Tesla 2014 Annual Report Download - page 111

Table of Contents
certain future financial covenants and funding of the debt service reserve account, and in June and December 2012 to allow us to effect certain
initiatives in our business plan. In September 2012, we entered into an amendment with the DOE to remove our obligation to comply with the
current ratio financial covenant as of September 30, 2012 and amend the timing of pre-funding the principal payment due in June 2013. We
entered into another amendment with the DOE in March 2013 that, among other things, modified certain future financial covenants, accelerated
the maturity date of the DOE Loan Facility to December 15, 2017, created an obligation to repay approximately 1.0% of the outstanding
principal under the DOE Loan Facility on or before June 15, 2013, and created additional contingent obligations based on excess cash flows that
may result in accelerated repayment of the DOE Loan Facility starting in 2015. The original amortization schedule for the DOE Loan Facility
was not affected by this amendment, and so the debt service payments remained the same until the new maturity date when all outstanding loans
under the DOE Loan Facility were to be repaid. We refer to the loan facility with the DOE, as amended, as the DOE Loan Facility. Under the
DOE Loan Facility, the FFB made available to us two multi-draw term loan facilities in an aggregate principal amount of $465.0 million. As of
August 31, 2012, we had fully drawn down the aforementioned facilities.
All outstanding amounts under the DOE Loan Facility were repayable in quarterly installments, which commenced on December 15, 2012
and would be due on the maturity date of December 15, 2017. All obligations under the DOE Loan Facility were secured by substantially all of
our property.
The DOE Loan Facility documents contained customary covenants that included, among others, a requirement that the projects be
conducted in accordance with the business plan for such project, compliance with all requirements of the ATVM Program, and limitations on our
and our subsidiaries’ ability to incur indebtedness, incur liens, make investments or loans, enter into mergers or acquisitions, dispose of assets,
pay dividends or make distributions on capital stock, pay indebtedness, pay management, advisory or similar fees to affiliates, enter into certain
affiliate transactions, enter into new lines of business, and enter into certain restrictive agreements, in each case subject to customary exceptions.
The DOE Loan Facility documents also contained customary financial covenants requiring us to maintain a minimum ratio of current assets to
current liabilities, and (i) a limit on capital expenditures, (ii) from December 31, 2013, a maximum leverage ratio, a minimum interest coverage
ratio, a minimum fixed charge coverage ratio, and (iii) from March 31, 2014, a maximum ratio of total liabilities to shareholder equity. We were
in compliance with our current applicable financial covenants as of March 31, 2013. The DOE Loan Facility documents also contained
customary events of default, subject in some cases to customary cure periods for certain defaults. In addition, events of default included a failure
of Elon Musk, our Chief Executive Officer (CEO), and certain of his affiliates, at any time prior to one year after we would complete the project
relating to the Model S Facility, to own at least 65% of capital stock held by Mr. Musk and such affiliates as of the date of the DOE Loan
Facility. As part of the amendment to the DOE Loan Facility in March 2013, we agreed to, among other things, (i) make an early payment of
approximately 1.0% of the outstanding principal under the DOE Loan Facility on or before June 15, 2013, (ii) make additional quarterly
prepayments equal to: 20% of our excess cash flow for each quarter of fiscal 2015; and 35% of our excess cash flow for each quarter of fiscal
2016 and 2017.
Under the DOE Loan Facility, we had agreed to pre-fund a dedicated debt service reserve account with our planned loan repayments as
required by the DOE loan facility. As of December 31, 2012, $14.9 million was held in this dedicated account and classified this cash as current
restricted cash on the consolidated balance sheet.
DOE Warrant Expiration
In connection with the closing of the DOE Loan Facility, we issued in January 2010 a warrant to the DOE to purchase up to 9,255,035
shares of our Series E convertible preferred stock at an exercise price of $2.51 per share. Upon the completion of our initial public offering on
July 2, 2010, this preferred stock warrant became a warrant to purchase up to 3,090,111 shares of common stock at an exercise price of $7.54 per
share. Since the number of shares ultimately issuable under the warrants would vary depending on the average outstanding balance of the loan
during the contractual vesting period, and decisions to prepay would be influenced by our
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