Exhibit 10.3


 


December 7,
2020


 


Volkswagen Group of America Investments, LLC 


220 Ferdinand Porsche Dr. 


Herndon, VA 20171 


Attn: Kevin Duke


 


Re: QuantumScape Corporation – Board Designees
and Committee Representation


 


Ladies and Gentlemen:


 


Reference is made to
(a) that certain Business Combination Agreement dated as of September 2, 2020 (as the same may be amended from time to
time, the “BCA”), by and among QuantumScape Corporation, a Delaware corporation then known as “Kensington
Capital Acquisition Corp.” (the “Company”), Kensington Merger Sub Corp., and QuantumScape Subsidiary, Inc.,
a Delaware corporation then known as “QuantumScape Corporation” (the “Subsidiary”), (b) that
certain Stockholder Support Agreement dated as of September 2, 2020 (the “Support Agreement”), by and between
the Company and Volkswagen Group of America Investments, LLC (“VWGoAI”) and (c) that certain Amended and
Restated Voting Agreement, dated as of September 11, 2018 (as the same may be amended from time to time, the “Voting
Agreement”), by and among the Subsidiary, VWGoAI, and the other persons and entities listed on the signature pages thereto.
Capitalized terms used but not defined herein shall have the meanings assigned to them in the Voting Agreement unless the context
otherwise clearly requires, other than capitalized terms used in Section 4 or 5 which shall have the meanings assigned to
them in the Support Agreement.


 


This letter agreement
amends and supersedes that certain letter agreement dated September 2, 2020, regarding board designees, by and among the Company,
the Subsidiary and VWGoAI. In consideration of the mutual promises and covenants set forth herein and in the Support Agreement,
the Company, the Subsidiary and VWGoAI (collectively, the “Parties”) hereby agree as follows:


 


1.            VWGoAI
Designee(s) Post-Closing.


 


(a)            Promptly
following the later of (x) the execution and delivery of this letter agreement, and (y) VWGoAI’s written request,
the Company and the Subsidiary shall cause up to two representatives designated by VWGoAI in writing to be included on the Company’s
board of directors (the “Board” and each such representative, a “VW Board Member”).


 


(b)            Subject
to the provisions of Section 1(c), in connection with any annual or special meeting of the stockholders of the Company at
which directors will be elected (unless VWGoAI declines in writing to designate a nominee), the Company shall cause to be nominated,
for election to the Board as part of the Company’s slate two (2) designees of VWGoAI (to be selected by VWGoAI).


 






    


     


    

 


(c)            The
Company’s obligations pursuant to Section 1(b) shall automatically terminate:


 


(i)            with
respect to one designee of VWGoAI, upon the earliest to occur of (x) VWGoAI and its affiliates collectively holding any less
than all the shares of the Company’s common stock that VWGoAI (A) received in the exchange for its capital stock of
the Subsidiary in connection with the Merger (as defined under the BCA) and (B) purchased under that certain Series F
Preferred Stock Purchase Agreement, dated May 14, 2020, by and between the Subsidiary and VWGoAI (as amended and as the same
may be further amended from time to time, the “VGA Purchase Agreement”) and any common stock into which such
capital stock is convertible or exchangeable (as adjusted for any stock dividend, stock split, consolidation of shares, reorganization,
recapitalization, reclassification or other similar event), (y) the termination of the Joint Venture Agreement (as defined
in the “VGA Purchase Agreement”), and (z) a Change in Control (as defined below) of the Company;


 


(ii)            with
respect to the remaining designee of VWGoAI, upon the earliest to occur of (x) VWGoAI and its affiliates collectively ceasing
to hold at least 50% of the shares of the Company’s common stock that VWGoAI (A) received in the exchange for its capital
stock of the Subsidiary in connection with the Merger (as defined under the BCA) and (B) purchased under the VGA Purchase
Agreement and any common stock into which such capital stock is convertible or exchangeable (as adjusted for any stock dividend,
stock split, consolidation of shares, reorganization, recapitalization, reclassification or other similar event), (y) the
termination of the Joint Venture Agreement (as defined in the VGA Purchase Agreement), and (z) a Change in Control (as defined
below) of the Company (each, a “VW Board Triggering Event”);


 


provided, that
a restatement of the Joint Venture Agreement or a termination of the Joint Venture Agreement in conjunction with the substantially
concurrent execution and delivery of a new joint venture agreement with respect to a German JV Entity (as defined in the Joint
Venture Agreement) shall not be deemed a termination of the Joint Venture Agreement for purposes of this Section 1(c); and


 


(iii)            with
respect to either or both designees of VWGoAI, as the case may be, at such other time as VWGoAI and the Company may agree in writing.


 


2.            Committee
Representation and Materials.


 


(a)            The
Parties hereby agree as follows with respect to service on committees of the Board and materials received by any VW Board Member:


 


(i)            promptly
following the execution and delivery of this letter agreement, the Company and the Subsidiary shall cause one VW Board Member,
as designated by VWGoAI in writing, to be appointed to the Nominating and Governance Committee of the Board, provided that such
VW Board Member is determined to be an “independent” director by the Board under applicable NYSE general independence
rules.


 






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(ii)            one
VW Board Member may attend, as a non-voting observer, meetings of the Audit Committee of the Board and, to the extent no VW Board
Member is determined to be an “independent” director by the Board as set forth above, one VW Board Member may attend,
as a non-voting observer, meetings of the Nominating and Governance Committee of the Board, as described further below. The Company
further agrees that it shall provide any such VW Board Member, in his or her capacity as a non-voting observer of the applicable
Committee, with copies of all notices, minutes, consents and other materials that it provides to members of such Committee, except
as may be otherwise provided herein.


 


(iii)            no
VW Board Members shall have the right to participate in the activities of the Compensation Committee of the Board, other than the
right to (A) speak with the chair of the Compensation Committee and request information from him or her and the Company that
would be helpful in understanding decisions made or to be made by the Compensation Committee or Board and (B) except as may
be otherwise provided herein, receive copies of all notices, minutes, consents and other materials that the Company provides to
members of the Compensation Committee. The Company agrees to use reasonable best efforts to make the chair of the Compensation
Committee and its other personnel available to the VW Board Member(s) and to respond to, and cause the chair of the Compensation
Committee to respond to, reasonable requests for information made by such VW Board Member(s).


 


(b)            The
Parties acknowledge and agree that the Company and the chairpersons of the Audit Committee and the Compensation Committee and,
if Section 2(a)(ii) applies, the chairperson of the Nominating and Governance Committee shall have the right, in their
reasonable discretion, to limit the disclosure of committee materials and, if applicable, to recuse or exclude the VW Board Member
from all or portions of such Committee’s meetings (i) if the Board or such Committee reasonably determines that such
access could adversely affect the attorney-client privilege, work product doctrine or any other applicable privilege between the
Company and its counsel, or (ii) if the Board or such Committee reasonably determines that such access by a VW Board Member
constitutes, or could reasonably be expected to constitute, a conflict of interest, or (iii) to the extent necessary to conduct
routine executive sessions.


 


(c)            The
Parties agree that the Company will send all Board and Committee materials to which a VW Board Member is entitled pursuant to the
terms of this Agreement or otherwise directly to the applicable VW Board Member(s) or designated outside counsel, and each
VW Board Member agrees to safeguard such materials consistent with its duty of care and loyalty to the Company, subject to the
other terms and conditions of this Section 2(c). VWGoAI acknowledges and agrees that VW Board Members may only share information
provided to the Board, any Committee or any member(s) of any of the foregoing by the Company or the Subsidiary (i) to
the extent necessary to enable the VW Board Member to exercise their fiduciary duties as a member of the Board or applicable Committee,
as applicable, or (ii) to provide VWGoAI and its affiliates with information and updates to enable such persons to evaluate
their investment in the Company and indirectly in the Subsidiary. The Company acknowledges and agrees that the VW Board Members
may share such information in accordance with this Section 2(c).


 






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(d)            To
the extent that any information shared in connection with this letter agreement may include material subject to the attorney-client
privilege, work product doctrine or any other applicable privilege between the Company or the Subsidiary and its respective counsel
concerning pending or threatened legal proceedings or governmental investigations, the Parties understand and agree that they have
common legal interests with respect to such matters and it is their desire, intention and mutual understanding that the sharing
of such material is not intended to, and shall not, waive or diminish in any way the confidentiality of such material or its continued
protection under the attorney-client privilege, work product doctrine or other applicable privilege. All information provided by
the Company or the Subsidiary that is entitled to protection under the attorney-client privilege, work product doctrine or other
applicable privilege shall remain entitled to such protection under these privileges and under the joint defense doctrine. Nothing
in this letter agreement obligates any party to reveal material subject to the attorney-client privilege, work product doctrine
or any other applicable privilege to any person who is not a member of the Board.


 


(e)            The
Parties acknowledge and agree that, in the event a VW Board Member acquires knowledge of a potential transaction or matter in such
person’s capacity as a director, officer or employee of Volkswagen AG or its affiliates (an “Industry Participant”)
and that may be a corporate opportunity for both the Company and such Industry Participant, such director shall to the fullest
extent permitted by law have fully satisfied and fulfilled such director’s fiduciary duty to the Company and its stockholders
with respect to such corporate opportunity, and the Company to the fullest extent permitted by law waives any claim that such business
opportunity constituted a corporate opportunity that should have been presented to the Company or any of its stockholders, if such
director acts in good faith in a manner consistent with the following policy: a corporate opportunity offered to any person who
is a director of the Company, and who is also a director, officer or employee of an Industry Participant shall belong to such Industry
Participant, unless such opportunity was expressly offered to such person solely in his or her capacity as a director of the Company.


 


(f)            VWGoAI
acknowledges and agrees that information provided to the Board may constitute material, non-public information regarding the Company
or the Subsidiary (“MNPI”). VWGoAI hereby acknowledges and agrees that it is aware, and that it will advise
the VW Board Members, that the United States securities laws prohibit any person or entity who has received from an issuer (including
the Company) MNPI from purchasing or selling securities of such issuer or from communicating such information to any other person
or entity under circumstances in which it is reasonably foreseeable that such person or entity is likely to purchase or sell such
securities. VWGoAI agrees that it and its affiliates will not use or communicate the confidential information of the Company or
the Subsidiary, including any MNPI or other information that it receives in connection with the VW Board Member’s participation
on the Board or pursuant to this letter agreement, in violation of these laws.


 


(g)            The
rights set forth in Section 2(a) shall terminate upon the earliest to occur of: (i) a VW Board Triggering Event;
or (ii) a material breach of this letter agreement by VWGoAI or its affiliates.


 


3.            Voting
Agreement. The Parties hereby confirm that, effective as of the Closing, the Voting Agreement has been terminated in its entirety.


 






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4.            Representations
and Warranties of the Company. The Company hereby represents and warrants to VWGoAI as follows:


 


(a)            The
execution and delivery by the Company of this letter agreement does not, and the performance of this letter agreement by the Company
will not, (i) conflict with or violate the governing documents of the Company, (ii) conflict with or violate any Law
applicable to the Company, (iii) result in any breach of, or constitute a default (or an event which, with notice or lapse
of time or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation
of, or result in the creation of a Lien (other than a Permitted Lien) on any property or asset of the Company pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which
the Company is a party or by which the Company is bound or (iv) require any consent, approval, authorization or permit of,
or filing with or notification to, any Governmental Authority, except, with respect to clauses (ii), (iii) and (iv), for any
such conflicts, violations, breaches, defaults, consents, approvals, authorizations, permits or filings or other occurrences that,
individually or in the aggregate, are not reasonably expected to prevent, materially delay or materially impede the performance
by the Company of its obligations under this letter agreement.


 


(b)            The
Company has all necessary power and authority to execute and deliver this letter agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution and delivery by the Company of this letter agreement, the
performance by the Company of its obligations hereunder and the consummation by the Company of the transactions contemplated hereby,
have been duly and validly authorized by all necessary corporate action and no other corporate actions on the part of the Company
are necessary to authorize this letter agreement or to consummate the transactions contemplated hereby. This letter agreement has
been duly and validly executed and delivered by the Company and, assuming due authorization, execution and delivery by the other
Parties hereto, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance
with its terms subject to the Remedies Exceptions.


 


5.            Representations
and Warranties of the Subsidiary. The Subsidiary hereby represents and warrants to VWGoAI as follows:


 


(a)            The
execution and delivery by the Subsidiary of this letter agreement does not, and the performance of this letter agreement by the
Subsidiary will not, (i) conflict with or violate the governing documents of the Subsidiary, (ii) conflict with or violate
any Law applicable to the Subsidiary, (iii) result in any breach of, or constitute a default (or an event which, with notice
or lapse of time or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a Lien (other than a Permitted Lien) on any property or asset of the Subsidiary pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation
to which the Subsidiary is a party or by which the Subsidiary is bound or (iv) require any consent, approval, authorization
or permit of, or filing with or notification to, any Governmental Authority, except, with respect to clauses (ii), (iii) and
(iv), for any such conflicts, violations, breaches, defaults, consents, approvals, authorizations, permits or filings or other
occurrences that, individually or in the aggregate, are not reasonably expected to prevent, materially delay or materially impede
the performance by the Subsidiary of its obligations under this letter agreement.


 






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(b)            The
Subsidiary has all necessary power and authority to execute and deliver this letter agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution and delivery by the Subsidiary of this letter agreement,
the performance by the Subsidiary of its obligations hereunder and the consummation by the Subsidiary of the transactions contemplated
hereby, have been duly and validly authorized by all necessary corporate action and no other corporate actions on the part of the
Subsidiary are necessary to authorize this letter agreement or to consummate the transactions contemplated hereby. This letter
agreement has been duly and validly executed and delivered by the Subsidiary and, assuming due authorization, execution and delivery
by the other Parties hereto, constitutes a legal, valid and binding obligation of the Subsidiary, enforceable against the Subsidiary
in accordance with its terms subject to the Remedies Exceptions.


 


6.            Definitions.
As used herein, “Change in Control” means the occurrence, on a date after the Closing, of a change in the ownership
of the Company which occurs on the date that any one person, or more than one person acting as a group, other than VWGoAI or its
affiliates (any such person or group, a “Person”), acquires, directly or indirectly, ownership of stock of the
Company that, together with the stock already held by such Person, constitutes more than fifty percent (50%) of the total voting
power of the stock of the Company; provided, however, that for purposes of this definition, (a) the acquisition of additional
stock by any one Person, who is considered to own more than fifty percent (50%) of the total voting power of the stock of the Company
will not be considered a Change in Control, and (b) if the stockholders of the Company immediately before such change in ownership
continue to retain immediately after the change in ownership, in substantially the same proportions as their ownership of shares
of the Company’s voting stock immediately prior to the change in ownership, the direct or indirect beneficial ownership of
fifty percent (50%) or more of the total voting power of the stock of the Company or of the ultimate parent entity of the Company,
such event will not be considered a Change in Control. For this purpose, indirect beneficial ownership will include, without limitation,
an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own
the Company, as the case may be, either directly or through one or more subsidiary corporations or other business entities.


 


For purposes of this
definition, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation,
purchase or acquisition of stock, or similar business transaction with the Company.


 


Notwithstanding the
foregoing, a transaction will not be deemed a Change in Control unless the transaction qualifies as a change in control event within
the meaning of Section 409A of the U.S. Internal Revenue Code of 1986, as amended, as it has been and may be amended from
time to time, and any proposed or final Treasury Regulations and Internal Revenue Service guidance that has been promulgated or
may be promulgated thereunder from time to time.


 


Further and for the
avoidance of doubt, a transaction will not constitute a Change in Control if: (i) its sole purpose is to change the jurisdiction
of the Company’s incorporation, or (ii) its sole purpose is to create a holding company that will be owned in substantially
the same proportions by the persons who held the Company’s securities immediately before such transaction.


 






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7.            Miscellaneous.
Notwithstanding termination of the Voting Agreement as contemplated by Section 3 of this letter agreement, Section 7
of the Voting Agreement is incorporated herein by reference, mutatis mutandis. The Company, the Subsidiary and VWGoAI expressly
acknowledge and agree that each VW Board Member shall be a third party beneficiary of this Agreement entitled to the rights and
benefits in favor of VW Board Members hereunder and to enforce this letter agreement as if he or she were a party hereto.


 


[Signature page follows]


 






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Very truly yours,


 


QUANTUMSCAPE SUBSIDIARY, INC.


 


	By: 	/s/
                                         Michael O. McCarthy
	 
	 
	Name: 	Michael O. McCarthy
	 
	Title: 	Chief Legal Officer




 


Agreed and Accepted:


 


QUANTUMSCAPE CORPORATION


 


	By:	/s/ Mike McCarthy	 
	 
	Name: 	Mike McCarthy 	 
	 
	Title:	Chief Legal Officer	 



 


VOLKSWAGEN GROUP OF AMERICA INVESTMENTS,
LLC


 	By:	/s/ Kevin Duke	 
	 
	Name: 	Kevin Duke	 
	 
	Title:	VP & Secretary	 




 


[Signature
Page to Side Letter Agreement]