Tesla 2014 Annual Report Download - page 115

Table of Contents
Fair Value Adoption
We utilize the fair value method in recognizing stock-based compensation expense. Under the fair value method, we estimated the fair
value of each option award and the ESPP on the grant date generally using the Black-Scholes option pricing model and the weighted average
assumptions noted in the following table.
The weighted-average grant-date fair value for option awards granted during the years ended December 31, 2013, 2012 and 2011 was
$40.72, $16.37 and $17.43 per share, respectively. The weighted-average grant-date fair value for ESPP granted during the years ended
December 31, 2013, 2012 and 2011 was $19.22, $8.99 and $7.52 per share, respectively. The fair value of RSUs is measured on the grant date
based on the closing fair market value of our common stock.
Performance-Based Stock Options
In December 2009, our Board of Directors approved an option grant to our CEO representing 4% of our fully-diluted share base prior to
such grant as of the grant date, or 3,355,986 stock options, with 1/4th of the shares vesting immediately, and 1/36th of the remaining shares
scheduled to vest each month over three years, assuming continued employment through each vesting date in recognition of his and our
company’s achievements and to create incentives for future success. In addition, to create incentives for the attainment of clear performance
objectives around a key element of our business plan— the successful launch and commercialization of Model S—the Board of Directors
approved an additional option grant to our CEO totaling an additional 4% of our fully-diluted shares prior to such grant as of the grant date, or
3,355,986 stock options, with a vesting schedule based entirely on the attainment of performance objectives as follows, assuming our CEO’s
continued employment and service to us through each vesting date:
Through December 31, 2013, all performance milestones were achieved. Stock-based compensation expense related to this grant to our
CEO was $0.4 million, $4.2 million and $6.3 million for the years ended December 31, 2013, 2012 and 2011, respectively.
114
Year Ended December 31,
2013
2012
2011
Risk
-
free interest rate:
Stock options
1.3
%
1.0
%
2.0
%
ESPP
0.1
%
0.2
%
0.2
%
Expected term (in years):
Stock options
6.1
5.9
6.0
ESPP
0.5
0.5
0.5
Expected volatility:
Stock options
57
%
63
%
70
%
ESPP
43
%
51
%
59
%
Dividend yield:
Stock options
0.0
%
0.0
%
0.0
%
ESPP
0.0
%
0.0
%
0.0
%
•
1/4th of the shares subject to the option are scheduled to vest upon the successful completion of Model S Engineering Prototype;
•
1/4th of the shares subject to the option are scheduled to vest upon the successful completion of Model S Validation Prototype;
•
1/4th of the shares subject to the option are scheduled to vest upon the completion of the first Model S Production Vehicle; and
•
1/4th of the shares subject to the option are scheduled to vest upon the completion of the 10,000th Model S Production Vehicle.