Tesla 2016 Annual Report Download - page 28

Ifthepriceofourcommonstockdeclines,Mr.Muskmaybeforcedbyoneormoreofthebankinginstitutionstoprovideadditionalcollateral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,prohibit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
senior notes could impair a takeover attempt.
Ourcertificateofincorporation,bylaws,Delawarelawandthetermsofourconvertiblesenior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seniornotesrequireustorepurchasethenotesintheeventofafundamentalchange.Atakeoverofourcompany
wouldtriggeranoptionoftheholdersofthenotestorequireustorepurchasethenotes.Thismayhavetheeffectofdelayingorpreventingatakeoverofour
companythatwouldotherwisebebeneficialtoourstockholders.
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I TEM 1B. UNRESOLVED STAFF COMMENTS
None.
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