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Yosef Peretz (SBN 209288) s at EE i Te WD
Emily Knoles (SBN 241671) N MATEO OGUNTY
Genevieve Guertin (SBN 262479)
PERETZ & ASSOCIATES
22 Battery Street, Suite 202
San Francisco, California 94111
Telephone: (415) 732-3777
Facsimile: (415) 732-3791
Attomeys for Plaintiff MARTIN EBERHARD
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN MATEO
MARTIN EBERHARD, Fi led Bs F OK
Civil Case No. CIV-484400
DECLARATION OF PLAINTIFF
MARTIN EBERHARD IN SUPPORT
VS. OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION
ELON MUSK; TESLA MOTORS, INC.; TO STRIKE PORTIONS OF
Plaintiff,
and DOES 1-20, inclusive, PLAINTIFE’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST
PUBLIC PARTICIPATION
Defendants.
Date: July 29, 2009
Time: 9:00 a.m.
Dep.: 11
Judge: Hon. John L. Grandsaert
I, Martin Eberhard, declare:
1. I am the Plaintiff in this action. I have personal knowledge of the matters set
forth herein and if called upon to testify, I could and would do so competently.
2. This declaration is given in support of the Plaintiff's Opposition to Defendants’
Special Motion to Strike Portions of Plaintiff's Complaint as a Strategic Lawsuit Against
Public Participation (“Motion”).
I. The Formation of the Idea of a Lithium-ion Powered Sport Car
3. I hold a bachelor degree in Computer Engineering from the University of
Illinois at Urbana Champaign, which I completed and obtained in 1982. I hold a Masters
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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Degree in Electrical Engineering from the University of Illinois, which I completed in late
1983 and obtained in early 1984.
4. I am a technological entrepreneur by profession. In the 1990s I was one of the
founders of two different technological start-up companies: Network Computing Devices, Inc.
and NuvoMedia, Inc. After the successful sale of NuvoMedia, Inc. to Gemstar/TV Guide in
2000, I took on the role of President of Engineering at Packet Design that I held until 2002.
5. Beginning in January 2002, inspired by ever-rising gas prices and the increasing
threat of global warming, I enlisted my long time business partner Marc Tarpenning
(“Tarpenning”) to join me in searching for an alternative to gasoline-powered cars.
6. We spent approximately 18 months in technical research during which I came to
the conclusion that electric cars were indeed the most efficient, least polluting alternative to
gasoline-powered cars. We then researched the causes for the failure of electric vehicles in the
past and analyzed the benefits and shortcomings of electric cars in comparison to other
alternative-fuel vehicles.
7. As early as November 2002, I contacted Tom Gage, the CEO of AC Propulsion,
Inc. (“ACP”), to discuss alternative-fuel vehicles. ACP is a small drive-systems company that
experimented with alternative-fuel vehicles. ACP produced a very limited number of electric
car roadsters named the Tzero that operated on lead-acid batteries. Only 3 Tzero roadsters
were ever made by ACP, and at that time, I offered to pay the company $100,000 to $120,000
to make me the fourth Tzero, provided that this car would be built and operate on lithium-ion
batteries.
8. ACP suffered from financial difficulties, and after several meetings and
discussions, I agreed to invest a total of $250,000 in the company: about $100,000 to pay for a
Tzero for me, and about $150,000 as an investment in ACP, for which I would receive stocks
in the company. My investment in ACP was designed specifically to fund the development of
a prototype lithium-ion battery pack for a Tzero that ACP owned and for the Tzero that would
be built for me.
9. ACP was never able to build and deliver my Tzero. By December 2002, it
became clear to me that ACP would never produce a significant number of electric vehicles,
and that no other companies seemed poised to do so. J therefore realized that if I ever wanted a
lithium-ion battery operated roadster, I would have to build it myself.
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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10. At that same timeframe, the established car companies were in the process of
forcing a modification of the California Air Resources Board’s Zero-Emissions Mandate such
that they would no longer be obliged to sell electric vehicles. Tarpenning and I saw this as an
opportunity to start an electric car company.
11. Instead of focusing on an affordable but lower-quality electric car model, we
decided to focus on the creation of a fully-electric sport car with high performance that would
hopefully serve as a springboard to an affordable and high-quality electric car for every
American. With less constraint on price, we conceived a completely new drivetrain for the
electric car, powered by commodity lithium-ion batteries like those used in consumer
electronics.
I The Founding of Tesla Motors
12. Tarpenning and I originally founded our electric car venture in the beginning of
2003 and funded it ourselves from its inception until April 2004. During this time, neither
Tarpenning nor I had any income from this venture and we devoted our entire time to the
formation and conceptualization of the lithium-ion operated electric car roadster (“Roadster”).
13. I decided to name Tesla Motors after Nikola Tesla — one of the most important
scientists and innovators of the modern age in the area of electrical engineering — during a trip
to Disneyland I took with my wife on January 25, 2003.
14. Tarpenning purchased the domain name “teslamostors.com” on April 23, 2003.
15. Defendant TESLA MOTORS, INC. (“Tesla Motors”) was incorporated on July
1, 2003. A true and correct copy of Tesla Motors’ Certificate of Incorporation is attached
hereto as Exhibit “2”.
16. I served as Tesla Motors’ Chief Executive Officer (“CEO”) from its formation,
and Tarpenning was the President, Vice President of Engineering and Tesla Motors’ Chief
Financial Officer (‘CFO”).. The Board of Directors of Tesla Motors (“BoD”) was formed in
July 2003 and consisted of Tarpenning and me, Laurie Yoler (“Yoler’”), who served on the
board until about 2008, and Bernard Tse, who served on the board until approximately August
| 2006.
17. Tesla Motors was a fully functioning venture from its formation. The company
moved to its first office on Oak Grove Street, Palo Alto in August 2003, and had official phone
and fax numbers, a website, email addresses, formal legal representation that was provided by
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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Mark White (“White”) of White & Lee LLP, and a bank account at City National Bank in Palo
Alto.!
18. Jan Wright (“Wright”) joined Tesla Motors on or about January 20, 2004, and
he left the company in early January 2005. During his tenure at Tesla Motors, Wright was the
Chief Operating Officer (“COO”).
19. In December 2003, Tarpenning and J began searching for venture capitalists to
help fund Tesla Motors and to get the Roadster into production. In conjunction with that
search, J wrote the company’s first business plan that was first published on February 19, 2004
and is entitled Confidential Business Plan Version 1.0 (“BP 1.0’). A true and correct copy of
BP 1.0 is attached hereto as Exhibit “3”.
20. BP 1.0 provided a thorough backdrop for the direction and future of Tesla
Motors, including the following concepts that were later adopted by Tesla Motors as it grew
from a two-person operation to a internationally-recognized car company over the course of
the last 7 years:
a. Plans for product development and specifications for a fully electric roadster
(pages 9 through 11 of the plan);
b. A model that included the manufacturing of the chassis and body of the
Roadster by Lotus Engineering (“Lotus”), with ACP providing technology
for powertrain components, and Tesla Motors assembling the car and
developing the battery components (page 17 of the plan); ”
c. A four-step funding plan labeled as Series A through D funding (page 21 of
the plan); and
’ The operations of Tesla Motors stands in opposite to the allegations made by Defendant
ELON MUSK (“Musk”) in his blog, “In the Beginning” (“ITB”), which was published on June
22, 2009, wherein he asserts that Tesla Motors did not have a formal office when I first met
him and that all I had was essentially a business plan and a unfunded corporation. A true and
correct copy of the ITB is attached as Exhibit 128 to the Declaration of Joshua Katz in Support
of Plaintiff's Opposition to Defendants’ Special Motion to Strike Portions of the Complaint
(“PE 128”).
* In ITB Musk asserts that my business plan was to merely commercialize ACP’s Tzero when
we first met. However, as stated in BP 1.0, my original plan was to create a new electric
commercial vehicle based on my idea to use lithium-ion batteries, drivetrain technology based
on and derived from ACP’s drivetrain technology, and a derivative of the Lotus Elise chassis.
[See PE 128.]
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS?’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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d. Organization consisting of a management team, information technology
team, digital engineering team, vehicle engineering team, manufacturing
team, sales and marketing team, and support team (page 22 of the plan).
21. BP 1.0 states that Tarpenning and I founded Tesla Motors (page 6 of the plan),
and outlined possible future directions, including the possibility of moving down market to
build a four-seat coupe or compact wagon, and eventually low-price alternatives once Tesla
Motors had established enough volume in sales (page 12 of the plan). This direction was based
on my original idea — ultimately adopted by Tesla Motors — to first build a highly desirable
electric car that will open the door to the production of an affordable family car.°
22. After meeting with several prospective venture capitalists — which showed a
genuine interest to invest in Tesla Motors — in the winter of 2003 and spring of 2004, on
March 31, 2004, I wrote an email to Defendant ELON MUSK (“Musk”) informing him that
Tesla Motors was an investor in ACP and funded its research into lithium-ion battery packs for
electric cars. I told Musk that Tarpenning and I were the founders of Tesla Motors, and asked
if he might be interested in investing in the company. I told Musk that Tesla Motors was going
to build high-performance electric cars based on a derivative of the ACP drivetrain and based
ona derivative of the Lotus Elise chassis. Musk responded positively to my email that same
day. A true and correct copy of the email to Musk and his response to that email is attached
hereto as Exhibit “4”.
23. Tesla Motors and Musk quickly reached an agreement upon which Musk would
lead the first group of outside investors in Tesla Motors. The first round of investors also
included Tarpenning and me, two venture capitalist firms from Silicon Valley and some of my
friends and family members.
24. Between 2004 and 2007, I oversaw the growth of Tesla Motors from a team of
two to a company of 280 people with the expertise necessary to run a mass-production car
> In the Declaration of Elon Musk in Support of Defendants’ Special Motion to Strike (“Musk
Declaration”), Musk mistakenly asserts that the model of following the roadster with a lower-
cost family car was a change to our initial program, although this issue is specifically covered
in BP 1.0. Id. at (6.
* In ITB Musk asserts that he requested through ACP to meet me. However, Musk never
contacted me in the five weeks between receiving the February 24, 2004 email from ACP
mentioning my name and the day I wrote Musk on March 31, 2004. [See PE 128.]
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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company, spanning four countries. I had also led the development of the Roadster from its
inception and design through the safety and performance testing that validated the Roadster’s
ability to achieve 0-60 miles per hour in less than four seconds, as well as its break-through of
an almost 250-mile range per charge. During this time J devoted my entire workday time to
Tesla Motors, often spending as much as 60 to 80 hours per week working for the company.
Iu. The Acknowledgment of Tarpenning and I as Tesla Motors’ Founders
25. On April 23, 2004, Tesla Motors closed on an investment round called Series A
Preferred Stock Financing (“Series A”). The Index of Documents for Series A state in two
separate places that I am a Founder of Tesla Motors. Musk is not named as a Founder of Tesla
Motors in this index and Tarpenning, Wright, and J are the only individuals named as Founders
in the Series A documents. A true and correct copy of the cover page and Index of Documents
to Series A is attached hereto as Exhibit “5”.
26. As part of the closing of Series A funding, on April 23, 2004, Musk signed an
agreement entitled Right of First Refusal and Co-Sale Agreement that states in the following
signature pages that I am a Founder of Tesla Motors. Musk is not named as a Founder of Tesla
Motors in this agreement. A true and correct copy of the Right of First Refusal and Co-Sale
Agreement from Series A is attached hereto as Exhibit “6”,
27. Jt was further determined at the closing of Series A that Musk will join the BoD
as the Chairman of the BoD in addition to the previously appointed BoD members, and that I
will maintain the CEO position and Tarpenning the positions of Vice President of Engineering
and CFO.
28. On April 23, 2004, White, as counsel for Tesla Motors, sent an opinion letter in
connection with Series A. In this letter, which was sent to purchasers of Tesla Motors’ stock,
including Musk, White refers to me as a Founder. Musk is not referred to as a Founder of
> Musk asserts in ITB that he “convinced” John B. Straubel (“Straubel”) to join Tesla Motors
soon after he provided funding [in Series A]. This assertion is over-simplified because I was
the one to propose to Musk that Tesla Motors hires Straubel. On May 3 and 4, 2004, Musk and
I discussed the hiring of Straubel as an employee of Tesla Motors via email. Musk told me that
he initially wanted to hire Straubel for a company that he owns, Space Exploration
Technologies - SpaceX (“SpaceX”), but he agreed with me that Straubel would be a better fit at
Tesla Motors instead. A true and correct copy of this email thread is attached hereto as Exhibit
“8”, Straubel was first hired as a salaried Drive-train Engineer on or about May 17, 2004 and
was later promoted by me to the position of Chief Technology Officer (“CTO”).
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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Tesla Motors in this letter. A true and correct copy of this opinion letter is attached hereto as
Exhibit “7”.
29. On February 14, 2005, Tesla Motors closed on an investment round called the |
Series B Preferred Stock Financing (“Series B”). There is one section referring to me as a_
Founder of Tesla Motors in the Index of Documents. Musk is not named as a Founder of Tesla
Motors in this index. A true and correct copy of the cover page and Index of Documents to
Series B is attached hereto as Exhibit “9”.
30. ‘As part of Series B, the Right of First Refusal and Co-sale Agreement from
Series A was amended and restated. Musk signed the Amended and Restated Right of First
Refusal and Co-sale Agreement on February 14, 2005. I am specifically named as a founder in
this agreement and in the following signature pages. Musk is not named as a Founder in this
agreement and Tarpenning and I are the only persons named as Founder in Series B
documents. A true and correct copy of this agreement is attached hereto as Exhibit “10”.
31. On February 14, 2005, Tesla Motors’ counsel, White, prepared an opinion letter
in connection with the Series B agreements that was sent to all the investors, including Musk.
|In this letter, White states that Iam a Founder of Tesla Motors. Musk is not referred to as a
Founder of Tesla Motors in this letter. A true and correct copy of this letter is attached hereto
as Exhibit “11”.
32. Both Series A and Series B were drafted by Musk’s then attorneys and not by
Tesla Motors attorneys, White & Lee LLP.
33. On April 4, 2006, and well after Wright left Tesla Motors, I wrote an email to
Musk, informing him that Wright referred to himself as the founder of Tesla Motors. Musk
responded by email that it was probably time to send Wright a “cease and desist letter” because
Wright may pass as a member of the founding team of Tesla Motors but he is certainly not a
founder of the company. A true and correct copy of this email exchange is attached hereto as
Exhibit “12”.°
34. On May 10, 2006, in anticipation of closing on an investment round to be called
the Series C Preferred Stock Financing (“Series C”), a Second Amended and Restated
Musk stated that apart from leading investment, his influence on the car itself runs from “the
headlights to the styling of the doorsill to the trunk.” Musk never mentioned in this email that
he is a founder of Tesla Motors or that his involvement was greater than the headlights and
styling of minor parts of the Roadster. A true and correct copy of this email from Musk is
attached hereto as Exhibit “17”.’
39. On July 20, 2006, Musk wrote an email to PCG Campbell (“PCGC”), Tesla
Motors’ public relations agents at the time, stating that he was “incredibly insulted and
embarrassed by the NY Times article, where [he was] not merely unmentioned, but where [I
am] actually referred to as the chairman.” Musk threatened to end Tesla Motors’ relationship
with PCGC as a result of this purportedly offensive description. Musk went on further to state
“Please ensure that the NYT publishes a correction as soon as possible.” Musk never stated in
this email that he should be referred to as the founder of Tesla Motors. A true and correct copy
of this email from Musk is attached hereto as Exhibit “18”.
40. Onor about April 12, 2007, Tesla Motors finalized a Confidential Business Plan
Version 4.6 (“BP 4.6”) in anticipation of the Series D Preferred Stock Financing (“Series D”)
investment round. Page 6 of BP 4.6 states that I am a founder of Tesla Motors. A true and
correct copy of excerpts of BP 4.6 is attached hereto as Exhibit “19”.
41. On May 9, 2007 Tesla Motors closed on Series D. As a part of Series D, a
Third Amended and Restated Investors’ Rights Agreement was executed. In Section 1.1(h) of
this agreement, the term “Founder” is defined as a list of persons containing only Tarpenning
and me. Musk in not mentioned as a Founder in this agreement. Musk signed this agreement
on May 9, 2007. A true and correct copy of this agreement is attached hereto as Exhibit “20”.
IV. Musk and the Rest of the BoD Members were fully Aware of Increased Costs and
Delays in the Roadster Program
42. During the design process of the Roadster, Musk took a persistent and
distracting interest in random details of lesser importance, compared to the critical and difficult
development of the battery system, traction motor, power electronics, transmission, and the
difficult task of finding suppliers for each and all of the approximately 500 components
installed in the car.
43. Asa result of wasting valuable resources and time on research on such items as
installing electronic door latches rather than conventional door latches, headlights and the
styling of the doorsill, there were increased delays and expenses in the Roadster’s production
that added to the delays and cost increases caused by other factors,
44. —_ | routinely expressed concern about the additional risk and cost to Musk, but he
insisted on expanding the scope of the Roadster program almost every time.
45. Musk involvement in the operations of the company increased as a result of his
increasing financial interest at Tesla Motors. Furthermore, with the increase in his financial
investment in the company, Musk had, and exercised, the privilege to appoint members to the
BoD. In winter 2006 and spring 2007, the BoD was comprised of seven members, three of
whom served at the pleasure of Musk, including his brother, Kimbal Musk. After the closure
of Series D, Musk’s representation on the BoD increased to 6 out of the 7 members on the
board, with me being the only person not serving at his pleasure.’
46. I never received any complaint, critique, or negative review of my performance
from anyone in the company during my time as CEO and as President of Technology of the
company. In fact, I was complimented for my work repeatedly, even by Musk. For example,
on June 5, 2006, Musk wrote me an email to tell me that he was planning on speaking with
BoD member Jim Marver (“Marver’”) about granting me more stocks with Tesla Motors as
recognition of my contribution to the company. A true and correct copy of this email is
attached here to as Exhibit “21”. Additionally, on May 23, 2007, Musk wrote me an email
|| where he said that the number of great product people in the world is tiny and he thinks I am
one of them. A true and correct copy of this email is attached hereto as Exhibit “22”.
47. The BoD held meetings on a monthly basis. At BoD meetings, members of the
different teams at Tesla Motors made presentations to the BoD and were available for
questioning. I never told anyone at Tesla Motors to conceal information from the BoD, to limit
information to the BoD, to withhold information from the BoD, or to alter information to the
BoD. I never concealed, limited, withheld or altered information from the BoD myself.
® Yoler was appointed to the original BoD, however due to his close relationship with Yoler,
Musk decided to leave her on the BoD as his representative.
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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48, Tesla Motors, from its inception, was based on a business model of
collaboration between ACP, Lotus and Tesla Motors to piece together all the necessary
components for the Roadster. To secure funding for the program, it was necessary to estimate
the cost of producing and manufacturing the Roadsters. As in other volume manufacturing
businesses, the plan had always been to drive down costs as production increased. Tesla
|Motors’ first business plan, BP 1.0, estimated a $49,000 production cost per car, with a
detailed breakdown of specific costs (page 39 of the plan).
49, On April 15, 2004, I wrote Tesla Motors’ Confidential Business Plan version
1.7 CBP 1.7”). BP 1.7 estimated the production cost of the Roadster at $50,740 (page 45 of
plan). A true and correct copy of excerpts from BP 1.7 is hereto attached as exhibit “23.”
-50. Early on, Musk interjected his ideas into the design process of the Roadster.
The initial concept for the Roadster included using the original body materials and chassis of
the Lotus Elise because they were lightweight and had undergone significant mandated tests,
such as impact tests, that will greatly reduce the cost of the Roadster. Musk was insistent on
using carbon-fiber body panels for the Roadster, although I was hesitant to using this material
because of its complexity. Must was so confident in carbon fiber that he wrote me an email
where he stated, “you could make the body panels for at least 500 cars worth per year if you
bought the sort of oven we have at SpaceX! . . . If someone tells you this is hard, they are full
of shit. You can make high quality composites in the oven in your home. Once you’ve made a
few of these things, you realize that there is nothing magical about glue and string [emphasis
added].” A true and correct copy of this email is attached hereto as Exhibit “24”.
51. It turned out that the change to carbon fiber dramatically increased the cost of
the Roadster and was one of the two critical path issues (along with the transmission) that
delayed the production of the car in 2007.
52. As early as 2005, it became apparent that Tesla Motors required an experienced
CFO to handle the complex financial situation involved with running a startup automobile
company. On November 28, 2005, Tarpenning emailed Musk to inform him that Tesla Motors
was close to needing a full-time CFO. Tarpenning told Musk what his ideal CFO candidate
would be and asked Musk for guidance on hiring a CFO at the company. It took the BoD
° Nonetheless, | have never estimated the cost of producing the Roadster at $25,000 as stated
by Musk in ITB.
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION :
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almost two years to find a replacement for Tarpenning and it was only after he resigned his
CFO position, that the BoD replaced Tarpenning with another CFO. A true and correct copy
of this email is attached hereto as Exhibit “25”.
53. The BoD was involved in approving costs from the very beginning. Beginning
after the Series C investment, all Purchase Order (“PO”) requests totaling more that $500,000
required approval by the BoD. For example, on July 24, 2007, Tesla Motors’ General Counsel,
Craig Harding (“Harding”), sent an email to the BoD requesting approval for a PO for over
$500,000 for HVAC controllers required for Roadster production.’° The request originated
from the manufacturing department and Musk approved Harding’s request. A true and correct
copy of Harding’s email and Musk’s response is attached hereto as Exhibit “26”.
34. On July 18, 2006, Musk and I exchanged emails regarding the pricing of the
Roadster. I informed Musk that J was nervous about him telling people that the production
price will be around $85,000 due to impending changes and uncertainty about the Roadster’s
transmission. Tesla Motors was contracting with Magna International (“Magna”), a respected
Transmission manufacturing company, to build a customized transmission for the Roadster.
The value of this contract was approximately $5 million and was approved by the BoD. A true
and correct copy of this email thread is attached hereto as Exhibit “27”.
55. Changes and uncertainty with regard to the transmission were largely due to the
fact that the Roadster required a different transmission than any transmission in production.
Unlike most manual transmissions, an electric vehicle’s transmission requires a parking lock to
prevent the vehicle from rolling. Tesla Motors was also less desirable to established
manufacturing suppliers. Tesla Motors was not in the position to place orders for
transmissions in the volume that is customary in the automotive business and is measured in
the hundred thousands of a single model of transmission for a single customer. Since Tesla
Motors would order only a few hundred transmissions in the first year, and perhaps a few
thousand in the following years, the supplier would make little profit from the relationship, and
'? HVAC (heating, ventilation and air-conditioning) controllers are computerized systems for
climate control.
DECLARATION OF PLAINTIFF MARTIN EBERHARD JN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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would need to recover engineering and tooling costs over a much smaller number of produced
transmissions."
56. Musk understood in 2006 that Tesla Motors was having serious issues getting
the Roadster into production. For example, on October 25, 2006, Musk told me via email that
“as things stood, Tesla Motors will be hard pressed to actually deliver 2007 model year
Roadsters in 2007.” A true and correct copy of this email is attached hereto as Exhibit “28”.
57. Musk was not the only member of the BoD who knew that the Roadsters were
going to be costlier than anticipated. As far back as August 8, 2006, Musk sent an email to
John Woolard of Vantage Point Investments, Marver, and me, where he predicted that
Roadsters with the same options as Signature 100 Collector’s Edition cars would probably cost
more than $100,000. * A true and correct copy of Musk’s email is attached hereto as Exhibit
“29”,
58. On November 27, 2006, I emailed Musk to tell him that “I stay up at night
worrying about simply getting the [Roadster] into production sometime in 2007.” At that time,
however, Musk was focused on the appearance of the dashboard of the Roadster. I told Musk
that I could not worry about a dashboard upgrade when there were more pressing issues. |
specifically stated that the issues included “everything from serious cost problems to supplier
problems (transmission, air conditioning, etc.) to our own design immaturity to Lotus’s
stability.” Musk did not respond to the many serious problems I had outlined; instead, his sole
response was that he just needed to hear that the [dashboard issue] would be addressed after
Start of Production (“SOP”). A true and correct copy of my email and Musk’s response is
attached hereto as Exhibit “30”.
59. On November 28, 2006, Musk forwarded an email to me that he originally sent
to Marver on the subject of costs and pricing. Musk told Marver that he was comfortable with
how Tarpenning and I understood vehicle costs and price derivations. A true and correct copy
of this email is attached hereto as Exhibit “31”.
'! Tn another attempt to re-write history, Musk claims in ITB that I insisted on a two speed
transmission while Straubel and Musk wanted to use a single speed one; Musk forgets to
acknowledge the original plan was to use a single speed transmission as outlined in BP 1.0.
[See, Exhibit “3” and PE 128.]
" This title for the first production of Tesla Roadsters was later replaced by the title in use as
of today, the Founder’s Series.
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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@ eo
60. To attract investors for the Series D funding round, Tesla Motors revised and
updated its business plan that was ultimately published as BP 4.6. BP 4.6 was many months in
the making and involved the compilation and work of many people on the company. Parts of .
BP 4.6 were authored by various executives in the company with Darrel Siry (“Siry’”), then
Tesla Motors’ Vice President of Global Sales, Marketing and Service serving as the primary
editor and consolidator of this plan. This plan was ultimately approved by me, the BoD and
Musk himself.
61. On December 27, 2006, Siry sent an email to Tesla Motors’ executive team
regarding the creation of BP 4.6 and attached.an outline detailing the point-person or
department at the company would be responsible for which segment in the plan. This outline
demonstrates that I was responsible for the Executive Summary, and Siry and Malcolm Powell
(“Powell”), then Vice President of Vehicle Integration, were responsible for the Tesla Motors’
Roadster section. The outline does not name an individual responsible for the Finance Section,
although I believe that Tarpenning wrote this section, and he did that without my involvement
or my influence to skew the data one way or the other. A true and correct copy of this email
and the attached outline are attached hereto as Exhibit “32”.
62. The BP 4.6 revisions required numerous modifications. On January 2, 2007, for :
example, Powell sent an email to marketing consultant Dottie Hall, Siry, and me to inform us
that he had modified the and first table in the draft business plan. A true and correct copy of
this email is attached hereto as Exhibit “33”.
63. On or about January 12, 2007, Simon Wood (“Wood”), the Director of
Engineering at Lotus, met with Musk on the status of the Roadster program. Musk flew to
Lotus offices in England for this meeting without me and communicated directly with Lotus’
executive team on the Roadster program. At that meeting, Wood gave a PowerPoint
presentation to Musk highlighting Lotus’ concerns regarding the increasing risks for
production delays and cost increases in the program. The presentation slides clearly
demonstrated to Musk that Tesla Motors was behind schedule and was short on the
components needed to move ahead with the production of the Roadster. Wood sent me the
slides for the presentation via email after that meeting. A true and correct copy of the email
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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and the above PowerPoint presentation is attached hereto as Exhibit “34”. The presentation
outlines the following issues regarding the program:
a. At the time of the presentation, Tesla Motors was missing 27% of parts
needed to build validation prototypes (“VPs”) of the Roadster; '*
b. Data suggested that there would be significant production slips, including
delay in SOP;
c. Unless Engineering Change Order (“ECO”) release performance is
improved, this problem would re-occur at subsequent phases of the
project;
d. Lotus was worried about the volume of “concerns” in the system,
specifically 846 at that time, with only 94 concerns closed;’® and
e. The target for eliminating “concerns” suggested by Tesla Motors — was not
achievable.
64. | Musk was not the only member of the BoD who was aware of delays and costs
increases of the Roadster. On January 24, 2007, Musk wrote an email to the BoD in response
to an email from Marver regarding financing of the company. Musk mentioned delays in
delivery and the risk of more such delays. Marver’s email also confirms that BP 4.6 would be
released to investment bankers as part Series D after it was received and approved by the BoD.
A true and correct copy of this email thread is attached hereto as Exhibit “35”.
65. Beginning with the first days of the company and including the years 2006 and
2007, at almost every monthly board meeting that I recall, the BoD was given presentations on
the status of the Roadster and the finances of the company that included the estimate and actual
costs of the Roadster program. These presentations were given by the person in charge of
those issues with Tarpenning or the controller of the company, Josie Co, giving the financial
'3 Musk, however, asserts in ITB that he and the BoD were under the impression that Tesla
Motors’ only significant problem was with the transmission.
'4 VPs are the second generation of prototypes of a car, succeeding the first generation
Engineering Prototypes (“EPs”). VPs are much closer in design to the final production car and
so enable more refined testing and validation of the car.
'S ECO release performance refers to the time it takes to begin part production once the
engineering phase is complete.
'6 Ty this context, concerns are a synonym for problems; “closing a concern” is identical to
“resolving a problem.”
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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presentation and Powel and Tom Colson, then VP Of Manufacturing (“Colson”), giving the
technical presentation. I have never instructed any presenter what to say at the BoD meetings
and I have never instructed any person at the company to hide or conceal any information
about the Roaster program. Furthermore, for each BoD meeting, a Board Meeting Packet was
distributed to all the BoD members; the financial records of the company were often included
in these packets.
66. Tesla Motors sent potential investors preliminary versions of portions of BP 4.6
in order to attract investments. For example, on February 2, 2007, Tarpenning sent an email to
Vipul Tandon at Soros Fund Management with an attachment of Tesla Motors’ preliminary
versions of the executive summary and finance section from the business plan to be used for
Series D funding. A true and correct copy of this email and the attached preliminary summary
and finance section are attached hereto as Exhibit “36”.
67. | Tarpenning’s financial section was based on his best estimate on the costs and
expenses of the Roadster program and ultimately was included in the final version of BP 4.6.
On February 6, 2007, I emailed Marko Maschek of 3i Investments (“Maschek”), my personal
assistant Alina Dini (“Dini”), and Tarpenning to tell them that I would send Maschek a copy of
BP 4.6 as soon as I had BoD approval for such. In this email, I stated that Tarpenning was .
getting the financial section in order for the business plan and that I would send Maschek the
financial numbers soon. A true and correct copy of this email is attached hereto as Exhibit
“37”.
68. The BoD had the final say on the business plan to be used for attracting new
investors to Tesla Motors for Series D and it approved BP 4.6 for that purpose. On February 6,
2007, I wrote Musk an email to ask his advice on having a lawyer review the business plan.
Musk replied that for big investment rounds, legal counsel usually reviews the plan, but any
changes are up to the BoD. A tre and correct copy of this email and Musk’s response is
attached hereto as Exhibit “38”.
69. On February 25, 2007, while Tesla Motors was in the process of revising the
business plan, Musk and I discussed the delays and costs of Tesla Motors’ contract for
transmissions from Magna. A true and correct copy of this email thread is attached hereto as
Exhibit “39”,
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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70. On March 2, 2007, Musk, fully aware of the costs associated with the Roadster,
wrote me an email asking if Tesla Motors should increase the base price of the Roadster to
$95,000 because he was worried about the profit margins of the sale of the car. A true and
correct copy of this email is attached hereto as Exhibit “40”.
71. On March 15, 2007, I sent Musk an email with a PowerPoint presentation of
Tesla Motors’ Transmission Project. The PowerPoint presentation states that there were cost
and timing risks resulting from problems with the transmission program. A true and correct
copy of this email is attached hereto as Exhibit “41”.
72. On April 20, 2007, Musk wrote an email to Harding to talk about Magna
transmission expenditures and stated that the Magna issue needed to be decided if there would
be a “production slip.” A true and correct copy of this email is attached hereto as Exhibit “42”.
73. On April 21, 2007, Musk wrote me an email asking to meet with a group about
the costs associated with the cells and batteries, by which he acknowledges that these
components make up a significant portion of the cost of a Roadster. This meeting indeed took
place thereafter. A true and correct copy of this email is attached hereto as Exhibit “43”.
74, On April 23, 2007, BoD members Simon Rothman (“Rothman”) and Marver
expressed reluctance in emails to authorize a PO for transmissions from Magna without first
having a cash flow projection. Musk responded that Tesla Motors should move forward and
that delaying the PO would only cause harm. A true and correct copy of this email thread is
attached hereto as Exhibit “44”,
75. On April 24, 2007, Tarpenning sent an email to Musk and Marver with an
attachment of cash flow projections for 2007. Musk replied to Tarpenning’s email by showing
concerns for the rising expenditures. A true and correct copy of this email, Musk’s response,
and the attached cash flow projections spreadsheet document are hereto attached as Exhibit
“45”.
76. On April 25, 2007, Musk wrote an email in which he stated that Tesla Motors
needed another two rounds of funding beyond Series D because Tesla Motors would need
between $70 million to $80 million to make it to March or April of 2008.!? Musk was
responding to Marver, who wrote to the BoD with financial advice. Marver stated in his email
'? This email contrasts Musk allegation in ITB that Series D was the last round of funding
before the Roadster production and profitability.
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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@ oe
that he is hopeful Tesla Motors would ship Roadster in October 2007, which serves as an
acknowledgement that the BoD knew well that the shipping target of September 2007 in BP
4.6 was indeed only a target. Marver further cautioned the BoD on potential delivery delays,
feature slip or weak capital markets that could occur. A true and correct copy of this email
thread is attached hereto as Exhibit “46”.
77... Based on the increasing concerns about the cost of production, on the On April
26, 2007, Musk asked me in an email when I thought we should increase the price of the
Roadster because again he was worried about our margins. A true and correct copy of this
email is attached hereto as Exhibit “47”.
78. In this context, on April 27, 2007, Siry proposed a strategy that included a base
price increase of the Roadster from $92,000 to $98,000 in an email sent to Musk and me,
stating. Siry stated that the reason for the increase in price were increase in costs, and
primarily because of the change in the exchange rate of the British Pound. Musk responded
positively via email to Siry’s plan. A true and correct copy of this email and Musk’s response
is attached hereto as Exhibit “48”.
79. Shortly after closing the Series D round, the BoD created six new
subcommittees. These subcommittees had free access to Tesla Motors staff at every level and
free access to Tesla Motors’ financial records. The subcommittees reported progress at every
BoD meeting. The new subcommittees were:
a. The Audit Subcommittee, led by BoD member Steve Westly (“Westly”) and
Musk;
b. The Operations Subcommittee, led by BoD member Antonio Gracias and
Musk;
c. The Tesla Stores Subcommittee, which focused on store designs, and was
led by Kimbal Musk and Yoler;
d. The Government Affairs Subcommittee Committee, led by Westly and
Yoler.
e. The CEO Search Subcommittee, led by Musk, BoD member Ira Ehrenpreis
(“Ehrenpreis”) and me; and
f. The CFO Search Subcommittee, led by Musk, Ehrenpreis and me.
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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80. On May 8, 2007, I received an email from Glyn Owen (“Owen”), the General
Manager of Tesla Motors Ltd., Tesla Motors’ UK subsidiary. Owen informed me of the details
from a meeting between Musk and Lotus, including Owen, Wood, and Lotus CEO Mike
Kimberly, which occurred on May 3, 2007. According to both Owen and Wood, Musk was
aware of the costs and risks highlighted by Lotus. Musk was also made aware of the risk to the
SOP timing and the risk of additional costs for potentially failing to make use of reserved
build-slots as a result of Tesla Motors’ delays. Wood specifically noted in his email that “He
[Musk] understood the risk to SOP timing & appeared to accept the likely risk of additional
cost for resource support & Possible (sic) missed build slots.”!® Nonetheless, as Wood notes,
Musk “greatest concern remains the poor quality of the interior whish (sic) he views as totally
unsuitable for the car.” A true and correct copy of this email and the attached PowerPoint
presentation from Lotus is attached hereto as Exhibit “49”.
81. | After Musk met with Lotus and was made aware of the scheduling slippage, the
SOP was redefined to include only the delivery of a pre-production “durability” car to Musk in
order to allow the company to “claim” that it had started production at that time, but the actual
SOP date for building production Roadsters for customers was pushed up to an uncertain date,
once all of the problems in the the pre-production cars are sorted out. See, Exhibit 49 above.
82. On June 5, 2007, Dini sent the BoD members a board meeting packet for a
board meeting to be held on June 6, 2007. A true and correct copy of this email and the
attached board meeting packet is attached hereto as Exhibit “50”.
83. The packet for the June 6, 2007 board meeting included the following items:
a. Board Meeting Agenda for the meeting on June 6, 2007;
b. Harding’s official minutes from a board meeting held on April 25, 2007;
c. A presentation on the Roadster production status made by Powell; and
d. A presentation from Tarpenning concerning finances of the company.
84. According to Harding’s minutes from the April 25, 2007 board meeting, the
BoD discussed the search for a new CEO and Tarpenning’s discussion about the financial
status of Tesla Motors at that meeting, which were topics that were routinely discussed by the
'8 Tn his blog, ITB, Musk accuses me of causing Tesla Motor to be liable for the $4M penalty
imposed by Lotus for the lost of the production slots wherein he was fully aware that the risk
of losing those slots was imposed by he requests for additional resources. [See, PE 128.]
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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BoD. Similarly, the June 6, 2007 board meeting agenda includes a discussion about the
engagement of the firm Russell Reynolds (“Reynolds”) to find a new CEO, the hiring of a
temporary CFO and the engagement of Reynolds to accomplish this task.
85. During my tenure as the CEO, the same type of board packets, including
financial and manufacturing updates, were given to the BoD members after each board
meeting.
86. On June 19, 2007, I gave a presentation at Tesla Motors and sent everybody at
the company, which I believe included its executive staff and Musk, an email with an
attachment of the slides from my presentation. I highlighted in my presentation that Tesla
Motors had failed to pass another stage, or “gateway”, for our Final Approval with Lotus that
would affect the delay of production of the Roadster. I specified nine reasons for our Final
Approval failure, and I urged everyone at Tesla Motors that “A Lot is at Stake,” including the
lexistence of Tesla Motors, and I included the phrase, “Your jobs and mine.” A true and correct
copy of this email and my attached slides from my presentation on June 19, 2007 are attached
hereto as Exhibit “S1”.
87. On July 16, 2007, Dini sent me the Board packet for a July 18, 2007 board
meeting. A true and correct copy of this email and the attached packet is attached hereto as
Exhibit “52”. The packet included the following documents:
a. A Board Meeting Agenda, which included information about the CFO
search and temporary CFO that was hired Dan Saccani (“Saccani”), as well
as the search for a new CEO;
b. A presentation of Powell on engineering and manufacturing that included an
update on production;
c. Financial reports, predicting a shortage of cash by the end of that year, 2007; |
and
d. Harding’s official minutes from the June 6, 2007 Board meeting with all
directors present.
88. Notably, Powell’s presentation for the July 18, 2007 board meeting projected
production delays of several weeks in the production of the Roadster due to transmission
problems that render the entire production schedule tentative except for the delivery of Musk’s
car.
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF'S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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@ oe
89. Saccani was hired as the temporary CFO soon after Tarpenning resigned as
CFO on June 7, 2007. On July 23, 2007, Saccani sent an email to the Executive Staff with an
attached weekly finance report. A true and correct copy of the email and attached report is
attached hereto as Exhibit “53”.
90. In Saccani’s first presentation to the BoD during the July 18, 2007 meeting, he
presented slides clearly showing the issues of critical path delays, especially the transmission
problems. Saccani’s presentation projected that the PTS, otherwise known as “pass to sale”,
was for delivery of Roadsters in September in 2007.'? However, the delivery schedule of the
-Roadster had already redefined to only include Musk’s Roadster and the delivery of the
Roadster to the customers had been pushed back to a later date. A true and correct copy of the
slides presented by Saccani is attached hereto as Exhibit “54”.
91. On July 31, 2007, Sacanni sent an email to board member Steve Westly
explaining that the first fifty Roadsters. would each cost $110,000 to produce, and that plans
| would be developed to determine means of reducing costs. Westly responded that this news
was better than anticipated and expressed his confidence that costs could be driven down with
higher volumes. A true a correct copy of this email and Westly’s response is attached hereto as
Exhibit “55”.
92. On August 2, 2007, Saccani asked me if he needed board approval to cut a PO
for 227 cars at a cost of $4 million in order to resolve issues with Lotus arising from missing
parts and production slips. The high cost of this PO was due in large part to Tesla Motors’
delay issues that Lotus presented to Musk in January and May of 2007. I told Saccani he
needed BoD approval for this expense. A true and correct copy of this email and my response
is attached hereto as Exhibit “56”.
93. On August 7, 2007, Saccani sent an email with an attached preview of the
finances for the month of May 2007 to Westly, BoD member Ira Ehrenpreis (“Ehrenpreis”),
|’? Musk claims in ITB that I represented to him that Tesla Motors would deliver Roadsters in
September of 2007. However, as demonstrated by his visits with Lotus in January and May of
2007, Musk already knew by the time of Saccani’s first BoD presentation that delivery meant
only Musk’s. vehicle and that the commercial production of Roadsters will be delayed. [See,
PE 128.]
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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and me. He told us that he was still in the process of updating the financial plan. A true and
correct copy of this email is attached hereto as Exhibit “57”.
94. On August 16, 2007, Tarpenning sent Colson, Vice President of Vehicle
Integration, Malcolm Smith, and me an email with attached slides for a detailed breakdown of
costs prepared in November 2006. Tarpenning stated that the numbers from the slides were the
numbers used in preparing Plan 4.6 for the Series D fund raising. These numbers and the
slides themselves were presented to the BoD. A true and correct copy of this email and the
attached slides are attached hereto as Exhibit “58”. The BoD was presented with the following
information: a) a detailed breakdown part by part of gaps in production costs versus targeted
costs; b) a statement that the Roadster’s Bill of Material (“BOM”) was still not fully defined;””
c) a statement that the Arena System did not accurately define product costs; and d) logistical
and operational requirements had yet to be defined.
95. Musk led a discussion concerning cash flow and margins during the July 18,
2007 board meetirig. During this same meeting, Powell led a discussion of the Roadster,
including projected production dates. Harding prepared the official Board minutes for the July
| 18, 2007 board meeting and sent them as an attachment to the BoD on July 30, 2007. A true
and correct copy of this email and the attached minutes is attached hereto as Exhibit “59”.
96. The highly open and documented discussions on the costs and delays in the |
| production of the Roadster as demonstrated by the unfiltered disclosures made to the BoD by
| various members of the Tesla Motors’ team and Lotus in May through July 2007 were typical
|to the operation of the company in my tenure as its CEO. As I emphasized before, I never
attempted to conceal any material information from the BoD or unduly influenced any of the
company’s employees to engage in such conduct. I promoted open communications between
the BoD members directly with employees of the company.
97. Timothy Watkins (“Watkins”), a managing partner at Valor Equity Group, a
Tesla investor, was asked in July 2007 to assist the company with supply chain issues relating
to the Roadster upon my request. The scope of Watkins’ services inherently included the
tracking of costs of the components of the Roadster; an issue that needed to be streamlined as
?0 BOM is synonymous with cost of the components used for production.
*] The Arena System was an in-house accounting system used by Tesla Motors to track costs of
production.
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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the company faced actual production. The assistance of Watkins was provided during my
tenure as the CEO and directly resulted from the transparent and open discussions at the BoD
level on costs and productions issues as demonstrated above.
V. My Separation from Tesla Motors
98. I brought up the idea of searching for a new CEO at a dinner with Musk the
evening before the January 2007 BoD meeting. I did so because the company was becoming
too complex for a CEO of my experience to handle. I wanted Tesla Motors to hire a CEO with
more automotive industry experience to handle day-to-day operations so that I could focus
more on the design aspect of bringing the vision of a commercially viable electric vehicle to
fruition.
99. On February 5, 2007, Musk sent an email to Hau Thai-Tang (“Thai-Tang”)
stating that Tesla Motors was beginning its CEO search in earnest and asking Thai-Tang his
opinion on using headhunters to find a CEO. A true and correct copy of this email is attached
hereto as Exhibit “61”.
100. On June 13, 2007, Musk wrote me an email stating that “he would be happy to
correct the perception that I was fired from Tesla.” He states that “the objective fact is that I
brought up the idea of searching for a new CEO months prior to my resignation as CEO.” A
true and correct copy of this email is attached hereto as Exhibit “62”.
101. On August 12, 2007, during a Special Board Meeting via teleconference, I
resigned as CEO of Tesla Motors and I accepted the position of President of Technology of
Tesla Motors. A true and correct copy of the minutes of this meeting, taken by Harding, and
the email sent to me by Harding with his minutes attached are attached hereto as Exhibit “63”.
VI. The Production of Roadster Nos. 1 and 2
102. On January 17, 2007, I received a letter and certificate for my reservation of car
number 2. Musk and I signed the certificate. A true and correct copy of this letter and
certificate is attached hereto as Exhibit “64”.
103. Musk and IJ decided ourselves who would get car number | and car number 2.
On July 6, 2007, Musk and I sent emails to each other concerning who would be car number
one and car number two. After some discussion, Musk agreed that I could have the first car.
As a token of my appreciation for his financial contributions to the company, I then said that he
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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could have the first car.” A true and correct copy of this email thread is attached hereto as
Exhibit “65”.
VII. Musk Intentionally Defamed Me
104. On or around January 12, 2008, Musk and Ze’ev Drori (“Drori”), then CEO of
Tesla Motors, sent an. email to employees, customers, and investors of Tesla Motors whereby
he claimed that the recent changes at Tesla Motors were made to create a culture of
accountability. Musk and Drori further stated that, “a lack of such accountability leads to
missed deadlines and continuous delays. This accountability starts at the top and permeates
throughout the entire organization. As such we have made some changes at every level.” I
received a copy of this email because I was an owner of a car at that time. A true and correct
copy of this email is hereto attached as Exhibit “60”.
105. On or about June, 2008, I was banned from accessing and posting on “owner’s
forum” of the Tesla Motors Club website, www.teslamotorsclub.com,. a service that is
available to all Roadster owners. J was reinstated by the company on or about June 23, 2008.
106. On March 29, 2005, Musk sent Straubel and me an email stating that he
originally came to California to do a Ph.D. at Stanford. Musk elaborated further that he did not
care about the degree but had no money for a lab and no legal right to stay in the United States,
so the program seemed a safe bet for him.”? A true and correct copy of this email is attached
hereto as Exhibit “66”.
107. On June 4, 2009, and after I filed this action, I was asked to bring my car for a
power train upgrade which I was promised on the date I first received my car on July 19, 2008.
I brought the car for an upgrade the next day, June 5, 2009, and I was told that about half of the
cars that needed an upgrade had already went through it, although I was the person to receive
the second produced Roadster.
*2 In ITB, Musk incorrectly asserts that the reason he received the first Roadster was because
the BoD established that the cars would be delivered in the same order of payment made. The
wiring of payments for Roadster by Musk and me happened well after our discussion on who
shall get the first produced Roadster. [See, PE 128.]
33 Tn contrast to this statement, in ITB and various other occasions, Musk stated that he was
interested to join a PhD program at Stanford University as a result of his longstanding interest
in electric cars.
DECLARATION OF PLAINTIFF MARTIN. EBERHARD IN. SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO.STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
° STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION ,
~24-Page 25 @ UG:UL FUnp S| yazssuey any
I declare under penalty of perjury under the Jaws of the State of Califomia that the
foregoing is true and correct. Executed this 15th day of July 2009 at Ingolstadt, Germany.
fed,
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DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF'S OPPOSITION TO
DEFENDANTS’ SPECLAL MOTION TO STRIKE PORTIONS OF PLAINTIFF'S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
LBLECELGL PI
ZLEaad 8 WELIATY TELOZELETOL xXVA 2O:2T 8003/9T/L0
APPENDIX C: THE LOTUS ELISE AS A BASIS FOR THE TESLA ROADSTER
ROAD AND TRACK TEST RESULTS
NOTES
APPENDIX D: NOTES FOR THE AC-150 GEN 2 ELECTRIC PROPULSION SYSTEM
APPENDIX E: HYDROGEN FUEL CELL ARTICLES
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woececonosecooseeesoooes
Yes, it’s electric. No, it is not a dream waiting for battery or drivetrain technology to be developed, or for some
new fuel/power distribution infrastructure to be deployed. It uses commodity lithium-ion batteries that are
already manufactured in the millions per year.
You can drive one today. An impressive proof-of-concept car has been built to demonstrate the performance of
this battery and drivetrain technology. The Tesla Roadster will be a production sportscar based on this prototype.
Using outsourced design and manufacturing, the company will break even selling about 300 cars per year.
Why a sportscar?
Every electric car so far has been designed and marketed as a commuter car. Such cars must compete against
high-volume cars made by Honda, Toyota, etc. The problem is that with the low sales volumes of a new car
company, there is no way to compete on price with these giants, regardless of technology.
Happily we don’t need to compete on price; we can compete on outright performance. Electric motors can
produce high power over a very wide (13,500 rpm) range. No gearshift, clutch, or torque converter is needed; the
resulting performance in a well-designed sportscar is astonishing. Customers for such a car are less sensitive to
price, so long as it meets their standards for style, quality, and (especially for an electric car) driving distance.
The Tesla Roadster is a disruptive technology — completely off the usual performance-energy efficiency curve,
offering among the quickest acceleration and the absolute highest energy efficiency at the same time.
: @ACPitzero
Disruptive |)“ “ic ead cue] vest Roadster
| Technology Sa -
xiParsthe ‘Carrera GT
at bili fw iS , P bars SK: Laiviborghini Murcielago
Performance ihe os we Ne j_"« J) [@Dodge Viper SRT-10
reduces mileage - 3 os to me ic
Through pressure from the auto ff
industry, the Zero Emissions
Mandate was repealed in March |
of 2003. Every single car Se 0 a OE el
company immediately cancelled — eo ‘ . Ce a ya *
its EV program. Those : i
customers who leased their
electric cars (e.g. EV1’s) had
their leases terminated and were
forced to return the cars so that
they could be crushed.
Today, the only electric cars
available in the US are
“Neighborhood Electric
Vehicles” — little more than
glorified golf carts.
"i
te
The federal government is now
subsidizing auto makers to
develop hydrogen-powered fuel
cell cars hoping they will be the
long-term solution to pollution " ° oon
and dependence on foreign oil. Crushed EV1’s at GM’s Desert Proving Grounds in Mesa, AZ.
Even the most optimistic — December, 2003
proponents of this technology
admit that it will be at least ten years before the first of these cars is available to the public. There are, however,
very good reasons to believe that hydrogen-based fuel cell cars will never reduce pollution or reduce dependence
on foreign oil.’
Feel Good Cars, www.feelgoodcars.com, may someday produce the
“Zenn,” a tiny commuter car limited to 25 mph and 30 miles range.
GEM, www.gemcars.com, makes a line of “Neighborhood Electric Vehicles” that
resemble golf carts, limited to 25 mph and 30 miles range. GEM is owned by
DaimlerChrysler.
Reva India, www.revaindia.com, recently spun off from California-
based Amerigon to sell the tiny Reva car in India. It is limited to 40
mph and a 50 mile range.
Solectria, www.solectria.com, has stopped producing the modest
electric sedan called the Solectria Force and several other electric
vehicle conversions. Today, the only vehicles they produce are vans
and school busses. Solectria primarily produces components for
electric vehicles.
, Wespeste
THINK, www.think.no, was sold by Ford Motor Company to Nordic
investors in 2003. They continue to sell the tiny THINK City in
Scandinavia. It has a top speed of 55 mph and a range of 50 miles.
ae
cl
ee
ZAP! Cars, www.zapworld.com, markets a variety of electric scooters, bikes,
and neighborhood electric vehicles, most of which it imports from overseas.
All their cars are limited to 25 mph and have very limited ranges.
Zhaocheng Electric, Anhui Province, China, in conjunction with Qirui
Automobile Co. of Shanghai, has announced develépment of a lead-acid
electric “sports car” called the ZC 7050 A. This car has a top speed of 50
mph and a range of 170 miles. It is not clear that this car will go into
production.
Zytek Automotive, the West Midlands, UK (www.zytek.co.uk) is a
company that produces mostly race car components. They produced one
relatively low performance twin-motor Lotus Elise conversion as a
demonstration of their electric car technology and a demonstration of an
electrically-converted Smart car. They appear to have no plans to put
these cars in production, concentrating their electric car efforts instead on
contracts with major car companies (e.g. General Motors’s parallel hybrid
truck) to develop hybrid cars.
Road to profitability
We estimate that the low volume cost of an assembled Tesla Roadster will be $49K, including a guess of $5K for
shipping and taxes, and including a $3K reserve for warranty and insurance (see Major Risk Factors below).
Batteries dominate the cost at $18K per car. However, we should enjoy volume discounts on these commodity
batteries and costs should decline as production grows above 100 cars per year. It will take approximately $23K
to fabricate the rest of the car — chassis, body components, drivetrain, and electronics. These costs are similar to
industry estimates for the small volume Lotus Elise.
With a $79,999 MSRP, our price to the dealers will be $64K, giving us $15K of gross margin. We project
breakeven when we sell 300 cars per year. By 2007, selling 400 cars per year, total revenue will be $27M with a
32% average gross margin, resulting in projected before tax income of $4M. We believe that there might be
significantly higher demand than our sales forecast have projected, but we have chosen conservative sales
numbers for the business model.
We expect to spend a significant portion of our income developing follow-on models of cars, though it is
premature to estimate the costs associated with this development.
In our model, we have made the simplifying assumption that we must pay 100% of the COGS at the beginning
of production and will not receive any sales dollars until 90 days after production has started. In reality, we
expect to have better terms with our suppliers, and have a deposit system for our sales, so we hope cash flow
requirements may be better than projected.
Income Statement Summary
SE
97 805,000
519,649 $7,359,200 $4,746,800 $4,746,800
519,649 7,359 1,776,800 058
823 7,321,089 1,738,985 098,825
2
Major Risks Factors
Although confident that our key assumptions are correct, there are risks for any project. Here are major risks
from the financial perspective that we have identified.
Automotive design costs
We have allocated $8M for design fees based on preliminary conservations with Lotus Engineering. Within a
few weeks from start of contract with Lotus we will have much better cost and time estimates, including COGS
for the Roadster. These numbers may change our future capital requirements or change our gross margins if we
maintain the same sale price point.
Timeline
Based on our preliminary discussions with Lotus Engineering, our two-year timeline appears to be in line with
their 19-month engineering and tooling estimate. However, if we are unable to come to market within two years
for some reason, we will require additional funding or a change in our expense plans. Early in the engagement
with Lotus, we will have more accurate time estimates.
Liability Insurance
We are currently engaged in a process to determine insurance options for the company. There are few small car
companies in existence; therefore a standard insurance model and insurance product does not exist. We may
have to be quite creative on this front, either by finding a way to fit into the existing insurance market or by
partnering with a larger firm (such as our manufacturing partner).
Notes
There is a small debt of $25K to the founders that will éonvert to equity at the Series-A price. It is the intent of _
the principals to participate in Series-A funding.
Additional Funding Rounds
The Tesla Motors business plan includes a total of four rounds of funding. The approximate amounts, dates, and
purpose are as follows:
-Mar. n
31-Dec-04| $8,000,000] Final
000,000} Final & I
-06 000] Product nch
2. \Where a Lotus manufactured part is not essential
to meet (1), use a mass produced part from the
motor industry.
6. The most elegantly effective and traditionally Lotus
solution is the one with the least number of parts,
effectively deployed.
In 2004, we have the opportunity to apply disruptive drivetrain technology to this philosophy: with Li-ion
batteries and the Tesla Motors motor and controller, we can for the first time achieve the highest outright
performance and the highest outright efficiency in the same car. Also, we can reduce the number of parts
dramatically, and improve the handling by lowering the center of mass (most of the drivetrain mass is in the
batteries rather than a gasoline engine: the batteries can be distributed for optimum chassis dynamics.) No doubt
Mr. Chapman would have approved.
The Elise is generally recognized as the
world’s best-handling sportscar, lacking
only the power to accelerate out of turns
(see R&T test results below’). It has an
innovative extruded aluminum alloy,
adhesive-bonded chassis weighing only
70kg, but with extremely high torsional
rigidity and excellent crashworthiness.
An example of the design philosophy
(and design integrity) is the bare alloy
extrusion visible inside the cockpit. In
other cars, this sort of thing is a styling
feature, adding weight and complexity.
In the Elise the chassis extrusion itself
is made a styling feature.
As an example, look at the Elise compared with the Ferrari 360 Modena (representative of the best of
conventional sportscar design). The Ferrari weighs 3370 Ibs; the Elise 1900. To achieve roughly similar
performance on the racetrack (faster on some segments, slower on others — see below), the Ferrari has a very
expensive and complex 3.6-liter V8 producing 395 hp at 8500 rpm; the Elise has a simple 1.8-liter 4-cylinder
engine producing 122 hp at 5600 rpm. And the Ferrari costs about 4 times as much.
The Tesla Roadster will
definitely solve the “lack of
power to accelerate out of
turns” problem, and will even
improve on the Elise
handling due to a lower
centre of mass. If Road and
Track were to re-run the
same test with the Tesla
Roadster, they would find it
to be fastest through every
segment.
The Hairpin of Buttonwillow’s East Loop is made tricky by a left-hand
kink that occurs in the braking zone immediately preceding the
increasing-radius right-hander. Exit speeds are largely influenced by
vehicle power.
‘ ree ae
Click on the image above to see an
enlarged version of the Hairpin Turn.
wre a
Mitsubishi
Chevrolet Ferrari Lancer Porsche Porsche
Map BMW M3 Corvette 360 Lotus Mazda Evolution Boxster 911
Key Coupe Zz06 Modena _ Elise MP3 VII s Turbo
Corner Entry 2 50.4
Speed, mph
Te EET ERE MC SERIE SUS To
jApex'Speed;
FPaknae aM
noe
BRYAN HERINS GOMER -
BMW M3 Chevrolet Ferrari360 ‘Lotus Mazda Mitsubishi Porsche Porsche
Coupe Corvette Modena Elise MPS Lancer BoxsterS 911
I'd like to ZO6 It is quick, The The car Evolution Oncethe Turbo
see it IT don’t feel though it brakes are picksup WII car starts It hasa
have a like I can doesn’t have easy to some This is one to lot of
little more brake as an modulate understeer place to understeer, power and
grip late as I overwhelming before and a little me where it is locked it's a fast
coming off want to amount of turning in. wheelspin. it still feels in that car. There
the corner going into power. The Thefront I would like a mode and I is a lot of
where I the corner. tight tucks in like to see front- can't understeer
can really Itturnsin suspension nicely. a little wheel- balance it through
put some fairly well. gives youa have more ride drivecar.I the way! __ the hairpin
ofthat M Itis a lot of tot of enough and pick up want, and on-
power fun feedback, griptogo damping that power power
down to accelerating faster ifI control. understeer. coming
the off the had more off.
ground. corner. power.
Transition Segment
The Transition Segment requires the driver to
compromise the ideal line in the right-hander to get
the car up properly for the more important left turn.
Click on the image above to see an enlarged version of the
The Transition Segment.
TRANS GEOMENT...
Mitsubishi
Chevrolet Ferrari Lancer Porsche Porsche
Map BMW M3 Corvette 360 Lotus Mazda Evoiution Boxster 911
Key Coupe Z06 Modena Elise MPS VII Ss Turbo
é i ee Boel
; 7 x i ae se siegseeler auth ee
Corner Exit 6 58.5 » . . . 59.8 61.7
Speed) mF mph
BMW M3 Chevrolet Ferrari Lotus Elise Mazda MP3 Mitsubishi Porsche Porsche
Coupe Corvette 360 Icancarry alot Once the car Lancer Boxster S 911
Todrive 206 Modena __ of speed into the foadsdownand Evolution The car Turbo
this car The The car’s corner, but once I I try to build VIE carries Definitely
hard, I steering suspension start to scrub it speed, ithasno The same some a car
have to has a gives you off, I don’thave problem thing that understeer that’s |
accept the positive feedback enough powerto accommodating. helps the on power, loose on
fact it turn-in early and pull It has more grip carto have whichisa entry and
needs to and nice itis more through.
be feedback. reactive to td> turn-in also tendency too much
sideways. The driver makes it when I am understeer
It is suspension input. good for coming off on exit.
almosta has a lot transitioning the
rally style of from one corner.
of driving, movement direction
and feels back to the
soft. next.
Performance
Mitsubishi
Chevrolet Ferrari Lancer Porsche Porsche
BMW M3 Cervette 360 Lotus Mazda Evolution Boxster 911
Coupe 206 Modena Elise MP3 VII s Turbo
PRLS be ST TAAT NOT RSET ao RT PETIA AR RTO EH TCA
TO gOUE MOO zee.. +) ak zoreey. SoOU ee
Get st Tye ih
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= Pe Bee The Te Se ae Ce ab : 3 i bd Perel a BERS 3, ae abe sh aerial: Pe ce ESE, reba tak,
Horsepower 333 bhp @ 405 bhp @ 395 bhp 122 bhp 40 bhp @ 276bhp@ 250bhp@ 415 bhp @
(SAE) 7900 rpm = 6000 rpm 8500 rpm @5600 6000rpm 6500 rpm 6250 rpm 6000 rpm
rpm
” Ae! a | i * ay we i
" . nh i 3 HEFEED
Transmissio 6-sp 6-sp 6-sp manual 5-s 5-sp 5-sp manual 6-sp 6-sp
n manuai manual (progressive manual manual manual manual
are
ialeer
aluminum/ fiberglass
unit steel aluminum /
space frame aluminum .
space
frame
MacPherso MacPherson
f/r n struts, lower A- lower A- lower A- — struts, coil struts, coil n struts, struts, coil
coil arms, arms, coil arms, coil springs, springs, coil springs,
springs, transverse springs, springs, anti-roll anti-roll bar/ springs, anti-roll
anti-roll composite anti-roll bar/ anti-roll bar/ multitink, anti-roll f & bar/
bar/ leaf upper & barf&r trapezoidal- coil springs, r multilink,
multilink, springs, lower A- link, coil anti-roll bar coil springs,
coil anti-roll arms, toe springs, anti-roll bar
springs, barf&r links, coil anti-roll bar
anti-roll springs,
bar anti-roll bar
*European pricing and specifications.
Notes
12,000
—, Low ervoltage has bss avaiabk pow er
200
175
150 .
. etd”
125 Oo a
° ¢
100 , o
75 Fi
50 + at = l= SHAFT POWER kW )
o” jamS—TORQUE W-n)
so-
oH t
0 2,000 4,000 6,000 8,000 10,000
MOTOR RPM
160-
AC-150 efficiency map
sombined moter and inverter
S346¥ input
{12,006 rpm mex}
z
:
a
3g
07, ~ ed
ty < OD fe
NS a 9g S=—Sase
Q t 1 I q | T TL T T d
4000 2600 3000 4000 5000 6000 8000 sooo 10000 11000
Speed, rpm
AC-150 Application Notes 6 AC Propulsion, Inc.Page 99 “Ne
DRIVE SYSTEM APPLICATION NOTES
Gear Reduction
The AC-150 motor is not supplied with a gear reduction unit, although in most applications, one is
required. As an aid in matching the drive system to vehicle requirements, the graph on page 6
shows the maximum available motor torque (and thus power which is the product of speed and
torque) versus motor rpm for the AC-150 system. For a conventional passenger car in the 2500
to 3500 pound range, a direct drive single speed gear reduction unit is usuallly suitable to match
the motor to the drive wheels. A single speed gear unit is lighter and more efficient than a
multispeed transmission. For example, a motor /wheel ratio of 9.6:1 will provide outstanding
acceleration and a top speed above 80 mph. As a general guideline, the continuous motor
running torque should not exceed 1/3 of the maximum available torque. High peak torque is
available for brief periods such as vehicle acceleration or hill climbs. Note that from 0 to about
6000 rpm, accelerator position, motor currents and motor torque are all approximately
proportional. Battery current is approximately proportional to output power, not motor current. So
at low motor speeds, battery current will be low because output power is low, even though the
motor may be running at maximum current and will eventually overheat. Therefore when high
power is required for extended periods, it is better to gear the motor to run at higher rpm.
Propulsion Battery
a. Voltage - 336 VDC nominal is recommended (28 12V batteries for example). This is
the minimum voltage required for compatibility of the integrated charger with a 240
Vrms recharge line. Maximum recharge voltage is 450 VDC. Battery recharge
voltage and current limits are set by charge control commands to the PEU. In drive
mode, PEU begins power limiting as voltage drops below about 270 VDC and goes
to zero power available at 240 VDC.
b. Current- The drive system will require up to 525 amps from the battery at full power
and can return up to 200 amps during regenerative braking.
c. Isolation — For safety and charge system requirements, the propulsion battery must
be isolated from chassis.
c. Although the PEU has an internal fuse for the battery power, it is strongly
recommended that the propulsion battery pack have over-current protection to
protect the batteries and battery pack wiring in the event of an external short circuit.
As a minimum, one fuse rated for at least 400 amps and 500 VDC should be used.
Two fuses (separating the battery pack into 3 sections) is even safer.
Regenerative Braking
This powerful feature greatly increases vehicle efficiency by the conversion of vehicle kinetic
energy to electric energy to charge the battery during braking. An additional benefit is the virtual
elimination of mechanical brake wear. A very simple and elegant control strategy can be used
with the accelerator peda! signal only. Referring to the diagram below, regen. braking begins
when the vehicle is moving and the accel pedal is less than 30% depressed. At approx. 30%, the
motor torque is zero. More than 30% depression commands positive (accelerating) torque and
less than 30% commands negative (decelerating) torque. Regen torque is proportional to
accelerator position, so as the accelerator is lifted, more regen torque is applied. The regen
torque fades away to zero as the vehicle speed decreases to zero. This gives smooth continuous
control with one foot and the mechanical brake is seldom needed. The PEU has an input that
controls the regen torque gain (0 to 5V signal). A dashboard mounted potentiometer may be
used for the driver to set the desired sensitivity of regen braking. An optional PEU input accepts
a brake pedal signal (0 to 5V) which subtracts from the accelerator signal. The PEU has a control
circuit which limits regen brake torque when the battery is too full to absorb regen power so that
the battery does not exceed a preset voltage limit (normally 405V).
AC-150 Application Notes 7 AC Propuision, Inc.Page 100 Cooling Air Considerations
Both PEU and motor are air cooled, each unit having its own variable speed blower. Traction
inverter temperature controls the PEU blower and motor winding temperature controls the motor
blower. The installation should provide outside air for the blower inlets and allow heated exhaust
air to escape the vehicle. Avoid blower ingestion of exhaust air.
Avoid turning the system off if the motor temperature is above 100°C. With the system on, the
motor cooling blower continues to run until temperature drops to <100°C . This will prevent heat
‘soak into the encoder electronics in the motor.
PEU Mounting
Preferred Orientation of the PEU in the vehicle is horizontal as shown on the picture on the
following page. Contactors inside the PEU best withstand shock and vibration in this orientation.
Four vibration isolation mounts are supplied with the system and should be used for supporting
the PEU. The PEU should be located as close as is reasonably possible to the motor to minimize
motor cable length.
AC-150 Application Notes 8 AC Propulsion, Inc. |
a0
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Yosef Peretz (SBN 209288) s at EE i Te WD
Emily Knoles (SBN 241671) N MATEO OGUNTY
Genevieve Guertin (SBN 262479)
PERETZ & ASSOCIATES
22 Battery Street, Suite 202
San Francisco, California 94111
Telephone: (415) 732-3777
Facsimile: (415) 732-3791
Attomeys for Plaintiff MARTIN EBERHARD
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN MATEO
MARTIN EBERHARD, Fi led Bs F OK
Civil Case No. CIV-484400
DECLARATION OF PLAINTIFF
MARTIN EBERHARD IN SUPPORT
VS. OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION
ELON MUSK; TESLA MOTORS, INC.; TO STRIKE PORTIONS OF
Plaintiff,
and DOES 1-20, inclusive, PLAINTIFE’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST
PUBLIC PARTICIPATION
Defendants.
Date: July 29, 2009
Time: 9:00 a.m.
Dep.: 11
Judge: Hon. John L. Grandsaert
I, Martin Eberhard, declare:
1. I am the Plaintiff in this action. I have personal knowledge of the matters set
forth herein and if called upon to testify, I could and would do so competently.
2. This declaration is given in support of the Plaintiff's Opposition to Defendants’
Special Motion to Strike Portions of Plaintiff's Complaint as a Strategic Lawsuit Against
Public Participation (“Motion”).
I. The Formation of the Idea of a Lithium-ion Powered Sport Car
3. I hold a bachelor degree in Computer Engineering from the University of
Illinois at Urbana Champaign, which I completed and obtained in 1982. I hold a Masters
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
~l-
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Degree in Electrical Engineering from the University of Illinois, which I completed in late
1983 and obtained in early 1984.
4. I am a technological entrepreneur by profession. In the 1990s I was one of the
founders of two different technological start-up companies: Network Computing Devices, Inc.
and NuvoMedia, Inc. After the successful sale of NuvoMedia, Inc. to Gemstar/TV Guide in
2000, I took on the role of President of Engineering at Packet Design that I held until 2002.
5. Beginning in January 2002, inspired by ever-rising gas prices and the increasing
threat of global warming, I enlisted my long time business partner Marc Tarpenning
(“Tarpenning”) to join me in searching for an alternative to gasoline-powered cars.
6. We spent approximately 18 months in technical research during which I came to
the conclusion that electric cars were indeed the most efficient, least polluting alternative to
gasoline-powered cars. We then researched the causes for the failure of electric vehicles in the
past and analyzed the benefits and shortcomings of electric cars in comparison to other
alternative-fuel vehicles.
7. As early as November 2002, I contacted Tom Gage, the CEO of AC Propulsion,
Inc. (“ACP”), to discuss alternative-fuel vehicles. ACP is a small drive-systems company that
experimented with alternative-fuel vehicles. ACP produced a very limited number of electric
car roadsters named the Tzero that operated on lead-acid batteries. Only 3 Tzero roadsters
were ever made by ACP, and at that time, I offered to pay the company $100,000 to $120,000
to make me the fourth Tzero, provided that this car would be built and operate on lithium-ion
batteries.
8. ACP suffered from financial difficulties, and after several meetings and
discussions, I agreed to invest a total of $250,000 in the company: about $100,000 to pay for a
Tzero for me, and about $150,000 as an investment in ACP, for which I would receive stocks
in the company. My investment in ACP was designed specifically to fund the development of
a prototype lithium-ion battery pack for a Tzero that ACP owned and for the Tzero that would
be built for me.
9. ACP was never able to build and deliver my Tzero. By December 2002, it
became clear to me that ACP would never produce a significant number of electric vehicles,
and that no other companies seemed poised to do so. J therefore realized that if I ever wanted a
lithium-ion battery operated roadster, I would have to build it myself.
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
-2-
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wo wo PPO HO NH HN HN NH NHN HF HF KF KF OF OP OFS Sl
oN DN UO FF WD NYO K§ DBD COC BH INT Dn BR WO PO KS GS
10. At that same timeframe, the established car companies were in the process of
forcing a modification of the California Air Resources Board’s Zero-Emissions Mandate such
that they would no longer be obliged to sell electric vehicles. Tarpenning and I saw this as an
opportunity to start an electric car company.
11. Instead of focusing on an affordable but lower-quality electric car model, we
decided to focus on the creation of a fully-electric sport car with high performance that would
hopefully serve as a springboard to an affordable and high-quality electric car for every
American. With less constraint on price, we conceived a completely new drivetrain for the
electric car, powered by commodity lithium-ion batteries like those used in consumer
electronics.
I The Founding of Tesla Motors
12. Tarpenning and I originally founded our electric car venture in the beginning of
2003 and funded it ourselves from its inception until April 2004. During this time, neither
Tarpenning nor I had any income from this venture and we devoted our entire time to the
formation and conceptualization of the lithium-ion operated electric car roadster (“Roadster”).
13. I decided to name Tesla Motors after Nikola Tesla — one of the most important
scientists and innovators of the modern age in the area of electrical engineering — during a trip
to Disneyland I took with my wife on January 25, 2003.
14. Tarpenning purchased the domain name “teslamostors.com” on April 23, 2003.
15. Defendant TESLA MOTORS, INC. (“Tesla Motors”) was incorporated on July
1, 2003. A true and correct copy of Tesla Motors’ Certificate of Incorporation is attached
hereto as Exhibit “2”.
16. I served as Tesla Motors’ Chief Executive Officer (“CEO”) from its formation,
and Tarpenning was the President, Vice President of Engineering and Tesla Motors’ Chief
Financial Officer (‘CFO”).. The Board of Directors of Tesla Motors (“BoD”) was formed in
July 2003 and consisted of Tarpenning and me, Laurie Yoler (“Yoler’”), who served on the
board until about 2008, and Bernard Tse, who served on the board until approximately August
| 2006.
17. Tesla Motors was a fully functioning venture from its formation. The company
moved to its first office on Oak Grove Street, Palo Alto in August 2003, and had official phone
and fax numbers, a website, email addresses, formal legal representation that was provided by
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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Mark White (“White”) of White & Lee LLP, and a bank account at City National Bank in Palo
Alto.!
18. Jan Wright (“Wright”) joined Tesla Motors on or about January 20, 2004, and
he left the company in early January 2005. During his tenure at Tesla Motors, Wright was the
Chief Operating Officer (“COO”).
19. In December 2003, Tarpenning and J began searching for venture capitalists to
help fund Tesla Motors and to get the Roadster into production. In conjunction with that
search, J wrote the company’s first business plan that was first published on February 19, 2004
and is entitled Confidential Business Plan Version 1.0 (“BP 1.0’). A true and correct copy of
BP 1.0 is attached hereto as Exhibit “3”.
20. BP 1.0 provided a thorough backdrop for the direction and future of Tesla
Motors, including the following concepts that were later adopted by Tesla Motors as it grew
from a two-person operation to a internationally-recognized car company over the course of
the last 7 years:
a. Plans for product development and specifications for a fully electric roadster
(pages 9 through 11 of the plan);
b. A model that included the manufacturing of the chassis and body of the
Roadster by Lotus Engineering (“Lotus”), with ACP providing technology
for powertrain components, and Tesla Motors assembling the car and
developing the battery components (page 17 of the plan); ”
c. A four-step funding plan labeled as Series A through D funding (page 21 of
the plan); and
’ The operations of Tesla Motors stands in opposite to the allegations made by Defendant
ELON MUSK (“Musk”) in his blog, “In the Beginning” (“ITB”), which was published on June
22, 2009, wherein he asserts that Tesla Motors did not have a formal office when I first met
him and that all I had was essentially a business plan and a unfunded corporation. A true and
correct copy of the ITB is attached as Exhibit 128 to the Declaration of Joshua Katz in Support
of Plaintiff's Opposition to Defendants’ Special Motion to Strike Portions of the Complaint
(“PE 128”).
* In ITB Musk asserts that my business plan was to merely commercialize ACP’s Tzero when
we first met. However, as stated in BP 1.0, my original plan was to create a new electric
commercial vehicle based on my idea to use lithium-ion batteries, drivetrain technology based
on and derived from ACP’s drivetrain technology, and a derivative of the Lotus Elise chassis.
[See PE 128.]
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS?’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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d. Organization consisting of a management team, information technology
team, digital engineering team, vehicle engineering team, manufacturing
team, sales and marketing team, and support team (page 22 of the plan).
21. BP 1.0 states that Tarpenning and I founded Tesla Motors (page 6 of the plan),
and outlined possible future directions, including the possibility of moving down market to
build a four-seat coupe or compact wagon, and eventually low-price alternatives once Tesla
Motors had established enough volume in sales (page 12 of the plan). This direction was based
on my original idea — ultimately adopted by Tesla Motors — to first build a highly desirable
electric car that will open the door to the production of an affordable family car.°
22. After meeting with several prospective venture capitalists — which showed a
genuine interest to invest in Tesla Motors — in the winter of 2003 and spring of 2004, on
March 31, 2004, I wrote an email to Defendant ELON MUSK (“Musk”) informing him that
Tesla Motors was an investor in ACP and funded its research into lithium-ion battery packs for
electric cars. I told Musk that Tarpenning and I were the founders of Tesla Motors, and asked
if he might be interested in investing in the company. I told Musk that Tesla Motors was going
to build high-performance electric cars based on a derivative of the ACP drivetrain and based
ona derivative of the Lotus Elise chassis. Musk responded positively to my email that same
day. A true and correct copy of the email to Musk and his response to that email is attached
hereto as Exhibit “4”.
23. Tesla Motors and Musk quickly reached an agreement upon which Musk would
lead the first group of outside investors in Tesla Motors. The first round of investors also
included Tarpenning and me, two venture capitalist firms from Silicon Valley and some of my
friends and family members.
24. Between 2004 and 2007, I oversaw the growth of Tesla Motors from a team of
two to a company of 280 people with the expertise necessary to run a mass-production car
> In the Declaration of Elon Musk in Support of Defendants’ Special Motion to Strike (“Musk
Declaration”), Musk mistakenly asserts that the model of following the roadster with a lower-
cost family car was a change to our initial program, although this issue is specifically covered
in BP 1.0. Id. at (6.
* In ITB Musk asserts that he requested through ACP to meet me. However, Musk never
contacted me in the five weeks between receiving the February 24, 2004 email from ACP
mentioning my name and the day I wrote Musk on March 31, 2004. [See PE 128.]
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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company, spanning four countries. I had also led the development of the Roadster from its
inception and design through the safety and performance testing that validated the Roadster’s
ability to achieve 0-60 miles per hour in less than four seconds, as well as its break-through of
an almost 250-mile range per charge. During this time J devoted my entire workday time to
Tesla Motors, often spending as much as 60 to 80 hours per week working for the company.
Iu. The Acknowledgment of Tarpenning and I as Tesla Motors’ Founders
25. On April 23, 2004, Tesla Motors closed on an investment round called Series A
Preferred Stock Financing (“Series A”). The Index of Documents for Series A state in two
separate places that I am a Founder of Tesla Motors. Musk is not named as a Founder of Tesla
Motors in this index and Tarpenning, Wright, and J are the only individuals named as Founders
in the Series A documents. A true and correct copy of the cover page and Index of Documents
to Series A is attached hereto as Exhibit “5”.
26. As part of the closing of Series A funding, on April 23, 2004, Musk signed an
agreement entitled Right of First Refusal and Co-Sale Agreement that states in the following
signature pages that I am a Founder of Tesla Motors. Musk is not named as a Founder of Tesla
Motors in this agreement. A true and correct copy of the Right of First Refusal and Co-Sale
Agreement from Series A is attached hereto as Exhibit “6”,
27. Jt was further determined at the closing of Series A that Musk will join the BoD
as the Chairman of the BoD in addition to the previously appointed BoD members, and that I
will maintain the CEO position and Tarpenning the positions of Vice President of Engineering
and CFO.
28. On April 23, 2004, White, as counsel for Tesla Motors, sent an opinion letter in
connection with Series A. In this letter, which was sent to purchasers of Tesla Motors’ stock,
including Musk, White refers to me as a Founder. Musk is not referred to as a Founder of
> Musk asserts in ITB that he “convinced” John B. Straubel (“Straubel”) to join Tesla Motors
soon after he provided funding [in Series A]. This assertion is over-simplified because I was
the one to propose to Musk that Tesla Motors hires Straubel. On May 3 and 4, 2004, Musk and
I discussed the hiring of Straubel as an employee of Tesla Motors via email. Musk told me that
he initially wanted to hire Straubel for a company that he owns, Space Exploration
Technologies - SpaceX (“SpaceX”), but he agreed with me that Straubel would be a better fit at
Tesla Motors instead. A true and correct copy of this email thread is attached hereto as Exhibit
“8”, Straubel was first hired as a salaried Drive-train Engineer on or about May 17, 2004 and
was later promoted by me to the position of Chief Technology Officer (“CTO”).
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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Qa nN TO UN FSF WN FF Oo GO fF ND OH FSF WY NY KK OS
Tesla Motors in this letter. A true and correct copy of this opinion letter is attached hereto as
Exhibit “7”.
29. On February 14, 2005, Tesla Motors closed on an investment round called the |
Series B Preferred Stock Financing (“Series B”). There is one section referring to me as a_
Founder of Tesla Motors in the Index of Documents. Musk is not named as a Founder of Tesla
Motors in this index. A true and correct copy of the cover page and Index of Documents to
Series B is attached hereto as Exhibit “9”.
30. ‘As part of Series B, the Right of First Refusal and Co-sale Agreement from
Series A was amended and restated. Musk signed the Amended and Restated Right of First
Refusal and Co-sale Agreement on February 14, 2005. I am specifically named as a founder in
this agreement and in the following signature pages. Musk is not named as a Founder in this
agreement and Tarpenning and I are the only persons named as Founder in Series B
documents. A true and correct copy of this agreement is attached hereto as Exhibit “10”.
31. On February 14, 2005, Tesla Motors’ counsel, White, prepared an opinion letter
in connection with the Series B agreements that was sent to all the investors, including Musk.
|In this letter, White states that Iam a Founder of Tesla Motors. Musk is not referred to as a
Founder of Tesla Motors in this letter. A true and correct copy of this letter is attached hereto
as Exhibit “11”.
32. Both Series A and Series B were drafted by Musk’s then attorneys and not by
Tesla Motors attorneys, White & Lee LLP.
33. On April 4, 2006, and well after Wright left Tesla Motors, I wrote an email to
Musk, informing him that Wright referred to himself as the founder of Tesla Motors. Musk
responded by email that it was probably time to send Wright a “cease and desist letter” because
Wright may pass as a member of the founding team of Tesla Motors but he is certainly not a
founder of the company. A true and correct copy of this email exchange is attached hereto as
Exhibit “12”.°
34. On May 10, 2006, in anticipation of closing on an investment round to be called
the Series C Preferred Stock Financing (“Series C”), a Second Amended and Restated
° Nonetheless, Musk asserts in ITB that he, Straubel, Tarpenning, Wright and me should be
considered “members of the founding team” of Tesla Motors and he does not acknowledge the
distinction between this term and the founder of the company. [See PE 128.]
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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48, Tesla Motors, from its inception, was based on a business model of
collaboration between ACP, Lotus and Tesla Motors to piece together all the necessary
components for the Roadster. To secure funding for the program, it was necessary to estimate
the cost of producing and manufacturing the Roadsters. As in other volume manufacturing
businesses, the plan had always been to drive down costs as production increased. Tesla
|Motors’ first business plan, BP 1.0, estimated a $49,000 production cost per car, with a
detailed breakdown of specific costs (page 39 of the plan).
49, On April 15, 2004, I wrote Tesla Motors’ Confidential Business Plan version
1.7 CBP 1.7”). BP 1.7 estimated the production cost of the Roadster at $50,740 (page 45 of
plan). A true and correct copy of excerpts from BP 1.7 is hereto attached as exhibit “23.”
-50. Early on, Musk interjected his ideas into the design process of the Roadster.
The initial concept for the Roadster included using the original body materials and chassis of
the Lotus Elise because they were lightweight and had undergone significant mandated tests,
such as impact tests, that will greatly reduce the cost of the Roadster. Musk was insistent on
using carbon-fiber body panels for the Roadster, although I was hesitant to using this material
because of its complexity. Must was so confident in carbon fiber that he wrote me an email
where he stated, “you could make the body panels for at least 500 cars worth per year if you
bought the sort of oven we have at SpaceX! . . . If someone tells you this is hard, they are full
of shit. You can make high quality composites in the oven in your home. Once you’ve made a
few of these things, you realize that there is nothing magical about glue and string [emphasis
added].” A true and correct copy of this email is attached hereto as Exhibit “24”.
51. It turned out that the change to carbon fiber dramatically increased the cost of
the Roadster and was one of the two critical path issues (along with the transmission) that
delayed the production of the car in 2007.
52. As early as 2005, it became apparent that Tesla Motors required an experienced
CFO to handle the complex financial situation involved with running a startup automobile
company. On November 28, 2005, Tarpenning emailed Musk to inform him that Tesla Motors
was close to needing a full-time CFO. Tarpenning told Musk what his ideal CFO candidate
would be and asked Musk for guidance on hiring a CFO at the company. It took the BoD
° Nonetheless, | have never estimated the cost of producing the Roadster at $25,000 as stated
by Musk in ITB.
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION :
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almost two years to find a replacement for Tarpenning and it was only after he resigned his
CFO position, that the BoD replaced Tarpenning with another CFO. A true and correct copy
of this email is attached hereto as Exhibit “25”.
53. The BoD was involved in approving costs from the very beginning. Beginning
after the Series C investment, all Purchase Order (“PO”) requests totaling more that $500,000
required approval by the BoD. For example, on July 24, 2007, Tesla Motors’ General Counsel,
Craig Harding (“Harding”), sent an email to the BoD requesting approval for a PO for over
$500,000 for HVAC controllers required for Roadster production.’° The request originated
from the manufacturing department and Musk approved Harding’s request. A true and correct
copy of Harding’s email and Musk’s response is attached hereto as Exhibit “26”.
34. On July 18, 2006, Musk and I exchanged emails regarding the pricing of the
Roadster. I informed Musk that J was nervous about him telling people that the production
price will be around $85,000 due to impending changes and uncertainty about the Roadster’s
transmission. Tesla Motors was contracting with Magna International (“Magna”), a respected
Transmission manufacturing company, to build a customized transmission for the Roadster.
The value of this contract was approximately $5 million and was approved by the BoD. A true
and correct copy of this email thread is attached hereto as Exhibit “27”.
55. Changes and uncertainty with regard to the transmission were largely due to the
fact that the Roadster required a different transmission than any transmission in production.
Unlike most manual transmissions, an electric vehicle’s transmission requires a parking lock to
prevent the vehicle from rolling. Tesla Motors was also less desirable to established
manufacturing suppliers. Tesla Motors was not in the position to place orders for
transmissions in the volume that is customary in the automotive business and is measured in
the hundred thousands of a single model of transmission for a single customer. Since Tesla
Motors would order only a few hundred transmissions in the first year, and perhaps a few
thousand in the following years, the supplier would make little profit from the relationship, and
'? HVAC (heating, ventilation and air-conditioning) controllers are computerized systems for
climate control.
DECLARATION OF PLAINTIFF MARTIN EBERHARD JN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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would need to recover engineering and tooling costs over a much smaller number of produced
transmissions."
56. Musk understood in 2006 that Tesla Motors was having serious issues getting
the Roadster into production. For example, on October 25, 2006, Musk told me via email that
“as things stood, Tesla Motors will be hard pressed to actually deliver 2007 model year
Roadsters in 2007.” A true and correct copy of this email is attached hereto as Exhibit “28”.
57. Musk was not the only member of the BoD who knew that the Roadsters were
going to be costlier than anticipated. As far back as August 8, 2006, Musk sent an email to
John Woolard of Vantage Point Investments, Marver, and me, where he predicted that
Roadsters with the same options as Signature 100 Collector’s Edition cars would probably cost
more than $100,000. * A true and correct copy of Musk’s email is attached hereto as Exhibit
“29”,
58. On November 27, 2006, I emailed Musk to tell him that “I stay up at night
worrying about simply getting the [Roadster] into production sometime in 2007.” At that time,
however, Musk was focused on the appearance of the dashboard of the Roadster. I told Musk
that I could not worry about a dashboard upgrade when there were more pressing issues. |
specifically stated that the issues included “everything from serious cost problems to supplier
problems (transmission, air conditioning, etc.) to our own design immaturity to Lotus’s
stability.” Musk did not respond to the many serious problems I had outlined; instead, his sole
response was that he just needed to hear that the [dashboard issue] would be addressed after
Start of Production (“SOP”). A true and correct copy of my email and Musk’s response is
attached hereto as Exhibit “30”.
59. On November 28, 2006, Musk forwarded an email to me that he originally sent
to Marver on the subject of costs and pricing. Musk told Marver that he was comfortable with
how Tarpenning and I understood vehicle costs and price derivations. A true and correct copy
of this email is attached hereto as Exhibit “31”.
'! Tn another attempt to re-write history, Musk claims in ITB that I insisted on a two speed
transmission while Straubel and Musk wanted to use a single speed one; Musk forgets to
acknowledge the original plan was to use a single speed transmission as outlined in BP 1.0.
[See, Exhibit “3” and PE 128.]
" This title for the first production of Tesla Roadsters was later replaced by the title in use as
of today, the Founder’s Series.
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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60. To attract investors for the Series D funding round, Tesla Motors revised and
updated its business plan that was ultimately published as BP 4.6. BP 4.6 was many months in
the making and involved the compilation and work of many people on the company. Parts of .
BP 4.6 were authored by various executives in the company with Darrel Siry (“Siry’”), then
Tesla Motors’ Vice President of Global Sales, Marketing and Service serving as the primary
editor and consolidator of this plan. This plan was ultimately approved by me, the BoD and
Musk himself.
61. On December 27, 2006, Siry sent an email to Tesla Motors’ executive team
regarding the creation of BP 4.6 and attached.an outline detailing the point-person or
department at the company would be responsible for which segment in the plan. This outline
demonstrates that I was responsible for the Executive Summary, and Siry and Malcolm Powell
(“Powell”), then Vice President of Vehicle Integration, were responsible for the Tesla Motors’
Roadster section. The outline does not name an individual responsible for the Finance Section,
although I believe that Tarpenning wrote this section, and he did that without my involvement
or my influence to skew the data one way or the other. A true and correct copy of this email
and the attached outline are attached hereto as Exhibit “32”.
62. The BP 4.6 revisions required numerous modifications. On January 2, 2007, for :
example, Powell sent an email to marketing consultant Dottie Hall, Siry, and me to inform us
that he had modified the and first table in the draft business plan. A true and correct copy of
this email is attached hereto as Exhibit “33”.
63. On or about January 12, 2007, Simon Wood (“Wood”), the Director of
Engineering at Lotus, met with Musk on the status of the Roadster program. Musk flew to
Lotus offices in England for this meeting without me and communicated directly with Lotus’
executive team on the Roadster program. At that meeting, Wood gave a PowerPoint
presentation to Musk highlighting Lotus’ concerns regarding the increasing risks for
production delays and cost increases in the program. The presentation slides clearly
demonstrated to Musk that Tesla Motors was behind schedule and was short on the
components needed to move ahead with the production of the Roadster. Wood sent me the
slides for the presentation via email after that meeting. A true and correct copy of the email
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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and the above PowerPoint presentation is attached hereto as Exhibit “34”. The presentation
outlines the following issues regarding the program:
a. At the time of the presentation, Tesla Motors was missing 27% of parts
needed to build validation prototypes (“VPs”) of the Roadster; '*
b. Data suggested that there would be significant production slips, including
delay in SOP;
c. Unless Engineering Change Order (“ECO”) release performance is
improved, this problem would re-occur at subsequent phases of the
project;
d. Lotus was worried about the volume of “concerns” in the system,
specifically 846 at that time, with only 94 concerns closed;’® and
e. The target for eliminating “concerns” suggested by Tesla Motors — was not
achievable.
64. | Musk was not the only member of the BoD who was aware of delays and costs
increases of the Roadster. On January 24, 2007, Musk wrote an email to the BoD in response
to an email from Marver regarding financing of the company. Musk mentioned delays in
delivery and the risk of more such delays. Marver’s email also confirms that BP 4.6 would be
released to investment bankers as part Series D after it was received and approved by the BoD.
A true and correct copy of this email thread is attached hereto as Exhibit “35”.
65. Beginning with the first days of the company and including the years 2006 and
2007, at almost every monthly board meeting that I recall, the BoD was given presentations on
the status of the Roadster and the finances of the company that included the estimate and actual
costs of the Roadster program. These presentations were given by the person in charge of
those issues with Tarpenning or the controller of the company, Josie Co, giving the financial
'3 Musk, however, asserts in ITB that he and the BoD were under the impression that Tesla
Motors’ only significant problem was with the transmission.
'4 VPs are the second generation of prototypes of a car, succeeding the first generation
Engineering Prototypes (“EPs”). VPs are much closer in design to the final production car and
so enable more refined testing and validation of the car.
'S ECO release performance refers to the time it takes to begin part production once the
engineering phase is complete.
'6 Ty this context, concerns are a synonym for problems; “closing a concern” is identical to
“resolving a problem.”
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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presentation and Powel and Tom Colson, then VP Of Manufacturing (“Colson”), giving the
technical presentation. I have never instructed any presenter what to say at the BoD meetings
and I have never instructed any person at the company to hide or conceal any information
about the Roaster program. Furthermore, for each BoD meeting, a Board Meeting Packet was
distributed to all the BoD members; the financial records of the company were often included
in these packets.
66. Tesla Motors sent potential investors preliminary versions of portions of BP 4.6
in order to attract investments. For example, on February 2, 2007, Tarpenning sent an email to
Vipul Tandon at Soros Fund Management with an attachment of Tesla Motors’ preliminary
versions of the executive summary and finance section from the business plan to be used for
Series D funding. A true and correct copy of this email and the attached preliminary summary
and finance section are attached hereto as Exhibit “36”.
67. | Tarpenning’s financial section was based on his best estimate on the costs and
expenses of the Roadster program and ultimately was included in the final version of BP 4.6.
On February 6, 2007, I emailed Marko Maschek of 3i Investments (“Maschek”), my personal
assistant Alina Dini (“Dini”), and Tarpenning to tell them that I would send Maschek a copy of
BP 4.6 as soon as I had BoD approval for such. In this email, I stated that Tarpenning was .
getting the financial section in order for the business plan and that I would send Maschek the
financial numbers soon. A true and correct copy of this email is attached hereto as Exhibit
“37”.
68. The BoD had the final say on the business plan to be used for attracting new
investors to Tesla Motors for Series D and it approved BP 4.6 for that purpose. On February 6,
2007, I wrote Musk an email to ask his advice on having a lawyer review the business plan.
Musk replied that for big investment rounds, legal counsel usually reviews the plan, but any
changes are up to the BoD. A tre and correct copy of this email and Musk’s response is
attached hereto as Exhibit “38”.
69. On February 25, 2007, while Tesla Motors was in the process of revising the
business plan, Musk and I discussed the delays and costs of Tesla Motors’ contract for
transmissions from Magna. A true and correct copy of this email thread is attached hereto as
Exhibit “39”,
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
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70. On March 2, 2007, Musk, fully aware of the costs associated with the Roadster,
wrote me an email asking if Tesla Motors should increase the base price of the Roadster to
$95,000 because he was worried about the profit margins of the sale of the car. A true and
correct copy of this email is attached hereto as Exhibit “40”.
71. On March 15, 2007, I sent Musk an email with a PowerPoint presentation of
Tesla Motors’ Transmission Project. The PowerPoint presentation states that there were cost
and timing risks resulting from problems with the transmission program. A true and correct
copy of this email is attached hereto as Exhibit “41”.
72. On April 20, 2007, Musk wrote an email to Harding to talk about Magna
transmission expenditures and stated that the Magna issue needed to be decided if there would
be a “production slip.” A true and correct copy of this email is attached hereto as Exhibit “42”.
73. On April 21, 2007, Musk wrote me an email asking to meet with a group about
the costs associated with the cells and batteries, by which he acknowledges that these
components make up a significant portion of the cost of a Roadster. This meeting indeed took
place thereafter. A true and correct copy of this email is attached hereto as Exhibit “43”.
74, On April 23, 2007, BoD members Simon Rothman (“Rothman”) and Marver
expressed reluctance in emails to authorize a PO for transmissions from Magna without first
having a cash flow projection. Musk responded that Tesla Motors should move forward and
that delaying the PO would only cause harm. A true and correct copy of this email thread is
attached hereto as Exhibit “44”,
75. On April 24, 2007, Tarpenning sent an email to Musk and Marver with an
attachment of cash flow projections for 2007. Musk replied to Tarpenning’s email by showing
concerns for the rising expenditures. A true and correct copy of this email, Musk’s response,
and the attached cash flow projections spreadsheet document are hereto attached as Exhibit
“45”.
76. On April 25, 2007, Musk wrote an email in which he stated that Tesla Motors
needed another two rounds of funding beyond Series D because Tesla Motors would need
between $70 million to $80 million to make it to March or April of 2008.!? Musk was
responding to Marver, who wrote to the BoD with financial advice. Marver stated in his email
'? This email contrasts Musk allegation in ITB that Series D was the last round of funding
before the Roadster production and profitability.
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
-17-
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NO NO NO NO NO NO NY NY NO KF F FF FF FE FOO Ee OO SS
So XN DBD nH F&F WH NYO KY DT GO SF NI DH A F&F WO NY KY OS
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that he is hopeful Tesla Motors would ship Roadster in October 2007, which serves as an
acknowledgement that the BoD knew well that the shipping target of September 2007 in BP
4.6 was indeed only a target. Marver further cautioned the BoD on potential delivery delays,
feature slip or weak capital markets that could occur. A true and correct copy of this email
thread is attached hereto as Exhibit “46”.
77... Based on the increasing concerns about the cost of production, on the On April
26, 2007, Musk asked me in an email when I thought we should increase the price of the
Roadster because again he was worried about our margins. A true and correct copy of this
email is attached hereto as Exhibit “47”.
78. In this context, on April 27, 2007, Siry proposed a strategy that included a base
price increase of the Roadster from $92,000 to $98,000 in an email sent to Musk and me,
stating. Siry stated that the reason for the increase in price were increase in costs, and
primarily because of the change in the exchange rate of the British Pound. Musk responded
positively via email to Siry’s plan. A true and correct copy of this email and Musk’s response
is attached hereto as Exhibit “48”.
79. Shortly after closing the Series D round, the BoD created six new
subcommittees. These subcommittees had free access to Tesla Motors staff at every level and
free access to Tesla Motors’ financial records. The subcommittees reported progress at every
BoD meeting. The new subcommittees were:
a. The Audit Subcommittee, led by BoD member Steve Westly (“Westly”) and
Musk;
b. The Operations Subcommittee, led by BoD member Antonio Gracias and
Musk;
c. The Tesla Stores Subcommittee, which focused on store designs, and was
led by Kimbal Musk and Yoler;
d. The Government Affairs Subcommittee Committee, led by Westly and
Yoler.
e. The CEO Search Subcommittee, led by Musk, BoD member Ira Ehrenpreis
(“Ehrenpreis”) and me; and
f. The CFO Search Subcommittee, led by Musk, Ehrenpreis and me.
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
-18-
PDF Page 20
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NO NO No No DO NO NO No NO —= —=- — — — —_ —_> — =
ao NY Dn On F&F WY NY KY FT Oo Fe HN DH TO F&F WY NY | OS
80. On May 8, 2007, I received an email from Glyn Owen (“Owen”), the General
Manager of Tesla Motors Ltd., Tesla Motors’ UK subsidiary. Owen informed me of the details
from a meeting between Musk and Lotus, including Owen, Wood, and Lotus CEO Mike
Kimberly, which occurred on May 3, 2007. According to both Owen and Wood, Musk was
aware of the costs and risks highlighted by Lotus. Musk was also made aware of the risk to the
SOP timing and the risk of additional costs for potentially failing to make use of reserved
build-slots as a result of Tesla Motors’ delays. Wood specifically noted in his email that “He
[Musk] understood the risk to SOP timing & appeared to accept the likely risk of additional
cost for resource support & Possible (sic) missed build slots.”!® Nonetheless, as Wood notes,
Musk “greatest concern remains the poor quality of the interior whish (sic) he views as totally
unsuitable for the car.” A true and correct copy of this email and the attached PowerPoint
presentation from Lotus is attached hereto as Exhibit “49”.
81. | After Musk met with Lotus and was made aware of the scheduling slippage, the
SOP was redefined to include only the delivery of a pre-production “durability” car to Musk in
order to allow the company to “claim” that it had started production at that time, but the actual
SOP date for building production Roadsters for customers was pushed up to an uncertain date,
once all of the problems in the the pre-production cars are sorted out. See, Exhibit 49 above.
82. On June 5, 2007, Dini sent the BoD members a board meeting packet for a
board meeting to be held on June 6, 2007. A true and correct copy of this email and the
attached board meeting packet is attached hereto as Exhibit “50”.
83. The packet for the June 6, 2007 board meeting included the following items:
a. Board Meeting Agenda for the meeting on June 6, 2007;
b. Harding’s official minutes from a board meeting held on April 25, 2007;
c. A presentation on the Roadster production status made by Powell; and
d. A presentation from Tarpenning concerning finances of the company.
84. According to Harding’s minutes from the April 25, 2007 board meeting, the
BoD discussed the search for a new CEO and Tarpenning’s discussion about the financial
status of Tesla Motors at that meeting, which were topics that were routinely discussed by the
'8 Tn his blog, ITB, Musk accuses me of causing Tesla Motor to be liable for the $4M penalty
imposed by Lotus for the lost of the production slots wherein he was fully aware that the risk
of losing those slots was imposed by he requests for additional resources. [See, PE 128.]
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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BoD. Similarly, the June 6, 2007 board meeting agenda includes a discussion about the
engagement of the firm Russell Reynolds (“Reynolds”) to find a new CEO, the hiring of a
temporary CFO and the engagement of Reynolds to accomplish this task.
85. During my tenure as the CEO, the same type of board packets, including
financial and manufacturing updates, were given to the BoD members after each board
meeting.
86. On June 19, 2007, I gave a presentation at Tesla Motors and sent everybody at
the company, which I believe included its executive staff and Musk, an email with an
attachment of the slides from my presentation. I highlighted in my presentation that Tesla
Motors had failed to pass another stage, or “gateway”, for our Final Approval with Lotus that
would affect the delay of production of the Roadster. I specified nine reasons for our Final
Approval failure, and I urged everyone at Tesla Motors that “A Lot is at Stake,” including the
lexistence of Tesla Motors, and I included the phrase, “Your jobs and mine.” A true and correct
copy of this email and my attached slides from my presentation on June 19, 2007 are attached
hereto as Exhibit “S1”.
87. On July 16, 2007, Dini sent me the Board packet for a July 18, 2007 board
meeting. A true and correct copy of this email and the attached packet is attached hereto as
Exhibit “52”. The packet included the following documents:
a. A Board Meeting Agenda, which included information about the CFO
search and temporary CFO that was hired Dan Saccani (“Saccani”), as well
as the search for a new CEO;
b. A presentation of Powell on engineering and manufacturing that included an
update on production;
c. Financial reports, predicting a shortage of cash by the end of that year, 2007; |
and
d. Harding’s official minutes from the June 6, 2007 Board meeting with all
directors present.
88. Notably, Powell’s presentation for the July 18, 2007 board meeting projected
production delays of several weeks in the production of the Roadster due to transmission
problems that render the entire production schedule tentative except for the delivery of Musk’s
car.
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF'S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
-20-
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89. Saccani was hired as the temporary CFO soon after Tarpenning resigned as
CFO on June 7, 2007. On July 23, 2007, Saccani sent an email to the Executive Staff with an
attached weekly finance report. A true and correct copy of the email and attached report is
attached hereto as Exhibit “53”.
90. In Saccani’s first presentation to the BoD during the July 18, 2007 meeting, he
presented slides clearly showing the issues of critical path delays, especially the transmission
problems. Saccani’s presentation projected that the PTS, otherwise known as “pass to sale”,
was for delivery of Roadsters in September in 2007.'? However, the delivery schedule of the
-Roadster had already redefined to only include Musk’s Roadster and the delivery of the
Roadster to the customers had been pushed back to a later date. A true and correct copy of the
slides presented by Saccani is attached hereto as Exhibit “54”.
91. On July 31, 2007, Sacanni sent an email to board member Steve Westly
explaining that the first fifty Roadsters. would each cost $110,000 to produce, and that plans
| would be developed to determine means of reducing costs. Westly responded that this news
was better than anticipated and expressed his confidence that costs could be driven down with
higher volumes. A true a correct copy of this email and Westly’s response is attached hereto as
Exhibit “55”.
92. On August 2, 2007, Saccani asked me if he needed board approval to cut a PO
for 227 cars at a cost of $4 million in order to resolve issues with Lotus arising from missing
parts and production slips. The high cost of this PO was due in large part to Tesla Motors’
delay issues that Lotus presented to Musk in January and May of 2007. I told Saccani he
needed BoD approval for this expense. A true and correct copy of this email and my response
is attached hereto as Exhibit “56”.
93. On August 7, 2007, Saccani sent an email with an attached preview of the
finances for the month of May 2007 to Westly, BoD member Ira Ehrenpreis (“Ehrenpreis”),
|’? Musk claims in ITB that I represented to him that Tesla Motors would deliver Roadsters in
September of 2007. However, as demonstrated by his visits with Lotus in January and May of
2007, Musk already knew by the time of Saccani’s first BoD presentation that delivery meant
only Musk’s. vehicle and that the commercial production of Roadsters will be delayed. [See,
PE 128.]
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
-21-
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ony DA A BF Yb NHN KF Ss BD ew WD HW FF WN SF OO
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and me. He told us that he was still in the process of updating the financial plan. A true and
correct copy of this email is attached hereto as Exhibit “57”.
94. On August 16, 2007, Tarpenning sent Colson, Vice President of Vehicle
Integration, Malcolm Smith, and me an email with attached slides for a detailed breakdown of
costs prepared in November 2006. Tarpenning stated that the numbers from the slides were the
numbers used in preparing Plan 4.6 for the Series D fund raising. These numbers and the
slides themselves were presented to the BoD. A true and correct copy of this email and the
attached slides are attached hereto as Exhibit “58”. The BoD was presented with the following
information: a) a detailed breakdown part by part of gaps in production costs versus targeted
costs; b) a statement that the Roadster’s Bill of Material (“BOM”) was still not fully defined;””
c) a statement that the Arena System did not accurately define product costs; and d) logistical
and operational requirements had yet to be defined.
95. Musk led a discussion concerning cash flow and margins during the July 18,
2007 board meetirig. During this same meeting, Powell led a discussion of the Roadster,
including projected production dates. Harding prepared the official Board minutes for the July
| 18, 2007 board meeting and sent them as an attachment to the BoD on July 30, 2007. A true
and correct copy of this email and the attached minutes is attached hereto as Exhibit “59”.
96. The highly open and documented discussions on the costs and delays in the |
| production of the Roadster as demonstrated by the unfiltered disclosures made to the BoD by
| various members of the Tesla Motors’ team and Lotus in May through July 2007 were typical
|to the operation of the company in my tenure as its CEO. As I emphasized before, I never
attempted to conceal any material information from the BoD or unduly influenced any of the
company’s employees to engage in such conduct. I promoted open communications between
the BoD members directly with employees of the company.
97. Timothy Watkins (“Watkins”), a managing partner at Valor Equity Group, a
Tesla investor, was asked in July 2007 to assist the company with supply chain issues relating
to the Roadster upon my request. The scope of Watkins’ services inherently included the
tracking of costs of the components of the Roadster; an issue that needed to be streamlined as
?0 BOM is synonymous with cost of the components used for production.
*] The Arena System was an in-house accounting system used by Tesla Motors to track costs of
production.
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
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the company faced actual production. The assistance of Watkins was provided during my
tenure as the CEO and directly resulted from the transparent and open discussions at the BoD
level on costs and productions issues as demonstrated above.
V. My Separation from Tesla Motors
98. I brought up the idea of searching for a new CEO at a dinner with Musk the
evening before the January 2007 BoD meeting. I did so because the company was becoming
too complex for a CEO of my experience to handle. I wanted Tesla Motors to hire a CEO with
more automotive industry experience to handle day-to-day operations so that I could focus
more on the design aspect of bringing the vision of a commercially viable electric vehicle to
fruition.
99. On February 5, 2007, Musk sent an email to Hau Thai-Tang (“Thai-Tang”)
stating that Tesla Motors was beginning its CEO search in earnest and asking Thai-Tang his
opinion on using headhunters to find a CEO. A true and correct copy of this email is attached
hereto as Exhibit “61”.
100. On June 13, 2007, Musk wrote me an email stating that “he would be happy to
correct the perception that I was fired from Tesla.” He states that “the objective fact is that I
brought up the idea of searching for a new CEO months prior to my resignation as CEO.” A
true and correct copy of this email is attached hereto as Exhibit “62”.
101. On August 12, 2007, during a Special Board Meeting via teleconference, I
resigned as CEO of Tesla Motors and I accepted the position of President of Technology of
Tesla Motors. A true and correct copy of the minutes of this meeting, taken by Harding, and
the email sent to me by Harding with his minutes attached are attached hereto as Exhibit “63”.
VI. The Production of Roadster Nos. 1 and 2
102. On January 17, 2007, I received a letter and certificate for my reservation of car
number 2. Musk and I signed the certificate. A true and correct copy of this letter and
certificate is attached hereto as Exhibit “64”.
103. Musk and IJ decided ourselves who would get car number | and car number 2.
On July 6, 2007, Musk and I sent emails to each other concerning who would be car number
one and car number two. After some discussion, Musk agreed that I could have the first car.
As a token of my appreciation for his financial contributions to the company, I then said that he
DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
-23-
PDF Page 25
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N N dN N No N N N N — —_ — — — _ —_ —_ —_ —
could have the first car.” A true and correct copy of this email thread is attached hereto as
Exhibit “65”.
VII. Musk Intentionally Defamed Me
104. On or around January 12, 2008, Musk and Ze’ev Drori (“Drori”), then CEO of
Tesla Motors, sent an. email to employees, customers, and investors of Tesla Motors whereby
he claimed that the recent changes at Tesla Motors were made to create a culture of
accountability. Musk and Drori further stated that, “a lack of such accountability leads to
missed deadlines and continuous delays. This accountability starts at the top and permeates
throughout the entire organization. As such we have made some changes at every level.” I
received a copy of this email because I was an owner of a car at that time. A true and correct
copy of this email is hereto attached as Exhibit “60”.
105. On or about June, 2008, I was banned from accessing and posting on “owner’s
forum” of the Tesla Motors Club website, www.teslamotorsclub.com,. a service that is
available to all Roadster owners. J was reinstated by the company on or about June 23, 2008.
106. On March 29, 2005, Musk sent Straubel and me an email stating that he
originally came to California to do a Ph.D. at Stanford. Musk elaborated further that he did not
care about the degree but had no money for a lab and no legal right to stay in the United States,
so the program seemed a safe bet for him.”? A true and correct copy of this email is attached
hereto as Exhibit “66”.
107. On June 4, 2009, and after I filed this action, I was asked to bring my car for a
power train upgrade which I was promised on the date I first received my car on July 19, 2008.
I brought the car for an upgrade the next day, June 5, 2009, and I was told that about half of the
cars that needed an upgrade had already went through it, although I was the person to receive
the second produced Roadster.
*2 In ITB, Musk incorrectly asserts that the reason he received the first Roadster was because
the BoD established that the cars would be delivered in the same order of payment made. The
wiring of payments for Roadster by Musk and me happened well after our discussion on who
shall get the first produced Roadster. [See, PE 128.]
33 Tn contrast to this statement, in ITB and various other occasions, Musk stated that he was
interested to join a PhD program at Stanford University as a result of his longstanding interest
in electric cars.
DECLARATION OF PLAINTIFF MARTIN. EBERHARD IN. SUPPORT OF PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ SPECIAL MOTION TO.STRIKE PORTIONS OF PLAINTIFF’S COMPLAINT AS A
° STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION ,
~24-
PDF Page 26
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I declare under penalty of perjury under the Jaws of the State of Califomia that the
foregoing is true and correct. Executed this 15th day of July 2009 at Ingolstadt, Germany.
fed,
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DECLARATION OF PLAINTIFF MARTIN EBERHARD IN SUPPORT OF PLAINTIFF'S OPPOSITION TO
DEFENDANTS’ SPECLAL MOTION TO STRIKE PORTIONS OF PLAINTIFF'S COMPLAINT AS A
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
LBLECELGL PI
ZLEaad 8 WELIATY TELOZELETOL xXVA 2O:2T 8003/9T/L0
600 Py
Confidential Business Plan
Thursday, February 19, 2004
Version 1.0
.
Copy Number: O |
Distributed to:
Date:
845 Oak Grove Avenue, Suite 204
Menlo Park, CA 94025
Tel: (650) 329-1100
Fax: (650) 329-1188
) Email: info@teslamotors.com
Festa Motorsn Proprietary & Confidential
Organization
Management
We will have a small management team of approximately 5 people, including a controller and office assistant.
se,
Information Technology
A small] team of 2 to 3 people is responsible for development of back-end systems. Production machines will be
hosted offsite and website design will be contracted out. These systems support:
Sales & Marketing programs
Dealer and sales inquiries
Support services for our manufacturers
Support services for the dealers
Support services for customers
Data collection from vendors and dealers for failure analysis
a 2 = a a a
Digital Engineering
This group develops in-car electronics and software and consists of 4 engineers. These systems provide:
# Battery control and monitoring
& Dashboard displays and electronics
= Diagnostic devices for service and data logging
Vehicle Engineering
This team of 2 engineers is responsible for:
# Relationship with Lotus Engineering and AC Propulsion
® Roadster automotive and usability design
& Vehicle manufacturability {
Manufacturing
Our manufacturing team is small at 3 people and is responsible for:
e Relationships with contract manufacturers
Contents
page
Important Safety Precautions 3
System Description and Specifications 4
AC-150 Torque, Power & Efficiency Curves 6
Drive System Application Notes 7
Gear Reduction 7
Propulsion Battery 7
Regenerative Braking 7
Cooling Air Considerations 8
PEU Mounting 8
Power Electronics Unit 9
Automatic Battery Contactor Operation 10
Operating Modes 10
Motor 11
Insulated Coupling 12
Mechanical Interface Drawings 13
PEU 13
Motor 14
Motor Coupling Drawing 16
AC-150 Application Notes 2 AC Propulsion, Inc.
PDF Page 96
e IMPORTANT SAFETY PRECAUTIONS
DANGER - VOLTAGES UP TO 450V ARE PRESENT IN
THIS SYSTEM. FAILURE TO OBSERVE SAFE INSTALLATION,
OPERATION AND SERVICE CAN RESULT IN DEATH OR INJURY
AND EQUIPMENT DAMAGE.
This system is to be installed and serviced by qualified technicians only, who are trained in the
safe installation and handling of high voltage and high power devices.
Extra care must be taken when working with dc voltages because of the tendency to continue to
arc once an arc has started. A high power dc source such as a vehicle battery can cause
electrical explosions.
The Power Electronics Unit (PEU) cover is removable. Do not remove cover until battery
connector J3 has been disengaged and enough time has passed to allow internal capacitors to
discharge. An internal discharge circuit normally does this within a few minutes. Always check
that dangerous voltages are not present with a voltmeter before working on equipment. There is
no cover electrical interlock, but there is provision for locking the cover latches.
PEU chassis must be electrically grounded to vehicle chassis via connector J7 before connecting
battery connector J3.
High voltage may be present on PEU J8 and J10 connector contacts.
The propulsion battery (or other de source) must be electrically isolated from vehicle chassis.
In grid connected mode (battery recharge or discharge), the propulsion battery, motor lines, motor
chassis and motor shaft are electrically live with respect to chassis. They are connected to the
utility power lines through the PEU. The vehicle chassis and PEU chassis are connected to
earth ground through the utility power cord. The motor mount and shaft must be insulated from
the vehicle chassis. Insulated motor mounting hardware is included with the motor and drawings
showing a recommended insulated motor coupling are included in this document. Operator or
service personnel must never come in contact with the motor aluminum housing.
Care must be used in matching battery recharge power and voltage to the particular battery being
used. Too high power or voltage can cause battery failure and/or explosive or toxic chemical
generation.
Never allow the voltage applied to the PEU J3 connector to go above 450V (for example by using
external batiery charging apparatus). Doing so may cause. extensive damage to the PEU.
The PEU and motor are not designed to tolerate direct water splash or extreme dirty or dusty
environment. Suitable protection must be provided in the vehicle installation. Do not operate if
PEU or motor are wet.
The AC-150 motor has maximum speed rating of 12,000 rom. The controller has an electronic
speed limit of 12,000 rpm, however it is possible to exceed this speed if the motor is driven
mechanically, such as when down shifting a multi-speed gearbox. Exceeding this motor speed
limit can cause catastrophic failure and loss of control of the vehicle.
Do not connect or operate the system if any cable or insulation is damaged. Recharge cords and
power outlets should meet the normal electrical codes.
AC-150 Application Notes 3 AC Propulsion, Inc.
PDF Page 97
SYSTEM DESCRIPTION & SPECIFICATIONS
Introducing the AC-150 Integrated Electric Drive / Recharge System - a ground-breaking
product that features High Performance, High Efficiency and Unparalleled charging convenience
all in a safe and reliable package.
‘The AC-150 system includes a power electronics unit and an AC-induction traction motor that
combine to provide high performance, high efficiency, and rapid, convenient charging capabilities
for electric and hybrid vehicle applications. These components have been designed from the
ground up as a tightly integrated system to deliver up to 150 kW (200 hp) motor output, yet
maximize vehicle driving range with high efficiency over a broad operating range and
comprehensive energy recovery through regenerative braking. Both power electronics and motor
are forced-air cooled to provide exceptional ease of installation and maintenance while reducing
cost.
The AC-150 embodies patented control and construction techniques that allow the power
electronics and motor windings to be re-configured as a high-rate Reductive™ battery charger.
By using motor drive componenis, the Reductive Charger reduces vehicle cost and weight. By
allowing safe charging from existing 110V to 240V outlets at rates as high as 20 kW, the
Reductive™ Charger reduces infrastructure installation requirements and costs, and its
innovative bi-directional power capability opens a new world of capabilities including self
contained vehicle battery diagnostics, standby or standalone power generation, vehicle to vehicle
(V2V) charge transfer and vehicle to grid power functions (V2G).
Two companion products have been developed to work with the AC-150 drive system. The
Vehicle Management System (VMS) and Batt-Opt battery management system were designed to
integrate important vehicle functions and driver controls. The VMS incorporates charge controls,
data displays for charge parameters, vehicle and battery energy status, and control/display of the
Batt-Opt modules. See page 7 to see how these systems interface.
Features
Advanced. Drive Control Circuitry
* "Glass smooth" torque under all load and speed conditions
+ Natural and transparent driving feel
« Driver adjustable regenerative braking
* Traction control
* Integral power distribution and fusing for battery optimizer, cabin PTC heater and hybrid / fuel cell
APU.
integrated Bidirectional Reductive™ Charger
Charge from any power source between 100 and 250 VAC, 50 or 60 Hz.
Charge rate controllable from 200W up to 20kW (with 240 V line)
Unity power factor, sine wave current draw
GFI outlet compatible
Automatic mode switching (recharge mode activated when charge power is connected)
Controlled battery discharge into power line for battery diagnostics and conditioning with automatic
disconnect if line voltage drops out or changes beyond normal range.
UPS mode for backup power and energy transfer to other electric vehicles.
+e * * *
AC-150 Application Notes 4 AC Propulsion, Inc.
PDF Page 98
Features - continued
Designed-in Safety
x Protection against over-current, over-voltage and over-temperature conditions.
Battery floats with respect to vehicle chassis
Double insulated motor
Zero motor back-EMF when excitation removed
Interlocks prevent accidental operation
e* €F &
Operating Performance
Input Voltage 336-360 V nominal
240 V min, 450 V max
Input Current 580 Adc max (drive)
-200 Adc max (regeneration)
Torque 220 Nm max, 0-5,000 rpm (drive)
115 Nm max (regeneration)
Power 150 kW max, 7,000-8,000 rpm
50 kW continuous at 8,000 rom
(torque and power at 336V DC input)
Efficiency: 91% peak (50 kW, 9000 rpm)
86% road load (8 kW, 8500 rpm)
>93% recharge (240V line, 10 kW)
Power Electronics Unit
Pulse-width-modulated, voltage fed, {GBT inverter with current mode, sine-modulated controls; battery
charging circuitry; auxiliary 13.5V power supply; and interfaces for control pedals and dash instruments.
Environmentally rugged forced air-cooled design.
Dimensions: 186 x 313 x 760 mm (excluding blower)
Total weight: 30 kg (incl blower)
Cooling: Forced-air with pwm speed control
Power connectors: Aircraft-style circular
Control connectors: AMP waterproof automotive
Control inputs: Ground-referenced signals for key switch, accelerator pedal, regenerative sensitivity,
forward, neutral, and reverse; and RS-232 for recharge/discharge control and cabin heat. Optional
CAN bus.
Instrumentation outputs: RS-232 for battery voltage, Inverter, hybrid and accessory currents, inverter
temp, motor temp, motor rpm, motor direction, line voltage, line current, battery isolation, and 12V
bus voltage
Aux Power supply current rating: 100 A @ 13.5 V (up to 30A allocated for cooling blowers)
Motor
Four-pole induction, high frequency design with inverter-controlled magnetic flux.
Dimensions: 245mm dia x 350 mm long (excluding blower and cable)
Total weight: 50 kg (incl blower)
Maximum rpm: 12,000
Insulation: Class H, double-insulated
Cooling: Forced-air with pwm speed control
Sensors: Winding temp, tachometer
AC-150 Application Notes 5 AC Propulsion, Inc.
PDF Page 99
AC-150 ELECTRE PROPULSDN SYSTEM
MAXMUM TORQUE & POW ER vs. RPM
250
ah im} 1 (uF
,
Dataw thVin= 336 Vdc
12,000
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200
175
150 .
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100 , o
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50 + at = l= SHAFT POWER kW )
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25 so-
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0 2,000 4,000 6,000 8,000 10,000
MOTOR RPM
160-
AC-150 efficiency map
sombined moter and inverter
S346¥ input
{12,006 rpm mex}
z
:
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3g
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2 ty < OD fe
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4000 2600 3000 4000 5000 6000 8000 sooo 10000 11000
Speed, rpm
AC-150 Application Notes 6 AC Propulsion, Inc.
PDF Page 100
“Ne
DRIVE SYSTEM APPLICATION NOTES
Gear Reduction
The AC-150 motor is not supplied with a gear reduction unit, although in most applications, one is
required. As an aid in matching the drive system to vehicle requirements, the graph on page 6
shows the maximum available motor torque (and thus power which is the product of speed and
torque) versus motor rpm for the AC-150 system. For a conventional passenger car in the 2500
to 3500 pound range, a direct drive single speed gear reduction unit is usuallly suitable to match
the motor to the drive wheels. A single speed gear unit is lighter and more efficient than a
multispeed transmission. For example, a motor /wheel ratio of 9.6:1 will provide outstanding
acceleration and a top speed above 80 mph. As a general guideline, the continuous motor
running torque should not exceed 1/3 of the maximum available torque. High peak torque is
available for brief periods such as vehicle acceleration or hill climbs. Note that from 0 to about
6000 rpm, accelerator position, motor currents and motor torque are all approximately
proportional. Battery current is approximately proportional to output power, not motor current. So
at low motor speeds, battery current will be low because output power is low, even though the
motor may be running at maximum current and will eventually overheat. Therefore when high
power is required for extended periods, it is better to gear the motor to run at higher rpm.
Propulsion Battery
a. Voltage - 336 VDC nominal is recommended (28 12V batteries for example). This is
the minimum voltage required for compatibility of the integrated charger with a 240
Vrms recharge line. Maximum recharge voltage is 450 VDC. Battery recharge
voltage and current limits are set by charge control commands to the PEU. In drive
mode, PEU begins power limiting as voltage drops below about 270 VDC and goes
to zero power available at 240 VDC.
b. Current- The drive system will require up to 525 amps from the battery at full power
and can return up to 200 amps during regenerative braking.
c. Isolation — For safety and charge system requirements, the propulsion battery must
be isolated from chassis.
c. Although the PEU has an internal fuse for the battery power, it is strongly
recommended that the propulsion battery pack have over-current protection to
protect the batteries and battery pack wiring in the event of an external short circuit.
As a minimum, one fuse rated for at least 400 amps and 500 VDC should be used.
Two fuses (separating the battery pack into 3 sections) is even safer.
Regenerative Braking
This powerful feature greatly increases vehicle efficiency by the conversion of vehicle kinetic
energy to electric energy to charge the battery during braking. An additional benefit is the virtual
elimination of mechanical brake wear. A very simple and elegant control strategy can be used
with the accelerator peda! signal only. Referring to the diagram below, regen. braking begins
when the vehicle is moving and the accel pedal is less than 30% depressed. At approx. 30%, the
motor torque is zero. More than 30% depression commands positive (accelerating) torque and
less than 30% commands negative (decelerating) torque. Regen torque is proportional to
accelerator position, so as the accelerator is lifted, more regen torque is applied. The regen
torque fades away to zero as the vehicle speed decreases to zero. This gives smooth continuous
control with one foot and the mechanical brake is seldom needed. The PEU has an input that
controls the regen torque gain (0 to 5V signal). A dashboard mounted potentiometer may be
used for the driver to set the desired sensitivity of regen braking. An optional PEU input accepts
a brake pedal signal (0 to 5V) which subtracts from the accelerator signal. The PEU has a control
circuit which limits regen brake torque when the battery is too full to absorb regen power so that
the battery does not exceed a preset voltage limit (normally 405V).
AC-150 Application Notes 7 AC Propuision, Inc.
PDF Page 101
Cooling Air Considerations
Both PEU and motor are air cooled, each unit having its own variable speed blower. Traction
inverter temperature controls the PEU blower and motor winding temperature controls the motor
blower. The installation should provide outside air for the blower inlets and allow heated exhaust
air to escape the vehicle. Avoid blower ingestion of exhaust air.
Avoid turning the system off if the motor temperature is above 100°C. With the system on, the
motor cooling blower continues to run until temperature drops to <100°C . This will prevent heat
‘soak into the encoder electronics in the motor.
PEU Mounting
Preferred Orientation of the PEU in the vehicle is horizontal as shown on the picture on the
following page. Contactors inside the PEU best withstand shock and vibration in this orientation.
Four vibration isolation mounts are supplied with the system and should be used for supporting
the PEU. The PEU should be located as close as is reasonably possible to the motor to minimize
motor cable length.
AC-150 Application Notes 8 AC Propulsion, Inc. |
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