF NEVADA BEING A PORTION OF PARCEL 2008-87, AS SHOWN ON THAT “RECORD OF SURVEY FOR TAHOE-RENO INDUSTRIAL CENTER, LLC”, FILED IN THE OFFICE OF THE STOREY COUNTY RECORDER, JANUARY 15, 2009, FILE NO. 110530, OFFICIAL RECORDS OF STOREY COUNTY, NEVADA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT A POINT, FROM WHICH POINT THE SOUTHWEST CORNER OF SAID SECTION 6 BEARS SOUTH 83°34.52. WEST, 2553.29 FEET;

THENCE NORTH 37°10.39. WEST, 650.50 FEET;

THENCE NORTH 52°49.21. EAST, 468.75 FEET TO THE NORTH LINE OF SAID PARCEL 2008-87;

THENCE, ALONG SAID NORTH LINE, SOUTH 37°10.39. EAST, 650.50 FEET;

THENCE, LEAVING SAID NORTH LINE, SOUTH 52°49.21. WEST, 468.75 FEET TO THE POINT OF BEGINNING.

THE ABOVE METES AND BOUNDS DESCRIPTION APPEARED PREVIOUSLY IN THAT CERTAIN DOCUMENT RECORDED MAY 13, 2009, AS DOCUMENT NO. 111168 OF OFFICIAL RECORDS.

PARCEL 4:

INTENTIONALLY DELETED

PARCEL 5:

First American Title Insurance Company
Addendum 2	[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.
-2-

 

---

 

Confidential Treatment Requested by Tesla Motors, Inc.

 

Form No. 1068-2	Commitment No. 121-2466598
ALTA Plain Language Commitment	Page Number: 7
	Property Address:	005-091-17, 18, 29 & 34, 005-011-22 & 24 McCarran, NV

 

 

INTENTIONALLY DELETED

PARCEL 6:

PARCEL 2014-4 OF RECORD OF SURVEY MAP NO. 120562, FILED IN THE OFFICE OF THE COUNTY RECORDER OF STOREY COUNTY, STATE OF NEVADA ON JUNE 30, 2014, AS FILE NO. 120562, OF OFFICIAL RECORDS, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

ALL THAT CERTAIN REAL PROPERTY SITUATED WITHIN A PORTION OF THE NORTH ONE-HALF (1/2) OF SECTION TWELVE (12), TOWNSHIP 19 NORTH, RANGE 22 EAST, MOUNT DIABLO MERIDIAN, STOREY COUNTY, STATE OF NEVADA, BEING A PORTION OF PARCEL 2009-39 AS SHOWN ON THAT “RECORD OF SURVEY FOR TAHOE-RENO INDUSTRIAL CENTER, LLC”, RECORDED IN THE OFFICE OF THE STOREY COUNTY RECORDER, DECEMBER 04, 2009, AS DOCUMENT NO. 112341, OFFICIAL RECORDS OF STOREY COUNTY, NEVADA. MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT THE NORTHEAST CORNER OF SAID PARCEL 2009-39, BEING THE NORTHEAST CORNER OF SAID SECTION TWELVE (12), THENCE, ALONG THE EAST LINE OF SAID PARCEL, SOUTH 00°56’57” WEST, 988.90 FEET;

THENCE, LEAVING SAID EAST LINE, SOUTH 89°54’15” WEST, 3358.63 FEET;

THENCE, SOUTH 71°09’26” WEST, 116.44 FEET;

THENCE, ALONG A TANGENT CURVE TO THE LEFT HAVING A RADIUS OF 570.00 FEET, A CENTRAL ANGLE OF 35°24’30”, AND AN ARC LENGTH OF 352.26 FEET;

THENCE, SOUTH 35°44’56” WEST, 560.61 FEET;

THENCE, ALONG A TANGENT CURVE TO THE LEFT HAVING A RADIUS OF 810.00 FEET, A CENTRAL ANGLE OF 19°09’56”, AND AN ARC LENGTH OF 270.95 FEET;

THENCE, SOUTH 16°35’00” WEST, 20.98 FEET;

THENCE, ALONG A TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 870.00 FEET, A CENTRAL ANGLE OF 06°39’25”, AND AN ARC LENGTH OF 101.08 FEET, TO THE NORTH LINE OF EAST SYDNEY DRIVE, AS DESCRIBED PER DEDICATION DOCUMENT NO. 107605, OFFICIAL RECORDS OF STOREY COUNTY;

THENCE, ALONG SAID NORTH LINE, ALONG A NON-TANGENT CURVE TO THE LEFT HAVING A RADIUS OF 90.00 FEET, A CENTRAL ANGLE OF 55°45’04”, WITH A RADIAL LINE IN OF SOUTH 01°30’00” WEST AND A RADIAL LINE OUT OF NORTH 54°15’04” WEST FOR AN ARC LENGTH OF 87.57 FEET, TO THE WEST LINE OF SAID EAST SYDNEY DRIVE;

THENCE, ALONG SAID WEST LINE OF EAST SYDNEY DRIVE, SOUTH 35°44’56” WEST, 114.04 FEET;

THENCE, LEAVING SAID WEST LINE OF EAST SYDNEY DRIVE, ALONG THE WEST LINE OF SAID PARCEL 2009-39, ALONG A NON-TANGENT CURVE TO THE LEFT, HAVING A TANGENT BEARING OF NORTH 35°44’56” EAST HAVING A RADIUS OF 810.00 FEET, A CENTRAL ANGLE OF 19°09’56”, AND AN ARC LENGTH OF 270.95 FEET;

 

First American Title Insurance Company
Addendum 2	[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.
-3-

 

---

 

Confidential Treatment Requested by Tesla Motors, Inc.

 

Form No. 1068-2	Commitment No. 121-2466598
ALTA Plain Language Commitment	Page Number: 8
	Property Address:	005-091-17, 18, 29 & 34, 005-011-22 & 24 McCarran, NV

 

 

THENCE, CONTINUING ALONG SAID WEST LINE OF PARCEL 2009-39, NORTH 16°35’00” EAST, 20.98 FEET;

THENCE, ALONG A TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 870.00 FEET, A CENTRAL ANGLE OF 19°09’56”, AND AN ARC LENGTH OF 291.02 FEET,

THENCE, NORTH 35°44’56” EAST, 560.61 FEET;

THENCE, ALONG A TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 630.00 FEET, A CENTRAL ANGLE OF 35°24’30”, AND AN ARC LENGTH OF 389.33 FEET;

THENCE, NORTH 71°09’26” EAST, 118.20 FEET;

THENCE, ALONG A TANGENT CURVE TO THE LEFT HAVING A RADIUS OF 620.00 FEET, A CENTRAL ANGLE OF 23°29’47”, AND AN ARC LENGTH OF 254.26 FEET;

THENCE, NORTH 47°39’39” EAST, 417.70 FEET;

THENCE, ALONG A TANGENT CURVE TO THE LEFT HAVING A RADIUS OF 620.00 FEET, A CENTRAL ANGLE OF 04°41’29”, AND AN ARC LENGTH OF 50.77 FEET;

THENCE, NORTH 42°58’10” EAST, 184.32 FEET;

THENCE, ALONG A TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 850.00 FEET, A CENTRAL ANGLE OF 36°27’03”, AND AN ARC LENGTH OF 540.76 FEET;

THENCE, NORTH 79°25’13” EAST, 484.95 FEET;

THENCE, ALONG A TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 850.00 FEET, A CENTRAL ANGLE OF 11°12’48”, AND AN ARC LENGTH OF 166.35 FEET;

THENCE, NORTH 00°38’01” EAST, 14.69 FEET, TO THE NORTH LINE OF SAID PARCEL 2009-39;

THENCE, ALONG SAID NORTH LINE, SOUTH 89°21’59” EAST, 1596.78 FEET, THE POINT OF BEGINNING.

THE ABOVE METES AND BOUNDS DESCRIPTION APPEARED PREVIOUSLY IN THAT CERTAIN DOCUMENT RECORDED JUNE 30, 2014, AS DOCUMENT NO. 120563 OF OFFICIAL RECORDS.

PARCEL 7:

INTENTIONALLY DELETED

PARCEL 8:

INTENTIONALLY DELETED

PARCEL 9:

PARCEL 2014-9 OF RECORD OF SURVEY MAP NO. 120564, FILED IN THE OFFICE OF THE

First American Title Insurance Company
Addendum 2	[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.
-4-

 

---

 

Confidential Treatment Requested by Tesla Motors, Inc.

 

Form No. 1068-2	Commitment No. 121-2466598
ALTA Plain Language Commitment	Page Number: 9
	Property Address:	005-091-17, 18, 29 & 34, 005-011-22 & 24 McCarran, NV

 

 

COUNTY RECORDER OF STOREY COUNTY, STATE OF NEVADA ON JUNE 30, 2014, AS FILE NO. 120564, OF OFFICIAL RECORDS, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

ALL THAT CERTAIN REAL PROPERTY SITUATED WITHIN A PORTION OF THE EAST ONE-HALF (1/2) OF SECTION ONE (1), TOWNSHIP 19 NORTH, RANGE 22 EAST, AND PORTIONS OF SECTIONS SIX (6), AND THE NORTH ONE-HALF (1/2) OF SECTION SEVEN (7), TOWNSHIP 19 NORTH, RANGE 23 EAST, MOUNT DIABLO MERIDIAN, STOREY COUNTY, STATE OF NEVADA, BEING A PORTION OF PARCEL 2009-7 AS SHOWN ON THAT “RECORD OF SURVEY FOR TAHOE-RENO INDUSTRIAL CENTER, LLC”, RECORDED IN THE OFFICE OF THE STOREY COUNTY RECORDER, MAY 13, 2009, AS DOCUMENT NO, 111167, OFFICIAL RECORDS OF STOREY COUNTY, NEVADA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT THE SOUTHWEST CORNER OF SAID PARCEL 2009-7, BEING THE WEST ONE-QUARTER (1/4) CORNER OF SAID SECTION SEVEN (7), THENCE, ALONG THE WEST LINE OF SAID PARCEL,

BEGINNING AT A POINT ON THE SOUTHERLY LINE OF SAID PARCEL 2009-7, ALSO BEING THE SOUTHEAST CORNER OF SAID SECTION SEVEN (7);

THENCE, ALONG SAID SOUTHERLY LINE OF PARCEL 2009-7, NORTH 89°21’59” WEST, 1596.76 FEET;

THENCE, LEAVING SAID SOUTHERLY LINE, NORTH 00°38’01” EAST, 282.77 FEET;

THENCE NORTH 31°23’52” EAST, 2934.29 FEET;

THENCE, SOUTH 58°36’24” EAST, 672.98 FEET;

THENCE, NORTH 31°23’36” EAST, 512.57 FEET;

THENCE ALONG A NON-TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 1340.00 FEET, A CENTRAL ANGLE OF 12°34’29”, WITH A RADIAL LINE IN OF SOUTH 31°23’36” WEST AND A RADIAL LINE OUT OF NORTH 43°58’05” EAST FOR AN ARC LENGTH OF 294.09 FEET;

THENCE, SOUTH 46°01’55” EAST, 1323.58 FEET;

THENCE, ALONG A TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 1350.00 FEET, A CENTRAL ANGLE OF 08°51’16”, AND AN ARC LENGTH OF 208.63 FEET;

THENCE, SOUTH 37°10’39” EAST, 691.35 FEET;

THENCE, SOUTH 52°49’21” WEST, 468.75 FEET;

THENCE, SOUTH 37°10’39” EAST, 1020.03 FEET;

THENCE, SOUTH 80°55’36” EAST, 156.06 FEET;

THENCE, NORTH 52°49’21” EAST, 335.86 FEET;

THENCE, ALONG A NON-TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 1450.00 FEET, A CENTRAL ANGLE OF 24°27’22”, WITH A RADIAL LINE IN OF SOUTH 63°28’16” WEST AND A

First American Title Insurance Company
Addendum 2	[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.
-5-

 

---

 

Confidential Treatment Requested by Tesla Motors, Inc.

 

Form No. 1068-2	Commitment No. 121-2466598
ALTA Plain Language Commitment	Page Number: 10
	Property Address:	005-091-17, 18, 29 & 34, 005-011-22 & 24 McCarran, NV

 

 

RADIAL LINE OUT OF NORTH 87°55’38” EAST FOR AN ARC LENGTH OF 618.92 FEET;

THENCE, ALONG A REVERSE CURVE TO THE LEFT HAVING A RADIUS OF 1550.00 FEET, A CENTRAL ANGLE OF 32°44’13”, AND AN ARC LENGTH OF 885.62 FEET;

THENCE, SOUTH 34°48’36” EAST, 742.52 FEET;

THENCE, ALONG A TANGENT CURVE TO THE LEFT HAVING A RADIUS OF 2550.00 FEET, A CENTRAL ANGLE OF 13°08’50”, AND AN ARC LENGTH OF 585.13 FEET;

THENCE, NORTH 89°39’48” WEST, 602.80 FEET;

THENCE, NORTH 59°18’09” WEST, 2571.38 FEET;

THENCE, SOUTH 89°54’15” WEST, 1622.76 FEET;

THENCE, NORTH 00°56’57” EAST, 988.90 FEET, TO THE POINT OF BEGINNING.

THE ABOVE METES AND BOUNDS DESCRIPTION APPEARED PREVIOUSLY IN THAT CERTAIN DOCUMENT RECORDED JUNE 30, 2014, AS DOCUMENT NO. 120565 OF OFFICIAL RECORDS.

PARCEL 10:

INTENTIONALLY DELETED

PARCEL 11:

INTENTIONALLY DELETED

PARCEL 12:

INTENTIONALLY DELETED

PARCEL 13:

PARCEL 2014-13 OF RECORD OF SURVEY MAP NO. 120567, FILED IN THE OFFICE OF THE COUNTY RECORDER OF STOREY COUNTY, STATE OF NEVADA ON JUNE 30, 2014, AS FILE NO. 120567, OF OFFICIAL RECORDS, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

ALL THAT CERTAIN REAL PROPERTY SITUATED WITHIN PORTIONS OF THE WEST ONE-HALF (1/2) OF SECTION FIVE (5), SECTION SIX (6), THE NORTHEAST ONE-QUARTER (1/4) OF SECTION SEVEN (7), AND THE NORTHWEST ONE-QUARTER (1/4) OF SECTION 8, TOWNSHIP 19 NORTH, RANGE 23 EAST, MOUNT DIABLO MERIDIAN, STOREY COUNTY, STATE OF NEVADA, BEING ALL OF PARCEL 2014-1 AS SHOWN ON THAT “RECORD OF SURVEY FOR TAHOE-RENO INDUSTRIAL CENTER, LLC”, RECORDED IN THE OFFICE OF THE STOREY COUNTY RECORDER, ON JUNE 30, 2014, AS DOCUMENT NO. 0120559.

BEING A PORTION OF PARCEL 2012-7 AS SHOWN ON THAT “RECORD OF SURVEY TO SUPPORT A BOUNDARY LINE ADJUSTMENT FOR TAHOE-RENO INDUSTRIAL CENTER, LLC”, RECORDED IN THE OFFICE OF THE STOREY COUNTY RECORDER, OCTOBER 02, 2012, AS DOCUMENT NO. 117414, BEING ALL OF PARCELS 2012-11 AND 2012-12 AS SHOWN ON THAT “RECORD OF

First American Title Insurance Company
Addendum 2	[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.
-6-

 

---

 

Confidential Treatment Requested by Tesla Motors, Inc.

 

Form No. 1068-2	Commitment No. 121-2466598
ALTA Plain Language Commitment	Page Number: 11
	Property Address:	005-091-17, 18, 29 & 34, 005-011-22 & 24 McCarran, NV

 

 

SURVEY FOR TAHOE- RENO INDUSTRIAL CENTER, LLC”, RECORDED IN THE OFFICE OF THE STOREY COUNTY RECORDER. DECEMBER 04, 2012, AS DOCUMENT NO. 117725, OFFICIAL RECORDS OF STOREY COUNTY, NEVADA, AND BEING ALL OF PARCELS 2012-15 AND 2012-16, AND A PORTION OF PARCELS 2012- 14 AND 2012-17 AS SHOWN ON THAT “RECORD OF SURVEY FOR TAHOE-RENO INDUSTRIAL CENTER, LLC”, RECORDED IN THE OFFICE OF THE STOREY COUNTY RECORDER, DECEMBER 04, 2012, AS DOCUMENT NO. 117727, OFFICIAL RECORDS OF STOREY COUNTY, NEVADA MORE PARTICULARLY DESCRIBED AS FOLLOWS;

BEGINNING AT THE NORTHWEST CORNER OF SAID PARCEL 2012-11, SAID POINT BEING ON THE SOUTH LINE OF MILAN DRIVE AS DESCRIBED IN DEDICATION DEED DOCUMENT NO. 110596, OFFICIAL RECORDS OF STOREY COUNTY, NEVADA;

THENCE, ALONG SAID SOUTH LINE OF MILAN DRIVE AND ITS EXTENSION THEREOF, SOUTH 88°40’40” EAST, 1605.31 FEET;

THENCE, ALONG A TANGENT CURVE TO THE LEFT HAVING A RADIUS OF 910.00 FEET, A CENTRAL ANGLE OF 30°56’06”, AND AN ARC LENGTH OF 491.33 FEET;

THENCE, NORTH 60°23’14” EAST, 317.00 FEET;

THENCE, LEAVING THE SOUTH LINE OF MILAN DRIVE, SOUTH 37°51’40” EAST, 5271.04 FEET;

THENCE, SOUTH O0°38’30” WEST, 2540.48 FEET;

THENCE, SOUTH 59°39’43” WEST, 2246.95 FEET;

THENCE, SOUTH 53°46’10” EAST, 580.76 FEET;

THENCE, ALONG A TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 1150.00 FEET, A CENTRAL ANGLE OF 03°17’21”, WITH A RADIAL LINE IN OF SOUTH 36°13’50” WEST AND A RADIAL LINE OUT OF NORTH 39°31’11” EAST FOR AN ARC LENGTH OF 66.02 FEET, TO THE SOUTH LINE OF SAID PARCEL 2012-14, ALSO BEING THE SOUTH LINE OF SAID SECTION 8;

THENCE, CONTINUING ALONG SAID SOUTH LINE OF PARCEL 2012-14, NORTH 89°14’53” WEST, 163.12 FEET, TO THE WEST ONE-QUARTER (1/4) CORNER OF SAID SECTION 8;

THENCE, NORTH 89°39’48” WEST, 176.42 FEET;

THENCE, LEAVING THE SOUTH LINE OF SAID PARCEL 2012-14, ALONG ITS WESTERLY LINE, NORTH 53°46’10 “WEST, 370.99 FEET;

THENCE, ALONG A TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 2550.00 FEET, A CENTRAL ANGLE OF 18°57’34”, AND AN ARC LENGTH OF 843.81 FEET;

THENCE, NORTH 34°48’36” WEST, 742.52 FEET;

THENCE, ALONG A TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 1550.00 FEET, A CENTRAL ANGLE OF 32°44’13”, AND AN ARC LENGTH OF 885.62 FEET;

THENCE, ALONG A REVERSE CURVE TO THE LEFT HAVING A RADIUS OF 1450.00 FEET, A CENTRAL ANGLE OF 35°06’16”, AND AN ARC LENGTH OF 888.40 FEET;

 

First American Title Insurance Company
Addendum 2	[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.
-7-

 

---

 

Confidential Treatment Requested by Tesla Motors, Inc.

 

Form No. 1068-2	Commitment No. 121-2466598
ALTA Plain Language Commitment	Page Number: 12
	Property Address:	005-091-17,18, 29 & 34, 005-011-22 & 24 McCarran, NV

 

 

THENCE, NORTH 37°10’39” WEST, 1556.18 FEET, TO A POINT ON THE WESTERLY LINE OF SAID PARCEL 2012-7;

THENCE, ALONG SAID WESTERLY LINE, ALONG A TANGENT CURVE TO THE LEFT HAVING A RADIUS OF 1350.00 FEET, A CENTRAL ANGLE OF 08°51’16”, AND AN ARC LENGTH OF 208.63 FEET;

THENCE, NORTH 46°01’55” WEST, 1323.58 FEET;

THENCE, ALONG A TANGENT CURVE TO THE LEFT HAVING A RADIUS OF 1340.00 FEET, A CENTRAL ANGLE OF 12°34’29”, AND AN ARC LENGTH OF 294.09 FEET;

THENCE, LEAVING SAID WESTERLY LINE OF PARCEL 2012-7, NORTH 31°23’36” EAST, 200.00 FEET, TO THE MOST WESTERLY CORNER OF SAID PARCEL 2012-12;

THENCE, ALONG THE WESTERLY LINE OF SAID PARCEL 2012-12, NORTH 88°42’42” EAST, 188.30 FEET, TO THE SOUTHWEST CORNER OF SAID PARCEL 2012-11;

THENCE, ALONG THE WEST LINE OF SAID PARCEL 2012-11, NORTH 01°19’20” EAST, 2228.00 FEET, TO THE POINT OF BEGINNING.

THE ABOVE METES AND BOUNDS DESCRIPTION APPEARED PREVIOUSLY IN THAT CERTAIN DOCUMENT RECORDED JUNE 30, 2014, AS DOCUMENT NO. 120568 OF OFFICIAL RECORDS.

PARCEL 14:

PARCEL 2014-15 OF RECORD OF SURVEY MAP NO. 120567, FILED IN THE OFFICE OF THE COUNTY RECORDER OF STOREY COUNTY, STATE OF NEVADA ON JUNE 30, 2014, AS FILE NO. 120567, OF OFFICIAL RECORDS, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

ALL THAT CERTAIN REAL PROPERTY SITUATED WITHIN A PORTION OF THE NORTHEAST ONE-QUARTER (1/4) OF SECTION SEVEN (7), TOWNSHIP 19 NORTH, RANGE 23 EAST, MOUNT DIABLO MERIDIAN, STOREY COUNTY, STATE OF NEVADA, BEING A PORTION OF PARCEL 2012-14 AS SHOWN ON THAT “RECORD OF SURVEY FOR TAHOE-RENO INDUSTRIAL CENTER, LLC”, RECORDED IN THE OFFICE OF THE STOREY COUNTY RECORDER, DECEMBER 04, 2012, AS DOCUMENT NO. 117727, OFFICIAL RECORDS OF STOREY COUNTY, NEVADA MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT A POINT, FROM WHICH POINT THE NORTHEAST CORNER OF SAID SECTION SEVEN BEARS NORTH 83°59’07” EAST, 1294.45 FEET;

THENCE, SOUTH 09°20’51” WEST, 100.00 FEET;

THENCE, NORTH 80°39’09” WEST, 80.00 FEET;

THENCE, NORTH 09°20’51” EAST, 100.00 FEET;

THENCE, SOUTH 80°39’09” EAST, 80.00 FEET, THE POINT OF BEGINNING.

THE ABOVE METES AND BOUNDS DESCRIPTION APPEARED PREVIOUSLY IN THAT CERTAIN

 

First American Title Insurance Company
Addendum 2	[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.
-8-

 

---

 

Confidential Treatment Requested by Tesla Motors, Inc.

 

Form No. 1068-2	Commitment No. 121-2466598
ALTA Plain Language Commitment	Page Number:13
	Property Address:	005-091-17,18, 29 & 34, 005-011-22 & 24 McCarran, NV

 

 

DOCUMENT RECORDED JUNE 30, 2014, AS DOCUMENT NO. 120568 OF OFFICIAL RECORDS.

PARCEL 15:

INTENTIONALLY DELETED

PARCEL 16:

INTENTIONALLY DELETED

PARCEL 17:

INTENTIONALLY DELETED

PARCEL 18:

INTENTIONALLY DELETED

PARCEL 19:

INTENTIONALLY DELETED

PARCEL 20:

INTENTIONALLY DELETED

PARCEL 21:

A NON-EXCLUSIVE EASEMENT FOR ACCESS AND UTILITIES AS SET FORTH IN DOCUMENT RECORDED MAY 13, 1999 AS DOCUMENT NO. 111166 OF OFFICIAL RECORDS.

 

First American Title Insurance Company
Addendum 2	[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.
-9-

 

---

 

 

Confidential Treatment Requested by Tesla Motors, Inc.

Operations Employment Schedule

 

Lead Participant: Tesla Motors, Inc	County: Storey County

Section 1 - Full-Time Operations Employees

Directions: Please complete columns (a) through (d) in Section 1 with information on all qualified employees* that are projected to be hired and employed by the Participants by the end of the allowable 10-year period.

*

A qualified employee must be employed at the site of a qualified project, scheduled to work an average minimum of 30 hours per week, is offered coverage under a plan of health insurance provided by his or her employer, is eligible for health care coverage, and whose position is a “primary job” as set forth in NAC 360.474.

 

(a)		(b)	( c)*	(d)	(e)	(f)
New Hire Position Title/Description	NV Resident (Y/N)	Number of Positions	Average Hourly Wage	Average Weekly Hours	Annual Wage per Position	Total Annual Wages
Production Associates		4550	$22.79		$47,400.00	$215,670,000
Material Handlers		200	$22.79		$47,400.00	$9,480,000
Equipment Technicians		460	$27.88		$58,000.00	$26,680,000
Quality Technicians		360	$27.88		$58,000.00	$20,880,000
Engineers and Senior Staff		930	$41.83		$87,000.00	$80,910,000
Additional detail submitted as confidential proprietary information of Tesla.
* Column (c) represents an average hourly W-2 wage. It includes overtime & other items included in income for federal income tax purposes.
TOTAL		6500	$26.16		$54,403	$353,620,000

EXPAND AS NECESSARY OR CAN BE REPLACED BY SEPARATE DOCUMENT

Section 2 - Operations Employment Projections

Directions: Please provide one- three- five- eight- and ten-year employment projections in Section 2.

Full-Time Employment

 

1-Year Projection:	300	5-Year Projection:	4000	10-Year Projection:	6,500
3-Year Projection:	2000	8-Year Projection:	6500

 

Attachment “D”

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

---

 

 

Confidential Treatment Requested by Tesla Motors, Inc.

Construction Employment Schedule

 

Lead Participant: Tesla Motors, Inc.	County: Storey County

Section 1 - Construction Employees

Directions: Please complete columns (a) through (d) in Section 1 with information on all construction employees that are projected to be hired and employed by contractors, sub-contractors and others, the “Construction Employers”*, for the Qualified project by the end of the allowable 10-year period.

*	Each Construction Employer engaged in the construction at the Qualified project must offer a plan of health insurance to each construction employee employed at the Qualified project.

 

(a)		(b)	(c)	(d)	(e)	(f)
New Hire Position Title/Description	NV Resident (Y/N)	Number of Positions	Average Hourly Wage	Average Weekly Hours	Annual Wage per Position	Total Annual Wages
See Addendum 3.
Additional detail submitted as confidential
proprietary information of Tesla.
TOTAL					$0.00

EXPAND AS NECESSARY OR CAN BE REPLACED BY SEPARATE DOCUMENT

 

 

Attachment “E”

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

---

 

 

Confidential Treatment Requested by Tesla Motors, Inc.

Tesla Gigafactory

Projected Manpower Phase 1 - Phase 5

Yates Construction Company

October 21, 2014

 

		2014								2015																						2016																									2017
		Sep		Oct		Nov		Dec		Jan	Feb		Mar		Apr		May		Jun		Jul	Aug		Sep		Oct		Nov		Dec		Jan		Feb		Mar		Apr		May		Jun		Jul		Aug		Sep		Oct		Nov			Dec		Jan		Feb		Mar		Apr		May		Jun		Jul			Aug	Sep			Oct		Nov		Dec		Total Tradesmen		Avg. Tradesmen
Phase 1		45		105		203		430		580	868		1135		1295		1359		1119		989	389		208		0																																																								8725		671
Phase 2								100		195	322		430		652		802		960		1050	1068		897		739		429		183																																																				7827		602
Phase 3															120		180		340		350	589		890		1100		1245		1388		1100		898		430		209		80																																										8919		637
Phase 4																	44		86		116	434		580		811		1101		1250		1100		1034		908		845		690		589		403		345		276		118		74			26																											10830		542
Phase 5																																														26		44		89		143			208		266		340		350		589		890		920		1034			821	733			510		333		140		7436		437
Total		45		105		203		530		775	1190		1565		2067		2385		2505		2505	2480		2575		2650		2775		2821		2200		1932		1338		1054		770		589		403		371		320		207		217			234		266		340		350		589		890		920		1034			821	733			510		333		140		43737
Totals		Sep		Oct		Nov		Dec		Jan	Feb		Mar		Apr		May		Jun		Jul	Aug		Sep		Oct		Nov		Dec		Jan		Feb		Mar		Apr		May		Jun		Jul		Aug		Sep		Oct		Nov			Dec		Jan		Feb		Mar		Apr		May		Jun		Jul			Aug	Sep			Oct		Nov		Dec
		45		105		203		530		775	1190		1565		2067		2385		2505		2505	2480		2575		2650		2775		2821		2200		1932		1338		1054		770		589		403		371		320		207		217			234		266		340		350		589		890		920		1034			821	733			510		333		140

 

 

 

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

---

 

 

Confidential Treatment Requested by Tesla Motors, Inc.

CLIENT CONFIDENTIAL

Tesla Gigafactory

Projected Manpower – [***]

Yates Construction Company

October 20, 2014

Average Cost Per Manhour

October 20, 2014

 

Laborer

Mason

Operator

Carpenter

Ironworker

Roofer

Electrician

Pipefitter

Sheet Metal

Plumber

Boilermaker

Average

1

Base Wage

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

2

Labor Burdens

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

3

Overtime [***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

4

TOTAL LABOR RATE

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

 

 

Addendum 3.1

-1-

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

---

 

Confidential Treatment Requested by Tesla Motors, Inc.

CLIENT CONFIDENTIAL

Tesla Gigafactory

Projected Manpower – [***]

Yates Construction Company

October 20, 2014

 

Storey County Classifications

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

Total Tradesmen

Avg. Tradesmen

1

AIR BALANCE TECHNICIAN

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

2

ALARM INSTALLER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

3

BOILERMAKER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

4

BRICKLAYER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

5

CARPENTER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

6

CEMENT MASON

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

7

ELECTRICIAN–COMMUNICATION TECH.

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

8

ELECTRICIAN–LINE

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

9

ELECTRICIAN–NEON SIGN

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

10

ELECTRICIAN–WIREMAN

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

11

ELEVATOR CONSTRUCTOR

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

12

FENCE ERECTOR

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

13

FLAGPERSON

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

14

FLOOR COVERER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

15

GLAZIER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

16

HIGHWAY STRIPER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

17

HOD CARRIER–BRICK MASON

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

18

HOD CARRIER–PLASTERER TENDER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

19

IRON WORKER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

20

LABORER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

21

MECHANICAL INSULATOR

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

22

MILLWRIGHT

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

23

OPERATING ENGINEER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

24

OPERATING ENG. STEEL FAB/ERECTOR

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

25

OPERATING ENGINEER–PILEDRIVER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

26

PAINTER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

27

PILEDRIVER (NON–EQUIPMENT)

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

28

PLASTERER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

29

PLUMBER/PIPEFITTER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

30

REFRIGERATION

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

31

ROOFER (Does not include sheet metal )

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

32

SHEET METAL WORKER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

33

SPRINKLER FITTER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

34

SURVEYOR (NON–LICENSED)

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

35

TAPER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

36

TILE /TERRAZZO WORKER/MARBLE MASON

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

37

TRAFFIC BARRIER ERECTOR

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

38

TRUCK DRIVER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

39

WELL DRILLER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

40

LUBRICATION AND SERVICE ENGINEER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

41

SOIL TESTER (CERTIFIED)

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

Average Number of Craft Employees [***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***] Projected Craft Payroll

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

Yates is aware of the Nevada residency requirements of SB1 and is currently engaged in designing and implementing compliance procedures.

 

Addendum 3.1

-2-

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

---

 

Confidential Treatment Requested by Tesla Motors, Inc.

CLIENT CONFIDENTIAL

Tesla Gigafactory

Projected Manpower – [***]

Yates Construction Company

October 20, 2014

 

Storey County Classifications

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

Total Tradesmen

Avg. Tradesmen

1

AIR BALANCE TECHNICIAN

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

2

ALARM INSTALLER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

3

BOILERMAKER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

4

BRICKLAYER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

5

CARPENTER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

6

CEMENT MASON

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

7

ELECTRICIAN–COMMUNICATION TECH.

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

8

ELECTRICIAN–LINE

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

9

ELECTRICIAN–NEON SIGN

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

10

ELECTRICIAN–WIREMAN

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

11

ELEVATOR CONSTRUCTOR

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

12

FENCE ERECTOR

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

13

FLAGPERSON

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

14

FLOOR COVERER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

15

GLAZIER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

16

HIGHWAY STRIPER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

17

HOD CARRIER–BRICK MASON

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

18

HOD CARRIER–PLASTERER TENDER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

19

IRON WORKER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

20

LABORER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

21

MECHANICAL INSULATOR

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

22

MILLWRIGHT

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

23

OPERATING ENGINEER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

24

OPERATING ENG. STEEL FAB/ERECTOR

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

25

OPERATING ENGINEER–PILEDRIVER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

26

PAINTER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

27

PILEDRIVER (NON–EQUIPMENT)

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

28

PLASTERER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

29

PLUMBER/PIPEFITTER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

30

REFRIGERATION

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

31

ROOFER (Does not include sheet metal )

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

32

SHEET METAL WORKER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

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[***]

[***]

[***]

[***]

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[***]

33

SPRINKLER FITTER

[***]

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[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

34

SURVEYOR (NON–LICENSED)

[***]

[***]

[***]

[***]

[***]

[***]

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[***]

[***]

[***]

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35

TAPER

[***]

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[***]

[***]

[***]

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[***]

[***]

[***]

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[***]

36

TILE /TERRAZZO WORKER/MARBLE MASON

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

37

TRAFFIC BARRIER ERECTOR

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

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[***]

[***]

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[***]

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38

TRUCK DRIVER

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39

WELL DRILLER

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[***]

[***]

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[***]

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[***]

[***]

[***]

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40

LUBRICATION AND SERVICE ENGINEER

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

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41

SOIL TESTER (CERTIFIED)

[***]

[***]

[***]

[***]

[***]

[***]

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[***]

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[***]

[***]

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42

SOILS AND MATERIALS TESTER

[***]

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Average Number of Craft Employees [***]

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[***] Projected Craft Payroll

[***]

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[***]

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[***]

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[***]

[***]

Yates is aware of the Nevada residency requirements of SB1 and is currently engaged in designing and implementing compliance procedures.

 

Addendum 3.1

-3-

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Confidential Treatment Requested by Tesla Motors, Inc.

Capital Investment

 

Lead Participant: Tesla Motors, Inc.	County: Storey County

Directions: Capital investment means all costs and expenses proposed to be incurred by the participants in a qualified project. This includes all project costs such as acquisition, construction, installation and equipping of the Qualified project. According to Nevada Revised Statutes, all property that is not defined or taxed as “real estate” or “real property” is considered “personal property.” Please provide a list of the real and personal property the Participants’ intend to acquire, construct, and purchase over the 10-year period.

 

(a)	(b)	(c)	(d)
Capital Investment Type/Description	# of Units	Price per Unit	Total Cost
Building and Site Infrastructure			$1,100,000,000
Machinery and Equipment - Building Systems			300,000,000
Machinery and Equipment - Module, Pack and Battery Assembly			2,200,000,000
Machinery and Equipment - Materials Processing			1,400,000,000
Additional detail submitted as confidential proprietary information of Tesla.
TOTAL CAPITAL INVESTMENT			$5,000,000,000.00

EXPAND AS NECESSARY OR CAN BE REPLACED BY SEPARATE DOCUMENT

 

 

Attachment “F”

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

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	Confidential Treatment Requested by Tesla Motors, Inc.
10/20/2014	Entity Details - Secretary of State, Nevada

TESLA MOTORS, INC.

 

Business Entity Information
Status:	Active	File Date:		11/6/2012
Type:	Foreign Corporation	Entity Number:		E0576452012-6
Qualifying State:	DE	List of Officers Due:		11/30/2014
Managed By:		Expiration Date:
NV Business ID:	NV20121672465	Business License Exp:		11/30/2014
Additional Information
	Central Index Key:   E0576452012-6
Registered Agent Information
Name:	THE CORPORATION TRUST COMPANY OF NEVADA		Address 1:	311 S DIVISION ST
Address 2:			City:	CARSON CITY
State:	NV		Zip Code:	89703
Phone:			Fax:
Mailing Address 1:			Mailing Address 2:
Mailing City:			Mailing State:	NV
Mailing Zip Code:
Agent Type:	Commercial Registered Agent - Corporation
Jurisdiction:	NEVADA	Status:		Active
Financial Information
No Par Share Count:	0	Capital Amount:		$2,100,000.00
Par Share Count:	2,100,000,000.00	Par Share Value:		$0.001
Officers				¨ Include Inactive Officers
Treasurer - DEEPAK AHUJA
Address 1:	3500 DEER CREEK ROAD	Address 2:
City:	PALO ALTO	State:		CA
Zip Code:	94583	Country:		USA
Status:	Active	Email:
Secretary - TODD MARON
Address 1:	3500 DEER CREEK ROAD	Address 2:
City:	PALO ALTO	State:		CA
Zip Code:	94583	Country:		USA
Status:	Active	Email:
President - ELON R MUSK
Address 1:	3500 DEER CREEK ROAD	Address 2:
City:	PALO ALTO	State:		CA
Zip Code:	94583	Country:		USA
Status:	Active	Email:
Director - ELON R MUSK
Address 1:	3500 DEER CREEK ROAD	Address 2:
City:	PALO ALTO	State:		CA
Zip Code:	94583	Country:		USA
Status:	Active	Email:

 

Attachment “G”	[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.	1/2
-1-

 

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	Confidential Treatment Requested by Tesla Motors, Inc.
10/20/2014	Entity Details - Secretary of State, Nevada

 

ActionsAmendments
Action Type:	Foreign Qualification
Document Number:	20120756640-23	# of Pages:	2
File Date:	11/6/2012	Effective Date:
Initial Stock Value: Par Value Shares: 2,100,000,000 Value: $ 0.001 No Par Value Shares: 0                                                              Total Authorized Capital: $ 2,100,000.00
Action Type:	Miscellaneous
Document Number:	20120756641-34	# of Pages:	1
File Date:	11/6/2012	Effective Date:
(No notes for this action)
Action Type:	Initial List
Document Number:	20120857386-72	# of Pages:	1
File Date:	12/20/2012	Effective Date:
(No notes for this action)
Action Type:	Annual List
Document Number:	20130617641-11	# of Pages:	1
File Date:	9/22/2013	Effective Date:
(No notes for this action)
Action Type:	Registered Agent Change
Document Number:	20130627236-12	# of Pages:	1
File Date:	9/25/2013	Effective Date:
(No notes for this action)

 

Attachment “G”	[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.	2/2
-2-

 

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Confidential Treatment Requested by Tesla Motors, Inc.

 

	Storey County Commissioners’ Office
	Drawer 176	Storey County	[e-mail]
	Virginia City, NV 89440	Courthouse	www.StoreyCounty.org
	[phone]	26 South B Street, Virginia City	Fax: [phone]

October 8, 2014

Steve Hill – Executive Director

Nevada Governor’s Office of Economic Development

555 East Washington Ave. Suite 5400

Las Vegas, NV 89101

Tesla Motors S.B. 1 Application Support Letter

Dear Mr. Hill,

Storey County fully supports the pending application of Tesla Motors, Inc. for participation in provisions of the recently enacted Senate Bill 1 from the 2014 Special Session. We are exceptionally grateful and proud that Tesla Motors has chosen Nevada, Storey County and the Tahoe-Reno Industrial Center as the home to their new battery manufacturing facility known as the “Gigafactory”.

While some might see abated revenues as “lost revenue”, that is a short-sighted outlook. Beyond the almost immediate benefit of jobs creation both during construction and operation, the focus this opportunity has provided our State is almost beyond comprehension. The Tesla project has served as a catalyst that is already driving in additional inquiries and transactions from other companies at unprecedented levels.

The economic analysis prepared by Applied Economics provides statistical evidence that Tesla’s selection of Nevada will have long-lasting and tremendous positive fiscal benefits thru our entire region. Our interaction with the Tesla Team has consistently proven that they are a highly talented and professional Company that will serve to raise the performance bar in our State.

As the local government entity with perhaps the most fiscal “impact” initially, we are ready and excited to welcome Tesla to our County and our State. Thank you for your consideration of their application. Please do not hesitate to contact me for any additional information or clarification as may be desired.

Sincerely,

 

Pat Whitten

Storey County Manager

 

cc:	Alex B. Leath – Bradley Arant Boult Cummings Kevin Kassekert – Tesla Motors, Inc.

Attachment “H”	[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.
-1-

 

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Confidential Treatment Requested by Tesla Motors, Inc.

 

Trustees	STOREY COUNTY SCHOOL DISTRICT	Robert Slaby Ed. D., Superintendent
	P.O. Box C
Colleen Conley, President	124 South “E” Street
Jeff Nevin, Clerk	Virginia City, NV 89440
Christine Miller, Member
Pamela Smith, Member	Where the Expectation is Excellence

October 8, 2014

Steve Hill – Executive Director

Nevada Governor’s Office of Economic Development

555 East Washington Ave. Suite 5400

Las Vegas, NV 89101

Re: Tesla S.B. 1 Application Support Letter

Dear Mr. Hill,

Storey County School District fully supports the pending application of Tesla Motors, Inc. for participation in provisions of the recently enacted Bill 1 from the 2014 Special Session. We are exceptionally grateful and proud that Tesla Motors has chosen Nevada, Storey County and the Tahoe-Reno Industrial Center as the home to their new battery manufacturing facility known as the “Gigafactory”.

The economic analysis prepared by Applied Economics provides statistical evidence that Tesla’s selection of Nevada will have long-lasting and tremendous positive fiscal impacts on our entire region. Our interaction with the Tesla Team has consistently proven that they are a highly talented and professional Company that will serve to raise the bar in our State.

As the local government entity with perhaps the most fiscal “impact” initially, we are ready and excited to welcome Tesla to our County and our State. Thank you for your consideration of their application. Please do not hesitate to contact me for any additional information or clarification as may be desired.

Sincerely,

 

Dr. Robert Slaby – Superintendent

Storey County School District is an Equal Opportunity Employer

Telephone: [phone] Fax: [phone]

Attachment “H”	[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.
-2-

 

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Confidential Treatment Requested by Tesla Motors, Inc.

 

 

 

Robert A. Cashell, Sr. Mayor   [phone] [phone] Fax [e-mail] Web site: www.Reno.gov		“The most livable of Nevada cities; the focus of culture, commerce and tourism in Northern Nevada.”

October 14, 2014

Nevada Governor’s Office of Economic Development

808 West Nye Lane

Carson City, NV 89703

I am writing to express my full support for Tesla and their request for approval of Sales & Use Tax Abatement, Modified Business Tax Abatement, Personal Property Tax Abatement, Real Property Tax Abatement, Economic Development Rate Rider and Transferable Tax Credits. Although it will be located in Storey County, the Tesla project will result in significant positive impacts on the City of Reno’s economy. As result of Tesla’s announcement to relocate to Northern Nevada, we have seen an increase in businesses evaluating relocation to our community over the past month. The selection of Northern Nevada over the many competing states shows the strength of our business climate and it is critical that we secure the project by providing the necessary abatements.

It is my understanding that the Tesla project will ultimately result in more than 6,000 jobs with average wages of more than $20 per hour. I have no doubt that these jobs will result in many indirect jobs in Reno.

I strongly encourage your support of Tesla’s incentive application.

Sincerely,

 

Robert A. Cashell, Sr.

Mayor, City of Reno

One East First Street, 15^th Floor P.O. Box 1900, Reno, NV 89505

 

Attachment “H”	[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.
-3-

 

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Confidential Treatment Requested by Tesla Motors, Inc.

 

 

 

October 17, 2014

Mr. Steve Hill

Governor’s Office of Economic Development

808 West Nye Lane

Carson City, NV 89703

Re: Tesla Motors Incentives

Dear Steve;

EDAWN hereby supports the application of Tesla Motors, Inc. for the following tax abatement, tax credits and economic development rate rider.

•	Up to 100% of Sales & Use Tax until June 30, 2034.

•	Up to 100% abatement of Real Property, Personal Property and Modified Business Tax Abatements until June 30, 2024.

•	Transferable tax credit of $12,500 per permanent, full-time job up to 6,000 jobs (average wage of $22 per hour to qualify).

•	Transferable tax credit of 5% for the first $1 billion investment, and 2.8% of the next $2.5 billion investment.

•	Extension of the Economic Development Rate Rider electric program from five to ten years.

Tesla Motors is a manufacturer of electric passenger vehicles and will be building one of the largest battery factories in the world at the Tahoe Regional Industrial Center located in Storey County.

Securing the 5.5 million square foot “Gigafactory” for Nevada was due the efforts of a number of Nevadans, and several factors including the state’s positive business climate, tax structure, cost of living, logistic advantages, and the incentive package recently by our State Legislature.

The company’s plans involve a factory investment of $1.1 billion and $3.9 billion in initial equipment purchases over a three year period. Additional plans include $5 billion in replacement equipment and upgrades over a subsequent ten year period. Tesla and its partners plan to hire 6500 operational employees with an average wage exceeding $22.00 per hour and full benefits package. Prioritization of employment will be made to Nevadans and veterans.

Over a twenty year period the Gigafactory is estimated to increase regional employment by 10%, with a total economic impact of approximately $100 billion. This impact is estimated to increase the regional GDP by an astonishing 20%. Over the same period, the Gigafactory is estimated to generate $1.9 billion in total fiscal impacts. Additionally, Tesla will make a direct contribution to K-12 education of $37.5 million beginning in August 2019, and commits to a grant of $1 million to fund advanced battery research at the University of Nevada Las Vegas.

EDAWN fully supports this application, and looks forward to representing the company before the GOED Board in November.

Sincerely,

 

Stan Thomas

EDAWN, Executive Vice President

Marketing & Competitive Expansion

 

Attachment “I”

www.edawn.org | 5190 Neil Road, Suite 110 | Reno, NV 89502 | (p) 775.829.3700 or 800-256-9761 | (f) 775-829-3710

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been

requested with respect to the omitted portions.

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Confidential Treatment Requested by Tesla Motors, Inc. YOUR GUIDE TO BENEFITS 2014 WHAT’S INSIDE CHOOSING STANDARD & OPTIONAL FEATURES TAKE CHARGE  OF YOUR MEDICAL PLAN CHECK OUT MODEL RX ELECTRIC SMILES YOUR WINDOW TO THE WORLD EXPLORE SAVINGS VEHICLES WHAT’S HOT? COOL ACCESSORIES [***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

 

 

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Confidential Treatment Requested by Tesla Motors, Inc.

 

 

		WHAT ’S INSIDE:   3ELIGIBILITY Find out who is eligible for your benefits and when you can change your benefits.   4MEDICAL Learn about your medical plan options.   7PRESCRIPTION DRUGS Find out how prescription drug coverage works with each of the medical plans.   8DENTAL Learn about your dental coverage.   9VISION Explore your vision benefits.   10FLEXIBLE SPENDING ACCOUNTS Learn how these accounts can save you money.   11LIFE , AD&D AND DISABILITY Get the protection you need with life, AD&D and disability.
WELCOME TO THE TESLA LIFE
Welcome to The Tesla Life. We are focused on being good health care consumers. We take care of ourselves and our family members by using preventive care and preventive prescriptions to avoid more serious health care events. We stretch and exercise to keep us healthy and effective in both work and life.	THE TESLA LIFE Tesla provides world class benefits so you can be at your best. The Tesla Life gives you and your family access to resources promoting well-being and a healthy lifestyle.
For 2014, we want to ensure your Tesla benefits experience is easy, engaging and supportive. We hope you’ll take advantage of programs such as Tesla Energy, which allow you to earn contributions toward the cost of health care by taking part in health and fitness activities;
Castlight Health, a tool to help you research high-quality health care at the best price; and TheTeslaLife.com, which seamlessly connects you to all of your Tesla rewards, features, tools, benefits and perks. TheTeslaLife.com also is where you’ll find your comprehensive Total Rewards Statement.
We are entering a transitional time with the implementation of health care reform. For everyone in the Tesla family, we will continue to stay in front of health care trends to ensure you and your family receive industry-leading benefits and access to an excellent health care program. Our commitment to you is to continue offering innovative and affordable benefits packages designed to support a healthy, balanced life. The Tesla Life.
		12401(K), ESPP AND EQUITY INCENTIVE PLAN Find out about the financial benefits of the 401(k), ESPP and Equity Incentive Plans.
		13TESLA PERKS Learn about other great benefits of The Tesla Life.
		14COST OF COVERAGE Check out the cost of benefits.
In Good Health,     Arnnon Geshuri Vice President, Human Resources		15ELECTING COVERAGE Review your enrollment checklist and make your selections online.
		BACK COVER Connect with the Tesla Benefits Team or our benefit partners.

 

Attachment “J”

2	THE TESLA LIFE — YOUR GUIDE TO BENEFITS	-2-
[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Confidential Treatment Requested by Tesla Motors, Inc.

 

[ELIGIBILITY]

STANDARD & OPTIONAL FEATURES

SOME TESLA BENEFITS COME STANDARD FOR YOU AND YOUR ELIGIBLE DEPENDENTS;

OTHERS ARE OPTIONAL ADD-ONS.

 

STANDARD FEATURES	OPTIONS	PASSENGERS
All active, full-time employees on the U.S. payroll who are scheduled to work at least 30 hours per week are eligible for the following benefits on the first day of work:   •Medical   •Dental   •Vision   •Flexible Spending Accounts   •Life, AD&D and Disability	All employees on the U.S. payroll are eligible for:   •401(k)   •Employee Stock Purchase Plan (ESPP)   •Tesla Perks	Your eligible dependents for medical, dental, vision, optional life and AD&D include:   •Your spouse or domestic partner   •Your children (biological, adopted, domestic partner’s children, stepchildren or children for whom you have guardianship), regardless of their marital or student status up until the end of the month in which they turn 26

 

31 THE NUMBER OF DAYS YOU HAVE FROM MOST LIFE EVENTS TO MAKE A CHANGE TO YOUR BENEFITS.	CHANGE IN DIRECTION? You have 31 days from the date of most life events to change your benefit elections. If you miss the deadline, you will not be able to make changes until the next annual benefits enrollment. Eligible life events include:   •Marriage, divorce, legal separation or annulment   •Birth or adoption   •Beginning or ending of domestic partnership   •Court order   •Beginning or ending of benefits coverage from a spouse or domestic partner’s plan   For more information on what changes can be made for each type of life event, visit TheTeslaLife.com.

THE KEY TO YOUR PERSONALIZED BENEFITS

TheTeslaLife.com allows you to see your total rewards from every angle. You have complete access to the details of your pay, stock, holidays, benefits, perks, account balances and more.

You can stay seamlessly connected to a range of innovative benefits designed to support a healthy, balanced life.

 

 

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AS A NEW HIRE WHAT HAPPENS IF I DON’T ENROLL?

If you do not make a benefit election, you will ONLY be enrolled in short-term and long-term disability, basic life and AD&D insurance.

 

 

GO MOBILE Access TheTeslaLife.com on the go SPOUSE/DOMESTIC PARTNER COVERAGE $200 If you choose to cover a spouse or domestic partner who has access to medical plan coverage through his or her employer in 2014, you will pay an additional spouse/domestic partner contribution of $200 per month.

 

Attachment “J”

		-3-	THE TESLA LIFE — YOUR GUIDE TO BENEFITS	3
[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Confidential Treatment Requested by Tesla Motors, Inc.

 

[MEDICAL]

TAKE CHARGE

WHEN IT COMES TO HEALTH CARE, WE ENCOURAGE YOU TO MAKE INFORMED DECISIONS FOR YOU AND YOUR FAMILY. TESLA PROVIDES YOU WITH THE TOOLS AND RESOURCES YOU NEED INCLUDING COVERING 100% OF THE COST OF PREVENTIVE CARE AND PREVENTIVE PRESCRIPTIONS.

CIGNA HEALTH SAVINGS PLAN

After you meet the annual deductible ($2,000 per employee/$4,000 per family), you pay 10% of the cost of most covered services you receive from in-network providers until you reach your out-of-pocket maximum. You also have the flexibility to visit out-of-network providers, but your portion of the cost of services is higher.

To help you pay for out-of-pocket expenses, Tesla makes an initial contribution ($200 per employee/$1,200 per family) to a Health Savings Account (HSA) set up in your name. You also have the opportunity to make pretax contributions to your HSA and earn up to $800 in additional contributions for participating in Tesla Energy health and fitness activities. (HSAs are explained on page 6; more information on Tesla Energy is available on TheTeslaLife.com.)

CIGNA REIMBURSEMENT PLAN

If you’d feel more comfortable with a lower annual deductible ($1,000 per employee/$1,500 per family) before Tesla pays benefits, you have the option of sharing the monthly cost of coverage with Tesla and enrolling in the Cigna Reimbursement Plan. This plan allows you to visit in-network or out-of-network providers. And, after you meet the deductible, you pay 10% of the cost of most covered services you receive from in-network providers until you reach your out-of-pocket maximum.

If you enroll in the Cigna Reimbursement Plan, Tesla will open a Health Reimbursement Account (HRA) in your name. Tesla does not contribute to your HRA initially, and you’re not permitted to make pretax contributions; however, you can earn up to $800 in contributions by participating in Tesla Energy health and fitness activities. (HRAs are explained on page 6; more information on Tesla Energy is available on TheTeslaLife.com.)

KAISER HEALTH SAVINGS PLAN AND KAISER REIMBURSEMENT PLAN

Employees in California have the option of enrolling in the Kaiser Health Savings Plan or the Kaiser Reimbursement Plan. If you choose a Kaiser plan, you and Tesla share the monthly cost of coverage.

The Kaiser plans operate in the same way as the Cigna plans, with one exception: If you enroll in a Cigna plan, you can visit in-network or out-of-network providers; if you enroll in a Kaiser plan, you must receive all care from Kaiser providers at Kaiser facilities except in case of an emergency.

TO HELP YOU DECIDE WHICH PROVIDER NETWORK AND PLAN WILL BEST MEET YOUR NEEDS, REVIEW THE KEY FEATURES OF THE PLANS (BELOW), THE SIDE-BY-SIDE COMPARISON OF PLAN BENEFITS (ON PAGE 5) AND THE COSTS OF COVERAGE (ON PAGE 14). YOU ALSO CAN USE THE EXPENSE ESTIMATOR ON THETESLALIFE.COM TO ESTIMATE YOUR HEALTH COVERAGE COSTS UNDER EACH MEDICAL PLAN.

 

FEATURE	CIGNA PLANS ALL EMPLOYEES		KAISER PLANS CALIFORNIA EMPLOYEES ONLY
	CIGNA HEALTH SAVINGS PLAN	CIGNA REIMBURSEMENT PLAN	KAISER HEALTH SAVINGS PLAN	KAISER REIMBURSEMENT PLAN
FREE PREVENTIVE CARE	ü	ü	ü	ü
FREE PREVENTIVE PRESCRIPTIONS	ü	ü	ü	ü
FREEDOM TO CHOOSE DOCTORS	ü	ü
INITIAL TESLA HSA CONTRIBUTION	ü		ü
TESLA ENERGY CONTRIBUTIONS	ü	ü	ü	ü
OPTIONAL EMPLOYEE CONTRIBUTIONS	ü		ü

 

Attachment “J”

4	THE TESLA LIFE — YOUR GUIDE TO BENEFITS	-4-
[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Confidential Treatment Requested by Tesla Motors, Inc.

 

 

	PLAN SPECS: MEDICAL PLAN COMPARISON CHART
	CIGNA PLANS All employees				KAISER PLANS California employees only
PLAN FEATURE	CIGNA HEALTH SAVINGS PLAN		CIGNA REIMBURSEMENT PLAN		KAISER HEALTH SAVINGS PLAN	KAISER REIMBURSEMENT PLAN
	In-Network	Out-of-Network	In-Network	Out-of-Network	Kaiser Network	Kaiser Network
ANNUAL DEDUCTIBLE (amount you must pay before Tesla begins paying; doesn’t apply to preventive care or preventive prescriptions)	$2,000 employee/ $4,000 family		$1,000 employee/ $1,500 family	$1,050 employee/ $2,000 family	$2,000 employee/ $4,000 family	$1,000 employee/ $1,500 family
ANNUAL OUT-OF-POCKET MAXIMUM (the most you have to pay for health care services this year; includes annual deductible, coinsurance and prescription drug copays)	$3,000 employee/ $6,500 family		$2,000 employee/ $4,000 family	$7,050 employee/ $14,000 family	$3,000 employee/ $6,500 family	$2,000 employee/ $4,000 family
INITIAL TESLA HSA CONTRIBUTION	$200 employee/ $1,200 family		N/A		$200 employee/ $1,200 family	N/A
(money you can use for health care expenses)
TESLA ENERGY CONTRIBUTIONS	Up to $800
PREVENTIVE CARE SERVICES	FREE	You pay 30% after deductible	FREE	You pay 30% after deductible	FREE
(routine exams, tests and immunizations)
PHYSICIAN OFFICE VISITS INPATIENT HOSPITAL STAYS OUTPATIENT SURGERY AND SERVICES CHIROPRACTIC CARE	You pay 10% after deductible		You pay 10% after deductible		You pay 10% after deductible
(maximum 30 visits per year)
URGENT CARE	You pay 10% after deductible
EMERGENCY ROOM VISITS

For more detailed coverage information, please refer to the plan documents available on TheTeslaLife.com.

EXPLORE THE TRUE COST OF HEALTH CARE WITH CASTLIGHT

•	Compare nearby doctors, medical facilities and health care services based on the price you’ll pay and the quality of care.

•	See personalized cost estimates based on your location, your medical plan and whether you’ve met your deductible.

•	Review step-by-step explanations of your medical spending so you know how much you paid and why.

•	Receive recommendations about ways to save money and find high-quality care.

Visit TheTeslaLife.com to access Castlight.

 

Attachment “J”

		-5-	THE TESLA LIFE — YOUR GUIDE TO BENEFITS	5
[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Confidential Treatment Requested by Tesla Motors, Inc.

 

HEALTH SAVINGS ACCOUNTS AND HEALTH REIMBURSEMENT ACCOUNTS

Health Savings Accounts (HSAs) and Health Reimbursement Accounts (HRAs) are both designed to help lower your out-of-pocket health care costs, but they are structured differently.

 

HEALTH SAVINGS ACCOUNTS (HSAs) •The Health Savings Plans come with an HSA. •Tesla makes an initial contribution to your HSA. •You can earn additional HSA funds by participating in Tesla Energy health and fitness activities. •You can make pretax contributions to your HSA. •Your account balance rolls over from year to year. •The money in your account grows tax-free, and it is yours to keep even if you leave Tesla. •Once your HSA balance reaches $2,000, you can invest it in a variety of investment options.

HEALTH REIMBURSEMENT ACCOUNTS (HRAs) •The Reimbursement Plans come with an HRA. •Tesla does not make an initial contribution to your HRA. •You can earn HRA funds by participating in Tesla Energy health and fitness activities. •You cannot make pretax contributions to your HRA. •Your account balance does not roll over from year to year. •You cannot keep the money in your account if you leave Tesla.

 

Key features of HSAs and HRAs are outlined below.

 

	HEALTH SAVINGS ACCOUNT	HEALTH REIMBURSEMENT ACCOUNT
INITIAL TESLA CONTRIBUTION	$200 employee/$1,200 family	$0
TESLA ENERGY CONTRIBUTIONS	Up to $800	Up to $800
OPTIONAL EMPLOYEE CONTRIBUTIONS	Up to $2,300 employee/$4,550 family	No
YEAR-TO-YEAR BALANCE ROLLOVER	Yes	No
ABILITY TO TAKE YOUR ACCOUNT WITH YOU	Yes	No

You can use the money in your HSA to help pay for eligible health care expenses—medical, dental and vision—for yourself and your dependents. The money in your HRA can only be used to help pay the annual medical deductible.

TESLA ENERGY CONTRIBUTIONS

If you participate in Tesla Energy health and fitness activities, Tesla will reward you with contributions to your HSA or HRA. Once you’ve completed an activity, Tesla will credit your HSA or HRA with the contributions you’ve earned. Visit TheTeslaLife.com to learn more about Tesla Energy.

 

$1,080	If you and all of the family members you cover on your medical plan do not use tobacco products, you will receive a tobacco-free discount of $90 per month ($1,080 per year).   If you or any of your covered family members do use tobacco products, you may be eligible for a retroactive discount within the same calendar year if you complete the Quit For Life program in 2014. Visit TheTeslaLife.com to learn more.

BENEFITS ADVOCATE

Benefits Advocates are available to participants in all medical plans. They provide you with:

 

•Timely resolutions of health care billing and insurance claims disputes. •Easy-to-understand information about treatment options, specialists and prescription drugs.

•Assistance locating doctors and hospitals covered by your medical plan. •Explanations of diagnoses, and how to obtain the best medication and treatment from medical professionals.

•Facilitating second opinions when needed. To contact a Benefits Advocate, call 855.668.5041 and say, “Speak with a Benefits Advocate.”

 

 

Attachment “J”

6	THE TESLA LIFE — YOUR GUIDE TO BENEFITS	-6-
[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Confidential Treatment Requested by Tesla Motors, Inc.

 

[ PRESCRIPTION DRUGS ]

CHECK OUT MODEL RX

PRESCRIPTION DRUG (RX) COVERAGE COMES AS A STANDARD FEATURE OF YOUR MEDICAL PLAN AND WORKS DIFFERENTLY DEPENDING ON WHICH PLAN YOU CHOOSE.

 

	PLAN SPECS: PRESCRIPTION DRUG BENEFITS
	CIGNA PLANS				KAISER PLANS
	All employees				California employees only
PLAN FEATURE	CIGNA HEALTH SAVINGS PLAN		CIGNA REIMBURSEMENT PLAN		KAISER HEALTH SAVINGS PLAN	KAISER REIMBURSEMENT PLAN
	In-Network	Out-of-Network	In-Network	Out-of-Network	Kaiser Network	Kaiser Network
PREVENTIVE CARE DRUGS (includes many medications prescribed to treat diabetes, high blood pressure and high cholesterol)	FREE1	You pay 30% after deductible	FREE1	You pay 30% after deductible	FREE2	FREE2
RETAIL PRESCRIPTION DRUGS (30-day supply)	You pay 10% after deductible for generics, $50 maximum after deductible for preferred brands, $100 maximum after deductible for non-preferred brands	You pay 30% after deductible	You pay $10 for generics, $25 for preferred brands, $40 for non- preferred brands; not subject to deductible	You pay 50%	You pay 10% after deductible for generics, $50 maximum after deductible for preferred brands, $100 maximum after deductible for non-preferred brands	You pay $10 for generics, $25 for brand-name, $40 for brand-name non-formulary; not subject to deductible
MAIL ORDER PRESCRIPTION DRUGS	You pay 10% after deductible for generics, $75 maximum after deductible for preferred brands, $150 maximum after deductible for non-preferred brands3	Not covered	You pay $10 for generics, $50 for preferred brands, $80 for non-preferred brands; not subject to deductible3	Not covered	You pay 10% after deductible for generics, $75 maximum after deductible for preferred brands, $150 maximum after deductible for non-preferred brands4	You pay $10 for generics, $50 for brand- name, $80  for brand-name non-formulary; not subject to deductible4

¹ Based on Cigna’s preventive care drug list

² Based on Kaiser’s preventive care drug list

³ 90-day supply

⁴ 100-day supply

 

RX FREQUENTLY ASKED QUESTIONS	WHAT ARE PREVENTIVE CARE DRUGS?
	Preventive care drugs include many medications prescribed to treat diabetes, high blood pressure, high cholesterol and asthma. Prenatal vitamins are also included.
	IS BIRTH CONTROL COVERED?
	Yes, generic and some preferred brands of oral contraceptives are covered at 100%.
	WHAT’S THE DIFFERENCE BETWEEN BRAND-NAME AND GENERIC DRUGS?
	You can save money if your prescription is filled with a generic drug. Generic drugs cost less than brand-name drugs, and meet the same FDA requirements for effectiveness, quality and safety.
	WHEN WOULD I USE THE MAIL ORDER BENEFIT?
	This benefit is used for maintenance medications that you take on a regular basis. Using the mail order service usually saves you money, and you have the added convenience of receiving your medications at home.

 

Attachment “J”

		-7-	THE TESLA LIFE — YOUR GUIDE TO BENEFITS	7
[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

---

 

Confidential Treatment Requested by Tesla Motors, Inc.

 

[ DENTAL ]

ELECTRIC SMILES

RECENT RESEARCH SHOWS THAT DENTAL HEALTH IS CLOSELY LINKED TO YOUR OVERALL HEALTH. TO KEEP YOUR SMILE HEALTHY, TESLA PROVIDES DENTAL COVERAGE THROUGH CIGNA FOR YOU AND YOUR FAMILY—AT NO COST TO YOU. SEE THE CHART BELOW FOR DETAILS.

 

PLAN SPECS: CIGNA DENTAL PLAN
PLAN FEATURE	IN-NETWORK	OUT- OF- NETWORK
ANNUAL DEDUCTIBLE	$50 employee/ $150 family	$50 employee/ $150 family
PREVENTIVE CARE (includes routine exams, cleanings, X-rays and fluoride treatments)	FREE	You pay the difference between UCR* and the billed amount
BASIC CARE (includes fillings, root canals and extractions)	You pay 20%	You pay 20% of UCR*
RESTORATIVE CARE (includes dentures, crowns, bridgework, inlays and onlays)	You pay 50%	You pay 50% of UCR*
ORTHODONTIA (for children and adults)	You pay 50%	You pay 50% of UCR*
ANNUAL MAXIMUM BENEFIT	$2,000 per person
LIFETIME MAXIMUM BENEFIT	$2,000 per person for orthodontia

 

*What’s UCR?

USR is the average price for a given service in your geographical area.

FREE

PREVENTIVE CARE, INCLUDING ROUTINE EXAMS, CLEANINGS, X-RAYS AND FLUORIDE TREATMENTS, WHEN YOU RECEIVE SERVICE FROM AN IN-NETWORK PROVIDER.

 

Attachment “J”

8	THE TESLA LIFE — YOUR GUIDE TO BENEFITS	-8-
[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

---

 

Confidential Treatment Requested by Tesla Motors, Inc.

 

[ VISION ]

WINDOWS TO THE WORLD

AT TESLA, WE PRIDE OURSELVES ON BEING VISIONARIES. OUR EYES ARE OUR WINDOWS TO THE WORLD. THAT’S WHY WE PROVIDE COMPREHENSIVE VISION COVERAGE THROUGH OUR VISION SERVICE PLAN FOR YOU AND YOUR FAMILY—AT NO COST TO YOU. SEE THE CHART BELOW FOR DETAILS.

 

PLAN SPECS: VSP VISION PLAN
BENEFIT	DESCRIPTION	COPAY	FREQUENCY
WELLVISION EXAM	•Focuses on your eyes and overall wellness	FREE	Every 12 months
PRESCRIPTION GLASSES
FRAME	•$150 allowance for a wide selection of frames	$25	Every 24 months
	•20% off amount over your allowance
	•$80 allowance for Costco
LENSES	•Single vision, lined bifocal and lined trifocal lenses	Combined with	Every 12 months
	•Polycarbonate lenses for dependent children	frame
LENS OPTIONS	•Standard progressive lenses	$50	Every 12 months
	•Premium progressive lenses	$80 - $90
	•Custom progressive lenses	$120 - $160
	•Average 35-40% off other lens options
CONTACTS
CONTACTS (instead of glasses)	•$150 allowance for contacts and contact lens exam (fitting and evaluation)	FREE	Every 12 months
	•15% off contact lens exam (fitting and evaluation)
PRIMARY EYECARE
	•Treatment and diagnosis of eye conditions such as pink eye, vision loss and monitoring of cataracts, glaucoma and diabetic retinopathy. Limitations and coordination with medical coverage may apply.	$20	As needed

 

YOUR COVERAGE WITH OTHER PROVIDERS
Exam up to $50	Single vision lenses up to $50	Lined trifocal lenses up to $100	Contacts up to $105
Frame up to $70	Lined bifocal lenses up to $75	Progressive lenses up to $85

 

 

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ProTec Safety® (Employee-Only Coverage)

FRAME

•Fully covered when you choose a safety frame from your VSP doctor’s ProTec Eyewear® collection

• Certified according to the American National Standards Institute (ANSI) guidelines for impact protection. A second pair of Safety frames will be covered, if broken.

LENSES

•Prescription single vision, lined bifocal, lined trifocal, polycarbonate lenses and vermillion tinting covered in full

•Certified according to the American National Standards Institute (ANSI) guideline for impact protection. A second pair of prescription safety lenses will be covered, if broken.

$20 pair every 24 months

Copay combined with frame every 12 months

Attachment “J”

		-9-	THE TESLA LIFE — YOUR GUIDE TO BENEFITS	9
[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

---

 

Confidential Treatment Requested by Tesla Motors, Inc.

 

 

[FLEXIBLE SPENDING ACCOUNTS ]

TAX—FREE FINANCING OPTIONS

DON’T MISS YOUR CHANCE TO GET EXTRA SAVINGS. WHEN YOU USE FLEXIBLE SPENDING ACCOUNTS (FSAs), YOU ARE NEVER TAXED ON THE MONEY YOU CONTRIBUTE. THIS MEANS THAT EVERY TIME YOU USE YOUR FSA TO PAY AN ELIGIBLE EXPENSE, YOU RECEIVE A DISCOUNT THAT’S EQUAL TO YOUR INCOME TAX BRACKET. TESLA OFFERS TWO TYPES OF FSAs.

 

•HEALTH CARE FLEXIBLE SPENDING ACCOUNT (HC FSA):   If you are enrolled in the Cigna Reimbursement Plan or the Kaiser Reimbursement Plan, you can use a HC FSA to pay for medical expenses (such as copayments and coinsurance), dental expenses (non-cosmetic), most prescription drugs and eye glasses.	THE FINE PRINT   In exchange for tax-free financing you must follow a few simple rules:   •You cannot transfer money from one FSA to another, and you cannot use money from one FSA to cover expenses that should be claimed from the other account.   •You must use your FSAs on eligible expenses. For a complete list of eligible expenses for each account, visit www.irs.gov and review publications 502 and 503.   •You cannot contribute more than the IRS maximums to each account. Here are the limits for 2014:   •HC FSA: up to $2,500   •DC FSA: up to $5,000   •“Use it or lose it.” This means that all the money in your HC FSA must be spent by March 15 of the following year and claims must be submitted by April 30 of that year. All the money in your DC FSA must be spent by December 31 and claims must be submitted by April 30 of the following year. Any amount remaining at the end of the plan year is forfeited, so estimate your expenses carefully.
•DEPENDENT CARE FLEXIBLE SPENDING ACCOUNT (DC FSA):   You can use this account to pay for preschool expenses, nursery school expenses, child care in your home, senior day care facility needs and licensed home child care. Dependent Care FSA expenses related to the care of a child must be for a child under the age of 13.
Contributions to a DC FSA cannot be used to pay for dependents’ health care expenses; they can only be used to pay for the care provided to qualifying dependent children or adults.
You can enroll in one, both or neither of the accounts; however, if you are enrolled in the Cigna or Kaiser Health Savings Plan, you may participate in the Dependent Care FSA but NOT in the Health Care FSA.

YOU MUST RE-ENROLL EACH YEAR TO PARTICIPATE IN AN FSA. YOUR ELECTIONS DO NOT ROLL OVER FROM YEAR TO YEAR.

TEST DRIVE THE SAVINGS

The following chart shows you how much you would save on your health care and dependent care expenses if you contribute up to the maximum amount for each account. It assumes you are married and file your taxes jointly with a combined annual income of $50,000.

 

	WITHOUT FSA	WITH FSA
Combined annual income	$50,000	$50,000
Pretax contribution
•Health Care FSA	$0	$2,500
•Dependent Care FSA	$0	$5,000
Taxable income	$50,000	$42,500
Estimated taxes*	$8,017	$6,892
Take-home pay	$41,983	$35,608
After-tax health and dependent care expenses	$7,500	$0
Final take-home pay	$34,483	$35,608
Increase in take-home pay	$0	$1,125

*	Based on federal tax law for 2013. This may vary depending on your state, local taxes and personal tax situation.

 

Attachment “J”

10	THE TESLA LIFE — YOUR GUIDE TO BENEFITS	-10-
[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

---

 

Confidential Treatment Requested by Tesla Motors, Inc.

 

[LIFE, AD&D AND DISABILITY]

BUILT-IN SAFETY FEATURES

THE ROAD AHEAD CAN BE UNCERTAIN AT TIMES. THAT’S WHY IT’S IMPORTANT TO PLAN FOR THE FUTURE. TESLA’S BENEFITS HAVE BUILT-IN SAFETY FEATURES DESIGNED TO PROVIDE YOU AND YOUR FAMILY WITH THE PROTECTION YOU NEED.

BASIC SAFETY FEATURES

Tesla provides the following coverage at no cost to you:

•	Two times your annual earnings up to $750,000 in basic life insurance; up to $500,000 in basic accidental death and dismemberment (AD&D) insurance

•	In general, if you become disabled, you’ll get two-thirds of your income until you return to work or reach retirement age

>>	Short-term disability pays up to $2,308 per week for up to 90 days

>>	Long-term disability pays up to $15,000 per month

ENHANCED SAFETY FEATURES

If you’d like additional protection, you can elect optional life insurance or optional AD&D. Note: You may be required to provide Evidence of Insurability.

 

OPTIONAL LIFE INSURANCE	OPTIONAL AD&D
FOR YOURSELF: $10,000 increments up to $600,000 maximum, not to exceed five times your base annual earnings	FOR YOURSELF: $10,000 increments up to $300,000 maximum, not to exceed five times your base annual earnings
FOR YOUR SPOUSE/DOMESTIC PARTNER: $10,000 increments up to $100,000 maximum, not to exceed 50% of your optional life insurance amount	FOR YOUR SPOUSE/DOMESTIC PARTNER: $10,000 increments up to $50,000 maximum, not to exceed 50% of your optional AD&D coverage amount
FOR YOUR CHILD(REN): $5,000 or $10,000	FOR YOUR CHILD(REN): $5,000

EVIDENCE OF INSURABILITY

You may be required to provide proof of your good health, depending on the amount of optional life insurance you elect.

•	You can enroll for coverage up to $200,000, in $10,000 increments, without answering any health questions if you enroll as a new hire.

•	Coverage up to $600,000 is available when you answer a few simple health questions and are approved.

•	If you elect coverage for your spouse that is more than $20,000, your spouse will need to answer health questions.

•	You never have to answer health questions for coverage for your children.

Note: You never have to answer health questions for coverage for yourself, your spouse or your children for optional AD&D coverage.

 

BENEFICIARY DESIGNATIONS   Life insurance benefits are paid to the beneficiary on file at the time of the claim. To ensure that your life insurance proceeds are paid according to your wishes, keep your beneficiary designations up to date. Visit TheTeslaLife.com to review your beneficiary designations and update them as needed.   If you elect optional life and/or AD&D insurance for your spouse and/or children, you are automatically the beneficiary.

 

Attachment “J”

		-11-	THE TESLA LIFE — YOUR GUIDE TO BENEFITS	11
[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

---

 

Confidential Treatment Requested by Tesla Motors, Inc.

 

[401(K), ESPP AND EQUITY INCENTIVE PLAN]

SAVINGS VEHICLES

THE TESLA LIFE IS A RADICALLY DIFFERENT EXPERIENCE. WE OFFER GREAT SAVINGS PROGRAMS TO HELP DRIVE YOUR SUCCESS TODAY WHILE PREPARING FOR YOUR FUTURE. CHECK OUT TESLA’S 401(K) PLAN, EMPLOYEE STOCK PURCHASE PLAN AND EQUITY INCENTIVE PLAN TO START SAVING NOW.

 

401(K) PLAN With the Tesla 401(k) Plan, saving for retirement is automatic. Unless you tell us you’d like to do something else, we’ll put 3% of your pay into the 401(k) Plan. You can change this amount at any time. To make things easy for you, we put the automatic contribution into a “life cycle” fund—this type of fund is based on your date of birth and a retirement age of 65. The fund takes the pressure off you because it is managed by investment experts who monitor your investments and adjust the level of risk as you near retirement. If you’d like to actively manage your investments, the plan offers you other options that allow you to do so. Visit TheTeslaLife.com to learn more about your options and to choose the ones that best fit you and your family’s needs.

EMPLOYEE STOCK PURCHASE PLAN (ESPP) Through this program, you can purchase company stock at a 15% discount off the market price at either the beginning of the six-month offering period or the market price at the end of the offering period, whichever is lower. Offering periods begin on March 1 and September 1, and purchases are made on the last day of each offering. You purchase shares through after-tax contributions made through payroll deductions that accumulate during the 6-month offering period. Shortly after the shares are purchased, they are deposited into your E*TRADE Stock Plans account, where you can hold onto them as long as you want or, subject to Tesla’s Insider Trading Policy, sell or gift the shares without any holding period restrictions.

EQUITY INCENTIVE PLAN To give every employee the opportunity to own a portion of the company whose success they’re helping to drive, Tesla created the Equity Incentive Plan. The plan allows Tesla to recognize outstanding work performance, and allows employees to benefit from the Company’s continued success. The value of vested Tesla shares of stock can be a significant portion of your total compensation. Each employee contributes to that value through innovation, efficiency and commitment to quality. Hard work is as evident in the exceptional products we deliver to customers as it is in the performance our stock delivers to employees’ compensation. Tesla has partnered with E*TRADE Financial to keep Equity Incentive Plan participants updated on the status of their accounts. To learn more about the plan, visit TheTeslaLife.com.

 

15%

THE DISCOUNT YOU GET WHEN BUYING TESLA STOCK.

Attachment “J”

12	THE TESLA LIFE — YOUR GUIDE TO BENEFITS	-12-
[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Confidential Treatment Requested by Tesla Motors, Inc.

 

[TESLA PERKS]

COOL ACCESSORIES

TO MAKE IT EASIER TO LIVE A HEALTHY AND PRODUCTIVE LIFE AT WORK AND AT HOME, TESLA GIVES YOU ACCESS TO MANY PERKS, INCLUDING DISCOUNTED FITNESS MEMBERSHIPS, ORGANIC PRODUCE DELIVERY, PERSONALIZED BANKING SERVICES, AND ACCESS TO SERVICES FROM SELECT PARTNERS. VISIT THETESLALIFE.COM TO LEARN MORE.

 

TESLA BABIES Tesla Babies provides you with the support you need to make healthy choices during your pregnancy, including Wiser Health, a peer-to-peer decision-making tool; information and resources, including smartphone apps; healthy recipes and exercises; and time off to bond with your baby. KINDERCARE DISCOUNTS Tesla families have access to a 10% tuition discount with the largest network of early childhood education programs in the U.S. through KinderCare, CCLC, and Champions. Visit any KinderCare facility after January 1, 2014 to learn more.

COMMUTER BENEFITS Tesla pays for up to $125 per month of your costs to commute to work on public transportation. You can apply for commuter benefits any time through WageWorks.com. BICYCLE REIMBURSEMENT If you ride your bike to work, Tesla will reimburse up to $20 a month for eligible commuting expenses, such as your bike purchase, maintenance and storage. Visit WageWorks.com to request bicycle reimbursement. LEGAL SERVICES You can elect legal coverage through MetLaw that provides you with telephone and office consultations on matters such as estate planning, family law, and financial and real estate transactions. Your cost of coverage, which is deducted from your pay on an after-tax basis, is $18 per month.

PERSONAL TRAVEL ASSISTANCE Tesla provides personal travel assistance for you and your family members when you travel for up to 120 days and more than 100 miles from home. This benefit includes medical referrals, emergency evacuation, prescription delivery, lost luggage assistance and other services. BUSINESS TRAVEL INSURANCE You have 24-hour assistance when traveling on business, including pre-travel assistance, medical travel services, and personal security assistance. This benefit also comes with concierge services for local recommendations and arrangements. Visit TheTeslaLife.com for more information.

 

GuidanceResources

Ever wish you had a personal assistant? Whether searching for a new home appliance or planning for a vacation or birthday party, with GuidanceResources you have someone to help you with all life’s details. Plus, it’s free to you and your family members.

>> WORK-LIFE SOLUTIONS

Work-Life specialists can provide referrals for getting care for your kids, elders and pets when you need it. They can also get you referrals for home repairs, help you research your options when you are thinking about making a major purchase, such as buying a car or house and they’ll even help you plan for college.

>> PERSONAL ISSUES

Most people don’t like asking for help, especially when it comes to their personal life. But talking with someone can often make a big difference. That’s why we offer you confidential access to highly trained master’s and doctoral level clinicians who will listen to your concerns and quickly refer you to in-person counseling and other resources. Whether you’re stressed out, anxious, depressed or dealing with relationship issues, job pressures or substance abuse, help is just a phone call away.

>> FINANCIAL ISSUES

Wouldn’t it be nice if you had someone to help you understand your finances and plan for the future? With GuidanceResources, you do. You can speak with Certified Public Accountants and Certified Financial Planners on a wide range of financial issues, including: getting out of debt, retirement planning, credit card or loan problems, estate planning, tax questions and saving for college. It’s like having your own financial coach.

QUIT FOR LIFE

Tesla offers Quit For Life at no cost to you to help you stop using tobacco products. You’ll receive a personalized “Quit Plan,” nicotine replacement therapy and ongoing support from coaches and a community of peers. Call 866.QUIT.4.LIFE (866.784.8454) or visit QuitNow.net to enroll.

Attachment “J”

		-13-	THE TESLA LIFE — YOUR GUIDE TO BENEFITS	13
[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Confidential Treatment Requested by Tesla Motors, Inc.

 

[COST OF COVERAGE]

FINANCING

 

	EMPLOYEE ONLY	EMPLOYEE + SPOUSE/ DOMESTIC PARTNER	EMPLOYEE + CHILDREN	EMPLOYEE + FAMILY
MEDICAL PLAN (rates exclude spouse/domestic partner contribution; include tobacco-free discount)
CIGNA HEALTH SAVINGS PLAN
You pay monthly	$0	$0	$0	$0
Tesla pays monthly	$422	$892	$772	$1,176
CIGNA REIMBURSEMENT PLAN
You pay monthly	$30	$80	$50	$176
Tesla pays monthly	$422	$892	$772	$1,176
KAISER HEALTH SAVINGS PLAN
You pay monthly	$60	$128	$94	$186
Tesla pays monthly	$422	$892	$772	$1,176
KAISER REIMBURSEMENT PLAN
You pay monthly	$88	$126	$74	$224
Tesla pays monthly	$422	$892	$772	$1,176

SPOUSE/DOMESTIC PARTNER CONTRIBUTION

If you choose to cover a spouse or domestic partner who has access to medical plan coverage through his or her employer in 2014, you will pay an additional spouse/domestic partner contribution of $200 per month. This additional contribution helps ensure that Tesla is not subsidizing other employers’ health care costs, and allows Tesla to provide affordable benefits to you and all Tesla families.

TOBACCO-FREE DISCOUNT

If you and all of the family members you cover on your medical plan do not use tobacco products, you will receive a tobacco-free discount of $90 each month. If you or any of your covered family members do use tobacco products, you’re not eligible for the tobacco-free discount; however, you may be eligible for a retroactive discount if you complete the Quit For Life program. Visit TheTeslaLife.com to learn more.

 

	EMPLOYEE ONLY	EMPLOYEE + SPOUSE/ DOMESTIC PARTNER	EMPLOYEE + CHILDREN	EMPLOYEE + FAMILY
DENTAL PLAN
You pay monthly	$0	$0	$0	$0
Tesla pays monthly	$49	$122	$105	$162
VISION PLAN
You pay monthly	$0	$0	$0	$0
Tesla pays monthly	$12	$18	$18	$27

 

OPTIONAL LIFE INSURANCE FOR YOU AND YOUR SPOUSE/ DOMESTIC PARTNER
YOUR AGE OR YOUR SPOUSE/DOMESTIC PARTNER’S AGE AS OF JANUARY 1, 2014	YOUR MONTHLY RATE PER $1,000 (up to $600,000)	MONTHLY SPOUSE/ DOMESTIC PARTNER RATE PER $1,000 (up to $100,000)
Under age 25	$0.050	$0.050
25 to 29	$0.060	$0.060
30 to 34	$0.080	$0.080
35 to 39	$0.090	$0.090
40 to 44	$0.111	$0.111
45 to 49	$0.167	$0.167
50 to 54	$0.257	$0.257
55 to 59	$0.479	$0.479
60 to 64	$0.734	$0.734
65 to 69	$1.412	$1.412
70 and above	$2.291	$2.291
OPTIONAL CHILD LIFE
AGE	RATE PER CHILD PER $5,000 OF COVERAGE	MAXIMUM COVERAGE AMOUNT
Birth up to age 26 regardless of student or marital status	$0.18	$10,000
OPTIONAL AD&D FOR YOU, YOUR SPOUSE/DOMESTIC PARTNER AND CHILDREN
AGE	RATE PER PERSON PER $1,000 OF COVERAGE	MAXIMUM COVERAGE AMOUNT
Child Optional AD&D: birth up to age 26 regardless of student or marital status Spouse or Domestic Partner: no age restrictions	$0.035 per person per $1,000 of coverage	$300,000 for you; $50,000 for your spouse; $5,000 for your children

 

Attachment “J”

14	THE TESLA LIFE — YOUR GUIDE TO BENEFITS	-14-
[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

---

 

Confidential Treatment Requested by Tesla Motors, Inc.

 

[ELECTING COVERAGE]

START YOUR ENGINES

NOW THAT YOU’VE HAD A CHANCE TO REVIEW YOUR BENEFIT OPTIONS FOR 2014, IT’S TIME TO MAKE YOUR SELECTIONS. BE SURE TO ENROLL BY THE DEADLINE; IF YOU MISS IT, YOU WON’T BE ABLE TO PARTICIPATE UNTIL 2015 (UNLESS YOU HAVE A QUALIFYING LIFE EVENT, SUCH AS THE BIRTH OF A CHILD).

 

ENROLLMENT CHECKLIST ¨PEOPLE TO COVER ¨You ¨Spouse/domestic partner ¨Children ¨MEDICAL PLANS ¨Cigna Health Savings Plan ¨Cigna Reimbursement Plan ¨Kaiser Health Savings Plan ¨Kaiser Reimbursement Plan ¨ HEALTH SAVINGS ACCOUNT ¨Yes $                  up to $2,300 employee/$4,550 family ¨No ¨SPOUSE/DOMESTIC PARTNER HAS OTHER MEDICAL COVERAGE ¨Yes     ¨ No ¨ALL PEOPLE ENROLLED IN MEDICAL PLAN ARE TOBACCO FREE ¨Yes     ¨ No ¨DENTAL ¨Yes     ¨ No ¨VISION ¨Yes     ¨ No ¨FLEXIBLE SPENDING ACCOUNTS ¨Health Care FSA $                 up to $2,500 ¨Dependent Care FSA $                 up to $5,000 ¨OTHER BENEFITS ¨Optional Life (remember to update beneficiaries) ¨Optional AD&D (remember to update beneficiaries) ¨MetLaw A CONFIRMATION OF YOUR ELECTIONS WILL BE MAILED TO YOUR HOME. REVIEW IT CAREFULLY AS IT IS YOUR LAST CHANCE TO CORRECT ANY ERRORS.

ONLINE ENROLLMENT Log on to TheTeslaLife.com and click on “Enroll Now!” If you haven’t created an account on TheTeslaLife.com, you’ll need to do so to elect your 2014 benefits. 1.Click on “First-Time User?”. 2.Enter your last name, date of birth, ZIP code and the last four digits of your Social Security number. 3.Create a user name and password of your choice. (Your user name must be between 8 and 20 characters or numbers.) 4.Answer the security questions, which will be used to confirm your identity if you ever forget your login information. 5.Return to the home page and click on “Enroll Now”. You may enroll in the 401(k) Plan and take part in Tesla Perks programs at any time during the year. Employee Stock Purchase Plan offering periods begin on March 1 and September 1, and purchases are made on the last day of each offering period.

 

 

 

Attachment “J”

		-15-	THE TESLA LIFE — YOUR GUIDE TO BENEFITS	15
[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

---

 

Confidential Treatment Requested by Tesla Motors, Inc.

 

 

[CONTACT INFORMATION]

THE TESLA BENEFITS TEAM IS HERE TO BE YOUR CO-PILOT

You can always visit TheTeslaLife.com or contact the Tesla Benefits Team at 855.668.5041, Monday through Friday from 5 a.m. to 5 p.m. PT. In addition, if you’d like to reach out directly to one of our benefit partners, you can do so by contacting them through the websites and phone numbers listed below.

 

BENEFIT	WEBSITE	PHONE NUMBER
Tesla Benefits Team	TheTeslaLife.com	855.668.5041
GuidanceResources	guidanceresources.com	855.742.6142
ComPsych	WebID: TESLA
Benefits Advocate	aonhewittadvocacy.com	855.668.5041 (Say, “Speak with a Benefits Advocate.”)
Medical	cigna.com	800.CIGNA.24
Cigna Health Savings Plan and	mycigna.com	800.244.6224
Cigna Reimbursement Plan
Group: 3333615
Medical	kp.org	Northern California 800.663.1771
Kaiser Health Savings Plan and		Southern California 800.533.1833
Kaiser Reimbursement Plan
Group: 00140001
Dental	cigna.com	800.CIGNA.24
Cigna	mycigna.com	800.244.6224
Group: 3333615
Vision	vsp.com	800.877.7195
VSP Vision Care
Policy: 30004376
Flexible Spending Accounts (FSA)	TheTeslaLife.com	855.668.5041 (Say, “Flexible Spending Accounts.”)
Your Spending Account (YSA)
401(k)	401k.com	800.835.5097
Fidelity Investments
Plan: 27719
ESPP	etrade.com	800.838.0908
E*Trade Financial
Equity Incentive Plan	etrade.com	800.838.0908
E*Trade Financial
Life, AD&D, Short-Term Disability and	prudential.com	800.524.0542 (life insurance claims)
Long-Term Disability		888.257.0412 (evidence of insurability)
Prudential
Personal Travel Assistance	axa-assistance.us	800.565.9320
AXA Assistance		312.935.3654 (collect)
Business Travel Assistance	TheTeslaLife.com	877.244.6871
Chartis		+1 715.346.0859 (overseas collect)
Commuter Benefit Program and Bicycle Reimbursement	wageworks.com	877.WageWorks 877.924.3967
WageWorks
Legal Services	info.legalplans.com	800.821.6400
MetLaw	Enter access code: GETLAW
Tobacco Cessation	quitnow.net	866.QUIT.4.LIFE
Quit For Life		866.784.8454
Tesla Perks	TheTeslaLife.com	N/A
Banking, Produce Delivery, Discounts and More

 

Attachment “J”

16	THE TESLA LIFE — YOUR GUIDE TO BENEFITS	-16-
[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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GO MOBILE Access TheTeslaLife.com on the go   GO MOBILE Access TheTeslaLife.com on the go	This document is subject to change without notice. Tesla Motors Inc. does not warrant that the material contained in this document is error-free. If you find any problems with this document, please report them to Tesla Motors, Inc. Human Resources in writing.   Tesla Motors, Inc. reserves the right to terminate, suspend, withdraw, or modify the benefits described in this document, in whole or in part, at any time. No statement in this or any other document, and no oral representation, should be construed as a waiver of this right.   This is not a legal document. Please refer to the summary plan description for detailed information. This document is not intended to cover every option detail. Complete details are in the legal documents, contracts, and administrative policies that govern benefit operation and administration.   If there should ever be any differences between the summaries in this handbook and these legal documents, contract, policies, the document contracts and policies will be the final authority.

 

 

Attachment “J”

		-17-
[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Confidential Treatment Requested by Tesla Motors, Inc.

EXHIBIT B

GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT

INCENTIVE AGREEMENT

CERTIFICATE OF ELIGIBILITY – LOCAL SALES AND USE TAX

EXECUTION VERSION

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Confidential Treatment Requested by Tesla Motors, Inc.

 

 

Docket No. 14-1017141

Date Issued: January 30, 2015

Effective: October 17, 2014

NEVADA GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT

CERTIFICATE OF ELIGIBILITY

This is to certify that

TESLA MOTORS, INC.

Has been granted a Certificate of Eligibility for abatement of local sales and use tax at the Qualified Project as set forth in Senate Bill. 1, 28^th (2014) Special Session of the Nevada Legislature as further described herein:

AN ABATEMENT OF THE LOCAL SALES AND SALES AND USE TAXES IMPOSED PURSUANT TO CHAPTERS 374 AND 377 OF NRS ON THE GROSS RECEIPTS OF ANY RETAILER FROM THE SALE OF TANGIBLE PERSONAL PROPERTY SOLD AT RETAIL, OR DELIVERED, STORED, USED OR OTHERWISE CONSUMED, AT THE SITE OF THE GIGAFACTORY PROJECT. THE TERM DOES NOT INCLUDE THE TAXES IMPOSED BY NRS 372. THIS ACTION WOULD ABATE SAID LOCAL TAXES FROM THE PREVAILING COUNTRY RATE IMPOSED PURSUANT TO NRS CHAPTERS 374 AND 377 TO A LOCAL RATE OF 0.75%, RESULTING IN AN AJUSTED OVERALL STATE AND LOACAL SALES AND USE TAX RATE OF 2.75%, COMMENCING ON OCTOBER 17, 2014 AND CONTINUING THROUGH JUNE 30, 2034.

Steven D. Hill, Executive Director

Date 1/30/15

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Confidential Treatment Requested by Tesla Motors, Inc.

EXHIBIT C

GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT

INCENTIVE AGREEMENT

CERTIFICATE OF ELIGIBILITY – EMPLOYER EXCISE TAX

EXECUTION VERSION

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Confidential Treatment Requested by Tesla Motors, Inc.

 

Docket No. 14-1017141

Date Issued: January 30, 2015

Effective: October 17, 2014

NEVADA GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT

CERTIFICATE OF ELIGIBILITY

This is to certify that

TESLA MOTORS, INC.

Has been granted a Certificate of Eligibility for abatement of employer excise tax at the Qualified Project As set forth in Senate Bill No. 1, 28^th (2014) special Session of the Nevada Legislature as further described herein:

AN ABATEMENT OF ALL EMPLOYTER EXCISE TAXES COMMENCING ON OCTOBER 17, 2014 AND CONTINUING THROUGH JUNE 30, 2024, IN AN AMOUNT THAT EQUALS THE AMONUT OF THE EMPLOYER EXCISE TAXES THAT WOULD OTHERWISE BE OWED BY EACH PARTICIPANT FOR EMPLOYEES EMPLOYED BY THE PARTICIPANT FOR THE GIGAFACTORY PROJECT.

Steven D. Hill, Executive Director

Date 1/30/15

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

 

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Confidential Treatment Requested by Tesla Motors, Inc.

EXHIBIT D

GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT

INCENTIVE AGREEMENT

CERTIFICATE OF ELIGIBILITY – PERSONAL PROPERTY TAX

EXECUTION VERSION

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

---

 

 

Confidential Treatment Requested by Tesla Motors, Inc.

 

Docket No. 14-1017141

Date Issued: January 30, 2015

Effective: October 17, 2014

NEVADA GOVERNOR’S OFFICE ECONOMIC DEVELOPMENT

CERTIFICATE OF ELIGIBILITY

This is to certify that

TESLA MOTORS, INC.

Has been granted a Certificate of Eligibility for property tax at the Qualified Project as set forth in senate Bill No. 1, 28th (2014) Special session of the Nevada Legislature as further described herein:

AN ABATEMENT OF ALL PROPERTY TAXES, BOTH REAL AND PERSONAL, COMMENCING ON OCTOBER 17, 2014 AND CONTINUING THROUGHT JUNE 30, 2024, IN AN AMOUNT THAT EQUALS THE AMOUNT OF THE PROPERTY TAXES THAT WOULD OTHERWISE BE OWED BY THE LEAD PARTICIPANT AND EACH OTHER PARTICIPANT FOR THE GIGAFACTORY PROJECT.

Steven D. Hill, Executive Director

Date 1/30/15

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

 

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Confidential Treatment Requested by Tesla Motors, Inc.

EXHIBIT E

GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT

INCENTIVE AGREEMENT

CERTIFICATE OF ELIGIBILITY – REAL PROPERTY TAX

EXECUTION VERSION

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

---

 

 

Confidential Treatment Requested by Tesla Motors, Inc.

 

Docket No. 14-1017141

Date Issued: January 30, 2015

Effective: October 17, 2014

NEVADA GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT

CERTIFICATE OF ELIGIBILITY

This is to certify that

TESLA MOTORS, INC.

Has been granted a Certificate of Eligibility for abatement of property tax at the Qualified Project as set forth in Senate Bill No. 1, 28^th (2014) Special Session of the Nevada Legislature as further described herein:

An abatement of all property taxes, both real and personal, commencing on October 17, 2014 and continuing through June 30, 2024, in an amount that equals the amount of the property taxes that would otherwise be owed by the lead participant and each other Participant for the Gigafactory Project.

Steven D. Hill, Executive Director Date

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

 

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Confidential Treatment Requested by Tesla Motors, Inc.

EXHIBIT F

GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT

INCENTIVE AGREEMENT

CERTIFICATE OF ELIGIBILITY – EDRR

EXECUTION VERSION

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Confidential Treatment Requested by Tesla Motors, Inc.

 

Docket No. 14-1017141

Date Issued: January 30, 2015

Effective: October 17, 2014

NEVADA GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT

CERTIFICATE OF ELIGIBILITY

This is to certify that

TESLA MOTORS, INC

Has been granted a Certificate of Eligibility for electronic capacity allocation for the Qualified Project as set forth in Senate Bill No. 1, 28^th (2014) Special Session of the Nevada Legislature as further described herein.

The Economic Development Electric Rate Rider (EDRR) As Further Described in the Motion, AB No. 1 and NRS

704.7871 Through NRS 704.7882, Collectivity

Steven D. Hill Executive Director Date 1/30/15

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions. 

 

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Confidential Treatment Requested by Tesla Motors, Inc.

EXHIBIT G

GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT

INCENTIVE AGREEMENT

CERTIFICATES OF ELIGIBILITY – TRANSFERABLE TAX CREDITS

EXECUTION VERSION

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

---

 

 

Confidential Treatment Requested by Tesla Motors, Inc.

 

Docket No. 14-1017141

Date Issued: January 30, 2015

Effective: October 17, 2014

NEVADA GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT

CERTIFICATE OF ELIGIBILITY

This is to certify that

Tesla Motors, Inc

Has been granted a Certificate of Eligibility for transferable tax credits for qualified employees at the Qualified Project as set forth in Senate Bill No. 1, 28th (2014) Special Session of the Nevada Legislature as further described herein:

TRANSFERABLE TAX CREDITS IN AN AMOUNT NOT TO EXCEED A TOTAL OF $75,000,000, IN THE AMOUNT OF $12,500 FOR EACH QUALIFIED EMPLOYEE OF A PARTICIPANT, TO A MAXIMUM OF 6,000 QUALIFIED EMPLOYEES EMPLOYED AT THE GIGAFACTORY PROJECT BY ALL PARTICIPANTS, COLLECTIVELY; AS FURTHER CONDITIONED BY THE STATE FISCAL YEAR LIMITATIONS ESTABLISHED IN SEC. 14 OF SB NO. 1.

Steven D. Hill, Executive Director

Date 1/30/15

(***) Information has been omitted and filed separately with the Securities and Exchange Commission confidential Treatment has been requested with respect to the omitted portions  

 

 

---

 

Docket No. 14-1017141

Date Issued: January 30, 2015

Effective: October 17, 2014

NEVADA GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT

CERTIFICATE OF ELIGIBILITY

This is to certify that

TESLA MOTORS, INC.

Has been granted a Certificate of Eligibility for transferable tax credits for new capital investment at the Qualified Project as set forth in Senate Bill No. 1, 28th (2014) Special Session of the Nevada Legislature as further described herein:

TRANSFERABLE TAX CREDITS IN AN AMOUNT NOT TO EXCEED A TOTAL OF $120,000,000, IN AN AMOUNT EQUAL TO (A) 5 PERCENT OF THE FIRST $1 BILLION OF NEW CAPITAL INVESTMENT IN THIS STATE MADE COLLECTIVELY BY THE PARTICIPANTS IN THE GIGAFACTORY PROJECT; AND (B) 2.8 PERCENT OF THE NEXT $2.5 BILLION OF NEW CAPITAL INVESTMENT IN THIS STATE MADE COLLECTIVELY BY THE PARTICIPANTS IN THE GIGAFACTORY PROJECT; AS ALSO CONDITIONED BY THE STATE FISCAL YEAR LIMITATIONS ESTABLISHED IN SEC. 14 OF SB NO. 1.

Steven D. HILL, Executive Director

Date 1/30/15

 

 

 

 

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Confidential Treatment Requested by Tesla Motors, Inc.

EXHIBIT H

GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT

INCENTIVE AGREEMENT

FORM DECLARATION OF PARTICIPANT

EXECUTION VERSION

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Confidential Treatment Requested by Tesla Motors, Inc.

[Tesla letterhead]

<<Company Name>>

<<Company Address>>

<<Company C/S/Z>>

Dear <<Company Official>>,

This letter serves to confirm <<Company Name>>’s status as a <<[Choose one:] Participant / Contractor>> in the Qualified Project commonly known as the Gigafactory.

Accordingly, this letter serves as the written authorization for <<Company Name>> to make tax exempt purchases of Eligible Property, as that term is defined by the Special Exemption Letter dated December 17, 2014 and effective October 17, 2014 (a copy of which is attached hereto).

All tax exempt purchases made pursuant to this Special Exemption Letter must be reported by the purchaser on a monthly sales/use tax return as required by the Nevada Department of Taxation. The purchaser must remit the applicable 2.75% sales/use tax with the return.

IMPORTANT NOTE: This exemption applies only to sales/use tax. It does not apply to fuel taxes such as the motor vehicle fuel excise tax, tire tax, or any other tax imposed by Nevada, Storey County or the Federal government. Items subject to these taxes are still taxable.

Should you, or any of your venders, have any questions you may contact <<Tesla Representative>> at <<Phone>> or <<Email>>.

Sincerely,

<<Tesla Representative>>

<<Title>>

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Confidential Treatment Requested by Tesla Motors, Inc.

EXHIBIT I

GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT

INCENTIVE AGREEMENT

PROJECT SITE DESCRIPTION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXECUTION VERSION

 

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Confidential Treatment Requested by Tesla Motors, Inc.

 

Form No. 1068-2	Commitment No. 121-2466598
ALTA Plain Language Commitment	Page Number: 5
	Property Address:	005-091-17,18, 29 & 34, 005-011-22 & 24 McCarran, NV

 

SCHEDULE A

1.	Commitment Date: September 3, 2014 at 7:30 A.M.

2.	Policy or Policies to be issued: Amount

a.	ALTA 2006 Extended Coverage Owner Policy $To Be Determined

Proposed Insured:

Tesla Motors, Inc., a Delaware Corporation

3.	(A)      The estate or interest in the land described in this Commitment is:

Fee as to Parcels 1, 3, 6, 9, 13 and 14 Easement as to Parcel 21

(B)	Title to said estate or interest at the date hereof is vested in:

Tahoe-Reno Industrial Center, LLC, a Nevada limited liability company

4.	The land referred to in this Commitment is situated in the County of Storey, State of Nevada, and is described as follows:

PARCEL 1:

PARCEL 2009-6 OF RECORD OF SURVEY MAP NO. 111167, FILED IN THE OFFICE OF THE COUNTY RECORDER OF STOREY COUNTY, STATE OF NEVADA ON MAY 13, 2009, AS FILE NO. 111167, OF OFFICIAL RECORDS, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

ALL THAT CERTAIN REAL PROPERTY SITUATE WITHIN THE SOUTH ONE-HALF (1/2) OF SECTION 6, TOWNSHIP 19 NORTH, RANGE 23 EAST, MOUNT DIABLO MERIDIAN, STOREY COUNTY, STATE OF NEVADA BEING A PORTION OF PARCEL 2008-87, AS SHOWN ON THAT “RECORD OF SURVEY FOR TAHOE-RENO INDUSTRIAL CENTER, LLC”, FILED IN THE OFFICE OF THE STOREY COUNTY RECORDER, JANUARY 15, 2009, FILE NO. 110530, OFFICIAL RECORDS OF STOREY COUNTY, NEVADA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT A POINT, FROM WHICH POINT THE SOUTHWEST CORNER OF SAID SECTION 6 BEARS SOUTH 83°34’52” WEST, 2553.29 FEET;

THENCE NORTH 52°49’21” EAST, 468.75 FEET TO THE NORTH LINE OF SAID PARCEL 2008-87;

THENCE, ALONG SAID NORTH LINE, SOUTH 37°10’39” EAST, 214.33 FEET;

First American Title Insurance Company
-1-	[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Confidential Treatment Requested by Tesla Motors, Inc.

 

Form No. 1068-2	Commitment No. 121-2466598
ALTA Plain Language Commitment	Page Number: 6
	Property Address:	005-091-17,18, 29 & 34, 005-011-22 & 24 McCarran, NV

 

THENCE, ALONG A NON-TANGENT CURVE TO THE RIGHT, FROM A TANGENT WHICH BEARS SOUTH 26°31’44” EAST HAVING A RADIUS OF 1450.00 FEET, A CENTRAL ANGLE OF 10°38’55”, AND AN ARC LENGTH OF 269.49 FEET;

THENCE, LEAVING SAID NORTH LINE, SOUTH 52°49’21” WEST, 335.86 FEET;

THENCE NORTH 80°55’36” WEST, 156.06 FEET;

THENCE NORTH 37°10’39” WEST, 369.53 FEET TO THE POINT OF BEGINNING.

THE ABOVE METES AND BOUNDS DESCRIPTION APPEARED PREVIOUSLY IN THAT CERTAIN DOCUMENT RECORDED MAY 13, 2009, AS DOCUMENT NO. 111168 OF OFFICIAL RECORDS.

PARCEL 2:

INTENTIONALLY DELETED

PARCEL 3:

PARCEL 2009-5 OF RECORD OF SURVEY MAP NO. 111167, FILED IN THE OFFICE OF THE COUNTY RECORDER OF STOREY COUNTY, STATE OF NEVADA ON MAY 13, 2009, AS FILE NO. 111167, OF OFFICIAL RECORDS, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

ALL THAT CERTAIN REAL PROPERTY SITUATE WITHIN THE SOUTH ONE-HALF (1/2) OF SECTION 6, TOWNSHIP 19 NORTH, RANGE 23 EAST, MOUNT DIABLO MERIDIAN, STOREY COUNTY, STATE OF NEVADA BEING A PORTION OF PARCEL 2008-87, AS SHOWN ON THAT “RECORD OF SURVEY FOR TAHOE-RENO INDUSTRIAL CENTER, LLC”, FILED IN THE OFFICE OF THE STOREY COUNTY RECORDER, JANUARY 15, 2009, FILE NO. 110530, OFFICIAL RECORDS OF STOREY COUNTY, NEVADA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT A POINT, FROM WHICH POINT THE SOUTHWEST CORNER OF SAID SECTION 6 BEARS SOUTH 83°34.52. WEST, 2553.29 FEET;

THENCE NORTH 37°10.39. WEST, 650.50 FEET;

THENCE NORTH 52°49.21. EAST, 468.75 FEET TO THE NORTH LINE OF SAID PARCEL 2008-87;

THENCE, ALONG SAID NORTH LINE, SOUTH 37°10.39. EAST, 650.50 FEET;

THENCE, LEAVING SAID NORTH LINE, SOUTH 52°49.21. WEST, 468.75 FEET TO THE POINT OF BEGINNING.

THE ABOVE METES AND BOUNDS DESCRIPTION APPEARED PREVIOUSLY IN THAT CERTAIN DOCUMENT RECORDED MAY 13, 2009, AS DOCUMENT NO. 111168 OF OFFICIAL RECORDS.

PARCEL 4:

INTENTIONALLY DELETED

PARCEL 5:

First American Title Insurance Company
-2-	[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Confidential Treatment Requested by Tesla Motors, Inc.

 

Form No. 1068-2	Commitment No. 121-2466598
ALTA Plain Language Commitment	Page Number: 7
	Property Address:	005-091-17,18, 29 & 34, 005-011-22 & 24 McCarran, NV

 

INTENTIONALLY DELETED

PARCEL 6:

PARCEL 2014-4 OF RECORD OF SURVEY MAP NO. 120562, FILED IN THE OFFICE OF THE COUNTY RECORDER OF STOREY COUNTY, STATE OF NEVADA ON JUNE 30, 2014, AS FILE NO. 120562, OF OFFICIAL RECORDS, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

ALL THAT CERTAIN REAL PROPERTY SITUATED WITHIN A PORTION OF THE NORTH ONE-HALF (1/2) OF SECTION TWELVE (12), TOWNSHIP 19 NORTH, RANGE 22 EAST, MOUNT DIABLO MERIDIAN, STOREY COUNTY, STATE OF NEVADA, BEING A PORTION OF PARCEL 2009-39 AS SHOWN ON THAT “RECORD OF SURVEY FOR TAHOE-RENO INDUSTRIAL CENTER, LLC”, RECORDED IN THE OFFICE OF THE STOREY COUNTY RECORDER, DECEMBER 04, 2009, AS DOCUMENT NO. 112341, OFFICIAL RECORDS OF STOREY COUNTY, NEVADA. MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT THE NORTHEAST CORNER OF SAID PARCEL 2009-39, BEING THE NORTHEAST CORNER OF SAID SECTION TWELVE (12), THENCE, ALONG THE EAST LINE OF SAID PARCEL, SOUTH 00°56’57” WEST, 988.90 FEET;

THENCE, LEAVING SAID EAST LINE, SOUTH 89°54’15” WEST, 3358.63 FEET;

THENCE, SOUTH 71°09’26” WEST, 116.44 FEET;

THENCE, ALONG A TANGENT CURVE TO THE LEFT HAVING A RADIUS OF 570.00 FEET, A CENTRAL ANGLE OF 35°24’30”, AND AN ARC LENGTH OF 352.26 FEET;

THENCE, SOUTH 35°44’56” WEST, 560.61 FEET;

THENCE, ALONG A TANGENT CURVE TO THE LEFT HAVING A RADIUS OF 810.00 FEET, A CENTRAL ANGLE OF 19°09’56”, AND AN ARC LENGTH OF 270.95 FEET;

THENCE, SOUTH 16°35’00” WEST, 20.98 FEET;

THENCE, ALONG A TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 870.00 FEET, A CENTRAL ANGLE OF 06°39’25”, AND AN ARC LENGTH OF 101.08 FEET, TO THE NORTH LINE OF EAST SYDNEY DRIVE, AS DESCRIBED PER DEDICATION DOCUMENT NO. 107605, OFFICIAL RECORDS OF STOREY COUNTY;

THENCE, ALONG SAID NORTH LINE, ALONG A NON-TANGENT CURVE TO THE LEFT HAVING A RADIUS OF 90.00 FEET, A CENTRAL ANGLE OF 55°45’04”, WITH A RADIAL LINE IN OF SOUTH 01°30’00” WEST AND A RADIAL LINE OUT OF NORTH 54°15’04” WEST FOR AN ARC LENGTH OF 87.57 FEET, TO THE WEST LINE OF SAID EAST SYDNEY DRIVE;

THENCE, ALONG SAID WEST LINE OF EAST SYDNEY DRIVE, SOUTH 35°44’56” WEST, 114.04 FEET;

THENCE, LEAVING SAID WEST LINE OF EAST SYDNEY DRIVE, ALONG THE WEST LINE OF SAID PARCEL 2009-39, ALONG A NON-TANGENT CURVE TO THE LEFT, HAVING A TANGENT BEARING OF NORTH 35°44’56” EAST HAVING A RADIUS OF 810.00 FEET, A CENTRAL ANGLE OF 19°09’56”, AND AN ARC LENGTH OF 270.95 FEET;

First American Title Insurance Company
-3-	[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Confidential Treatment Requested by Tesla Motors, Inc.

 

Form No. 1068-2	Commitment No. 121-2466598
ALTA Plain Language Commitment	Page Number: 8
	Property Address:	005-091-17,18, 29 & 34, 005-011-22 & 24 McCarran, NV

 

THENCE, CONTINUING ALONG SAID WEST LINE OF PARCEL 2009-39, NORTH 16°35’00” EAST, 20.98 FEET;

THENCE, ALONG A TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 870.00 FEET, A CENTRAL ANGLE OF 19°09’56”, AND AN ARC LENGTH OF 291.02 FEET,

THENCE, NORTH 35°44’56” EAST, 560.61 FEET;

THENCE, ALONG A TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 630.00 FEET, A CENTRAL ANGLE OF 35°24’30”, AND AN ARC LENGTH OF 389.33 FEET;

THENCE, NORTH 71°09’26” EAST, 118.20 FEET;

THENCE, ALONG A TANGENT CURVE TO THE LEFT HAVING A RADIUS OF 620.00 FEET, A CENTRAL ANGLE OF 23°29’47”, AND AN ARC LENGTH OF 254.26 FEET;

THENCE, NORTH 47°39’39” EAST, 417.70 FEET;

THENCE, ALONG A TANGENT CURVE TO THE LEFT HAVING A RADIUS OF 620.00 FEET, A CENTRAL ANGLE OF 04°41’29”, AND AN ARC LENGTH OF 50.77 FEET;

THENCE, NORTH 42°58’10” EAST, 184.32 FEET;

THENCE, ALONG A TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 850.00 FEET, A CENTRAL ANGLE OF 36°27’03”, AND AN ARC LENGTH OF 540.76 FEET;

THENCE, NORTH 79°25’13” EAST, 484.95 FEET;

THENCE, ALONG A TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 850.00 FEET, A CENTRAL ANGLE OF 11°12’48”, AND AN ARC LENGTH OF 166.35 FEET;

THENCE, NORTH 00°38’01” EAST, 14.69 FEET, TO THE NORTH LINE OF SAID PARCEL 2009-39;

THENCE, ALONG SAID NORTH LINE, SOUTH 89°21’59” EAST, 1596.78 FEET, THE POINT OF BEGINNING.

THE ABOVE METES AND BOUNDS DESCRIPTION APPEARED PREVIOUSLY IN THAT CERTAIN DOCUMENT RECORDED JUNE 30, 2014, AS DOCUMENT NO. 120563 OF OFFICIAL RECORDS.

PARCEL 7:

INTENTIONALLY DELETED

PARCEL 8:

INTENTIONALLY DELETED

PARCEL 9:

PARCEL 2014-9 OF RECORD OF SURVEY MAP NO. 120564, FILED IN THE OFFICE OF THE

First American Title Insurance Company
-4-	[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Form No. 1068-2	Commitment No. 121-2466598
ALTA Plain Language Commitment	Page Number: 9
	Property Address:	005-091-17,18, 29 & 34, 005-011-22 & 24 McCarran, NV

 

COUNTY RECORDER OF STOREY COUNTY, STATE OF NEVADA ON JUNE 30, 2014, AS FILE NO, 120564, OF OFFICIAL RECORDS, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

ALL THAT CERTAIN REAL PROPERTY SITUATED WITHIN A PORTION OF THE EAST ONE-HALF (1/2) OF SECTION ONE (1), TOWNSHIP 19 NORTH, RANGE 22 EAST, AND PORTIONS OF SECTIONS SIX (6), AND THE NORTH ONE-HALF (1/2) OF SECTION SEVEN (7), TOWNSHIP 19 NORTH, RANGE 23 EAST, MOUNT DIABLO MERIDIAN, STOREY COUNTY, STATE OF NEVADA, BEING A PORTION OF PARCEL 2009-7 AS SHOWN ON THAT “RECORD OF SURVEY FOR TAHOE-RENO INDUSTRIAL CENTER, LLC”, RECORDED IN THE OFFICE OF THE STOREY COUNTY RECORDER, MAY 13, 2009, AS DOCUMENT NO, 111167, OFFICIAL RECORDS OF STOREY COUNTY, NEVADA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT THE SOUTHWEST CORNER OF SAID PARCEL 2009-7, BEING THE WEST ONE-QUARTER (1/4) CORNER OF SAID SECTION SEVEN (7), THENCE, ALONG THE WEST LINE OF SAID PARCEL,

BEGINNING AT A POINT ON THE SOUTHERLY LINE OF SAID PARCEL 2009-7, ALSO BEING THE SOUTHEAST CORNER OF SAID SECTION SEVEN (7);

THENCE, ALONG SAID SOUTHERLY LINE OF PARCEL 2009-7, NORTH 89°21’59” WEST, 1596.76 FEET;

THENCE, LEAVING SAID SOUTHERLY LINE, NORTH 00°38’01” EAST, 282.77 FEET;

THENCE NORTH 31°23’52” EAST, 2934.29 FEET;

THENCE, SOUTH 58°36’24” EAST, 672.98 FEET;

THENCE, NORTH 31°23’36” EAST, 512.57 FEET;

THENCE ALONG A NON-TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 1340.00 FEET, A CENTRAL ANGLE OF 12°34’29”, WITH A RADIAL LINE IN OF SOUTH 31°23’36” WEST AND A RADIAL LINE OUT OF NORTH 43°58’05” EAST FOR AN ARC LENGTH OF 294.09 FEET;

THENCE, SOUTH 46°01’55” EAST, 1323.58 FEET;

THENCE, ALONG A TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 1350.00 FEET, A CENTRAL ANGLE OF 08°51’16”, AND AN ARC LENGTH OF 208.63 FEET;

THENCE, SOUTH 37°10’39” EAST, 691.35 FEET;

THENCE, SOUTH 52°49’21’ WEST, 468.75 FEET;

THENCE, SOUTH 37°10’39” EAST, 1020.03 FEET;

THENCE, SOUTH 80°55’36” EAST, 156.06 FEET;

THENCE, NORTH 52°49’21” EAST, 335.86 FEET;

THENCE, ALONG A NON-TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 1450.00 FEET, A CENTRAL ANGLE OF 24°27’22”, WITH A RADIAL LINE IN OF SOUTH 63°28’16” WEST AND A

First American Title Insurance Company
-5-	[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Form No. 1068-2	Commitment No. 121-2466598
ALTA Plain Language Commitment	Page Number: 10
	Property Address:	005-091-17,18, 29 & 34, 005-011-22 & 24 McCarran, NV

 

RADIAL LINE OUT OF NORTH 87°55’38” EAST FOR AN ARC LENGTH OF 618.92 FEET;

THENCE, ALONG A REVERSE CURVE TO THE LEFT HAVING A RADIUS OF 1550.00 FEET, A CENTRAL ANGLE OF 32°44’13”, AND AN ARC LENGTH OF 885.62 FEET;

THENCE, SOUTH 34°48’36” EAST, 742.52 FEET;

THENCE, ALONG A TANGENT CURVE TO THE LEFT HAVING A RADIUS OF 2550.00 FEET, A CENTRAL ANGLE OF 13°08’50”, AND AN ARC LENGTH OF 585.13 FEET;

THENCE, NORTH 89°39’48” WEST, 602.80 FEET;

THENCE, NORTH 59°18’09” WEST, 2571.38 FEET;

THENCE, SOUTH 89°54’15” WEST, 1622.76 FEET;

THENCE, NORTH 00°56’57” EAST, 988.90 FEET, TO THE POINT OF BEGINNING.

THE ABOVE METES AND BOUNDS DESCRIPTION APPEARED PREVIOUSLY IN THAT CERTAIN DOCUMENT RECORDED JUNE 30, 2014, AS DOCUMENT NO. 120565 OF OFFICIAL RECORDS.

PARCEL 10:

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PARCEL 11:

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PARCEL 12:

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PARCEL 13:

PARCEL 2014-13 OF RECORD OF SURVEY MAP NO. 120567, FILED IN THE OFFICE OF THE COUNTY RECORDER OF STOREY COUNTY, STATE OF NEVADA ON JUNE 30, 2014, AS FILE NO. 120567, OF OFFICIAL RECORDS, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

ALL THAT CERTAIN REAL PROPERTY SITUATED WITHIN PORTIONS OF THE WEST ONE-HALF (1/2) OF SECTION FIVE (5), SECTION SIX (6), THE NORTHEAST ONE-QUARTER (1/4) OF SECTION SEVEN (7), AND THE NORTHWEST ONE-QUARTER (1/4) OF SECTION 8, TOWNSHIP 19 NORTH, RANGE 23 EAST, MOUNT DIABLO MERIDIAN, STOREY COUNTY, STATE OF NEVADA, BEING ALL OF PARCEL 2014-1 AS SHOWN ON THAT “RECORD OF SURVEY FOR TAHOE-RENO INDUSTRIAL CENTER, LLC”, RECORDED IN THE OFFICE OF THE STOREY COUNTY RECORDER, ON JUNE 30, 2014, AS DOCUMENT NO. 0120559.

BEING A PORTION OF PARCEL 2012-7 AS SHOWN ON THAT “RECORD OF SURVEY TO SUPPORT A BOUNDARY LINE ADJUSTMENT FOR TAHOE-RENO INDUSTRIAL CENTER, LLC”, RECORDED IN THE OFFICE OF THE STOREY COUNTY RECORDER, OCTOBER 02, 2012, AS DOCUMENT NO. 117414, BEING ALL OF PARCELS 2012-11 AND 2012-12 AS SHOWN ON THAT “RECORD OF

First American Title Insurance Company
-6-	[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Confidential Treatment Requested by Tesla Motors, Inc.

 

Form No. 1068-2	Commitment No. 121-2466598
ALTA Plain Language Commitment	Page Number: 11
	Property Address:	005-091-17,18, 29 & 34, 005-011-22 & 24 McCarran, NV

 

SURVEY FOR TAHOE- RENO INDUSTRIAL CENTER, LLC”, RECORDED IN THE OFFICE OF THE STOREY COUNTY RECORDER. DECEMBER 04, 2012, AS DOCUMENT NO. 117725, OFFICIAL RECORDS OF STOREY COUNTY, NEVADA, AND BEING ALL OF PARCELS 2012-15 AND 2012-16, AND A PORTION OF PARCELS 2012- 14 AND 2012-17 AS SHOWN ON THAT “RECORD OF SURVEY FOR TAHOE-RENO INDUSTRIAL CENTER, LLC”, RECORDED IN THE OFFICE OF THE STOREY COUNTY RECORDER, DECEMBER 04, 2012, AS DOCUMENT NO. 117727, OFFICIAL RECORDS OF STOREY COUNTY, NEVADA MORE PARTICULARLY DESCRIBED AS FOLLOWS;

BEGINNING AT THE NORTHWEST CORNER OF SAID PARCEL 2012-11, SAID POINT BEING ON THE SOUTH LINE OF MILAN DRIVE AS DESCRIBED IN DEDICATION DEED DOCUMENT NO. 110596, OFFICIAL RECORDS OF STOREY COUNTY, NEVADA;

THENCE, ALONG SAID SOUTH LINE OF MILAN DRIVE AND ITS EXTENSION THEREOF, SOUTH 88°40’40” EAST, 1605.31 FEET;

THENCE, ALONG A TANGENT CURVE TO THE LEFT HAVING A RADIUS OF 910.00 FEET, A CENTRAL ANGLE OF 30°56’06”, AND AN ARC LENGTH OF 491.33 FEET;

THENCE, NORTH 60°23’14” EAST, 317.00 FEET;

THENCE, LEAVING THE SOUTH LINE OF MILAN DRIVE, SOUTH 37°51’40” EAST, 5271.04 FEET;

THENCE, SOUTH 00°38’30” WEST, 2540.48 FEET;

THENCE, SOUTH 59°39’43” WEST, 2246.95 FEET;

THENCE, SOUTH 53°46’10” EAST, 580.76 FEET;

THENCE, ALONG A TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 1150.00 FEET, A CENTRAL ANGLE OF 03°17’21”, WITH A RADIAL LINE IN OF SOUTH 36°13’50” WEST AND A RADIAL LINE OUT OF NORTH 39°31’11” EAST FOR AN ARC LENGTH OF 66.02 FEET, TO THE SOUTH LINE OF SAID PARCEL 2012-14, ALSO BEING THE SOUTH LINE OF SAID SECTION 8;

THENCE, CONTINUING ALONG SAID SOUTH LINE OF PARCEL 2012-14, NORTH 89°14’53” WEST, 163.12 FEET, TO THE WEST ONE-QUARTER (1/4) CORNER OF SAID SECTION 8;

THENCE, NORTH 89°39’48” WEST, 176.42 FEET;

THENCE, LEAVING THE SOUTH LINE OF SAID PARCEL 2012-14, ALONG ITS WESTERLY LINE, NORTH 53°46’10“WEST, 370.99 FEET;

THENCE, ALONG A TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 2550.00 FEET, A CENTRAL ANGLE OF 18°57’34”, AND AN ARC LENGTH OF 843.81 FEET;

THENCE, NORTH 34°48’36” WEST, 742.52 FEET;

THENCE, ALONG A TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 1550.00 FEET, A CENTRAL ANGLE OF 32°44’13”, AND AN ARC LENGTH OF 885.62 FEET;

THENCE, ALONG A REVERSE CURVE TO THE LEFT HAVING A RADIUS OF 1450.00 FEET, A CENTRAL ANGLE OF 35°06’16”, AND AN ARC LENGTH OF 888.40 FEET;

First American Title Insurance Company
-7-	[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Confidential Treatment Requested by Tesla Motors, Inc.

 

Form No. 1068-2	Commitment No. 121-2466598
ALTA Plain Language Commitment	Page Number: 12
	Property Address:	005-091-17,18, 29 & 34, 005-011-22 & 24 McCarran, NV

 

THENCE, NORTH 37°10’39” WEST, 1556.18 FEET, TO A POINT ON THE WESTERLY LINE OF SAID PARCEL 2012-7;

THENCE, ALONG SAID WESTERLY LINE, ALONG A TANGENT CURVE TO THE LEFT HAVING A RADIUS OF 1350.00 FEET, A CENTRAL ANGLE OF 08°51’16”, AND AN ARC LENGTH OF 208.63 FEET;

THENCE, NORTH 46°01’55” WEST, 1323.58 FEET;

THENCE, ALONG A TANGENT CURVE TO THE LEFT HAVING A RADIUS OF 1340.00 FEET, A CENTRAL ANGLE OF 12°34’29”, AND AN ARC LENGTH OF 294.09 FEET;

THENCE, LEAVING SAID WESTERLY LINE OF PARCEL 2012-7, NORTH 31°23’36” EAST, 200.00 FEET, TO THE MOST WESTERLY CORNER OF SAID PARCEL 2012-12;

THENCE, ALONG THE WESTERLY LINE OF SAID PARCEL 2012-12, NORTH 88°42’42” EAST, 188.30 FEET, TO THE SOUTHWEST CORNER OF SAID PARCEL 2012-11;

THENCE, ALONG THE WEST LINE OF SAID PARCEL 2012-11, NORTH 01°19’20” EAST, 2228.00 FEET, TO THE POINT OF BEGINNING.

THE ABOVE METES AND BOUNDS DESCRIPTION APPEARED PREVIOUSLY IN THAT CERTAIN DOCUMENT RECORDED JUNE 30, 2014, AS DOCUMENT NO. 120568 OF OFFICIAL RECORDS.

PARCEL 14:

PARCEL 2014-15 OF RECORD OF SURVEY MAP NO. 120567, FILED IN THE OFFICE OF THE COUNTY RECORDER OF STOREY COUNTY, STATE OF NEVADA ON JUNE 30, 2014, AS FILE NO. 120567, OF OFFICIAL RECORDS, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

ALL THAT CERTAIN REAL PROPERTY SITUATED WITHIN A PORTION OF THE NORTHEAST ONE-QUARTER (1/4) OF SECTION SEVEN (7), TOWNSHIP 19 NORTH, RANGE 23 EAST, MOUNT DIABLO MERIDIAN,STOREY COUNTY, STATE OF NEVADA, BEING A PORTION OF PARCEL 2012-14 AS SHOWN ON THAT “RECORD OF SURVEY FOR TAHOE-RENO INDUSTRIAL CENTER, LLC”, RECORDED IN THE OFFICE OF THE STOREY COUNTY RECORDER, DECEMBER 04, 2012, AS DOCUMENT NO. 117727, OFFICIAL RECORDS OF STOREY COUNTY, NEVADA MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT A POINT, FROM WHICH POINT THE NORTHEAST CORNER OF SAID SECTION SEVEN BEARS NORTH 83°59’07” EAST, 1294.45 FEET;

THENCE, SOUTH 09°20’51” WEST, 100.00 FEET;

THENCE, NORTH 80°39’09” WEST, 80.00 FEET;

THENCE, NORTH 09°20’51” EAST, 100.00 FEET;

THENCE, SOUTH 80°39’09” EAST, 80.00 FEET, THE POINT OF BEGINNING.

THE ABOVE METES AND BOUNDS DESCRIPTION APPEARED PREVIOUSLY IN THAT CERTAIN

First American Title Insurance Company
-8-	[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Confidential Treatment Requested by Tesla Motors, Inc.

 

Form No. 1068-2	Commitment No. 121-2466598
ALTA Plain Language Commitment	Page Number: 13
	Property Address:	005-091-17,18, 29 & 34, 005-011-22 & 24 McCarran, NV

 

DOCUMENT RECORDED JUNE 30, 2014, AS DOCUMENT NO. 120568 OF OFFICIAL RECORDS.

PARCEL 15:

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PARCEL 16:

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PARCEL 17:

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PARCEL 18:

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PARCEL 19:

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PARCEL 20:

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PARCEL 21:

A NON-EXCLUSIVE EASEMENT FOR ACCESS AND UTILITIES AS SET FORTH IN DOCUMENT RECORDED MAY 13, 1999 AS DOCUMENT NO. 111166 OF OFFICIAL RECORDS.

 

First American Title Insurance Company
-9-	[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Confidential Treatment Requested by Tesla Motors, Inc.

 

 

EXHIBIT J

GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT

INCENTIVE AGREEMENT

ORDER OF THE OFFICE GRANTING INCENTIVES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXECUTION VERSION

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Confidential Treatment Requested by Tesla Motors, Inc.

 

 

BEFORE THE NEVADA GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT

 

Application of Tesla Motors, Inc.                     )
for Transferable Tax Credits and Tax               )	Docket No. 14-1017141
Abatements.                                                        )

 

	Following a hearing by the Governor’s Office of Economic Development held at the Governor’s conference room in Las Vegas, NV on November 20, 2014.

ORDER

The Board (the “Board”) of the Nevada Governor’s Office of Economic Development (the “Office”) makes the following findings of fact and conclusions of law:

I.	INTRODUCTION

Tesla Motors, Inc., a foreign corporation registered to do business in Nevada, filed an application (“Application”) with the Office for abatement of property taxes, employer excise taxes, local sales and use taxes, and for issuance of transferable tax credits, as provided for in Senate Bill No. 1, enacted in the 28^th (2014) Special Session of the Nevada Legislature (“SB No. 1”), and an Economic Development Electric Rate Rider (“EDRR”), as provided for in Assembly Bill No. 1, enacted in the 28^th (2014) Special Session of the Nevada Legislature (“AB No. 1”), and in Nevada Revised Statutes (“NRS”) 704.7871 through 704.7882. For purposes of this Order, Tesla Motors, Inc. shall hereinafter be referred to as Tesla, or as the Lead participant as defined in section 5 of SB No. 1, and, except as otherwise defined in this Order, capitalized terms used in this Order shall have the meanings ascribed to such terms in sections 2 through 10 of SB No. 1.

II.	PROCEDURAL HISTORY

•	On October 17, 2014, Tesla, acting as Lead participant, filed the Application with the Office

 

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Confidential Treatment Requested by Tesla Motors, Inc.

 

pursuant to SB No. 1 and AB No. 1. The matter was designated as Docket No. 14-1017141. The Application is incorporated as part of this Order as Attachment “A”. The Application included letters of support for the Application from the Storey County Commissioners’ Office, Storey County School District, the City of Reno and the Economic Development Authority of Western Nevada.

•

On October 20, 2014, pursuant to SB No. 1, the Office issued a notice of the Application and of the date, time and location of the public hearing at which the Application would be considered, to Tesla and other Participants in the Project commonly known as the “Gigafactory Project”; the Nevada Department of Taxation; the Nevada State Gaming Control Board; the governing body of the county, the board of trustees of the school district and the governing body of the city or town, if any, in which the Project is located; the governing body of any other political subdivision that the Office determined could experience a direct economic effect as a result of the abatement; and to the general public; and posted this notice on the Internet website for the Office.

•	On November 17, 2014, the Office filed a summary of the Application with the Board which is incorporated as part of this Order as Attachment “B”.

•

The Board conducted the public hearing on November 20, 2014, with Governor Brian Sandoval presiding. Executive Director of the Office, Steven Hill, summarized the information provided in the Application, verified that the Application satisfied all applicable requirements of SB No. 1, and presented a finding that the Gigafactory Project is a Qualified Project, and eligible to participate in the incentives offered by SB No. 1 and AB No. 1 based upon information provided in the Application. Minutes related to the hearing on this Application are incorporated as part of this Order as Attachment “C”.

•	Following discussion by the Board, a motion (“Motion”) was made by Board member Kathleen

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Drakulich to approve the Application and instruct the Executive Director to issue certificates of eligibility authorized by SB No. 1. The Motion also authorized Executive Director Hill to take the following actions without further Board review: approve the addition of other Participants to the Gigafactory Project upon petition of Tesla acting as Lead participant; administer other terms and conditions contained in SB No. 1; negotiate and execute a contract by and between the state of Nevada, acting through the Office, and the Lead participant (“the Agreement”); and administer the EDRR as provided for in AB No. 1. The Motion further directed the Executive Director to issue an annual report to the Board on all of these economic incentives while they are in effect. This Motion was seconded by Board member Sam Routson. The Motion passed unanimously, and is further described in the minutes set forth in Attachment C to this Order.

III.	CONCLUSION:

The Board of the Office has found that the Tesla, acting as Lead participant, has satisfied the requirements of SB No. 1 and AB No. 1 for approval of the Application, and therefore determines that the Gigafactory Project is a Qualified Project as defined in SB No. 1 and that Tesla is eligible to participate in the EDRR.

THEREFORE, it is ORDERED:

1. Subject to the limitations of Ordering Paragraph 4 below, the Office shall issue Certificates of Eligibility to Tesla, acting as Lead participant, for:

a.	An abatement of all property taxes, both real and personal, commencing on October 17, 2014 and continuing through June 30, 2024, in an amount that equals the amount of the property taxes that would otherwise be owed by the Lead participant and each other Participant for the Gigafactory Project;

b.	An abatement of all employer excise taxes commencing on October 17,

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Docket No. 14-1017121

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2014 and continuing through June 30, 2024, in an amount that equals the amount of the employer excise taxes that would otherwise be owed by each Participant for employees employed by the Participant for the Gigafactory Project;

c.

An abatement of the Local Sales and Use Taxes imposed pursuant to chapters 374 and 377 of NRS on the gross receipts of any retailer from the sale of tangible personal property sold at retail, or delivered, stored, used or otherwise consumed, at the site of the Gigafactory Project. The term does not include the taxes imposed by NRS 372. This action would abate said local taxes from the prevailing county rate imposed pursuant to NRS chapters 374 and 377 to a local rate of 0.75%, resulting in an adjusted overall state and local sales and use tax rate of 2.75%, commencing on October 17, 2014 and continuing through June 30, 2034;

d.

Transferable tax credits in an amount not to exceed a total of $75,000,000, in the amount of $12,500 for each qualified employee of a Participant, to a maximum of 6,000 Qualified Employees employed at the Gigafactory Project by all Participants, collectively; as further conditioned by the state fiscal year limitations established in Sec. 14 of SB No. 1;

e.

Transferable tax credits in an amount not to exceed a total of $120,000,000, in an amount equal to (a) 5 percent of the first $1 billion of new Capital Investment in this State made collectively by the Participants in the Gigafactory Project; and (b) 2.8 percent of the next $2.5 billion of new Capital Investment in this State made collectively by the Participants in the Gigafactory Project; as also conditioned by the state fiscal year

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Docket No. 14-1017121

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limitations established in Sec. 14 of SB No. 1; and,

f.	The EDRR as further described in the Motion, AB No. 1 and NRS 704.7871 through NRS 704.7882, collectively.

2.

Subject to the limitations of Ordering Paragraph 4 below, and in addition to issuing the Certificates of Eligibility for Local Sales and Use Taxes pursuant to Ordering Paragraph 1(c) above, the Office shall, in conjunction with the Nevada State Department of Taxation, issue to Tesla, acting as the Lead participant, an Exemption Letter regarding abatement of, and self-accrual for, sales and use taxes.

3.

Tesla, acting as the Lead participant, shall provide to the Nevada State Department of Taxation and to the Office on an ongoing basis and as required by either agency, a list of Tesla sub-contractors and Participants in the Gigafactory Project who are eligible for tax abatements authorized by this Order; and Tesla will provide to each Tesla sub-contractor and Participant in the Gigafactory Project a copy of the Certificates of Eligibility and Exemption Letter(s) issued under Ordering Paragraphs 1(a) through 1(c), and Paragraph 2 above, following provision to the Department and Office of the list including that Tesla sub-contractor or Participant.

4.	The Executive Director shall approve without further Board review the addition of other Participants to the Gigafactory Project upon petition of Tesla acting as Lead participant.

5.	The Executive Director shall negotiate and execute a contract by and between the state of Nevada, acting through the Office, and the Lead participant (“the Agreement”).

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6.	The Executive Director shall administer the EDRR as provided for in AB No. 1.

7.	The Executive Director shall issue an annual report to the Board on all of these economic incentives approved by this Order while they are in effect.

8.	The Executive Director shall administer other terms and conditions contained in SB No. 1.

The Office may correct errors that have occurred in the drafting or issuance of this Order.

 

By the Governor’s Office of Economic Development,
		/s/ Steven D. Hill
		STEVEN D. HILL,
		Executive Director
		1/29/15, effective October 17, 2014
		Dated: Las Vegas, Nevada

 

CC:	Nevada Department of Taxation
	Nevada Tax Commission
	Storey County Treasurer

 

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Docket No. 14-1017121

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EXHIBIT K

GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT

INCENTIVE AGREEMENT

ONE PAGE SUMMARY OF ABATEMENTS AND INCENTIVES GRANTED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXECUTION VERSION

 

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

 

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Board Summary	Tesla Motors 3500 Deer Creek Road, Palo Alto, CA 94304 Daniel Witt—Manager, Business Development and Policy Electric Vehicle Battery Manufacturing	Date: 11/20/2014 Main Location: Las Vegas

 

Business Type: New	County: Storey County	Development Authority Representative: Stan Thomas—EDAWN

PROJECT DESCRIPTION

- Gigafactory: 5.5 million square-foot battery manufacturing facility

- $5 billion initial investment in facility and equipment, $1.1 in building and $3.9 in equipment.

- Peak construction employment of approximately 3,000 construction and installation workers; construction duration from Sep 2014 thru Dec 2017; 3 year construction impact of $1.6 billion

- 6,500 direct jobs on the site with an average wage of $27 per hour, plus excellent benefit package; 16,000 indirect jobs at an average wage of $28

- Tesla and on-site partners will combine to make investment and hire employees in an agreed upon economic diversification district

PROFILE

“Tesla Motors uses proprietary technology, world-class design and state-of-the-art manufacturing processes to create a new generation of highway capable electric vehicles. We utilize an innovative distribution model based on Company-owned sales and service centers. This approach allows us to maintain the highest levels of customer experience and benefit from short customer feedback loops to ensure our customer needs are fulfilled. We believe our operational infrastructure provides us with a competitive advantage compared to traditional automobile manufacturers. The Tesla Roadster entered production in 2008 and Model S in 2012. Deliveries for Model X coming in 2015. Tesla’s batteries and powertrains will help lessen global dependence on petroleum-based transportation and drive down the cost of electric vehicles. By cooperating with other car manufacturers, we hope to put more electric cars on the road.” Source: www.teslamotors.com

SIGNIFICANCE OF ABATEMENTS IN THE COMPANY’S DECISION TO RELOCATE/EXPAND

Tesla inspected almost 100 different sites in the Western states during 2013, that included 31 in California alone. In Nevada, Tesla considered sites in the Reno and Las Vegas areas. By February 2014, Tesla announced it would focus on four states, Nevada, Texas, New Mexico and Arizona, with California added soon thereafter. Tax abatements were considered by Tesla to be a crucial part of its financial plan for the Gigafactory.

REQUIREMENTS

 

Job Creation	6,000, not an abatement requirement, but related to tax credit cap
Average Wage	$22, not an abatement requirement, but a tax credit program requirement
Equipment CapEx	$3.5 billion over 10 years

 

INCENTIVES	Requested Terms		Estimated $ Amount
Abatements
Sales Tax Abmt. (Local)	Until 6/30/2034	Up to 100%	$725.8 million
Real & Personal Property Tax Abmt.	Until 6/30/2024	100%	$332.6 million
Modified Business Tax Abmt.	Until 6/30/2024	100%	$27.0 million
Subtotal			$1.1 billion
Credits
TTC A—on jobs	Up to 6,000 jobs	$12,500 / job	$75.0 million
TTC B—on investment	$3.5 billion investment	5% on $1B, 2.8% on $2.5B	$120.0 million
Subtotal			$195.0 million
Total			$1.3 billion

 

 

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JOB CREATION	Contracted	12-Month Projection	3 to 5-Year Projection
	Up to 6,000	2,000	6,000
OTHER CAPITAL INVESTMENT	Land	Building Purchase	BTS / Building Improvements
	N/A	N/A	$1 billion

 

ECONOMIC IMPACT ESTIMATES (20-Year Cumulative)	Total
Total Jobs Supported	22,715
Total Payroll Supported	$24.1 billion
Total Output Estimate	$96.9 billion
Estimate includes jobs, payroll & output by the company assisted as well as the secondary impacts to other local businesses.

 

KEY FISCAL ESTIMATES (20-Year Cumulative)	Direct	Indirect	Total
Local Taxes
Local Government	$298.1 million	$688.0 million	$986.1 million
School District	$101.9 million	$411.2 million	$513.1 million
State Taxes
State of Nevada	$59.6 million	$387.4 million	$446.9 million
Total	$459.6 million	$1.5 billion	$1.9 billion

 

COST-BENEFIT ASSESSMENT	Economic Impact per Abatement Dollar	New Total Tax per Abated Dollar
	$76	$1.52

EMPLOYEE BENEFITS

- Percentage of health insurance covered by company: 90%

- Health care package cost per employee—$9,800 annually with options for dependents.

- Overtime, PTO/Sick/Vacation, Bonus, Retirement, Merit, Equity Incentive, and a variety of “Tesla Perks”

NOTES

- Percentage of market outside of Nevada: 100%.

- Gigafactory projected in increase state employment by 2& and regional employment by more than 10%.

- Gigafactory projected to add over 3% to State Gross Domestic Product, which represents more than a 20% increase in regional GDP.

- Tesla will make direct contributions to K-12 education of $37.5 million beginning August 2018; grant $1 million to fund advanced battery research at UNLV; prioritize the employment of Nevadans and Veterans.

 

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

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Confidential Treatment Requested by Tesla Motors, Inc.

 

 

EXHIBIT L

GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT

INCENTIVE AGREEMENT

SPECIAL EXEMPTION LETTER

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXECUTION VERSION

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

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Confidential Treatment Requested by Tesla Motors, Inc.

 

 

 

BRIAN SANDOVAL Governor ROBERT R. BARENGO Chair. Nevada Tax Commission DEONNE E. CONTINE Executive Director	STATE OF NEVADA DEPARTMENT OF TAXATION Web Site: http://tax.nv.gov 1550 College Parkway, Suite 115 Carson City, Nevada 89706-7937 Phone: [phone] Fax [phone]   LAS VEGAS OFFICE Grant Sawyer Office Building, Suite1300 555 E Washington Avenue Las Vegas, Nevada 89101 Phone: [phone] Fax: [phone]	RENO OFFICE 4600 Kietzke Lane Building L, Suite 235 Reno, Nevada 89502 Phone: [phone] Fax: [phone]   HENDERSON OFFICE 2550 Paseo Verde Parkway, Suite 180 Henderson, Nevada 89074 Phone: [phone] Fax: [phone]

December 17, 2014

NOTICE OF SENATE BILL 1 ABATEMENT

EXEMPTION FROM LOCAL SALES AND USE TAX FOR

TESLA MOTORS, INC., TESLA SUB-CONTRACTORS AND PARTICIPANTS

EFFECTIVE DATE: October 17, 2014 EXPIRATION DATE: June 30, 2034

The Governor’s Office of Economic Development (“GOED”) has approved the application of Tesla Motors, Inc. (“Tesla”) for abatement of local sales and use taxes on tangible personal property delivered, stored, used or otherwise consumed at the Qualified Project known as the “Gigafactory” in Storey County, Nevada (“Eligible Property”).

Upon receipt of this special exemption letter and written authorization from Tesla, you may sell Eligible Property tax exempt to Tesla, Tesla sub-contractors and Participants. Tesla, Tesla subcontractors and/or Participants (as appropriate) will pay the 2.75% non-abated portion of Nevada state and local sales and use taxes directly to the Nevada Department of Taxation.

Vendors shall report all of these exempt sales on their tax returns as they report other tax exempt sales. Vendors must retain a copy of this exemption letter in the vendors’ files as proof of exempt sales.

This exemption applies only to purchases of Eligible Property by Tesla, Tesla sub-contractors, and Participants in the Gigafactory project, and is not extended to any other individuals, contractors, or lessors to or for such organizations. Fraudulent use of this exemption letter is a violation of Nevada law.

If the Nevada State Department of Taxation, or GOED, determines that Tesla, or the Gigafactory Project, no longer meet the criteria outlined in Senate Bill 1 and other applicable laws, this letter of exemption will be revoked.

Any vendor having questions concerning the use of this sales/use tax exemption letter may contact Kathleen Douglas, at the Department of Taxation at 775-684-2067, or Brad Mamer, at GOED at 702-486-2785.

 

Sincerely,

Deonne E. Contine Executive Director

cc: Nevada Governor’s Office of Economic Development

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

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Confidential Treatment Requested by Tesla Motors, Inc.

 

 

EXHIBIT M

GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT

INCENTIVE AGREEMENT

SAMPLE FORMAT FOR PROPERTY AUDIT DATA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXECUTION VERSION

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

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Confidential Treatment Requested by Tesla Motors, Inc.

 

REQUIRED PROPERTY AUDIT DATA

(to be completed by each Participant)

Qualified Project Name: Tesla Gigafactory Project

Participant:

Reporting Period:

Project to Date (PTD) Period: October 17, 2014 –

 

Property Description	Period Total (in Dollars)	PTD Total (in Dollars)
Real Property
Land
Building/Structure
Subtotal
Personal Property
Three (3) Year Life
Five (5) Year Life
Seven (7) Year Life
Ten (10) Year Life
Fifteen (15) Year Life
Twenty (20) Year Life
Thirty (30) Year Life
Expensed Property
Subtotal
Total Capital Investment

I hereby certify that the information in this compliance audit data report is, to the best of my knowledge, complete and accurate.

 

Name:
	(Participant’s authorized representative)
Title:
	(title of authorized representative)

Date:                        

NOTE: EXHIBITS M, N AND O MAY BE CONSOLIDATED INTO A SINGLE REPORT IF ALL THE REQUIRED INFORMATION IS STILL SHOWN.

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

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Confidential Treatment Requested by Tesla Motors, Inc.

 

 

EXHIBIT N

GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT

INCENTIVE AGREEMENT

SAMPLE FORMAT FOR CONSTRUCTION WORKER AUDIT DATA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXECUTION VERSION

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

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Confidential Treatment Requested by Tesla Motors, Inc.

 

 

REQUIRED CONSTRUCTION WORKER AUDIT DATA

(to be completed by the Lead Participant on behalf of the Project)

Qualified Project Name: Tesla Gigafactory Project

Lead Participant: Tesla Motors, Inc.

Reporting Period:

Project to Date (PTD) Period: October 17, 2014 –

 

Construction Workforce Composition	Period Total	PTD Total
	(as of end of Reporting Period)	(cumulative total)
Number of Construction Employees (CE)
Number of CEs who are Nevada Residents
Residency as a Percent

Nevada residency requirements verified: (Yes / No)

I hereby certify that the information in this compliance audit data report is, to the best of my knowledge, complete and accurate.

 

Name:
	(Tesla’s authorized representative)
Title:
	(title of authorized representative)

Date:                        

NOTE: EXHIBITS M, N AND O MAY BE CONSOLIDATED INTO A SINGLE REPORT IF ALL THE REQUIRED INFORMATION IS STILL SHOWN.

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

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Confidential Treatment Requested by Tesla Motors, Inc.

 

 

EXHIBIT O

GOVERNOR’S OFFICE OF ECONOMIC DEVELOPMENT

INCENTIVE AGREEMENT

SAMPLE FORMAT FOR QUALIFIED EMPLOYEE AUDIT DATA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXECUTION VERSION

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

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Confidential Treatment Requested by Tesla Motors, Inc.

 

 

REQUIRED QUALIFIED EMPLOYEE AUDIT DATA

(to be completed by each Participant)

Qualified Project Name: Tesla Gigafactory Project

Participant:

Reporting Period:

Project to Date (PTD) Period: October 17, 2014 –

 

Workforce Composition	Period Total	PTD Total
	(as of end of Reporting Period)	(cumulative total)
Number of New Qualified Employees (NQE)
Number of NQEs who are Nevada Residents
Residency as a Percent
Average Wage of Qualified Employees

Nevada residency requirements verified: (Yes / No)

Qualified Employees requirements verified: (Yes / No)

Note: For purposes of determining whether the average wage threshold of Qualified Employees is met, the following definition of wages will be used: The wages for federal income tax purposes reported or required to be reported on Form W-2, as the term “wages” is defined by § 3401(a) of the Internal Revenue Code (26 U.S.C. § 3401), without regard to the exclusions listed in § 3401(a)(1) through (23), inclusive. (For example, wages shall include employee contributions to § 401(k) plans as well as § 125 cafeteria plans for things such as FSA and transportation benefits.)

I hereby certify that the information in this compliance audit data report is, to the best of my knowledge, complete and accurate.

 

Name:
	(Participant’s authorized representative)
Title:
	(title of authorized representative)

Date:                                          

NOTE: EXHIBITS M, N AND O MAY BE CONSOLIDATED INTO A SINGLE REPORT IF ALL THE REQUIRED INFORMATION IS STILL SHOWN.

 

 

[***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

Exhibit 31.1

RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, Elon Musk, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Tesla Motors, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 7, 2015				/s/ Elon Musk
				Elon Musk
				Chief Executive Officer
				(Principal Executive Officer)

 

Exhibit 31.2

RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, Deepak Ahuja, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Tesla Motors, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 7, 2015				/s/ Deepak Ahuja
				Deepak Ahuja
				Chief Financial Officer
				(Principal Financial Officer)

 

Exhibit 32.1

SECTION 1350 CERTIFICATIONS

I, Elon Musk, certify, pursuant to 18 U.S.C. Section 1350, that, to my knowledge, the Quarterly Report of Tesla Motors, Inc. on Form 10-Q for the quarterly period ended June 30, 2015, (i) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) that the information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Tesla Motors, Inc.

 

Date: August 7, 2015				/s/ Elon Musk
				Elon Musk
				Chief Executive Officer
				(Principal Executive Officer)

I, Deepak Ahuja, certify, pursuant to 18 U.S.C. Section 1350, that, to my knowledge, the Quarterly Report of Tesla Motors, Inc. on Form 10-Q for the quarterly period ended June 30, 2015, (i) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) that the information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Tesla Motors, Inc.

 

Date: August 7, 2015				/s/ Deepak Ahuja
				Deepak Ahuja
				Chief Financial Officer
				(Principal Financial Officer)