424B3 1 d14810d424b3.htm 424B3 424B3
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Filed Pursuant to Rule 424(b)(3)
Registration File No.: 333-248930

 

KENSINGTON CAPITAL ACQUISITION CORP.

1400 Old Country Road, Suite 301

Westbury, NY 11590

Dear Kensington Capital Acquisition Corp. Stockholders and QuantumScape Corporation Stockholders:

Kensington Capital Acquisition Corp., a Delaware corporation (“Kensington”), Kensington Merger Sub Corp., a Delaware corporation and a wholly-owned subsidiary of Kensington (“Merger Sub”), and QuantumScape Corporation, a Delaware corporation (“QuantumScape”), have entered into a Business Combination Agreement (as may be amended from time to time, the “Business Combination Agreement”) pursuant to which, among other things, Merger Sub will merge with and into QuantumScape, with QuantumScape surviving the merger and becoming a wholly-owned direct subsidiary of Kensington (collectively with the other transactions described in the Business Combination Agreement, the “Business Combination”). At the closing of the Business Combination (the “Closing”), each outstanding share of QuantumScape Class A common stock, together with each share of QuantumScape preferred stock that is outstanding immediately prior to the Closing and convertible into a share of QuantumScape Class A common stock pursuant to the provisions of QuantumScape’s certificate of incorporation, and each outstanding share of QuantumScape Class B common stock, together with each share of QuantumScape preferred stock that is outstanding immediately prior to the Closing and convertible into a share of QuantumScape Class B common stock pursuant to the provisions of QuantumScape’s certificate of incorporation, will be cancelled and automatically converted into the right to receive a number of shares of Kensington Class A common stock or shares of Kensington Class B common stock, as applicable, determined in each case by reference to an “Exchange Ratio,” calculated in accordance with the Business Combination Agreement. As of the date of the initial signing of the Business Combination Agreement, the Exchange Ratio was 4.0032186234. Kensington will file with the U.S. Securities and Exchange Commission (the “SEC”) a Current Report on Form 8-K announcing the final Exchange Ratio no later than four business days prior to the special meeting of its stockholders described below. See the section entitled “The Business Combination” on page 93 of the attached proxy statement/prospectus/information statement for further information on the consideration being paid to the stockholders of QuantumScape.

From and after the Closing, the Kensington Class A common stock will have one vote per share and the Kensington Class B common stock will have 10 votes per share. As a result of the Business Combination, the current stockholders of Kensington will own shares of Kensington Class A common stock representing approximately 6.10% of the total shares then outstanding in the aggregate and approximately 1.28% of the vote.

Kensington’s units, Class A common stock and warrants are currently listed on The New York Stock Exchange, under the symbols “KCAC.U,” “KCAC,” and “KCAC WS,” respectively. Kensington intends to apply to list shares of Kensington Class A common stock and Kensington warrants on The New York Stock Exchange under the symbols “QS” and “QS.W,” respectively, upon the Closing. At the Closing, each Kensington unit will separate into its components consisting of one share of Kensington Class A common stock and one-half of one redeemable warrant.

Kensington is holding a special meeting of its stockholders in order to obtain the stockholder approvals necessary to consummate the Business Combination. At the Kensington special meeting of stockholders, which will be held on November 25, 2020, at 10:00 a.m., Eastern time, via live webcast at www.virtualshareholdermeeting.com/KCAC2020, unless postponed or adjourned to a later date, Kensington will ask its stockholders to adopt the Business Combination Agreement, thereby approving the Business Combination, and approve the other proposals described in this proxy statement/prospectus/information statement.

In addition, as promptly as practicable after this proxy statement/prospectus/information statement becomes effective, QuantumScape will seek an irrevocable written consent of QuantumScape’s stockholders as required to approve and adopt the Business Combination Agreement, the Business Combination and other proposed transactions contemplated by the Business Combination Agreement (together, the “Proposed Transactions”). Such approval will be sought from and requires the affirmative vote of the holders of at least (a) a majority of the


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outstanding shares of QuantumScape capital stock, (b) a majority of the outstanding shares of QuantumScape Class A common stock and the outstanding shares of QuantumScape Class B common stock, each voting separately as a class, (c) a majority of the outstanding shares of QuantumScape Class A common stock and shares of QuantumScape preferred stock that are convertible into shares of QuantumScape Class A common stock, voting as a single class, and (d) a majority of the outstanding shares of QuantumScape Class B common stock and the outstanding shares of QuantumScape preferred stock that are convertible into shares of QuantumScape Class B common stock, voting together as a single class. No additional approval or vote from any holders of any class or series of stock of QuantumScape will be necessary to adopt and approve the Business Combination Agreement, the Business Combination and the Proposed Transactions.

As described in this proxy statement/prospectus/information statement, certain stockholders of QuantumScape are parties to support agreements with Kensington whereby such stockholders agreed to vote all of their shares of QuantumScape common stock and QuantumScape preferred stock in favor of approving the Business Combination and the Proposed Transactions. These stockholders collectively have a sufficient number of votes to obtain the approvals set forth in the preceding paragraph.

After careful consideration, the respective Kensington and QuantumScape boards of directors have unanimously approved the Business Combination Agreement, the Kensington board of directors has approved the other proposals described in this proxy statement/prospectus/information statement, and each of the Kensington and QuantumScape boards of directors has determined that it is advisable to consummate the Business Combination. The Kensington board of directors recommends that its stockholders vote “FOR” the proposals described in this proxy statement/prospectus/information statement, and the QuantumScape board of directors recommends that its stockholders sign and return to QuantumScape the written consent indicating their approval of the Business Combination Agreement, the Business Combination and the Proposed Transactions.

More information about Kensington, QuantumScape, the Business Combination Agreement, the Business Combination and the Proposed Transactions is contained in this proxy statement/prospectus/information statement. Kensington and QuantumScape urge you to read the accompanying proxy statement/prospectus/information statement, including the financial statements and annexes and other documents referred to herein, carefully and in their entirety. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER THE SECTION ENTITLED “RISK FACTORS” BEGINNING ON PAGE 41 OF THIS PROXY STATEMENT/PROSPECTUS/INFORMATION STATEMENT.

If you have any questions regarding the accompanying proxy statement/prospectus/information statement, you may contact D.F. King & Co., Inc., Kensington’s proxy solicitor, toll-free at (877) 478-5045 or collect at (212) 269-5550 or email at KCAC@dfking.com.

On behalf of our board of directors, I thank you for your support and look forward to the successful consummation of the Business Combination.

 

   Sincerely,
   LOGO
   Justin Mirro
November 12, 2020    Chairman and Chief Executive Officer


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This proxy statement/prospectus/information statement is dated November 12, 2020 and is first being mailed to the stockholders of Kensington on or about that date.

NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS/INFORMATION STATEMENT OR ANY OF THE SECURITIES TO BE ISSUED IN THE BUSINESS COMBINATION, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATION OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS PROXY STATEMENT/PROSPECTUS/INFORMATION STATEMENT. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.


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KENSINGTON CAPITAL ACQUISITION CORP.

1400 Old Country Road, Suite 301

Westbury, NY 11590

NOTICE OF SPECIAL MEETING IN LIEU OF 2020 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON NOVEMBER 25, 2020

To the Stockholders of Kensington Capital Acquisition Corp.:

NOTICE IS HEREBY GIVEN that a special meeting in lieu of the 2020 annual meeting of stockholders (the “special meeting”) of Kensington Capital Acquisition Corp., a Delaware corporation (“Kensington,” “we,” “our” or “us”), will be held on November 25, 2020, at 10:00 a.m., Eastern time, via live webcast at www.virtualshareholdermeeting.com/KCAC2020. You are cordially invited to attend the special meeting for the following purposes:

 

  1.

Proposal No. 1—The “Business Combination Proposal”—to approve and adopt the Business Combination Agreement, dated as of September 2, 2020 (as may be amended from time to time, the “Business Combination Agreement”), by and among Kensington, QuantumScape Corporation, a Delaware corporation (“QuantumScape”), and Kensington Merger Sub Corp., a Delaware corporation (“Merger Sub”), and the transactions contemplated thereby, pursuant to which Merger Sub will merge with and into QuantumScape, with QuantumScape surviving the merger and becoming a wholly-owned direct subsidiary of Kensington (collectively with the other transactions described in the Business Combination Agreement, the “Business Combination”).

 

  2.

Proposal No. 2—The “Authorized Share Charter Proposal”—to approve a proposal to amend Kensington’s amended and restated certificate of incorporation to increase the number of authorized shares of Kensington’s common stock and preferred stock.

 

  3.

Proposal No. 3—The “Director Declassification Charter Proposal”—to approve a proposal to amend Kensington’s amended and restated certificate of incorporation to declassify Kensington’s board of directors.

 

  4.

Proposal No. 4—The “Dual Class Charter Proposal”—to approve a proposal to amend Kensington’s amended and restated certificate of incorporation to implement a dual class stock structure comprised of New QuantumScape Class A Common Stock (as defined below), which will carry one vote per share, and New QuantumScape Class B Common Stock (as defined below), which will carry 10 votes per share.

 

  5.

Proposal No. 5—The “Additional Charter Proposal”—to approve a proposal to amend Kensington’s amended and restated certificate of incorporation to eliminate provisions in the amended and restated certificate of incorporation relating to the Business Combination that will no longer be applicable following the closing of the Business Combination (the “Closing”), change New QuantumScape’s (as defined below) name to “QuantumScape Corporation” and make certain other changes that Kensington’s board of directors deems appropriate for a public operating company (the “Additional Charter Proposal,” together with the Authorized Share Charter Proposal, the Director Declassification Charter Proposal and the Dual Class Charter Proposal, the “Charter Proposals”).

 

  6.

Proposal No. 6—The “Election of Directors Proposal”—to elect, effective at the Closing, nine directors to serve on the New QuantumScape Board (as defined below).

 

  7.

Proposal No. 7—The “Equity Incentive Plan Proposal”—to approve and adopt the equity incentive award plan established to be effective upon the Closing.

 

  8.

Proposal No. 8—The “NYSE Proposal”—to issue New QuantumScape Common Stock (as defined below) to the QuantumScape stockholders in the Merger (as defined below) pursuant to the Business Combination Agreement and to the investors in the PIPE (as defined below).


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  9.

Proposal No. 9—The “Employee Stock Purchase Plan Proposal”—to approve and adopt the employee stock purchase plan established to be effective upon the Closing.

 

  10.

Proposal No. 10—The “Adjournment Proposal”—to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the special meeting, there are not sufficient votes to approve one or more proposals presented to stockholders for a vote.

The Charter Proposals, Election of Directors Proposal, Equity Incentive Plan Proposal, NYSE Proposal and Employee Stock Purchase Plan Proposal are all conditioned on the approval of the Business Combination Proposal. If the Charter Proposals are approved, the Proposed Certificate of Incorporation (as defined below) will be approved and adopted in its entirety. The Adjournment Proposal does not require the approval of the Business Combination Proposal and Business Combination to be effective. It is important for you to note that in the event the Business Combination Proposal is not approved, Kensington will not consummate the Business Combination.

Your attention is directed to the proxy statement/prospectus/information statement accompanying this notice (including the financial statements and annexes attached thereto) for a more complete description of the proposed Business Combination and related transactions and each of our proposals. We encourage you to read this proxy statement/prospectus/information statement carefully. If you have any questions or need assistance voting your shares, please call our proxy solicitor, D.F. King & Co., Inc., toll-free at (877) 478-5045; banks and brokers can call collect at (212) 269-5550 or email at KCAC@dfking.com.

YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES OF KENSINGTON COMMON STOCK YOU OWN. Stockholders are urged to vote their proxies by completing, signing, dating and returning the enclosed proxy card in the accompanying pre-addressed postage paid envelope. You may also submit a proxy by telephone or via the internet by following the instructions printed on your proxy card. If you hold your shares through a brokerage firm, bank or other nominee, you should direct the vote of your shares in accordance with the voting instruction form provided by the broker, bank or nominee.

 

   By Order of the Board of Directors,
  

LOGO

 

Justin Mirro

November 12, 2020    Chairman and Chief Executive Officer


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ABOUT THIS PROXY STATEMENT/PROSPECTUS/INFORMATION STATEMENT

     1  

FREQUENTLY USED TERMS

     2  

QUESTIONS AND ANSWERS ABOUT THE BUSINESS COMBINATION

     7  

SUMMARY OF THE PROXY STATEMENT/PROSPECTUS/INFORMATION STATEMENT

     22  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF QUANTUMSCAPE

     34  

SELECTED HISTORICAL FINANCIAL INFORMATION OF KENSINGTON

     35  

SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     36  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     39  

RISK FACTORS

     41  

Risks Related to QuantumScape

     41  

Risks Related to Kensington

     55  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     73  

THE SPECIAL MEETING OF KENSINGTON STOCKHOLDERS

     86  

The Kensington Special Meeting

     86  

Date, Time and Place of the Special Meeting

     86  

Purpose of the Special Meeting

     86  

Recommendation of the Kensington Board

     87  

Record Date and Voting

     88  

Voting Your Shares

     88  

Who Can Answer Your Questions About Voting Your Shares

     89  

Quorum and Vote Required for the Kensington Proposals

     89  

Abstentions and Broker Non-Votes

     89  

Revocability of Proxies

     90  

Redemption Rights

     90  

Appraisal or Dissenters’ Rights

     91  

Solicitation of Proxies

     91  

Stock Ownership

     92  

PROPOSALS TO BE CONSIDERED BY KENSINGTON’S STOCKHOLDERS: PROPOSAL NO. 1—THE BUSINESS COMBINATION PROPOSAL

     93  

THE BUSINESS COMBINATION

     93  

The Background of the Business Combination

     93  

Certain QuantumScape Projected Financial Information

     99  

Interests of Kensington’s Directors and Officers in the Business Combination

     103  

Interests of QuantumScape’s Directors and Officers in the Business Combination

     104  

Potential Actions to Secure Requisite Stockholder Approvals

     105  

Regulatory Approvals Required for the Business Combination

     106  

Litigation Relating to the Business Combination

     106  

Accounting Treatment of the Business Combination

     106  

THE BUSINESS COMBINATION AGREEMENT

     107  

CERTAIN AGREEMENTS RELATED TO THE BUSINESS COMBINATION

     122  

Stockholder Support Agreements

     122  

Registration Rights and Lock-Up Agreement

     122  

Subscription Agreements

     123  

Senior Employee Lock-Up Agreements

     123  

CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS OF THE REDEMPTION AND THE BUSINESS COMBINATION

     124  

PROPOSAL NO. 2—THE AUTHORIZED SHARE CHARTER PROPOSAL

     131  

PROPOSAL NO. 3—THE DIRECTOR DECLASSIFICATION CHARTER PROPOSAL

     132  

PROPOSAL NO. 4—THE DUAL CLASS CHARTER PROPOSAL

     133  

 

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PROPOSAL NO. 5—THE ADDITIONAL CHARTER PROPOSAL

     135  

PROPOSAL NO. 6—THE ELECTION OF DIRECTORS PROPOSAL

     138  

PROPOSAL NO. 7—THE EQUITY INCENTIVE PLAN PROPOSAL

     139  

PROPOSAL NO. 8—THE NYSE PROPOSAL

     147  

PROPOSAL NO. 9—THE EMPLOYEE STOCK PURCHASE PLAN PROPOSAL

     149  

PROPOSAL NO. 10—THE ADJOURNMENT PROPOSAL

     155  

INFORMATION ABOUT QUANTUMSCAPE

     156  

QUANTUMSCAPE’S EXECUTIVE COMPENSATION

     171  

QUANTUMSCAPE MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     179  

CERTAIN QUANTUMSCAPE RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     192  

INFORMATION ABOUT KENSINGTON

     197  

KENSINGTON MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     211  

CERTAIN KENSINGTON RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     215  

MANAGEMENT AFTER THE BUSINESS COMBINATION

     220  

DESCRIPTION OF KENSINGTON’S SECURITIES

     230  

SHARES ELIGIBLE FOR FUTURE SALE

     249  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     252  

PRICE RANGE OF SECURITIES AND DIVIDENDS

     256  

ADDITIONAL INFORMATION

     257  

WHERE YOU CAN FIND MORE INFORMATION

     259  

INDEX TO FINANCIAL STATEMENTS

     F-1  

QUANTUMSCAPE FINANCIAL STATEMENTS

     F-30  

KENSINGTON FINANCIAL STATEMENTS

     F-64  
ANNEX A: Business Combination Agreement (including Amendment No. 1 thereto)   
ANNEX B: Second Amended and Restated Certificate of Incorporation   
ANNEX C: Form of Amended and Restated Bylaws   
ANNEX D: 2020 Equity Incentive Plan   
ANNEX E: 2020 Employee Stock Purchase Plan   

 

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ABOUT THIS PROXY STATEMENT/PROSPECTUS/INFORMATION STATEMENT

This document, which forms part of a registration statement on Form S-4 filed with the SEC, by Kensington (File No. 333-248930) (the “Registration Statement”), constitutes a prospectus of Kensington under Section 5 of the Securities Act, with respect to the shares of New QuantumScape Class A Common Stock (as defined below) and New QuantumScape Class B Common Stock (as defined below) to be issued if the Business Combination described below is consummated. This document also constitutes a notice of meeting and a proxy statement under Section 14(a) of the Exchange Act with respect to the special meeting of Kensington stockholders at which Kensington stockholders will be asked to consider and vote upon a proposal to approve the Business Combination by the approval and adoption of the Business Combination Agreement, among other matters.


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FREQUENTLY USED TERMS

In this document:

“2010 Plan” means the QuantumScape 2010 Equity Incentive Plan, as amended, supplemented or modified from time to time.

“Adjournment Proposal” means a proposal to adjourn the special meeting of stockholders of Kensington to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the special meeting, there are not sufficient votes to approve one or more proposals presented to stockholders for vote at such special meeting.

“broker non-vote” means the failure of a Kensington stockholder, who holds his or her shares in “street name” through a broker or other nominee, to give voting instructions to such broker or other nominee.

“Business Combination” means the transactions contemplated by the Business Combination Agreement.

“Business Combination Agreement” means the Business Combination Agreement, dated as of September 2, 2020, as may be amended from time to time, among QuantumScape, Kensington and Merger Sub.

“Business Combination Proposal” means the proposal to approve the adoption of the Business Combination Agreement and the Business Combination.

“Closing” means the consummation of the Business Combination.

“Closing Date” means the date on which the Closing occurs.

“Code” means the Internal Revenue Code of 1986, as amended.

“DGCL” means the General Corporation Law of the State of Delaware.

“Employee Stock Purchase Plan Proposal” means the proposal to approve the adoption of the QuantumScape Corporation 2020 Employee Stock Purchase Plan.

“Equity Incentive Plan Proposal” means the proposal to approve the adoption of the QuantumScape Corporation 2020 Equity Incentive Plan.

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.

“Existing Certificate of Incorporation” means Kensington’s current amended and restated certificate of incorporation.

“Extension Period” means any extended time that Kensington has to consummate a business combination beyond 24 months as a result of a stockholder vote to amend Kensington’s amended and restated certificate of incorporation, as then in effect.

“GAAP” means United States generally accepted accounting principles.

“Investment Company Act” means the Investment Company Act of 1940, as amended.

“IPO” means Kensington’s initial public offering of units, consummated on June 30, 2020.

“JOBS Act” means the Jumpstart Our Business Startups Act of 2012, as amended.

 

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“Kensington” means Kensington Capital Acquisition Corp., a Delaware corporation.

“Kensington Board” means the board of directors of Kensington, prior to the Business Combination.

“Kensington Class A Common Stock” means Kensington’s Class A common stock, par value $0.0001 per share, as in effect immediately prior to the Closing.

“Kensington Class B Common Stock” means Kensington’s Class B common stock, par value $0.0001 per share, as in effect immediately prior to the Closing.

“Kensington Common Stock” means the Kensington Class A Common Stock and Kensington Class B Common Stock.

“Kensington Initial Stockholders” means the Sponsor, Kensington’s officers and Kensington’s directors.

“Kensington Unit” means one share of Kensington Class A Common Stock and one-half of one Kensington Warrant.

“Kensington Warrant Agreement” means the Warrant Agreement dated as of June 30, 2020 by and between Kensington and Continental Stock Transfer & Trust Company, governing the Kensington Warrants.

“Kensington Warrants” means the warrants to purchase shares of Kensington Class A Common Stock contemplated by the Kensington Warrant Agreement, with each warrant exercisable for one share of Kensington Class A Common Stock at an exercise price of $11.50.

“Merger” means the merging of Merger Sub with and into QuantumScape with QuantumScape surviving the Merger as a wholly-owned subsidiary of Kensington.

“Merger Sub” means Kensington Merger Sub Corp., a Delaware corporation and wholly-owned direct subsidiary of Kensington.

“Merger Sub Common Stock” means Merger Sub’s common stock, par value $0.01 per share.

“New QuantumScape” means Kensington, immediately upon the Closing.

“New QuantumScape Board” means the board of directors of New QuantumScape, immediately upon the Closing.

“New QuantumScape Class A Common Stock” means Kensington’s Class A common stock, par value $0.0001 per share, as in effect immediately after the Closing.

“New QuantumScape Class B Common Stock” means Kensington’s Class B common stock, par value $0.0001 per share, as in effect immediately after the Closing.

“New QuantumScape Common Stock” means New QuantumScape Class A Common Stock and New QuantumScape Class B Common Stock.

“New QuantumScape Preferred Stock” means New QuantumScape preferred stock, par value $0.0001 per share, as in effect immediately after the Closing.

“NYSE” means The New York Stock Exchange.

“PCAOB” means the Public Company Accounting Oversight Board.

 

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“PCAOB Audited Financials” means the audited consolidated balance sheet of QuantumScape and its consolidated subsidiaries as of December 31, 2018 and December 31, 2019, and the related audited consolidated statements of income and cash flows of QuantumScape and its consolidated subsidiaries for such years, each audited in accordance with the auditing standards of the PCAOB.

“PIPE” means the sale of PIPE Shares to the Subscribers, for a purchase price of $10.00 per share and an aggregate purchase price of $500 million, in a private placement.

“PIPE Shares” means an aggregate of 50,000,000 shares of Kensington Class A Common Stock to be issued to Subscribers in the PIPE.

“Private Warrants” means the warrants to purchase shares of Kensington Class A Common Stock owned by the Sponsor.

“Proposed Bylaws” means the proposed bylaws of New QuantumScape which will be effective upon the Closing.

“Proposed Certificate of Incorporation” means the proposed certificate of incorporation of New QuantumScape which will be effective upon the Closing.

“Proposed Transactions” means the Business Combination and other proposed transactions contemplated by the Business Combination Agreement.

“prospectus” means the prospectus included in the Registration Statement on Form S-4 (Registration No. 333-248930) filed with the SEC.

“Public Shares” means shares of Kensington Class A Common Stock issued as part of the Kensington Units sold in the IPO.

“Public Stockholders” means the holders of shares of Kensington Class A Common Stock.

“Public Warrants” means the warrants included in the Kensington Units sold in the IPO, each of which is exercisable for one share of Kensington Class A Common Stock, in accordance with its terms.

“QuantumScape” means QuantumScape Corporation, a Delaware corporation.

“QuantumScape Board” means the board of directors of QuantumScape, prior to the Business Combination.

“QuantumScape Capital Stock” means QuantumScape Common Stock and QuantumScape Preferred Stock.

“QuantumScape Class A Common Stock” means QuantumScape’s Class A common stock, par value $0.0001 per share.

“QuantumScape Class A Preferred Stock” means Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock.

“QuantumScape Class B Common Stock” means QuantumScape’s Class B common stock, par value $0.0001 per share.

“QuantumScape Class B Preferred Stock” means Series A Preferred Stock, Series B Preferred Stock and Series B-1 Preferred Stock.

 

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“QuantumScape Common Stock” means QuantumScape Class A Common Stock and QuantumScape Class B common stock.

“QuantumScape Options” means all options to purchase outstanding shares of QuantumScape Common Stock, whether or not exercisable and whether or not vested, immediately prior to the Closing under QuantumScape option plans or otherwise, other than the QuantumScape Warrants.

“QuantumScape Preferred Stock” means Series A Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock.

“QuantumScape Restricted Stock” means all outstanding shares of restricted stock granted under QuantumScape option plans or acquired via the early exercise of QuantumScape Options, immediately prior to the Closing.

“QuantumScape RSUs” means all outstanding restricted stock units granted by QuantumScape, immediately prior to the Closing under QuantumScape option plans or otherwise.

“QuantumScape Warrants” means all outstanding and unexercised warrants to purchase shares of QuantumScape Capital Stock.

“SEC” means the U.S. Securities and Exchange Commission.

“Securities Act” means the U.S. Securities Act of 1933, as amended.

“Series A Preferred Stock” means QuantumScape’s Series A preferred stock, par value $0.0001 per share.

“Series B Preferred Stock” means QuantumScape’s Series B preferred stock, par value $0.0001 per share.

“Series B-1 Preferred Stock” means QuantumScape’s Series B-1 preferred stock, par value $0.0001 per share.

“Series C Preferred Stock” means QuantumScape’s Series C preferred stock, par value $0.0001 per share.

“Series D Preferred Stock” means QuantumScape’s Series D preferred stock, par value $0.0001 per share.

“Series E Preferred Stock” means QuantumScape’s Series E preferred stock, par value $0.0001 per share.

“Series F Preferred Stock” means QuantumScape’s Series F preferred stock, par value $0.0001 per share.

“Series F Subscription Amount” means $388 million, which is the aggregate amount of funding and funding commitments received by QuantumScape as of the Closing Date with respect to private sales of its Series F Preferred Stock.

“Sponsor” means Kensington Capital Sponsor LLC, a Delaware limited liability company.

“Sponsor Shares” means the 5,750,000 shares of Kensington Class B Common Stock purchased by the Sponsor in a private placement prior to the IPO, after giving effect to a stock dividend prior to the IPO.

“Stockholder Support Agreements” means, together (i) the Stockholder Support Agreement, dated as of September 2, 2020, by and between Kensington and Volkswagen Group of America Investments, LLC and (ii) the Stockholder Support Agreement, dated as of September 2, 2020, by and among Kensington and certain of QuantumScape’s stockholders.

 

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“Subscribers” means the purchasers of the PIPE Shares.

“Surviving Corporation” means the entity surviving the Merger as a wholly-owned subsidiary of New QuantumScape.

“Trust Account” means the trust account that holds a portion of the proceeds of the IPO and the concurrent sale of the Private Warrants.

 

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QUESTIONS AND ANSWERS ABOUT THE BUSINESS COMBINATION

The following questions and answers briefly address some commonly asked questions about the proposals to be presented at the special meeting of stockholders, including with respect to the proposed Business Combination. The following questions and answers may not include all the information that is important to Kensington stockholders. Stockholders are urged to read carefully this entire proxy statement/prospectus/information statement, including the financial statements and annexes attached hereto and the other documents referred to herein.

Questions and Answers About the Special Meeting of Kensington’s Stockholders and the Related Proposals

 

Q.

Why am I receiving this proxy statement/prospectus/information statement?

 

A.

Kensington has entered into the Business Combination Agreement with QuantumScape and Merger Sub pursuant to which Merger Sub will be merged with and into QuantumScape, with QuantumScape surviving the Merger as a wholly-owned subsidiary of Kensington. A copy of the Business Combination Agreement is attached to this proxy statement/prospectus/information statement as Annex A.

At the Closing, as a result of the Business Combination, (i) each outstanding share of QuantumScape Class A Common Stock and QuantumScape Class A Preferred Stock will be cancelled and automatically converted into the right to receive a number of shares of New QuantumScape Class A Common Stock, and (ii) each outstanding share of QuantumScape Class B Common Stock and QuantumScape Class B Preferred Stock will be cancelled and automatically converted into the right to receive a number of shares of New QuantumScape Class B Common Stock, determined in each case by reference to an “Exchange Ratio,” as calculated in accordance with the Business Combination Agreement. As of the date of the initial signing of the Business Combination Agreement, the Exchange Ratio was 4.0032186234. Kensington will file with the SEC a Current Report on Form 8-K announcing the final Exchange Ratio no later than four business days prior to the special meeting of its stockholders. See the sections entitled “Summary of the proxy statement/prospectus/information statement—Ownership of New QuantumScape After the Closing” and “Unaudited Pro Forma Condensed Combined Financial Information” for further information.

Kensington stockholders are being asked to consider and vote upon the Business Combination Proposal to approve the adoption of the Business Combination Agreement and the Business Combination, among other proposals.

The Kensington Class A Common Stock, Kensington Warrants and Kensington Units are currently listed on the NYSE under the symbols “KCAC,” “KCAC WS” and “KCAC.U,” respectively. At the Closing, as a result of the Business Combination, each outstanding share of Kensington Class B Common Stock will convert into Kensington Class A Common Stock, and all Kensington Class A Common Stock will become New QuantumScape Class A Common Stock. Kensington intends to apply to list shares of New QuantumScape Class A Common Stock on the NYSE under the symbol “QS” in connection with the Closing. All outstanding Kensington Units will be separated into their underlying securities following the Closing. Accordingly, there will be no Kensington Units nor any NYSE listing of Kensington Units following the Closing.

This proxy statement/prospectus/information statement and its annexes contain important information about the proposed Business Combination and the proposals to be acted upon at the special meeting. You should read this proxy statement/prospectus/information statement and its annexes carefully and in their entirety. This document also constitutes a prospectus of Kensington with respect to the Kensington Common Stock issuable in connection with the Business Combination.

 

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Q.

What matters will stockholders consider at the special meeting?

 

A.

At the Kensington special meeting of stockholders, Kensington will ask its stockholders to vote in favor of the following proposals (the “Kensington Proposals”):

 

  1.

Proposal No. 1—The Business Combination Proposal—a proposal to approve and adopt the Business Combination Agreement and the Business Combination.

 

  2.

Proposal No. 2—The Authorized Share Charter Proposal—a proposal to amend the Existing Certificate of Incorporation to increase the number of authorized shares of Kensington Common Stock and Kensington’s preferred stock.

 

  3.

Proposal No. 3—The Director Declassification Charter Proposal—a proposal to amend the Existing Certificate of Incorporation to declassify the Kensington Board.

 

  4.

Proposal No. 4—The Dual Class Charter Proposal—a proposal to amend the Existing Certificate of Incorporation to implement a dual class stock structure comprised of New QuantumScape Class A Common Stock, which will carry one vote per share, and New QuantumScape Class B Common Stock, which will carry 10 votes per share.

 

  5.

Proposal No. 5—The Additional Charter Proposal—a proposal to amend the Existing Certificate of Incorporation to eliminate provisions in the Existing Certificate of Incorporation relating to the Business Combination that will no longer be applicable following the Closing, change New QuantumScape’s name to “QuantumScape Corporation” and make certain other changes that the Kensington Board deems appropriate for a public operating company (the Additional Charter Proposal, together with the Authorized Share Charter Proposal, the Director Declassification Charter Proposal and the Dual Class Charter Proposal, the “Charter Proposals”).

 

  6.

Proposal No. 6—The Election of Directors Proposal—a proposal to elect, effective at the Closing, nine directors to serve on the New QuantumScape Board.

 

  7.

Proposal No. 7—The Equity Incentive Plan Proposal—a proposal to approve and adopt the equity incentive award plan established to be effective upon the Closing.

 

  8.

Proposal No. 8—The NYSE Proposal—a proposal to issue New QuantumScape Common Stock to the QuantumScape stockholders in the Merger pursuant to the Business Combination Agreement and to the investors in the PIPE.

 

  9.

Proposal No. 9—The Employee Stock Purchase Plan Proposal—a proposal to approve and adopt the employee stock purchase plan established to be effective upon the Closing.

 

  10.

Proposal No. 10—The Adjournment Proposal—a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the special meeting, there are not sufficient votes to approve one or more proposals presented to stockholders for vote.

 

Q.

Are any of the proposals conditioned on one another?

 

A.

The Charter Proposals, Election of Directors Proposal, Equity Incentive Plan Proposal, NYSE Proposal and Employee Stock Purchase Plan Proposal are all conditioned on the approval of the Business Combination Proposal. If the Charter Proposals are approved, the Proposed Certificate of Incorporation will be approved and adopted in its entirety. The Adjournment Proposal does not require the approval of the Business Combination Proposal and Business Combination to be effective. It is important for you to note that in the event the Business Combination Proposal is not approved, Kensington will not consummate the Business Combination.

 

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Q.

What will happen upon the Closing?

 

A.

On the Closing Date, Merger Sub will merge into QuantumScape, whereupon Merger Sub will cease to exist and QuantumScape will continue as the Surviving Corporation. In addition, Kensington will change its name from “Kensington Capital Acquisition Corp.” to “QuantumScape Corporation” upon the Closing. The Merger will have the effects specified under Delaware law. As consideration for the Business Combination, each outstanding share of QuantumScape Class A Common Stock and QuantumScape Class A Preferred Stock that is outstanding immediately prior to the Closing and convertible into a share of QuantumScape Class A Common Stock pursuant to the provisions of QuantumScape’s certificate of incorporation, and each outstanding share of QuantumScape Class B Common Stock and QuantumScape Class B Preferred Stock that is outstanding immediately prior to the Closing and convertible into a share of QuantumScape Class B Common Stock pursuant to the provisions of QuantumScape’s certificate of incorporation, will be cancelled and automatically converted into the right to receive a number of shares of New QuantumScape Class A Common Stock or shares of New QuantumScape Class B Common Stock, as applicable, determined in each case by reference to an “Exchange Ratio,” calculated in accordance with the Business Combination Agreement. As of the date of the initial signing of the Business Combination Agreement, the Exchange Ratio was 4.0032186234. Kensington will file with the SEC a Current Report on Form 8-K announcing the final Exchange Ratio no later than four business days prior to the special meeting of its stockholders. In addition, automatically upon the Closing, each share of Kensington Class B Common Stock outstanding will be converted into a share of New QuantumScape Class A Common Stock on a one-for-one basis.

 

Q.

Why is Kensington proposing the Business Combination Proposal?

 

A.

Kensington was organized for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. Kensington is not limited to any particular industry or sector, but intended to focus in the North America automotive and automotive-related sector.

Kensington received $230,000,000 from its IPO (including net proceeds from the exercise in full by the underwriters of their over-allotment option) and sale of the Private Warrants, which was placed into the Trust Account immediately following the IPO. In accordance with the Existing Certificate of Incorporation, the funds held in the Trust Account will be released upon the Closing. See the question entitled “What happens to the funds held in the Trust Account upon the Closing?

There currently are 28,750,000 shares of Kensington Common Stock outstanding, consisting of 23,000,000 Public Shares and 5,750,000 Sponsor Shares. In addition, there currently are 18,075,000 Kensington Warrants outstanding, consisting of 11,500,000 Public Warrants and 6,575,000 Private Warrants. Each whole Kensington Warrant entitles the holder thereof to purchase one share of Kensington Class A Common Stock at a price of $11.50 per share. The Kensington Warrants will become exercisable 30 days after the Closing, and expire at 5:00 p.m., New York City time, five years after the Closing or earlier upon redemption or liquidation. The Private Warrants, however, are non-redeemable so long as they are held by the Sponsor or its permitted transferees (except as described in the section entitled “Description of Kensington’s Securities—Kensington Warrants— Redemption of Kensington Warrants when the price per share of Kensington Class A Common Stock equals or exceeds $10.00”).

Under the Existing Certificate of Incorporation, Kensington must generally provide the holders of Public Shares with the opportunity to have their Public Shares redeemed upon the consummation of Kensington’s initial business combination in conjunction with a stockholder vote.

 

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Q.

Who is QuantumScape?

 

A.

QuantumScape is developing next generation battery technology for electric vehicles (“EVs”) and other applications. It believes that its technology will enable a new category of battery that meets the requirements for broader market adoption. The lithium-metal solid-state battery technology that QuantumScape is developing is being designed to offer greater energy density, longer life, faster charging, and greater safety when compared to today’s conventional lithium-ion batteries.

QuantumScape is a development stage company with no revenue to date that has incurred a net loss of approximately $51.3 million for the year ended December 31, 2019 and an accumulated deficit of approximately $295.9 million from its inception through the year ended December 31, 2019.

QuantumScape was incorporated in Delaware in 2010. The mailing address of QuantumScape’s principal executive office is 1730 Technology Dr., San Jose, CA 95110, and its telephone number is (408) 452-2000.

 

Q.

What equity stake will current Kensington stockholders and QuantumScape stockholders have in New QuantumScape after the Closing, assuming no redemption?

 

A.

It is anticipated that, upon the Closing, there will be approximately 219,276,744 shares of New QuantumScape Class A Common Stock and 157,511,978 shares of New QuantumScape Class B Common Stock outstanding, and the ownership of New QuantumScape will be as follows:

 

   

current holders of QuantumScape Class A Common Stock and QuantumScape Class A Preferred Stock will own 140,526,744 shares of New QuantumScape Class A Common Stock, representing approximately 37.30% of the total shares then outstanding in the aggregate and approximately 7.83% of the vote (upon exercise of QuantumScape’s options or other equity-based awards, current holders of QuantumScape Class A Common Stock and QuantumScape Class A Preferred Stock will own 201,169,095 shares of New QuantumScape Class A Common Stock, which will represent approximately 44.95% of the total shares then outstanding in the aggregate and approximately 10.28% of the vote);

 

   

current holders of QuantumScape Class B Common Stock and QuantumScape Class B Preferred Stock will own 157,511,978 shares of New QuantumScape Class B Common Stock, representing approximately 41.80% of the total shares then outstanding in the aggregate and approximately 87.78% of the vote (upon exercise of QuantumScape’s options or other equity-based awards, current holders of QuantumScape Class B Common Stock and QuantumScape Class B Preferred Stock will own 167,630,840 shares of New QuantumScape Class B Common Stock, which will represent approximately 37.46% of the total shares then outstanding in the aggregate and approximately 85.69% of the vote);

 

   

current holders of QuantumScape Common Stock and QuantumScape Preferred Stock will own 298,038,722 shares of New QuantumScape Common Stock, representing approximately 79.10% of the total shares then outstanding in the aggregate and approximately 95.61% of the vote;

 

   

Volkswagen will own 67,921,684 shares of New QuantumScape Class A Common Stock, representing approximately 30.98% of the total shares of New QuantumScape Class A Common Stock then outstanding and 17,897,585 shares of New QuantumScape Class B Common Stock, representing 11.36% of the total shares of New QuantumScape Class B Common Stock then outstanding. In the aggregate, Volkswagen will own 85,819,269 shares of New QuantumScape Common Stock, representing approximately 22.78% of the total shares then outstanding in the aggregate and approximately 13.76% of the vote;

 

   

the PIPE investors will own 50,000,000 shares of New QuantumScape Class A Common Stock, representing approximately 13.27% of the total shares then outstanding in the aggregate and approximately 2.79% of the vote;

 

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the Public Stockholders will own 23,000,000 shares of New QuantumScape Class A Common Stock, representing approximately 6.10% of the total shares then outstanding in the aggregate and approximately 1.28% of the vote (upon exercise of QuantumScape’s options or other equity-based awards, restricted stock units and warrants, Public Stockholders will own 23,000,000 shares of New QuantumScape Class A Common Stock, which will represent approximately 5.14% of the total shares then outstanding in the aggregate and approximately 1.18% of the vote); and

 

   

the holder of Sponsor Shares will own 5,750,000 shares of New QuantumScape Class A Common Stock, representing approximately 1.53% of the total shares then outstanding in the aggregate and approximately 0.32% of the vote.

The numbers of shares and percentage interests set forth above are based on a number of assumptions, including that (i) none of the Public Stockholders exercise their redemption rights, (ii) QuantumScape does not issue any additional equity securities prior to the Merger, other than the issuance of 14,684,843 shares of Series F Preferred Stock pursuant to certain Series F Stock Purchase Agreements by and between QuantumScape and the investors thereto, and that no other event occurs that would change the Exchange Ratio from what it would have been as of the date of the initial signing of the Business Combination Agreement and (iii) there are no future exercises of the Kensington Warrants. If the actual facts differ from these assumptions, the numbers of shares and percentage interests set forth above will be different.

 

Q.

What are the material differences in the rights of securityholders as a result of the dual-class structure?

 

A.

Shares of New QuantumScape Class B Common Stock will have 10 votes per share, while shares of New QuantumScape Class A Common Stock have one vote per share. Although no one holder or group of holders will control more than 30% of the voting power of New QuantumScape’s capital stock, the holders of the QuantumScape Class B Common Stock will control approximately 87.78% of the voting power of New QuantumScape’s capital stock and will collectively be able to control matters submitted to its stockholders for approval, including the election of directors, amendments of its organizational documents and any merger, consolidation, sale of all or substantially all of New QuantumScape’s assets or other major corporate transactions. Even though these holders are not party to any agreement that requires them to vote together, they may have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests.

Additionally, New QuantumScape cannot predict whether its dual class structure will result in a lower or more volatile market price of New QuantumScape Class A Common Stock or in adverse publicity or other adverse consequences. For example, certain index providers have announced restrictions on including companies with multiple-class share structures in certain of their indexes. S&P Dow Jones and FTSE Russell have announced changes to their eligibility criteria for inclusion of shares of public companies on certain indices, including the S&P 500, pursuant to which companies with multiple classes of shares of common stock are excluded.

See the sections entitled “Description of Kensington’s Securities” and “Risk Factors—The dual class structure of New QuantumScape’s Common Stock has the effect of concentrating voting control with the current holders of QuantumScape Class B Common Stock. This will limit or preclude your ability to influence corporate matters, including the outcome of important transactions, including a change in control” and “—New QuantumScape’s dual class structure may depress the trading price of New QuantumScape Class A Common Stock.”

 

Q.

Who will be the officers and directors of Kensington if the Business Combination is consummated?

 

A.

The Business Combination Agreement provides that, immediately following the Closing, the New QuantumScape Board shall consist of Jagdeep Singh as Chairman, one member to be selected by

 

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  Kensington, who will be Justin Mirro, and additional members to be selected by QuantumScape, who are expected to be Prof. Fritz Prinz, Frank Blome, Brad Buss, John Doerr, Prof. Dr. Jürgen Leohold, Dipender Saluja and J.B. Straubel.

Immediately following the Closing, we expect that the following will be the officers of New QuantumScape: Jagdeep Singh, as Chief Executive Officer; Dr. Timothy Holme, as Chief Technology Officer; Dr. Mohit Singh, as Chief Development Officer; Kevin Hettrich, as Chief Financial Officer; Howard Lukens, as Chief Sales Officer; and Michael McCarthy, as Chief Legal Officer and Head of Corporate Development. See the section entitled “Management After the Business Combination.

 

Q.

What conditions must be satisfied to complete the Business Combination?

 

A.

There are a number of closing conditions in the Business Combination Agreement, including that Kensington’s stockholders have approved and adopted the Business Combination Agreement. For a summary of the conditions that must be satisfied or waived prior to the Closing, see the section entitled “The Business Combination Agreement—Conditions to Closing.”

 

Q.

What happens if I sell my shares of Kensington Common Stock before the special meeting of stockholders?

 

A.

The record date for the special meeting of stockholders is earlier than the expected Closing Date. If you transfer your shares of Kensington Common Stock after the record date, but before the special meeting of stockholders, unless the transferee obtains from you a proxy to vote those shares, you will retain your right to vote at the special meeting of stockholders. However, you will not be entitled to receive any shares of New QuantumScape Common Stock following the Closing because only Kensington’s stockholders and QuantumScape’s stockholders on the date of the Closing will be entitled to receive shares of New QuantumScape Common Stock in connection with the Closing.

 

Q.

What vote is required to approve the proposals presented at the special meeting of stockholders?

 

A.

The approval of the Business Combination Proposal and the Charter Proposals require the affirmative vote (in person or by proxy) of the holders of a majority of all outstanding shares of Kensington Common Stock entitled to vote thereon at the special meeting. Accordingly, a Kensington stockholder’s failure to vote by proxy or to vote in person at the special meeting of stockholders, an abstention from voting or a broker non-vote will have the same effect as a vote against these proposals. Our Sponsor, officers, directors and independent directors have agreed to vote any shares of Kensington Common Stock held by them in favor of the Business Combination. Kensington expects that the Sponsor, officers, directors and independent directors (and their permitted transferees) will own at least approximately 20% of the outstanding shares of Kensington Common Stock at the time of any such stockholder vote.

The approval of the Equity Incentive Plan Proposal, NYSE Proposal, Employee Stock Purchase Plan Proposal and Adjournment Proposal require the affirmative vote (in person or by proxy) of the holders of a majority of the shares of Kensington Common Stock that are voted at the special meeting of stockholders. Accordingly, a Kensington stockholder’s failure to vote by proxy or to vote in person at the special meeting of stockholders, an abstention from voting, or a broker non-vote will have no effect on the outcome of any vote on these proposals.

The approval of the election of each director nominee pursuant to the Election of Directors Proposal requires the affirmative vote of the holders of a plurality of the outstanding shares of Kensington Common Stock entitled to vote and actually voted thereon at the special meeting. Accordingly, a Kensington stockholder’s failure to vote by proxy or to vote in person at the special meeting of stockholders, an abstention from voting, or a broker non-vote will have no effect on the outcome of any vote on the Election of Directors Proposal.

 

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The Charter Proposals, Election of Directors Proposal, Equity Incentive Plan Proposal, NYSE Proposal and Employee Stock Purchase Plan Proposal are all conditioned on the approval of the Business Combination Proposal. If the Charter Proposals are approved, the Proposed Certificate of Incorporation will be approved and adopted in its entirety. The Adjournment Proposal does not require the approval of the Business Combination Proposal and Business Combination to be effective. It is important for you to note that in the event the Business Combination Proposal is not approved, Kensington will not consummate the Business Combination.

 

Q.

Have any QuantumScape stockholders entered into agreements with Kensington to vote in favor of the Business Combination?

 

A.

Yes. On September 2, 2020, (i) Kensington and Volkswagen Group of America Investments, LLC (“VGA”) entered into a stockholder support agreement, (the “Volkswagen Support Agreement”), pursuant to which, among other things, VGA agreed to vote its shares of QuantumScape Preferred Stock in favor of the Business Combination Agreement and the Proposed Transactions, and (ii) Kensington and certain QuantumScape stockholders (together with VGA) with a sufficient number of votes to approve the Business Combination and other transactions that require the approval of QuantumScape’s stockholders (the “Key QuantumScape Stockholders”) entered into a stockholder support agreement (the “Key Stockholder Support Agreement”), pursuant to which, among other things, the Key QuantumScape Stockholders agreed, among other things, to vote their shares of QuantumScape Common Stock and QuantumScape Preferred Stock in favor of the Business Combination Agreement and the Proposed Transactions.

As of November 6, 2020, VGA and the Key QuantumScape Stockholders collectively held approximately 57.83% of the QuantumScape Class A Common Stock, 78.16% of the QuantumScape Class B Common Stock and 76.49% of the total QuantumScape Capital Stock vote then outstanding, which represents a sufficient number of votes for QuantumScape’s stockholders to approve the Business Combination.

The numbers of shares and percentage interests set forth above are based on a number of assumptions, including that (i) none of the Public Stockholders exercise their redemption rights, (ii) QuantumScape does not issue any additional equity securities prior to the Merger, other than the issuance of 14,684,843 shares of Series F Preferred Stock pursuant to certain Series F Stock Purchase Agreements by and between QuantumScape and the investors thereto, and that no other event occurs that would change the Exchange Ratio from what it would have been as of the date of the initial signing of the Business Combination Agreement and (iii) there are no future exercises of the Kensington Warrants. If the actual facts differ from these assumptions, the numbers of shares and percentage interests set forth above will be different.

For further information, please see the section entitled “Certain Agreements Related to the Business Combination—Stockholder Support Agreements.”

 

Q.

If the Business Combination Agreement is terminated, will QuantumScape be required to pay a termination fee to Kensington?

Yes. If the Business Combination Agreement is terminated under certain circumstances, QuantumScape will be required to pay Kensington a termination fee in the amount of $82 million. For further information, please see the section entitled “The Business Combination Agreement—Termination.”

 

Q.

May Kensington or Kensington’s directors, officers or advisors, or their affiliates, purchase shares in connection with the Business Combination?

 

A.

In connection with the stockholder vote to approve the proposed Business Combination, the Sponsor and Kensington’s directors, officers, advisors or their affiliates may privately negotiate transactions to purchase shares or warrants or a combination thereof prior to the Closing from stockholders who would have otherwise elected to have their shares redeemed in conjunction with a proxy solicitation pursuant to the proxy rules for a

 

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  per share pro rata portion of the Trust Account without the prior written consent of QuantumScape. None of the Sponsor, directors, officers or advisors, or their respective affiliates, will make any such purchases when they are in possession of any material non-public information not disclosed to the seller of such shares. Such a purchase would include a contractual acknowledgement that such stockholder, although still the record holder of such shares, is no longer the beneficial owner thereof and therefore agrees not to exercise his, her or its redemption rights. In the event that the Sponsor, directors, officers or advisors, or their affiliates, purchase shares in privately negotiated transactions from Public Stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. Any such privately negotiated purchases may be effected at purchase prices that are in excess of the per share pro rata portion of the Trust Account. The purpose of these purchases would be to increase the amount of cash available to Kensington for use in the Business Combination.

 

Q.

How many votes do I have at the special meeting of stockholders?

 

A.

Kensington’s stockholders are entitled to one vote at the special meeting for each share of Kensington Common Stock held of record as of the record date. As of the close of business on the record date, there were 28,750,000 outstanding shares of Kensington Common Stock.

 

Q.

What interests do Kensington’s current officers and directors have in the Business Combination?

 

A.

Kensington’s executive officers and directors may have interests in the Business Combination that are different from, in addition to or in conflict with, yours. These interests include:

 

   

the beneficial ownership of the Sponsor of an aggregate of 5,750,000 Sponsor Shares and 6,575,000 Private Warrants, which shares and warrants would become worthless if Kensington does not complete a business combination within the applicable time period, as the Sponsor has waived any right to redemption with respect to these shares. The Sponsor paid an aggregate of $25,000 for the Sponsor Shares and $6,575,000 for the Private Warrants. Such shares and warrants have an aggregate market value of approximately $81,305,000 and $22,157,750, respectively, based on the closing price of Kensington Class A Common Stock and Public Warrants of $14.14 and $3.37, respectively, on the NYSE on November 11, 2020;

 

   

Justin Mirro, Kensington’s Chief Executive Officer and Chairman is the managing member of the managing member of the Sponsor. Consequently, he may be deemed the beneficial owner of the 5,750,000 Sponsor Shares and 6,575,000 Private Warrants and to have voting and dispositive control over such securities. Mr. Mirro disclaims beneficial ownership of any securities other than to the extent he may have a pecuniary interest therein, directly or indirectly. Each of Kensington’s other officers and directors are non-managing members of the Sponsor;

 

   

the Sponsor has made a loan of $75,000 to Kensington; the Sponsor has informed Kensington that the Sponsor intends to convert the loan into 75,000 warrants on the same terms as the Private Warrants (as contemplated by the warrant agreement pursuant to which the Private Warrants were issued) at the same time the Business Combination is completed and for such warrants to be issued to Justin Mirro, who had advanced such amount to the Sponsor in order for the loan to be made. Such warrants have an aggregate market value of approximately $252,750 based on the closing price of the Public Warrants of $3.37 on the NYSE on November 11, 2020;

 

   

the Sponsor and Kensington’s directors and executive officers and their respective affiliates will not receive reimbursement for any out-of-pocket expenses incurred by them on Kensington’s behalf incident to identifying, investigating and completing a business combination to the extent such expenses exceed the amount not required to be retained in the Trust Account, unless a business combination is consummated. As of October 31, 2020, the Sponsor and Kensington’s directors and executive officers and their respective affiliates had incurred approximately $32,000 of such reimburseable out-of-pocket expenses;

 

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the anticipated continuation of Justin Mirro, Kensington’s Chairman and Chief Executive Officer, as a director of New QuantumScape following the Closing;

 

   

DEHC LLC (“DEHC”), an affiliate of Daniel Huber, Kensington’s Chief Financial Officer and Secretary and Simon Boag, Kensington’s Chief Technology Officer, entered into services agreements with Kensington to provide administrative and other services as may be reasonably requested by Kensington for one year after the Closing in order to assist it in connection with the post-Closing integration of QuantumScape into New QuantumScape. In consideration of the agreements by DEHC and Mr. Boag to provide such services, Kensington agreed to pay each of them $240,000 at the Closing. The foregoing amounts are subject to recoupment by Kensington in the event DEHC or Mr. Boag, as applicable, fails to satisfy its obligations under the agreements; and

 

   

the continued indemnification of current directors and officers of Kensington and the continuation of directors’ and officers’ liability insurance after the Business Combination.

These interests may influence Kensington’s directors in making their recommendation that you vote in favor of the approval of the Business Combination Proposal. You should also read the section entitled “The Business Combination—Interests of Kensington’s Directors and Officers in the Business Combination.”

 

Q.

Did the Kensington Board obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the Business Combination?

 

A.

The Kensington Board did not obtain a third-party valuation or fairness opinion in connection with its determination to approve the Business Combination. The Kensington Board believes that based upon the financial skills and background of its directors, it was qualified to conclude that the Business Combination was fair from a financial perspective to its stockholders. The Kensington Board also determined, without seeking a valuation from a financial advisor, that QuantumScape’s fair market value was at least 80% of Kensington’s net assets, excluding any taxes payable on interest earned. Accordingly, investors will be relying on the judgment of the Kensington Board as described above in valuing QuantumScape’s business and assuming the risk that the Kensington Board may not have properly valued such business.

 

Q.

What factors did the Kensington Board consider in determining whether or not to proceed with the Business Combination?

 

A.

The Kensington Board considered a number of factors pertaining to the Business Combination as generally supporting its decision to enter into the Business Combination Agreement and the transactions contemplated thereby, including, but not limited to: (i) the due diligence conducted by Kensington’s management and the Kensington Board; (ii) QuantumScape’s outlook, financial plan, cash position, absence of indebtedness, customer contracts and capital expenditure plan; (iii) the public trading market valuation of comparable pure-play EV/component companies; (iv) QuantumScape’s management team, which is expected to remain with New QuantumScape to seek to execute the strategic and growth goals of the combined business; (v) other business combination opportunities reasonably available to Kensington; and (vi) the financial and other terms of the Business Combination Agreement and the fact that such terms and conditions are reasonable and were the product of arm’s length negotiations between Kensington and QuantumScape.

The Kensington Board also considered a variety of uncertainties and risks and other potentially negative factors concerning the Business Combination including, but not limited to: (i) QuantumScape’s status as a pre-revenue company, and the risk that it may not be able to execute on its business plan; (ii) macroeconomic uncertainty and the effects it could have on the revenues of the combined business; (iii) the potential that a significant number of Kensington stockholders elect to redeem their shares prior to the Closing and pursuant to Kensington’s existing charter; (iv) the risk that Kensington’s or QuantumScape’s stockholders may fail to provide the respective votes and written consents, respectively, necessary to effect the Business Combination; (v) the fact that the Closing is conditioned on the satisfaction of certain closing conditions that are not within Kensington’s control; (vi) the possibility of litigation challenging the Business

 

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Combination or that an adverse judgment granting permanent injunctive relief could indefinitely enjoin the Closing; (vii) the risks that the potential benefits of the Business Combination may not be fully achieved or may not be achieved within the expected timeframe; (viii) the risk that Kensington did not obtain a third-party valuation or fairness opinion in connection with the Business Combination; (ix) the fact that Kensington stockholders will hold a minority position in New QuantumScape; (x) the interests of the Kensington Board and officers in the Business Combination (see “—Interests of Kensington’s Directors and Officers in the Business Combination”); and (xi) various other risk factors associated with QuantumScape’s business, as described in the section entitled “Risk Factors” appearing elsewhere in this proxy statement/prospectus/information statement.

See the sections entitled “The Business Combination—Kensington’s Board of Directors’ Reasons for the Approval of the Business Combination.”

 

Q.

What happens if the Business Combination Proposal is not approved?

 

A.

If the Business Combination Proposal is not approved, Kensington will look for other opportunities to consummate an initial business combination by June 30, 2022, pursuant to its amended and restated certificate of incorporation, as then in effect. If Kensington does not consummate an initial business combination by such date, Kensington will either amend its amended and restated certificate of incorporation to extend the date by which Kensington must consummate an initial business combination, or Kensington will be required to dissolve and liquidate the Trust Account.

 

Q.

Do I have redemption rights?

 

A.

If you are a holder of Public Shares, you may redeem your Public Shares for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account, calculated as of two business days prior to the Closing, including interest earned on the funds held in the Trust Account and not previously released to Kensington to pay Kensington’s taxes, net of taxes payable, upon the Closing. The per share amount Kensington will distribute to holders who properly redeem their shares will not be reduced by the deferred underwriting commissions Kensington will pay to the underwriters of its IPO if the Business Combination is consummated. Holders of the outstanding Public Warrants do not have redemption rights with respect to such warrants in connection with the Business Combination. The Sponsor and Kensington’s officers and directors have agreed to waive their redemption rights with respect to their Sponsor Shares and any Public Shares that they may have acquired during or after the IPO in connection with the completion of Kensington’s initial business combination. The Sponsor Shares will be excluded from the pro rata calculation used to determine the per share redemption price. For illustrative purposes, based on funds in the Trust Account of $230 million on June 30, 2020, the per share redemption price would have been $10.00. Additionally, Public Shares properly tendered for redemption will only be redeemed if the Business Combination is consummated; otherwise, holders of such shares will only be entitled to a pro rata portion of the Trust Account, including interest (which interest shall be net of taxes payable by Kensington and up to $100,000 of interest to pay dissolution expenses), in connection with the liquidation of the Trust Account.

 

Q.

Is there a limit on the number of shares I may redeem?

 

A.

A Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined in Section 13 of the Exchange Act) will be restricted from redeeming his or her shares with respect to more than an aggregate of 15% of the Public Shares without Kensington’s prior consent. Accordingly, all shares in excess of 15% of the Public Shares owned by a holder will not be redeemed. On the other hand, a Public Stockholder who holds 15% or less of the Public Shares may redeem all of the Public Shares held by him or her for cash.

 

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Q.

Will how I vote affect my ability to exercise redemption rights?

 

A.

No. You may exercise your redemption rights whether you vote your Public Shares for or against the Business Combination Proposal or do not vote your shares. As a result, the Business Combination Proposal can be approved by stockholders who will redeem their Public Shares and no longer remain stockholders, leaving stockholders who choose not to redeem their Public Shares holding shares in a company with a less liquid trading market, fewer stockholders, less cash and the potential inability to meet the listing standards of the NYSE.

 

Q.

How do I exercise my redemption rights?

 

A.

In order to exercise your redemption rights, you must, prior to 4:30 p.m. Eastern time on November 23, 2020 (two business days before the special meeting), (i) submit a written request to Kensington’s transfer agent that Kensington redeem your Public Shares for cash, and (ii) deliver your stock to Kensington’s transfer agent physically or electronically through The Depository Trust Company (“DTC”). The address of Continental Stock Transfer & Trust Company, Kensington’s transfer agent, is listed under the question “Who can help answer my questions?” below. Kensington requests that any requests for redemption include the identity as to the beneficial owner making such request. Electronic delivery of your stock generally will be faster than delivery of physical stock certificates.

A physical stock certificate will not be needed if your stock is delivered to Kensington’s transfer agent electronically. In order to obtain a physical stock certificate, a stockholder’s broker and/or clearing broker, DTC and Kensington’s transfer agent will need to act to facilitate the request. It is Kensington’s understanding that stockholders should generally allot at least one week to obtain physical certificates from the transfer agent. However, because Kensington does not have any control over this process or over the brokers or DTC, it may take significantly longer than one week to obtain a physical stock certificate. If it takes longer than anticipated to obtain a physical certificate, stockholders who wish to redeem their shares may be unable to obtain physical certificates by the deadline for exercising their redemption rights and thus will be unable to redeem their shares.

Any demand for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with Kensington’s consent, until the vote is taken with respect to the Business Combination. If you delivered your shares for redemption to Kensington’s transfer agent and decide within the required timeframe not to exercise your redemption rights, you may request that Kensington’s transfer agent return the shares (physically or electronically). You may make such request by contacting Kensington’s transfer agent at the phone number or address listed under the question “Who can help answer my questions?

 

Q.

What are the U.S. federal income tax consequences of exercising my redemption rights?

 

A.

Kensington stockholders who exercise their redemption rights to receive cash from the Trust Account in exchange for their Public Shares generally will be required to treat the transaction as a sale of such shares and recognize gain or loss upon the redemption in an amount equal to the difference, if any, between the amount of cash received and the tax basis of the shares of Kensington Class A Common Stock redeemed. Such gain or loss should be treated as capital gain or loss if such shares were held as a capital asset on the date of the redemption. A stockholder’s tax basis in his, her or its shares of Kensington Class A Common Stock generally will equal the cost of such shares. A stockholder who purchased Kensington Units will have to allocate the cost between the shares of Kensington Class A Common Stock or Kensington Warrants comprising the Kensington Units based on their relative fair market values at the time of the purchase. See the section entitled “Certain U.S. Federal Income Tax Considerations of the Redemption and the Business Combination” and “Risk Factors—There is uncertainty regarding the federal income tax consequences of the redemption to the holders of Kensington Class A Common Stock.

 

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Q.

If I hold Kensington Warrants, can I exercise redemption rights with respect to my warrants?

 

A.

No. There are no redemption rights with respect to the Kensington Warrants.

 

Q.

Do I have appraisal rights if I object to the proposed Business Combination?

 

A.

No. There are no appraisal rights available to holders of shares of Kensington Common Stock in connection with the Business Combination, except to the extent available under the DGCL.

 

Q.

What happens to the funds held in the Trust Account upon Closing?

 

A.

If the Business Combination is consummated, the funds held in the Trust Account will be released to pay (i) Kensington stockholders who properly exercise their redemption rights and (ii) expenses incurred by QuantumScape and Kensington in connection with the Proposed Transactions, to the extent not otherwise paid prior to the Closing. Any additional funds available for release from the Trust Account will be used for general corporate purposes of Kensington following the Business Combination.

 

Q.

What happens if the Business Combination is not consummated?

 

A.

There are certain circumstances under which the Business Combination Agreement may be terminated. If, as a result of the termination of the Business Combination Agreement or otherwise, the Business Combination is not consummated, Kensington will look for other opportunities to consummate an initial business combination by June 30, 2022, pursuant to its amended and restated certificate of incorporation, as then in effect. If Kensington does not consummate an initial business combination by then, Kensington will either amend its amended and restated certificate of incorporation to extend the date by which Kensington must consummate an initial business combination, or Kensington will be required to dissolve and liquidate the Trust Account. See the section entitled “The Business Combination Agreement—Termination” for information regarding the parties’ specific termination rights.

 

Q.

When is the Business Combination expected to be consummated?

 

A.

It is currently anticipated that the Business Combination will be consummated promptly following the special meeting of stockholders, provided that all other conditions to the Closing have been satisfied or waived.

For a description of the conditions to the completion of the Business Combination, see the section entitled “The Business Combination Agreement—Conditions to Closing.”

 

Q.

What do I need to do now?

 

A.

You are urged to carefully read and consider the information contained in this proxy statement/prospectus/information statement, including the financial statements and annexes attached hereto, and to consider how the Business Combination will affect you as a stockholder. You should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus/information statement on the enclosed proxy card or, if you hold your shares through a brokerage firm, bank or other nominee, on the voting instruction form provided by the broker, bank or nominee.

 

Q.

How do I vote?

 

A.

If you were a holder of record of Kensington Common Stock on October 27, 2020, the record date for the special meeting of stockholders, you may vote with respect to the applicable proposals in any of the following ways, if available:

 

   

Vote by Mail: by signing, dating and returning the enclosed proxy card in the accompanying postage-paid envelope;

 

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Vote by Internet: visit the website shown on your proxy card to vote via the internet, 24 hours a day, seven days a week, until 11:59 p.m. Eastern Time on November 24, 2020;

 

   

Vote by Phone: by calling the toll-free number on your proxy card (within the United States or Canada); or

 

   

Vote at the Special Meeting: by attending the special meeting and voting in person. You will be given a ballot when you arrive.

If your shares are held in “street name” through a broker, bank or other nominee, your broker, bank or other nominee will send you separate instructions describing the procedure for voting your shares. Simply complete, sign and date your voting instruction card and return it in the postage-paid envelope provided to ensure that your vote is counted. Alternatively, you may vote by telephone or over the internet as instructed by your broker, bank or other nominee. If you wish to attend the special meeting of stockholders and vote in person, you must obtain a proxy from your broker, bank or nominee.

Stockholders are urged to vote their proxies by completing, signing, dating and returning the enclosed proxy card in the accompanying pre-addressed postage paid envelope, or to direct their brokers or other agents on how to vote the shares in their accounts, as applicable.

 

Q.

What will happen if I abstain from voting or fail to vote at the special meeting?

 

A.

At the special meeting of stockholders, Kensington will count a properly executed proxy marked “ABSTAIN” with respect to a particular proposal as present for purposes of determining whether a quorum is present. For purposes of approval, an abstention or failure to vote will have the same effect as a vote against each of the Business Combination Proposal and the Charter Proposals, and will have no effect on any of the other proposals.

 

Q.

What will happen if I sign and return my proxy card without indicating how I wish to vote?

 

A.

Signed and dated proxies received by Kensington without an indication of how the stockholder intends to vote on a proposal will be voted in favor of each proposal presented to the stockholders.

 

Q.

Do I need to attend the special meeting of stockholders to vote my shares?

 

A.

No. You are invited to attend the special meeting to vote on the proposals described in this proxy statement/prospectus/information statement. However, you do not need to attend the special meeting of stockholders to vote your shares. Instead, you may submit your proxy by signing, dating and returning the applicable enclosed proxy card(s) in the pre-addressed postage-paid envelope or vote by internet or phone as described above. Your vote is important. Kensington encourages you to vote as soon as possible after carefully reading this proxy statement/prospectus/information statement.

 

Q.

If I am not going to attend the special meeting of stockholders in person, should I return my proxy card instead?

 

A.

Yes. After carefully reading and considering the information contained in this proxy statement/prospectus/information statement, please submit your proxy, as applicable, by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.

 

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Q.

If my shares are held in “street name,” will my broker, bank or nominee automatically vote my shares for me?

 

A.

No. If your broker holds your shares in its name and you do not give the broker voting instructions, under the applicable stock exchange rules, your broker may not vote your shares on any of the Kensington Proposals. If you do not give your broker voting instructions and the broker does not vote your shares, this is referred to as a “broker non-vote.” Broker non-votes will be counted for purposes of determining the presence of a quorum at the special meeting of stockholders. Your bank, broker, or other nominee can vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your shares in accordance with directions you provide. In addition, in no event will a broker non-vote have the effect of exercising your redemption rights for a pro rata portion of the Trust Account, and therefore no shares as to which a broker non-vote occurs will be redeemed in connection with the proposed Business Combination.

 

Q.

May I change my vote after I have mailed my signed proxy card?

 

A.

Yes. You may change your vote by sending a later-dated, signed proxy card to Kensington’s secretary at the address listed below prior to the vote at the special meeting of stockholders, or attending the special meeting and voting in person. You also may revoke your proxy by sending a notice of revocation to Kensington’s secretary, provided such revocation is received prior to the vote at the special meeting. If your shares are held in street name by a broker or other nominee, you must contact the broker or nominee to change your vote.

 

Q.

What should I do if I receive more than one set of voting materials?

 

A.

You may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus/information statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast your vote with respect to all of your shares.

 

Q.

What is the quorum requirement for the special meeting of stockholders?

 

A.

A quorum will be present at the special meeting of stockholders if a majority of the Kensington Common Stock outstanding and entitled to vote at the meeting is represented in person or by proxy. In the absence of a quorum, a majority of Kensington’s stockholders, present in person or represented by proxy, and voting thereon will have the power to adjourn the special meeting.

As of the record date for the special meeting, 14,375,001 shares of Kensington Common Stock would be required to achieve a quorum.

Your shares will be counted towards the quorum only if you submit a valid proxy (or your broker, bank or other nominee submits one on your behalf) or if you vote in person at the special meeting of stockholders. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum, a majority of the shares represented by stockholders present at the special meeting or by proxy may authorize adjournment of the special meeting to another date.

 

Q.

What happens to the Kensington Warrants I hold if I vote my shares of Kensington Class A Common Stock against approval of the Business Combination Proposal and validly exercise my redemption rights?

 

A.

A holder voting his, her or its Kensington Class A Common Stock against the Business Combination Proposal and/or exercising his, her or its redemption rights will not affect any Kensington Warrants held by such holder, which will remain outstanding following the Closing.

 

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Q.

Who will solicit and pay the cost of soliciting proxies?

 

A.

Kensington will pay the cost of soliciting proxies for the special meeting. Kensington has engaged D.F. King & Co., Inc. (“D.F. King”) to assist in the solicitation of proxies for the special meeting. Kensington has agreed to pay D.F. King a fee of $20,000. Kensington will reimburse D.F. King for reasonable out-of-pocket expenses and will indemnify D.F. King and its affiliates against certain claims, liabilities, losses, damages and expenses. Kensington also will reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of shares of Kensington Common Stock for their expenses in forwarding soliciting materials to beneficial owners of Kensington Common Stock and in obtaining voting instructions from those owners. Kensington’s directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the internet or in person. They will not be paid any additional amounts for soliciting proxies.

 

Q.

Who can help answer my questions?

 

A.

If you have questions about the stockholder proposals, or if you need additional copies of this proxy statement/prospectus/information statement, the proxy card or the consent card you should contact our proxy solicitor at:

D.F. King & Co., Inc.

48 Wall Street, 22nd Floor

New York, NY 10005

Call Toll-Free: (877) 478-5045

Banks and Brokers Call: (212) 269-5550

KCAC@dfking.com

You may also contact Kensington at:

Kensington Capital Acquisition Corp.

1400 Old Country Road, Suite 301

Westbury, NY 11590

Telephone: (703) 674-6514

Attention: Secretary

To obtain timely delivery, Kensington’s stockholders and warrant holders must request the materials no later than five business days prior to the special meeting.

You may also obtain additional information about Kensington from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find More Information.”

If you intend to seek redemption of your Public Shares, you will need to send a letter demanding redemption and deliver your stock (either physically or electronically) to Kensington’s transfer agent prior to 4:30 p.m., New York time, on the second business day prior to the special meeting of stockholders. If you have questions regarding the certification of your position or delivery of your stock, please contact:

Continental Stock Transfer & Trust Company

One State Street Plaza, 30th Floor

New York, NY 10004

Attention: Mark Zimkind

E-mail: mzimkind@continentalstock.com

 

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SUMMARY OF THE PROXY STATEMENT/PROSPECTUS/INFORMATION STATEMENT

This summary highlights selected information from this proxy statement/prospectus/information statement and does not contain all of the information that is important to you. To better understand the Business Combination and the proposals to be considered at the special meeting, you should read this entire proxy statement/prospectus/information statement carefully, including the annexes. See also the section entitled “Where You Can Find More Information.”

Parties to the Business Combination

Kensington

Kensington is a Delaware corporation formed for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, reorganization, recapitalization or other similar business combination with one or more businesses, referred to throughout this proxy statement/prospectus/information statement as its initial business combination. Although Kensington may pursue its initial business combination in any business, industry or geographic location, it has focused on opportunities to capitalize on the ability of its management team, particularly its executive officers, to identify, acquire and operate a business in the North America automotive and automotive-related sector. Upon the Closing, we intend to change our name from “Kensington Capital Acquisition Corp.” to “QuantumScape Corporation.”

Kensington Class A Common Stock, Kensington Warrants and Kensington Units, consisting of one share of Kensington Class A Common Stock and one-half of a Kensington Warrant, are traded on the NYSE under the ticker symbols “KCAC,” “KCAC WS” and “KCAC.U,” respectively. We intend to apply to continue the listing of the Kensington Class A Common Stock and Kensington Warrants on the NYSE under the symbols “QS” and “QS.W,” respectively, upon the Closing.

The mailing address of Kensington’s principal executive office is 1400 Old Country Road, Suite 301, Westbury, NY 11590, and its telephone number is (703) 674-6514.

QuantumScape

QuantumScape is developing next generation battery technology for EVs and other applications. It believes that its technology will enable a new category of battery that meets the requirements for broader market adoption. The lithium-metal solid-state battery technology that QuantumScape is developing is being designed to offer greater energy density, longer life, faster charging, and greater safety when compared to today’s conventional lithium-ion batteries.

QuantumScape is a development stage company with no revenue to date that has incurred a net loss of approximately $51.3 million for the year ended December 31, 2019 and an accumulated deficit of approximately $295.9 million from its inception through the year ended December 31, 2019.

QuantumScape was incorporated in Delaware in 2010. The mailing address of QuantumScape’s principal executive office is 1730 Technology Dr., San Jose, CA 95110, and its telephone number is (408) 452-2000.

For more information about QuantumScape, see the sections entitled “Information About QuantumScape” and “QuantumScape Management’s Discussion and Analysis of Financial Condition and Results of Operation.”



 

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The Business Combination

The Business Combination Agreement

On September 2, 2020, Kensington, Merger Sub and QuantumScape entered into the Business Combination Agreement, pursuant to which Kensington and QuantumScape will consummate the Business Combination. The Business Combination Agreement contains customary representations and warranties, covenants, closing conditions, termination fee provisions and other terms relating to the Merger and the other transactions contemplated thereby.

The Merger is to become effective by the filing of a certificate of merger with the Secretary of State of the State of Delaware and will be effective immediately upon such filing or upon such later time as may be agreed by the parties and specified in such certificate of merger (such time, the “Effective Time”). The parties will hold the Closing immediately prior to such filing of a certificate of merger, on the Closing Date to be specified by Kensington and QuantumScape, as promptly as practicable following the satisfaction or waiver (to the extent such waiver is permitted by applicable law) of the conditions set forth in the Business Combination Agreement (other than those conditions that by their nature are to be satisfied at Closing, but subject to the satisfaction or waiver of those conditions at such time), but in no event later than the third business day after the satisfaction or waiver, if legally permissible, of each of the conditions to the completion of the Business Combination (or on such other date, time or place as Kensington and QuantumScape may mutually agree).

At the Effective Time, by virtue of the Merger and without any action on the part of Kensington, Merger Sub, QuantumScape or the holders of any of QuantumScape’s securities:

 

   

each share of QuantumScape Class A Common Stock and QuantumScape Class A Preferred Stock outstanding immediately prior to the Effective Time and convertible into a share of QuantumScape Class A Common Stock pursuant to the provisions of QuantumScape’s certificate of incorporation, will be cancelled and converted into the right to receive the number of shares of New QuantumScape Class A Common Stock equal to the Exchange Ratio (as described below), with each holder’s shares rounded down to the nearest whole number;

 

   

each share of QuantumScape Class B Common Stock and QuantumScape Class B Preferred Stock outstanding immediately prior to the Effective Time and convertible into a share of QuantumScape Class B Common Stock pursuant to the provisions of QuantumScape’s certificate of incorporation, will be cancelled and converted into the right to receive the number of shares of New QuantumScape Class B Common Stock equal to the Exchange Ratio (as described below), with each holder’s shares rounded down to the nearest whole number;

 

   

all shares of QuantumScape Capital Stock held in the treasury of QuantumScape will be cancelled without any conversion thereof and no payment or distribution will be made with respect thereto;

 

   

each share of Merger Sub Common Stock outstanding immediately prior to the Effective Time will be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation; and

 

   

each QuantumScape Option that is outstanding immediately prior to the Effective Time, whether vested or unvested, will be converted into an option to purchase a number of shares of the applicable class of New QuantumScape Common Stock that the pre-conversion QuantumScape Option covers (such option, an “Exchanged Option”) equal to the product (rounded down to the nearest whole number) of (i) the number of shares of QuantumScape Common Stock subject to such QuantumScape Option immediately prior to the Effective Time multiplied by (ii) the Exchange Ratio, at an exercise price per share (rounded up to the nearest whole cent) equal to (A) the exercise price per share of such QuantumScape Option immediately prior to the Effective Time divided by (B) the Exchange Ratio.



 

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Except as specifically provided in the Business Combination Agreement, following the Effective Time, each Exchanged Option will continue to be governed by the same terms and conditions (including vesting and exercisability terms) as were applicable to the corresponding former QuantumScape Option immediately prior to the Effective Time;

 

   

each share of QuantumScape Restricted Stock that is outstanding immediately prior to the Effective Time will be converted into restricted shares of the applicable class of New QuantumScape Common Stock that the pre-conversion QuantumScape Restricted Stock covers (such share of restricted New QuantumScape Common Stock, an “Exchanged Restricted Stock”) equal to the product (rounded down to the nearest whole number) of (i) the number of shares subject to a QuantumScape Restricted Stock immediately prior to the Effective Time multiplied by (ii) the Exchange Ratio. Except as specifically provided above, following the Effective Time, each Exchanged Restricted Stock shall continue to be governed by the same terms and conditions (including transfer restrictions and repurchase right terms) as were applicable to the corresponding former QuantumScape Restricted Stock immediately prior to the Effective Time;

 

   

each QuantumScape RSU that is outstanding immediately prior to the Effective Time will be converted into restricted stock units of the applicable class of New QuantumScape Common Stock that the pre-conversion QuantumScape RSU covers (such restricted stock unit award covering New QuantumScape Common Stock, an “Exchanged RSU”) equal to the product (rounded down to the nearest whole number) of (i) the number of shares of QuantumScape RSU immediately prior to the Effective Time multiplied by (ii) the Exchange Ratio. Except as specifically provided above, following the Effective Time, each Exchanged RSU shall continue to be governed by the same terms and conditions (including transfer restrictions and repurchase right terms) as were applicable to the corresponding former QuantumScape RSU immediately prior to the Effective Time;

 

   

the obligation to purchase shares of Series F Preferred Stock upon satisfaction of certain milestones, if still outstanding, will become an obligation to purchase, upon satisfaction of the milestones, shares of New QuantumScape Class A Common Stock equal in number to the shares of New QuantumScape Class A Common Stock that would have been issued in the Merger in exchange for such shares of Series F Preferred Stock if such shares of Series F Preferred Stock had been outstanding prior to the Merger; and

 

   

each QuantumScape Warrant that is outstanding immediately prior to the Effective Time shall be converted into a warrant to purchase a number of shares of the applicable class of New QuantumScape Common Stock (such warrant, the “Exchanged Warrant”) equal to the product (rounded down to the nearest whole number) of (i) the number of shares of QuantumScape Common Stock subject to such QuantumScape Warrant immediately prior to the Effective Time multiplied by (ii) the Exchange Ratio. Except as specifically provided above, following the Effective Time, each Exchanged Warrant shall continue to be governed by the same terms and conditions (including vesting and exercisability terms) as were applicable to the corresponding former QuantumScape Warrant immediately prior to the Effective Time.

The “Exchange Ratio” is defined in the Business Combination Agreement as a quotient that is calculated on the basis of:

(i) the “Target Share Amount,” which means an amount equal to (a) 360,000,000, plus or minus (b) the quotient obtained by dividing (x) the amount, if any, by which the Series F Subscription Amount is greater than or less than, as applicable, $300,000,000, by (y) $10. As of the date of the initial signing of the Business Combination Agreement, the Target Share Amount was equal to 368,799,998;



 

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divided by

(ii) QuantumScape’s “Fully-Diluted Company Shares” (with such “Fully-Diluted Company Shares” being, as of the date of the initial signing of the Business Combination Agreement, equal to 92,125,870).

As of the date of the initial signing of the Business Combination Agreement, the Exchange Ratio was 4.0032186234. The Exchange Ratio will be finally calculated in accordance with the methodology and procedures set forth in the Business Combination Agreement, and Kensington will file with the SEC a Current Report on Form 8-K announcing the final Exchange Ratio no later than four business days prior to the special meeting of its stockholders.

For more information about the Business Combination Agreement and the Business Combination and other transactions contemplated thereby, see the sections entitled “Proposal No. 1—The Business Combination Proposal” and “The Business Combination Agreement.”

Conditions to the Closing

Under the Business Combination Agreement, the Closing is subject to customary and other conditions, including:

 

   

our stockholders having approved, among other things, the Proposed Transactions;

 

   

the absence of any governmental order that would prohibit the Business Combination;

 

   

the expiration of the waiting period (or extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (as amended, the “HSR Act”);

 

   

the Series F Subscription Amount shall be at least $300 million in the aggregate;

 

   

QuantumScape having no indebtedness for borrowed money;

 

   

Kensington having at least $500 million in the aggregate in (A) its Trust Account (after giving effect to any Redemption Rights (as defined in the Business Combination Agreement) that are actually perfected) plus (B) cash proceeds received in connection with the PIPE (calculated without reduction for any payments in respect of Outstanding Kensington Transaction Expenses (as defined in the Business Combination Agreement));

 

   

the representations and warranties of the parties to the Business Combination Agreement being true and correct, subject to the materiality and material adverse effect standards contained in the Business Combination Agreement; and

 

   

compliance by the parties in all material respects with their respective covenants.

Regulatory Matters

To complete the Business Combination, Kensington and QuantumScape must obtain approvals or consents from, or make filings with certain U.S. federal authorities. The Business Combination is subject to the requirements of the HSR Act, which prevents Kensington and QuantumScape from completing the Business Combination until required information and materials are furnished to the Antitrust Division of the Department of Justice (the “DOJ”) and the Federal Trade Commission (the “FTC”) and specified waiting period requirements have been satisfied. On September 30, 2020, Kensington filed a Premerger Notification and Report Form pursuant to the HSR Act with the DOJ and FTC and requested early termination of the waiting period under the HSR Act. On October 14, the FTC granted early termination of the waiting period under the HSR Act.

For more information, see the section entitled “The Business Combination—Regulatory Approvals Required for the Business Combination.”



 

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Litigation Relating to the Business Combination

On October 2, 2020, a putative class action lawsuit was filed in the Supreme Court of the State of New York by a purported Kensington stockholder in connection with the Business Combination: Sanchez v. Kensington Capital Acquisition Corp., et al., Index No. 654941/2020 (Sup. Ct. N.Y. Cnty.). The complaint names Kensington and certain current and former members of the Kensington Board as defendants. The complaint alleges, among other things, breach of fiduciary duty claims against the Kensington Board in connection with the Business Combination.

Termination Rights

The Business Combination Agreement is subject to termination prior to Effective Time as follows:

 

   

by the mutual written consent of Kensington and QuantumScape;

 

   

by Kensington or QuantumScape, if (i) the Effective Time shall not have occurred prior to the Outside Date (as defined in the Business Combination Agreement); provided, however, that the Business Combination Agreement may not be terminated by any party that either directly or indirectly through its affiliates is in breach or violation of any representation, warranty, covenant, agreement or obligation contained in the Business Combination Agreement and such breach or violation is the principal cause of the failure of a the conditions to the Merger on or prior to the Outside Date; (ii) any governmental authority in the United States has enacted, issued, promulgated, enforced or entered any injunction, order, decree or ruling (whether temporary, preliminary or permanent) which has become final and nonappealable and has the effect of making the Closing illegal or otherwise preventing or prohibiting the Closing and the Merger; or (iii) any of the Kensington Proposals fail to receive the requisite vote for approval at the special meeting;

 

   

by QuantumScape if (i) there is an occurrence of a breach of any representation, warranty, covenant or agreement on the part of Kensington and Merger Sub set forth in the Business Combination Agreement, or if any representation or warranty of Kensington and Merger Sub shall have become untrue, in either case such that the conditions described in subsections (a) and (b) under the heading “The Business Combination Agreement—Conditions to Closing; The Company” would not be satisfied (a “Terminating Kensington Breach”); provided that QuantumScape has not waived such Terminating Kensington Breach and QuantumScape is not then in material breach of their representations, warranties, covenants or agreements in the Business Combination Agreement; provided, however, that, if such Terminating Kensington Breach is curable by Kensington and Merger Sub, QuantumScape may not terminate the Business Combination Agreement under the applicable section for so long as Kensington and Merger Sub continue to exercise their reasonable efforts to cure such breach, unless such breach is not cured within thirty days after notice of such breach is provided by QuantumScape to Kensington; or (ii) at any time prior to receipt of the irrevocable written consent of QuantumScape stockholders holding the requisite approval in favor of the approval and adoption of the Business Combination Agreement and the Proposed Transactions (the “Written Consent”), in connection with entering into any agreement in principle, letter of intent, memorandum of understanding, term sheet, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other written arrangement relating to any acquisition proposal or any proposal or offer that could reasonably be expected to lead to an acquisition proposal (each, a “QuantumScape Acquisition Agreement”) with respect to a Superior Proposal (as defined in the section entitled “The Business Combination Agreement—No Solicitation; Change in Recommendation”) in accordance with Section 7.05(d) of the Business Combination Agreement; provided, that prior to or concurrently with such termination QuantumScape pays the Termination Fee (as defined in the Business Combination Agreement and below); and



 

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by Kensington if (i) the QuantumScape Board or a committee thereof, prior to obtaining the Written Consent has made an Adverse Recommendation Change (as defined in the section entitled “The Business Combination Agreement—No Solicitation; Change in Recommendation”); provided, however, that Kensington’s right to terminate the Business Combination Agreement will expire at the end of the tenth (10th) business day following the date on which the Adverse Recommendation Change occurs; or (ii) QuantumScape has failed to deliver the Written Consent to Kensington within 24 hours after the Registration Statement becomes effective; provided, however, that Kensington’s right to terminate the Business Combination Agreement will expire at the end of the fifth (5th) business day following the date on which the Written Consent is delivered to Kensington; or (iii) there is an occurrence of a breach of any representation, warranty, covenant or agreement on the part of QuantumScape set forth in the Business Combination Agreement, or if any representation or warranty of QuantumScape has become untrue, in either case such that the conditions described in subsections (a) and (b) under the heading “The Business Combination Agreement—Conditions to Closing; Kensington and Merger Sub” would not be satisfied (a “Terminating Company Breach”); provided that Kensington has not waived such Terminating Company Breach and Kensington and Merger Sub are not then in material breach of their representations, warranties, covenants or agreements in the Business Combination Agreement; provided further that, if such Terminating Company Breach is curable by QuantumScape, Kensington may not terminate the Business Combination Agreement under this provision for so long as QuantumScape continues to exercise its reasonable efforts to cure such breach, unless such breach is not cured within thirty days after notice of such breach is provided by Kensington to QuantumScape.

If the Business Combination Agreement is terminated, the agreement will forthwith become void, and there will be no liability under the Business Combination Agreement on the part of any party to the Business Combination Agreement, except as set forth in the Business Combination Agreement or in the case of termination subsequent to a willful material breach of the Business Combination Agreement by a party thereto.

QuantumScape shall pay a termination fee in the amount of $82 million (the “Termination Fee”) in the event that:

 

  (a)

(i) the Business Combination Agreement is terminated (A) by QuantumScape or Kensington, if the Effective Time did not occur prior to the Outside Date (as defined in the Business Combination Agreement), (B) by Kensington, if QuantumScape failed to deliver the Written Consent to Kensington within 24 hours after the Registration Statement became effective or (C) pursuant to a Terminating Company Breach, (ii) a bona fide Acquisition Proposal (as defined in the section entitled “The Business Combination Agreement—No Solicitation; Change in Recommendation”) has been made, proposed or otherwise communicated to QuantumScape after the date of the Business Combination Agreement but before the date of termination, and (iii) within six months of the date the Business Combination Agreement is terminated, QuantumScape enters into a definitive agreement with respect to such Acquisition Proposal; or

 

  (b)

the Business Combination Agreement is terminated (x) by Kensington if the QuantumScape Board or a committee thereof, prior to obtaining the Written Consent, shall have made an Adverse Recommendation Change; or (y) by QuantumScape, if at any time prior to receiving the Written Consent, QuantumScape enters into a QuantumScape Acquisition Agreement with respect to a Superior Proposal.

For more information, see the section entitled “The Business Combination Agreement—Termination.”



 

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Amendments to the Existing Certificate of Incorporation

Pursuant to the Business Combination Agreement, at the Effective Time, if the Charter Proposals are all approved, the Existing Certificate of Incorporation will be amended and restated in the form attached hereto as Annex B and incorporated herein by reference to, among other things:

 

   

increase the number of authorized shares of our common stock and preferred stock;

 

   

declassify our board of directors;

 

   

implement a dual class stock structure comprised of New QuantumScape Class A Common Stock, which will carry one vote per share, and New QuantumScape Class B Common Stock, which will carry 10 votes per share; and

 

   

eliminate provisions in the Existing Certificate of Incorporation relating to the Business Combination that will no longer be applicable following the Closing, change New QuantumScape’s name to “QuantumScape Corporation,” and make certain other changes that the Kensington Board deems appropriate for a public operating company.

For more information about these amendments to the Existing Certificate of Incorporation, see the sections entitled “Proposal No. 2—The Authorized Share Charter Proposal,” “Proposal No. 3—The Director Declassification Charter Proposal,” “Proposal No. 4—The Dual Class Charter Proposal” and “Proposal No. 5—The Additional Charter Proposal.”

Other Agreements Related to the Business Combination Agreement

Stockholder Support Agreements

On September 2, 2020, (i) Kensington and VGA entered into the Volkswagen Support Agreement, pursuant to which, among other things, VGA agreed to vote its shares of QuantumScape Preferred Stock in favor of the Business Combination Agreement and the Proposed Transactions, and (ii) Kensington and the Key QuantumScape Stockholders entered into the Key Stockholder Support Agreement, pursuant to which, among other things, the Key QuantumScape Stockholders agreed to vote their shares of QuantumScape Common Stock and QuantumScape Preferred Stock in favor of the Business Combination Agreement and the Proposed Transactions. As of November 6, 2020, VGA and the Key QuantumScape Stockholders collectively held approximately 57.83% of the QuantumScape Class A Common Stock, 78.16% of the QuantumScape Class B Common Stock and 76.49% of the total QuantumScape Capital Stock vote then outstanding.

The numbers of shares and percentage interests set forth above are based on a number of assumptions, including that (i) none of the Public Stockholders exercise their redemption rights, (ii) QuantumScape does not issue any additional equity securities prior to the Merger, other than the issuance of 14,684,843 shares of Series F Preferred Stock pursuant to certain Series F Stock Purchase Agreements by and between QuantumScape and the investors thereto, and that no other event occurs that would change the Exchange Ratio from what it would have been as of the date of the initial signing of the Business Combination Agreement and (iii) there are no future exercises of the Kensington Warrants. If the actual facts differ from these assumptions, the numbers of shares and percentage interests set forth above will be different.

For more information about the Stockholder Support Agreements, see the section entitled “Certain Agreements Related to the Business Combination—Stockholder Support Agreements.”

Registration Rights and Lock-Up Agreement

On September 2, 2020, Kensington, the Sponsor and certain stockholders of QuantumScape (the “New Holders” and, collectively with the Sponsor, the “Holders”) entered into a Registration Rights and



 

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Lock-Up Agreement, which shall be effective at the Closing. Pursuant to the terms of the Registration Rights and Lock-Up Agreement, Kensington will be obligated to file a registration statement to register the resale of certain shares of Kensington Common Stock held by the Holders after the Closing. In addition, pursuant to the terms of the Registration Rights and Lock-Up Agreement and subject to certain requirements and customary conditions, including with regard to the number of demand rights that may be exercised, the Holders may demand at any time or from time to time, that Kensington file a registration statement on Form S-3 (or on Form S-1 if Form S-3 is not available) to register the securities of Kensington held by such Holders, and Kensington is separately required at all times to maintain an effective resale registration statement for the benefit of the Holders. The Registration Rights and Lock-Up Agreement will also provide the Holders with “piggy-back” registration rights, subject to certain requirements and customary conditions.

The Registration Rights and Lock-Up Agreement further provides for the securities of Kensington held by the Holders to be locked-up for a period of time following the Closing, subject to certain exceptions.

For more information about the Registration Rights and Lock-Up Agreement, see the section entitled “Certain Agreements Related to the Business Combination—Registration Rights and Lock-Up Agreement.”

Subscription Agreements

In connection with the execution of the Business Combination Agreement, effective as of September 2, 2020, Kensington entered into separate subscription agreements (each, a “Subscription Agreement”) with a number of Subscribers, pursuant to which the Subscribers agreed to purchase, and Kensington agreed to sell to the Subscribers, the PIPE Shares, for a purchase price of $10.00 per share and an aggregate purchase price of $500 million. Pursuant to the terms of the Subscription Agreements and subject to certain requirements and customary conditions, Kensington is required to file and maintain an effective resale registration statement with respect to the PIPE Shares for the benefit of the Subscribers.

The closing of the sale of the PIPE Shares pursuant to the Subscription Agreements is contingent upon, among other customary closing conditions, the substantially concurrent Closing. The purpose of the PIPE is to raise additional capital for use by New QuantumScape following the Closing.

For more information about the Subscription Agreements, see the section entitled “Certain Agreements Related to the Business Combination—Subscription Agreements.”

Senior Employee Lock-Up Agreements

On September 2, 2020, Kensington entered into separate Senior Employee Lock-Up Agreements with certain senior level employees of QuantumScape (the “Senior Employees”), including QuantumScape’s executive officers. The Senior Employee Lock-Up Agreements provide that the securities of Kensington owned of record or beneficially by the Senior Employees (including certain securities that may be granted or issued to a Senior Employee after the Effective Time) (collectively, the “Lock-Up Shares”) may generally not be transferred for at least 180 days after the Closing (the “Initial Lock-Up Period”) and up to four years after the Closing, subject to certain exceptions. Following the Initial Lock-Up Period, Senior Employees may transfer Lock-Up Shares without restriction as follows: (i) during the first year after the Effective Time, up to 25% of the total number of Lock-Up Shares, (ii) following the first anniversary of the Effective Time until the earlier of four years after the Closing or the occurrence of an event described below, up to 50% of the total number of Lock-Up Shares (taking into account any transfers under clause (i) above), and (iii) up to an additional 50% of the total number of Lock-Up Shares following satisfaction of agreed delivery requirements between QuantumScape and VGA.



 

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These transfer restrictions are subject to earlier release if (i) New QuantumScape completes a liquidation, merger, stock exchange or other similar transaction after the Closing that results in all of New QuantumScape’s stockholders having the right to exchange their shares of common stock for cash, securities or other property; (ii) VGA terminates for any reason the Amended and Restated Joint Venture Agreement, dated as of May 14, 2020, by and among QuantumScape and VGA; (iii) VGA issues a critical or negative statement regarding New QuantumScape and its technology unless such statement is required to be made by VGA under applicable law and is truthful and accurate; or (iv) VGA transfers certain New QuantumScape securities in excess of the amounts set forth in the Senior Employee Lock-Up Agreements. The Senior Employee Lock-Up Agreements also provide that, upon consummation of the Merger, Kensington or QuantumScape shall pay to each Senior Employee a one-time cash bonus equal to 20% of the Senior Employee’s then annual base salary.

For more information about the Senior Employee Lock-Up Agreements, see the section entitled “Certain Agreements Related to the Business Combination—Senior Employee Lock-Up Agreements.”

Interests of Certain Persons in the Business Combination

In considering the recommendation of the Kensington Board to vote in favor of the Business Combination, stockholders should be aware that, aside from their interests as stockholders, the Sponsor and our directors and officers have interests in the Business Combination that are different from, or in addition to, those of other stockholders generally. Our directors were aware of and considered these interests, among other matters, in evaluating the Business Combination, and in recommending to stockholders that they approve the Business Combination. Stockholders should take these interests into account in deciding whether to approve the Business Combination. These interests include:

 

   

the beneficial ownership of the Sponsor of an aggregate of 5,750,000 Sponsor Shares and 6,575,000 Private Warrants, which shares and warrants would become worthless if Kensington does not complete a business combination within the applicable time period, as the Sponsor has waived any right to redemption with respect to these shares. The Sponsor paid an aggregate of $25,000 for the Sponsor Shares and $6,575,000 for the Private Warrants. Such shares and warrants have an aggregate market value of approximately $81,305,000 and $22,157,750, respectively, based on the closing price of Kensington Class A Common Stock and Public Warrants of $14.14 and $3.37, respectively, on the NYSE on November 11, 2020;

 

   

Justin Mirro, Kensington’s Chief Executive Officer and Chairman is the managing member of the managing member of the Sponsor. Consequently, he may be deemed the beneficial owner of the 5,750,000 Sponsor Shares and 6,575,000 Private Warrants and to have voting and dispositive control over such securities. Mr. Mirro disclaims beneficial ownership of any securities other than to the extent he may have a pecuniary interest therein, directly or indirectly. Each of Kensington’s other officers and directors are non-managing members of the Sponsor;

 

   

the Sponsor has made a loan of $75,000 to Kensington; the Sponsor has informed Kensington that the Sponsor intends to convert the loan into 75,000 warrants on the same terms as the Private Warrants (as contemplated by the warrant agreement pursuant to which the Private Warrants were issued) at the same time the Business Combination is completed and for such warrants to be issued to Justin Mirro, who had advanced such amount to the Sponsor in order for the loan to be made. Such warrants have an aggregate market value of approximately $252,750 based on the closing price of the Public Warrants of $3.37 on the NYSE on November 11, 2020;

 

   

the Sponsor and Kensington’s directors and executive officers will not receive reimbursement for any out-of-pocket expenses incurred by them on Kensington’s behalf incident to identifying, investigating and completing a business combination to the extent such expenses exceed the amount not required to be retained in the Trust Account, unless a business combination is consummated. As of October 31,



 

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2020, the Sponsor and Kensington’s directors and executive officers and their respective affiliates had incurred approximately $32,000 of such reimburseable out-of-pocket expenses;

 

   

the anticipated continuation of Justin Mirro, Kensington’s Chairman and Chief Executive Officer, as a director of New QuantumScape following the Closing;

 

   

DEHC, an affiliate of Daniel Huber, Kensington’s Chief Financial Officer and Secretary and Simon Boag, Kensington’s Chief Technology Officer, entered into services agreements with Kensington to provide administrative and other services as may be reasonably requested by Kensington for one year after the Closing in order to assist it in connection with the post Closing integration of QuantumScape into New QuantumScape. In consideration of the agreements by DEHC and Mr. Boag to provide such services, Kensington agreed to pay each of them $240,000 at the Closing. The foregoing amounts are subject to recoupment by Kensington in the event DEHC or Mr. Boag, as applicable, fails to satisfy its obligations under the agreements; and

 

   

the continued indemnification of current directors and officers of Kensington and the continuation of directors’ and officers’ liability insurance after the Business Combination.

These interests may influence Kensington’s directors in making their recommendation that you vote in favor of the approval of the Business Combination Proposal.

Reasons for the Approval of the Business Combination

After careful consideration, the Kensington Board recommends that Kensington stockholders vote “FOR” each Kensington Proposal at the Kensington special meeting of stockholders.

For a description of Kensington’s reasons for the approval of the Business Combination and the recommendation of our board of directors, see the section entitled “The Business Combination—Kensington’s Board of Directors’ Reasons for the Approval of the Business Combination.”

Redemption Rights

Under the Existing Certificate of Incorporation, holders of Kensington Class A Common Stock may elect to have their shares redeemed for cash at the applicable redemption price per share equal to the quotient obtained by dividing (a) the aggregate amount on deposit in the Trust Account as of two business days prior to the Closing, including interest not previously released to Kensington to pay its franchise and income taxes, by (b) the total number of shares of Kensington Class A Common Stock included as part of the Kensington Units issued in the IPO. However, Kensington will not redeem any public shares to the extent that such redemption would result in Kensington having net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) of less than $5,000,001. For illustrative purposes, based on funds in the Trust Account of $230 million on June 30, 2020, the per share redemption price would have been $10.00. Under the Existing Certificate of Incorporation, in connection with an initial business combination, a public stockholder, together with any affiliate or any other person with whom such stockholder is acting in concert of as a “group” (as defined under Section 13(d)(3) of the Exchange Act), is restricted from seeking redemption rights with respect to more than 15% of the public shares.

If a holder exercises his, her or its redemption rights, then such holder will be exchanging his, her or its shares of Kensington Class A Common Stock for cash and will no longer own shares of Kensington Class A Common Stock and will not participate in the future growth of Kensington, if any. Such a holder will be entitled to receive cash for its public shares only if it properly demands redemption and delivers its shares (either physically or electronically) to Kensington’s transfer agent in accordance with the procedures described herein. See the section entitled “The Special Meeting of Kensington Stockholders—Redemption Rights” for the procedures to be followed if you wish to redeem your shares for cash.



 

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Ownership of New QuantumScape After the Closing

It is anticipated that, upon the Closing, there will be approximately 219,276,744 shares of New QuantumScape Class A Common Stock and 157,511,978 shares of New QuantumScape Class B Common Stock outstanding, and the ownership of New QuantumScape will be as follows:

 

   

current holders of QuantumScape Class A Common Stock and QuantumScape Class A Preferred Stock will own 140,526,744 shares of New QuantumScape Class A Common Stock, representing approximately 37.30% of the total shares then outstanding in the aggregate and approximately 7.83% of the vote (upon exercise of QuantumScape’s options or other equity-based awards, current holders of QuantumScape Class A Common Stock and QuantumScape Class A Preferred Stock will own 201,169,095 shares of New QuantumScape Class A Common Stock, which will represent approximately 44.95% of the total shares then outstanding in the aggregate and approximately 10.28% of the vote);

 

   

current holders of QuantumScape Class B Common Stock and QuantumScape Class B Preferred Stock will own 157,511,978 shares of New QuantumScape Class B Common Stock, representing approximately 41.80% of the total shares then outstanding in the aggregate and approximately 87.78% of the vote (upon exercise of QuantumScape’s options or other equity-based awards, current holders of QuantumScape Class B Common Stock and QuantumScape Class B Preferred Stock will own 167,630,840 shares of New QuantumScape Class B Common Stock, which will represent approximately 37.46% of the total shares then outstanding in the aggregate and approximately 85.69% of the vote);

 

   

current holders of QuantumScape Common Stock and QuantumScape Preferred Stock will own 298,038,722 shares of New QuantumScape Common Stock, representing approximately 79.10% of the total shares then outstanding in the aggregate and approximately 95.61% of the vote;

 

   

Volkswagen will own 67,921,684 shares of New QuantumScape Class A Common Stock, representing approximately 30.98% of the total shares of New QuantumScape Class A Common Stock then outstanding and 17,897,585 shares of New QuantumScape Class B Common Stock, representing 11.36% of the total shares of New QuantumScape Class B Common Stock then outstanding. In the aggregate, Volkswagen will own 85,819,269 shares of New QuantumScape Common Stock, representing approximately 22.78% of the total shares then outstanding in the aggregate and approximately 13.76% of the vote;

 

   

the PIPE investors will own 50,000,000 shares of New QuantumScape Class A Common Stock, representing approximately 13.27% of the total shares then outstanding in the aggregate and approximately 2.79% of the vote;

 

   

the Public Stockholders will own 23,000,000 shares of New QuantumScape Class A Common Stock, representing approximately 6.10% of the total shares then outstanding in the aggregate and approximately 1.28% of the vote (upon exercise of QuantumScape’s options or other equity-based awards, restricted stock units and warrants, Public Stockholders will own 23,000,000 shares of New QuantumScape Class A Common Stock, which will represent approximately 5.14% of the total shares then outstanding in the aggregate and approximately 1.18% of the vote); and

 

   

the holder of Sponsor Shares will own 5,750,000 shares of New QuantumScape Class A Common Stock, representing approximately 1.53% of the total shares then outstanding in the aggregate and approximately 0.32% of the vote.

The numbers of shares and percentage interests set forth above are based on a number of assumptions, including that (i) none of the Public Stockholders exercise their redemption rights, (ii) QuantumScape does not issue any additional equity securities prior to the Merger, other than the issuance of 14,684,843 shares of its Series F Preferred Stock pursuant to certain Series F Stock Purchase Agreements by and between QuantumScape



 

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and the investors thereto, some of which are subject to achievement of a specified technical milestone, and that no other event occurs that would change the Exchange Ratio from what it would have been as of the date of the initial signing of the Business Combination Agreement, and (iii) there are no future exercises of the Kensington Warrants. If the actual facts differ from these assumptions, the numbers of shares and percentage interests set forth above will be different.

Please see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” for further information.



 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF QUANTUMSCAPE

The selected historical consolidated statements of operations data of QuantumScape for the years ended December 31, 2019 and 2018 and the historical consolidated balance sheet data as of December 31, 2019 and 2018 are derived from QuantumScape’s audited consolidated financial statements included elsewhere in this proxy statement/prospectus/information statement. The selected historical condensed consolidated statements of operations data of QuantumScape for the six months ended June 30, 2020 and 2019 and the condensed consolidated balance sheet data as of June 30, 2020 are derived from QuantumScape’s unaudited interim condensed consolidated financial statements included elsewhere in this proxy statement/prospectus/information statement. In QuantumScape management’s opinion, the unaudited interim condensed consolidated financial statements include all adjustments necessary to state fairly QuantumScape’s financial position as of June 30, 2020 and the results of operations for the six months ended June 30, 2020 and 2019.

QuantumScape’s historical results are not necessarily indicative of the results that may be expected in the future and QuantumScape’s results for the six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2020 or any other period. You should read the following selected historical consolidated financial data together with “QuantumScape Management’s Discussion and Analysis of Financial Condition and Results of Operations” and QuantumScape’s consolidated financial statements and related notes included elsewhere in this proxy statement/prospectus/information statement.

 

Statement of Operations Data   For the Six
Months Ended
June 30, 2020
    For the Six
Months Ended
June 30, 2019
    For the Year
Ended
December 31,
2019
    For the Year
Ended
December 31,
2018
 
    (In thousand, except Share and per Share Amounts)  

Research and development

  $ 25,396     $ 21,203     $ 45,944     $ 35,634  

General and administrative

    4,747       4,927       9,874       9,768  

Amortization of intangible assets

    —         —         —         51  
 

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

    (30,143     (26,130     (55,818     (45,453

Other income (expense):

       

Interest expense

    8       (1     (94     (1,520

Interest income

    811       2,046       3,608       2,127  

Other income

    —         592       1,041       702  
 

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

    (29,324     (23,493     (51,263     (44,144

Less: Net (loss) income attributable to non-controlling interest, net of tax of $0

    (5     8       20       5  
 

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to common stockholders

  $ (29,319   $ (23,501   $ (51,283   $ (44,149
 

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding of common stock—basic and diluted

    11,233,773       11,181,928       11,194,183       11,108,638  
 

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share of common stock—basic and diluted

  $ (2.61   $ (2.10   $ (4.58   $ (3.97
 

 

 

   

 

 

   

 

 

   

 

 

 

 

Balance Sheet Data    June 30,
2020
     December 31,
2019
     December 31,
2018
 
            (In thousand)         

Total assets

   $ 146,204      $ 172,384      $ 211,214  

Total liabilities

     20,673        21,982        18,294  

Total redeemable convertible preferred stock and stockholders’ deficit

     125,531        150,402        192,920  


 

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SELECTED HISTORICAL FINANCIAL INFORMATION OF KENSINGTON

The following table shows selected historical financial information of Kensington for the periods and as of the dates indicated. The selected historical financial information of Kensington as of May 1, 2020 and for the period from April 17, 2020 (inception) through May 1, 2020 was derived from the audited historical financial statements of Kensington included elsewhere in this proxy statement/prospectus/information statement. The selected historical interim financial information of Kensington as of June 30, 2020 and for the period from April 17, 2020 (inception) through June 30, 2020 was derived from the unaudited interim consolidated financial statements of Kensington included elsewhere in this proxy statement/prospectus/information statement. The following table should be read in conjunction with “Kensington Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical financial statements and the notes and schedules related thereto, included elsewhere in this proxy statement/prospectus/information statement. The historical results presented below are not necessarily indicative of financial results to be achieved by New QuantumScape following the Business Combination.

 

     As of and for
the period from
April 17, 2020
(inception) through
June 30, 2020
     As of and for
the period from
April 17, 2020
(inception) through
May 1, 2020
 

Statement of Operations Data:

     

General and administrative expenses

   $ 22,314      $ 2,500  

Franchise tax expense

     40,548        —    
  

 

 

    

 

 

 

Net loss

   $ (62,862    $ (2,500
  

 

 

    

 

 

 

Weighted average shares outstanding, basic and diluted

     5,031,247        4,375,000  
  

 

 

    

 

 

 

Basic and diluted net loss per share

   $ (0.01    $ (0.00
  

 

 

    

 

 

 

Balance Sheet Data:

     

Cash

   $ 1,739,697      $ 25,000  

Prepaid expenses

     237,797        —    

Total assets

     231,977,494        86,500  

Total liabilities

     8,538,223        64,000  


 

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SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following summary unaudited pro forma condensed combined financial data (the “summary pro forma data”) gives effect to the Business Combination and related transactions described in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.” The Business Combination will be accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, Kensington will be treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of QuantumScape issuing stock for the net assets of Kensington, accompanied by a recapitalization whereby no goodwill or other intangible assets are recorded. The summary unaudited pro forma condensed combined balance sheet data as of June 30, 2020 gives pro forma effect to the Business Combination and related transactions as if they had occurred on June 30, 2020. The summary unaudited pro forma condensed combined statement of operations data for the six months ended June 30, 2020 and year ended December 31, 2019 give pro forma effect to the Business Combination and related transactions as if they had been consummated on January 1, 2019.

The summary pro forma data have been derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial information of New QuantumScape appearing elsewhere in this proxy statement/prospectus/information statement and the accompanying notes. The unaudited pro forma condensed combined financial information is based upon, and should be read in conjunction with, the historical consolidated financial statements of Kensington and QuantumScape and related notes included in this proxy statement/prospectus/information statement. The summary pro forma data have been presented for informational purposes only and are not necessarily indicative of what New QuantumScape’s financial position or results of operations actually would have been had the Business Combination and related transactions been completed as of the dates indicated. In addition, the summary pro forma data do not purport to project the future financial position or operating results of New QuantumScape. The summary pro forma data does not include the issuance of 3,784,754 shares of Series F Preferred Stock subject to the achievement of a specified technical milestone (15,151,197 shares of New QuantumScape Class A Common Stock converted at the Exchange Ratio).

The following table presents summary pro forma data after giving effect to the Business Combination and related transactions, assuming two redemption scenarios as follows:

 

   

Assuming No Redemption—this scenario assumes that no shares of Kensington Common Stock are redeemed; and



 

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Assuming Maximum Redemption—this scenario assumes that 23,000,000 shares of Kensington Common Stock are redeemed for an aggregate payment of approximately $230.0 million (based on the estimated per share redemption price of approximately $10.00 per share) from the Trust Account. The Business Combination Agreement includes a condition to the Closing that, at the Closing, Kensington will have a minimum of $500 million in cash comprising (i) the cash held in the Trust Account after giving effect to any Kensington share redemptions and (ii) gross proceeds from the PIPE. The gross proceeds from the PIPE of $500 million is sufficient to satisfy this closing condition, and accordingly, this scenario results in public share redemptions of 23,000,000 shares of Kensington Class A Common Stock.

 

     Pro Forma
Combined
(Assuming No
Redemptions)
     Pro Forma
Combined
(Assuming
Maximum
Redemptions)
 
     (in thousands, except share and per
share data)
 

Summary Unaudited Pro Forma Condensed Combined

     

Statement of Operations Data Six Months Ended June 30, 2020

     

Total operating expenses

   $ 30,790      $ 30,790  

Basic and diluted net loss per share—Class A and Class B

   $ (0.08    $ (0.09

Basic and diluted weighted average shares outstanding—Class A and Class B

     361,637,525        338,637,525  

Statement of Operations Data Year Ended December 31, 2019

     

Total operating expenses

   $ 57,026      $ 57,026  

Basic and diluted net loss per share—Class A and Class B

   $ (0.15    $ (0.16

Basic and diluted weighted average shares outstanding—Class A and Class B

     361,637,525        338,637,525  

Selected Unaudited Pro Forma Condensed Combined

     

Balance Sheet Data as of June 30, 2020

     

Total assets

   $ 1,107,842      $ 877,842  

Total liabilities

   $ 21,087      $ 21,087  

Total stockholders’ equity

   $ 1,086,755      $ 856,755  

Comparative Historical and Unaudited Pro Forma Combined Per Share Financial Information

The following table sets forth selected historical comparative share information for Kensington and QuantumScape and unaudited pro forma condensed combined per share information of New QuantumScape after giving effect to the Business Combination and related transactions, assuming two redemption scenarios as follows:

 

   

Assuming No Redemption—this scenario assumes that no shares of Kensington Common Stock are redeemed; and

 

   

Assuming Maximum Redemption—this scenario assumes that 23,000,000 shares of Kensington Common Stock are redeemed for an aggregate payment of approximately $230.0 million (based on the estimated per share redemption price of approximately $10.00 per share) from the Trust Account. The



 

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Business Combination Agreement includes a condition to the Closing that, at the Closing, Kensington will have a minimum of $500 million in cash comprising (i) the cash held in the Trust Account after giving effect to any Kensington share redemptions and (ii) gross proceeds from the PIPE. The gross proceeds from the PIPE of $500 million is sufficient to satisfy this closing condition, and accordingly, this scenario results in public share redemptions of 23,000,000 shares of Kensington Class A Common Stock.

The pro forma book value information reflects the Business Combination and related transactions as if they had occurred on June 30, 2020. The weighted average shares outstanding and net loss per share information give pro forma effect to the Business Combination and related transactions as if they had occurred on January 1, 2019.

This information is only a summary and should be read together with the selected historical financial information included elsewhere in this proxy statement/prospectus/information statement and the historical financial statements of Kensington and QuantumScape and related notes that are included elsewhere in this proxy statement/prospectus/information statement. The unaudited pro forma combined per share information of Kensington and QuantumScape is derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial statements and related notes included elsewhere in this proxy statement/prospectus/information statement.

The unaudited pro forma combined earnings per share information below does not purport to represent the earnings per share which would have occurred had the companies been combined during the periods presented, nor earnings per share for any future date or period. The unaudited pro forma combined book value per share information below does not purport to represent what the value of Kensington and QuantumScape would have been had the companies been combined during the periods presented.

 

                Combined Pro Forma     QuantumScape equivalent
pro forma per share data (2)
 
    Kensington
(Historical)
    QuantumScape
(Historical)
    (Assuming
No
Redemption)
    (Assuming
Maximum
Redemption)
    (Assuming
No
Redemption)
    (Assuming
Maximum
Redemption)
 

As of and for the Six Months Ended June 30, 2020 (3)

           

Book value per share (1)

  $ 0.99       (24.93     3.01       2.53       12.03       10.13  

Weighted average common shares outstanding—basic and diluted

    5,031,247       11,233,773       361,637,525       338,637,525       282,887,525       282,887,525  

Net income (loss) per share—basic and diluted

  $ (0.01     (2.61     (0.08     (0.09     (0.33     (0.35

As of and for the Year Ended December 31, 2019 (3)

           

Weighted average common shares outstanding—basic and diluted

    N/A (4)      11,194,183       361,637,525       338,637,525       282,887,525       282,887,525  

Net income (loss) per share—basic and diluted

  $ N/A (4)      (4.58     (0.15     (0.16     (0.58     (0.62

 

(1)

Book value per share = Total equity/shares outstanding.

(2)

The equivalent pro forma basic and diluted per share data for QuantumScape is based on the Exchange Ratio set forth in the Business Combination Agreement. The weighted average shares outstanding includes QuantumScape preferred stock, which will be converted into shares of Kensington common stock at the Effective Time.

(3)

There were no cash dividends declared in the period presented.

(4)

Not applicable as Kensington was incorporated on April 17, 2020.



 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this proxy statement/prospectus/information statement may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our, our management team’s, QuantumScape’s and QuantumScape’s management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this proxy statement/prospectus/information statement may include, for example, statements about:

 

   

our ability to consummate the Business Combination;

 

   

the expected benefits of the Business Combination;

 

   

New QuantumScape’s financial and business performance following the Business Combination, including financial projections and business metrics;

 

   

changes in New QuantumScape’s strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans;

 

   

the implementation, market acceptance and success of New QuantumScape’s business model;

 

   

New QuantumScape’s ability to scale in a cost-effective manner;

 

   

developments and projections relating to QuantumScape’s competitors and industry;

 

   

the impact of health epidemics, including the COVID-19 pandemic, on QuantumScape’s business and the actions QuantumScape may take in response thereto;

 

   

QuantumScape’s expectations regarding its ability to obtain and maintain intellectual property protection and not infringe on the rights of others;

 

   

expectations regarding the time during which we will be an emerging growth company under the JOBS Act;

 

   

QuantumScape’s future capital requirements and sources and uses of cash;

 

   

QuantumScape’s ability to obtain funding for its operations;

 

   

QuantumScape’s business, expansion plans and opportunities;

 

   

the outcome of any known and unknown litigation and regulatory proceedings; and

 

   

QuantumScape’s relationship with Volkswagen, including the development of its joint venture arrangements with Volkswagen, and Kensington’s expectations and plans with respect to QuantumScape’s future cooperation with Volkswagen, including as a potential customer.

These forward-looking statements are based on information available as of the date of this proxy statement/prospectus/information statement, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

You should not place undue reliance on these forward-looking statements in deciding how to vote your proxy or instruct how your vote should be cast on the proposals set forth in this proxy statement/prospectus/

 

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information statement. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

 

   

the occurrence of any event, change or other circumstances that could delay, impede or prevent the Business Combination or give rise to the termination of the Business Combination Agreement;

 

   

the outcome of any legal proceedings that may be instituted against Kensington or New QuantumScape following announcement of the proposed Business Combination and transactions contemplated thereby;

 

   

the inability to complete the Business Combination due to the failure to obtain approval of the stockholders of Kensington or of the parties to satisfy other conditions to the Closing in the Business Combination Agreement;

 

   

the ability to obtain or maintain the listing of New QuantumScape Class A Common Stock on the NYSE following the Business Combination;

 

   

the risk that the proposed Business Combination disrupts current plans and operations of QuantumScape as a result of the announcement and consummation of the transactions described herein;

 

   

our ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition and the ability of New QuantumScape to grow and manage growth profitably following the Business Combination;

 

   

costs related to the Business Combination;

 

   

changes in applicable laws or regulations;

 

   

the effect of the COVID-19 pandemic on QuantumScape’s business;

 

   

the ability of QuantumScape to execute its business model, including market acceptance of its planned products and services;

 

   

New QuantumScape’s ability to raise capital;

 

   

the possibility that Kensington or New QuantumScape may be adversely affected by other economic, business, and/or competitive factors; and

 

   

other risks and uncertainties described in this proxy statement/prospectus/information statement, including those under the section entitled “Risk Factors.”

 

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RISK FACTORS

New QuantumScape will face a market environment that cannot be predicted and that involves significant risks, many of which will be beyond its control. In addition to the other information contained in this proxy statement/prospectus/information statement, you should carefully consider the material risks described below before deciding how to vote your shares of stock. In addition, you should read and consider the risks associated with the business of Kensington because these risks may also affect New QuantumScape—these risks can be found in Kensington’s final prospectus filed with the SEC on June 26, 2020, as updated by subsequent Quarterly Reports on Form 10-Q, all of which are filed with the SEC. You should also read and consider the other information in this proxy statement/prospectus/information statement and the other documents incorporated by reference into this proxy statement/prospectus/information statement. Please see the section entitled “Where You Can Find More Information” in this proxy statement/prospectus/information statement. The references to QuantumScape in the below section entitled “Risk Factors—Risks Related to QuantumScape” will apply to New QuantumScape upon Closing.

SUMMARY RISK FACTORS

The following summary risk factors and other information included in this proxy statement/prospectus/information statement should be carefully considered. The summary risks and uncertainties described below are not the only ones QuantumScape faces. Additional risks and uncertainties not currently known to QuantumScape or that it currently deems less significant may also affect QuantumScape’s business operations or financial results. If any of the following risks actually occur, QuantumScape’s stock price, business, operating results and financial condition could be materially adversely affected. For more information, see below for more detailed descriptions of each risk factor.

Risks Related to QuantumScape

 

 

QuantumScape faces significant barriers in its attempts to produce a solid-state battery cell and may not be able to successfully develop its solid-state battery cell. If QuantumScape cannot successfully overcome those barriers, its business will be negatively impacted and could fail.

 

 

QuantumScape may encounter substantial delays in the design, manufacture, regulatory approval, and launch of QuantumScape’s solid-state battery cells, which could prevent QuantumScape from commercializing any products it determines to develop on a timely basis, if at all.

 

 

QuantumScape may not be able to establish supply relationships for necessary components or may be required to pay costs for components that are more expensive than anticipated, which could delay the introduction of QuantumScape’s product and negatively impact its business.

 

 

QuantumScape may be unable to adequately control the costs associated with its operations and the components necessary to build its solid-state battery cells.

 

 

QuantumScape relies on complex machinery for its operations and production involves a significant degree of risk and uncertainty in terms of operational performance and costs.

 

 

QuantumScape’s relationship with Volkswagen is subject to various risks which could adversely affect QuantumScape’s business and future prospects. There are no assurances that QuantumScape will be able to commercialize solid-state batteries from its joint development relationship with Volkswagen.

 

 

If QuantumScape’s batteries fail to perform as expected, QuantumScape’s ability to develop, market and sell its batteries could be harmed.

 

 

QuantumScape’s future growth and success are dependent upon consumers’ willingness to adopt EVs.

 

 

QuantumScape may not be able to accurately estimate the future supply and demand for its batteries, which could result in a variety of inefficiencies in its business and hinder its ability to generate revenue. If

 

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QuantumScape fails to accurately predict its manufacturing requirements, it could incur additional costs or experience delays.

 

 

QuantumScape relies heavily on its intellectual property portfolio. If QuantumScape is unable to protect its intellectual property rights, its business and competitive position would be harmed.

 

 

QuantumScape may need to defend itself against intellectual property infringement claims, which may be time-consuming and could cause it to incur substantial costs.

 

 

The battery market continues to evolve, is highly competitive, and QuantumScape may not be successful in competing in this industry or establishing and maintaining confidence in its long-term business prospectus among current and future partners and customers.

Risks Related to QuantumScape’s Technology Development and Scale-Up

QuantumScape faces significant barriers in its attempts to produce a solid-state battery cell and may not be able to successfully develop its solid-state battery cell. If QuantumScape cannot successfully overcome those barriers, its business will be negatively impacted and could fail.

Producing lithium-metal solid-state batteries that meet the requirements for wide adoption by automotive original equipment manufacturers (“OEMs”) is a difficult undertaking. QuantumScape is still in development stage and faces significant challenges in completing development of its battery and in producing battery cells in commercial volumes. Some of the development challenges that could prevent the introduction of QuantumScape’s solid-state battery cell include difficulties with increasing the yield of its separators and single-layer cells, multi-layer cell stacking, packaging engineering to ensure adequate cycle life, cost reduction, completion of the rigorous and challenging specifications required by QuantumScape’s automotive partners, including but not limited to, calendar life, mechanical testing, and abuse testing and development of the final manufacturing processes.

QuantumScape’s solid-state separators are in the development stage. These separators have never been used before for battery applications (or to QuantumScape’s knowledge, for any other applications) and there are significant yield, cost, performance and manufacturing process challenges to be solved in order for the separators to be produced and used commercially. QuantumScape is likely to encounter engineering challenges as QuantumScape increases the dimensions and reduces the thickness of its solid-state separators. If QuantumScape is not able to overcome these barriers in developing and producing its solid-state separators, QuantumScape’s business could fail.

To achieve target energy density, QuantumScape needs to stack its single-layer cells in a multi-layer format, which is enclosed within a single battery package. QuantumScape’s battery cell will require over one hundred single-layer battery cells within each battery package. QuantumScape has not yet built a multi-layer solid-state battery cell in the dimensions required for automotive applications. There are significant developmental and mechanical challenges that QuantumScape must overcome to build its multi-layer battery cell for automotive application. In addition, QuantumScape will need to acquire certain tools that it currently does not possess and develop the manufacturing process necessary to make these multi-layer battery cells in high volume. If QuantumScape is not able to overcome these developmental hurdles in building its multi-layer cells, QuantumScape’s business is likely to fail.

QuantumScape is evaluating multiple cathode material compositions for inclusion in its solid-state battery cells and has not yet finalized the cathode composition or formulation. QuantumScape also has not validated that the current cell design, with the inclusion of an organic gel made of an organic polymer and organic liquid catholyte as part of the cathode, meets all automotive requirements. QuantumScape has not yet validated a manufacturing process or acquired the tools necessary to produce high volumes of its cathode material that meets all commercial requirements. If QuantumScape is not able to overcome these developmental and manufacturing hurdles its business likely will fail.

 

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Even if QuantumScape completes development and achieves volume production of its solid-state battery, if the cost, performance characteristics or other specifications of the battery fall short of QuantumScape’s targets, QuantumScape’s sales, product pricing and margins would likely be adversely affected.

QuantumScape may encounter substantial delays in the design, manufacture, regulatory approval, and launch of QuantumScape’s solid-state battery cells, which could prevent QuantumScape from commercializing any products it determines to develop on a timely basis, if at all.

Any delay in the development and manufacturing scale-up of QuantumScape’s solid-state battery cells would negatively impact its business as it will delay time to revenue and negatively impact QuantumScape’s customer relationships. Additionally, QuantumScape may encounter delays in obtaining the necessary regulatory approvals or launching its solid-state battery on the market, including delays in entering into agreements for the supply of component parts and manufacturing tools and supplies. Delays in the launching of QuantumScape’s product would materially damage its business, prospects, financial condition, operating results and brand.

QuantumScape may not be able to establish supply relationships for necessary components or may be required to pay costs for components that are more expensive than anticipated, which could delay the introduction of QuantumScape’s product and negatively impact its business.

QuantumScape relies on third-party suppliers for components necessary to develop and manufacture its solid-state batteries, including key supplies, such as QuantumScape’s cathode material and manufacturing tools for both QuantumScape’s separator and solid-state battery cells. QuantumScape is collaborating with key suppliers but has not yet entered into agreements for the supply of production quantities of these materials. To the extent that QuantumScape is unable to enter into commercial agreements with these suppliers on beneficial terms, or these suppliers experience difficulties ramping up their supply of materials to meet QuantumScape’s requirements, the introduction of QuantumScape’s battery will be delayed. To the extent QuantumScape’s suppliers experience any delays in providing or developing the necessary materials, QuantumScape could experience delays in delivering on its timelines.

QuantumScape expects to incur significant costs related to procuring materials required to manufacture and assemble its batteries. QuantumScape expects to use various materials in its batteries that will require QuantumScape to negotiate purchase agreements and delivery lead-times on advantageous terms. QuantumScape may not be able to control fluctuation in the prices for these materials or negotiate agreement with suppliers on terms that are beneficial to QuantumScape. QuantumScape’s business depends on the continued supply of certain proprietary materials for its products. QuantumScape is exposed to multiple risks relating to the availability and pricing of such materials and components. Substantial increases in the prices for QuantumScape’s raw materials or components would increase its operating costs and negatively impact QuantumScape’s prospects.

Any disruption in the supply of components or materials could temporarily disrupt research and development activities or production of QuantumScape’s batteries until an alternative supplier is able to supply the required material. Changes in business conditions, unforeseen circumstances, governmental changes, and other factors beyond QuantumScape’s control or which it does not presently anticipate, could also affect its suppliers’ ability to deliver components to QuantumScape on a timely basis. Any of the foregoing could materially and adversely affect QuantumScape’s results of operations, financial condition and prospects.

Currency fluctuations, trade barriers, tariffs or shortages and other general economic or political conditions may limit QuantumScape’s ability to obtain key components for its solid-state batteries or significantly increase freight charges, raw material costs and other expenses associated with QuantumScape’s business, which could further materially and adversely affect its results of operations, financial condition and prospects.

 

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QuantumScape may be unable to adequately control the costs associated with its operations and the components necessary to build its solid-state battery cells.

QuantumScape will require significant capital to develop and grow its business and expects to incur significant expenses, including those relating to research and development, raw material procurement, leases, sales and distribution as it builds its brand and markets its batteries, and general and administrative costs as it scales its operations. QuantumScape’s ability to become profitable in the future will not only depend on its ability to successfully market its solid-state batteries and services, but also to control its costs. If QuantumScape is unable to cost efficiently design, manufacture, market, sell and distribute its solid-state batteries and services, its margins, profitability and prospects would be materially and adversely affected. QuantumScape has not yet produced any solid-state battery cells at volume and its forecasted cost advantage for the production of these cells at scale, compared to conventional lithium-ion cells, will require QuantumScape to achieve rates of throughput, use of electricity and consumables, yield, and rate of automation demonstrated for mature battery, battery material, and ceramic manufacturing processes, that QuantumScape has not yet achieved. If QuantumScape is unable to achieve these targeted rates, its business will be adversely impacted.

QuantumScape relies on complex machinery for its operations and production involves a significant degree of risk and uncertainty in terms of operational performance and costs.

QuantumScape relies heavily on complex machinery for its operations and the production of its solid-state battery cells, all of which has not yet been qualified to operate at large-scale manufacturing. The work required to integrate this equipment into the production of QuantumScape’s solid-state battery cells is time intensive and requires QuantumScape to work closely with the equipment provider to ensure that it works properly for QuantumScape’s unique battery technology. This integration work will involve a significant degree of uncertainty and risk and may result in the delay in the scaling up of production or result in additional cost to QuantumScape’s battery cells.    

Both QuantumScape’s pilot manufacturing facilities and its large-scale manufacturing facility will require large-scale machinery. Such machinery is likely to suffer unexpected malfunctions from time to time and will require repairs and spare parts to resume operations, which may not be available when needed. Unexpected malfunctions of QuantumScape’s production equipment may significantly affect the intended operational efficiency. In addition, because this equipment has not been used to build solid-state battery cells, the operational performance and costs associated with this equipment can be difficult to predict and may be influenced by factors outside of QuantumScape’s control, such as, but not limited to, failures by suppliers to deliver necessary components of QuantumScape’s products in a timely manner and at prices and volumes acceptable to QuantumScape, environmental hazards and remediation, difficulty or delays in obtaining governmental permits, damages or defects in systems, industrial accidents, fires, seismic activity and other natural disasters.

Operational problems with QuantumScape’s manufacturing equipment could result in the personal injury to or death of workers, the loss of production equipment, damage to manufacturing facilities, monetary losses, delays and unanticipated fluctuations in production. In addition, operational problems may result in environmental damage, administrative fines, increased insurance costs and potential legal liabilities. All of these operational problems could have a material adverse effect on QuantumScape’s business, results of operations, cash flows, financial condition or prospects.

Customer Risks and Risks Related to QuantumScape’s Partnership with Volkswagen

QuantumScape’s relationship with Volkswagen is subject to various risks which could adversely affect QuantumScape’s business and future prospects. There are no assurances that QuantumScape will be able to commercialize solid-state batteries from its joint development relationship with Volkswagen.

Volkswagen and QuantumScape formed a joint venture to collaborate on the manufacturing ramp up of QuantumScape’s solid-state battery cell.

 

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There is no assurance that QuantumScape will be able to complete the development of the solid-state battery cells in the time frame required by the joint venture arrangements. If QuantumScape does not complete this development in a timely manner, Volkswagen may terminate its participation in the joint venture. QuantumScape’s joint venture arrangements with Volkswagen provide a framework for QuantumScape’s cooperation and require that QuantumScape and Volkswagen enter into certain additional arrangements regarding the purchase by the joint venture of solid-state separators from QuantumScape, the purchase and pricing of the solid-state battery cells that will be produced by the joint venture and sold to Volkswagen, and the terms for licensing QuantumScape technology to the joint venture. There can be no assurance that the parties will be able to agree to the pricing for these key elements on terms that are financially beneficial for QuantumScape or to enter into the additional arrangements, including any purchase orders, with Volkswagen for commercialization under the joint venture arrangements.

The purchase by Volkswagen of the output of the joint venture will depend on the performance of QuantumScape’s solid-state battery and the demand for the vehicles that Volkswagen develops to utilize the solid-state battery cells that will be produced by the joint venture. If Volkswagen does not select QuantumScape’s solid-state battery cell or if there is a delay in the introduction of the Volkswagen vehicles that intend to use QuantumScape’s solid-state battery cells, QuantumScape’s business will be harmed.

The strong relationship that QuantumScape has developed with Volkswagen may deter other automotive OEMs from working closely with QuantumScape. If QuantumScape is not able to expand its relationship over time to include other customer relationships, or if QuantumScape becomes too dependent on Volkswagen for QuantumScape’s revenue, QuantumScape’s business could be harmed.

Volkswagen, and any other partners in the future, may have economic, business or legal interests or goals that are inconsistent with QuantumScape’s goals. Any disagreements with Volkswagen or other future business partners may impede QuantumScape’s ability to maximize the benefits of its partnerships and slow the commercialization of QuantumScape’s solid-state battery. QuantumScape’s joint venture arrangements may require it, among other things, to pay certain costs or to make certain capital investments or to seek the joint venture partner’s consent to take certain actions. In addition, if Volkswagen is unable or unwilling to meet its economic or other obligations under the joint venture arrangements, QuantumScape may be required to either fulfill those obligations alone to ensure the ongoing success of the joint venture or to dissolve and liquidate the joint venture. These factors could result in a material adverse effect on QuantumScape’s business and financial results.

If QuantumScape’s batteries fail to perform as expected, QuantumScape’s ability to develop, market, and sell its batteries could be harmed.

Once commercial production of QuantumScape’s solid-state battery cells commences, its batteries may contain defects in design and manufacture that may cause them to not perform as expected or that may require repairs, recalls, and design changes. QuantumScape’s batteries are inherently complex and incorporate technology and components that have not been used for other applications and that may contain defects and errors, particularly when first introduced. QuantumScape has a limited frame of reference from which to evaluate the long-term performance of its solid-state batteries. There can be no assurance that QuantumScape will be able to detect and fix any defects in its solid-state batteries prior to the sale to potential consumers. If QuantumScape’s batteries fail to perform as expected, it could lose design wins and customers may delay deliveries, terminate further orders or initiate product recalls, each of which could adversely affect QuantumScape’s sales and brand and could adversely affect QuantumScape’s business, prospects, and results of operations.

QuantumScape future growth and success are dependent upon consumers’ willingness to adopt EVs.

QuantumScape’s growth and future demand for QuantumScape’s products is highly dependent upon the adoption by consumers of alternative fuel vehicles in general and EVs in particular. The market for new energy

 

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vehicles is still rapidly evolving, characterized by rapidly changing technologies, competitive pricing and competitive factors, evolving government regulation and industry standards, and changing consumer demands and behaviors. If the market for EVs in general does not develop as expected, or develops more slowly than expected, QuantumScape’s business, prospects, financial condition and operating results could be harmed.

QuantumScape’s future growth and success depend on its ability to sell effectively to large customers.

QuantumScape’s potential customers are manufacturers of EVs that tend to be large enterprises. Therefore, QuantumScape’s future success will depend on its ability to effectively sell its products to such large customers. Sales to these end-customers involve risks that may not be present (or that are present to a lesser extent) with sales to smaller customers. These risks include, but are not limited to, (i) increased purchasing power and leverage held by large customers in negotiating contractual arrangements with QuantumScape and (ii) longer sales cycles and the associated risk that substantial time and resources may be spent on a potential end-customer that elects not to purchase QuantumScape’s solutions.

Large organizations often undertake a significant evaluation process that results in a lengthy sales cycle. In addition, product purchases by large organizations are frequently subject to budget constraints, multiple approvals and unanticipated administrative, processing and other delays. Finally, large organizations typically have longer implementation cycles, require greater product functionality and scalability, require a broader range of services, demand that vendors take on a larger share of risks, require acceptance provisions that can lead to a delay in revenue recognition and expect greater payment flexibility. All of these factors can add further risk to business conducted with these potential customers.

QuantumScape may not be able to accurately estimate the future supply and demand for its batteries, which could result in a variety of inefficiencies in its business and hinder its ability to generate revenue. If QuantumScape fails to accurately predict its manufacturing requirements, it could incur additional costs or experience delays.

It is difficult to predict QuantumScape’s future revenues and appropriately budget for its expenses, and QuantumScape may have limited insight into trends that may emerge and affect its business. QuantumScape anticipates being required to provide forecasts of its demand to its current and future suppliers prior to the scheduled delivery of products to potential customers. Currently, there is no historical basis for making judgments on the demand for QuantumScape’s batteries or its ability to develop, manufacture, and deliver batteries, or QuantumScape’s profitability in the future. If QuantumScape overestimates its requirements, its suppliers may have excess inventory, which indirectly would increase QuantumScape’s costs. If QuantumScape underestimates its requirements, its suppliers may have inadequate inventory, which could interrupt manufacturing of its products and result in delays in shipments and revenues. In addition, lead times for materials and components that QuantumScape’s suppliers order may vary significantly and depend on factors such as the specific supplier, contract terms and demand for each component at a given time. If QuantumScape fails to order sufficient quantities of product components in a timely manner, the delivery of batteries to its potential customers could be delayed, which would harm QuantumScape’s business, financial condition and operating results.

QuantumScape’s Intellectual Property Risks

QuantumScape relies heavily on its intellectual property portfolio. If QuantumScape is unable to protect its intellectual property rights, its business and competitive position would be harmed.

QuantumScape may not be able to prevent unauthorized use of its intellectual property, which could harm its business and competitive position. QuantumScape relies upon a combination of the intellectual property protections afforded by patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as license agreements and other contractual protections, to establish, maintain and enforce rights in its proprietary technologies. In addition, QuantumScape seeks to protect its intellectual property rights

 

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through nondisclosure and invention assignment agreements with its employees and consultants, and through non-disclosure agreements with business partners and other third parties. Despite QuantumScape’s efforts to protect its proprietary rights, third parties may attempt to copy or otherwise obtain and use QuantumScape’s intellectual property. Monitoring unauthorized use of QuantumScape’s intellectual property is difficult and costly, and the steps QuantumScape has taken or will take to prevent misappropriation may not be sufficient. Any enforcement efforts QuantumScape undertakes, including litigation, could be time-consuming and expensive and could divert management’s attention, which could harm its business, results of operations and financial condition. In addition, existing intellectual property laws and contractual remedies may afford less protection than needed to safeguard QuantumScape’s intellectual property portfolio.

Patent, copyright, trademark and trade secret laws vary significantly throughout the world. A number of foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States. Therefore, QuantumScape’s intellectual property rights may not be as strong or as easily enforced outside of the United States and efforts to protect against the unauthorized use of QuantumScape’s intellectual property rights, technology and other proprietary rights may be more expensive and difficult outside of the United States. Failure to adequately protect QuantumScape’s intellectual property rights could result in its competitors using QuantumScape’s intellectual property to offer products, potentially resulting in the loss of some of QuantumScape’s competitive advantage and a decrease in its revenue which, would adversely affect its business, prospects, financial condition and operating results.

QuantumScape may need to defend itself against intellectual property infringement claims, which may be time-consuming and could cause it to incur substantial costs.

Companies, organizations or individuals, including QuantumScape’s current and future competitors, may hold or obtain patents, trademarks or other proprietary rights that would prevent, limit or interfere with QuantumScape’s ability to make, use, develop or sell its products, which could make it more difficult for QuantumScape to operate its business. From time to time, QuantumScape may receive inquiries from holders of patents or trademarks inquiring whether QuantumScape is infringing their proprietary rights and/or seek court declarations that they do not infringe upon QuantumScape’s intellectual property rights. Companies holding patents or other intellectual property rights relating to batteries, electric motors or electronic power management systems may bring suits alleging infringement of such rights or otherwise asserting their rights and seeking licenses. In addition, if QuantumScape is determined to have infringed upon a third party’s intellectual property rights, QuantumScape may be required to do one or more of the following:

 

   

cease selling, incorporating or using products that incorporate the challenged intellectual property;

 

   

pay substantial damages;

 

   

obtain a license from the holder of the infringed intellectual property right, which license may not be available on reasonable terms or at all; or

 

   

redesign its batteries.

In the event of a successful claim of infringement against QuantumScape and its failure or inability to obtain a license to the infringed technology, QuantumScape’s business, prospects, operating results and financial condition could be materially adversely affected. In addition, any litigation or claims, whether or not valid, could result in substantial costs and diversion of resources and management’s attention.

QuantumScape also licenses patents and other intellectual property from third parties, and it may face claims that its use of this intellectual property infringes the rights of others. In such cases, QuantumScape may seek indemnification from its licensors under its license contracts with them. However, QuantumScape’s rights to indemnification may be unavailable or insufficient to cover its costs and losses, depending on its use of the technology, whether it chooses to retain control over conduct of the litigation, and other factors.

 

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QuantumScape’s patent applications may not result in issued patents or its patent rights may be contested, circumvented, invalidated or limited in scope, any of which could have a material adverse effect on QuantumScape’s ability to prevent others from interfering with its commercialization of its products.

QuantumScape’s patent applications may not result in issued patents, which may have a material adverse effect on its ability to prevent others from commercially exploiting products similar to QuantumScape’s. The status of patents involves complex legal and factual questions and the breadth of claims allowed is uncertain. As a result, QuantumScape cannot be certain that the patent applications that it files will result in patents being issued, or that its patents and any patents that may be issued to QuantumScape will afford protection against competitors with similar technology. Numerous patents and pending patent applications owned by others exist in the fields in which QuantumScape has developed and is developing its technology. In addition to those who may claim priority, any of QuantumScape existing or pending patents may also be challenged by others on the basis that they are otherwise invalid or unenforceable. Furthermore, patent applications filed in foreign countries are subject to laws, rules and procedures that differ from those of the United States, and thus QuantumScape cannot be certain that foreign patent applications related to issued U.S. patents will be issued.

Even if QuantumScape’s patent applications succeed and it is issued patents in accordance with them, it is still uncertain whether these patents will be contested, circumvented, invalidated or limited in scope in the future. The rights granted under any issued patents may not provide QuantumScape with meaningful protection or competitive advantages, and some foreign countries provide significantly less effective patent enforcement than in the United States. In addition, the claims under any patents that issue from QuantumScape’s patent applications may not be broad enough to prevent others from developing technologies that are similar or that achieve results similar to QuantumScape’s. The intellectual property rights of others could also bar QuantumScape from licensing and exploiting any patents that issue from its pending applications. In addition, patents issued to QuantumScape may be infringed upon or designed around by others and others may obtain patents that it needs to license or design around, either of which would increase costs and may adversely affect its business, prospects, financial condition and operating results.

QuantumScape’s Business Risks

The battery market continues to evolve, is highly competitive, and QuantumScape may not be successful in competing in this industry or establishing and maintaining confidence in its long-term business prospects among current and future partners and customers.

The battery market in which QuantumScape competes continues to evolve and is highly competitive. To date, QuantumScape has focused its efforts on its lithium-metal solid-state battery technology, which is being designed to outperform conventional lithium-ion battery technology. However, lithium-ion battery technology has been widely adopted and QuantumScape’s current competitors have, and future competitors may have, greater resources than QuantumScape does and may also be able to devote greater resources to the development of their current and future technologies. These competitors also may have greater access to customers and may be able to establish cooperative or strategic relationships amongst themselves or with third parties that may further enhance their resources and competitive positioning. In addition, lithium-ion battery manufacturers may continue to reduce cost and expand supply of conventional batteries and therefore reduce the prospects for QuantumScape’s business or negatively impact the ability for QuantumScape to sell its products at a market-competitive price and yet at sufficient margins.

Most automotive OEMs are researching and investing in solid-state battery efforts and, in some cases, in battery development and production. There are a number of companies seeking to develop alternative approaches to solid-state battery technology, including lithium-metal batteries. QuantumScape expects competition in battery technology and EVs to intensify due to increased demand for these vehicles and a regulatory push for EVs, continuing globalization, and consolidation in the worldwide automotive industry. Developments in alternative technologies or improvements in batteries technology made by competitors may materially adversely affect the sales, pricing and gross margins of QuantumScape’s batteries. If a competing technology is developed that has

 

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superior operational or price performance, QuantumScape’s business will be harmed. Similarly, if QuantumScape fails to accurately predict and ensure that its battery technology can address customers’ changing needs or emerging technological trends, or if QuantumScape’s customers fail to achieve the benefits expected from QuantumScape’s solid-state batteries, QuantumScape’s business will be harmed.

QuantumScape must continue to commit significant resources to develop its battery technology in order to establish a competitive position, and these commitments will be made without knowing whether such investments will result in products potential customers will accept. There is no assurance QuantumScape will successfully identify new customer requirements, develop and bring its batteries to market on a timely basis, or that products and technologies developed by others will not render QuantumScape’s batteries obsolete or noncompetitive, any of which would adversely affect QuantumScape’s business and operating results.

Customers will be less likely to purchase QuantumScape’s batteries if they are not convinced that its business will succeed in the long term. Similarly, suppliers and other third parties will be less likely to invest time and resources in developing business relationships with QuantumScape if they are not convinced that QuantumScape’s business will succeed in the long term. Accordingly, in order to build and maintain its business, QuantumScape must maintain confidence among current and future partners, customers, suppliers, analysts, ratings agencies and other parties in its long-term financial viability and business prospects. Maintaining such confidence may be particularly complicated by certain factors including those that are largely outside of QuantumScape’s control, such as its limited operating history, market unfamiliarity with its products, any delays in scaling manufacturing, delivery and service operations to meet demand, competition and uncertainty regarding the future of EVs and QuantumScape’s eventual production and sales performance compared with market expectations.

If QuantumScape is unable to attract and retain key employees and qualified personnel, its ability to compete could be harmed.

QuantumScape’s success depends on its ability to attract and retain its executive officers, key employees and other qualified personnel, and its operations may be severely disrupted if it lost their services. As QuantumScape builds its brand and becomes more well known, there is increased risk that competitors or other companies will seek to hire QuantumScape personnel. None of QuantumScape’s employees are bound by a non-competition agreement. The failure to attract, integrate, train, motivate and retain these personnel could seriously harm QuantumScape’s business and prospects.

In addition, QuantumScape is highly dependent on the services of Jagdeep Singh, its Chief Executive Officer, and other senior technical and management personnel, including its executive officers, who would be difficult to replace. If Mr. Singh or other key personnel were to depart, QuantumScape may not be able to successfully attract and retain senior leadership necessary to grow its business.

QuantumScape is an early stage company with a history of financial losses and expects to incur significant expenses and continuing losses for the foreseeable future.

QuantumScape incurred a net loss of approximately $51.3 million for the year ended December 31, 2019 and an accumulated deficit of approximately $295.9 million from its inception in 2010 through the year ended December 31, 2019. QuantumScape believes that it will continue to incur operating and net losses each quarter until at least the time it begins significant production of its lithium-metal solid-state batteries, which is not expected to occur until 2024, and may occur later.

QuantumScape expects the rate at which it will incur losses to be significantly higher in future periods as it, among other things, continues to incur significant expenses in connection with the design, development and manufacturing of its batteries; and as it expands its research and development activities; invests in manufacturing capabilities; builds up inventories of components for its batteries; increases its sales and marketing activities;

 

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develops its distribution infrastructure; and increases its general and administrative functions to support its growing operations. QuantumScape may find that these efforts are more expensive than it currently anticipates or that these efforts may not result in revenues, which would further increase QuantumScape’s losses.

QuantumScape has been, and may in the future be, adversely affected by the global COVID-19 pandemic.

QuantumScape faces various risks related to epidemics, pandemics, and other outbreaks, including the recent COVID-19 pandemic. The impact of COVID-19, including changes in consumer and business behavior, pandemic fears and market downturns, and restrictions on business and individual activities, has created significant volatility in the global economy and led to reduced economic activity. The spread of COVID-19 has also impacted QuantumScape’s potential customers and suppliers by disrupting the manufacturing, delivery and overall supply chain of battery and EV manufacturers and suppliers and has led to a global decrease in battery and EV sales in markets around the world.

The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, stay-at-home or shelter-in-place orders, and business shutdowns. For example, some employees at QuantumScape’s headquarters located in San Jose, California are generally subject to a stay-at-home order from the state government. These measures have and may continue to adversely impact QuantumScape’s employees, research and development activities and operations and the operations of its suppliers, vendors and business partners, and may negatively impact its sales and marketing activities. In addition, various aspects of QuantumScape’s business cannot be conducted remotely. These measures by government authorities may remain in place for a significant period of time and they are likely to continue to adversely affect QuantumScape’s future manufacturing plans, sales and marketing activities, business and results of operations. QuantumScape may take further actions as may be required by government authorities or that it determines are in the best interests of its employees, suppliers, vendors and business partners.

The extent to which the COVID-19 pandemic continues to impact QuantumScape’s business, prospects and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating activities can resume. Even after the COVID-19 pandemic has subsided, QuantumScape may continue to experience an adverse impact to its business as a result of its global economic impact, including any recession that has occurred or may occur in the future.

There are no comparable recent events that may provide guidance as to the effect of the spread of COVID-19 and a pandemic, and, as a result, the ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain.

QuantumScape’s operating and financial results forecast relies in large part upon assumptions and analyses developed by QuantumScape. If these assumptions or analyses prove to be incorrect, QuantumScape’s actual operating results may be materially different from its forecasted results.

The projected financial and operating information appearing elsewhere in this proxy statement/prospectus/information statement reflect current estimates of future performance. Whether actual operating and financial results and business developments will be consistent with QuantumScape’s expectations and assumptions as reflected in its forecasts depends on a number of factors, many of which are outside QuantumScape’s control, including, but not limited to:

 

   

success and timing of development activity;

 

   

customer acceptance of QuantumScape’s products;

 

   

competition, including from established and future competitors;

 

   

whether QuantumScape can obtain sufficient capital to build its manufacturing facilities and sustain and grow its business;

 

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QuantumScape’s ability to manage its growth;

 

   

whether QuantumScape can manage relationships with key suppliers;

 

   

QuantumScape’s ability to retain existing key management, integrate recent hires and attract, retain and motivate qualified personnel; and

 

   

the overall strength and stability of domestic and international economies.

Unfavorable changes in any of these or other factors, most of which are beyond QuantumScape’s control, could materially and adversely affect its business, results of operations and financial results.

From time to time, QuantumScape may be involved in legal proceedings and commercial or contractual disputes, which could have an adverse impact on QuantumScape’s profitability and consolidated financial position.

QuantumScape may be involved in legal proceedings and commercial or contractual disputes that, from time to time, are significant. These are typically claims arise in the normal course of business including, without limitation, commercial or contractual disputes, including warranty claims and other disputes with potential customers and suppliers; intellectual property matters; personal injury claims; environmental issues; tax matters; and employment matters.

It is difficult to predict the outcome or ultimate financial exposure, if any, represented by these matters, and there can be no assurance that any such exposure will not be material. Such claims may also negatively affect QuantumScape’s reputation.

QuantumScape may become subject to product liability claims, which could harm its financial condition and liquidity if it is not able to successfully defend or insure against such claims.

QuantumScape may become subject to product liability claims, even those without merit, which could harm its business, prospects, operating results, and financial condition. QuantumScape faces inherent risk of exposure to claims in the event its batteries do not perform as expected or malfunction resulting in personal injury or death. QuantumScape’s risks in this area are particularly pronounced given its batteries have not yet been commercially tested or mass produced. A successful product liability claim against QuantumScape could require QuantumScape to pay a substantial monetary award. Moreover, a product liability claim could generate substantial negative publicity about QuantumScape’s batteries and business and inhibit or prevent commercialization of other future battery candidates, which would have material adverse effect on QuantumScape’s brand, business, prospects and operating results. Any insurance coverage might not be sufficient to cover all potential product liability claims. Any lawsuit seeking significant monetary damages either in excess of QuantumScape’s coverage, or outside of QuantumScape’s coverage, may have a material adverse effect on QuantumScape’s reputation, business and financial condition. QuantumScape may not be able to secure additional product liability insurance coverage on commercially acceptable terms or at reasonable costs when needed, particularly if it does face liability for its products and are forced to make a claim under its policy.

QuantumScape’s batteries and its website, systems, and data it maintains may be subject to intentional disruption, other security incidents, or alleged violations of laws, regulations, or other obligations relating to data handling that could result in liability and adversely impact its reputation and future sales.

QuantumScape expects to face significant challenges with respect to information security and maintaining the security and integrity of its systems and other systems used in its business, as well as with respect to the data stored on or processed by these systems. Advances in technology, an increased level of sophistication, and an increased level of expertise of hackers, new discoveries in the field of cryptography or others can result in a compromise or breach of the systems used in its business or of security measures used in its business to protect confidential information, personal information, and other data.

 

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The availability and effectiveness of QuantumScape’s batteries, and QuantumScape’s ability to conduct its business and operations, depend on the continued operation of information technology and communications systems, some of which QuantumScape has yet to develop or otherwise obtain the ability to use. Systems used in QuantumScape’s business, including data centers and other information technology systems, will be vulnerable to damage or interruption. Such systems could also be subject to break-ins, sabotage and intentional acts of vandalism, as well as disruptions and security incidents as a result of non-technical issues, including intentional or inadvertent acts or omissions by employees, service providers, or others. QuantumScape anticipates using outsourced service providers to help provide certain services, and any such outsourced service providers face similar security and system disruption risks as QuantumScape. Some of the systems used in QuantumScape’s business will not be fully redundant, and its disaster recovery planning cannot account for all eventualities. Any data security incidents or other disruptions to any data centers or other systems used in QuantumScape’s business could result in lengthy interruptions in its service.

QuantumScape facilities or operations could be damaged or adversely affected as a result of natural disasters and other catastrophic events.

QuantumScape’s facilities or operations could be adversely affected by events outside of its control, such as natural disasters, wars, health epidemics such as the ongoing COVID-19 pandemic, and other calamities. QuantumScape cannot assure you that any backup systems will be adequate to protect it from the effects of fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events. Any of the foregoing events may give rise to interruptions, breakdowns, system failures, technology platform failures or internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect QuantumScape’s ability to provide services.

Any financial or economic crisis, or perceived threat of such a crisis, including a significant decrease in consumer confidence, may materially and adversely affect QuantumScape’s business, financial condition, and results of operations.

In recent years, the United States and global economies suffered dramatic downturns as the result of the COVID-19 pandemic, a deterioration in the credit markets and related financial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and credit availability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have taken unprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financial markets. If the actions taken by these governments are not successful, the return of adverse economic conditions may negatively impact the demand for QuantumScape’s solid-state battery cells and may negatively impact QuantumScape’s ability to raise capital, if needed, on a timely basis and on acceptable terms or at all.

QuantumScape’s ability to utilize its net operating loss and tax credit carryforwards to offset future taxable income may be subject to certain limitations.

In general, under Section 382 of the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to use its pre-change net operating loss carryforwards, or NOLs, to offset future taxable income. The limitations apply if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a three-year period. If QuantumScape has experienced an ownership change at any time since its incorporation, New QuantumScape may already be subject to limitations on its ability to utilize QuantumScape’s existing NOLs and other tax attributes to offset taxable income or tax liability. In addition, the Business Combination and future changes in New QuantumScape’s stock ownership, which may be outside of New QuantumScape’s control, may trigger an ownership change. Similar provisions of state tax law may also apply to limit New QuantumScape’s use of accumulated state tax attributes. As a result, even if New QuantumScape earns net taxable income in the future, its ability to use its or QuantumScape’s pre-change NOL carryforwards and other tax attributes to offset

 

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such taxable income or tax liability may be subject to limitations, which could potentially result in increased future income tax liability to New QuantumScape.

There is also a risk that changes in law or regulatory changes made in response to the need for some jurisdictions to raise additional revenue to help counter the fiscal impact from the COVID-19 pandemic or for other unforeseen reasons, including suspensions on the use of net operating losses or tax credits, possibly with retroactive effect, may result in New QuantumScape and QuantumScape’s existing net operating losses or tax credits expiring or otherwise being unavailable to offset future income tax liabilities. A temporary suspension of the use of certain net operating losses and tax credits has been enacted in California, and other states may enact suspensions as well.

QuantumScape is or will be subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws, and non-compliance with such laws can subject QuantumScape to administrative, civil and criminal fines and penalties, collateral consequences, remedial measures and legal expenses, all of which could adversely affect its business, results of operations, financial condition and reputation.

QuantumScape is or will be subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and regulations in various jurisdictions in which it conducts or in the future may conduct activities, including the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act 2010, and other anti-corruption laws and regulations. The FCPA and the U.K. Bribery Act 2010 prohibit QuantumScape and its officers, directors, employees and business partners acting on its behalf, including agents, from corruptly offering, promising, authorizing or providing anything of value to a “foreign official” for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment. The FCPA also requires companies to make and keep books, records and accounts that accurately reflect transactions and dispositions of assets and to maintain a system of adequate internal accounting controls. The U.K. Bribery Act also prohibits non-governmental “commercial” bribery and soliciting or accepting bribes. A violation of these laws or regulations could adversely affect QuantumScape’s business, results of operations, financial condition and reputation. QuantumScape’s policies and procedures designed to ensure compliance with these regulations may not be sufficient and its directors, officers, employees, representatives, consultants, agents, and business partners could engage in improper conduct for which it may be held responsible.

Non-compliance with anti-corruption, anti-bribery, anti-money laundering or financial and economic sanctions laws could subject QuantumScape to whistleblower complaints, adverse media coverage, investigations, and severe administrative, civil and criminal sanctions, collateral consequences, remedial measures and legal expenses, all of which could materially and adversely affect QuantumScape’s business, results of operations, financial condition and reputation. In addition, changes in economic sanctions laws in the future could adversely impact QuantumScape’s business and investments in its common stock.

QuantumScape’s insurance coverage may not be adequate to protect it from all business risks.

QuantumScape may be subject, in the ordinary course of business, to losses resulting from products liability, accidents, acts of God, and other claims against QuantumScape, for which QuantumScape may have no insurance coverage. As a general matter, the policies that QuantumScape does have may include significant deductibles or self-insured retentions, and QuantumScape cannot be certain that its insurance coverage will be sufficient to cover all future losses or claims against it. A loss that is uninsured or which exceeds policy limits may require QuantumScape to pay substantial amounts, which could adversely affect its financial condition and operating results.

 

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QuantumScape’s Regulatory Risks

QuantumScape is subject to substantial regulation and unfavorable changes to, or failure by QuantumScape to comply with, these regulations could substantially harm its business and operating results.

QuantumScape’s batteries, and the sale of EVs and motor vehicles in general, are subject to substantial regulation under international, federal, state and local laws, including export control laws. QuantumScape expects to incur significant costs in complying with these regulations. Regulations related to the battery and EV industry and alternative energy are currently evolving and QuantumScape faces risks associated with changes to these regulations.

To the extent the laws change, QuantumScape’s products may not comply with applicable international, federal, state or local laws, which would have an adverse effect on its business. Compliance with changing regulations could be burdensome, time consuming, and expensive. To the extent compliance with new regulations is cost prohibitive, QuantumScape’s business, prospects, financial condition and operating results would be adversely affected.

Internationally, there may be laws in jurisdictions QuantumScape has not yet entered or laws it is unaware of in jurisdictions it has entered that may restrict its sales or other business practices. The laws in this area can be complex, difficult to interpret and may change over time. Continued regulatory limitations and other obstacles that may interfere with QuantumScape’s ability to commercialize its products could have a negative and material impact on its business, prospects, financial condition and results of operations.

QuantumScape is subject to requirements relating to environmental and safety regulations and environmental remediation matters which could adversely affect its business, results of operation and reputation.

QuantumScape is subject to numerous federal, state and local environmental laws and regulations governing, among other things, solid and hazardous waste storage, treatment and disposal, and remediation of releases of hazardous materials. There are significant capital, operating and other costs associated with compliance with these environmental laws and regulations. Environmental laws and regulations may become more stringent in the future, which could increase costs of compliance or require QuantumScape to manufacture with alternative technologies and materials.

Federal, state and local authorities also regulate a variety of matters, including, but not limited to, health, safety and permitting in addition to the environmental matters discussed above. New legislation and regulations may require QuantumScape to make material changes to its operations, resulting in significant increases to the cost of production.

QuantumScape’s manufacturing process will have hazards such as but not limited to hazardous materials, machines with moving parts, and high voltage and/or high current electrical systems typical of large manufacturing equipment and related safety incidents. There may be safety incidents that damage machinery or product, slow or stop production, or harm employees. Consequences may include litigation, regulation, fines, increased insurance premiums, mandates to temporarily halt production, workers’ compensation claims, or other actions that impact the company brand, finances, or ability to operate.

Risks related to Ownership of Common Stock of QuantumScape

QuantumScape’s business model of manufacturing solid-state batteries is capital-intensive, and QuantumScape may not be able to raise additional capital on attractive terms, if at all, which could be dilutive to stockholders. If QuantumScape cannot raise additional capital when needed, its operations and prospects could be materially and adversely affected.

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result of the capital-intensive nature of QuantumScape’s business, it can be expected to continue to sustain substantial operating expenses without generating sufficient revenues to cover expenditures. Over time, QuantumScape expects that it will need to raise additional funds, including through entry into new or extending existing joint venture arrangements, through the issuance of equity, equity-related or debt securities or through obtaining credit from financial institutions to fund, together with QuantumScape’s principal sources of liquidity, ongoing costs such as research and development relating to its batteries, the construction of large factories, any significant unplanned or accelerated expenses, and new strategic investments. QuantumScape cannot be certain that additional capital will be available on attractive terms, if at all, when needed, which could be dilutive to stockholders, and its financial condition, results of operations, business and prospects could be materially and adversely affected.

Risks Related to Kensington

New QuantumScape may redeem your unexpired Kensington Warrants prior to their exercise at a time that is disadvantageous to you, thereby making your Kensington Warrants worthless.

New QuantumScape will have the ability to redeem outstanding Kensington Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of Kensington Class A Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date New QuantumScape sends the notice of redemption to Kensington Warrant holders and provided certain other conditions are met. If and when the Kensington Warrants become redeemable by New QuantumScape, New QuantumScape may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws. As a result, New QuantumScape may redeem the Kensington Warrants as set forth above even if the holders are otherwise unable to exercise the Kensington Warrants. Redemption of the outstanding Kensington Warrants could force you (i) to exercise your Kensington Warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your Kensington Warrants at the then-current market price when you might otherwise wish to hold your Kensington Warrants or (iii) to accept the nominal redemption price which, at the time the outstanding Kensington Warrants are called for redemption, Kensington expects would be substantially less than the market value of your Kensington Warrants. None of the Private Warrants will be redeemable by New QuantumScape so long as they are held by the Sponsor or its permitted transferees.

In addition, Kensington has the ability to redeem outstanding Kensington Warrants ninety days after they become exercisable for $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their Kensington Warrants prior to redemption for a number of Kensington Class A Common Stock determined based on the redemption date and the fair market value of Kensington Class A Common Stock and provided certain other conditions are met. Kensington would redeem the Kensington Warrants in this manner when Kensington believes it is in Kensington’s best interest to update its capital structure to remove the Kensington Warrants and pay fair market value to the Kensington Warrant holders. Kensington can also redeem the Kensington Warrants for Kensington Common Stock when the Kensington Class A Common Stock is trading at a price starting at $10, which is below the exercise price of $11.50, because it will provide certainty with respect to Kensington’s capital structure and cash position while providing Kensington Warrant holders with fair market value in the form of shares of Kensington Class A Common Stock. If Kensington chooses to redeem the Kensington Warrants when the Kensington Class A Common Stock is trading at a price below the exercise price of the Kensington Warrants, this could result in the Kensington Warrant holders receiving fewer shares of Kensington Class A Common Stock than they would have received if they had chosen to wait to exercise their Kensington Warrants for shares of Kensington Class A Common Stock if and when the Kensington Class A Common Stock trades at a price higher than the exercise price of $11.50. Any such redemption may have similar consequences to a cash redemption described above. In addition, such redemption may occur at a time when the Kensington Warrants are “out-of-the-money,” in which case you would lose any potential embedded value from a subsequent increase in the value of the Kensington

 

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Class A Common Stock had your Kensington Warrants remained outstanding. Finally, this redemption feature provides a ceiling to the value of your Kensington Warrants since it locks in the redemption price in the number of Kensington Class A Common Stock to be received if Kensington chooses to redeem the Kensington Warrants for Kensington Common Stock.

We will require Public Stockholders who wish to redeem their shares of Kensington Class A Common Stock in connection with the Business Combination to comply with specific requirements for redemption that may make it more difficult for them to exercise their redemption rights prior to the deadline for exercising their rights.

We will require the Public Stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to Kensington’s transfer agent prior to the expiration date set forth in the tender offer documents mailed to such holders, or in the event Kensington distributes proxy materials, up to two business days prior to the vote on the proposal to approve the Business Combination, or to deliver their shares to the transfer agent electronically using DTC’s Deposit/Withdrawal At Custodian System (“DWAC System”), at the holder’s option. In order to obtain a physical stock certificate, a stockholder’s broker and/or clearing broker, DTC and Kensington’s transfer agent will need to act to facilitate this request. It is Kensington’s understanding that stockholders should generally allot at least one week to obtain physical certificates from the transfer agent. However, because Kensington does not have any control over this process or over the brokers or DTC, it may take significantly longer than one week to obtain a physical stock certificate. While Kensington has been advised that it takes a short time to deliver shares through the DWAC System, this may not be the case. Under Kensington’s bylaws, Kensington is required to provide at least 10 days advance notice of any stockholder meeting, which would be the minimum amount of time a stockholder would have to determine whether to exercise redemption rights. Accordingly, if it takes longer than Kensington anticipates for stockholders to deliver their shares, stockholders who wish to redeem may be unable to meet the deadline for exercising their redemption rights and thus may be unable to redeem their shares. In the event that a stockholder fails to comply with the various procedures that must be complied with in order to validly tender or redeem Public Shares, its shares may not be redeemed.

Additionally, despite Kensington’s compliance with the proxy rules, stockholders may not become aware of the opportunity to redeem their shares.

If a Public Stockholder fails to receive notice of Kensington’s offer to redeem their shares of Kensington Class A Common Stock in connection with the Business Combination, or fails to comply with the procedures for tendering its share of Kensington Class A Common Stock, such shares may not be redeemed.

We will comply with the tender offer rules or proxy rules, as applicable, when conducting redemptions in connection with the initial business combination. Despite Kensington’s compliance with these rules, if a stockholder fails to receive Kensington’s tender offer or proxy materials, as applicable, such stockholder may not become aware of the opportunity to redeem its shares. In addition, the tender offer documents or proxy materials, as applicable, that Kensington will furnish to holders of its Public Shares in connection with the initial business combination will describe the various procedures that must be complied with in order to validly tender or redeem Public Shares. For example, Kensington may require Kensington’s Public Stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to Kensington’s transfer agent prior to the date set forth in the tender offer documents mailed to such holders, or up to two business days prior to the vote on the proposal to approve the Business Combination in the event Kensington distributes proxy materials, or to deliver their shares to the transfer agent electronically. In the event that a stockholder fails to comply with these or any other procedures, its shares may not be redeemed.

 

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There is uncertainty regarding the federal income tax consequences of the redemption to the holders of Kensington Class A Common Stock.

There is some uncertainty regarding the federal income tax consequences to holders of Kensington Class A Common Stock who exercise their redemption rights. The uncertainty of tax consequences relates primarily to the individual circumstances of the taxpayer and include whether the redemption results in a dividend, taxable as ordinary income, or a sale, taxable as capital gain. Whether the redemption qualifies for sale treatment, resulting in taxation as capital gain rather than ordinary income, will depend largely on whether the holder owns (or is deemed to own) any shares of Kensington Class A Common Stock following the redemption, and if so, the total number of shares of Kensington Class A Common Stock held by the holder both before and after the redemption relative to all shares of Kensington Class A Common Stock outstanding both before and after the redemption. The redemption generally will be treated as a sale, rather than a dividend, if the redemption (i) is “substantially disproportionate” with respect to the holder, (ii) results in a “complete termination” of the holder’s interest in Kensington or (iii) is “not essentially equivalent to a dividend” with respect to the holder. Due to the personal and subjective nature of certain of such tests and the absence of clear guidance from the Internal Revenue Services (“IRS”), there is uncertainty as to whether a holder who elects to exercise his, her or its redemption rights will be taxed on any gain from the redemption as ordinary income or capital gain. See the section entitled “Certain U.S. Federal Income Tax Considerations of the Redemption and the Business Combination.”

Kensington does not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for Kensington to complete the Business Combination even if a substantial majority of Kensington’s stockholders do not agree.

The Existing Certificate of Incorporation does not provide a specified maximum redemption threshold, except that Kensington will only redeem its Public Shares so long as (after such redemption) Kensington’s net tangible assets will be at least $5,000,001 either immediately prior to or upon consummation of its initial business combination and after payment of underwriters’ fees and commissions (so that Kensington does not then become subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to the Business Combination. As a result, Kensington may be able to complete the Business Combination even if a substantial majority of the Public Stockholders do not agree with the Business Combination and have redeemed their shares. In the event the aggregate cash consideration Kensington would be required to pay for all shares of Kensington Class A Common Stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the Business Combination exceed the aggregate amount of cash available to Kensington, Kensington will not complete the Business Combination or redeem any shares, all shares of Kensington Class A Common Stock submitted for redemption will be returned to the holders thereof, and Kensington instead may search for an alternate business combination.

If a stockholder or a “group” of stockholders are deemed to hold in excess of 15% of the Kensington Class A Common Stock, such stockholder or group will lose the ability to redeem all such shares in excess of 15% of the Kensington Class A Common Stock.

The Existing Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the shares sold in the IPO, which Kensington refers to as the “Excess Shares,” without Kensington’s prior written consent. However, the Existing Certificate of Incorporation does not restrict Kensington stockholders’ ability to vote all of their shares (including Excess Shares) for or against Kensington’s initial business combination. The inability of a stockholder to redeem the Excess Shares will reduce its influence over Kensington’s ability to complete its initial business combination and such stockholder could suffer a material loss on its investment in Kensington if it sells such Excess Shares in open market transactions. Additionally, a stockholder will not receive redemption distributions with respect to the Excess Shares if

 

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Kensington completes its initial business combination. And as a result, such stockholder will continue to hold that number of shares exceeding 15% and, in order to dispose of such shares, would be required to sell its stock in open market transactions, potentially at a loss.

There can be no assurance that New QuantumScape’s Class A Common Stock will be approved for listing on the NYSE or that New QuantumScape will be able to comply with the continued listing standards of the NYSE.

In connection with the Closing, Kensington intends to list the New QuantumScape Class A Common Stock and warrants on the NYSE under the symbols “QS” and “QS.W,” respectively. New QuantumScape’s continued eligibility for listing may depend on the number of Kensington’s shares that are redeemed. If, after the Business Combination, the NYSE delists New QuantumScape’s shares from trading on its exchange for failure to meet the listing standards and Kensington is not able to list such securities on another national securities exchange, Kensington expects such securities could be quoted on an over-the-counter market. If this were to occur, New QuantumScape and its stockholders could face significant material adverse consequences including:

 

   

a limited availability of market quotations for New QuantumScape’s securities;

 

   

reduced liquidity for New QuantumScape’s securities;

 

   

a determination that the New QuantumScape Class A Common Stock is a “penny stock” which will require brokers trading the New QuantumScape Class A Common Stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for shares of New QuantumScape Class A Common Stock;

 

   

a limited amount of news and analyst coverage; and

 

   

a decreased ability to issue additional securities or obtain additional financing in the future.

Kensington’s Sponsor, officers, directors and independent directors have agreed to vote in favor of the Business Combination, regardless of how the Public Stockholders vote.

Our Sponsor, officers, directors and independent directors have agreed to vote any shares of Kensington Common Stock held by them in favor of the Business Combination. Kensington expects that Kensington’s Sponsor, officers, directors and independent directors (and their permitted transferees) will own at least approximately 20% of the outstanding shares of Kensington Common Stock at the time of any such stockholder vote. Accordingly, it is more likely that the necessary stockholder approval will be received than would be the case if such persons agreed to vote their Sponsor Shares in accordance with the majority of the votes cast by the Public Stockholders.

QuantumScape’s management has limited experience in operating a public company.

QuantumScape’s executive officers have limited experience in the management of a publicly traded company. QuantumScape’s management team may not successfully or effectively manage its transition to a public company that will be subject to significant regulatory oversight and reporting obligations under federal securities laws. Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities which will result in less time being devoted to the management and growth of New QuantumScape. QuantumScape may not have adequate personnel with the appropriate level of knowledge, experience, and training in the accounting policies, practices or internal controls over financial reporting required of public companies in the United States. The development and implementation of the standards and controls necessary for New QuantumScape to achieve the level of accounting standards required of a public company in the United States may require costs greater than expected. It is possible that New QuantumScape will be required to expand its employee base and hire additional employees to support its operations as a public company which will increase its operating costs in future periods.

 

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The dual class structure of New QuantumScape’s Common Stock has the effect of concentrating voting control with the current holders of QuantumScape Class B Common Stock. This will limit or preclude your ability to influence corporate matters, including the outcome of important transactions, including a change in control.

Shares of New QuantumScape Class B Common Stock will have 10 votes per share, while shares of New QuantumScape Class A Common Stock have one vote per share. Although no one holder or group of holders will control more than 30% of the voting power of New QuantumScape’s capital stock, the holders of the QuantumScape Class B Common Stock will control approximately 87.78% of the voting power of New QuantumScape’s capital stock and will collectively be able to control matters submitted to its stockholders for approval, including the election of directors, amendments of its organizational documents and any merger, consolidation, sale of all or substantially all of New QuantumScape’s assets or other major corporate transactions. Even though these holders are not party to any agreement that requires them to vote together, they may have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. This concentrated control may have the effect of delaying, preventing or deterring a change in control of New QuantumScape, could deprive its stockholders of an opportunity to receive a premium for their capital stock as part of a sale of New QuantumScape, and might ultimately affect the market price of shares of New QuantumScape Class A Common Stock. For information about New QuantumScape’s dual class structure, see the section entitled “Description of Kensington’s Securities.”

New QuantumScape’s dual class structure may depress the trading price of New QuantumScape Class A Common Stock.

New QuantumScape cannot predict whether its dual class structure will result in a lower or more volatile market price of New QuantumScape Class A Common Stock or in adverse publicity or other adverse consequences. For example, certain index providers have announced restrictions on including companies with multiple-class share structures in certain of their indexes. S&P Dow Jones and FTSE Russell have announced changes to their eligibility criteria for inclusion of shares of public companies on certain indices, including the S&P 500, pursuant to which companies with multiple classes of shares of common stock are excluded. In addition, several stockholder advisory firms have announced their opposition to the use of multiple class structures. As a result, the dual class structure of New QuantumScape Common Stock may cause stockholder advisory firms to publish negative commentary about New QuantumScape’s corporate governance practices or otherwise seek to cause New QuantumScape to change its capital structure. Any such exclusion from indices or any actions or publications by stockholder advisory firms critical of New QuantumScape’s corporate governance practices or capital structure could adversely affect the value and trading market of New QuantumScape Class A Common Stock.

Kensington’s ability to successfully effect the Business Combination and New QuantumScape’s ability to successfully operate the business thereafter will be largely dependent upon the efforts of certain key personnel of QuantumScape. The loss of such key personnel could negatively impact the operations and financial results of the combined business.

Kensington’s ability to successfully effect the Business Combination and New QuantumScape’s ability to successfully operate the business following the Closing is dependent upon the efforts of certain key personnel of QuantumScape. Although Kensington expect key personnel to remain with New QuantumScape following the Business Combination, there can be no assurance that they will do so. It is possible that QuantumScape will lose some key personnel, the loss of which could negatively impact the operations and profitability of New QuantumScape. Furthermore, following the Closing, certain of the key personnel of QuantumScape may be unfamiliar with the requirements of operating a company regulated by the SEC, which could cause New QuantumScape to have to expend time and resources helping them become familiar with such requirements.

 

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The Kensington Board did not obtain a fairness opinion in determining whether or not to proceed with the Business Combination and, as a result, the terms may not be fair from a financial point of view to the Public Stockholders.

In analyzing the Business Combination, the Kensington Board conducted significant due diligence on QuantumScape. For a complete discussion of the factors utilized by the Kensington Board in approving the Business Combination, see the section entitled, “The Business Combination—Kensington’s Board of Directors’ Reasons for the Approval of the Business Combination.” The Kensington Board believes because of the financial skills and background of its directors, it was qualified to conclude that the Business Combination was fair from a financial perspective to its stockholders and that QuantumScape’s fair market value was at least 80% of the value of the Trust Account (excluding any taxes payable on interest earned).

Notwithstanding the foregoing, the Kensington Board did not obtain a fairness opinion to assist it in its determination. Accordingly, the Kensington Board may be incorrect in its assessment of the Business Combination.

Kensington’s Sponsor, directors, officers, advisors or their affiliates may enter into certain transactions, including purchasing shares or warrants from the public, which may influence the outcome of the Business Combination and reduce the public “float” of the Kensington Class A Common Stock.

Kensington’s Sponsor, directors, officers, advisors or their affiliates may purchase Public Shares or Public Warrants or a combination thereof in privately negotiated transactions or in the open market either prior to or following the Closing, although they are under no obligation to do so. Such a purchase may include a contractual acknowledgement that such stockholder, although still the record holder of Kensington’s shares is no longer the beneficial owner thereof and therefore agrees not to exercise his, her or its redemption rights. In the event that Kensington’s Sponsor, directors, officers, advisors or their affiliates purchase shares in privately negotiated transactions from Public Stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. Additionally, at any time at or prior to the Business Combination, subject to applicable securities laws (including with respect to material nonpublic information), Kensington’s Sponsor, directors, officers, advisors or their affiliates may enter into transactions with investors and others to provide them with incentives to acquire Public Shares, vote their Public Shares in favor of the Business Combination or not redeem their Public Shares. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. The purpose of any such transaction could be to (a) vote such shares in favor of the Business Combination and thereby increase the likelihood of obtaining stockholder approval of the Business Combination, or (b) reduce the number of Kensington Warrants outstanding or to vote such Kensington Warrants on any matters submitted to the Kensington Warrant holders for approval in connection with the Business Combination, where it appears that such requirement would otherwise not be met. This may result in the Closing that may not otherwise have been possible.

In addition, if such purchases are made, the public “float” of Kensington Class A Common Stock or Kensington Warrants and the number of beneficial holders of Kensington’s securities may be reduced, possibly making it difficult to obtain or maintain the quotation, listing or trading of Kensington’s securities on a national securities exchange.

The Existing Certificate of Incorporation requires, to the fullest extent permitted by law, that derivative actions brought in Kensington’s name, actions against Kensington’s directors, officers, other employees or stockholders for breach of fiduciary duty and other similar actions be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel, which may have the effect of discouraging lawsuits against Kensington’s directors, officers, other employees or stockholders.

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stockholders for breach of fiduciary duty and other similar actions be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel except any action (A) as to which the Court of Chancery in the State of Delaware determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, (C) for which the Court of Chancery does not have subject matter jurisdiction, or (D) any action arising under the Securities Act, as to which the Court of Chancery and the federal district court for the District of Delaware shall have concurrent jurisdiction. Any person or entity purchasing or otherwise acquiring any interest in shares of Kensington’s capital stock is deemed to have notice of and consented to the forum provisions in the Existing Certificate of Incorporation. This choice of forum provision may make it more costly for a stockholder to bring a claim, and it may also limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with Kensington or any of its directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims, although Kensington’s stockholders cannot waive Kensington’s compliance with federal securities laws and the rules and regulations thereunder. Alternatively, if a court were to find the choice of forum provision contained in the Existing Certificate of Incorporation invalid, Kensington may incur additional costs associated with resolving such action in other jurisdictions, which could harm Kensington’s business, operating results and financial condition.

The Existing Certificate of Incorporation provides that the exclusive forum provision will be applicable to the fullest extent permitted by applicable law. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.

If third parties bring claims against Kensington, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share.

Kensington’s placing of funds in the Trust Account may not protect those funds from third-party claims against Kensington. Although Kensington has sought to have all vendors, service providers, prospective target businesses and other entities with which it does business execute agreements with Kensington waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of the Public Stockholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the Trust Account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against Kensington’s assets, including the funds held in the Trust Account. If any third party refuses to execute an agreement waiving such claims to the monies held in the Trust Account, Kensington’s management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to Kensington than any alternative. Making such a request of potential target businesses may make Kensington’s acquisition proposal less attractive to them and, to the extent prospective target businesses refuse to execute such a waiver, it may limit the field of potential target businesses that Kensington might pursue. Marcum LLP, Kensington’s independent registered public accounting firm, will not execute agreements with Kensington waiving such claims to the monies held in the trust account.

Examples of possible instances where Kensington may engage a third party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no

 

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guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with Kensington and will not seek recourse against the Trust Account for any reason. Upon redemption of the Public Shares, if Kensington has not completed its initial business combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with its initial business combination, Kensington will be required to provide for payment of claims of creditors that were not waived that may be brought against Kensington within the 10 years following redemption. Accordingly, the per share redemption amount received by Public Stockholders could be less than the $10.00 per share initially held in the Trust Account, due to claims of such creditors.

The Sponsor has agreed that it will be liable to Kensington if and to the extent any claims by a third party (except for Kensington’s independent registered public accounting firm) for services rendered or products sold to us, or by a prospective target business with which Kensington has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.00 per public share or (ii) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes. This liability will not apply with respect to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under Kensington’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, then the Sponsor will not be responsible to the extent of any liability for such third-party claims. Kensington has not independently verified whether the Sponsor, which is a newly formed entity, has sufficient funds to satisfy its indemnity obligations and believes that the Sponsor’s only assets are securities of Kensington. Kensington has not asked the Sponsor to reserve for such indemnification obligations. Therefore, Kensington cannot assure you that the Sponsor would be able to satisfy those obligations. As a result, if any such claims were successfully made against the Trust Account, the funds available for Kensington’s initial business combination and redemptions could be reduced to less than $10.00 per public share. In such event, Kensington may not be able to complete its initial business combination, and its stockholders would receive such lesser amount per Public Share in connection with any redemption of their Public Shares. None of Kensington’s officers will indemnify Kensington for claims by third parties including, without limitation, claims by vendors and prospective target businesses.

Legal proceedings in connection with the business combination, the outcomes of which are uncertain, could delay or prevent the completion of the business combination.

On October 2, 2020, a putative class action lawsuit was filed in the Supreme Court of the State of New York by a purported Kensington stockholder in connection with the Business Combination: Sanchez v. Kensington Capital Acquisition Corp., et al., Index No. 654941/2020 (Sup. Ct. N.Y. Cnty.). The complaint names Kensington and certain current and former members of the Kensington Board as defendants. The complaint alleges, among other things, breach of fiduciary duty claims against the Kensington Board in connection with the Business Combination. The complaint also alleges that this proxy statement/prospectus/information statement is misleading and/or omits material information concerning the Business Combination. The complaint generally seeks, among other things, injunctive relief and an award of attorneys’ fees. Additionally, on October 12, 2020, Kensington received a letter from attorneys representing a different purported Kensington stockholder demanding certain “corrective disclosures” be made in this proxy statement/prospectus/information statement. Additional lawsuits may be filed against Kensington or its directors and officers in connection with the Business Combination. Defending such additional lawsuits could require Kensington to incur significant costs and draw the attention of Kensington’s management team away from the Business Combination. Further, the defense or settlement of any lawsuit or claim that remains unresolved at the Closing may adversely affect the combined company’s business, financial condition, results of operations and cash flows. Such legal proceedings could delay or prevent the Closing from occuring within the contemplated timeframe.

 

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Public Stockholders will not have any rights or interests in funds from the Trust Account, except under certain limited circumstances. To liquidate their investment, therefore, Public Stockholders may be forced to sell their Public Shares or Public Warrants, potentially at a loss.

Public Stockholders will be entitled to receive funds from the Trust Account only upon the earliest to occur of: (a) the consummation of Kensington’s initial business combination, and then only in connection with those shares of Kensington Class A Common Stock that such Public Stockholder elected to redeem, subject to the limitations described herein, (b) the redemption of any Public Shares properly submitted in connection with a stockholder vote to amend Kensington’s amended and restated certificate of incorporation (i) to modify the substance or timing of Kensington’s obligation to allow redemption in connection with its initial business combination or to redeem 100% of the Public Shares if Kensington does not complete its initial business combination within 24 months from the closing of the IPO or (ii) with respect to any other provisions relating to stockholders’ rights or pre-initial business combination activity and (c) the redemption of the Public Shares if Kensington has not completed its initial business combination within 24 months from the closing of the IPO, subject to applicable law and as further described herein. In addition, if Kensington has not completed an initial business combination within the allocated time period for any reason, compliance with Delaware law may require that Kensington submit a plan of dissolution to its then-existing stockholders for approval prior to the distribution of the proceeds held in the Trust Account. In that case, Public Stockholders may be forced to wait beyond the end of such period before they receive funds from the Trust Account. In no other circumstances will a stockholder have any right or interest of any kind to the funds in the Trust Account. Holders of Kensington Warrants will not have any right to the proceeds held in the Trust Account with respect to the Kensington Warrants. Accordingly, to liquidate their investment, the Public Stockholders may be forced to sell their Public Shares or Public Warrants, potentially at a loss.

Kensington’s independent directors may decide not to enforce the indemnification obligations of the Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to the Public Stockholders.

In the event that the proceeds in the Trust Account are reduced below the lesser of (i) $10.00 per public share or (ii) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes, and the Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, Kensington’s independent directors would determine whether to take legal action against the Sponsor to enforce its indemnification obligations. While Kensington currently expects that its independent directors would take legal action on Kensington’s behalf against the Sponsor to enforce its indemnification obligations to Kensington, it is possible that Kensington’s independent directors in exercising their business judgment may choose not to do so if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. If Kensington’s independent directors choose not to enforce these indemnification obligations, the amount of funds in the Trust Account available for distribution to the Public Stockholders may be reduced below $10.00 per share.

Kensington’s stockholders may be held liable for claims by third parties against Kensington to the extent of distributions received by them upon redemption of their shares.

Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of the Trust Account distributed to the Public Stockholders upon the redemption of the Public Shares in the event Kensington does not complete the initial business combination within the required time period may be considered a liquidating distribution under Delaware law. If a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the

 

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corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. However, it is Kensington’s intention to redeem the Public Shares as soon as reasonably possible following the 24th month from the closing of the IPO (or the end of any Extension Period) in the event Kensington does not complete the initial business combination and, therefore, Kensington does not intend to comply with the foregoing procedures.

Because Kensington will not be complying with Section 280, Section 281(b) of the DGCL requires Kensington to adopt a plan, based on facts known to Kensington at such time that will provide for Kensington’s payment of all existing and pending claims or claims that may be potentially brought against Kensington within the 10 years following its dissolution. However, because Kensington is a blank check company, rather than an operating company, and Kensington’s operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from Kensington’s vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. If Kensington’s plan of distribution complies with Section 281(b) of the DGCL, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would likely be barred after the third anniversary of the dissolution. Kensington cannot assure you that it will properly assess all claims that may be potentially brought against us. As such, Kensington’s stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of Kensington’s stockholders may extend beyond the third anniversary of such date. Furthermore, if the pro rata portion of the Trust Account distributed to Kensington’s Public Stockholders upon the redemption of the Public Shares in the event Kensington does not complete the initial business combination within the required time period is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution.

If, after Kensington distributes the proceeds in the Trust Account to Kensington’s Public Stockholders, Kensington files a bankruptcy petition or an involuntary bankruptcy petition is filed against Kensington that is not dismissed, a bankruptcy court may seek to recover such proceeds, and Kensington and the Kensington Board may be exposed to claims of punitive damages.

If, after Kensington distributes the proceeds in the Trust Account to Kensington’s Public Stockholders, Kensington files a bankruptcy petition or an involuntary bankruptcy petition is filed against Kensington that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts received by Kensington’s stockholders. In addition, the Kensington Board may be viewed as having breached its fiduciary duty to Kensington’s creditors and/or having acted in bad faith, by paying Public Stockholders from the Trust Account prior to addressing the claims of creditors, thereby exposing itself and Kensington to claims of punitive damages. If, before distributing the proceeds in the trust account to Kensington’s public stockholders, Kensington files a bankruptcy petition or an involuntary bankruptcy petition is filed against Kensington that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of Kensington’s stockholders and the per-share amount that would otherwise be received by Kensington’s stockholders in connection with Kensington’s liquidation may be reduced.

 

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If, before distributing the proceeds in the Trust Account to Kensington’s Public Stockholders, Kensington files a bankruptcy petition or an involuntary bankruptcy petition is filed against it that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in Kensington’s bankruptcy estate and subject to the claims of third parties with priority over the claims of Kensington’s stockholders. To the extent any bankruptcy claims deplete the Trust Account, the per-share amount that would otherwise be received by Kensington’s stockholders in connection with Kensington’s liquidation may be reduced.

If, before distributing the proceeds in the Trust Account to Kensington’s Public Stockholders, Kensington files a bankruptcy petition or an involuntary bankruptcy petition is filed against Kensington that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in Kensington’s bankruptcy estate and subject to the claims of third parties with priority over the claims of Kensington’s stockholders. To the extent any bankruptcy claims deplete the Trust Account, the per-share amount that would otherwise be received by Kensington’s stockholders in connection with Kensington’s liquidation may be reduced.

When considering the Kensington Board’s recommendation that Kensington’s stockholders vote in favor of the approval of the Business Combination Proposal, Kensington’s stockholders should be aware that certain of Kensington’s Sponsor, executive officers and directors have interests in the Business Combination that may be different from, or in addition to, the interests of Kensington’s stockholders. These interests include:

 

   

the beneficial ownership of the Sponsor of an aggregate of 5,750,000 Sponsor Shares and 6,575,000 Private Warrants, which shares and warrants would become worthless if Kensington does not complete a business combination within the applicable time period, as the Sponsor has waived any right to redemption with respect to these shares. The Sponsor paid an aggregate of $25,000 for the Sponsor Shares and $6,575,000 for the Private Warrants. Such shares and warrants have an aggregate market value of approximately $81,305,000 and $22,157,750, respectively, based on the closing price of the Kensington Class A Common Stock and Public Warrants of $14.14 and $3.37, respectively, on the NYSE on November 11, 2020;

 

   

Justin Mirro, Kensington’s Chief Executive Officer and Chairman is the managing member of the managing member of the Sponsor. Consequently, he may be deemed the beneficial owner of the 5,750,000 Sponsor Shares and 6,575,000 Private Warrants and to have voting and dispositive control over such securities. Mr. Mirro disclaims beneficial ownership of any securities other than to the extent he may have a pecuniary interest therein, directly or indirectly. Each of Kensington’s other officers and directors are non-managing members of the Sponsor;

 

   

the Sponsor has made a loan of $75,000 to Kensington; the Sponsor has informed Kensington that the Sponsor intends to convert the loan into 75,000 warrants on the same terms as the Private Warrants (as contemplated by the warrant agreement pursuant to which the Private Warrants were issued) at the same time the Business Combination is completed and for such warrants to be issued to Justin Mirro, who had advanced such amount to the Sponsor in order for the loan to be made. Such warrants have an aggregate market value of approximately $252,750 based on the closing price of the Public Warrants of $3.37 on the NYSE on November 11, 2020;

 

   

the Sponsor and Kensington’s directors and executive officers will not receive reimbursement for any out-of-pocket expenses incurred by them on Kensington’s behalf incident to identifying, investigating and completing a business combination to the extent such expenses exceed the amount not required to be retained in the Trust Account, unless a business combination is consummated. As of October 31, 2020, the Sponsor and Kensington’s directors and executive officers and their respective affiliates had incurred approximately $32,000 of such reimburseable out-of-pocket expenses;

 

   

the anticipated continuation of Justin Mirro, Kensington’s Chairman and Chief Executive Officer, as a director of New QuantumScape following the Closing;

 

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DEHC, an affiliate of Daniel Huber, Kensington’s Chief Financial Officer and Secretary and Simon Boag, Kensington’s Chief Technology Officer, entered into services agreements with Kensington to provide administrative and other services as may be reasonably requested by Kensington for one year after the Closing in order to assist it in connection with the post-closing integration of New QuantumScape. In consideration of the agreements by DEHC and Mr. Boag to provide such services, Kensington agreed to pay each of them $240,000 at the Closing. The foregoing amounts are subject to recoupment by Kensington in the event DEHC or Mr. Boag, as applicable, fails to satisfy its obligations under the agreements; and

 

   

the continued indemnification of current directors and officers of Kensington and the continuation of directors’ and officers’ liability insurance after the Business Combination.

These interests may influence Kensington’s directors in making their recommendation that you vote in favor of the Business Combination Proposal, and the transactions contemplated thereby.

We may amend the terms of the Kensington Warrants in a manner that may be adverse to holders of Public Warrants with the approval by the holders of at least 50% of the then outstanding Public Warrants. As a result, the exercise price of your Kensington Warrants could be increased, the exercise period could be shortened and the number of shares of Kensington Class A Common Stock purchasable upon exercise of a Kensington Warrant could be decreased, all without your approval.

The Kensington Warrants were issued in registered form under the Kensington Warrant Agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The Kensington Warrant Agreement provides that the terms of the Kensington Warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision but requires the approval by the holders of at least 50% of the then outstanding Public Warrants to make any change that adversely affects the interests of the registered holders of Public Warrants and, solely with respect to any amendment to the terms of the Private Warrants or working capital warrants or any provision of the Kensington Warrant Agreement with respect to the Private Warrants or working capital warrants, 50% of the number of the then outstanding Private Warrants or working capital warrants, as applicable. Accordingly, Kensington may amend the terms of the Public Warrants in a manner adverse to a holder if holders of at least 50% of the then outstanding Public Warrants approve of such amendment. Although Kensington’s ability to amend the terms of the Public Warrants with the consent of at least 50% of the then outstanding Public Warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the Kensington Warrants, convert the Kensington Warrants into cash or stock, shorten the exercise period or decrease the number of shares of Kensington Class A Common Stock issuable upon exercise of a Kensington Warrant.

The issuance of shares in the Business Combination will dilute the interest of Kensington’s stockholders.

The Proposed Certificate of Incorporation authorizes two classes of New QuantumScape Common Stock, New QuantumScape Class A Common Stock and New QuantumScape Class B Common Stock. Holders of New QuantumScape Class A Common Stock will be entitled to one vote per share and holders of New QuantumScape Class B Common Stock will be entitled to ten votes per share. The Proposed Certificate of Incorporation authorizes the issuance of up to 1,000,000,000 shares of New QuantumScape Class A Common Stock, 250,000,000 shares of New QuantumScape Class B Common Stock and 100,000,000 shares of New QuantumScape Preferred Stock, $0.0001 par value per share.

As disclosed in the section entitled “Summary of the Proxy Statement/Prospectus/Information Statement-Ownership of New QuantumScape After the Closing,” it is anticipated that, upon the Closing and subject to the assumptions disclosed in that section, there will be approximately 219,276,744 shares of New QuantumScape Class A Common Stock and 157,511,179 shares of New QuantumScape Class B Common Stock outstanding. Of these shares:

 

   

the Public Stockholders will own 23,000,000 shares of New QuantumScape Class A Common Stock, representing approximately 6.10% of the total shares then outstanding in the aggregate and

 

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approximately 1.28% of the vote (upon exercise of QuantumScape’s options or other equity-based awards, restricted stock units and warrants, Public Stockholders will own 23,000,000 shares of New QuantumScape Class A Common Stock, which will represent approximately 5.14% of the total shares then outstanding in the aggregate and approximately 1.18% of the vote); and

 

   

the holder of Sponsor Shares will own 5,750,000 shares of New QuantumScape Class A Common Stock, representing approximately 1.53% of the total shares then outstanding in the aggregate and approximately 0.32% of the vote.

Accordingly, the issuance of shares in the Business Combination will dilute the interest of Kensington’s stockholders. If the actual facts differ from the assumptions set forth in the section entitled “Summary of the Proxy Statement/Prospectus/Information Statement-Ownership of New QuantumScape After the Closing,” the numbers of shares and percentage interests set forth above will be different.

Anti-takeover provisions in the Proposed Certificate of Incorporation, Proposed Bylaws and Delaware law could make an acquisition of New QuantumScape more difficult, limit attempts by New QuantumScape stockholders to replace or remove New QuantumScape’s management and limit the market price of New QuantumScape Class A Common Stock.

The Proposed Certificate of Incorporation, Proposed Bylaws and Delaware law contain provisions which could have the effect of rendering more difficult, delaying or preventing an acquisition deemed undesirable by the New QuantumScape Board. These provisions include:

 

   

authorizing “blank check” preferred stock, which could be issued by the New QuantumScape Board without stockholder approval and may contain voting, liquidation, dividend and other rights superior to New QuantumScape Common Stock;

 

   

limiting the liability of, and providing indemnification to, New QuantumScape’s directors and officers;

 

   

prohibiting cumulative voting in the election of directors;

 

   

providing that vacancies on the New QuantumScape Board may be filled only by majority of directors then in office of the New QuantumScape Board, even though less than a quorum;

 

   

prohibiting the ability of New QuantumScape stockholders to call special meetings;

 

   

establishing an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to the New QuantumScape Board;

 

   

requiring that, once there are no longer any outstanding shares of New QuantumScape Class B Common Stock, any action to be taken by New QuantumScape stockholders be effected at a duly called annual or special meeting and not by written consent;

 

   

specifying that special meetings of New QuantumScape stockholders can be called only by a majority of the New QuantumScape Board, the chair of the New QuantumScape Board, or the Chief Executive Officer of New QuantumScape;

 

   

requiring that, once there are no longer any outstanding shares of New QuantumScape Class B Common Stock, the approval of holders of at least two-thirds of the outstanding voting securities to amend the Proposed Bylaws and certain provisions of the Proposed Certificate of Incorporation; and

 

   

reflecting two classes of New QuantumScape Common Stock, as discussed in “Proposal No. 2—the Authorized Share Charter Proposal” and “Description of Kensington’s Securities.”

These provisions may frustrate or prevent any attempts by New QuantumScape stockholders to replace or remove New QuantumScape’s current management by making it more difficult for stockholders to replace members of the New QuantumScape Board, which is responsible for appointing the members of New QuantumScape’s management. In addition, because New QuantumScape is incorporated in Delaware, it is governed by the provisions of Section 203 of the DGCL, which generally prohibits a Delaware corporation from

 

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engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder.

The Proposed Bylaws provide, subject to limited exceptions, that the Court of Chancery of the State of Delaware and the federal district courts of the United States will be the sole and exclusive forum for certain stockholder litigation matters, which could limit New QuantumScape stockholders’ ability to obtain a chosen judicial forum for disputes with New QuantumScape or its directors, officers, employees or stockholders.

The Proposed Bylaws provide that, unless otherwise consented to by New QuantumScape in writing, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another State court in Delaware or the federal district court for the District of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for the following types of actions or proceedings: (i) any derivative action or proceeding brought on behalf of New QuantumScape; (ii) any action asserting a claim of breach of a fiduciary duty owed by, or otherwise wrongdoing by, any of New QuantumScape’s directors, officers, or other employees to New QuantumScape or its stockholders; (iii) any action arising pursuant to any provision of the DGCL or the Proposed Certificate of Incorporation or the Proposed Bylaws; (iv) any action to interpret, apply, enforce or determine the validity of the Proposed Certificate of Incorporation or the Proposed Bylaws; or (v) any other action asserting a claim that is governed by the internal affairs doctrine, in all cases subject to the court having jurisdiction over indispensable parties named as defendants. This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the U.S. federal courts have exclusive jurisdiction. The Proposed Bylaws further provide that, unless otherwise consented to by New QuantumScape in writing, the federal district courts of the United States will be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.

Any person or entity purchasing or otherwise acquiring any interest in New QuantumScape’s securities shall be deemed to have notice of and consented to this provision. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with New QuantumScape or any of its directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. There is uncertainty as to whether a court would enforce such provisions, and the enforceability of similar choice of forum provisions in other companies’ charter documents has been challenged in legal proceedings. It is possible that a court could find these types of provisions to be inapplicable or unenforceable, and if a court were to find the choice of forum provision contained in the Proposed Bylaws to be inapplicable or unenforceable in an action, New QuantumScape may incur additional costs associated with resolving such action in other jurisdictions, which could harm its business, operating results and financial condition.

Concentration of ownership among Volkswagen and New QuantumScape’s executive officers, directors and their affiliates may prevent new investors from influencing significant corporate decisions.

 

Upon the Closing, Volkswagen will beneficially own approximately 30.98% of New QuantumScape Class A Common Stock and 11.36% of New QuantumScape Class B Common Stock outstanding, representing 13.76% of the vote, and New QuantumScape’s executive officers, directors and their affiliates as a group will beneficially own approximately 37.61% of New QuantumScape Class A Common Stock and 40.86% New QuantumScape Class B Common Stock outstanding, representing 40.76% of the vote. As a result, these stockholders will be able to exercise a significant level of control over all matters requiring stockholder approval, including the election of directors, any amendment of the Proposed Certificate of Incorporation and approval of significant corporate transactions. In addition, Volkswagen will hold the right to designate two directors to the New QuantumScape Board following the Closing. This control could have the effect of delaying or preventing a change of control of New QuantumScape or changes in its management and will make the approval of certain transactions difficult or impossible without the support of these stockholders and of their votes.

The numbers of shares and percentage interests set forth above are based on a number of assumptions, including that (i) none of the Public Stockholders exercise their redemption rights, (ii) QuantumScape does not

 

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issue any additional equity securities prior to the Merger, other than the issuance of 14,684,843 shares of Series F Preferred Stock pursuant to certain Series F Stock Purchase Agreements by and between QuantumScape and the investors thereto, and that no other event occurs that would change the Exchange Ratio from what it would have been as of the date of the initial signing of the Business Combination Agreement and (iii) there are no future exercises of the Kensington Warrants. If the actual facts differ from these assumptions, the numbers of shares and percentage interests set forth above will be different.

Because Kensington has no current plans to pay cash dividends on Kensington Class A Common Stock for the foreseeable future, you may not receive any return on investment unless you sell Kensington Class A Common Stock for a price greater than that which you paid for it.

We may retain future earnings, if any, for future operations, expansion and debt repayment and have no current plans to pay any cash dividends for the foreseeable future. Any decision to declare and pay dividends as a public company in the future will be made at the discretion of the Kensington Board and will depend on, among other things, Kensington’s results of operations, financial condition, cash requirements, contractual restrictions and other factors that the Kensington Board may deem relevant. In addition, Kensington’s ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness Kensington or its subsidiaries incur. As a result, you may not receive any return on an investment in Kensington Class A Common Stock unless you sell Kensington Class A Common Stock for a price greater than that which you paid for it. See the section entitled “Price Range of Securities and Dividends—Dividends.”

New QuantumScape does not expect to declare any dividends in the foreseeable future.

After the Closing, New QuantumScape does not anticipate declaring any cash dividends to holders of its common stock in the foreseeable future. Consequently, investors may need to rely on sales of their shares after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

If the Business Combination’s benefits do not meet the expectations of investors or securities analysts, the market price of New QuantumScape’s securities may decline.

If the perceived benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of Kensington’s securities prior to the Closing may decline. The market values of New QuantumScape’s securities at the time of the Business Combination may vary significantly from their prices on the date the Business Combination Agreement was executed, the date of this proxy statement/prospectus/information statement, or the date on which Kensington’s stockholders vote on the Business Combination.

In addition, following the Business Combination, fluctuations in the price of New QuantumScape’s securities could contribute to the loss of all or part of your investment. Prior to the Business Combination, there has not been a public market for QuantumScape’s capital stock. Accordingly, the valuation Kensington has ascribed to QuantumScape in the Business Combination may not be indicative of the price that will be implied in the trading market for New QuantumScape’s securities following the Business Combination. If an active market for New QuantumScape’s securities develops and continues after the Business Combination, the trading price of such securities could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond New QuantumScape’s control. Any of the factors listed below could have a material adverse effect on your investment in New QuantumScape’s securities and New QuantumScape’s securities may trade at prices significantly below the price you paid for them or that were implied by the conversion of QuantumScape Capital Stock you owned into New QuantumScape’s securities as a result of the Business Combination. In such circumstances, the trading price of New QuantumScape’s securities may not recover and may experience a further decline.

Factors affecting the trading price of New QuantumScape’s securities may include:

 

   

actual or anticipated fluctuations in New QuantumScape’s quarterly financial results or the quarterly financial results of companies perceived to be similar to it;

 

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changes in the market’s expectations about New QuantumScape’s operating results;

 

   

success of competitors;

 

   

New QuantumScape’s operating results failing to meet the expectation of securities analysts or investors in a particular period;

 

   

changes in financial estimates and recommendations by securities analysts concerning New QuantumScape or the battery industry in general;

 

   

operating and share price performance of other companies that investors deem comparable to New QuantumScape;

 

   

New QuantumScape’s ability to bring its products and technologies to market on a timely basis, or at all;

 

   

changes in laws and regulations affecting New QuantumScape’s business;

 

   

New QuantumScape’s ability to meet compliance requirements;

 

   

commencement of, or involvement in, litigation involving New QuantumScape;

 

   

changes in New QuantumScape’s capital structure, such as future issuances of securities or the incurrence of additional debt;

 

   

the volume of New QuantumScape’s shares of common stock available for public sale;

 

   

any major change in the New QuantumScape Board or management;

 

   

sales of substantial amounts of New QuantumScape’s shares of common stock by New QuantumScape’s directors, executive officers or significant stockholders or the perception that such sales could occur; and

 

   

general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.

Broad market and industry factors may materially harm the market price of New QuantumScape’s securities irrespective of New QuantumScape’s operating performance. The stock market in general, and the NYSE in particular, have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of New QuantumScape’s securities, may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors perceive to be similar to New QuantumScape could depress New QuantumScape’s share price regardless of New QuantumScape’s business, prospects, financial conditions or results of operations. A decline in the market price of New QuantumScape’s securities also could adversely affect New QuantumScape’s ability to issue additional securities and New QuantumScape’s ability to obtain additional financing in the future.

Following the Closing, New QuantumScape will incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on its business, financial condition and results of operations.

Following the Closing, New QuantumScape will face increased legal, accounting, administrative and other costs and expenses as a public company that QuantumScape does not incur as a private company. The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), including the requirements of Section 404, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the rules and regulations promulgated and to be promulgated thereunder, the PCAOB and the securities exchanges, impose additional reporting and other obligations on public companies. Compliance with public company requirements will increase costs and make certain activities more time-consuming. A

 

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number of those requirements will require New QuantumScape to carry out activities QuantumScape has not done previously. For example, New QuantumScape will create new board committees and adopt new internal controls and disclosure controls and procedures. In addition, expenses associated with SEC reporting requirements will be incurred. Furthermore, if any issues in complying with those requirements are identified (for example, if the auditors identify a material weakness or significant deficiency in the internal control over financial reporting), New QuantumScape could incur additional costs rectifying those issues, and the existence of those issues could adversely affect New QuantumScape’s reputation or investor perceptions of it. It may also be more expensive to obtain director and officer liability insurance. Risks associated with New QuantumScape’s status as a public company may make it more difficult to attract and retain qualified persons to serve on New QuantumScape’s board of directors or as executive officers. The additional reporting and other obligations imposed by these rules and regulations will increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities. These increased costs will require New QuantumScape to divert a significant amount of money that could otherwise be used to expand the business and achieve strategic objectives. Advocacy efforts by stockholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs.

If, following the Business Combination, securities or industry analysts do not publish or cease publishing research or reports about New QuantumScape, its business, or its market, or if they change their recommendations regarding New QuantumScape’s securities adversely, the price and trading volume of New QuantumScape’s securities could decline.

The trading market for New QuantumScape’s securities will be influenced by the research and reports that industry or securities analysts may publish about New QuantumScape, its business, market or competitors. Securities and industry analysts do not currently, and may never, publish research on New QuantumScape. If no securities or industry analysts commence coverage of New QuantumScape, New QuantumScape’s share price and trading volume would likely be negatively impacted. If any of the analysts who may cover New QuantumScape change their recommendation regarding New QuantumScape’s shares of common stock adversely, or provide more favorable relative recommendations about New QuantumScape’s competitors, the price of New QuantumScape’s shares of common stock would likely decline. If any analyst who may cover New QuantumScape were to cease coverage of New QuantumScape or fail to regularly publish reports on it, New QuantumScape could lose visibility in the financial markets, which in turn could cause its share price or trading volume to decline.

Subsequent to the Closing, New QuantumScape may be required to take write-downs or write-offs, restructuring, impairment or other charges that could have a significant negative effect on New QuantumScape’s financial condition, results of operations and the price of New QuantumScape Common Stock, which could cause you to lose some or all of your investment.

Although Kensington has conducted due diligence on QuantumScape, Kensington cannot assure you that this diligence will surface all material issues that may be present with QuantumScape’s business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of QuantumScape’s and outside of Kensington’s control will not later arise. As a result of these factors, New QuantumScape may be forced to later write-down or write-off assets (including the equity it owns in the Surviving Corporation), restructure its operations, or incur impairment or other charges that could result in New QuantumScape reporting losses. Even if Kensington’s due diligence successfully identified certain risks, unexpected risks may arise, and previously known risks may materialize in a manner not consistent with Kensington’s preliminary risk analysis. Even though these charges may be non-cash items and therefore not have an immediate impact on New QuantumScape’s liquidity, the fact that New QuantumScape reports charges of this nature could contribute to negative market perceptions about New QuantumScape or its securities. In addition, charges of this nature may cause New QuantumScape to be unable to obtain future financing on favorable terms or at all. Accordingly, any stockholders or Kensington Warrant holders who choose to remain a stockholder or Kensington Warrant holder following the initial business combination could suffer a reduction in the value of their securities. Such security holders are unlikely to have a remedy for such reduction in value.

 

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New QuantumScape’s failure to timely and effectively implement controls and procedures required by Section 404(a) of the Sarbanes-Oxley Act that will be applicable to it after the Closing could have a material adverse effect on its business.

QuantumScape is currently not subject to Section 404 of the Sarbanes-Oxley Act. However, following the Closing, New QuantumScape will be required to provide management’s attestation on internal controls. The standards required for a public company under Section 404(a) of the Sarbanes-Oxley Act are significantly more stringent than those required of QuantumScape as a privately-held company. Management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that will be applicable after the Business Combination. If New QuantumScape is not able to implement the additional requirements of Section 404(a) in a timely manner or with adequate compliance, it may not be able to assess whether its internal controls over financial reporting are effective, which may subject it to adverse regulatory consequences and could harm investor confidence and the market price of its securities.

New QuantumScape will qualify as an “emerging growth company” within the meaning of the Securities Act, and if it takes advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make New QuantumScape’s securities less attractive to investors and may make it more difficult to compare New QuantumScape’s performance with other public companies.

New QuantumScape will qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. As such, New QuantumScape will be eligible for and intends to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as it continues to be an emerging growth company, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements. As a result, the stockholders may not have access to certain information they may deem important. New QuantumScape will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of New QuantumScape Common Stock that are held by non-affiliates exceeds $700 million as of June 30 of that fiscal year, (ii) the last day of the fiscal year in which it has total annual gross revenue of $1.07 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which it has issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) the last day of the fiscal year following the fifth anniversary of the date of the first sale of Kensington Units in the IPO. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as New QuantumScape is an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. Kensington has elected not to opt out of such extended transition period and, therefore, New QuantumScape may not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Investors may find New QuantumScape Class A Common Stock less attractive because New QuantumScape will rely on these exemptions, which may result in a less active trading market for the New QuantumScape Class A Common Stock and its price may be more volatile.

The unaudited pro forma financial information included herein may not be indicative of what New QuantumScape’s actual financial position or results of operations would have been.

The unaudited pro forma financial information included herein is presented for illustrative purposes only and is not necessarily indicative of what New QuantumScape’s actual financial position or results of operations would have been had the Business Combination been completed on the dates indicated.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Defined terms included below have the same meaning as terms defined and included elsewhere in this proxy statement/prospectus/information statement.

The following unaudited pro forma condensed combined financial information presents the combination of the financial information of Kensington and QuantumScape adjusted to give effect to the Business Combination and related transactions. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X.

The unaudited pro forma condensed combined balance sheet as of June 30, 2020 combines the historical balance sheet of Kensington and the historical balance sheet of QuantumScape on a pro forma basis as if the Business Combination and related transactions, summarized below, had been consummated on June 30, 2020. The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2020 and the year ended December 31, 2019 combine the historical statements of operations of Kensington and historical statements of operations of QuantumScape for such periods on a pro forma basis as if the Business Combination and related transactions, summarized below, had been consummated on January 1, 2019, the beginning of the earliest period presented:

 

   

the Merger;

 

   

the issuance and sale of 50,000,000 shares of Kensington Class A Common Stock for a purchase price of $10.00 per share and an aggregate purchase price of $500 million in the PIPE pursuant to the Subscription Agreements; and

 

   

the issuance and sale of 10,900,089 shares of Series F Preferred Stock, which includes 3,784,754 shares that are due to be issued on December 1, 2020, and 7,115,335 shares that are expected to be issued concurrent with the Closing of the Business Combination. Refer to Note 2 of this unaudited pro forma condensed combined financial information for further discussion.

The historical financial statements have been adjusted in the unaudited pro forma condensed combined financial statements to give pro forma effect to events that are: (i) directly attributable to the Business Combination; (ii) factually supportable; and (iii) with respect to the statements of operations, expected to have a continuing impact on the post-combination company’s results following the completion of the Business Combination.

The unaudited pro forma condensed combined financial statements have been developed from and should be read in conjunction with:

 

   

the accompanying notes to the unaudited pro forma condensed combined financial statements;

 

   

the historical unaudited financial statements of Kensington as of June 30, 2020 and for the period from April 17, 2020 (inception) through June 30, 2020 and the related notes included elsewhere in this proxy statement/prospectus/information statement;

 

   

the historical audited financial statements of QuantumScape as of and for the year ended December 31, 2019 and the related notes included elsewhere in this proxy statement/prospectus/information statement;

 

   

the historical unaudited financial statements of QuantumScape as of and for the six months ended June 30, 2020 and the related notes included elsewhere in this proxy statement/prospectus/information statement; and

 

   

other information relating to Kensington and QuantumScape contained in this proxy statement/prospectus/information statement, including the Business Combination Agreement and the description of certain terms thereof set forth in the section entitled “The Business Combination.”

 

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Notwithstanding the legal form of the Business Combination pursuant to the Business Combination Agreement, the Business Combination will be accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, Kensington is treated as the acquired company and QuantumScape is treated as the acquirer for financial statement reporting purposes. QuantumScape has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances:

 

   

QuantumScape’s existing stockholders will have the greatest voting interest in the combined entity under the no redemption and maximum redemption scenarios with over 95% of the voting interest in each scenario;

 

   

QuantumScape’s directors will represent the majority of the New QuantumScape Board;

 

   

QuantumScape’s senior management will be the senior management of New QuantumScape; and

 

   

QuantumScape is the larger entity based on historical operating activity and has the larger employee base.

Pursuant to the Existing Certificate of Incorporation, public stockholders are being offered the opportunity to redeem, upon the closing of the Business Combination, shares of Kensington Common Stock then held by them for cash equal to their pro rata share of the aggregate amount on deposit (as of two business days prior to the Closing) in the Trust Account. For illustrative purposes, based on the cash held in the Trust Account as of June 30, 2020 of approximately $230 million, the estimated per share redemption price would have been $10.00 per share.

The unaudited pro forma condensed combined financial statements present two redemption scenarios as follows:

 

   

Assuming No Redemption—this scenario assumes that no shares of Kensington Common Stock are redeemed; and

 

   

Assuming Maximum Redemption—this scenario assumes that 23,000,000 shares of Kensington Common Stock are redeemed for an aggregate payment of approximately $230.0 million (based on the estimated per share redemption price of approximately $10.00 per share) from the Trust Account. The Business Combination Agreement includes a condition to the Closing that, at the Closing, Kensington will have a minimum of $500 million in cash comprising (i) the cash held in the Trust Account after giving effect to any Kensington share redemptions and (ii) gross proceeds from the PIPE. The gross proceeds from the PIPE of $500 million is sufficient to satisfy this closing condition, and accordingly, this scenario results in public share redemptions of 23,000,000 shares of Kensington Class A Common Stock.

Description of the Business Combination

On September 2, 2020, Kensington, Merger Sub and QuantumScape entered into the Business Combination Agreement, pursuant to which Kensington and QuantumScape will consummate the Business Combination. At the Effective Time, by virtue of the Merger and without any action on the part of Kensington, Merger Sub, QuantumScape or the holders of any of QuantumScape’s securities:

 

   

each share of QuantumScape Class A Common Stock and QuantumScape Class A Preferred Stock outstanding immediately prior to the Effective Time and convertible into a share of QuantumScape Class A Common Stock pursuant to the provisions of QuantumScape’s certificate of incorporation, will be cancelled and converted into the right to receive the number of shares of New QuantumScape Class A Common Stock equal to the Exchange Ratio (as described below), with each holder’s shares rounded down to the nearest whole number;

 

   

each share of QuantumScape Class B Common Stock and QuantumScape Class B Preferred Stock outstanding immediately prior to the Effective Time and convertible into a share of QuantumScape

 

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Class B Common Stock pursuant to the provisions of QuantumScape’s certificate of incorporation, will be cancelled and converted into the right to receive the number of shares of New QuantumScape Class B Common Stock equal to the Exchange Ratio (as described below), with each holder’s shares rounded down to the nearest whole number;

 

   

all shares of QuantumScape Capital Stock held in the treasury of QuantumScape will be cancelled without any conversion thereof and no payment or distribution will be made with respect thereto;

 

   

each share of Merger Sub Common Stock outstanding immediately prior to the Effective Time will be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation;

 

   

each QuantumScape Option that is outstanding immediately prior to the Effective Time, whether vested or unvested, will be converted into an option to purchase a number of shares of the applicable class of New QuantumScape Common Stock that the pre-conversion QuantumScape Option covers (such option, an “Exchanged Option”) equal to the product (rounded down to the nearest whole number) of (i) the number of shares of QuantumScape Common Stock subject to such QuantumScape Option immediately prior to the Effective Time multiplied by (ii) the Exchange Ratio, at an exercise price per share (rounded up to the nearest whole cent) equal to (A) the exercise price per share of such QuantumScape Option immediately prior to the Effective Time divided by (B) the Exchange Ratio. Except as specifically provided in the Business Combination Agreement, following the Effective Time, each Exchanged Option will continue to be governed by the same terms and conditions (including vesting and exercisability terms) as were applicable to the corresponding former QuantumScape Option immediately prior to the Effective Time;

 

   

each share of QuantumScape Restricted Stock that is outstanding immediately prior to the Effective Time will be converted into restricted shares of the applicable class of New QuantumScape Common Stock that the pre-conversion QuantumScape Restricted Stock covers (such share of restricted New QuantumScape Common Stock, an “Exchanged Restricted Stock”) equal to the product (rounded down to the nearest whole number) of (i) the number of shares of QuantumScape Restricted Stock immediately prior to the Effective Time multiplied by (ii) the Exchange Ratio. Except as specifically provided above, following the Effective Time, each Exchanged Restricted Stock shall continue to be governed by the same terms and conditions (including transfer restrictions and repurchase right terms) as were applicable to the corresponding former QuantumScape Restricted Stock immediately prior to the Effective Time;

 

   

each QuantumScape RSU that is outstanding immediately prior to the Effective Time will be converted into restricted stock units of the applicable class of New QuantumScape Common Stock that the pre-conversion QuantumScape RSU covers (such restricted stock unit award covering New QuantumScape Common Stock, an “Exchanged RSU”) equal to the product (rounded down to the nearest whole number) of (i) the number of shares subject to a QuantumScape RSU immediately prior to the Effective Time multiplied by (ii) the Exchange Ratio. Except as specifically provided above, following the Effective Time, each Exchanged RSU shall continue to be governed by the same terms and conditions (including transfer restrictions and repurchase right terms) as were applicable to the corresponding former QuantumScape RSU immediately prior to the Effective Time;

 

   

the obligation to purchase shares of Series F Preferred Stock upon satisfaction of certain milestones, if still outstanding, will become an obligation to purchase, upon satisfaction of the milestones, shares of New QuantumScape Class A Common Stock equal in number to the shares of New QuantumScape Class A Common Stock that would have been issued in the Merger in exchange for such shares of Series F Preferred Stock if such shares of Series F Preferred Stock had been outstanding prior to the Merger; and

 

   

each QuantumScape Warrant that is outstanding immediately prior to the Effective Time shall be converted into a warrant to purchase a number of shares of the applicable class of New QuantumScape

 

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Common Stock (such warrant, the “Exchanged Warrant”) equal to the product (rounded down to the nearest whole number) of (i) the number of shares of QuantumScape Common Stock subject to such QuantumScape Warrant immediately prior to the Effective Time multiplied by (ii) the Exchange Ratio. Except as specifically provided above, following the Effective Time, each Exchanged Warrant shall continue to be governed by the same terms and conditions (including vesting and exercisability terms) as were applicable to the corresponding former QuantumScape Warrant immediately prior to the Effective Time.

The “Exchange Ratio” is defined in the Business Combination Agreement as a quotient that is calculated on the basis of:

(i) the “Target Share Amount,” which means an amount equal to (a) 360,000,000, plus or minus (b) the quotient obtained by dividing (x) the amount, if any, by which the Series F Subscription Amount is greater than or less than, as applicable, $300,000,000, by (y) $10. As of the date of the initial signing of the Business Combination Agreement, the Target Share Amount was equal to 368,799,998;

divided by

(ii) QuantumScape’s “Fully-Diluted Company Shares” (with such “Fully-Diluted Company Shares” being, as of the date of initial signing of the Business Combination Agreement, equal to 92,125,870).

As of the date of the initial signing of the Business Combination Agreement, the Exchange Ratio was 4.0032186234. The Exchange Ratio will be finally calculated in accordance with the methodology and procedures set forth in the Business Combination Agreement, and Kensington will file with the SEC a Current Report on Form 8-K announcing the final Exchange Ratio no later than four business days prior to the special meeting of its stockholders.

The aggregate consideration for the Business Combination is estimated to be $3.7 billion, payable in the form of New QuantumScape Common Stock. The following summarizes the consideration in both the no redemption and maximum redemption scenarios:

 

(in thousands, except for share and per share amounts)

      

Shares transferred at Closing (1)(3)

     368,799,935  

Value per share (2)

   $ 10.00  

Total Share Consideration

   $ 3,687,999  

 

(1)

Actual shares transferred is subject to an adjustment prior to Closing.

(2)

Share consideration is calculated using a $10.00 reference price. Actual total share consideration will be dependent on the value of the Kensington Common Stock at Closing.

(3)

Shares transferred at Closing include the following QuantumScape securities which are subject to future exercise, service conditions, contingent issuance provisions, or a combination thereof, and will not be legally outstanding at Closing:

 

   

56,824,294 unexercised stock options

 

   

1,018,033 unexercised warrants

 

   

12,918,886 shares issuable for restricted stock units

 

   

15,151,197 shares issuable upon the completion of a specified technical milestone pursuant to the Series F Stock Purchase Agreement with VGA, as described in Note 2

 

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The following summarizes the pro forma New QuantumScape Common Stock shares outstanding under the two redemption scenarios:

 

     Assuming No
Redemptions
(Shares)
     %     Assuming Max
Redemptions
(Shares)
     %  

QuantumScape shareholders - New QuantumScape Class A

     125,375,547        28.0     125,375,547        29.5

QuantumScape shareholders - New QuantumScape Class B

     157,511,978        35.2     157,511,978        37.1

QuantumScape warrants, options, RSUs and contingently issuable Series F preferred stock (1)

     85,912,410        19.2     85,912,410        20.2
  

 

 

    

 

 

   

 

 

    

 

 

 

Total QuantumScape Business Combination shares

     368,799,935        82.4     368,799,935        86.9

Kensington public stockholders

     23,000,000        5.1     —          —  

Holders of Kensington sponsor shares

     5,750,000        1.3     5,750,000        1.4

PIPE Investors

     50,000,000        11.2     50,000,000        11.8
  

 

 

    

 

 

   

 

 

    

 

 

 

Pro Forma Common Stock

     447,549,935        100.0     424,549,935        100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

 

(1)

Represents the following QuantumScape securities which are subject to future exercise, service conditions, contingent issuance provisions, or a combination thereof, and will not be legally outstanding at Closing:

 

   

56,824,294 unexercised stock options

 

   

1,018,033 unexercised warrants

 

   

12,918,886 shares issuable for restricted stock units

 

   

15,151,197 shares issuable upon the completion of a specified technical milestone pursuant to the Series F Stock Purchase Agreement with VGA, as described in Note 2

Assumptions and estimates underlying the unaudited pro forma adjustments set forth in the unaudited pro forma condensed combined financial statements are described in the accompanying notes. The unaudited pro forma condensed combined financial statements have been presented for illustrative purposes only and are not necessarily indicative of the operating results and financial position that would have been achieved had the Business Combination occurred on the dates indicated. Further, the unaudited pro forma condensed combined financial statements do not purport to project the future operating results or financial position of Kensington following the completion of the Business Combination. The unaudited pro forma adjustments represent Kensington management’s estimates based on information available as of the date of these unaudited pro forma condensed combined financial statements and are subject to change as additional information becomes available and analyses are performed.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF JUNE 30, 2020

(in thousands)

 

          Series F
Preferred
Stock
Financing

Adjustments
(Note 2)
    Pro Forma
Adjustments
(Assuming
No

Redemptions)
(Note 3)
          As of
June 30, 2020
    Additional
Pro Forma
Adjustments
(Assuming
Maximum

Redemptions)
(Note 3)
          As of
June 30, 2020
 
    As of June 30, 2020           Pro Forma
Combined
(Assuming

No
Redemptions)
          Pro Forma
Combined
(Assuming

Maximum
Redemptions)
 
    KENSINGTON     QUANTUMSCAPE              
    (Historical)     (Historical)              

Assets

                 

Cash and cash equivalents

  $ 1,740     $ 29,175     $ 276,100     $ 230,000       (a   $ 990,575     $ (230,000     (k   $ 760,575  
          (8,050     (b        
          (20,890     (c        
          482,500       (d        

Marketable securities

    —         69,512             69,512           69,512  

Prepaid expenses and other current assets

    238       1,703             1,941           1,941  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total current assets

    1,978       100,390       276,100       683,560         1,062,028       (230,000       832,028  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Cash held in Trust Account

    230,000       —           (230,000     (a     —             —    

Property and equipment, net

    —         31,285             31,285           31,285  

Right-of-use lease asset

      12,336             12,336           12,336  

Other assets

    —         2,193             2,193           2,193  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total assets

    231,978       146,204       276,100       453,560         1,107,842       (230,000       877,842  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Liabilities

                 

Accounts payable

    256       1,490             1,746           1,746  

Accrued liabilities

    117       1,987             2,104           2,104  

Accrued compensation

    —         1,349             1,349           1,349  

Operating lease liability, short-term

    —         1,148             1,148           1,148  

Strategic premium, short-term

    —         655             655           655  

Franchise tax payable

    41       —               41           41  

Note payable - related party

    75       —           (75     (h     —             —    
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total current liabilities

    489       6,629       —         (75       7,043       —           7,043  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Operating lease liability, long-term

    —         11,866             11,866           11,866  

Convertible preferred stock warrant liabilities

    —         1,851             1,851           1,851  

Strategic premium, long-term and other liabilities

    —         327             327           327  

Deferred underwriting compensation

    8,050       —           (8,050     (b     —             —    
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total liabilities

    8,539       20,673       —         (8,125       21,087       —           21,087  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

 

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          Series F
Preferred
Stock
Financing

Adjustments
(Note 2)
    Pro Forma
Adjustments
(Assuming
No

Redemptions)
(Note 3)
          As of
June 30, 2020
    Additional
Pro Forma
Adjustments
(Assuming
Maximum

Redemptions)
(Note 3)
          As of
June 30, 2020
 
    As of June 30, 2020           Pro Forma
Combined
(Assuming

No
Redemptions)
          Pro Forma
Combined
(Assuming

Maximum
Redemptions)
 
    KENSINGTON     QUANTUMSCAPE              
    (Historical)     (Historical)              

Commitments and contingencies

                 

Class A common shares subject to possible redemption

  $ 218,439         $ (218,439     (e   $ —           $ —    

Redeemable convertible preferred stock

    —       $ 405,575     $ 276,100       (681,675     (f     —             —    

Stockholders’ equity (deficit)

                 

Preferred Stock

    —         —               —             —    

Class A common Stock

    —         —           5       (d     21     $ (2     (k     19  
          2       (e        
          13       (f        
          1       (g        

Class B common Stock

    1       —           16       (f     16           16  
          (1     (g        

Common Stock

    —         1         —         (i     —             —    
          (1     (f        

Additional paid in capital

    5,062       47,473         (20,890     (c     1,410,047       (229,998     (k     1,180,049  
          482,495       (d        
          218,437       (e        
          681,647       (f        
          75       (h        
          (4,189     (i        
          (63     (j        

Treasury stock

    —         (4,189       4,189       (i     —             —    

Accumulated other comprehensive income

    —         147             147           147  

Accumulated deficit

    (63     (325,181       63       (j     (325,181         (325,181
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total stockholders’ equity (deficit) to common shareholders

    5,000       (281,749     —         1,361,799         1,085,050       (230,000       855,050  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Non-controlling interest

    —         1,705             1,705           1,705  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total stockholders’ equity (deficit)

    5,000       (280,044     —         1,361,799         1,086,755       (230,000       856,755  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total liabilities and stockholders’ equity

  $ 231,978     $ 146,204     $ 276,100     $ 453,560       $ 1,107,842     $ (230,000       877,842  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

 

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2020

(in thousands, except share and per share data)

 

    For the period
from
April 17, 2020
    Six Months Ended
June 30, 2020
    Pro Forma
Adjustments
(Assuming
No

Redemptions)
(Note 3)
          Six Months
Ended

June 30,
2020
    Additional
Pro Forma

Adjustments
(Assuming
Maximum

Redemptions)
(Note 3)
    Six Months
Ended

June 30,
2020
 
  (inception)
through
June 30, 2020
    Pro Forma
Combined
(Assuming

No
Redemptions)
    Pro Forma
Combined
(Assuming

Maximum
Redemptions)
 
  KENSINGTON
(Historical)
    QUANTUMSCAPE
(Historical)
 

Operating expenses:

             

Research and development

  $ —       $ 25,396     $ —         $ 25,396     $ —       $ 25,396  

General and administrative

    22       4,747       (20     (aa)       5,353       —         5,353  
        604       (bb)        

Franchise tax expense

    41       —         —           41       —         41  
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Total operating expenses

    63       30,143       584         30,790       —         30,790  
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Loss from operations

    (63     (30,143     (584       (30,790     —         (30,790
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Other income (expense)

             

Interest expense

    —         8       —           8       —         8  

Interest income

    —         811       —           811       —         811  
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Total other income (expense)

    —         819       —           819       —         819  
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Net loss

    (63     (29,324     (584       (29,971     —         (29,971
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Less: Net loss attributable to noncontrolling interest

    —         (5     —           (5     —         (5
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Net loss attributable to common shareholders

  $ (63   $ (29,319   $ (584     $ (29,966   $ —       $ (29,966
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Basic and diluted weighted average shares outstanding - Class A and Class B

            361,637,525         338,637,525  

Basic and diluted net loss per share - Class A and Class B

          $ (0.08     $ (0.09

 

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2019

(in thousands, except share and per share data)

 

          Pro Forma
Adjustments
(Assuming
No

Redemptions)
(Note 3)
          Year Ended
December 31,
2019
    Additional
Pro Forma

Adjustments
(Assuming
Maximum

Redemptions)
(Note 3)
    Year Ended
December 31,
2019
 
    Year Ended
December 31, 2019
    Pro Forma
Combined
(Assuming

No
Redemptions)
    Pro Forma
Combined
(Assuming

Maximum
Redemptions)
 
    KENSINGTON
(Historical)
    QUANTUMSCAPE
(Historical)
 

Operating expenses:

             

Research and development

  $ —       $ 45,944     $ —         $ 45,944     $ —       $ 45,944  

General and administrative

    —         9,874       1,208       (bb)       11,082       —         11,082  
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Total operating expenses

    —         55,818       1,208         57,026       —         57,026  
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Loss from operations

    —         (55,818     (1,208       (57,026     —         (57,026
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Other income (expense)

             

Interest expense

    —         (94     —           (94     —         (94

Interest income

    —         3,608       —           3,608       —         3,608  

Other income

    —         1,041       —           1,041       —         1,041  
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Total other income (expense)

    —         4,555       —           4,555       —         4,555  
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Net loss

    —         (51,263     (1,208       (52,471           (52,471

Less: Net loss attributable to noncontrolling interest

    —         20       —           20       —         20  
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Net loss attributable to common shareholders

  $ —       $ (51,283   $ (1,208     $ (52,491   $ —       $ (52,491
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Basic and diluted weighted average shares outstanding - Class A and Class B

            361,637,525         338,637,525  

Basic and diluted net loss per share - Class A and Class B

          $ (0.15     $ (0.16

 

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Notes to Unaudited Pro Forma Condensed Combined Financial Statements

 

1.

Basis of Presentation

The Business Combination will be accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, Kensington will be treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of QuantumScape issuing stock for the net assets of Kensington, accompanied by a recapitalization.

The net assets of QuantumScape will be stated at historical cost, with no goodwill or other intangible assets recorded.

The unaudited pro forma condensed combined balance sheet as of June 30, 2020 gives pro forma effect to the Business Combination as if it had been consummated on June 30, 2020. The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2020 and year ended December 31, 2019 give pro forma effect to the Business Combination as if it had been consummated on January 1, 2019.

The unaudited pro forma condensed combined balance sheet as of June 30, 2020 has been prepared using, and should be read in conjunction with, the following:

 

   

Kensington’s unaudited balance sheet as of June 30, 2020 and the related notes included elsewhere in this proxy statement/prospectus/information statement; and

 

   

QuantumScape’s unaudited balance sheet as of June 30, 2020 and the related notes included elsewhere in this proxy statement/prospectus/information statement.

The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2020 has been prepared using, and should be read in conjunction with, the following:

 

   

Kensington’s unaudited statement of operations for the period April 17, 2020 (inception) through June 30, 2020 and the related notes included elsewhere in this proxy statement/prospectus/information statement; and

 

   

QuantumScape’s unaudited statement of operations for the six months ended June 30, 2020 and the related notes included elsewhere in this proxy statement/prospectus/information statement.

The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019 has been prepared using, and should be read in conjunction with, the following:

 

   

QuantumScape’s audited statement of operations for the year ended December 31, 2019 and the related notes included elsewhere in this proxy statement/prospectus/information statement.

Management has made significant estimates and assumptions in its determination of the pro forma adjustments. As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented.

The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings or cost savings that may be associated with the Business Combination. The pro forma adjustments reflecting the Closing are based on certain currently available information and certain assumptions and methodologies that Kensington believes are reasonable under the circumstances. The unaudited condensed pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible the difference may be material. Kensington believes that its assumptions and methodologies provide a reasonable basis for presenting all of the

 

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significant effects of the Business Combination based on information available to management at the time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.

The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the Business Combination taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of the post-combination company. They should be read in conjunction with the historical financial statements and notes thereto of Kensington and QuantumScape.

 

2.

Adjustments for Series F Preferred Stock Financing

In May 2020 and September 2020, QuantumScape and VGA entered into a Series F Preferred Stock Purchase Agreement and related agreements and amendments thereto, pursuant to which it agreed to sell, and VGA agreed to purchase, up to a total of 7,569,508 shares of Series F Preferred Stock at $26.4218 per share for an aggregate purchase price of $200 million. Pursuant to the terms of the Series F Preferred Stock Purchase Agreement with VGA, the Series F Preferred Stock issued to VGA will fund in two tranches: (1) 3,784,754 shares of Series F Preferred Stock will be issued for $100 million on December 1, 2020, and (2) 3,784,754 shares of Series F Preferred Stock will be issued for $100 million subject to certain conditions including the achievement of a specified technical milestone by March 31, 2021, as set forth in such agreements. The Series F Preferred Stock Purchase Agreement with VGA, as amended, contains provisions pursuant to which, if the relevant closing of such Series F Preferred Stock Purchase Agreement (in whole or in part) were to occur only after effectiveness of the Merger, VGA has agreed to purchase, and Kensington has agreed to issue, instead of the relevant number of shares of Series F Preferred Stock to be purchased at such closing, such number of shares of New QuantumScape Class A Common Stock as would have been issued in the Merger in exchange for such shares of Series F Preferred Stock if they had been outstanding prior to the Merger.

In August 2020, QuantumScape entered into Series F Preferred Stock Purchase Agreements and related agreements thereto with several investors, pursuant to which it agreed to sell, and the investors agreed to purchase, an aggregate of 7,115,335 shares of Series F Preferred Stock at $26.4218 per share for an aggregate purchase price of $188 million. Pursuant to the terms of these Series F Preferred Stock Purchase Agreements, funding is expected to occur concurrent with the Closing of the Business Combination.

The Series F Preferred Stock Financing Adjustment reflects the pro forma adjustment for the issuance of 3,784,754 shares of Series F Preferred Stock to VGA for $100 million on December 1, 2020, and the issuance of 7,115,335 shares for $188 million to various investors concurrent with the Closing of the Business Combination, net of issuance costs of $11.9 million. In total, the 10,900,089 shares of Series F Preferred Stock included in the Series F Preferred Stock Financing Adjustment will convert into an aggregate 43,635,433 shares of New QuantumScape Class A Common Stock, based on the Exchange Ratio. The Series F Preferred Stock Financing Adjustment does not include the issuance of 3,784,754 shares of Series F Preferred Stock subject to the achievement of a specified technical milestone (15,151,197 shares of New QuantumScape Class A Common Stock converted at the Exchange Ratio).

 

3.

Adjustments to Unaudited Pro Forma Condensed Combined Financial Information

The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Business Combination and has been prepared for informational purposes only. The historical financial statements have been adjusted in the unaudited pro forma condensed combined financial information to give pro forma effect to events that are (1) directly attributable to the Business Combination, (2) factually supportable, and (3) with respect to the statements of operations, expected to have a continuing impact on the results of the post-combination company. Kensington and QuantumScape have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

 

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The pro forma combined provision for income taxes does not necessarily reflect the amounts that would have resulted had the post-combination company filed consolidated income tax returns during the periods presented.

Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet

The adjustments included in the unaudited pro forma condensed combined balance sheet as of June 30, 2020 are as follows:

 

  (a)

Reflects the reclassification of cash held in the Trust Account that becomes available following the Business Combination, assuming no redemption.

 

  (b)

Reflects the settlement of $8.1 million in deferred underwriting compensation.

 

  (c)

Represents preliminary estimated transaction costs incurred by Kensington and QuantumScape of approximately $4.9 million and $16 million, respectively, for legal, financial advisory and other professional fees incurred in consummating the Business Combination. The unaudited pro forma condensed combined balance sheet reflects these costs as a reduction of cash with a corresponding decrease in additional paid-in capital.

 

  (d)

Reflects proceeds of $500 million from the issuance and sale of 50,000,000 shares of Kensington Class A Common Stock at $10.00 per shares in the PIPE pursuant to the Subscription Agreements, net of issuance costs of $17.5 million.

 

  (e)

Reflects the reclassification of $218.4 million of Kensington Class A Common Stock subject to possible redemption to permanent equity.

 

  (f)

Reflects the conversion of 59,290,940 shares of QuantumScape Preferred Stock, including 10,900,089 shares of Series F Preferred Stock as described in Note 2, and 11,374,095 shares of QuantumScape Common Stock into 125,375,547 shares of New QuantumScape Class A Common Stock and 157,511,978 shares of New QuantumScape Class B Common Stock.

 

  (g)

Reflects the conversion of Kensington Class B Common Stock held by the Sponsor into New QuantumScape Class A Common Stock.

 

  (h)

Reflects the conversion of the loan made from the Sponsor to Kensington into 75,000 warrants on the same terms as the Private Warrants.

 

  (i)

Represents the retirement of 438,191 shares of QuantumScape Capital Stock held in treasury.

 

  (j)

Reflects the elimination of Kensington’s historical retained earnings.

 

  (k)

Represents the redemption of the maximum number of shares of 23,000,000 shares of Kensington Class A Common Stock for $230.0 million allocated to Class A common stock and additional paid-in capital using par value of $0.0001 per share and at a redemption price of $10.00 per share (based on the cash held in the Trust Account as of June 30, 2020 of $230 million).

Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations

The pro forma adjustments included in the unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2020 and year ended December 31, 2019 are as follows:

 

  (aa)

Represents pro forma adjustment to eliminate historical expenses related to Kensington’s general administrative services paid to an affiliate of Kensington’s Chief Financial Officer, which will terminate upon the Closing.

 

  (bb)

Reflects the amortization of share-based awards granted in connection with the Business Combination. The estimated grant date fair value of $6.0 million associated with the share-based awards was calculated using a Black-Scholes option pricing model and will be recognized over an estimated five-year service period.

 

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4.

Loss per Share

Represents the net loss per share calculated using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Business Combination, assuming the shares were outstanding since January 1, 2019. As the Business Combination is being reflected as if it had occurred at the beginning of the periods presented, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the shares issuable relating to the Business Combination have been outstanding for the entire periods presented. When assuming maximum redemption, this calculation is adjusted to eliminate such shares for the entire period. Basic and diluted earnings per share are the same for each class of common stock because they are entitled to the same liquidation and dividend rights.

The unaudited pro forma condensed combined financial information has been prepared assuming two alternative levels of redemption for the six months ended June 30, 2020 and for the year ended December 31, 2019:

 

     Six Months Ended
June 30, 2020
    Year Ended
December 31, 2019
 
     Assuming No
Redemptions
    Assuming
Maximum
Redemptions
    Assuming No
Redemptions
    Assuming
Maximum
Redemptions
 

Pro forma net loss attributable to common shareholders (in thousands)

   $ (29,966   $ (29,966   $ (52,491   $ (52,491

Weighted average shares outstanding, basic and diluted - Class A and Class B

     361,637,525       338,637,525      
361,637,525
 
    338,637,525  

Net loss per share, basic and diluted - Class A and Class B (1)

   $ (0.08   $ (0.09   $ (0.15   $ (0.16

Weighted average shares calculation, basis and diluted - Class A and Class B

        

Kensington public stockholders - Class A

     23,000,000       —         23,000,000       —    

Holders of Kensington sponsor shares - Class A

     5,750,000       5,750,000       5,750,000       5,750,000  

PIPE Investors - Class A

     50,000,000       50,000,000       50,000,000       50,000,000  

QuantumScape stockholders - Class A (2)

     125,375,547       125,375,547       125,375,547       125,375,547  

QuantumScape stockholders - Class B (2)

     157,511,978       157,511,978       157,511,978       157,511,978  
  

 

 

   

 

 

   

 

 

   

 

 

 
    

361,637,525

   

338,637,525

   

361,637,525

   

338,637,525

 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

For the purpose of calculating diluted loss per share, it was assumed that all outstanding Kensington Warrants sold in the IPO are exchanged for Kensington Class A Common Stock. However, since this results in anti-dilution, the effect of such exchange was not included in the calculation of diluted loss per share.

(2)

The pro forma basic and diluted shares of current QuantumScape stockholders exclude the following as these are contingently issuable shares and would reduce diluted loss per share:

 

   

56,824,294 unexercised stock options

 

   

1,018,033 unexercised warrants

 

   

12,918,886 shares issuable for restricted stock units

 

   

15,151,197 shares issuable upon the completion of a specified technical milestone pursuant to the Series F Stock Purchase Agreement with VGA, as described in Note 2

 

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THE SPECIAL MEETING OF KENSINGTON STOCKHOLDERS

The Kensington Special Meeting

Kensington is furnishing this proxy statement/prospectus/information statement to you as part of the solicitation of proxies by our board of directors for use at the special meeting of stockholders to be held on November 25, 2020, and at any adjournment or postponement thereof. This proxy statement/prospectus/information statement is first being furnished to Kensington’s stockholders on or about November 12, 2020. This proxy statement/prospectus/information statement provides you with information you need to know to be able to vote or instruct your vote to be cast at the special meeting of stockholders.

Date, Time and Place of the Special Meeting

The special meeting of stockholders of Kensington will be held at 10:00 a.m., Eastern time, on November 25, 2020, via live webcast at www.virtualshareholdermeeting.com/KCAC2020, or such other date, time and place to which such meeting may be adjourned or postponed, for the purpose of considering and voting upon the proposals.

Stockholders are urged to vote their proxies by completing, signing, dating and returning the enclosed proxy card in the accompanying pre-addressed postage paid envelope, or to direct their brokers or other agents on how to vote the shares in their accounts, as applicable.

Purpose of the Special Meeting

At the Kensington special meeting of stockholders, Kensington will ask the Kensington stockholders to vote in favor of the following proposals:

 

   

Proposal No. 1—The Business Combination Proposal—a proposal to approve and adopt the Business Combination Agreement and the Business Combination.

 

   

Proposal No. 2—The Authorized Share Charter Proposal—a proposal to amend the Existing Certificate of Incorporation to increase the number of authorized shares of Kensington Common Stock and Kensington’s preferred stock.

 

   

Proposal No. 3—The Director Declassification Charter Proposal—a proposal to amend the Existing Certificate of Incorporation to declassify the Kensington Board.

 

   

Proposal No. 4—The Dual Class Charter Proposal—a proposal to amend the Existing Certificate of Incorporation to implement a dual class stock structure comprised of New QuantumScape Class A Common Stock, which will carry one vote per share, and New QuantumScape Class B Common Stock, which will carry 10 votes per share.

 

   

Proposal No. 5—The Additional Charter Proposal—a proposal to amend the Existing Certificate of Incorporation to eliminate provisions in the Existing Certificate of Incorporation relating to the Business Combination that will no longer be applicable following the Closing, change New QuantumScape’s name to “QuantumScape Corporation” and make certain other changes that the Kensington Board deems appropriate for a public operating company.

 

   

Proposal No. 6—The Election of Directors Proposal—a proposal to elect, effective at the Closing, nine directors to serve on the New QuantumScape Board.

 

   

Proposal No. 7—The Equity Incentive Plan Proposal—a proposal to approve and adopt the equity incentive award plan established to be effective upon the Closing.

 

   

Proposal No. 8—The NYSE Proposal—a proposal to issue New QuantumScape Common Stock to the QuantumScape stockholders in the Merger pursuant to the Business Combination Agreement and to the investors in the PIPE.

 

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Proposal No. 9—The Employee Stock Purchase Plan Proposal—a proposal to approve and adopt the employee stock purchase plan established to be effective upon the Closing.

 

   

Proposal No. 10—The Adjournment Proposal—a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the special meeting, there are not sufficient votes to approve one or more proposals presented to stockholders for a vote.

Recommendation of the Kensington Board

The Kensington Board believes that each of the proposals to be presented at the special meeting of stockholders is in the best interests of Kensington and its stockholders and unanimously recommends that its stockholders vote “FOR” each of the proposals.

When you consider the recommendation of the Kensington Board in favor of approval of the Business Combination Proposal, you should keep in mind that certain of Kensington’s directors and officers have interests in the Business Combination that are different from, or in addition to, your interests as a stockholder. These interests include, among other things:

 

   

the beneficial ownership of the Sponsor of an aggregate of 5,750,000 Sponsor Shares and 6,575,000 Private Warrants, which shares and warrants would become worthless if Kensington does not complete a business combination within the applicable time period, as the Sponsor has waived any right to redemption with respect to these shares. The Sponsor paid an aggregate of $25,000 for the Sponsor Shares and $6,575,000 for the Private Warrants. Such shares and warrants have an aggregate market value of approximately $81,305,000 and $22,157,750, respectively, based on the closing price of Kensington Class A Common Stock and Public Warrants of $14.14 and $3.37, respectively, on the NYSE on November 11, 2020;

 

   

Justin Mirro, Kensington’s Chief Executive Officer and Chairman is the managing member of the managing member of the Sponsor. Consequently, he may be deemed the beneficial owner of the 5,750,000 Sponsor Shares and 6,575,000 Private Warrants and to have voting and dispositive control over such securities. Mr. Mirro disclaims beneficial ownership of any securities other than to the extent he may have a pecuniary interest therein, directly or indirectly. Each of Kensington’s other officers and directors are non-managing members of the Sponsor;

 

   

the Sponsor has made a loan of $75,000 to Kensington; the Sponsor has informed Kensington that the Sponsor intends to convert the loan into 75,000 warrants on the same terms as the Private Warrants (as contemplated by the warrant agreement pursuant to which the Private Warrants were issued) at the same time the Business Combination is completed and for such warrants to be issued to Justin Mirro, who had advanced such amount to the Sponsor in order for the loan to be made. Such warrants have an aggregate market value of approximately $252,750 based on the closing price of the Public Warrants of $3.37 on the NYSE on November 11, 2020;

 

   

the Sponsor and Kensington’s directors and executive officers will not receive reimbursement for any out-of-pocket expenses incurred by them on Kensington’s behalf incident to identifying, investigating and completing a business combination to the extent such expenses exceed the amount not required to be retained in the Trust Account, unless a business combination is consummated. As of October 31, 2020, the Sponsor and Kensington’s directors and executive officers and their respective affiliates had incurred approximately $32,000 of such reimburseable out-of-pocket expenses;

 

   

the anticipated continuation of Justin Mirro, Kensington’s Chairman and Chief Executive Officer, as a director of New QuantumScape following the Closing;

 

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DEHC, an affiliate of Daniel Huber, Kensington’s Chief Financial Officer and Secretary and Simon Boag, Kensington’s Chief Technology Officer, entered into services agreements with Kensington to provide administrative and other services as may be reasonably requested by Kensington for one year after the Closing in order to assist it in connection with the post-closing integration of the New QuantumScape. In consideration of the agreements by DEHC and Mr. Boag to provide such services, Kensington agreed to pay each of them $240,000 at the Closing. The foregoing amounts are subject to recoupment by Kensington in the event DEHC or Mr. Boag, as applicable, fails to satisfy its obligations under the agreements; and

 

   

the continued indemnification of current directors and officers of Kensington and the continuation of directors’ and officers’ liability insurance after the Business Combination.

Record Date and Voting

You will be entitled to vote or direct votes to be cast at the special meeting of stockholders if you owned shares of Kensington Common Stock at the close of business on October 27, 2020, which is the record date for the special meeting of stockholders. You are entitled to one vote for each share of Kensington Common Stock that you owned as of the close of business on the record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker, bank or other nominee to ensure that votes related to the shares you beneficially own are properly counted. On the record date, there were 28,750,000 shares of Kensington Common Stock outstanding, of which 23,000,000 are shares of Kensington Class A Common Stock and 5,750,000 are Sponsor Shares held by Kensington Initial Stockholders.

The Sponsor has agreed to vote all of its Sponsor Shares and any Public Shares acquired by it in favor of the Business Combination Proposal. Kensington’s outstanding Kensington Warrants do not have voting rights at the special meeting of stockholders.

Voting Your Shares

Each share of Kensington Common Stock that you own in your name entitles you to one vote on each of the proposals for the special meeting of stockholders. Your one or more proxy cards show the number of shares of Kensington Common Stock that you own.

If you were a holder of record of Kensington Common Stock on October 27, 2020, the record date for the special meeting of stockholders, you may vote with respect to the applicable proposals in any of the following ways, if available:

 

   

Vote by Mail: by signing, dating and returning the enclosed proxy card in the accompanying postage-paid envelope;

 

   

Vote by Internet: visit the website shown on your proxy card to vote via the internet, 24 hours a day, seven days a week, until 11:59 p.m. Eastern Time on November 24, 2020;

 

   

Vote by Phone: by calling the toll-free number on your proxy card (within the United States or Canada); or

 

   

Vote at the Special Meeting: by attending the special meeting and voting in person. You will be given a ballot when you arrive. However, if your shares of Kensington Common Stock are held in the name of your broker, bank or other nominee, you must get a proxy from the broker, bank or other nominee. That is the only way we can be sure that the broker, bank or nominee has not already voted your shares of Kensington Common Stock.

If your shares are held in “street name” through a broker, bank or other nominee, your broker, bank or other nominee will send you separate instructions describing the procedure for voting your shares. Simply complete,

 

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sign and date your voting instruction card and return it in the postage-paid envelope provided to ensure that your vote is counted. Alternatively, you may vote by telephone or over the internet as instructed by your broker, bank or other nominee. If you wish to attend the special meeting of stockholders and vote in person, you must obtain a proxy from your broker, bank or nominee.

If you sign and return the proxy card but do not give instructions on how to vote your shares, your shares of Kensington Common Stock will be voted as recommended by the Kensington Board. With respect to proposals for the special meeting of stockholders, that means: “FOR” the Business Combination Proposal, “FOR” the Authorized Share Charter Proposal, “FOR” the Director Declassification Charter Proposal, “FOR” the Dual Class Charter Proposal, “FOR” the Additional Charter Proposal, “FOR” the Election of Directors Proposal, “FOR” the Equity Incentive Plan Proposal, “FOR” the NYSE Proposal, “FOR” the Employee Stock Purchase Plan Proposal and “FOR” the Adjournment Proposal.

Who Can Answer Your Questions About Voting Your Shares

If you have any questions about how to vote or direct a vote in respect of your shares of Kensington Common Stock, you may contact D.F. King & Co., Inc., our proxy solicitor, toll-free at (877) 478-5045 (banks and brokers call (212) 269-5550) or email at KCAC@dfking.com.

Quorum and Vote Required for the Kensington Proposals

A quorum of Kensington’s stockholders is necessary to hold a valid meeting. A quorum will be present at the special meeting of stockholders if a majority of the Kensington Common Stock outstanding and entitled to vote at the meeting is represented in person or by proxy. Abstentions will count as present for the purposes of establishing a quorum.

The approval of the Business Combination Proposal and the Charter Proposals require the affirmative vote (in person or by proxy) of the holders of a majority of all outstanding shares of Kensington Common Stock entitled to vote thereon at the special meeting. Accordingly, a Kensington stockholder’s failure to vote by proxy or to vote in person at the special meeting of stockholders, an abstention from voting or a broker non-vote will have the same effect as a vote against these proposals.

The approval of the Equity Incentive Plan Proposal, NYSE Proposal, Employee Stock Purchase Plan Proposal and Adjournment Proposal require the affirmative vote (in person or by proxy) of the holders of a majority of the shares of Kensington Common Stock that are voted at the special meeting of stockholders. Accordingly, a Kensington stockholder’s failure to vote by proxy or to vote in person at the special meeting of stockholders, an abstention from voting, or a broker non-vote will have no effect on the outcome of any vote on these proposals.

The approval of the election of each director nominee pursuant to the Election of Directors Proposal requires the affirmative vote of the holders of a plurality of the outstanding shares of Common Stock entitled to vote and actually voted thereon at the special meeting. Accordingly, a Kensington stockholder’s failure to vote by proxy or to vote in person at the special meeting of stockholders, an abstention from voting, or a broker non-vote will have no effect on the outcome of any vote on the Election of Directors Proposal.

Abstentions and Broker Non-Votes

Under the rules of various national and regional securities exchanges, your broker, bank or nominee cannot vote your shares with respect to non-discretionary matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or nominee. Kensington believes all of the proposals presented to its stockholders at the special meeting will be considered non-discretionary and, therefore, your broker, bank or nominee cannot vote your shares without your instruction.

 

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If you do not provide instructions with your proxy, your bank, broker or other nominee may deliver a proxy card expressly indicating that it is NOT voting your shares; this indication that a bank, broker or nominee is not voting your shares is referred to as a “broker non-vote.”

Abstentions and broker non-votes will be counted for purposes of determining the presence of a quorum at the special meeting of Kensington stockholders. For purposes of approval, an abstention or broker non-vote will have the same effect as a vote against each of the Business Combination Proposal and the Charter Proposals, and will have no effect on any of the other proposals.

Revocability of Proxies

If you have submitted a proxy to vote your shares and wish to change your vote, you may do so by delivering a later-dated, signed proxy card to Kensington’s secretary, at 1400 Old Country Road, Suite 301, Westbury, NY 11590, prior to the date of the special meeting or by voting in person at the special meeting. Attendance at the special meeting alone will not change your vote. You also may revoke your proxy by sending a notice of revocation to Kensington’s secretary at the above address.

Redemption Rights

Pursuant to the Existing Certificate of Incorporation, any holders of Public Shares may demand that such shares be redeemed in exchange for a pro rata share of the aggregate amount then on deposit in the Trust Account, calculated as of two business days prior to the Closing, including interest earned on the funds held in the Trust Account and not previously released to Kensington to pay Kensington’s taxes, net of taxes payable, provided that such stockholders follow the specific procedures for redemption set forth in this proxy statement/prospectus/information statement relating to the stockholder vote on the Business Combination. If demand is properly made and the Business Combination is consummated, these shares, immediately prior to the Closing, will cease to be outstanding and will represent only the right to receive a pro rata share of the aggregate amount then on deposit in the Trust Account, calculated as of two business days prior to the Closing, including any amounts representing interest earned on the funds held in the Trust Account and not previously released to Kensington to pay Kensington’s taxes, net of taxes payable, upon the Closing. For illustrative purposes, based on funds in the Trust Account of $230 million on June 30, 2020, the per share redemption price would have been $10.00.

Redemption rights are not available to holders of Kensington Warrants in connection with the Business Combination.

In order to exercise your redemption rights, you must, prior to 4:30 p.m., Eastern time, on November 23 2020 (two business days before the special meeting), both:

 

   

Submit a request in writing that Kensington redeem your Public Shares for cash to Continental Stock Transfer & Trust Company, Kensington’s transfer agent, at the following address:

Continental Stock Transfer & Trust Company

One State Street Plaza, 30th Floor

New York, NY 10004

Attention: Mark Zimkind

E-mail: mzimkind@continentalstock.com

 

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Deliver your Public Shares either physically or electronically through DTC to Kensington’s transfer agent. Stockholders seeking to exercise their redemption rights and opting to deliver physical certificates should allot sufficient time to obtain physical certificates from the transfer agent. It is Kensington’s understanding that stockholders should generally allot at least one week to obtain physical certificates from the transfer agent. However, Kensington does not have any control over this process and it may take longer than one week. Stockholders who hold their shares in street name will have to coordinate with their bank, broker or other nominee to have the shares certificated or delivered electronically. If you do not submit a written request and deliver your Public Shares as described above, your shares will not be redeemed.

Any demand for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with Kensington’s consent, until the vote is taken with respect to the Business Combination. If you delivered your shares for redemption to Kensington’s transfer agent and decide within the required timeframe not to exercise your redemption rights, you may request that Kensington’s transfer agent return the shares (physically or electronically). You may make such request by contacting Kensington’s transfer agent at the phone number or address listed above.

Each redemption of Public Shares by the Public Stockholders will decrease the amount in the Trust Account. In no event, however, will Kensington redeem Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001 upon the Closing.

Prior to exercising redemption rights, stockholders should verify the market price of their Kensington Class A Common Stock as they may receive higher proceeds from the sale of their Kensington Class A Common Stock in the public market than from exercising their redemption rights if the market price per share is higher than the redemption price. Kensington cannot assure you that you will be able to sell your shares of Kensington Class A Common Stock in the open market, even if the market price per share is higher than the redemption price stated above, as there may not be sufficient liquidity in Kensington Class A Common Stock when you wish to sell your shares.

If you exercise your redemption rights, your shares of Kensington Class A Common Stock will cease to be outstanding immediately prior to the Closing and will only represent the right to receive a pro rata share of the aggregate amount then on deposit in the Trust Account, calculated as of two business days prior to the Closing, including interest earned on the funds held in the Trust Account and not previously released to Kensington to pay Kensington’s taxes, net of taxes payable. You will no longer own those shares, and you will be entitled to receive cash for those shares only if you properly demand redemption.

Appraisal or Dissenters’ Rights

No appraisal or dissenters’ rights are available to holders of shares of Kensington Common Stock or Kensington Warrants or holders of QuantumScape Capital Stock in connection with the Business Combination, except to the extent available under the DGCL.

Solicitation of Proxies

Kensington will pay the cost of soliciting proxies for the special meeting. Kensington has engaged D.F. King to assist in the solicitation of proxies for the special meeting. Kensington has agreed to pay D.F. King a fee of $20,000. Kensington will reimburse D.F. King for reasonable out-of-pocket expenses and will indemnify D.F. King and its affiliates against certain claims, liabilities, losses, damages and expenses. Kensington also will reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of shares of Kensington Common Stock for their expenses in forwarding soliciting materials to beneficial owners of Kensington Common Stock and in obtaining voting instructions from those owners. Kensington’s directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

 

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Stock Ownership

As of the record date, the Sponsor beneficially owns an aggregate of approximately 20% of the outstanding shares of Kensington Common Stock. The Sponsor has agreed to vote all of its Sponsor Shares and any Public Shares acquired by it in favor of the Business Combination Proposal. As of the date of this proxy statement/prospectus/information statement, the Sponsor has not acquired any Public Shares.

 

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PROPOSALS TO BE CONSIDERED BY KENSINGTON’S STOCKHOLDERS

PROPOSAL NO. 1—THE BUSINESS COMBINATION PROPOSAL

THE BUSINESS COMBINATION

The Background of the Business Combination

The terms of the Business Combination Agreement are the result of arm’s-length negotiations between representatives of Kensington and QuantumScape. The following is a brief discussion of the background of these negotiations, the Business Combination Agreement and related transactions.

Kensington was formed for the purpose of effecting a combination, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more businesses. While Kensington may pursue a business combination in any industry or geographic region, it intended to focus its search for a target business operating in the North America automotive and automotive-related sector. Kensington believed there were 10,000 companies that met its criteria and had identified 313 target companies that it believed were larger than $500 million in value. Of these 313 companies, Kensington identified 63 targets that met one or more of its six acquisition criteria and prioritized 48 companies to initially approach. Kensington had identified the following six criteria that it believed would provide for attractive acquisition candidates (i) a North America-based automotive business valued at greater than $1.0 billion, (ii) a business that benefits from emerging automotive technology, (iii) validated technical, commercial and financial capabilities based upon global automotive standards, (iv) valuation supported by fundamental analysis of future profitability and comparable companies, (v) a world-class management team and board with expertise in leading and running public companies, and (vi) a business that could be enhanced by Kensington’s automotive industry expertise in order to accelerate commercial success. The entry into the Business Combination Agreement with QuantumScape is a result of an extensive search for a potential transaction from these 313 companies using the global network, automotive, investing and transaction experience of the Kensington Board and management team.

In June 2020, Kensington completed its IPO of 23,000,000 Kensington Units (including 3,000,000 Kensington Units sold upon the exercise in full of the underwriters’ over-allotment option), each Kensington Unit consisting of one share of Kensington Class A Common Stock and one-half of one redeemable Kensington Warrant, generating gross proceeds of $230 million (before underwriting discounts and commissions and offering expenses). Simultaneously with the closing of the IPO (including the exercise in full of the underwriters’ over-allotment option), Kensington completed a private placement of 6,575,000 Private Warrants issued to the Sponsor, generating total proceeds of $6.6 million. A total of $230 million of the net proceeds from the IPO and the private placement were placed in the Trust Account.

Except for a portion of the interest earned on the funds held in the Trust Account that may be released to us to pay taxes, none of the funds held in the Trust Account will be released until the earlier of the consummation of our initial business combination and the redemption of 100% of our Public Shares if we are unable to consummate a business combination by June 25, 2022 or obtain the approval of Kensington stockholders to extend the deadline for us to consummate an initial business combination.

Prior to the consummation of the IPO, neither Kensington, nor anyone on its behalf, contacted any prospective target business or had any substantive discussions, formal or otherwise, with respect to a transaction with Kensington.

After the IPO was consummated on June 30, 2020, Kensington began contacting the 48 prioritized targets.

On July 1, 2020, as part of Kensington’s initial outreach to acquisition targets, Kensington’s management team held an initial videoconference with QuantumScape’s management team to introduce the Kensington team

 

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to QuantumScape and to learn more about QuantumScape. Simon Boag, Kensington’s Chief Technology Officer, initially identified QuantumScape as a business combination target that could potentially achieve Kensington’s six investment criteria identified above. Based upon this initial assessment, Mr. Boag arranged an introductory video call between Kensington and QuantumScape on July 1, 2020 where QuantumScape’s management team presented materials to Kensington and the team engaged in a discussion around QuantumScape’s business.

On July 3, 2020, Kensington held its first post-IPO weekly meeting via videoconference with its management team and the Kensington Board to provide an update on the acquisition process. At the meeting, the management team and the Kensington Board discussed six potential acquisition candidates, including QuantumScape.

During the week of July 6, 2020, Kensington’s Chairman and Chief Executive Officer, Justin Mirro, met in-person with QuantumScape’s Chief Executive Officer, Jagdeep Singh, and Chief Legal Officer and Head of Corporate Development, Michael McCarthy, in Maryland to discuss a potential business combination, during which Mr. Mirro walked through the framework of a proposal for a business combination with Kensington. The original proposal ascribed an enterprise value of $3.3 billion to the company, assumed there would be a $320 million PIPE, a single class of stock, and two to three board seats for the Kensington management team. The enterprise valuation was initially determined by reviewing QuantumScape’s summary financials and performing a comparable company analysis with NIO, Tesla, Inc. and Contemporary Amperex Technology Co., Limited (CATL). Kensington ultimately validated this valuation upon completion of further due diligence of QuantumScape’s technical, commercial and financial results. Kensington also determined that QuantumScape needed an additional $500 million of capital to fulfill its business plan (which resulted in the initial proposal for a $320 million PIPE that, together with cash in Kensington’s trust account of $230 million, would provide $550 million of additional capital before deducting transaction fees and expenses).

On July 10, 2020, Kensington held its regularly scheduled weekly videoconference with its management team and the Kensington Board. At the meeting, the management team and the Kensington Board discussed the status of the 48 potential acquisition targets, including the recent meeting with QuantumScape.

During the week of July 13, 2020, members of the management teams from Kensington and QuantumScape continued discussions around due diligence and discussed the QuantumScape business plan. On July 17, 2020, Kensington held its regularly scheduled videoconference with its management team and the Kensington Board to provide an update on the acquisition process. At the meeting, the management team and the Kensington Board discussed the 48 potential acquisition targets, of which six acquisition targets were identified by management as “active,” 35 were identified by management as “in-process” and seven were identified by management as “inactive.” Of the six “active” candidates, there were three that were determined to be worth further exploring by Kensington, including QuantumScape. After this meeting, Kensington sent non-binding letters-of-intent to these three targets, including QuantumScape. The non-binding letter of intent sent to QuantumScape valued QuantumScape’s equity at $3.6 billion. This equity value included the capital raise of at least $300 million in cash from the Series F Preferred Stock financing. Kensington engaged in due diligence discussion directly with the three potential acquisition targets that received non-binding letters of intent from Kensington. All three non-binding letters of intent were sent to pre revenue companies with similar valuation in the electric vehicle segment of the automotive industry that met some or all of Kensington’s six investment criteria. Kensington ultimately pursued only QuantumScape because Kensington believed that QuantumScape was the only one to meet all six of Kensington’s investment criteria and also demonstrated the most compelling business combination based upon its business prospects, technology leadership, strong and visionary management team, large addressable market and growth potential into the foreseeable future. Kensington believes that QuantumScape’s patented technology in solid-state lithium-metal batteries and partnership with Volkswagen positions QuantumScape to capitalize on the automotive industry’s expected shift to EVs.

On July 20, 2020, the Kensington management team and its lawyers at Hughes Hubbard & Reed LLP (“Hughes Hubbard”) had a call with the QuantumScape management team and QuantumScape’s lawyers at

 

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Wilson Sonsini Goodrich & Rosati, Professional Corporation (“Wilson Sonsini”) to discuss the proposed non-binding letter of intent.

On July 21, 2020, the QuantumScape Board held a special board meeting via teleconference, with all members present, where QuantumScape’s fundraising activities to date were discussed. At this meeting, the QuantumScape Board also discussed the possibility of a business combination with Kensington. As part of this discussion, the QuantumScape Board discussed alternatives to a business combination with Kensington with members of management and with representatives of Goldman Sachs & Co. LLC (“Goldman Sachs”) in its role as exclusive financial advisor to QuantumScape. Goldman Sachs also provided the QuantumScape Board with a comparison of the advantages and disadvantages of a potential business combination versus the potential for an initial public offering of QuantumScape’s stock. The QuantumScape Board and members of management and Goldman Sachs also discussed the potential strategic fit with Kensington and alternative SPAC partners. Finally, the QuantumScape Board discussed with members of management and Goldman Sachs the details of Kensington’s non-binding letter of intent, including the proposed valuation, timing and risk associated with a potential transaction. After this board meeting QuantumScape notified Kensington that they would accept Kensington’s proposal only if it was modified to include a “dual-class” structure, and only one board seat for Kensington management. The dual-class structure was required by QuantumScape’s management and board. Kensington also accepted the single board seat representation once Kensington became aware of the significant experience provided by the existing QuantumScape board members. After Kensington and QuantumScape reached agreement on the foregoing terms, the QuantumScape Board voted in favor of entering into the letter of intent with Kensington and further pursuing discussions with Kensington to determine if a business combination and concurrent PIPE transaction was a viable alternative.

On July 21, 2020, Kensington and QuantumScape signed a non-binding letter of intent. The letter of intent contemplated a $320 million PIPE and provided Kensington with exclusivity through August 31, 2020. On the same day, lawyers from Hughes Hubbard and Wilson Sonsini had a call to discuss the timeline to complete the documentation required for the transaction and Kensington’s due diligence.

During the weeks from the execution of the letter of intent until the approval of the Business Combination Agreement, the management teams of Kensington and QuantumScape met on a regular – almost daily – basis for the purposes of reviewing QuantumScape’s technology and business and discussing the contemplated business combination transaction. During this period, the parties also met with potential PIPE investors to review QuantumScape’s business and address questions from potential investors.

On July 24, 2020, Kensington held a meeting of its board, and the management team provided an update on the status of discussions with QuantumScape and next steps in its diligence efforts.

On July 28, 2020, Hughes Hubbard sent an initial draft of the proposed Business Combination Agreement to QuantumScape. During the next several weeks, several drafts of the Business Combination Agreement and related documents (including the Stockholder Support Agreements, the Registration Rights and Lock-Up Agreement and the form of Subscription Agreement) were negotiated by the parties.

On July 29, 2020 and July 30, 2020, members of Kensington’s management team and the Kensington Board met in person at QuantumScape’s offices in San Jose, California to discuss the QuantumScape technology and related matters, including the contemplated business combination transaction.

On July 31, 2020, Kensington held its regularly-scheduled weekly videoconference with its management team and the Kensington Board, and the management team provided an update on the status of discussion with, and diligence of, QuantumScape and discussed engaging financial advisors in the proposed PIPE transaction.

During the week of August 2, 2020, Kensington engaged UBS Securities LLC to provide financial advisory services and assistance with the PIPE that would close at the same time as the business combination transaction

 

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with QuantumScape. Due to the successful initial public offering, Kensington engaged UBS to be joint-lead placement agent in its PIPE transaction given its knowledge of Kensington and its investor base. Kensington agreed to pay UBS a fee of 1.75% of the amount raised in the PIPE and to reimburse it for reasonable out-of-pocket expenses in exchange for performing such services. Kensington also agreed to pay UBS a fee of $1,000,000 upon closing of the Business Combination with QuantumScape. UBS had been engaged as Kensington’s lead advisor on its initial public offering due to its strong equity capital markets capabilities, dedicated SPAC effort and highly-ranked automotive industry coverage team.

Due to Goldman Sachs’ knowledge of QuantumScape, Kensington hired Goldman Sachs to be joint-lead placement agent with UBS on its PIPE. Kensington agreed to pay Goldman Sachs a fee of 1.75% of the amount raised in the PIPE and to reimburse it for reasonable out-of-pocket expenses in exchange for performing such services. Goldman Sachs had been hired by QuantumScape to provide advice to its board in connection with the Business Combination. Goldman Sachs did not provide any advice to Kensington regarding the valuation or business combination terms with QuantumScape. However, Goldman Sachs did advise QuantumScape in connection with the Business Combination. QuantumScape and Kensington each also signed a consent letter with Goldman Sachs acknowledging Goldman Sachs’ role as placement agent in connection with the PIPE, and as an advisor to QuantumScape, and waiving any conflicts. During the same week that Kensington engaged UBS and Goldman Sachs, Kensington began negotiating confidentiality agreements with potential investors in the PIPE and conducting preliminary meetings with them.

On August 7, 2020, the QuantumScape Board met via teleconference, with all members present to review with its management the status of the contemplated business combination transaction with Kensington. As part of this meeting, the QuantumScape Board reviewed and approved the signing of an engagement letter with Goldman Sachs to act as an advisor to QuantumScape in connection with the proposed business combination transaction. In connection with such approval, the QuantumScape Board was informed of Goldman Sachs’ role as placement agent to Kensington in connection with the PIPE.

On each of August 7, 2020, August 14, 2020, and August 21, 2020, Kensington held its regularly-scheduled weekly videoconference with its management team and the Kensington Board, and the management team provided an update on the status of discussions with, and diligence of, QuantumScape and the status of the PIPE and diligence-related matters.

On August 22, 2020, Kensington and QuantumScape agreed to amend the non-binding letter-of-intent to extend the exclusivity period to September 30, 2020.

On August 28, 2020, the Kensington Board met via videoconference, with all board members present. Also present were representatives of Hughes Hubbard, who reviewed the terms of the Business Combination Agreement, Subscription Agreement and related documents with the Kensington Board. The Kensington Board also discussed the valuation ascribed to QuantumScape in the proposed transaction.

On September 1, 2020, the audit committee and compensation committee of the Kensington Board met, with all committee members present, to consider the Service Agreements with DEHC, an affiliate of Daniel Huber, Kensington’s Chief Financial Officer and Secretary, and Simon Boag, Kensington’s Chief Technology Officer. At the meeting, the committees discussed Kensington’s need to coordinate with the members of the Kensington Board after completion of the Business Combination in order to provide the new board with access to Kensington’s financial and strategic expertise in the auto industry. Following the discussion, the committees approved the service agreements.

On September 2, 2020, the QuantumScape Board met via teleconference, with all board members present, to consider and discuss the proposed transaction with Kensington. Also present were representatives of Wilson Sonsini. Following a thorough review and discussion, the Business Combination Agreement and related documents and agreements were unanimously approved by all QuantumScape Board members who voted on the

 

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matters, and the QuantumScape Board determined to recommend the approval of the Business Combination Agreement to QuantumScape’s stockholders.

On September 2, 2020, the Kensington Board met via videoconference, with all board members present, as well as representatives of Hughes Hubbard, to review the terms of the Business Combination Agreement, the form of the Subscription Agreement and related documents and changes that had been made since the prior board meeting. The final version of the Business Combination Agreement did not include a maximum amount of redemptions as a condition to the obligation of QuantumScape to close the transaction, and included a requirement for QuantumScape to pay a termination fee of $82 million in order to, under certain circumstances, terminate the Business Combination Agreement and accept a “superior proposal.” QuantumScape had originally requested the termination fee to be $50 million. The Kensington Board also concluded that the fair market value of QuantumScape was equal to at least 80% of the funds held in the Trust Account. In making such determination, the Kensington Board considered, among other things, the implied valuation of QuantumScape based on the market valuation of comparable companies (as discussed below under “—Kensington’s Board of Directors’ Reasons for the Approval of the Business Combination—Attractive Market Valuation of Comparable Companies”) the price to be paid by purchasers of Series F Preferred Stock and the price to be paid by purchasers in the PIPE. The Kensington Board unanimously approved the Business Combination Agreement, the Subscription Agreement and related documents and agreements and recommended approval of the Business Combination Agreement to Kensington’s stockholders.

The Business Combination Agreement and related documents and agreements were executed on September 2, 2020. Prior to the market open on September 3, 2020, Kensington and QuantumScape issued a joint press release announcing the execution of the Business Combination Agreement and Kensington filed with the SEC a Current Report on Form 8-K announcing the execution of the Business Combination Agreement. On September 3, 2020, representatives of Kensington and QuantumScape conducted an investor conference call to announce the proposed Business Combination.

On September 15, 2020, the Kensington Board unanimously re-confirmed its approval of the Business Combination Agreement and approved Amendment No. 1 to the Business Combination Agreement. Amendment No. 1 (i) provided the name of the surviving corporation in the merger contemplated by the Business Combination Agreement will be as designated by QuantumScape prior to the Closing, and (ii) clarified certain of the events that will cause the automatic conversion of the New QuantumScape Class B Common Stock, which has 10 votes per share, into New QuantumScape Class A Common Stock which has one vote per share.

On September 17, 2020, the QuantumScape Board unanimously re-confirmed its approval of the Business Combination Agreement and approved Amendment No. 1 to the Business Combination Agreement.

Kensington’s Board of Directors’ Reasons for the Approval of the Business Combination

As described under “The Background of the Business Combination” above, the Kensington Board, in evaluating the Business Combination, consulted with Kensington’s management and financial and legal advisors. In reaching its unanimous decision to approve the Business Combination Agreement and the Proposed Transactions, the Kensington Board considered a range of factors, including, but not limited to, the factors discussed below. In light of the number and wide variety of factors considered in connection with its evaluation of the Business Combination, the Kensington Board did not consider it practicable to, and did not attempt to, quantify or otherwise assign relative weights to the specific factors that it considered in reaching its determination and supporting its decision. The Kensington Board viewed its decision as being based on all of the information available and the factors presented to and considered by it. In addition, individual directors may have given different weight to different factors.

This explanation of Kensington’s reasons for the Business Combination and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under the section entitled “Cautionary Note Regarding Forward-Looking Statements.”

 

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In approving the Business Combination, the Kensington Board determined not to obtain a fairness opinion. The officers and directors of Kensington have substantial experience in evaluating the operating and financial merits of companies from a wide range of industries, including the automotive sector, and concluded that their experience and background enabled them to make the necessary analyses and determinations regarding the Business Combination.

The Kensington Board considered a number of factors pertaining to the Business Combination as generally supporting its decision to enter into the Business Combination Agreement and the transactions contemplated thereby, including, but not limited to, the following:

 

   

Due Diligence. Kensington’s management and the Kensington Board conducted due diligence examinations of QuantumScape and discussions with QuantumScape’s management and Kensington’s financial and legal advisors concerning Kensington’s due diligence examination of QuantumScape;

 

   

Financial Condition. Kensington’s management and the Kensington Board considered factors such as QuantumScape’s outlook, financial plan, cash position, absence of indebtedness, customer contracts and capital expenditure plan (see the section entitled “—Certain QuantumScape Projected Financial Information”);

 

   

Attractive Market Valuation of Comparable Companies. The public trading market valuation of comparable pure-play EV/component companies (consisting of NIO, Tesla, Inc. and Contemporary Amperex Technology Co., Limited (CATL), which we refer to collectively as the “Comparable EV Companies”) have expected 2021 enterprise value/revenue multiples and enterprise value/EBITDA multiples (in each case based on market data as of August 31, 2020) ranging from 6.5x to 13.4x (and a median of 6.9x) and 33.9x to 82.7x (and a median of 58.3x), respectively. The Kensington Board believes that these multiples compare favorably to an initial market valuation of the post-Business Combination company reflected in the terms of the Business Combination corresponding to projected enterprise value/revenue multiples of 1.0x and 0.5x in 2027 and 2028, respectively;

 

   

Experienced and Proven Management Team. Kensington’s management and the Kensington Board believe that QuantumScape has a strong management team which is expected to remain with New QuantumScape to seek to execute the strategic and growth goals of the combined business;

 

   

Other Alternatives. The Kensington Board believes, after a thorough review of other business combination opportunities reasonably available to Kensington, that the proposed Business Combination represents the best potential business combination for Kensington and the most attractive opportunity for Kensington based upon the process utilized to evaluate and assess other potential combination targets, and the Kensington Board’s belief that such process has not presented a better alternative; and

 

   

Negotiated Transaction. The financial and other terms of the Business Combination Agreement and the fact that such terms and conditions are reasonable and were the product of arm’s length negotiations between Kensington and QuantumScape.

The Kensington Board also considered a variety of uncertainties and risks and other potentially negative factors concerning the Business Combination including, but not limited to, the following:

 

   

Development Stage Company. QuantumScape’s status as a pre-revenue company, and the risk that it may not be able to execute on its business plan;

 

   

Macroeconomic Risks. Macroeconomic uncertainty and the effects it could have on the revenues of the combined business;

 

   

Redemption Risk. The potential that a significant number of Kensington stockholders elect to redeem their shares prior to the consummation of the combination and pursuant to Kensington’s existing charter, which would potentially make the combination more difficult or impossible to complete, and/or reduce the amount of cash available to the combined business following the Closing;

 

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Stockholder Vote and Written Consent. The risk that Kensington’s or QuantumScape’s stockholders may fail to provide the respective votes and written consents, respectively, necessary to effect the Business Combination;

 

   

Closing Conditions. The fact that the Closing is conditioned on the satisfaction of certain closing conditions that are not within Kensington’s control;

 

   

Litigation. The possibility of litigation challenging the Business Combination or that an adverse judgment granting permanent injunctive relief could indefinitely enjoin the Closing;

 

   

Benefits May Not Be Achieved. The risks that the potential benefits of the Business Combination may not be fully achieved or may not be achieved within the expected timeframe;

 

   

No Third-Party Valuation. The risk that Kensington did not obtain a third-party valuation or fairness opinion in connection with the Business Combination;

 

   

Kensington Stockholders Receiving a Minority Position. The fact that Kensington stockholders will hold a minority position in New QuantumScape;

 

   

Interests of Kensington’s Directors and Officers. The interests of the Kensington Board and officers in the Business Combination (see “—Interests of Kensington’s Directors and Officers in the Business Combination”); and

 

   

Other Risks Factors. Various other risk factors associated with QuantumScape’s business, as described in the section entitled “Risk Factors” appearing elsewhere in this proxy statement/prospectus/information statement.

In connection with analyzing the Business Combination, Kensington’s management, based on its experience and judgment, selected the Comparable EV Companies. Kensington’s management selected these companies because they are publicly traded companies with certain operations, results, business mixes or size and scale that, for the purposes of analysis, may be considered similar to certain operations, results, business mixes or size and scale of QuantumScape. None of the Comparable EV Companies is identical or directly comparable to QuantumScape.

In connection with its analysis of the Business Combination, Kensington’s management reviewed and compared, using publicly available information, certain current, projected and historical financial information for QuantumScape corresponding to current and historical financial information, ratios and public market multiples for the Comparable EV Companies, as described above.

The Kensington Board also considered the Business Combination in light of the investment criteria set forth in Kensington’s final prospectus for its IPO including, without limitation, that based upon Kensington’s analyses and due diligence, QuantumScape has the potential to be a market leader and has substantial future growth opportunities, all of which the Kensington Board believed have a strong potential to create meaningful stockholder value following the Closing.

The above discussion of the material factors considered by the Kensington Board is not intended to be exhaustive but does set forth the principal factors considered by the Kensington Board.

Certain QuantumScape Projected Financial Information

QuantumScape provided Kensington with its internally prepared forecasts for each of the years in the seven-year period ending December 31, 2028 (and assuming start of production of the QuantumScape solid-state batteries in 2024). Kensington’s management reviewed the forecasts and presented key elements of the forecasts to the Kensington Board as part of the Kensington Board’s review and subsequent approval of the Business Combination. QuantumScape and Kensington do not, as a matter of general practice, publicly disclose long-term forecasts or internal projections of future performance, revenue, financial condition or other results. However, in

 

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connection with the proposed Business Combination, Kensington’s management used the financial forecasts set forth below as part of its comprehensive analysis. The forecasts were prepared solely for internal use and not with a view toward public disclosure, the published guidelines of the SEC regarding projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information but, in the view of QuantumScape’s management, was prepared on a reasonable basis, reflects the best currently available estimates and judgments, and presents, to the best of QuantumScape management’s knowledge and belief, the expected course of action and the expected future financial performance of QuantumScape.

The inclusion of financial projections in this proxy statement/prospectus/information statement should not be regarded as an indication that Kensington, QuantumScape, their respective directors, officers, advisors or other representatives considered, or now considers, such financial projections necessarily to be predictive of actual future results or to support or fail to support your decision whether to vote for or against the Business Combination Proposal. The financial projections are not fact and should not be relied upon as being necessarily indicative of future results, and readers of this proxy statement/prospectus/information statement, including investors or stockholders, are cautioned not to place undue reliance on this information. You are cautioned not to rely on the projections in making a decision regarding the Business Combination, as the projections may be materially different than actual results. We will not refer back to the financial projections in our future periodic reports filed under the Exchange Act.

The financial projections reflect numerous estimates and assumptions with respect to general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to QuantumScape’s business, all of which are difficult to predict and many of which are beyond QuantumScape’s and Kensington’s control. The financial projections are forward-looking statements that are inherently subject to significant uncertainties and contingencies, many of which are beyond QuantumScape’s control, including those described or incorporated by reference in the sections entitled “Risk Factors,” “QuantumScape Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Cautionary Note Regarding Forward-Looking Statements.” As a result, there can be no assurance that the projected results will be realized or that actual results will not be significantly higher or lower than projected. Since the financial projections cover multiple years, such information by its nature becomes less reliable with each successive year. These financial projections are subjective in many respects and thus are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments.

Furthermore, the financial projections do not take into account any circumstances or events occurring after the date they were prepared. None of QuantumScape’s independent registered public accounting firm, Kensington’s independent registered accounting firm or any other independent accountants, have compiled, examined or performed any procedures with respect to the financial projections included below, nor have they expressed any opinion or any other form of assurance on such information or their accuracy or achievability, and they assume no responsibility for, and disclaim any association with, the financial projections. Nonetheless, a summary of the financial projections is provided in this proxy statement/prospectus/information statement because they were made available to Kensington and the Kensington Board in connection with their review of the proposed Business Combination.

EXCEPT TO THE EXTENT REQUIRED BY APPLICABLE FEDERAL SECURITIES LAWS, BY INCLUDING IN THIS PROXY STATEMENT/PROSPECTUS/INFORMATION STATEMENT A SUMMARY OF THE FINANCIAL PROJECTIONS FOR QUANTUMSCAPE, KENSINGTON UNDERTAKES NO OBLIGATIONS AND EXPRESSLY DISCLAIMS ANY RESPONSIBILITY TO UPDATE OR REVISE, OR PUBLICLY DISCLOSE ANY UPDATE OR REVISION TO, THESE FINANCIAL PROJECTIONS TO REFLECT CIRCUMSTANCES OR EVENTS, INCLUDING UNANTICIPATED EVENTS, THAT MAY HAVE OCCURRED OR THAT MAY OCCUR AFTER THE PREPARATION OF THESE FINANCIAL PROJECTIONS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE FINANCIAL PROJECTIONS ARE SHOWN TO BE IN ERROR OR CHANGE

 

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The projections were prepared by, and are the responsibility of, QuantumScape. Neither Ernst & Young LLP, QuantumScape’s independent registered public accounting firm, nor Marcum LLP, Kensington’s independent auditor, have examined, compiled or otherwise applied procedures with respect to the accompanying prospective financial information presented herein and, accordingly, express no opinion or any other form of assurance on it or its achievability, and assume no responsibility for, and disclaim any association with, the prospective financial information. The Ernst & Young report included in this proxy statement/prospectus/information statement relates to historical financial information of QuantumScape. It does not extend to the projections and should not be read as if it does. The key elements of the forecasts provided by Kensington’s management to the Kensington Board, which assumes that QuantumScape’s initial 1GWh pilot facility (the “Pilot Facility,” and also referred to as the “QS-1”) production commences in 2024, are summarized in the tables below:

 

     Forecast  
     Year Ended December 31,  
     2022     2023     2024     2025     2026     2027     2028  
     (in millions)  

Total Revenue (1)

     —         —         14       39       275       3,210       6,439  

EBITDA (2)

     (102     (114     (130     (120     (59     808       1,622  

EBITDA % (3)

     nm       nm       nm       nm       nm       25     25

Free Cash Flow (4)

     (137     169       (222     (691     (1,346     (533     563  

Free Cash Flow assuming no capacity expansion after QS-1 Expansion (20 GWh) (5)

     (137     (169     (222     (312     (289     (17     69  

 

(1) 

Revenue includes margin for sale of separator to QSV Operations LLC.

(2) 

QuantumScape defines EBITDA as net income (loss), before interest expense, income tax provision (benefits), depreciation and amortization expense. EBITDA is not a financial measure prepared in accordance with GAAP and should not be considered a substitute for the net income (loss) prepared in accordance with GAAP.

(3)

QuantumScape defines EBITDA % as EBITDA divided by total revenue. EBITDA % is not a financial measure prepared in accordance with GAAP and should not be considered a substitute for the net income (loss) margin prepared in accordance with GAAP.

(4) 

QuantumScape defines free cash flow as cash provided by operating activities less payments for capital expenditures net of asset financing. Free cash flow is not a financial measure prepared in accordance with GAAP and should not be considered a substitute for cash flow from operations prepared in accordance with GAAP.

(5) 

QuantumScape forecasts free cash flow assuming no additional capacity expansion after the 20GWh Expansion Facility. Free cash flow is not a financial measure prepared in accordance with GAAP and should not be considered a substitute for cash flow from operations prepared in accordance with GAAP.

Other Non-Financial Metrics:

 

     Forecast  
     Year Ended December 31,  
     2022      2023      2024      2025      2026      2027      2028  

QS-1 Pilot Facility (1GWh)

     —          —          0.3        0.8        1        1        1  

QS-1 Expansion Facility (20 GWh)

     —          —          —          —          5        15        20  

QS-2

     —          —          —          —          —          30        70  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Production capacity (GWh)

     —          —          0.3        0.8        6        46        91  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The projections above assume that the Pilot Facility and 20GWh expansion of the Pilot Facility (the “20GWh Expansion Facility”) will be owned and operated by the joint venture between QuantumScape and Volkswagen, that QuantumScape will separately own and operate the QS-1 separator factory, and that

 

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QuantumScape will separately own and operate a second manufacturing facility (“QS-2”). The forecast also assumes that selling prices and costs will decline by 5% per year and that debt financing will be supported by offtake agreements with investment grade partners for the output of the 20GWh Expansion Facility and QS-2.

The factory economics incorporated in the projections include the standalone financial forecast for the 20GWh Expansion Facility provided below.

QuantumScape Factory Economics (QS-1, 20GWh)

 

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Note: Assumes 5% annual price and cost declines. Chart reflects 100% of factory financials.

(1)

Includes costs for planning, FAT/SAT, and start-up; excludes maintenance, capex, and interest expense.

(2)

Assumes debt financing for the remainder; debt financing net of amortization.

(3)

Periods -4 to 9 reflect the years 2022 to 2035.

The projections assume that development and manufacturing scale-up proceed on the following timeline.

Manufacturing Scale-Up Timeline

 

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Forecast revenue is based on a variety of operational assumptions, including the number of battery cells sold and the average sales price.

 

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Other key assumptions impacting the forecast include projected cost of material and manufacturing, research and development, selling, general and administrative expenses, capital expenditures and asset financing, among others.

Interests of Kensington’s Directors and Officers in the Business Combination

When you consider the recommendation of the Kensington Board in favor of approval of the Business Combination Proposal, you should keep in mind that certain of Kensington’s directors and officers have interests in the Business Combination that are different from, or in addition to, your interests as a stockholder or warrant holder. These interests include, among other things:

 

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