1015-00001 · Graymont Brothers Inc · Indemnification & D&O

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PRIVILEGED & CONFIDENTIAL ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP 1585 Broadway, 34th Floor New York, New York 10036

April 20, 2022

MEMORANDUM

TO: Jennifer Kwon, Responsible Partner, Capital Markets, Calderwood & Harkness LLP

FROM: Brendan Walsh, Calderwood & Harkness LLP

DATE: April 20, 2022

RE: Calloway-Briggs Renewables Inc. — Analysis of Directors & Officers Insurance Program for IPO Readiness

C&H MATTER NO.: 1015-00001

PRIVILEGE DESIGNATION: This memorandum is protected by the attorney-client privilege and constitutes attorney work product prepared in anticipation of litigation and in connection with the rendering of legal advice. This memorandum is intended solely for the use of the attorneys and professionals within the working group for the Calloway-Briggs Renewables Inc. initial public offering. Do not distribute outside the working group without the prior written consent of Calderwood & Harkness LLP.

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I. Executive Summary

This memorandum sets forth our assessment of the adequacy and IPO-readiness of the directors and officers liability insurance program (the "D&O Program") maintained by Calloway-Briggs Renewables Inc. ("CBR" or the "Company") in connection with its proposed initial public offering (the "IPO") of approximately $600,000,000 of common stock on the New York Stock Exchange (proposed ticker: CBRI). This analysis has been prepared at the direction of Jennifer Kwon, Responsible Partner, Capital Markets, for purposes of advising the Company and the working group regarding the sufficiency of the D&O Program ahead of the effectiveness of the Company's registration statement on Form S-1 and the closing of the IPO.

Based on our review of the existing policy documentation, correspondence with the Company's insurance broker, and market benchmarking data, we find that CBR has assembled a $50,000,000 aggregate D&O insurance tower arranged through its broker, Dravello Place Insurance Advisors LLC (Nina Radcliffe, Vice President), comprising three layers — a $25,000,000 primary layer underwritten by Meridian National Assurance Company, a $15,000,000 first excess layer underwritten by Stonebridge Indemnity Corp., and a $10,000,000 second excess layer underwritten by Commonwealth Omnivrel Insurance Ltd. The total estimated annual premium for the full tower is $1,870,000.

This memorandum evaluates the tower structure, the adequacy of the aggregate limit relative to market practice for comparable newly public renewable-energy companies, the Side A difference-in-conditions ("DIC") provisions contained in the primary layer, specific policy terms relevant to an initial public offering (including securities-offering endorsements, entity securities coverage, and SEC investigation coverage), run-off and tail coverage considerations for pre-IPO acts, and our recommendations for specific enhancements to the D&O Program that should be implemented prior to the effectiveness of the registration statement. We also address the interaction between the D&O Program and the Company's broader indemnification framework, including the Amended and Restated Certificate of Incorporation, the Amended and Restated Bylaws, and the individual indemnification agreements to be entered into with directors and officers.

Our principal contacts at CBR for purposes of this analysis have been Sandra Haverford, General Counsel and Corporate Secretary, and Priya Anand, Senior Vice President, Finance and Treasurer. We have also been in communication with Nina Radcliffe at Fenwick Place regarding policy specifications, pricing, and the availability of IPO-related endorsements.

This memorandum supplements the broader due diligence memorandum on insurance coverage prepared by Calderwood & Harkness LLP and dated March 28, 2022 (Document 26 in the matter file), which addresses the Company's full insurance program, including property, casualty, general liability, environmental, construction, and professional liability coverage. The present memorandum is limited in scope to the D&O liability insurance program.

Several items remain outstanding as of the date of this memorandum, including confirmation of carrier financial strength ratings, receipt of specimen public-company policy forms, and finalization of quotes for the pre-IPO tail policy. These items are detailed in Section XI below and are being actively pursued.

II. Background

A. The Company

Calloway-Briggs Renewables Inc. is a Delaware corporation headquartered at 4200 Ridgeline Parkway, Suite 1100, Austin, Texas 78746. The Company's employer identification number is 83-4027615. CBR is a developer and operator of utility-scale solar, onshore wind, and battery energy storage projects across the southwestern and south-central United States.

The Company's current operating portfolio consists of approximately 3.8 gigawatts ("GW") of generating and storage capacity across 22 projects located in Texas, New Mexico, Arizona, California, and Oklahoma. An additional 1.4 GW of capacity is currently under construction, and the Company maintains a development pipeline of approximately 6.2 GW of prospective projects in various stages of development. CBR's projects range from early-stage development and permitting through fully operational assets with long-term power purchase agreements and interconnection agreements in place with regional transmission organizations and independent system operators.

CBR was founded in 2014 by Garrett Calloway and Elaine Briggs. Mr. Calloway serves as Chairman of the Board and Chief Executive Officer, and Ms. Briggs serves as President, Development. The Company has grown substantially since its founding, particularly following the Series III fund investment by Pinnacle Vista Capital Partners III, LP in 2017.

For fiscal year 2021, the Company reported total revenue of $487.3 million, Adjusted EBITDA of $218.6 million, total assets of $3.94 billion, and total debt of $1.71 billion. As of December 31, 2021, the Company employed approximately 1,240 individuals across its headquarters and project sites.

B. Pre-IPO Ownership and Governance

Prior to the IPO, CBR's equity ownership is concentrated among three principal groups. Pinnacle Vista Capital Partners III, LP ("Pinnacle Vista"), the Series III fund vehicle of Pinnacle Vista Capital Partners, holds approximately 62% of the Company's outstanding equity. The Company's co-founders, Garrett Calloway and Elaine Briggs, together with current management, hold approximately 24% of the outstanding equity. Earlier-stage investors and employees holding vested equity awards account for the remaining approximately 14%.

The Company's pre-IPO Board of Directors consists of seven members:

1. Garrett Calloway — Chairman of the Board and Chief Executive Officer (co-founder)

2. Elaine Briggs — Director, President, Development (co-founder)

3. Hugh Pemberton — Director (Pinnacle Vista designee)

4. Diane Kovac — Director (Pinnacle Vista designee)

5. Warren Okoro — Director (independent)

6. Catherine Liang — Director (independent)

7. Richard Estavez — Director (independent)

Following the IPO, Pinnacle Vista is expected to continue to hold a significant percentage of the Company's outstanding common stock. Depending on the final offering size and the number of shares sold by Pinnacle Vista in the offering, Pinnacle Vista may continue to hold more than 50% of the outstanding voting power, in which case the controlled-company exemption under Section 303A of the NYSE Listed Company Manual may apply, potentially exempting the Company from certain corporate governance requirements, including the requirement that a majority of the board be composed of independent directors.

The governance structure is relevant to the D&O analysis because the presence of a controlling stockholder with board designees may increase certain categories of litigation risk, particularly with respect to allegations of conflicts of interest, self-dealing, or breach of fiduciary duty in connection with transactions between the Company and Pinnacle Vista or its affiliates.

C. The Proposed IPO

The proposed IPO consists of an offering of common stock with a proposed aggregate offering size of $600,000,000, inclusive of the underwriters' 15% overallotment option (the "greenshoe"). At the assumed midpoint IPO price of $22.00 per share, the base offering would consist of approximately 23,181,818 shares, with up to an additional 3,559,091 shares available to cover the overallotment. Post-IPO shares outstanding are projected at approximately 123,713,636 on a base basis, or approximately 127,272,727 assuming full exercise of the overallotment option.

Based on these assumptions, the Company's pre-money equity valuation is approximately $2.2 billion, and the post-money equity valuation on a base offering basis is approximately $2.72 billion. The Company's estimated enterprise value, based on FY 2021 financial data and projected net debt, is approximately $4.25 billion.

The Company intends to list its common stock on the New York Stock Exchange under the proposed ticker symbol "CBRI." The registration statement on Form S-1 was confidentially submitted to the Securities and Exchange Commission on April 11, 2022. The Company's SEC Central Index Key number is 0001948372.

The proposed IPO includes a significant secondary component: Pinnacle Vista Capital Partners III, LP is expected to sell approximately 6,818,182 shares (approximately $150,000,000 at the assumed midpoint price) as a selling stockholder. The presence of a significant selling stockholder component is a factor in the securities litigation risk assessment discussed in Section VI.B below.

D. Key Officers and Directors to Be Insured

The following individuals are the key officers and directors of the Company who are expected to be insured under the D&O Program. Several individuals serve in dual capacities as both directors and executive officers.

Officers:

• Garrett Calloway — Chairman of the Board and Chief Executive Officer

• Elaine Briggs — President, Development

• Marcus Yoon — Chief Financial Officer

• Sandra Haverford — General Counsel and Corporate Secretary

• Dale Renfroe — Chief Operating Officer

• Priya Anand — Senior Vice President, Finance and Treasurer

• Tomás Quintero — Senior Vice President, Project Development

• Rachel Whitmore — Chief People Officer

Directors:

• Garrett Calloway

• Elaine Briggs

• Hugh Pemberton (Pinnacle Vista designee)

• Diane Kovac (Pinnacle Vista designee)

• Warren Okoro (independent)

• Catherine Liang (independent)

• Richard Estavez (independent)

In total, there are 7 directors and 6 additional named executive officers (Messrs. Yoon, Renfroe, and Quintero and Mmes. Haverford, Anand, and Whitmore do not serve on the Board), for a total of 13 individuals holding indemnification agreements. As noted above, Mr. Calloway and Ms. Briggs serve in both capacities. It is essential that the D&O Program clearly encompasses all 13 individuals within its definition of "Insured Persons" and that coverage extends to their service in all capacities, including committee memberships and service as officers or directors of subsidiaries and project special purpose vehicles.

III. Overview of D&O Insurance Tower

A. Broker. The Company's D&O insurance program is placed and administered by Dravello Place Insurance Advisors LLC, a specialty insurance brokerage firm. Fenwick Place's principal office is located at 250 Greenwich Street, Suite 3700, New York, New York 10007. The primary contact for the CBR engagement is Nina Radcliffe, Vice President, who has been responsible for the placement of the full D&O program and is coordinating the IPO-related enhancements and renewal activities described in this memorandum.

We have been in regular communication with Ms. Radcliffe regarding the structure, terms, and pricing of the D&O Program, as well as the availability of specimen public-company policy forms. Fenwick Place has indicated that it has experience with D&O placements for newly public companies in the energy and infrastructure sectors, including several renewable-energy IPOs completed in 2020 and 2021. We anticipate that Fenwick Place will serve as the ongoing broker for the public-company D&O program following the IPO.

B. Tower Structure Summary

The D&O Program is structured as a three-layer tower with an aggregate limit of $50,000,000, as summarized in the table below:

The primary layer is written on a full ABC form (Sides A, B, and C) by Meridian National Assurance Company, a Connecticut-domiciled carrier with which CBR has maintained a D&O relationship since 2017. The two excess layers are written on a follow-form basis by Stonebridge Indemnity Corp. (Illinois) and Commonwealth Omnivrel Insurance Ltd. (Bermuda), respectively. Each excess layer attaches above the exhaustion of all underlying limits and follows the terms and conditions of the Meridian National primary policy, subject to certain potential modifications that are discussed in Section V below.

The total annual premium for the full tower is estimated at $1,870,000. This figure reflects initial quotes provided by Fenwick Place in connection with the IPO placement process. Final premiums will be confirmed upon binding of the public-company program, which is expected to occur concurrently with the closing of the IPO.

C. Policy Period

The current policy period is structured to align with the anticipated IPO closing date. The existing policies are in private-company form and will be converted or replaced with public-company forms upon the effectiveness of the registration statement on Form S-1 and the closing of the IPO. The precise inception date of the public-company program will be confirmed upon pricing of the offering.

The primary policy has been assigned policy number DNO-22-048871 by Meridian National Assurance Company. Policy numbers for the excess layers will be confirmed upon receipt of specimen public-company policy forms from Fenwick Place (see Section XI.A below).

It is important to note that the conversion from private-company to public-company coverage represents a material change in the scope and terms of coverage, particularly with respect to the activation of Side C (entity securities) coverage and the application of public-company policy definitions, exclusions, and conditions. Calderwood & Harkness will conduct a detailed review of the public-company policy forms upon receipt.

IV. Detailed Policy Analysis — Primary Layer (Meridian National Assurance Company)

A. Carrier Profile

The primary layer of the D&O Program is underwritten by Meridian National Assurance Company, a Connecticut-domiciled insurance carrier. Meridian National has served as CBR's primary D&O carrier since 2017, when the initial D&O placement was arranged in connection with the Pinnacle Vista Series III Fund investment. The long-standing carrier relationship provides continuity and is generally favorable, as it reduces the risk of coverage disputes arising from changes in underwriting philosophy or policy interpretation.

We have requested from Fenwick Place the current A.M. Best financial strength rating for Meridian National Assurance Company. As of the date of this memorandum, that rating has not yet been confirmed. We consider the financial strength of the primary carrier to be a critical element of the D&O analysis, particularly given that the primary layer bears the $25,000,000 ground-up risk and houses the Side A DIC endorsement. We will supplement this memorandum upon receipt of the rating confirmation. A.M. Best ratings for the two excess carriers have also been requested.

B. Insuring Agreements

The Meridian National primary policy provides coverage under three insuring agreements, commonly referred to as Sides A, B, and C:

Side A (Individual Director and Officer Coverage). Side A covers loss arising from claims made against individual directors and officers of the Company where the Company does not indemnify the individual, whether due to the Company's financial inability to indemnify (e.g., insolvency), legal prohibition on indemnification (e.g., certain derivative claims under Delaware law), or the Company's refusal to indemnify. Side A is the most critical component of the D&O Program from the perspective of individual directors and officers, as it provides direct protection to the insureds without requiring the Company to serve as an intermediary. Side A claims have no self-insured retention (i.e., the retention is $0), ensuring that individual directors and officers have immediate access to coverage from the first dollar of loss.

Side B (Corporate Reimbursement Coverage). Side B reimburses the Company for indemnification payments that the Company makes to its directors and officers pursuant to its charter, bylaws, indemnification agreements, or applicable law. In practice, Side B coverage functions as a mechanism for the Company to recoup the costs of fulfilling its indemnification obligations. Side B claims are subject to a self-insured retention of $500,000, as discussed in Section IV.D below.

Side C (Entity Securities Coverage). Side C provides coverage to the Company itself for securities claims — that is, claims alleging violations of federal or state securities laws in connection with the purchase or sale of the Company's securities. Side C coverage is available only with respect to claims arising from publicly traded securities and, accordingly, will be activated upon the closing of the IPO and the commencement of trading on the NYSE. Side C is a critical component of the public-company D&O program because securities-fraud class actions typically name the Company as a co-defendant alongside its individual directors and officers. Without Side C coverage, the Company would be required to fund its own defense and any settlement or judgment from its general assets, separate from the D&O policy limits. Side C claims are subject to a self-insured retention of $500,000.

The availability of all three insuring agreements — Sides A, B, and C — in the primary layer is consistent with standard market practice for newly public companies and is necessary for a comprehensive D&O program in the IPO context.

C. Side A DIC (Difference-in-Conditions) Feature

The Meridian National primary policy includes a non-rescindable Side A difference-in-conditions ("DIC") endorsement. This is a significant and favorable feature of the D&O Program that merits detailed discussion.

Scope of Coverage. The Side A DIC endorsement provides "difference in conditions" coverage to individual directors and officers in circumstances where the underlying ABC policy fails to respond. The Side A DIC is designed to fill gaps in coverage that may arise in range scenarios, including: (i) rescission of the underlying ABC policy by the carrier (e.g., due to alleged material misrepresentation in the insurance application); (ii) insolvency or financial impairment of the underlying carrier; (iii) coverage disputes between the insured and the carrier under the ABC policy; and (iv) situations where the underlying ABC policy contains an exclusion or limitation that does not apply under the Side A DIC terms. In each of these circumstances, the Side A DIC endorsement provides a separate and independent source of coverage for individual directors and officers, ensuring that they are not left without protection due to circumstances beyond their control.

Non-Rescindable Feature. The non-rescindable provision of the Side A DIC endorsement is of particular importance. Under a non-rescindable Side A endorsement, the carrier is prohibited from rescinding Side A coverage on the basis of material misrepresentation in the insurance application, except in the limited circumstance where the individual insured who is seeking coverage personally committed the fraudulent misrepresentation at issue. This means that even if the Company or another insured made a material misstatement in the D&O insurance application, the carrier cannot rescind Side A coverage as to an innocent individual insured. The "fraud carve-back" exception requires that the rescission apply only to the specific individual who engaged in the fraudulent conduct, not to other innocent insureds.

Importance for Independent and Designee Directors. The non-rescindable Side A DIC coverage is of critical importance for the independent directors on CBR's Board — Warren Okoro, Catherine Liang, and Richard Estavez — as well as for the Pinnacle Vista designee directors, Hugh Pemberton and Diane Kovac. These individuals will require assurance that their personal assets are protected in the event of securities litigation, derivative claims, or regulatory proceedings arising from their service on the Board. Independent directors, in particular, typically have no involvement in the preparation of the D&O insurance application and should not bear the risk that an error or misstatement in the application by the Company or its management could result in the rescission of their coverage.

The non-rescindable Side A DIC endorsement is also consistent with the form of individual indemnification agreement that the Company is entering into with all directors and officers, which provides for indemnification and advancement of expenses to the fullest extent permitted by law. The Side A DIC coverage supplements the indemnification framework by providing an independent, third-party source of funds that is not dependent on the Company's willingness or ability to indemnify. This structure is consistent with the indemnification provisions of the Amended and Restated Certificate of Incorporation, which provides for indemnification to the fullest extent permitted by the Delaware General Corporation Law.

We consider the non-rescindable Side A DIC endorsement to be a critical feature of the D&O Program and will confirm, in our review of the public-company policy forms, that this endorsement will be maintained in the public-company conversion.

D. Key Policy Terms

The following is a summary of the key terms of the Meridian National primary policy, based on our review of the existing private-company policy and the preliminary terms communicated by Fenwick Place for the public-company conversion:

Retention (Self-Insured Retention). The policy provides for a self-insured retention ("SIR") of $500,000 applicable to Side B (corporate reimbursement) and Side C (entity securities) claims. The SIR functions as a deductible, requiring the Company to bear the first $500,000 of loss for each covered claim under Sides B and C before the policy responds. Side A claims — that is, claims for loss incurred by individual directors and officers where the Company does not indemnify — are subject to a $0 retention. The $0 retention for Side A is standard market practice and ensures that individual insureds have access to coverage from the first dollar of loss without being required to satisfy any deductible amount.

Claims-Made Basis. The policy is written on a claims-made and reported basis. Coverage applies only to claims that are first made against an insured during the policy period and that are reported to the carrier during the policy period or any applicable extended reporting period. The claims-made structure is universal in the D&O insurance market and requires careful attention to the timing of claim notification. It is essential that CBR establish internal protocols for prompt identification and reporting of potential claims to the carrier, particularly in light of the heightened litigation risk associated with the IPO.

Definition of "Claim." The policy defines "Claim" broadly to include: (i) any written demand for monetary or non-monetary relief; (ii) any civil proceeding, including a class action, derivative action, or other representative action; (iii) any criminal proceeding; (iv) any administrative or regulatory proceeding, including proceedings before the SEC, FERC, or state public utility commissions; and (v) any formal investigation, including a subpoena or formal order of investigation issued by the SEC or any other governmental authority. The inclusion of formal SEC investigations within the definition of "Claim" is critical for a newly public company and is discussed further in Section VIII.C below.

Definition of "Loss." The policy defines "Loss" to include damages, judgments, settlements (with the carrier's consent, which is not to be unreasonably withheld), pre-judgment and post-judgment interest, and defense costs, including attorneys' fees and expenses incurred in the investigation, defense, or appeal of a covered claim. The inclusion of defense costs within the definition of "Loss" is standard and means that defense costs erode the policy limits (i.e., defense costs are paid from within the policy limits rather than in addition to the limits). This erosion feature should be considered in assessing the adequacy of the $50,000,000 tower, as significant defense costs in a complex securities class action could substantially reduce the funds available for settlement or judgment.

Exclusions. The policy contains the following standard exclusions:

(a) Prior or pending litigation: Claims arising from or based upon any litigation, proceeding, or investigation pending, or any fact, circumstance, or situation of which an insured had knowledge, prior to the inception of the policy period.

(b) Bodily injury and property damage: Claims for bodily injury, sickness, disease, death, or damage to or destruction of tangible property. This exclusion is standard and is not expected to be relevant to D&O claims, though it should be reviewed in coordination with the Company's general liability and environmental insurance programs.

(c) Fraud, personal profit, and deliberate criminal conduct: Claims arising from dishonest, fraudulent, or criminal acts or omissions, or the gaining of any personal profit or advantage to which the insured was not legally entitled. Importantly, these conduct exclusions apply only upon final adjudication — that is, only after a court or other tribunal has entered a final, non-appealable judgment or other final adjudication establishing that the insured engaged in the excluded conduct. The "final adjudication" trigger is favorable to insureds because it ensures that coverage is not denied based on mere allegations of fraud or misconduct, which are common in securities class actions and derivative suits.

(d) Insured versus insured: Claims brought by one insured against another insured, or by the Company against an insured. This exclusion is intended to prevent collusive or manufactured claims. Standard exceptions apply, including exceptions for derivative actions brought in the name of the Company by a stockholder, whistleblower claims, and cross-claims or third-party claims in proceedings initiated by a non-insured.

(e) ERISA: Claims arising under the Employee Retirement Income Security Act of 1974, as amended. ERISA claims are typically covered under a separate fiduciary liability policy.

(f) Pollution: Claims arising from the discharge, release, or escape of pollutants or contaminants. This exclusion is standard in D&O policies and should be reviewed in coordination with the Company's environmental liability insurance program, given the nature of the Company's operations in the renewable-energy sector, including potential environmental liabilities associated with construction and decommissioning of energy projects.

Severability. The policy contains a full severability provision. Under the severability clause, the knowledge or conduct of one insured is not imputed to any other insured for purposes of determining coverage. This means that if one director or officer engaged in conduct that would trigger a coverage exclusion (e.g., fraud), the coverage of all other innocent insureds remains unaffected. Full severability is essential for a multi-insured policy and is a critical protection for independent directors.

Priority of Payments. The policy includes a priority-of-payments clause providing that, in the event the aggregate policy limit is insufficient to cover all claims, or in the event of the Company's insolvency, Side A claims by individual directors and officers will receive priority of payment over Side B and Side C claims. This priority mechanism ensures that the policy's primary purpose — protecting individual directors and officers — is preserved even in the event of competing claims on the policy limits.

E. Securities-Offering Coverage

A critical element of our review is whether the Meridian National primary policy (and, by extension, the follow-form excess layers) provides adequate coverage for claims arising from the IPO and the associated offering documents.

IPO / Securities Offering Endorsement. We are reviewing whether the policy includes a specific IPO or securities-offering endorsement that expressly covers claims arising from the offer, sale, and distribution of securities in connection with an initial public offering. Such endorsements typically confirm that the registration statement, prospectus, and underwriting agreement are within the scope of covered "Wrongful Acts" giving rise to securities claims. In the absence of a specific endorsement, we will confirm that the policy's general definitions of "Wrongful Act" and "Securities Claim" are sufficiently broad to encompass IPO-related claims.

Securities Act Claims. The policy must clearly cover claims arising under the following provisions of the Securities Act of 1933, as amended (the "Securities Act"):

• Section 11: Claims for material misstatements or omissions in the registration statement, which impose strict liability on certain categories of defendants (including directors who signed the registration statement and officers who are named therein) and negligence-based liability on others.

• Section 12(a)(2): Claims for material misstatements or omissions in the prospectus or oral communications, which may be brought against the Company, its officers and directors, and the underwriters.

• Section 15: Control-person liability, which extends liability to persons who control any person liable under Sections 11 or 12. This provision is particularly relevant given Pinnacle Vista's potential control-person status and the status of Messrs. Calloway and Briggs as controlling founders.

Exchange Act Claims. The policy must also cover claims arising under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including claims under Section 10(b) and Rule 10b-5 thereunder, which is the primary basis for securities-fraud class actions alleging material misstatements or omissions in connection with the purchase or sale of securities. Post-IPO, the Company and its directors and officers will be subject to the antifraud provisions of the Exchange Act, and Section 10(b) / Rule 10b-5 claims are the most common form of securities litigation brought against newly public companies.

Absence of IPO Exclusion. We are confirming that the policy does not contain a "public offering exclusion," an "IPO exclusion," or a "prior acts" limitation that could exclude or limit coverage for claims arising from the IPO. Some D&O policies contain exclusions or limitations that apply to claims arising from public offerings of securities, particularly where the policy was originally written for a private company. Any such exclusion would be highly problematic and would need to be removed or modified prior to the IPO closing. We will confirm the status of this issue upon receipt of the specimen public-company policy forms.

V. Detailed Policy Analysis — Excess Layers

A. Excess Layer 1: Stonebridge Indemnity Corp.

The first excess layer is underwritten by Stonebridge Indemnity Corp., a carrier domiciled in Illinois. The Stonebridge layer provides $15,000,000 of coverage in excess of the $25,000,000 primary layer, attaching at the exhaustion of the Meridian National primary policy limit. The estimated annual premium for this layer is $490,000.

Follow-Form Status. The Stonebridge policy is written on a follow-form basis, meaning that it follows the terms, conditions, definitions, and exclusions of the Meridian National primary policy except as specifically modified in the Stonebridge policy itself. Follow-form excess policies are standard in multi-layer D&O towers and provide consistency of coverage across the tower. However, follow-form excess policies sometimes contain deviations from the primary policy terms, such as different arbitration or dispute resolution clauses, different territory limitations, additional exclusions, or modifications to the definitions of "Claim," "Loss," or "Insured Person."

We have requested from Fenwick Place a complete copy of the Stonebridge follow-form excess policy, including all endorsements, for purposes of identifying any deviations from the Meridian National primary policy. As of the date of this memorandum, we have not yet received the Stonebridge policy forms. Upon receipt, we will enumerate any material differences and assess their impact on the overall D&O Program.

Side A DIC and Non-Rescindable Feature. A critical question for the excess layers is whether the follow-form status extends to the Side A DIC endorsement and the non-rescindable feature contained in the Meridian National primary policy. If the Stonebridge follow-form excess policy does not incorporate the Side A DIC and non-rescindable provisions, there may be a gap in coverage for individual directors and officers at the excess layer — specifically, in a scenario where the primary layer is exhausted and the individual insureds seek coverage under the Stonebridge excess layer, the absence of Side A DIC and non-rescindable protections at the excess level could leave the insureds exposed. We have specifically requested confirmation from Fenwick Place on this point.

Carrier Rating. We have requested the A.M. Best financial strength rating for Stonebridge Indemnity Corp. and will include this information in our supplemental analysis upon receipt.

B. Excess Layer 2: Commonwealth Omnivrel Insurance Ltd.

The second excess layer is underwritten by Commonwealth Omnivrel Insurance Ltd., a carrier domiciled in Bermuda. The Commonwealth Fidelity layer provides $10,000,000 of coverage in excess of $40,000,000 (i.e., it attaches above the exhaustion of both the primary layer and the first excess layer). The estimated annual premium for this layer is $330,000.

Follow-Form Status. Like the Stonebridge first excess layer, the Commonwealth Fidelity second excess layer is written on a follow-form basis. The same considerations regarding potential deviations from the primary policy terms apply, and we have requested the complete policy forms from Fenwick Place for review.

Bermuda Domicile Considerations. As a Bermuda-domiciled carrier, Commonwealth Omnivrel Insurance Ltd. raises several additional considerations that do not apply to the domestically domiciled primary and first excess carriers:

Enforceability. We will confirm that the Commonwealth Fidelity policy contains a choice-of-law provision specifying the application of U.S. law (preferably the law of Delaware or New York) and a consent-to-jurisdiction clause providing for the jurisdiction of U.S. courts (preferably the courts of the State of New York or the U.S. District Court for the Southern District of New York). In the absence of such provisions, a coverage dispute with a Bermuda carrier could result in protracted jurisdictional and choice-of-law litigation that would delay the availability of coverage to the insureds.

Surplus Lines Compliance. Bermuda-domiciled carriers are typically classified as surplus lines or non-admitted insurers in U.S. states. Surplus lines insurance is subject to state-specific regulatory requirements, including broker licensing, premium tax obligations, and policy form filing requirements. CBR operates in Texas, New Mexico, Arizona, California, and Oklahoma, and the D&O Program must comply with surplus lines regulations in each state where coverage is required. We have requested that Fenwick Place confirm compliance with all applicable surplus lines requirements. We note that surplus lines policies are generally not covered by state guaranty fund protections, which means that in the event of Commonwealth Fidelity's insolvency, policyholders would not have access to the state guaranty fund mechanism that protects policyholders of admitted carriers.

Financial Strength. We have requested the A.M. Best financial strength rating for Commonwealth Omnivrel Insurance Ltd. Given the Bermuda domicile and the absence of state guaranty fund protections, the carrier's financial strength is particularly important.

VI. Adequacy of Tower Limits

A. Market Benchmarking

We have conducted an analysis of D&O insurance tower limits for comparable companies in the renewable-energy, clean-energy, and utilities sectors that have recently completed initial public offerings or have public-company D&O programs in place. Our analysis is based on publicly available information, market data provided by Dravello Place Insurance Advisors, and our own experience advising clients in the renewable-energy sector on D&O insurance placements.

Market comparables suggest that typical D&O tower limits for companies with post-IPO market capitalizations between $2 billion and $4 billion, and enterprise values in the $3 billion to $6 billion range, fall within a range of $30 million to $75 million in aggregate coverage. The specific limit selected by any given company depends on range factors, including the company's industry, litigation risk profile, governance structure, leverage, offering size, the presence of a controlling stockholder or significant selling stockholder, and the company's risk tolerance.

Within the renewable-energy and utilities sub-sectors, we have observed the following general patterns for recently completed IPOs:

• Companies with post-IPO market capitalizations of $1 billion to $2 billion have generally maintained D&O towers in the range of $25 million to $50 million.

• Companies with post-IPO market capitalizations of $2 billion to $4 billion have generally maintained D&O towers in the range of $40 million to $75 million.

• Companies with post-IPO market capitalizations exceeding $4 billion have generally maintained D&O towers of $75 million or more.

CBR's $50 million aggregate tower falls within the mid-range of market practice for similarly situated renewable-energy companies with post-IPO market capitalizations in the $2 billion to $4 billion range. The Company's post-money equity valuation (base) of approximately $2.72 billion and enterprise value of approximately $4.25 billion place CBR squarely within the target range for a $50 million tower. Detailed market benchmarking data, including anonymized comparables sourced from Fenwick Place, is presented in Appendix C.

B. Litigation Risk Assessment

In assessing the adequacy of the $50 million tower, we have considered the specific litigation risk factors applicable to CBR and its industry. Our assessment is as follows:

Industry Risk. The renewable-energy sector faces moderate-to-high securities litigation risk. This elevated risk profile is driven by several sector-specific factors, including volatility in energy commodity markets and wholesale power prices, regulatory uncertainty regarding the continuation and modification of federal investment tax credits ("ITC") and production tax credits ("PTC") under the Internal Revenue Code, construction and development risks inherent in large-scale energy infrastructure projects, and the complex financial structures (including tax-equity partnerships and sale-leaseback transactions) commonly used to finance renewable-energy assets. Each of these factors creates the potential for material adverse developments that could trigger stock-price declines and, consequently, securities-fraud class actions.

Selling Stockholder Risk. Pinnacle Vista Capital Partners III, LP, as a significant selling stockholder in the IPO (selling approximately $150 million of shares at the assumed midpoint price), introduces an additional litigation risk factor. Plaintiffs' attorneys may focus on the presence of a large selling stockholder as evidence that insiders were motivated to overstate the Company's prospects or financial condition in the registration statement and prospectus in order to obtain a higher offering price for the shares being sold. The selling stockholder component increases the incentive for plaintiffs to bring Section 11 and Section 12 claims under the Securities Act.

Emerging Growth Company Status. CBR is expected to qualify as an "emerging growth company" as defined in the JOBS Act, which permits the Company to take advantage of certain reduced disclosure requirements, including reduced financial statement requirements, exemptions from certain audit-related requirements, and modified executive compensation disclosure. While these accommodations are intended to reduce the regulatory burden on newly public companies, they may also create a perception among investors of information asymmetry, which plaintiffs' attorneys could exploit in alleging that the Company failed to disclose material information.

Accounting Complexity. The Company's accounting for tax-equity partnerships, including the use of the hypothetical liquidation at book value ("HLBV") methodology, presents a specific risk factor. The HLBV methodology involves complex estimates and assumptions regarding the allocation of income, loss, and tax benefits among the partners in a tax-equity structure. The draft registration statement on Form S-1 was the subject of two rounds of SEC staff comments — 18 comments in the first round and 7 comments in the second round — all of which have been resolved. However, the fact that the SEC staff focused on the Company's tax-equity accounting suggests that this is an area that could be the subject of future securities claims, particularly if post-IPO financial results differ materially from the projections and estimates disclosed in the offering documents.

Leverage. CBR's total debt of $1.71 billion relative to total assets of $3.94 billion results in a leverage ratio of approximately 43%. While this leverage level is manageable and not unusual for a capital-intensive infrastructure company, it represents a risk factor in a rising interest rate environment. Any deterioration in the Company's financial condition attributable to its debt burden could trigger stock-price declines and associated securities litigation.

Overall Assessment. Taking these factors together, we assess CBR's securities litigation risk as moderate-to-high. The $50 million tower provides adequate protection for the IPO and the initial post-IPO period. However, we recommend that the Company plan to reassess its D&O tower limits within 12 months following the IPO, with a view toward increasing the aggregate tower to $75 million as the Company's public float and market capitalization grow, the stock price establishes a sustained trading range, and the Company gains additional visibility into its post-IPO litigation risk profile.

C. Cost Reasonableness

The total annual premium of $1,870,000 for the full D&O tower represents approximately 0.069% of the Company's post-money equity valuation of approximately $2.72 billion. This premium-to-valuation ratio falls within the normal range of 0.04% to 0.10% observed for newly public companies in the energy and infrastructure sectors, based on market data compiled by Fenwick Place and our own experience.

The allocation of premiums across the three layers of the tower also appears consistent with market practice. The primary layer premium of $1,050,000 represents approximately 56% of the total tower premium, reflecting the higher risk borne by the ground-up primary carrier. The combined excess layer premiums of $820,000 represent approximately 44% of the total tower premium, with the premium declining at each successive layer as the attachment point increases — a standard feature of excess pricing in the D&O market.

We do not consider the total premium to be excessive relative to the coverage provided, the Company's risk profile, and current market conditions.

VII. Run-Off / Tail Coverage Considerations

A. Pre-IPO Run-Off ("Tail") Policy

The Company's existing D&O policy is written in private-company form and covers wrongful acts committed during the current policy period. Upon the closing of the IPO, this private-company policy will be replaced by the public-company D&O program described in this memorandum. The transition from a private-company to a public-company D&O program creates a potential gap in coverage: claims arising from pre-IPO wrongful acts that are first made after the IPO closing date would not be covered by the new public-company policy (which covers only claims arising from wrongful acts committed during the public-company policy period) unless separate run-off or "tail" coverage is obtained.

Accordingly, we recommend that the Company obtain a run-off or "tail" endorsement for the existing private-company D&O policy. A tail policy extends the reporting period under the expired private-company policy, allowing claims arising from pre-IPO acts to be reported and covered even though the private-company policy period has ended. This is essential because certain categories of claims — including securities-fraud class actions under Section 11 and Section 12 of the Securities Act and fraud claims under Section 10(b) of the Exchange Act — may not be brought until months or even years after the wrongful acts occurred.

Recommended Tail Period. We recommend a tail period of six (6) years from the IPO closing date. This recommendation is based on the following considerations:

(a) The statute of repose under Section 11 of the Securities Act is three years from the date the registration statement became effective; the statute of repose under Section 12(a)(2) is three years from the date of the sale of the security.

(b) The statute of limitations under Section 10(b) of the Exchange Act is the earlier of two years after discovery of the facts constituting the violation or five years after the violation occurred (28 U.S.C. § 1658(b)).

(d) A six-year tail provides a reasonable margin of safety to cover the full range of potential pre-IPO claims and is consistent with market practice for IPO tail policies.

Estimated Tail Premium. Fenwick Place has indicated that the tail premium is typically estimated at 150% to 200% of the final annual premium for the private-company policy. The specific tail premium will need to be negotiated with Meridian National Assurance Company (as the primary carrier on the existing private-company policy) and the applicable excess carriers. We have requested formal quotes from Fenwick Place (see Section XI.A below) and will provide an updated estimate when available. Priya Anand (SVP, Finance and Treasurer) will need to confirm budget approval for the tail premium expenditure.

B. Change of Control / M&A Tail

In addition to the pre-IPO tail policy, the public-company D&O program should include an automatic tail endorsement triggered upon any future change of control of CBR. A "change of control" is typically defined in the D&O policy to include, among other events: (i) a merger or consolidation in which CBR is not the surviving entity; (ii) the acquisition by any person or group of more than 50% of the voting power of CBR's outstanding securities; (iii) the sale of all or substantially all of CBR's assets; or (iv) the replacement of a majority of the Board of Directors as a result of a contested election.

Upon the occurrence of a change of control, the automatic tail endorsement would provide an extended reporting period of not less than six (6) years, during which claims arising from pre-change-of-control wrongful acts could be reported and covered under the D&O policy that was in effect prior to the change of control. This protection is critical for outgoing directors and officers who may face claims arising from their pre-acquisition service after the change of control has occurred.

The automatic change-of-control tail is standard in public-company D&O policies and should be included in the Meridian National public-company policy form. We will confirm the availability and terms of this endorsement upon receipt of the specimen policy forms. The tail endorsement should be coordinated with the Company's Amended and Restated Bylaws, which contain indemnification obligations that survive a change of control, and with the individual indemnification agreements, which provide for continued coverage following a change of control.

C. Coordination with Selling Stockholder (Pinnacle Vista)

Pinnacle Vista Capital Partners III, LP, as a significant stockholder of CBR and the selling stockholder in the IPO, and its designees on the Board of Directors (Hugh Pemberton and Diane Kovac), should be covered as insured persons under the D&O Program. This coverage is essential because the Pinnacle Vista designees face the same exposure to securities claims, derivative actions, and regulatory proceedings as the other directors.

We have confirmed with Sandra Haverford that the definition of "Insured Persons" in the existing private-company policy extends to directors who are designees of significant stockholders. We will confirm that this definition is maintained in the public-company conversion and that it explicitly encompasses individuals who serve as directors at the nomination or designation of a stockholder, regardless of whether such individuals are employed by or affiliated with the nominating stockholder.

Separately, Pinnacle Vista may maintain its own fund-level D&O or management liability insurance policy that provides coverage to the fund, its general partner, and its designated directors. To the extent that Pinnacle Vista's fund-level policy and CBR's company-level D&O policy both purport to cover claims against the Pinnacle Vista designee directors, there is a potential for unintended primary/excess stacking issues or coordination disputes between the two policies. We recommend that Fenwick Place coordinate with Pinnacle Vista's insurance advisors to identify any potential conflicts or gaps in coverage and to ensure that the respective policies' "other insurance" clauses are compatible. We have also flagged this issue for coordination with Whitfield Archer & Doss LLP (Christine Navarro and Derek Fong), counsel to Pinnacle Vista.

VIII. IPO-Specific Policy Enhancements — Recommendations

Based on our review of the D&O Program and the specific requirements of the proposed IPO, we recommend the following enhancements to the D&O Program, each of which should be implemented prior to the effectiveness of the registration statement and the closing of the IPO:

A. Public-Company Conversion Endorsement

The Meridian National primary policy must be endorsed to convert from a private-company form to a public-company form as of the date of IPO closing. The public-company conversion involves several material changes to the policy, including the activation of Side C (entity securities) coverage, the modification of certain definitions and exclusions to reflect the Company's status as a public reporting company, and the adjustment of the self-insured retention applicable to entity-level claims.

Side C (entity securities) coverage must be activated upon the listing of the Company's common stock on the NYSE. Until the Company's securities are publicly traded, Side C coverage is dormant and does not apply. The activation of Side C should be automatic upon IPO closing, and we will confirm the activation mechanics with Fenwick Place.

The definition of "Securities Claim" in the public-company policy should be reviewed to ensure that it is sufficiently broad to encompass claims arising under both the Securities Act of 1933 and the Securities Exchange Act of 1934, as well as analogous state securities laws (including state "blue sky" laws). The definition should also encompass claims brought in state courts, given the ongoing uncertainty regarding the enforceability of federal-forum provisions for Securities Act claims following the Delaware Supreme Court's decision in Salzberg v. Sciabacucchi, 227 A.3d 102 (Del. 2020).

B. Prospectus Liability Coverage Confirmation

We recommend that the Company obtain from Meridian National a written confirmation or endorsement expressly confirming that the policy covers claims arising from alleged misstatements or omissions in the Company's registration statement on Form S-1 (SEC CIK 0001948372), the prospectus included therein, and any amendments or supplements to the registration statement or prospectus. This confirmation should cover claims arising under Section 11 (registration statement liability) and Section 12(a)(2) (prospectus liability) of the Securities Act, as well as claims under Section 10(b) and Rule 10b-5 of the Exchange Act alleging fraud in connection with the IPO.

Additionally, coverage should extend to claims arising from the underwriting agreement and the selling-stockholder documentation, to the extent that such documents are referenced in or incorporated into the registration statement or prospectus. Given the reciprocal indemnification provisions in the underwriting agreement (discussed in Section IX.C below), the D&O policy's Side C coverage may be called upon to fund the Company's indemnification obligations to the underwriters for securities-law claims, and the policy should not contain any exclusion or limitation that would prevent it from responding in that context.

C. SEC Investigation Coverage

Given the heightened regulatory scrutiny applicable to newly public companies, we recommend that the D&O Program provide comprehensive coverage for SEC investigations and related proceedings.

Specifically, we recommend confirming that formal SEC investigations, including subpoenas, document requests, and formal orders of investigation, are covered as "Claims" under the policy and that the defense costs incurred in responding to such investigations are covered as "Loss." In addition, we recommend that the policy include pre-claim inquiry coverage for informal SEC inquiries — that is, inquiries that have not yet risen to the level of a formal investigation but that may require the engagement of counsel and the incurrence of significant legal fees.

This recommendation is informed by the fact that the Company's registration statement on Form S-1 was the subject of two rounds of SEC staff comments — 18 comments in the first round and 7 comments in the second round — all of which were resolved prior to the confidential submission. While the resolution of these comments is a positive development, the SEC's focus on the Company's disclosure, particularly with respect to tax-equity partnership accounting and the HLBV methodology, suggests that the Company may face additional SEC scrutiny in the post-IPO period. Pre-claim inquiry coverage would ensure that the costs associated with responding to informal post-IPO SEC inquiries are covered, even before a formal investigation is commenced.

D. Expanded Definition of "Insured"

We recommend that the definition of "Insured Persons" in the D&O policy be reviewed and, if necessary, expanded to ensure that it encompasses all individuals who may face exposure in connection with the Company's securities, governance, and operations. Specifically:

Directors Serving on Committees. The policy should confirm that directors serving on Board committees are covered in their committee capacities. The Company's Board committees following the IPO will include:

• Audit Committee: Warren Okoro (Chair, designated as Audit Committee financial expert), Catherine Liang, Richard Estavez

• Compensation Committee: Catherine Liang (Chair), Richard Estavez, Warren Okoro

• Nominating and Corporate Governance Committee: Richard Estavez (Chair), Catherine Liang, Hugh Pemberton

Committee members, particularly Audit Committee members, face elevated personal liability exposure due to their specific oversight responsibilities. The policy should expressly confirm coverage for committee service.

Officers of Subsidiaries. CBR conducts its operations through a number of subsidiaries and project-level special purpose vehicles ("SPVs"), including CBR Holdings LLC, Calloway-Briggs Operating Company LLC, and numerous project SPVs. Officers and directors who serve in dual capacities at both the parent company and one or more subsidiaries should be covered for their service at the subsidiary level. We will confirm that the policy's definition of "Insured Organization" or "Subsidiary" encompasses all of CBR's direct and indirect subsidiaries.

Employees Acting in Managerial or Supervisory Capacity. The policy should extend coverage to employees who exercise managerial or supervisory authority over the Company's operations, to the extent that such employees are named as defendants in securities or fiduciary duty claims. This category of insured is sometimes included in public-company D&O policies as a supplemental coverage feature.

Equity Plan Considerations. The Company has adopted the 2022 Omnibus Equity Incentive Plan and the 2022 Employee Stock Purchase Plan in connection with the IPO. We will confirm that the administration of these plans by the Company's directors, officers, and Compensation Committee members does not trigger any exclusion under the D&O policy (e.g., an ERISA exclusion or benefits plan exclusion) and that claims arising from the administration of the equity plans are within the scope of coverage.

E. Order-of-Payments / Priority-of-Payments Endorsement

As discussed in Section IV.D above, the primary policy includes a priority-of-payments clause providing that Side A claims by individual directors and officers receive priority over Side B and Side C claims. We recommend confirming that this priority-of-payments provision is clearly and unambiguously stated in the public-company policy forms and that it extends to the excess layers of the tower.

The priority-of-payments endorsement is particularly important given the Company's leverage profile ($1.71 billion total debt / $3.94 billion total assets). In the event that the Company were to experience financial distress or insolvency, the D&O policy limits could be subject to competing claims from the Company (seeking reimbursement under Side B or entity coverage under Side C) and from individual directors and officers (seeking personal protection under Side A). Without a clear priority-of-payments endorsement, a bankruptcy court could potentially treat the D&O policy limits as an asset of the bankruptcy estate, diverting funds away from individual insureds. The priority-of-payments endorsement mitigates this risk by establishing that Side A claims are to be satisfied first.

IX. Interaction with Indemnification Framework

A. Charter and Bylaw Indemnification

The Amended and Restated Certificate of Incorporation of Calloway-Briggs Renewables Inc. (to be effective upon the closing of the IPO) includes mandatory indemnification of directors and officers to the fullest extent permitted by the Delaware General Corporation Law. Section 145 of the DGCL authorizes a Delaware corporation to indemnify its directors and officers against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement in connection with any action, suit, or proceeding to which the individual is a party by reason of the fact that the individual is or was a director or officer, provided that the individual acted in good faith and in a manner the indiv

PRIVILEGED & CONFIDENTIAL ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 1585 Broadway, 34th Floor New York, New York 10036
April 20, 2022
MEMORANDUM
TO: Jennifer Kwon, Responsible Partner, Capital Markets, Calderwood & Harkness LLP
FROM: Brendan Walsh, Calderwood & Harkness LLP
DATE: April 20, 2022
RE: Calloway-Briggs Renewables Inc. — Analysis of Directors & Officers Insurance Program for IPO Readiness
C&H MATTER NO.: 1015-00001
PRIVILEGE DESIGNATION: This memorandum is protected by the attorney-client privilege and constitutes attorney work product prepared in anticipation of litigation and in connection with the rendering of legal advice. This memorandum is intended solely for the use of the attorneys and professionals within the working group for the Calloway-Briggs Renewables Inc. initial public offering. Do not distribute outside the working group without the prior written consent of Calderwood & Harkness LLP.
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I. Executive Summary
This memorandum sets forth our assessment of the adequacy and IPO-readiness of the directors and officers liability insurance program (the "D&O Program") maintained by Calloway-Briggs Renewables Inc. ("CBR" or the "Company") in connection with its proposed initial public offering (the "IPO") of approximately $600,000,000 of common stock on the New York Stock Exchange (proposed ticker: CBRI). This analysis has been prepared at the direction of Jennifer Kwon, Responsible Partner, Capital Markets, for purposes of advising the Company and the working group regarding the sufficiency of the D&O Program ahead of the effectiveness of the Company's registration statement on Form S-1 and the closing of the IPO.
Based on our review of the existing policy documentation, correspondence with the Company's insurance broker, and market benchmarking data, we find that CBR has assembled a $50,000,000 aggregate D&O insurance tower arranged through its broker, Dravello Place Insurance Advisors LLC (Nina Radcliffe, Vice President), comprising three layers — a $25,000,000 primary layer underwritten by Meridian National Assurance Company, a $15,000,000 first excess layer underwritten by Stonebridge Indemnity Corp., and a $10,000,000 second excess layer underwritten by Commonwealth Omnivrel Insurance Ltd. The total estimated annual premium for the full tower is $1,870,000.
This memorandum evaluates the tower structure, the adequacy of the aggregate limit relative to market practice for comparable newly public renewable-energy companies, the Side A difference-in-conditions ("DIC") provisions contained in the primary layer, specific policy terms relevant to an initial public offering (including securities-offering endorsements, entity securities coverage, and SEC investigation coverage), run-off and tail coverage considerations for pre-IPO acts, and our recommendations for specific enhancements to the D&O Program that should be implemented prior to the effectiveness of the registration statement. We also address the interaction between the D&O Program and the Company's broader indemnification framework, including the Amended and Restated Certificate of Incorporation, the Amended and Restated Bylaws, and the individual indemnification agreements to be entered into with directors and officers.
Our principal contacts at CBR for purposes of this analysis have been Sandra Haverford, General Counsel and Corporate Secretary, and Priya Anand, Senior Vice President, Finance and Treasurer. We have also been in communication with Nina Radcliffe at Fenwick Place regarding policy specifications, pricing, and the availability of IPO-related endorsements.
This memorandum supplements the broader due diligence memorandum on insurance coverage prepared by Calderwood & Harkness LLP and dated March 28, 2022 (Document 26 in the matter file), which addresses the Company's full insurance program, including property, casualty, general liability, environmental, construction, and professional liability coverage. The present memorandum is limited in scope to the D&O liability insurance program.
Several items remain outstanding as of the date of this memorandum, including confirmation of carrier financial strength ratings, receipt of specimen public-company policy forms, and finalization of quotes for the pre-IPO tail policy. These items are detailed in Section XI below and are being actively pursued.
II. Background
A. The Company
Calloway-Briggs Renewables Inc. is a Delaware corporation headquartered at 4200 Ridgeline Parkway, Suite 1100, Austin, Texas 78746. The Company's employer identification number is 83-4027615. CBR is a developer and operator of utility-scale solar, onshore wind, and battery energy storage projects across the southwestern and south-central United States.
The Company's current operating portfolio consists of approximately 3.8 gigawatts ("GW") of generating and storage capacity across 22 projects located in Texas, New Mexico, Arizona, California, and Oklahoma. An additional 1.4 GW of capacity is currently under construction, and the Company maintains a development pipeline of approximately 6.2 GW of prospective projects in various stages of development. CBR's projects range from early-stage development and permitting through fully operational assets with long-term power purchase agreements and interconnection agreements in place with regional transmission organizations and independent system operators.
CBR was founded in 2014 by Garrett Calloway and Elaine Briggs. Mr. Calloway serves as Chairman of the Board and Chief Executive Officer, and Ms. Briggs serves as President, Development. The Company has grown substantially since its founding, particularly following the Series III fund investment by Pinnacle Vista Capital Partners III, LP in 2017.
For fiscal year 2021, the Company reported total revenue of $487.3 million, Adjusted EBITDA of $218.6 million, total assets of $3.94 billion, and total debt of $1.71 billion. As of December 31, 2021, the Company employed approximately 1,240 individuals across its headquarters and project sites.
B. Pre-IPO Ownership and Governance
Prior to the IPO, CBR's equity ownership is concentrated among three principal groups. Pinnacle Vista Capital Partners III, LP ("Pinnacle Vista"), the Series III fund vehicle of Pinnacle Vista Capital Partners, holds approximately 62% of the Company's outstanding equity. The Company's co-founders, Garrett Calloway and Elaine Briggs, together with current management, hold approximately 24% of the outstanding equity. Earlier-stage investors and employees holding vested equity awards account for the remaining approximately 14%.
The Company's pre-IPO Board of Directors consists of seven members:
1. Garrett Calloway — Chairman of the Board and Chief Executive Officer (co-founder)
2. Elaine Briggs — Director, President, Development (co-founder)
3. Hugh Pemberton — Director (Pinnacle Vista designee)
4. Diane Kovac — Director (Pinnacle Vista designee)
5. Warren Okoro — Director (independent)
6. Catherine Liang — Director (independent)
7. Richard Estavez — Director (independent)
Following the IPO, Pinnacle Vista is expected to continue to hold a significant percentage of the Company's outstanding common stock. Depending on the final offering size and the number of shares sold by Pinnacle Vista in the offering, Pinnacle Vista may continue to hold more than 50% of the outstanding voting power, in which case the controlled-company exemption under Section 303A of the NYSE Listed Company Manual may apply, potentially exempting the Company from certain corporate governance requirements, including the requirement that a majority of the board be composed of independent directors.
The governance structure is relevant to the D&O analysis because the presence of a controlling stockholder with board designees may increase certain categories of litigation risk, particularly with respect to allegations of conflicts of interest, self-dealing, or breach of fiduciary duty in connection with transactions between the Company and Pinnacle Vista or its affiliates.
C. The Proposed IPO
The proposed IPO consists of an offering of common stock with a proposed aggregate offering size of $600,000,000, inclusive of the underwriters' 15% overallotment option (the "greenshoe"). At the assumed midpoint IPO price of $22.00 per share, the base offering would consist of approximately 23,181,818 shares, with up to an additional 3,559,091 shares available to cover the overallotment. Post-IPO shares outstanding are projected at approximately 123,713,636 on a base basis, or approximately 127,272,727 assuming full exercise of the overallotment option.
Based on these assumptions, the Company's pre-money equity valuation is approximately $2.2 billion, and the post-money equity valuation on a base offering basis is approximately $2.72 billion. The Company's estimated enterprise value, based on FY 2021 financial data and projected net debt, is approximately $4.25 billion.
The Company intends to list its common stock on the New York Stock Exchange under the proposed ticker symbol "CBRI." The registration statement on Form S-1 was confidentially submitted to the Securities and Exchange Commission on April 11, 2022. The Company's SEC Central Index Key number is 0001948372.
The proposed IPO includes a significant secondary component: Pinnacle Vista Capital Partners III, LP is expected to sell approximately 6,818,182 shares (approximately $150,000,000 at the assumed midpoint price) as a selling stockholder. The presence of a significant selling stockholder component is a factor in the securities litigation risk assessment discussed in Section VI.B below.
D. Key Officers and Directors to Be Insured
The following individuals are the key officers and directors of the Company who are expected to be insured under the D&O Program. Several individuals serve in dual capacities as both directors and executive officers.
Officers:
• Garrett Calloway — Chairman of the Board and Chief Executive Officer
• Elaine Briggs — President, Development
• Marcus Yoon — Chief Financial Officer
• Sandra Haverford — General Counsel and Corporate Secretary
• Dale Renfroe — Chief Operating Officer
• Priya Anand — Senior Vice President, Finance and Treasurer
• Tomás Quintero — Senior Vice President, Project Development
• Rachel Whitmore — Chief People Officer
Directors:
• Garrett Calloway
• Elaine Briggs
• Hugh Pemberton (Pinnacle Vista designee)
• Diane Kovac (Pinnacle Vista designee)
• Warren Okoro (independent)
• Catherine Liang (independent)
• Richard Estavez (independent)
In total, there are 7 directors and 6 additional named executive officers (Messrs. Yoon, Renfroe, and Quintero and Mmes. Haverford, Anand, and Whitmore do not serve on the Board), for a total of 13 individuals holding indemnification agreements. As noted above, Mr. Calloway and Ms. Briggs serve in both capacities. It is essential that the D&O Program clearly encompasses all 13 individuals within its definition of "Insured Persons" and that coverage extends to their service in all capacities, including committee memberships and service as officers or directors of subsidiaries and project special purpose vehicles.
III. Overview of D&O Insurance Tower
A. Broker. The Company's D&O insurance program is placed and administered by Dravello Place Insurance Advisors LLC, a specialty insurance brokerage firm. Fenwick Place's principal office is located at 250 Greenwich Street, Suite 3700, New York, New York 10007. The primary contact for the CBR engagement is Nina Radcliffe, Vice President, who has been responsible for the placement of the full D&O program and is coordinating the IPO-related enhancements and renewal activities described in this memorandum.
We have been in regular communication with Ms. Radcliffe regarding the structure, terms, and pricing of the D&O Program, as well as the availability of specimen public-company policy forms. Fenwick Place has indicated that it has experience with D&O placements for newly public companies in the energy and infrastructure sectors, including several renewable-energy IPOs completed in 2020 and 2021. We anticipate that Fenwick Place will serve as the ongoing broker for the public-company D&O program following the IPO.
B. Tower Structure Summary
The D&O Program is structured as a three-layer tower with an aggregate limit of $50,000,000, as summarized in the table below:
The primary layer is written on a full ABC form (Sides A, B, and C) by Meridian National Assurance Company, a Connecticut-domiciled carrier with which CBR has maintained a D&O relationship since 2017. The two excess layers are written on a follow-form basis by Stonebridge Indemnity Corp. (Illinois) and Commonwealth Omnivrel Insurance Ltd. (Bermuda), respectively. Each excess layer attaches above the exhaustion of all underlying limits and follows the terms and conditions of the Meridian National primary policy, subject to certain potential modifications that are discussed in Section V below.
The total annual premium for the full tower is estimated at $1,870,000. This figure reflects initial quotes provided by Fenwick Place in connection with the IPO placement process. Final premiums will be confirmed upon binding of the public-company program, which is expected to occur concurrently with the closing of the IPO.
C. Policy Period
The current policy period is structured to align with the anticipated IPO closing date. The existing policies are in private-company form and will be converted or replaced with public-company forms upon the effectiveness of the registration statement on Form S-1 and the closing of the IPO. The precise inception date of the public-company program will be confirmed upon pricing of the offering.
The primary policy has been assigned policy number DNO-22-048871 by Meridian National Assurance Company. Policy numbers for the excess layers will be confirmed upon receipt of specimen public-company policy forms from Fenwick Place (see Section XI.A below).
It is important to note that the conversion from private-company to public-company coverage represents a material change in the scope and terms of coverage, particularly with respect to the activation of Side C (entity securities) coverage and the application of public-company policy definitions, exclusions, and conditions. Calderwood & Harkness will conduct a detailed review of the public-company policy forms upon receipt.
IV. Detailed Policy Analysis — Primary Layer (Meridian National Assurance Company)
A. Carrier Profile
The primary layer of the D&O Program is underwritten by Meridian National Assurance Company, a Connecticut-domiciled insurance carrier. Meridian National has served as CBR's primary D&O carrier since 2017, when the initial D&O placement was arranged in connection with the Pinnacle Vista Series III Fund investment. The long-standing carrier relationship provides continuity and is generally favorable, as it reduces the risk of coverage disputes arising from changes in underwriting philosophy or policy interpretation.
We have requested from Fenwick Place the current A.M. Best financial strength rating for Meridian National Assurance Company. As of the date of this memorandum, that rating has not yet been confirmed. We consider the financial strength of the primary carrier to be a critical element of the D&O analysis, particularly given that the primary layer bears the $25,000,000 ground-up risk and houses the Side A DIC endorsement. We will supplement this memorandum upon receipt of the rating confirmation. A.M. Best ratings for the two excess carriers have also been requested.
B. Insuring Agreements
The Meridian National primary policy provides coverage under three insuring agreements, commonly referred to as Sides A, B, and C:
Side A (Individual Director and Officer Coverage). Side A covers loss arising from claims made against individual directors and officers of the Company where the Company does not indemnify the individual, whether due to the Company's financial inability to indemnify (e.g., insolvency), legal prohibition on indemnification (e.g., certain derivative claims under Delaware law), or the Company's refusal to indemnify. Side A is the most critical component of the D&O Program from the perspective of individual directors and officers, as it provides direct protection to the insureds without requiring the Company to serve as an intermediary. Side A claims have no self-insured retention (i.e., the retention is $0), ensuring that individual directors and officers have immediate access to coverage from the first dollar of loss.
Side B (Corporate Reimbursement Coverage). Side B reimburses the Company for indemnification payments that the Company makes to its directors and officers pursuant to its charter, bylaws, indemnification agreements, or applicable law. In practice, Side B coverage functions as a mechanism for the Company to recoup the costs of fulfilling its indemnification obligations. Side B claims are subject to a self-insured retention of $500,000, as discussed in Section IV.D below.
Side C (Entity Securities Coverage). Side C provides coverage to the Company itself for securities claims — that is, claims alleging violations of federal or state securities laws in connection with the purchase or sale of the Company's securities. Side C coverage is available only with respect to claims arising from publicly traded securities and, accordingly, will be activated upon the closing of the IPO and the commencement of trading on the NYSE. Side C is a critical component of the public-company D&O program because securities-fraud class actions typically name the Company as a co-defendant alongside its individual directors and officers. Without Side C coverage, the Company would be required to fund its own defense and any settlement or judgment from its general assets, separate from the D&O policy limits. Side C claims are subject to a self-insured retention of $500,000.
The availability of all three insuring agreements — Sides A, B, and C — in the primary layer is consistent with standard market practice for newly public companies and is necessary for a comprehensive D&O program in the IPO context.
C. Side A DIC (Difference-in-Conditions) Feature
The Meridian National primary policy includes a non-rescindable Side A difference-in-conditions ("DIC") endorsement. This is a significant and favorable feature of the D&O Program that merits detailed discussion.
Scope of Coverage. The Side A DIC endorsement provides "difference in conditions" coverage to individual directors and officers in circumstances where the underlying ABC policy fails to respond. The Side A DIC is designed to fill gaps in coverage that may arise in range scenarios, including: (i) rescission of the underlying ABC policy by the carrier (e.g., due to alleged material misrepresentation in the insurance application); (ii) insolvency or financial impairment of the underlying carrier; (iii) coverage disputes between the insured and the carrier under the ABC policy; and (iv) situations where the underlying ABC policy contains an exclusion or limitation that does not apply under the Side A DIC terms. In each of these circumstances, the Side A DIC endorsement provides a separate and independent source of coverage for individual directors and officers, ensuring that they are not left without protection due to circumstances beyond their control.
Non-Rescindable Feature. The non-rescindable provision of the Side A DIC endorsement is of particular importance. Under a non-rescindable Side A endorsement, the carrier is prohibited from rescinding Side A coverage on the basis of material misrepresentation in the insurance application, except in the limited circumstance where the individual insured who is seeking coverage personally committed the fraudulent misrepresentation at issue. This means that even if the Company or another insured made a material misstatement in the D&O insurance application, the carrier cannot rescind Side A coverage as to an innocent individual insured. The "fraud carve-back" exception requires that the rescission apply only to the specific individual who engaged in the fraudulent conduct, not to other innocent insureds.
Importance for Independent and Designee Directors. The non-rescindable Side A DIC coverage is of critical importance for the independent directors on CBR's Board — Warren Okoro, Catherine Liang, and Richard Estavez — as well as for the Pinnacle Vista designee directors, Hugh Pemberton and Diane Kovac. These individuals will require assurance that their personal assets are protected in the event of securities litigation, derivative claims, or regulatory proceedings arising from their service on the Board. Independent directors, in particular, typically have no involvement in the preparation of the D&O insurance application and should not bear the risk that an error or misstatement in the application by the Company or its management could result in the rescission of their coverage.
The non-rescindable Side A DIC endorsement is also consistent with the form of individual indemnification agreement that the Company is entering into with all directors and officers, which provides for indemnification and advancement of expenses to the fullest extent permitted by law. The Side A DIC coverage supplements the indemnification framework by providing an independent, third-party source of funds that is not dependent on the Company's willingness or ability to indemnify. This structure is consistent with the indemnification provisions of the Amended and Restated Certificate of Incorporation, which provides for indemnification to the fullest extent permitted by the Delaware General Corporation Law.
We consider the non-rescindable Side A DIC endorsement to be a critical feature of the D&O Program and will confirm, in our review of the public-company policy forms, that this endorsement will be maintained in the public-company conversion.
D. Key Policy Terms
The following is a summary of the key terms of the Meridian National primary policy, based on our review of the existing private-company policy and the preliminary terms communicated by Fenwick Place for the public-company conversion:
Retention (Self-Insured Retention). The policy provides for a self-insured retention ("SIR") of $500,000 applicable to Side B (corporate reimbursement) and Side C (entity securities) claims. The SIR functions as a deductible, requiring the Company to bear the first $500,000 of loss for each covered claim under Sides B and C before the policy responds. Side A claims — that is, claims for loss incurred by individual directors and officers where the Company does not indemnify — are subject to a $0 retention. The $0 retention for Side A is standard market practice and ensures that individual insureds have access to coverage from the first dollar of loss without being required to satisfy any deductible amount.
Claims-Made Basis. The policy is written on a claims-made and reported basis. Coverage applies only to claims that are first made against an insured during the policy period and that are reported to the carrier during the policy period or any applicable extended reporting period. The claims-made structure is universal in the D&O insurance market and requires careful attention to the timing of claim notification. It is essential that CBR establish internal protocols for prompt identification and reporting of potential claims to the carrier, particularly in light of the heightened litigation risk associated with the IPO.
Definition of "Claim." The policy defines "Claim" broadly to include: (i) any written demand for monetary or non-monetary relief; (ii) any civil proceeding, including a class action, derivative action, or other representative action; (iii) any criminal proceeding; (iv) any administrative or regulatory proceeding, including proceedings before the SEC, FERC, or state public utility commissions; and (v) any formal investigation, including a subpoena or formal order of investigation issued by the SEC or any other governmental authority. The inclusion of formal SEC investigations within the definition of "Claim" is critical for a newly public company and is discussed further in Section VIII.C below.
Definition of "Loss." The policy defines "Loss" to include damages, judgments, settlements (with the carrier's consent, which is not to be unreasonably withheld), pre-judgment and post-judgment interest, and defense costs, including attorneys' fees and expenses incurred in the investigation, defense, or appeal of a covered claim. The inclusion of defense costs within the definition of "Loss" is standard and means that defense costs erode the policy limits (i.e., defense costs are paid from within the policy limits rather than in addition to the limits). This erosion feature should be considered in assessing the adequacy of the $50,000,000 tower, as significant defense costs in a complex securities class action could substantially reduce the funds available for settlement or judgment.
Exclusions. The policy contains the following standard exclusions:
(a) Prior or pending litigation: Claims arising from or based upon any litigation, proceeding, or investigation pending, or any fact, circumstance, or situation of which an insured had knowledge, prior to the inception of the policy period.
(b) Bodily injury and property damage: Claims for bodily injury, sickness, disease, death, or damage to or destruction of tangible property. This exclusion is standard and is not expected to be relevant to D&O claims, though it should be reviewed in coordination with the Company's general liability and environmental insurance programs.
(c) Fraud, personal profit, and deliberate criminal conduct: Claims arising from dishonest, fraudulent, or criminal acts or omissions, or the gaining of any personal profit or advantage to which the insured was not legally entitled. Importantly, these conduct exclusions apply only upon final adjudication — that is, only after a court or other tribunal has entered a final, non-appealable judgment or other final adjudication establishing that the insured engaged in the excluded conduct. The "final adjudication" trigger is favorable to insureds because it ensures that coverage is not denied based on mere allegations of fraud or misconduct, which are common in securities class actions and derivative suits.
(d) Insured versus insured: Claims brought by one insured against another insured, or by the Company against an insured. This exclusion is intended to prevent collusive or manufactured claims. Standard exceptions apply, including exceptions for derivative actions brought in the name of the Company by a stockholder, whistleblower claims, and cross-claims or third-party claims in proceedings initiated by a non-insured.
(e) ERISA: Claims arising under the Employee Retirement Income Security Act of 1974, as amended. ERISA claims are typically covered under a separate fiduciary liability policy.
(f) Pollution: Claims arising from the discharge, release, or escape of pollutants or contaminants. This exclusion is standard in D&O policies and should be reviewed in coordination with the Company's environmental liability insurance program, given the nature of the Company's operations in the renewable-energy sector, including potential environmental liabilities associated with construction and decommissioning of energy projects.
Severability. The policy contains a full severability provision. Under the severability clause, the knowledge or conduct of one insured is not imputed to any other insured for purposes of determining coverage. This means that if one director or officer engaged in conduct that would trigger a coverage exclusion (e.g., fraud), the coverage of all other innocent insureds remains unaffected. Full severability is essential for a multi-insured policy and is a critical protection for independent directors.
Priority of Payments. The policy includes a priority-of-payments clause providing that, in the event the aggregate policy limit is insufficient to cover all claims, or in the event of the Company's insolvency, Side A claims by individual directors and officers will receive priority of payment over Side B and Side C claims. This priority mechanism ensures that the policy's primary purpose — protecting individual directors and officers — is preserved even in the event of competing claims on the policy limits.
E. Securities-Offering Coverage
A critical element of our review is whether the Meridian National primary policy (and, by extension, the follow-form excess layers) provides adequate coverage for claims arising from the IPO and the associated offering documents.
IPO / Securities Offering Endorsement. We are reviewing whether the policy includes a specific IPO or securities-offering endorsement that expressly covers claims arising from the offer, sale, and distribution of securities in connection with an initial public offering. Such endorsements typically confirm that the registration statement, prospectus, and underwriting agreement are within the scope of covered "Wrongful Acts" giving rise to securities claims. In the absence of a specific endorsement, we will confirm that the policy's general definitions of "Wrongful Act" and "Securities Claim" are sufficiently broad to encompass IPO-related claims.
Securities Act Claims. The policy must clearly cover claims arising under the following provisions of the Securities Act of 1933, as amended (the "Securities Act"):
• Section 11: Claims for material misstatements or omissions in the registration statement, which impose strict liability on certain categories of defendants (including directors who signed the registration statement and officers who are named therein) and negligence-based liability on others.
• Section 12(a)(2): Claims for material misstatements or omissions in the prospectus or oral communications, which may be brought against the Company, its officers and directors, and the underwriters.
• Section 15: Control-person liability, which extends liability to persons who control any person liable under Sections 11 or 12. This provision is particularly relevant given Pinnacle Vista's potential control-person status and the status of Messrs. Calloway and Briggs as controlling founders.
Exchange Act Claims. The policy must also cover claims arising under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including claims under Section 10(b) and Rule 10b-5 thereunder, which is the primary basis for securities-fraud class actions alleging material misstatements or omissions in connection with the purchase or sale of securities. Post-IPO, the Company and its directors and officers will be subject to the antifraud provisions of the Exchange Act, and Section 10(b) / Rule 10b-5 claims are the most common form of securities litigation brought against newly public companies.
Absence of IPO Exclusion. We are confirming that the policy does not contain a "public offering exclusion," an "IPO exclusion," or a "prior acts" limitation that could exclude or limit coverage for claims arising from the IPO. Some D&O policies contain exclusions or limitations that apply to claims arising from public offerings of securities, particularly where the policy was originally written for a private company. Any such exclusion would be highly problematic and would need to be removed or modified prior to the IPO closing. We will confirm the status of this issue upon receipt of the specimen public-company policy forms.
V. Detailed Policy Analysis — Excess Layers
A. Excess Layer 1: Stonebridge Indemnity Corp.
The first excess layer is underwritten by Stonebridge Indemnity Corp., a carrier domiciled in Illinois. The Stonebridge layer provides $15,000,000 of coverage in excess of the $25,000,000 primary layer, attaching at the exhaustion of the Meridian National primary policy limit. The estimated annual premium for this layer is $490,000.
Follow-Form Status. The Stonebridge policy is written on a follow-form basis, meaning that it follows the terms, conditions, definitions, and exclusions of the Meridian National primary policy except as specifically modified in the Stonebridge policy itself. Follow-form excess policies are standard in multi-layer D&O towers and provide consistency of coverage across the tower. However, follow-form excess policies sometimes contain deviations from the primary policy terms, such as different arbitration or dispute resolution clauses, different territory limitations, additional exclusions, or modifications to the definitions of "Claim," "Loss," or "Insured Person."
We have requested from Fenwick Place a complete copy of the Stonebridge follow-form excess policy, including all endorsements, for purposes of identifying any deviations from the Meridian National primary policy. As of the date of this memorandum, we have not yet received the Stonebridge policy forms. Upon receipt, we will enumerate any material differences and assess their impact on the overall D&O Program.
Side A DIC and Non-Rescindable Feature. A critical question for the excess layers is whether the follow-form status extends to the Side A DIC endorsement and the non-rescindable feature contained in the Meridian National primary policy. If the Stonebridge follow-form excess policy does not incorporate the Side A DIC and non-rescindable provisions, there may be a gap in coverage for individual directors and officers at the excess layer — specifically, in a scenario where the primary layer is exhausted and the individual insureds seek coverage under the Stonebridge excess layer, the absence of Side A DIC and non-rescindable protections at the excess level could leave the insureds exposed. We have specifically requested confirmation from Fenwick Place on this point.
Carrier Rating. We have requested the A.M. Best financial strength rating for Stonebridge Indemnity Corp. and will include this information in our supplemental analysis upon receipt.
B. Excess Layer 2: Commonwealth Omnivrel Insurance Ltd.
The second excess layer is underwritten by Commonwealth Omnivrel Insurance Ltd., a carrier domiciled in Bermuda. The Commonwealth Fidelity layer provides $10,000,000 of coverage in excess of $40,000,000 (i.e., it attaches above the exhaustion of both the primary layer and the first excess layer). The estimated annual premium for this layer is $330,000.
Follow-Form Status. Like the Stonebridge first excess layer, the Commonwealth Fidelity second excess layer is written on a follow-form basis. The same considerations regarding potential deviations from the primary policy terms apply, and we have requested the complete policy forms from Fenwick Place for review.
Bermuda Domicile Considerations. As a Bermuda-domiciled carrier, Commonwealth Omnivrel Insurance Ltd. raises several additional considerations that do not apply to the domestically domiciled primary and first excess carriers:
Enforceability. We will confirm that the Commonwealth Fidelity policy contains a choice-of-law provision specifying the application of U.S. law (preferably the law of Delaware or New York) and a consent-to-jurisdiction clause providing for the jurisdiction of U.S. courts (preferably the courts of the State of New York or the U.S. District Court for the Southern District of New York). In the absence of such provisions, a coverage dispute with a Bermuda carrier could result in protracted jurisdictional and choice-of-law litigation that would delay the availability of coverage to the insureds.
Surplus Lines Compliance. Bermuda-domiciled carriers are typically classified as surplus lines or non-admitted insurers in U.S. states. Surplus lines insurance is subject to state-specific regulatory requirements, including broker licensing, premium tax obligations, and policy form filing requirements. CBR operates in Texas, New Mexico, Arizona, California, and Oklahoma, and the D&O Program must comply with surplus lines regulations in each state where coverage is required. We have requested that Fenwick Place confirm compliance with all applicable surplus lines requirements. We note that surplus lines policies are generally not covered by state guaranty fund protections, which means that in the event of Commonwealth Fidelity's insolvency, policyholders would not have access to the state guaranty fund mechanism that protects policyholders of admitted carriers.
Financial Strength. We have requested the A.M. Best financial strength rating for Commonwealth Omnivrel Insurance Ltd. Given the Bermuda domicile and the absence of state guaranty fund protections, the carrier's financial strength is particularly important.
VI. Adequacy of Tower Limits
A. Market Benchmarking
We have conducted an analysis of D&O insurance tower limits for comparable companies in the renewable-energy, clean-energy, and utilities sectors that have recently completed initial public offerings or have public-company D&O programs in place. Our analysis is based on publicly available information, market data provided by Dravello Place Insurance Advisors, and our own experience advising clients in the renewable-energy sector on D&O insurance placements.
Market comparables suggest that typical D&O tower limits for companies with post-IPO market capitalizations between $2 billion and $4 billion, and enterprise values in the $3 billion to $6 billion range, fall within a range of $30 million to $75 million in aggregate coverage. The specific limit selected by any given company depends on range factors, including the company's industry, litigation risk profile, governance structure, leverage, offering size, the presence of a controlling stockholder or significant selling stockholder, and the company's risk tolerance.
Within the renewable-energy and utilities sub-sectors, we have observed the following general patterns for recently completed IPOs:
• Companies with post-IPO market capitalizations of $1 billion to $2 billion have generally maintained D&O towers in the range of $25 million to $50 million.
• Companies with post-IPO market capitalizations of $2 billion to $4 billion have generally maintained D&O towers in the range of $40 million to $75 million.
• Companies with post-IPO market capitalizations exceeding $4 billion have generally maintained D&O towers of $75 million or more.
CBR's $50 million aggregate tower falls within the mid-range of market practice for similarly situated renewable-energy companies with post-IPO market capitalizations in the $2 billion to $4 billion range. The Company's post-money equity valuation (base) of approximately $2.72 billion and enterprise value of approximately $4.25 billion place CBR squarely within the target range for a $50 million tower. Detailed market benchmarking data, including anonymized comparables sourced from Fenwick Place, is presented in Appendix C.
B. Litigation Risk Assessment
In assessing the adequacy of the $50 million tower, we have considered the specific litigation risk factors applicable to CBR and its industry. Our assessment is as follows:
Industry Risk. The renewable-energy sector faces moderate-to-high securities litigation risk. This elevated risk profile is driven by several sector-specific factors, including volatility in energy commodity markets and wholesale power prices, regulatory uncertainty regarding the continuation and modification of federal investment tax credits ("ITC") and production tax credits ("PTC") under the Internal Revenue Code, construction and development risks inherent in large-scale energy infrastructure projects, and the complex financial structures (including tax-equity partnerships and sale-leaseback transactions) commonly used to finance renewable-energy assets. Each of these factors creates the potential for material adverse developments that could trigger stock-price declines and, consequently, securities-fraud class actions.
Selling Stockholder Risk. Pinnacle Vista Capital Partners III, LP, as a significant selling stockholder in the IPO (selling approximately $150 million of shares at the assumed midpoint price), introduces an additional litigation risk factor. Plaintiffs' attorneys may focus on the presence of a large selling stockholder as evidence that insiders were motivated to overstate the Company's prospects or financial condition in the registration statement and prospectus in order to obtain a higher offering price for the shares being sold. The selling stockholder component increases the incentive for plaintiffs to bring Section 11 and Section 12 claims under the Securities Act.
Emerging Growth Company Status. CBR is expected to qualify as an "emerging growth company" as defined in the JOBS Act, which permits the Company to take advantage of certain reduced disclosure requirements, including reduced financial statement requirements, exemptions from certain audit-related requirements, and modified executive compensation disclosure. While these accommodations are intended to reduce the regulatory burden on newly public companies, they may also create a perception among investors of information asymmetry, which plaintiffs' attorneys could exploit in alleging that the Company failed to disclose material information.
Accounting Complexity. The Company's accounting for tax-equity partnerships, including the use of the hypothetical liquidation at book value ("HLBV") methodology, presents a specific risk factor. The HLBV methodology involves complex estimates and assumptions regarding the allocation of income, loss, and tax benefits among the partners in a tax-equity structure. The draft registration statement on Form S-1 was the subject of two rounds of SEC staff comments — 18 comments in the first round and 7 comments in the second round — all of which have been resolved. However, the fact that the SEC staff focused on the Company's tax-equity accounting suggests that this is an area that could be the subject of future securities claims, particularly if post-IPO financial results differ materially from the projections and estimates disclosed in the offering documents.
Leverage. CBR's total debt of $1.71 billion relative to total assets of $3.94 billion results in a leverage ratio of approximately 43%. While this leverage level is manageable and not unusual for a capital-intensive infrastructure company, it represents a risk factor in a rising interest rate environment. Any deterioration in the Company's financial condition attributable to its debt burden could trigger stock-price declines and associated securities litigation.
Overall Assessment. Taking these factors together, we assess CBR's securities litigation risk as moderate-to-high. The $50 million tower provides adequate protection for the IPO and the initial post-IPO period. However, we recommend that the Company plan to reassess its D&O tower limits within 12 months following the IPO, with a view toward increasing the aggregate tower to $75 million as the Company's public float and market capitalization grow, the stock price establishes a sustained trading range, and the Company gains additional visibility into its post-IPO litigation risk profile.
C. Cost Reasonableness
The total annual premium of $1,870,000 for the full D&O tower represents approximately 0.069% of the Company's post-money equity valuation of approximately $2.72 billion. This premium-to-valuation ratio falls within the normal range of 0.04% to 0.10% observed for newly public companies in the energy and infrastructure sectors, based on market data compiled by Fenwick Place and our own experience.
The allocation of premiums across the three layers of the tower also appears consistent with market practice. The primary layer premium of $1,050,000 represents approximately 56% of the total tower premium, reflecting the higher risk borne by the ground-up primary carrier. The combined excess layer premiums of $820,000 represent approximately 44% of the total tower premium, with the premium declining at each successive layer as the attachment point increases — a standard feature of excess pricing in the D&O market.
We do not consider the total premium to be excessive relative to the coverage provided, the Company's risk profile, and current market conditions.
VII. Run-Off / Tail Coverage Considerations
A. Pre-IPO Run-Off ("Tail") Policy
The Company's existing D&O policy is written in private-company form and covers wrongful acts committed during the current policy period. Upon the closing of the IPO, this private-company policy will be replaced by the public-company D&O program described in this memorandum. The transition from a private-company to a public-company D&O program creates a potential gap in coverage: claims arising from pre-IPO wrongful acts that are first made after the IPO closing date would not be covered by the new public-company policy (which covers only claims arising from wrongful acts committed during the public-company policy period) unless separate run-off or "tail" coverage is obtained.
Accordingly, we recommend that the Company obtain a run-off or "tail" endorsement for the existing private-company D&O policy. A tail policy extends the reporting period under the expired private-company policy, allowing claims arising from pre-IPO acts to be reported and covered even though the private-company policy period has ended. This is essential because certain categories of claims — including securities-fraud class actions under Section 11 and Section 12 of the Securities Act and fraud claims under Section 10(b) of the Exchange Act — may not be brought until months or even years after the wrongful acts occurred.
Recommended Tail Period. We recommend a tail period of six (6) years from the IPO closing date. This recommendation is based on the following considerations:
(a) The statute of repose under Section 11 of the Securities Act is three years from the date the registration statement became effective; the statute of repose under Section 12(a)(2) is three years from the date of the sale of the security.
(b) The statute of limitations under Section 10(b) of the Exchange Act is the earlier of two years after discovery of the facts constituting the violation or five years after the violation occurred (28 U.S.C. § 1658(b)).
(c) Certain state-law claims (e.g., breach of fiduciary duty under Delaware law) may have longer limitations periods.
(d) A six-year tail provides a reasonable margin of safety to cover the full range of potential pre-IPO claims and is consistent with market practice for IPO tail policies.
Estimated Tail Premium. Fenwick Place has indicated that the tail premium is typically estimated at 150% to 200% of the final annual premium for the private-company policy. The specific tail premium will need to be negotiated with Meridian National Assurance Company (as the primary carrier on the existing private-company policy) and the applicable excess carriers. We have requested formal quotes from Fenwick Place (see Section XI.A below) and will provide an updated estimate when available. Priya Anand (SVP, Finance and Treasurer) will need to confirm budget approval for the tail premium expenditure.
B. Change of Control / M&A Tail
In addition to the pre-IPO tail policy, the public-company D&O program should include an automatic tail endorsement triggered upon any future change of control of CBR. A "change of control" is typically defined in the D&O policy to include, among other events: (i) a merger or consolidation in which CBR is not the surviving entity; (ii) the acquisition by any person or group of more than 50% of the voting power of CBR's outstanding securities; (iii) the sale of all or substantially all of CBR's assets; or (iv) the replacement of a majority of the Board of Directors as a result of a contested election.
Upon the occurrence of a change of control, the automatic tail endorsement would provide an extended reporting period of not less than six (6) years, during which claims arising from pre-change-of-control wrongful acts could be reported and covered under the D&O policy that was in effect prior to the change of control. This protection is critical for outgoing directors and officers who may face claims arising from their pre-acquisition service after the change of control has occurred.
The automatic change-of-control tail is standard in public-company D&O policies and should be included in the Meridian National public-company policy form. We will confirm the availability and terms of this endorsement upon receipt of the specimen policy forms. The tail endorsement should be coordinated with the Company's Amended and Restated Bylaws, which contain indemnification obligations that survive a change of control, and with the individual indemnification agreements, which provide for continued coverage following a change of control.
C. Coordination with Selling Stockholder (Pinnacle Vista)
Pinnacle Vista Capital Partners III, LP, as a significant stockholder of CBR and the selling stockholder in the IPO, and its designees on the Board of Directors (Hugh Pemberton and Diane Kovac), should be covered as insured persons under the D&O Program. This coverage is essential because the Pinnacle Vista designees face the same exposure to securities claims, derivative actions, and regulatory proceedings as the other directors.
We have confirmed with Sandra Haverford that the definition of "Insured Persons" in the existing private-company policy extends to directors who are designees of significant stockholders. We will confirm that this definition is maintained in the public-company conversion and that it explicitly encompasses individuals who serve as directors at the nomination or designation of a stockholder, regardless of whether such individuals are employed by or affiliated with the nominating stockholder.
Separately, Pinnacle Vista may maintain its own fund-level D&O or management liability insurance policy that provides coverage to the fund, its general partner, and its designated directors. To the extent that Pinnacle Vista's fund-level policy and CBR's company-level D&O policy both purport to cover claims against the Pinnacle Vista designee directors, there is a potential for unintended primary/excess stacking issues or coordination disputes between the two policies. We recommend that Fenwick Place coordinate with Pinnacle Vista's insurance advisors to identify any potential conflicts or gaps in coverage and to ensure that the respective policies' "other insurance" clauses are compatible. We have also flagged this issue for coordination with Whitfield Archer & Doss LLP (Christine Navarro and Derek Fong), counsel to Pinnacle Vista.
VIII. IPO-Specific Policy Enhancements — Recommendations
Based on our review of the D&O Program and the specific requirements of the proposed IPO, we recommend the following enhancements to the D&O Program, each of which should be implemented prior to the effectiveness of the registration statement and the closing of the IPO:
A. Public-Company Conversion Endorsement
The Meridian National primary policy must be endorsed to convert from a private-company form to a public-company form as of the date of IPO closing. The public-company conversion involves several material changes to the policy, including the activation of Side C (entity securities) coverage, the modification of certain definitions and exclusions to reflect the Company's status as a public reporting company, and the adjustment of the self-insured retention applicable to entity-level claims.
Side C (entity securities) coverage must be activated upon the listing of the Company's common stock on the NYSE. Until the Company's securities are publicly traded, Side C coverage is dormant and does not apply. The activation of Side C should be automatic upon IPO closing, and we will confirm the activation mechanics with Fenwick Place.
The definition of "Securities Claim" in the public-company policy should be reviewed to ensure that it is sufficiently broad to encompass claims arising under both the Securities Act of 1933 and the Securities Exchange Act of 1934, as well as analogous state securities laws (including state "blue sky" laws). The definition should also encompass claims brought in state courts, given the ongoing uncertainty regarding the enforceability of federal-forum provisions for Securities Act claims following the Delaware Supreme Court's decision in Salzberg v. Sciabacucchi, 227 A.3d 102 (Del. 2020).
B. Prospectus Liability Coverage Confirmation
We recommend that the Company obtain from Meridian National a written confirmation or endorsement expressly confirming that the policy covers claims arising from alleged misstatements or omissions in the Company's registration statement on Form S-1 (SEC CIK 0001948372), the prospectus included therein, and any amendments or supplements to the registration statement or prospectus. This confirmation should cover claims arising under Section 11 (registration statement liability) and Section 12(a)(2) (prospectus liability) of the Securities Act, as well as claims under Section 10(b) and Rule 10b-5 of the Exchange Act alleging fraud in connection with the IPO.
Additionally, coverage should extend to claims arising from the underwriting agreement and the selling-stockholder documentation, to the extent that such documents are referenced in or incorporated into the registration statement or prospectus. Given the reciprocal indemnification provisions in the underwriting agreement (discussed in Section IX.C below), the D&O policy's Side C coverage may be called upon to fund the Company's indemnification obligations to the underwriters for securities-law claims, and the policy should not contain any exclusion or limitation that would prevent it from responding in that context.
C. SEC Investigation Coverage
Given the heightened regulatory scrutiny applicable to newly public companies, we recommend that the D&O Program provide comprehensive coverage for SEC investigations and related proceedings.
Specifically, we recommend confirming that formal SEC investigations, including subpoenas, document requests, and formal orders of investigation, are covered as "Claims" under the policy and that the defense costs incurred in responding to such investigations are covered as "Loss." In addition, we recommend that the policy include pre-claim inquiry coverage for informal SEC inquiries — that is, inquiries that have not yet risen to the level of a formal investigation but that may require the engagement of counsel and the incurrence of significant legal fees.
This recommendation is informed by the fact that the Company's registration statement on Form S-1 was the subject of two rounds of SEC staff comments — 18 comments in the first round and 7 comments in the second round — all of which were resolved prior to the confidential submission. While the resolution of these comments is a positive development, the SEC's focus on the Company's disclosure, particularly with respect to tax-equity partnership accounting and the HLBV methodology, suggests that the Company may face additional SEC scrutiny in the post-IPO period. Pre-claim inquiry coverage would ensure that the costs associated with responding to informal post-IPO SEC inquiries are covered, even before a formal investigation is commenced.
D. Expanded Definition of "Insured"
We recommend that the definition of "Insured Persons" in the D&O policy be reviewed and, if necessary, expanded to ensure that it encompasses all individuals who may face exposure in connection with the Company's securities, governance, and operations. Specifically:
Directors Serving on Committees. The policy should confirm that directors serving on Board committees are covered in their committee capacities. The Company's Board committees following the IPO will include:
• Audit Committee: Warren Okoro (Chair, designated as Audit Committee financial expert), Catherine Liang, Richard Estavez
• Compensation Committee: Catherine Liang (Chair), Richard Estavez, Warren Okoro
• Nominating and Corporate Governance Committee: Richard Estavez (Chair), Catherine Liang, Hugh Pemberton
Committee members, particularly Audit Committee members, face elevated personal liability exposure due to their specific oversight responsibilities. The policy should expressly confirm coverage for committee service.
Officers of Subsidiaries. CBR conducts its operations through a number of subsidiaries and project-level special purpose vehicles ("SPVs"), including CBR Holdings LLC, Calloway-Briggs Operating Company LLC, and numerous project SPVs. Officers and directors who serve in dual capacities at both the parent company and one or more subsidiaries should be covered for their service at the subsidiary level. We will confirm that the policy's definition of "Insured Organization" or "Subsidiary" encompasses all of CBR's direct and indirect subsidiaries.
Employees Acting in Managerial or Supervisory Capacity. The policy should extend coverage to employees who exercise managerial or supervisory authority over the Company's operations, to the extent that such employees are named as defendants in securities or fiduciary duty claims. This category of insured is sometimes included in public-company D&O policies as a supplemental coverage feature.
Equity Plan Considerations. The Company has adopted the 2022 Omnibus Equity Incentive Plan and the 2022 Employee Stock Purchase Plan in connection with the IPO. We will confirm that the administration of these plans by the Company's directors, officers, and Compensation Committee members does not trigger any exclusion under the D&O policy (e.g., an ERISA exclusion or benefits plan exclusion) and that claims arising from the administration of the equity plans are within the scope of coverage.
E. Order-of-Payments / Priority-of-Payments Endorsement
As discussed in Section IV.D above, the primary policy includes a priority-of-payments clause providing that Side A claims by individual directors and officers receive priority over Side B and Side C claims. We recommend confirming that this priority-of-payments provision is clearly and unambiguously stated in the public-company policy forms and that it extends to the excess layers of the tower.
The priority-of-payments endorsement is particularly important given the Company's leverage profile ($1.71 billion total debt / $3.94 billion total assets). In the event that the Company were to experience financial distress or insolvency, the D&O policy limits could be subject to competing claims from the Company (seeking reimbursement under Side B or entity coverage under Side C) and from individual directors and officers (seeking personal protection under Side A). Without a clear priority-of-payments endorsement, a bankruptcy court could potentially treat the D&O policy limits as an asset of the bankruptcy estate, diverting funds away from individual insureds. The priority-of-payments endorsement mitigates this risk by establishing that Side A claims are to be satisfied first.
IX. Interaction with Indemnification Framework
A. Charter and Bylaw Indemnification
The Amended and Restated Certificate of Incorporation of Calloway-Briggs Renewables Inc. (to be effective upon the closing of the IPO) includes mandatory indemnification of directors and officers to the fullest extent permitted by the Delaware General Corporation Law. Section 145 of the DGCL authorizes a Delaware corporation to indemnify its directors and officers against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement in connection with any action, suit, or proceeding to which the individual is a party by reason of the fact that the individual is or was a director or officer, provided that the individual acted in good faith and in a manner the indiv

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