Tesla 2014 Annual Report Download - page 123
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Table of Contents
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
claims were originally asserted against Tesla and two of its executive officers. The current complaint seeks damages, attorney fees and other
relief, and alleges, among other things, that Tesla made false and/or misleading representations and omissions including with respect to the
safety of the Model S vehicle and Tesla’s ability to meet public expectations with respect to its financial performance. The current complaint is
brought on behalf of a putative class consisting of “all persons other than Defendants who purchased Tesla’s securities between May 10, 2013
and November 6, 2013, inclusive.” We believe this lawsuit is without merit and intend to defend against it vigorously. As we are currently
unable to predict the outcome of this lawsuit, it is not possible for us to determine whether there is a reasonable possibility that a loss has been
incurred nor can we estimate the range of any potential loss.
13. Subsequent Events
Performance-based Stock Option Grant
In January 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 782,500 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.
122
•
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.