On June 24, 2020, Tesla, Inc. (“Tesla”) entered into an Indemnification Agreement (the “Indemnification Agreement”) with Elon Musk, Tesla’s Chief Executive Officer, for an interim term of 90 days (the “Bridge Term”). During the Bridge Term, Tesla is resuming its annual evaluation of all available options for providing directors’ and officers’ indemnity coverage, which it had suspended during the height of shelter-in-place requirements related to the COVID-19 pandemic. As part of such process, Tesla intends to obtain a binding market quote for a directors’ and officers’ liability insurance policy with an aggregate coverage limit of $100 million (the “Market Quote”), which Tesla will weigh in selecting an indemnity coverage option for a customary term following the end of the Bridge Term.
The Indemnification Agreement provides that Mr. Musk will provide, from his personal funds, directors’ and officers’ indemnity coverage to Tesladuring the Bridge Term in the event such coverage is not indemnifiable by Tesla, up to a total of $100 million. In return, Tesla will pay Mr. Musk a one-time fee of $972,361. Tesla will also exercise reasonable best efforts to obtain the Market Quote, and will pay an additional amount to Mr. Musk to reconcile the one-time fee to be equal to the market-based premium for the Market Quote as prorated for 90 days and further discounted by 50%, if the latter amount is greater. The Indemnification Agreement is also subject to certain terms and conditions that are customary of indemnification agreements with corporate directors and officers
