QUANTUMSCAPE CORPORATION Item 8.01. Other Events
Extraordinary Performance Award Program
On
Purpose
A primary purpose of the EPA Program is to incent senior management by granting equity rewards that are tied to achieving both exceptional stock performance and significant business milestones over a nine-year period.
The EPA Program also seeks to encourage the Company to seek large-scale deployment of the Company's technology over the next nine years. The Company is conscious that the world's climate crisis requires major and rapid reductions in carbon emissions and that the Company's solid-state battery may contribute to society's transition away from fossil fuels. Accordingly, the business milestones emphasize production and sales growth.
Performance-based Stock Options
The EPA Program provides stock option grants to the Company's Chief Executive
Officer,
For example, the first tranche of the EPA Program cannot be met unless the
Company achieves at least one of the business milestones and the Company's stock
price increases to
The stock price targets are
Each tranche requires completion of a business milestone that was not used to satisfy a prior tranche. The business milestones are:
(i) Automotive original equipment manufacturer validation of a completed B sample
battery cell (a B sample is a functional, complete battery cell prototype
that may be built with pilot tools).
(ii) Delivery of at least 1 GWh of battery cells to a single customer.
(iii) Delivery of at least 1 GWh of battery cells to each of three or more
customers.
(iv)
(v)
(vi) Total cumulative production of 500 GWh.
(vii) Total cumulative production of 1,000 GWh.
(viii) Adjusted EBITDA margin of 25% over four consecutive quarters.
(ix) 10% of worldwide market share in automotive battery cells, excluding
(x) 20% of worldwide market share in automotive battery cells, excluding
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To permit flexibility in how the business develops, the production, sales and market share targets are independent of the Company's business model and include cells manufactured by the Company, its subsidiaries, joint ventures and licensees, and by cell makers who incorporate separators manufactured by or under license from the Company.
Sharing Ratio; Participants
Stock option grants under the EPA Program may total up to 4% of the total shares
outstanding as of
Participants
The EPA Program provides that
The remaining options under the EPA Program would be shared by at least 14 other
members of the Company, including other executive officers and employees who are
key contributors to the Company's research and development efforts,
manufacturing, and business operations. Participants other than
Forward-Looking Statements
Certain information in this Current Report on Form 8-K may be considered "forward-looking statements," within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, statements regarding future timeline, stock price, product development, production, revenue, market share, and financial results.
The stock price and business milestones described above are intentionally
ambitious and there are significant risks and uncertainties in achieving such
results. Many of the obstacles to achieving the business milestones are
described in the "Risk Factors" section in the Company's Quarterly Report on
Form 10-Q filed with the
• The Company 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. Building high volumes of multi-layer
cells in commercially relevant sizes and with higher layer count
requires substantial development effort. The Company could encounter
significant delays and/or technical challenges in replicating the
performance seen in its single-layer cells and four-layer cells and in
achieving the high quality, consistency and throughput required for
commercial production and sale.
• The Company may encounter delays and cost overruns related to
planning, permitting, construction, equipment installation, utilities
infrastructure installation and operations start-up of our
manufacturing facilities, and other obstacles including vendor delays
and challenges in operating new manufacturing equipment for automated
and/or continuous flow processes and optimizing complex manufacturing
processes. Even if the Company successfully develops the capability
for high volume production, the product may not succeed in the market
due to competition or other factors. Furthermore, even if the Company
achieves volume production and the product succeeds in the market, it
will be extremely challenging to establish production (directly and
through joint ventures and licensing) to meet the volume and market
share milestones within nine years.
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• The Company's stock price depends on market conditions and other
factors unrelated to the Company, so even if the business milestones
are met for the EPA Program, the stock price targets may not be met.
Except as otherwise required by applicable law, the Company disclaims any duty to update any forward-looking statements to reflect events or circumstances after the date of this report. Should underlying assumptions prove incorrect, actual results and projections could different materially from those expressed in any forward-looking statements.
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