PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 599 Lexington Avenue, New York, NY 10022
MEMORANDUM
SUBJECT: Internal procedures for evaluating and processing early release requests under the lock-up agreements executed in connection with the proposed initial public offering of common stock of Calloway-Briggs Renewables Inc. ("CBR" or the "Company") on the New York Stock Exchange (proposed ticker: CBRI).
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I. Purpose and Scope
This memorandum establishes the internal Calderwood & Harkness LLP ("C&H") procedures for handling requests for early release from the 180-day lock-up agreements entered into by directors, executive officers, and significant stockholders in connection with the proposed initial public offering (the "IPO") of common stock of Calloway-Briggs Renewables Inc. ("CBR" or the "Company") on the New York Stock Exchange. The aggregate offering size, based on the last-proposed offering terms, is approximately $600,000,000, consisting of both primary and secondary components. The lock-up period runs for 180 calendar days following the date of the final prospectus (as defined in the applicable lock-up agreements), and the restrictions contained therein are a critical component of the underwriting arrangement and the post-IPO market stabilization strategy.
This memorandum is intended solely for use by the C&H deal team assigned to this matter, consisting of Jennifer Kwon (Responsible Partner), Theodore Langston (Partner, Capital Markets — advisory role), Brendan Walsh (Lead Associate), and Natasha Forbes (Working Associate). It is designed to serve as a comprehensive procedural guide in the event the offering is reactivated from its current dormant status. The offering was placed in dormant status on June 17, 2022, following a determination by the Company and its lead underwriter, Hargrove Keating & Co. ("Hargrove Keating"), that deteriorating renewables-sector IPO market conditions and broader equity-market volatility rendered the proposed pricing window untenable. While the dormancy period persists, no final prospectus has been filed and the lock-up period has not commenced; however, the procedures set forth herein should be in place and operational immediately upon any reactivation of the offering.
The scope of this memorandum encompasses the following matters:
(a) Identification of all lock-up parties and the specific terms binding each category of signatory, including execution status as of the dormancy date;
(b) A detailed description of the two release mechanisms available under the form of lock-up agreement: (i) the prior written consent of Hargrove Keating & Co. (as representative of the several underwriters) and (ii) the automatic release triggered by a Change of Control of CBR;
(c) An analysis of the permitted transfers and carve-outs that do not require a formal release from Hargrove Keating, including the conditions attendant to each carve-out;
(d) An internal evaluation framework setting forth the criteria C&H should apply when assessing and formulating recommendations with respect to early release requests;
(e) Notification procedures for communicating with the Company, the underwriters and their counsel, Pinnacle Vista Capital Partners III, LP ("Pinnacle Vista") and its counsel, regulatory authorities, and the requesting lock-up party; and
(f) Documentation and recordkeeping requirements designed to preserve work product, maintain an auditable record of all release-related activity, and ensure compliance with the firm's privilege-protection protocols.
The procedures described herein are intended to ensure that the C&H deal team handles all lock-up release matters in a consistent, thorough, and defensible manner. Given the complexity of the Company's capital structure, the significance of Pinnacle Vista's post-IPO ownership position, and the interlocking web of contractual arrangements that govern share transfers (including the Amended and Restated Stockholders' Agreement, the Registration Rights Agreement, and the Company's various credit facilities), a disciplined approach to release-request management is essential.
II. Summary of Lock-Up Provisions
A. Applicable Lock-Up Agreements
The lock-up arrangements applicable to the CBR IPO are embodied in a negotiated form of lock-up agreement (the "Lock-Up Agreement") among (i) the individual lock-up party (or, in the case of institutional stockholders, the entity), (ii) CBR, and (iii) the underwriters, acting through Hargrove Keating & Co. in its capacity as representative of the several underwriters named in the underwriting agreement. The form of Lock-Up Agreement is maintained in the C&H document management system as Document No. 68 and is attached hereto as Appendix A.
Lock-Up Period. The lock-up period is 180 calendar days, commencing on the date of the final prospectus (as filed with the Securities and Exchange Commission (the "SEC") pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the "Securities Act")). The 180-day duration is consistent with prevailing market practice for IPOs in the energy-infrastructure and renewables sectors, and was not the subject of significant negotiation during the bookbuilding preparation process.
Lock-Up Parties. The Lock-Up Agreement is required to be executed by all directors of CBR, all executive officers of CBR, Pinnacle Vista Capital Partners III, LP (the pre-IPO majority stockholder, holding approximately 62% of the fully diluted shares of common stock of CBR prior to the offering), and all other holders of 1% or more of the pre-IPO common stock of CBR. In total, approximately 18 persons and entities have been identified as required signatories.
Execution Status (as of June 17, 2022). As of the date the offering was placed in dormant status, 15 of the 18 identified signatories had fully executed and delivered Lock-Up Agreements. Three identified signatories remain outstanding. The outstanding agreements are attributable to the offering having entered dormancy before the final round of lock-up agreement execution could be completed. Upon any reactivation of the offering, the execution of the remaining three Lock-Up Agreements will constitute a gating condition to the closing of the IPO, as reflected in Item 14(c) of the Master Closing Checklist (Document No. 140). Natasha Forbes is responsible for tracking execution status, and the Lock-Up Agreement Schedule of Signatories (Document No. 69, Appendix B) should be updated promptly upon any reactivation.
B. Signatories — Categories
The lock-up parties are organized into four categories, each of which is described in detail below. The following identifies each signatory by name, title (where applicable), and relevant classification for purposes of regulatory analysis (e.g., Section 16 insider status, affiliate status, and board-committee membership).
1. Directors. The following seven individuals serve on the Board of Directors of CBR and are required to execute Lock-Up Agreements in their capacity as directors. Each is also a "reporting person" under Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and will be required to file Forms 3, 4, and 5 with the SEC following the effective date of the registration statement.
(a) Garrett Calloway — Co-Founder, Chairman of the Board, and Chief Executive Officer. Mr. Calloway is classified as non-independent and as a member of management. He is the largest individual stockholder of CBR (excluding Pinnacle Vista) and is expected to hold approximately 4.2% of the post-IPO common stock on a fully diluted basis. Mr. Calloway is also a party to the Amended and Restated Stockholders' Agreement and is subject to separate transfer restrictions thereunder.
(b) Elaine Briggs — Co-Founder and President, Development. Ms. Briggs is classified as non-independent and as a member of management. She is the second-largest individual stockholder and is expected to hold approximately 3.8% of the post-IPO common stock on a fully diluted basis. Like Mr. Calloway, Ms. Briggs is a party to the Amended and Restated Stockholders' Agreement.
(c) Hugh Pemberton — Co-Founder and Managing Partner of Pinnacle Vista Capital Management LLC, the general partner of Pinnacle Vista Capital Partners III, LP. Mr. Pemberton serves as a director of CBR as an investor designee of Pinnacle Vista and is classified as non-independent. Mr. Pemberton's shares consist primarily of the indirect beneficial interest attributable to his ownership interest in Pinnacle Vista Capital Management LLC.
(d) Diane Kovac — Co-Founder and Managing Partner of Pinnacle Vista Capital Management LLC. Ms. Kovac serves as a director of CBR as an investor designee of Pinnacle Vista and is classified as non-independent. Her share ownership mirrors the indirect beneficial interest structure described with respect to Mr. Pemberton.
(e) Warren Okoro — Independent Director. Mr. Okoro holds a de minimis equity position acquired through the Company's director equity compensation program. He serves on the Audit Committee and the Nominating and Corporate Governance Committee.
(f) Catherine Liang — Independent Director. Ms. Liang holds a de minimis equity position acquired through the Company's director equity compensation program. She serves on the Compensation Committee and the Nominating and Corporate Governance Committee.
(g) Richard Estavez — Independent Director. Mr. Estavez holds a de minimis equity position acquired through the Company's director equity compensation program. He serves as Chair of the Audit Committee and is the designated audit committee financial expert under Item 407(d)(5)(ii) of Regulation S-K.
2. Executive Officers (Non-Director)
The following six individuals are executive officers of CBR (within the meaning of Rule 3b-7 under the Exchange Act) who do not serve on the Board of Directors. Each is a Section 16 reporting person.
(a) Marcus Yoon — Chief Financial Officer. Mr. Yoon is expected to hold approximately 1.1% of the post-IPO common stock on a fully diluted basis.
(b) Sandra Haverford — General Counsel and Corporate Secretary. Ms. Haverford serves as the Company's principal legal officer and is the designated point of contact within the Company for all corporate-governance and securities-law matters, including Section 16 filings and insider-trading compliance. She is expected to hold approximately 0.6% of the post-IPO common stock on a fully diluted basis.
(c) Dale Renfroe — Chief Operating Officer. Mr. Renfroe is expected to hold approximately 0.8% of the post-IPO common stock on a fully diluted basis.
(d) Priya Anand — Senior Vice President, Finance and Treasurer. Ms. Anand is expected to hold approximately 0.4% of the post-IPO common stock on a fully diluted basis.
(e) Tomás Quintero — Senior Vice President, Project Development. Mr. Quintero is expected to hold approximately 0.5% of the post-IPO common stock on a fully diluted basis.
(f) Rachel Whitmore — Chief People Officer. Ms. Whitmore is expected to hold approximately 0.3% of the post-IPO common stock on a fully diluted basis.
3. Institutional Stockholder
Pinnacle Vista Capital Partners III, LP (the "Series III Fund") is the pre-IPO majority stockholder of CBR, holding approximately 62,000,000 shares of common stock, or approximately 62% of the fully diluted shares outstanding prior to the offering. The general partner of the Series III Fund is Pinnacle Vista Capital Management LLC ("PVCM"), which is managed by Hugh Pemberton and Diane Kovac. Investment decisions with respect to the disposition of shares held by the Series III Fund are made by PVCM's investment committee, which consists of Mr. Pemberton, Ms. Kovac, and two additional partners of PVCM.
Pinnacle Vista is selling 6,818,182 shares (approximately $150,000,000 at the proposed offering price of $22.00 per share) in the secondary component of the IPO. Following the completion of the offering (assuming no exercise of the underwriters' over-allotment option with respect to shares held by Pinnacle Vista), Pinnacle Vista will retain approximately 55,181,818 shares of common stock, representing approximately 49% of the post-IPO outstanding shares on a base-offering basis. These retained shares are subject to the Lock-Up Agreement.
Pinnacle Vista's counsel for purposes of this matter is Whitfield Archer & Doss LLP, with the following attorneys designated as working-group contacts: Philip Archer (Partner), Christine Navarro (Partner), and Derek Fong (Associate).
4. Other ≥1% Holders
In addition to the directors, executive officers, and Pinnacle Vista, the Lock-Up Agreement is required to be executed by all other holders of 1% or more of the pre-IPO common stock of CBR. This category encompasses a limited number of earlier-stage investors and key employees who acquired equity stakes through seed-stage and Series A financing rounds or through early employment equity grants. The specific names, shareholdings, and execution status of these holders are tracked on the Lock-Up Agreement Schedule of Signatories maintained as Document No. 69 in the C&H matter file (Appendix B). In the interest of maintaining the confidentiality of individual holdings and personal information, these holders are not identified by name in the body of this memorandum but are incorporated by reference to the Schedule of Signatories.
C. Issuer Lock-Up
In addition to the individual Lock-Up Agreements described above, CBR itself has agreed to a separate issuer lock-up covenant contained in the underwriting agreement (near-final draft, Document No. 62, Appendix D). Under this covenant, CBR agrees not to, directly or indirectly, issue, sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase, make any short sale, file a registration statement with respect to, or otherwise dispose of or agree to dispose of any shares of common stock or any securities convertible into or exchangeable or exercisable for common stock, for a period of 180 days following the date of the final prospectus, without the prior written consent of Hargrove Keating & Co.
The issuer lock-up is subject to the following customary exceptions, which were negotiated during the underwriting agreement drafting process and are documented in the Issuer Lock-Up Provisions Negotiation Memorandum (Document No. 70, Appendix C):
(a) Employee Equity Plan Issuances. Issuances of shares of common stock or options, restricted stock units, or other equity awards under the Company's 2022 Omnibus Equity Incentive Plan (the "Equity Plan"), which has a share reserve of 12,727,273 shares, and the Company's 2022 Employee Stock Purchase Plan (the "ESPP"), which has a share reserve of 2,545,455 shares. This exception is limited to grants and issuances in the ordinary course of the Company's employee compensation practices and does not extend to amendments to increase the share reserve of either plan during the lock-up period.
(b) Acquisition Consideration. Issuances of shares of common stock as consideration in connection with bona fide acquisitions, mergers, or strategic transactions, provided that (i) the aggregate number of shares so issued does not exceed a specified threshold (currently under negotiation; last-discussed cap of 5% of post-IPO outstanding shares), and (ii) any recipient of such shares executes a lock-up agreement for the remaining duration of the lock-up period.
(c) Other Customary Exceptions. Additional carve-outs for issuances pursuant to the conversion or exercise of convertible securities, warrants, or options outstanding as of the date of the final prospectus, and issuances in connection with the Company's dividend reinvestment plan (if any).
The issuer lock-up is a separate contractual covenant from the individual Lock-Up Agreements, and the release mechanisms and procedures described in this memorandum primarily address the individual Lock-Up Agreements. However, the C&H deal team should evaluate issuer lock-up compliance in connection with any early release request that implicates the issuance of new shares by the Company (for example, if a lock-up party requests release in connection with an exchange transaction that would involve the Company issuing new shares).
D. Permitted Transfers (Carve-Outs Not Requiring Release)
The form of Lock-Up Agreement includes several carve-outs that permit certain transfers of locked-up shares without the need for the prior written consent of Hargrove Keating & Co. These carve-outs are narrowly drawn and are subject to specific conditions that must be satisfied in each case. The C&H deal team should carefully analyze any proposed transfer claimed to fall within a carve-out to confirm that all applicable conditions are met before advising the lock-up party that no Hargrove Keating consent is required.
The permitted transfer carve-outs are as follows:
1. Affiliate Transfers. A lock-up party may transfer locked-up shares to an affiliate (as defined in Rule 405 under the Securities Act) of such lock-up party, provided that the transferee executes a Lock-Up Agreement on substantially the same terms as the transferor's Lock-Up Agreement for the remaining duration of the lock-up period. This carve-out is designed to permit routine intra-group transfers (e.g., from an individual to a wholly owned holding company, or from a fund entity to a parallel fund or co-investment vehicle) without triggering the consent requirement. The C&H deal team should review the proposed transferee's organizational documents to confirm affiliate status and should obtain an executed transferee Lock-Up Agreement before any transfer is consummated.
2. Estate-Planning Transfers. A lock-up party may transfer locked-up shares for bona fide estate-planning purposes, including transfers to revocable or irrevocable trusts for the benefit of the lock-up party or the lock-up party's immediate family members, transfers to family members, and transfers to charitable organizations. As with affiliate transfers, the transferee must execute a Lock-Up Agreement on substantially the same terms for the remaining duration of the lock-up period. The C&H deal team should request documentation establishing the bona fide estate-planning purpose of any such transfer (e.g., trust agreements, gift letters, or charitable pledge documentation).
3. 10b5-1 Plan Adoption. A lock-up party may adopt a trading plan that complies with Rule 10b5-1(c)(1) under the Exchange Act during the lock-up period; however, no sales or other dispositions of shares may occur under any such plan until the expiration of the lock-up period. This carve-out recognizes that the adoption of a 10b5-1 plan is not itself a sale or disposition and permits lock-up parties to establish their post-lock-up trading programs in advance. The C&H deal team should coordinate with the Company's General Counsel (Sandra Haverford) to ensure that any 10b5-1 plan adopted during the lock-up period complies with the Company's insider-trading policy and the SEC's recently amended requirements for 10b5-1 plans, including any applicable cooling-off periods.
4. Pledges to Lenders. A lock-up party may pledge locked-up shares to a lender as security for a bona fide loan, provided that no transfer or disposition of such shares occurs during the lock-up period as a result of foreclosure or other exercise of remedies by the pledgee. This carve-out is intended to permit margin lending and other customary financing arrangements; however, it carries significant risk if the pledgee forecloses during the lock-up period, as any such foreclosure would constitute a violation of the Lock-Up Agreement. The C&H deal team should evaluate any pledge request carefully, including an assessment of the lock-up party's creditworthiness and the loan-to-value ratio of the proposed loan, and should consider whether additional protections (e.g., a standstill agreement from the pledgee) are appropriate.
General Conditions Applicable to All Carve-Outs. In addition to the specific conditions described above, each carve-out is subject to the following general conditions:
(a) The transfer must not involve a disposition for value (i.e., the lock-up party must not receive cash or other consideration in exchange for the transferred shares, except in the case of the pledge carve-out, where the consideration is the loan proceeds).
(b) Any public filing required in connection with the transfer — including, without limitation, any Form 4 filing under Section 16 of the Exchange Act, any Schedule 13D or Schedule 13G amendment, and any Form 144 — must include a statement disclosing that the transfer was made pursuant to a permitted carve-out under the Lock-Up Agreement and that the transferred shares remain subject to the lock-up restrictions for the remaining duration of the lock-up period.
III. Release Mechanisms
The form of Lock-Up Agreement provides two mechanisms by which the lock-up restrictions may be terminated or modified prior to the expiration of the 180-day lock-up period: (A) the prior written consent of Hargrove Keating & Co. and (B) the occurrence of a Change of Control. Each mechanism is described in detail below.
A. Written Consent of Hargrove Keating & Co.
1. Authority. Under Section 2(a) of the form of Lock-Up Agreement, the lock-up restrictions may be released, in whole or in part, at any time during the 180-day lock-up period by the prior written consent of Hargrove Keating & Co. Hargrove Keating acts in this capacity as the lead-left book-running manager and coordinating underwriter for the offering, and its consent authority is exercised on behalf of the underwriting syndicate as a whole. No consent from any other individual underwriter is required.
The key contacts at Hargrove Keating for purposes of lock-up release matters are:
• Oliver Marchetti, Managing Director, Equity Capital Markets — Mr. Marchetti is the senior Hargrove Keating banker responsible for the CBR IPO and is the primary decision-maker with respect to lock-up release requests.
• Sonia Tran, Director, Power & Renewables Investment Banking — Ms. Tran is the coverage banker for CBR and serves as the primary day-to-day Hargrove Keating contact for the Company.
• Daniel Furman, Vice President, ECM Syndicate — Mr. Furman is responsible for syndicate-related matters, including coordination with the other joint book-runners and co-managers on lock-up and stabilization issues.
The underwriters' counsel is Prescott, Danforth & Yee LLP ("PD&Y"), with the following attorneys designated as working-group contacts:
• Margaret Yee, Partner
• Scott Halverson, Counsel
• Anita Desmond, Associate
2. Sole Discretion
The Lock-Up Agreement expressly provides that Hargrove Keating may grant or withhold its consent in its "sole and absolute discretion." There is no obligation on Hargrove Keating to grant consent to any release request, regardless of the reason or circumstances. The Lock-Up Agreement does not specify any criteria, standard, or factors that Hargrove Keating must or should consider in evaluating a request, and Hargrove Keating is under no obligation to explain or justify a decision to deny consent. This is a standard market provision and reflects the underwriters' interest in maintaining price stability and orderly trading in the post-IPO market.
In practice, Hargrove Keating will typically consider factors such as the volume and manner of the proposed sale, the identity and visibility of the selling stockholder, the then-current trading price and volume of CBR common stock, the proximity to the lock-up expiration date, and the potential market impact of the release. However, because these considerations are within Hargrove Keating's sole discretion and are not contractually mandated, C&H should not represent to any lock-up party that satisfaction of any particular criterion will result in the granting of consent.
3. Form of Consent
The Lock-Up Agreement requires that any consent to an early release be in writing. In market practice, Hargrove Keating's consent typically takes the form of a letter executed by an authorized representative of Hargrove Keating (usually Oliver Marchetti or a designee), addressed to the requesting lock-up party, with copies provided to the Company (attention: Sandra Haverford, General Counsel and Corporate Secretary) and to the issuer's counsel (Calderwood & Harkness LLP, attention: Jennifer Kwon).
The C&H deal team should insist on receiving a copy of any consent letter before advising the lock-up party that the release is effective, and should retain a copy of the consent letter in the matter file. Oral or informal indications of consent from Hargrove Keating representatives should not be relied upon.
4. Partial Release
Hargrove Keating's consent need not be an "all or nothing" determination. The Lock-Up Agreement permits Hargrove Keating to grant consent that is limited in any one or more of the following respects:
(a) Number of Shares. Consent may be limited to a specified number of shares, with the remaining shares continuing to be subject to the lock-up restrictions.
(b) Transaction Type. Consent may be limited to a specific type of transaction (e.g., a block sale to an institutional investor, a sale through a registered secondary offering, or a transfer to a strategic counterparty in connection with a commercial arrangement).
(c) Time Window. Consent may be limited to a designated time window (e.g., a five-trading-day period commencing on a specified date), with the lock-up restrictions re-attaching to any unsold shares at the expiration of the window.
(d) Conditions. Consent may be subject to conditions, such as the execution of an orderly-sale agreement, the engagement of a placement agent, or the satisfaction of specified volume limitations.
The C&H deal team should carefully review the terms of any partial release to ensure that the lock-up party and the Company understand the precise scope of the release and any conditions or limitations imposed by Hargrove Keating.
5. FINRA / Regulation M Considerations
Any early release of lock-up restrictions must be evaluated in light of applicable FINRA rules and Regulation M under the Exchange Act. In particular:
(a) FINRA Rule 5110 (Corporate Financing Rule). The corporate financing application filed with FINRA in connection with the IPO (FINRA Filing No. 20221129-01) includes a description of the lock-up arrangements. A material modification to the lock-up terms — including an early release of a significant number of shares — may require an amended corporate financing application to be filed with FINRA. The C&H deal team should coordinate with Hargrove Keating and PD&Y on the FINRA analysis for any proposed release.
(b) Regulation M (Rules 101–105 under the Exchange Act). Regulation M restricts certain activities by distribution participants and affiliated purchasers in connection with a distribution of securities. While the IPO distribution will have been completed by the time any lock-up release request is received, an early release could, depending on the circumstances, implicate Regulation M if it coincides with or is connected to a subsequent distribution (e.g., a secondary offering by Pinnacle Vista). The C&H deal team should analyze any release request for Regulation M implications.
Hargrove Keating will typically consult its internal compliance department and PD&Y before granting consent to any early release, and C&H should anticipate that this consultation process may add several business days to the timeline for obtaining a response.
B. Change of Control Trigger
1. Automatic Release
Section 4 of the form of Lock-Up Agreement provides for the automatic release of all lock-up restrictions upon the occurrence of a "Change of Control" of CBR. This automatic release operates without the need for any consent from Hargrove Keating & Co. or any other party. The inclusion of a Change of Control trigger is standard market practice in IPO lock-up agreements and is intended to ensure that lock-up parties are not prevented from tendering their shares or otherwise participating in a transaction that would result in a change of control of the Company.
2. Definition of Change of Control
The term "Change of Control" is defined in Section 1(b) of the form of Lock-Up Agreement as any of the following events:
(a) Acquisition of Voting Securities. The acquisition by any person or "group" (within the meaning of Section 13(d)(3) of the Exchange Act) of beneficial ownership of more than 50% of the outstanding voting securities of CBR, whether by purchase, exchange, tender offer, merger, or otherwise;
(b) Merger or Business Combination. The consummation of a merger, consolidation, or similar business combination transaction involving CBR in which the stockholders of CBR immediately prior to the consummation of such transaction hold less than 50% of the total voting power of all outstanding voting securities of the surviving or resulting entity immediately following the consummation of such transaction; or
(c) Asset Sale. The sale, lease, exchange, or other disposition, in one transaction or a series of related transactions, of all or substantially all of the assets of CBR and its subsidiaries, taken as a whole.
The definition is designed to capture the most common forms of change-of-control transactions while avoiding inadvertent triggering by routine corporate actions or immaterial transactions. Notably, the definition does not include a "board change" trigger (sometimes referred to as a "continuing directors" provision), which was discussed during the Lock-Up Agreement negotiation process but ultimately omitted at Hargrove Keating's request.
3. Mechanics. Upon the public announcement or consummation of a Change of Control, all lock-up restrictions applicable to all lock-up parties automatically terminate. The release is not conditioned on the completion of the Change of Control — a public announcement of a definitive agreement is sufficient to trigger the automatic release, provided that the announced transaction, if consummated, would constitute a Change of Control as defined in the Lock-Up Agreement.
In the event of an automatic release triggered by a Change of Control, C&H should promptly notify all lock-up parties (or their respective counsel) that the lock-up restrictions have terminated, and should coordinate with the Company and Hargrove Keating on any public disclosure that may be required.
4. C&H Monitoring
The C&H deal team should monitor, throughout the lock-up period, any indications of potential acquisition interest, unsolicited offers, or other corporate events that could trigger a Change of Control. Sources of information include press reports, filings with the SEC (including Schedule 13D and Schedule TO filings by third parties), and communications from the Company's management team. The team should also remain alert to the possibility that a lock-up party (particularly Pinnacle Vista) may seek to engineer a Change of Control transaction in order to obtain the benefit of the automatic release — while such a scenario may be unlikely, it should be considered as part of any comprehensive lock-up analysis.
IV. Internal Procedures for Evaluating Early Release Requests
A. Receipt and Initial Assessment
1. Point of Contact
All lock-up release requests, regardless of source, should be directed to Brendan Walsh (Lead Associate) as the initial point of contact within the C&H deal team. Upon receipt of any request — whether communicated by telephone, email, letter, or otherwise — Mr. Walsh should immediately notify Jennifer Kwon (Responsible Partner) and provide a brief summary of the request, including the identity of the requesting party, the number of shares involved, and the proposed transaction or rationale.
In the event that Mr. Walsh is unavailable (e.g., due to vacation, illness, or conflicting professional obligations), Natasha Forbes (Working Associate) should serve as the alternate initial point of contact and should follow the same notification procedures with respect to Jennifer Kwon. Under no circumstances should any lock-up release request be handled solely at the associate level without the knowledge and involvement of the Responsible Partner.
2. Documentation of Request
Upon receipt of a lock-up release request — whether from the lock-up party directly, from the lock-up party's legal counsel (e.g., Whitfield Archer & Doss LLP for Pinnacle Vista, with requests channeled through Philip Archer, Christine Navarro, or Derek Fong), or from CBR management (typically Sandra Haverford or Garrett Calloway) — the C&H deal team should immediately take the following steps:
(a) Record the Request. Create a written record of the request, documenting the date of receipt, the identity of the requesting party, the number of shares involved, the proposed transaction or disposition (including the proposed timing, counterparty, and manner of sale), and the stated rationale for the request.
(b) Verify Signatory Status. Confirm that the requesting party is a signatory to a Lock-Up Agreement by reference to the Lock-Up Agreement Schedule of Signatories (Document No. 69, Appendix B). Retrieve the executed Lock-Up Agreement applicable to the requesting party and verify the specific terms of that agreement.
(c) Assess Carve-Out Applicability. Determine whether the proposed transaction falls within one of the permitted transfer carve-outs described in Section II.D above. If the proposed transaction qualifies as a permitted transfer under one of the carve-outs, no consent from Hargrove Keating is required; however, the applicable conditions (e.g., execution of a transferee Lock-Up Agreement, inclusion of disclosure language in any public filing) must be satisfied. If the proposed transaction does not fall within a carve-out, the full evaluation process described in Section IV.B below should be initiated.
(d) Open a Sub-File. Create a dedicated sub-file within the Lock-Up workstream folder in the C&H document management system for all documents related to the specific request. Assign a sequential reference number to the request (e.g., LUR-001, LUR-002) for tracking purposes.
(e) Update the Running Log. Enter the request in the running log (spreadsheet) maintained for all lock-up release requests, as described in Section VIII.A below.
B. Evaluation Criteria
While Hargrove Keating retains sole and absolute discretion over whether to grant consent to an early release, C&H serves as counsel to CBR and has an independent obligation to advise the Company on the implications of any proposed release. Accordingly, the C&H deal team should evaluate each lock-up release request against the following criteria before formulating a recommendation to CBR management. The analysis should be documented in a brief internal memorandum prepared by Brendan Walsh and Natasha Forbes and reviewed by Jennifer Kwon.
1. Market Impact. The C&H deal team should assess whether the proposed release — considering the number of shares to be released, the proposed manner and timing of sale, and the identity of the selling stockholder — could adversely affect the trading price of CBR common stock, market perception of the Company, or the stability of the post-IPO trading market. Relevant considerations include the average daily trading volume of CBR common stock at the time of the request, the percentage of the public float represented by the proposed release, and whether the proposed sale could be interpreted as a negative signal regarding the Company's prospects. The team should consult, as appropriate, with the Company's investor relations advisor, Broadmark Strategic Communications Inc. (Jason Eklund), for market-impact analysis.
2. Fairness / Precedent. The team should evaluate whether granting the release to the requesting party could create expectations or perceived obligations to grant similar releases to other lock-up parties. A release granted to one lock-up party may be viewed by others as establishing a precedent, potentially leading to a "cascade" of release requests that could collectively undermine the purpose of the lock-up arrangement. This consideration is particularly acute in the case of releases granted to management insiders (Garrett Calloway, Elaine Briggs, and the named executive officers), where differential treatment could raise governance and fairness concerns.
3. Regulatory Compliance. The team should analyze whether the proposed release raises issues under any of the following regulatory frameworks:
(a) Regulation M — As discussed in Section III.A.5, the team should assess whether the release, in conjunction with any related distribution, could implicate the distribution-participation restrictions of Regulation M.
(b) Rule 144 — If the lock-up party is an affiliate of CBR (as defined in Rule 144(a)(1) under the Securities Act), the team should evaluate whether the proposed sale complies with the volume, manner-of-sale, notice, and current-public-information requirements of Rule 144. In particular, the team should confirm that the lock-up party will satisfy the applicable holding period (typically six months for restricted securities of a reporting company) and that the Company is current in its Exchange Act reporting obligations.
(c) Section 16 — If the lock-up party is a director or executive officer of CBR (and therefore a Section 16 reporting person), the team should evaluate whether the proposed transaction could result in "short-swing profit" liability under Section 16(b) of the Exchange Act, taking into account any purchases of CBR common stock by the lock-up party within the preceding six months.
(d) FINRA Rules — As discussed in Section III.A.5, the team should coordinate with Hargrove Keating and PD&Y on whether the release requires an amended FINRA filing.
4. Disclosure Obligations. The team should identify all disclosure and reporting obligations that would be triggered by the proposed release and the related transaction, including:
(a) Form 8-K — Whether CBR would be required to file a Current Report on Form 8-K with the SEC (Item 3.02 — Unregistered Sales of Equity Securities; Item 8.01 — Other Events) to disclose the early release or the related transaction. The Company's SEC Central Index Key (CIK) number is 0001948372.
(b) Section 16 Reports — Whether the lock-up party, if a Section 16 insider, would be required to file a Form 4 or other Section 16 report with the SEC to report the transaction. Sandra Haverford (Corporate Secretary) coordinates Section 16 filings through the Company's transfer agent and filing agent, Continental Shareowner Services, Inc. (Maria Costello, Client Relationship Manager).
(c) Beneficial-Ownership Reports — Whether the lock-up party (or any other person) would be required to file or amend a Schedule 13D or Schedule 13G as a result of the proposed transaction. This consideration is particularly relevant in the case of Pinnacle Vista, which files on Schedule 13D and may cross beneficial-ownership thresholds as a result of sales.
(d) Form 144 — Whether the lock-up party would be required to file a notice of proposed sale on Form 144 with the SEC.
5. Contractual Restrictions. The team should evaluate whether the proposed sale or other disposition implicates any restrictions contained in the Amended and Restated Stockholders' Agreement (Document No. 90, Appendix E), including transfer restrictions, rights of first refusal, co-sale rights, drag-along rights, and standstill provisions. The team should also evaluate whether the proposed transaction implicates any provisions of the Registration Rights Agreement (Document No. 91, Appendix F), including demand registration rights, piggyback registration rights, and S-3 shelf registration rights. In the event the lock-up party's proposed sale could trigger registration rights, the team should assess the impact on the Company's registration obligations and the potential for a secondary offering process.
6. Credit Agreement Implications. The team should determine whether the proposed share transfer triggers any change-of-control provision, ownership-threshold provision, event-of-default provision, or restrictive covenant under any of the Company's credit agreements, including:
(a) The Corporate Revolving Credit Facility with Veltrano National Bank, N.A. (Thomas Raines, Senior Vice President, Relationship Manager);
(b) The Term Loan B with Veltrano National Bank, N.A.; and
(c) Any project-finance credit agreement with Prairie Commercial Bank, N.A. (Brent Hollowell, Vice President, Project Finance).
The team should cross-reference the lender consent analysis prepared in connection with the IPO (Document No. 108) and, if necessary, coordinate with the lending institutions to confirm that the proposed release and related sale would not result in a breach of any credit agreement covenants.
7. Tax-Equity Implications. The team should assess whether the proposed transfer could adversely affect any of the Company's tax-equity partnerships or other tax-advantaged structures. In particular, the team should evaluate whether the proposed transfer could affect the Solaris West tax-equity partnership with Veltara Basin Financial LLC (an approximately $280,000,000 investment, with the anticipated tax-equity flip date in 2028) or could trigger recapture of investment tax credits ("ITC") under Section 50 of the Internal Revenue Code of 1986, as amended. The analysis of tax-equity implications requires specialized expertise, and the team should coordinate with Leonard Cross (Specialist Partner, Tax, Calderwood & Harkness LLP) and, if necessary, with the Company's external tax advisors at Kessler McBride & Associates LLP (Alan Kessler, Partner; Linda McBride, Partner) to ensure a comprehensive analysis.
8. Controlled-Company Status. The team should evaluate whether the proposed release — particularly with respect to shares held by Pinnacle Vista — could affect CBR's eligibility for the "controlled company" exemption under NYSE Listed Company Manual Section 303A. As of the proposed pricing of the IPO, Pinnacle Vista is expected to hold approximately 49% of the post-IPO voting power on a base-offering basis, which is below the 50% threshold required for the controlled-company exemption. However, the Company's post-IPO corporate governance structure has been designed with the expectation that Pinnacle Vista will maintain a substantial ownership stake, and a significant reduction in Pinnacle Vista's holdings during the lock-up period could affect the balance of power on the Board and the composition of board committees. The team should assess whether any proposed release of Pinnacle Vista shares would further reduce Pinnacle Vista's ownership below thresholds relevant to its board designation rights under the Stockholders' Agreement.
C. Internal Approval Process
The following internal approval process should be followed for each lock-up release request:
1. C&H Team Review. Brendan Walsh and Natasha Forbes prepare a brief internal memorandum (the "Release Analysis Memorandum") analyzing the request under each of the evaluation criteria set forth in Section IV.B above. The Release Analysis Memorandum should include a factual summary of the request, a legal analysis of the relevant regulatory, contractual, and tax considerations, and a recommended course of action (approve, reject, or approve with conditions). The memorandum should be prepared within two business days of receipt of the request, or sooner if circumstances warrant.
2. Jennifer Kwon Approval. Jennifer Kwon reviews the Release Analysis Memorandum and determines C&H's recommendation to the Company. Ms. Kwon may request additional analysis, consult with Theodore Langston or Leonard Cross (if tax issues are implicated), or convene a brief team discussion before finalizing the recommendation. Ms. Kwon's determination constitutes C&H's institutional recommendation, and no communication to the Company or to Hargrove Keating should be made without her approval.
3. Client Notification. Upon Ms. Kwon's approval, C&H communicates its analysis and recommendation to the Company's General Counsel, Sandra Haverford. As appropriate — and particularly in the case of requests involving significant numbers of shares, management insiders, or Pinnacle Vista — C&H should also communicate directly with Garrett Calloway (CEO) and Marcus Yoon (CFO). The communication should be delivered in writing (typically by email, marked "Privileged and Confidential — Attorney-Client Communication") and should summarize the key findings of the Release Analysis Memorandum without reproducing the full internal memorandum.
4. Company Decision. CBR management — typically acting through Sandra Haverford, with input from Garrett Calloway and Marcus Yoon as appropriate — determines the Company's position on the request. The Company may decide to support the release, oppose the release, or support a modified or conditional release. The Company's decision is communicated to C&H, and C&H then transmits the Company's position to Hargrove Keating in accordance with the notification procedures set forth in Section V below.
V. Notification and Communication Procedures
A. Communication with Hargrove Keating & Co.
If the Company supports the lock-up release request (in whole, in part, or subject to conditions), or if the requesting lock-up party seeks Hargrove Keating's consent directly (without first obtaining the Company's position), C&H should transmit the request to Hargrove Keating together with a clear statement of the Company's position. The communication should include:
(a) The identity of the requesting lock-up party;
(b) The number of shares proposed to be released;
(c) The proposed transaction (including manner of sale, timing, and counterparty, if known);
(d) The Company's position (support, opposition, or conditional support); and
(e) Any relevant analysis or considerations that the Company believes Hargrove Keating should take into account (taking care not to include any privileged attorney-client communications or attorney work product).
The primary contacts for lock-up release communications at Hargrove Keating are Oliver Marchetti and Sonia Tran. All communications should be copied to Daniel Furman. In addition, all communications to Hargrove Keating should be simultaneously copied to Prescott, Danforth & Yee LLP (Margaret Yee and Scott Halverson), as underwriters' counsel will need to evaluate the request from the underwriters' perspective and advise Hargrove Keating on regulatory and contractual considerations.
C&H should request a written response from Hargrove Keating within a reasonable timeframe specified in the communication. The standard response period is three to five business days from the date of C&H's communication, unless the urgency of the circumstances warrants a shorter period (in which case C&H should explain the basis for the expedited timeline). The C&H deal team should follow up with Hargrove Keating and PD&Y if no response is received within the specified timeframe.
B. Communication with Other Working-Group Members
In addition to Hargrove Keating and PD&Y, C&H should consider whether communication with other working-group members is appropriate in connection with a lock-up release request, as follows:
1. Whitfield Archer & Doss LLP (Pinnacle Vista's Counsel). If the release request involves shares held by Pinnacle Vista Capital Partners III, LP, C&H should coordinate directly with Christine Navarro and Derek Fong at Whitfield Archer & Doss LLP. Communication with Pinnacle Vista's counsel is essential to ensure that all relevant contractual restrictions (including those under the Stockholders' Agreement and the Registration Rights Agreement) are analyzed consistently and that any Pinnacle Vista board-designation-right implications are addressed. C&H should be mindful that Whitfield Archer & Doss represents Pinnacle Vista (not CBR), and that C&H's communications with Pinnacle Vista's counsel are not protected by the attorney-client privilege applicable to C&H's relationship with CBR.
2. Other Underwriters. The underwriting syndicate includes, in addition to Hargrove Keating & Co., the following joint book-runners and co-managers: Linden Pratt Securities, Graymont Brothers, Barfield Stuart & Co., and Crane Whitley Capital LLC. While only Hargrove Keating's consent is contractually required under the Lock-Up Agreements, C&H should consider — in consultation with Hargrove Keating — whether the other joint book-runners and co-managers should be notified of a proposed early release as a matter of professional courtesy and syndicate relations. In general, Hargrove Keating will manage communications with the other syndicate members, and C&H should defer to Hargrove Keating's preferences on this point.
3. Ashford & Pemberton LLP (Independent Auditor). If the proposed release could affect the Company's financial-statement disclosures, subsequent-events reporting, or the assumptions underlying any pro forma financial information included in the registration statement or prospectus, C&H should coordinate with the Company's independent auditor, Ashford & Pemberton LLP (Gregory Sondheim, Engagement Partner; Irene Valdez, Senior Manager). This coordination is particularly important if the release occurs during the "subsequent events" period for any financial statements included in the registration statement.
4. Broadmark Strategic Communications Inc. (IR Advisor). If the proposed release could generate market attention, media inquiries, or investor concerns, or if public disclosure of the release is required (as discussed in Section VI.D below), C&H should coordinate with the Company's investor relations advisor, Broadmark Strategic Communications Inc. (Jason Eklund, Managing Director), on the preparation and timing of any public communications.
C. Notification to the Lock-Up Party
Once Hargrove Keating's decision on the release request has been received and communicated to the Company, C&H should prepare a formal notification to the requesting lock-up party (or its counsel) confirming the outcome. The form and content of the notification will depend on whether consent was granted or denied.
1. If Consent Is Granted. The notification should specify:
(a) The scope of the release, including the number of shares released, the time period during which sales may occur, and any limitations on the type of transaction permitted;
(b) Any conditions imposed by Hargrove Keating (e.g., volume limitations, engagement of a placement agent, execution of an orderly-sale agreement);
(c) A description of all regulatory filings required in connection with the proposed transaction (including Section 16 reports, beneficial-ownership reports, and any required Form 144 filings); and
(d) A reminder that the lock-up party remains subject to the Company's insider-trading policy and applicable securities laws, and that the lock-up party should not effect any transaction while in possession of material nonpublic information.
2. If Consent Is Denied. The notification should communicate the denial of the release request in clear and unambiguous terms, without providing further explanation or rationale (consistent with Hargrove Keating's sole-discretion standard). The notification should note that the denial does not preclude the lock-up party from submitting a future request, and that the Lock-Up Agreement remains in full force and effect for the remainder of the lock-up period.
All notifications to lock-up parties should be reviewed and approved by Jennifer Kwon before transmission.
VI. Regulatory Filings and Public Disclosure
A. SEC Filings
Any early release of lock-up restrictions may trigger one or more filing obligations with the SEC. The C&H deal team should evaluate the following in connection with each release:
Form 8-K. The team should evaluate whether the early release triggers a Form 8-K filing obligation for CBR. Potentially applicable items include:
• Item 3.02 (Unregistered Sales of Equity Securities) — If the release leads to a sale of shares by the Company that constitutes an unregistered sale of equity securities (unlikely in the case of a secondary sale by a stockholder, but possible if the Company issues new shares in connection with the release).
• Item 8.01 (Other Events) — If the Company determines that disclosure of the early release is material information that should be disclosed to investors, the Company may elect (or, depending on the circumstances, may be required) to file a Form 8-K under the "other events" item.
Section 16 Reports. If the lock-up party whose shares are released is a director or executive officer of CBR (and therefore a Section 16 reporting person under the Exchange Act), the resulting transaction must be reported on Form 4 filed with the SEC within two business days of the transaction date. Sandra Haverford, in her capacity as Corporate Secretary, is responsible for coordinating Section 16 filings on behalf of the Company's insiders. Ms. Haverford works with Continental Shareowner Services, Inc. (Maria Costello, Client Relationship Manager) on the preparation and filing of Section 16 reports. The C&H deal team should confirm with Ms. Haverford that the required Form 4 will be timely filed and should review the form for accuracy before filing.
Beneficial-Ownership Reports. If the lock-up party (or any other person or group) crosses a beneficial-ownership threshold as a result of the proposed transaction, timely filing or amendment of Schedule 13D or Schedule 13G with the SEC may be required. This consideration is particularly relevant in the case of Pinnacle Vista, which files on Schedule 13D and whose beneficial ownership percentage will change with any sale of shares. The C&H deal team should coordinate with Whitfield Archer & Doss LLP (Pinnacle Vista's counsel) and with the Company's General Counsel to ensure that all required beneficial-ownership filings are timely made.
B. NYSE Notification
If the early release is material or involves a significant percentage of the outstanding shares of CBR common stock, the C&H deal team should consider whether the NYSE requires notification or whether the exchange's listing standards implicate disclosure obligations. The Company's NYSE Listing Application is designated NYSE-2022-04218. The team should consult the NYSE Listed Company Manual and, if necessary, contact the Company's NYSE listing representative to determine whether any notification or disclosure is required in connection with the proposed release.
C. FINRA Notification
The C&H deal team should coordinate with Hargrove Keating and PD&Y on whether FINRA notification is required in connection with any early release. The FINRA corporate financing application filed in connection with the IPO (FINRA Filing No. 20221129-01) includes a description of the lock-up arrangements. If the proposed release constitutes a material modification to the lock-up terms, an amended corporate financing application may be required under FINRA Rule 5110. PD&Y, as underwriters' counsel, typically takes the lead on FINRA filings, but C&H should confirm that the analysis has been completed and that any required filing is made in a timely manner.
D. Press Release / Public Disclosure
Under SEC and NYSE policy, if Hargrove Keating grants an early release of lock-up restrictions with respect to shares held by a director, officer, or affiliated stockholder, the issuer may be required to announce the impending release at least two business days before the effective date of the release through a press release reported by a major news service. This advance-notice requirement is designed to ensure that the market has adequate opportunity to absorb the information that additional shares will become available for sale.
C&H should coordinate with Broadmark Strategic Communications Inc. (Jason Eklund, Managing Director) and CBR's General Counsel (Sandra Haverford) on the preparation, review, and timing of any press release required in connection with an early release. The press release should be reviewed by Jennifer Kwon before issuance. The team should also consider whether the press release should be filed with the SEC as an exhibit to a Form 8-K.
VII. Special Considerations for Pinnacle Vista Capital Partners III, LP
Given the significance of Pinnacle Vista's position in the Company — both in terms of economic ownership and governance influence — any request from Pinnacle Vista for an early release of its lock-up restrictions warrants heightened scrutiny and a more comprehensive analysis than requests from other lock-up parties. This section describes the special considerations applicable to Pinnacle Vista release requests.
Magnitude of Pinnacle Vista's Position. Pinnacle Vista is the pre-IPO majority stockholder of CBR, holding approximately 62,000,000 shares (approximately 62%) of the pre-IPO fully diluted common stock. Pinnacle Vista is selling 6,818,182 shares (approximately $150,000,000 at $22.00 per share) in the secondary component of the IPO. Following the completion of the offering, Pinnacle Vista will retain approximately 55,181,818 shares, representing approximately 49% of the post-IPO outstanding shares on a base-offering basis. This makes Pinnacle Vista by far the largest post-IPO stockholder, and any request from Pinnacle Vista for an early release is likely to be the most significant in terms of market impact, regulatory implications, and contractual consequences.
Pinnacle Vista's Counsel. Pinnacle Vista's counsel for purposes of this matter is Whitfield Archer & Doss LLP, with Philip Archer (Partner), Christine Navarro (Partner), and Derek Fong (Associate) as the designated working-group contacts. Any release request from Pinnacle Vista will likely be communicated through its counsel, and C&H should coordinate directly with Whitfield Archer & Doss on all aspects of the request.
Amended and Restated Stockholders' Agreement (Document No. 90). The Amended and Restated Stockholders' Agreement (Appendix E) contains transfer restrictions and standstill provisions that may independently restrict Pinnacle Vista's ability to sell shares even if the lock-up is released by Hargrove Keating. The C&H deal team must analyze the Stockholders' Agreement in conjunction with any release request from Pinnacle Vista to confirm that the proposed sale does not violate any transfer restriction, right of first refusal, co-sale right, or standstill provision contained therein. In the event of a conflict between the Lock-Up Agreement and the Stockholders' Agreement, the more restrictive provision should generally be expected to control.
Registration Rights Agreement (Document No. 91). The Registration Rights Agreement (Appendix F) grants Pinnacle Vista demand registration rights, piggyback registration rights, and S-3 shelf registration rights with respect to its shares of CBR common stock. Any early release of Pinnacle Vista's lock-up could lead to Pinnacle Vista exercising one or more of these registration rights, which would trigger a secondary offering process involving the preparation and filing of a registration statement or prospectus supplement, engagement of underwriters, and potential market disruption. The C&H deal team should assess the likelihood that a release would be followed by a registration-rights exercise and should factor this assessment into its recommendation to the Company.
Board Designation Rights. The Stockholders' Agreement provides for Pinnacle Vista board designation rights subject to a step-down schedule tied to ownership thresholds. As Pinnacle Vista's ownership of CBR common stock decreases through sales, it may lose the right to designa