Summary
This 8-K filing from Tesla, Inc. on June 30, 2020, details a material definitive agreement entered into by the company with CEO Elon Musk regarding directors' and officers' (D&O) indemnity coverage. Due to disruptions from COVID-19 shelter-in-place orders, Tesla had suspended its annual evaluation of D&O indemnity options. To ensure coverage during this interim period, Tesla entered into a 90-day "Bridge Term" Indemnification Agreement with Mr. Musk. Under this agreement, Mr. Musk will personally provide D&O indemnity coverage to Tesla, up to $100 million, in cases where Tesla's own coverage might not apply. For this interim coverage, Tesla will pay Mr. Musk a one-time fee of $972,361. Tesla is also committed to obtaining a binding market quote for a $100 million D&O liability insurance policy. The company will further compensate Mr. Musk if the market-based premium for this quote, prorated for 90 days and discounted by 50%, exceeds the initial fee.
Key Highlights
- 1Tesla entered into a 90-day interim Indemnification Agreement with CEO Elon Musk.
- 2Mr. Musk will personally provide up to $100 million in D&O indemnity coverage for Tesla during the interim period.
- 3This agreement addresses a temporary gap in D&O coverage caused by COVID-19 related disruptions.
- 4Tesla will pay Mr. Musk a one-time fee of $972,361 for this interim coverage.
- 5Tesla is actively seeking a new D&O liability insurance policy with a $100 million coverage limit.
- 6Tesla may pay an additional amount to Mr. Musk based on the cost of the new market-based insurance policy.