FINANCIAL INDUSTRY REGULATORY AUTHORITY
CORPORATE FINANCING DEPARTMENT
CORPORATE FINANCING APPLICATION
Pursuant to FINRA Rule 5110
FINRA Filing No. 20221129-01
Filed contemporaneously with confidential Draft Registration Statement on Form S-1 (DRS-1) submitted to the Securities and Exchange Commission pursuant to Title I of the Jumpstart Our Business Startups Act of 2012.
Filing Prepared by:
Calderwood & Harkness LLP 599 Lexington Avenue New York, NY 10022
Jennifer Kwon, Responsible Partner, Capital Markets Brendan Walsh, Lead Associate, Capital Markets Telephone: (212) 558-4000 Facsimile: (212) 558-4001
Email: jkwon@calderwoodharkness.com
Filing on Behalf of:
Hargrove Keating & Co. (as Representative of the Several Underwriters) 383 Madison Place New York, NY 10017
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SECTION 1: ISSUER INFORMATION
1.1 Issuer Identification
The issuer in connection with this offering is Calloway-Briggs Renewables Inc., a Delaware corporation ("CBR," the "Company," or the "Issuer"). Set forth below is the identifying information for the Issuer as required by FINRA Rule 5110.
The Company was incorporated under the laws of the State of Delaware in 2014 and is principally engaged in the development, ownership, and operation of utility-scale solar generation facilities, onshore wind generation facilities, and battery energy storage systems across the continental United States. As more fully described in the Draft Registration Statement on Form S-1, the Company currently operates a portfolio of approximately 3.4 GW of installed renewable energy capacity, with an additional development pipeline of approximately 7.8 GW across various stages of development and permitting.
1.2 Issuer's General Counsel
The Issuer's General Counsel and Corporate Secretary is:
Ms. Haverford has served as General Counsel and Corporate Secretary of the Company since 2018. She is responsible for overseeing all legal affairs of the Company, including corporate governance, regulatory compliance, project finance documentation, and the Company's securities law obligations in connection with this offering.
1.3 Issuer's Outside Counsel
The Issuer has engaged outside counsel in connection with the proposed offering as set forth below:
Calderwood & Harkness LLP serves as primary outside counsel to the Issuer for purposes of the proposed initial public offering, including the preparation and filing of the Registration Statement on Form S-1, the negotiation of the underwriting agreement and related transaction documents, and the preparation and filing of this FINRA Corporate Financing Application. Calderwood & Harkness LLP has no ownership interest in the Issuer or any of its affiliates and is not affiliated with any participating FINRA member.
1.4 Issuer's Independent Auditor
The Issuer's independent registered public accounting firm is:
Ashford & Pemberton LLP has served as the Issuer's independent auditor since fiscal year 2016 and has audited the Company's consolidated financial statements for the fiscal years ended December 31, 2019, December 31, 2020, and December 31, 2021, each of which is included in the Draft Registration Statement. Ashford & Pemberton LLP is registered with the Public Company Accounting Oversight Board ("PCAOB") and is independent with respect to the Company within the meaning of the rules and regulations of the SEC and the PCAOB.
1.5 Key Officers and Directors
The following table sets forth the names, titles, and affiliations of all officers and directors of the Issuer as of the date of this filing. Additional biographical information with respect to each individual is included in the Draft Registration Statement on Form S-1.
The Board of Directors of the Issuer currently consists of thirteen (13) members, consisting of two (2) co-founders who also serve as executive officers, two (2) investor designees of Pinnacle Vista Capital Partners (each of whom serves pursuant to the terms of an Investors' Rights Agreement, as more fully described in the Draft Registration Statement), three (3) independent directors, and six (6) additional executive officers. It is expected that, following the completion of the offering and in connection with the Company's transition to a publicly traded company, the Board will be reconstituted to comply with the applicable independence requirements of the New York Stock Exchange Listed Company Manual. The Company intends to avail itself of the controlled company exemption under Section 303A of the NYSE Listed Company Manual for so long as Pinnacle Vista Capital Partners III, LP holds a majority of the voting power of the Company's outstanding common stock.
1.6 Pre-IPO Ownership Structure
The following table sets forth the ownership structure of the Issuer on a fully diluted basis as of the date of this filing, after giving effect to the reclassification of all outstanding shares into a single class of common stock, par value $0.01 per share, which will occur immediately prior to the effectiveness of the Registration Statement:
Prior to the reclassification, the Company's capitalization consists of multiple series of preferred stock and common stock. In connection with the offering, all outstanding shares of preferred stock will be converted into shares of common stock and all outstanding classes and series of capital stock will be reclassified into a single class of common stock, par value $0.01 per share, resulting in 100,000,000 shares of common stock outstanding on a fully diluted basis immediately prior to the offering. The reclassification is more fully described in the Draft Registration Statement.
1.7 Issuer Financial Summary
The following summary financial data is derived from the Company's audited consolidated financial statements for the fiscal year ended December 31, 2021, as included in the Draft Registration Statement. This information should be read in conjunction with the Company's complete financial statements, the notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Draft Registration Statement.
The Company's revenue for fiscal year 2021 was derived primarily from long-term power purchase agreements ("PPAs") with investment-grade utility counterparties and corporate offtakers, as well as the sale of renewable energy certificates ("RECs") and capacity payments. The Company's total indebtedness of approximately $1.71 billion as of December 31, 2021, consists primarily of non-recourse project-level debt, a $650,000,000 Term Loan B facility, and a $400,000,000 revolving credit facility, in each case with Veltrano National Bank serving as Administrative Agent.
SECTION 2: OFFERING INFORMATION
2.1 Type of Offering
The proposed offering is an initial public offering ("IPO") of shares of common stock, par value $0.01 per share, of Calloway-Briggs Renewables Inc. The offering will be conducted on a firm commitment underwriting basis pursuant to an underwriting agreement among the Company, the Selling Stockholder (as defined below), and the several underwriters named herein, with Hargrove Keating & Co. acting as representative of the several underwriters (the "Representative").
The offering will consist of both primary shares (to be issued and sold by the Company) and secondary shares (to be sold by Pinnacle Vista Capital Partners III, LP, the selling stockholder). The combined proceeds of the primary and secondary components of the offering, together with the proceeds from the exercise of the overallotment option (if exercised), constitute the aggregate offering described in this filing.
2.2 Registration Statement
The Company intends to register the shares of common stock to be offered and sold in the offering pursuant to a Registration Statement on Form S-1 under the Securities Act of 1933, as amended (the "Securities Act"). The initial confidential submission and current status of the Registration Statement are as follows:
This FINRA Corporate Financing Application is being filed contemporaneously with the initial confidential submission of the Draft Registration Statement to the SEC. The Company and the Representative expect that the SEC will issue comment letters following its review, and that one or more amendments to the Registration Statement will be filed in response thereto. FINRA will be provided with copies of all amendments to the Registration Statement and will be notified promptly of any material changes to the terms of the offering or underwriting compensation.
2.3 Offering Terms
The terms of the proposed offering, based on the assumed midpoint of the anticipated filing price range, are set forth below. The actual public offering price, number of shares, and related terms will be determined by negotiation between the Company, the Selling Stockholder, and the Representative at the time of pricing, and may differ materially from the assumed terms set forth herein.
The overallotment option will be granted by the Company and/or the Selling Stockholder to the several underwriters pursuant to the underwriting agreement and will be exercisable for a period of thirty (30) days following the date of the final prospectus. The shares subject to the overallotment option may consist of primary shares, secondary shares, or a combination thereof, as determined by the Company and the Selling Stockholder at the time of exercise. The overallotment option is included in the computation of the maximum aggregate offering price for purposes of calculating underwriting compensation under FINRA Rule 5110.
2.4 Primary and Secondary Components
The base offering consists of both primary shares to be issued and sold by the Company and secondary shares to be sold by the Selling Stockholder. The allocation between primary and secondary components is as follows:
The Company will not receive any proceeds from the sale of secondary shares by the Selling Stockholder. The Selling Stockholder will pay its pro rata portion of the underwriting discount applicable to the secondary shares.
The overallotment option will provide for up to 3,559,091 additional shares at the public offering price of $22.00 per share, representing additional gross proceeds of up to $78,300,000. The overallotment shares may be primary shares, secondary shares, or a combination thereof, as determined at the time of exercise. The allocation of overallotment shares between primary and secondary components will be disclosed in an amendment to this filing, if applicable.
2.5 Use of Proceeds (Primary Offering)
The Company estimates that the net proceeds from the sale of the primary shares in the offering (after deducting the underwriting discount and estimated offering expenses payable by the Company) will be approximately $351,700,000 (or approximately $410,800,000 if the underwriters exercise the overallotment option in full, assuming all overallotment shares are primary shares). The Company intends to use the net proceeds from the sale of primary shares as follows:
• Approximately $200,000,000 to repay a portion of the outstanding indebtedness under the Company's Term Loan B credit facility. The Term Loan B is a $650,000,000 senior secured term loan facility with Veltrano National Bank as Administrative Agent. As of December 31, 2021, the outstanding principal balance under the Term Loan B was approximately $617,500,000. The Term Loan B bears interest at a rate of SOFR + 2.75% per annum, with a maturity date of March 15, 2028. The partial repayment of the Term Loan B from IPO proceeds is expected to reduce the Company's annual interest expense by approximately $13,750,000.
• Approximately $100,000,000 to fund the construction of the Cimarron Solar project, a 400 MW utility-scale solar photovoltaic generation facility located in Doña Ana County, New Mexico. The Cimarron Solar project has received all material permits and approvals and has entered into a 25-year power purchase agreement with a major southwestern utility. Construction is expected to commence in the third quarter of 2022, with commercial operation expected in the fourth quarter of 2023.
• Approximately $71,700,000 for general corporate purposes, including working capital, potential future acquisitions, and other capital expenditures. The Company has not identified any specific acquisitions or capital expenditure projects that would be funded from this allocation as of the date of this filing.
The foregoing description of the intended use of proceeds is based on current plans and estimates and may change depending on range factors, including changes in market conditions, the timing and pricing of the offering, and the Company's capital allocation priorities. A more detailed description of the intended use of proceeds will be included in the final prospectus.
2.6 Exchange Listing
The Company has applied to list its shares of common stock on the New York Stock Exchange ("NYSE") under the proposed ticker symbol "CBRI." The listing application was submitted to the NYSE on April 11, 2022, and has been assigned NYSE Listing Application No. NYSE-2022-04218. Listing is subject to the approval of the NYSE and the satisfaction of all applicable listing requirements, including the minimum distribution and financial standards set forth in Section 102.01 of the NYSE Listed Company Manual.
SECTION 3: PARTICIPATING UNDERWRITERS / MEMBERS
3.1 Identification of Underwriters
Set forth below is a description of each underwriter participating in the proposed offering, including the lead-left book-running manager (acting as representative of the several underwriters), the joint book-running managers, and the co-managers.
Lead-Left Book-Running Manager (Representative)
Hargrove Keating & Co. is acting as lead-left book-running manager and representative of the several underwriters in the proposed offering. Hargrove Keating & Co. is a full-service investment banking and securities firm and a member of FINRA in good standing. The following key personnel at Hargrove Keating & Co. are principally responsible for the firm's participation in the offering:
• Oliver Marchetti, Managing Director, Equity Capital Markets — Mr. Marchetti is the senior banker responsible for the overall execution of the offering and serves as the primary point of contact between the underwriting syndicate and FINRA.
• Sonia Tran, Director, Power & Renewables Investment Banking — Ms. Tran serves as the sector coverage banker and is responsible for the industry-specific aspects of the transaction, including the preparation of marketing materials and investor targeting.
• Daniel Furman, Vice President, ECM Syndicate — Mr. Furman is responsible for syndicate operations, including share allocation, bookbuilding, and coordination with the co-managers.
Joint Book-Running Manager
The following key personnel at Linden Pratt Securities LLC are principally responsible for the firm's participation in the offering:
• Rebecca Innes, Managing Director, Equity Capital Markets
• James Alcorn, Director, Clean Energy & Infrastructure
Joint Book-Running Manager
The following key personnel at Graymont Brothers Inc. are principally responsible for the firm's participation in the offering:
• Kenneth Sato, Managing Director, Equity Capital Markets
• Lisa Trujillo, Director, Utilities & Renewables
Co-Managers.
Each of the foregoing co-managers is a FINRA member in good standing and is registered as a broker-dealer with the SEC.
3.2 Underwriters' Counsel
The underwriters have engaged the following law firm to serve as counsel to the underwriters in connection with the proposed offering:
Prescott, Danforth & Yee LLP is serving as legal counsel to the underwriters for all aspects of the proposed offering, including the review and negotiation of the underwriting agreement, the review of the Registration Statement and prospectus, and the review and preparation of this FINRA Corporate Financing Application. Prescott, Danforth & Yee LLP has no ownership interest in the Issuer or any of its affiliates and is not affiliated with any participating FINRA member.
3.3 Underwriter Share Allocations (Base Offering)
The following table sets forth the allocation of base offering shares among the several underwriters. These allocations are based on the currently contemplated syndicate structure and are subject to adjustment by the Representative prior to pricing. The overallotment shares, if any, will be allocated among the several underwriters in proportion to their respective base offering allocations, unless otherwise agreed by the Representative.
Each underwriter's obligation under the underwriting agreement will be several and not joint. The underwriting agreement will provide that the obligations of the several underwriters are subject to customary conditions, including the accuracy of the representations and warranties of the Company and the Selling Stockholder, the delivery of customary legal opinions and comfort letters, and the absence of a material adverse change in the business or financial condition of the Company.
SECTION 4: UNDERWRITING COMPENSATION AND TERMS — RULE 5110 DISCLOSURE
This Section 4 sets forth, in accordance with FINRA Rule 5110, a complete and accurate description of all items of compensation and other arrangements between and among the Issuer, the Selling Stockholder, and the participating underwriters in connection with the proposed offering. All items of value, whether in the form of cash, securities, or otherwise, that have been or will be received or are to be received by each participating underwriter or its associated persons in connection with the offering are described herein.
4.1 Gross Spread / Underwriting discount
The underwriting discount (also referred to as the "gross spread") to be received by the several underwriters in connection with the offering is as follows:
The gross spread of 5.50% is consistent with customary market practice for initial public offerings of this size and type. The gross spread will be paid to the several underwriters from the proceeds of the offering at closing. The gross spread applicable to the primary shares will be deducted from the gross proceeds payable to the Company, and the gross spread applicable to the secondary shares will be deducted from the gross proceeds payable to the Selling Stockholder.
4.2 Allocation of Gross Spread
The gross spread will be allocated among the management fee, underwriting fee, and selling concession as follows:
The management fee will be allocated among the book-running managers (Hargrove Keating & Co., Linden Pratt Securities LLC, and Graymont Brothers Inc.) in accordance with the terms of their agreement among underwriters. The underwriting fee will be allocated among all participating underwriters in proportion to their respective share allocations set forth in Section 3.3 above. The selling concession will be earned by each underwriter based on the shares actually sold by such underwriter to investors.
4.3 Underwriter Expense Reimbursement
In addition to the gross spread described above, the Company has agreed to reimburse the Representative for certain expenses incurred by the underwriters in connection with the offering, subject to the following cap:
The expenses subject to reimbursement include, but are not limited to, the following categories:
(a) FINRA-related expenses, including filing fees and the legal fees of underwriters' counsel allocable to the preparation and filing of this Corporate Financing Application and any amendments thereto;
(b) Road-show expenses, including the costs of preparation and production of road-show presentation materials, audiovisual equipment, and logistics for investor meetings;
(c) Out-of-pocket syndicate expenses, including tombstone advertising, printing of preliminary and final prospectuses for distribution by the underwriters, and communication and courier expenses; and
(d) Travel and entertainment expenses of the underwriters' personnel incurred in connection with the road show and investor meetings.
The aggregate amount of expense reimbursement payable by the Company to the underwriters shall not exceed $350,000 under any circumstances, and any expenses incurred by the underwriters in excess of such amount shall be borne solely by the underwriters. The Representative confirms that the total underwriting compensation (including the gross spread and the $350,000 expense reimbursement cap) complies with the underwriting compensation limits set forth in FINRA Rule 5110(c)(2).
4.4 Other Items of Value / Compensation
Other than the gross spread and the expense reimbursement cap described in Sections 4.1 through 4.3 above, the Representative hereby confirms, on behalf of itself and each of the other participating underwriters, that:
(a) No other items of value have been or will be paid, given, or granted to any underwriter or any associated person of any underwriter in connection with the proposed offering;
(b) No finder's fees have been or will be paid to any person in connection with the proposed offering;
(c) No non-accountable expense allowances have been or will be paid to any underwriter in connection with the proposed offering;
(d) No right of first refusal for future offerings of the Company or any of its affiliates has been or will be granted to any underwriter or its affiliates in connection with the proposed offering;
(e) No warrants, options, convertible securities, or other securities of the Company have been or will be issued or granted to any underwriter or any associated person of any underwriter in connection with the proposed offering;
(f) No consulting or advisory agreements have been entered into, or will be entered into, between the Company and any underwriter or its affiliates in connection with the proposed offering; and
(g) No other arrangements, agreements, or understandings exist between the Company (or the Selling Stockholder) and any underwriter (or any associated person of any underwriter) that would constitute items of value or underwriting compensation within the meaning of FINRA Rule 5110.
4.5 Per-Share Compensation Summary
The following table summarizes the per-share economics of the offering at the assumed midpoint price of $22.00 per share:
The per-share underwriting discount of $1.21 is identical for both primary shares sold by the Company and secondary shares sold by the Selling Stockholder. The Company and the Selling Stockholder will each bear their respective pro rata portions of the underwriting discount based on the number of shares sold by each.
4.6 Total Compensation as Percentage of Offering
The following table presents the total underwriting compensation as a percentage of the maximum aggregate offering price, inclusive of the full exercise of the overallotment option:
The maximum aggregate offering price for purposes of this calculation is $600,000,000 (the base offering of $521,700,000 plus the overallotment option of $78,300,000, each at the assumed midpoint price of $22.00 per share). The Representative hereby confirms that the total underwriting compensation of approximately 5.558% of the maximum aggregate offering price is within the parameters established by FINRA Rule 5110(c)(2) for offerings of this type and size, and does not exceed the applicable compensation ceiling.
SECTION 5: SELLING STOCKHOLDER INFORMATION
5.1 Identification of Selling Stockholder
The following is a description of the selling stockholder participating in the proposed offering:
Pinnacle Vista Capital Partners III, LP ("Pinnacle Vista" or the "Selling Stockholder") is a private equity fund organized as a Delaware limited partnership. Its general partner is Pinnacle Vista Capital Management LLC, a Delaware limited liability company. Pinnacle Vista made its initial investment in the Company in 2017 through a series of equity financings and has been the Company's largest stockholder since that time.
The Selling Stockholder has engaged the following law firm to serve as its counsel in connection with the proposed offering:
Whitfield Archer & Doss LLP is representing the Selling Stockholder for all aspects of the proposed offering, including the negotiation of the underwriting agreement and registration rights provisions, the preparation of the selling stockholder questionnaire and representation letter, and the review of the prospectus disclosure relating to the Selling Stockholder.
5.2 Shares Being Sold
The following table sets forth the shares being sold by the Selling Stockholder in the base offering and the Selling Stockholder's pre-IPO and post-IPO ownership:
The foregoing calculations assume that the overallotment option is not exercised and that no additional shares are sold by the Selling Stockholder pursuant to the overallotment option. If the overallotment option is exercised in full and all overallotment shares are secondary shares sold by the Selling Stockholder, Pinnacle Vista's post-IPO holdings would be further reduced accordingly.
Following the completion of the offering, Pinnacle Vista will remain the Company's largest stockholder and, depending on the final offering size, may continue to beneficially own a majority of the Company's outstanding shares of common stock for purposes of the NYSE controlled company exemption. The Selling Stockholder's shares are subject to the lock-up provisions described in Section 6 below.
5.3 FINRA Affiliation Disclosure
In connection with the preparation of this filing, Pinnacle Vista Capital Partners III, LP has completed a selling stockholder questionnaire and representation letter (copies of which are attached as Schedules D and E, respectively). In such questionnaire and representation letter, Pinnacle Vista has represented and warranted that:
(a) Neither Pinnacle Vista Capital Partners III, LP nor Pinnacle Vista Capital Management LLC (its general partner) is a FINRA member or an associated person of a FINRA member;
(b) No officer, director, partner, managing member, or employee of Pinnacle Vista Capital Partners III, LP or Pinnacle Vista Capital Management LLC is a registered representative or associated person of any FINRA member;
(c) Neither Pinnacle Vista Capital Partners III, LP nor any of its affiliates is subject to FINRA's restricted-person rules under FINRA Rule 5130 or FINRA Rule 5131 in a manner that would affect the eligibility of the Selling Stockholder's shares to be sold in this offering; and
(d) No FINRA-restricted person affiliation has been identified with respect to the Selling Stockholder.
Based on the foregoing representations and the inquiries conducted by issuer's counsel and underwriters' counsel, no FINRA-restricted person affiliation or other FINRA-related conflict has been identified with respect to the Selling Stockholder.
SECTION 6: LOCK-UP PROVISIONS
6.1 Individual Lock-Up Agreements
In connection with the proposed offering, each of the persons and entities listed below will enter into a lock-up agreement with the Representative restricting the offer, sale, or other disposition of shares of common stock for a period of 180 days following the date of the final prospectus:
The lock-up agreements are individual agreements between each lock-up party and the Representative (on behalf of itself and the other underwriters) and will be executed and delivered to the Representative prior to the commencement of the road show. A lock-up tracking sheet identifying all 18 lock-up signatories is maintained by the Representative; as of the date of this filing, 15 of the 18 lock-up agreements have been executed and delivered, with the remaining 3 agreements expected to be executed within the coming week.
6.2 Lock-Up Terms and Carve-Outs
Each lock-up party will agree, during the 180-day lock-up period, not to, directly or indirectly:
(a) offer, sell, contract to sell, or otherwise dispose of any shares of common stock or any securities convertible into or exchangeable or exercisable for shares of common stock;
(b) pledge, hypothecate, or grant any security interest in any shares of common stock;
(c) grant any option or right to purchase shares of common stock;
(d) enter into any swap, hedge, or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of shares of common stock; or
(e) publicly disclose the intention to do any of the foregoing;
in each case, without the prior written consent of the Representative, whether any such transaction is to be settled by delivery of shares of common stock, in cash, or otherwise.
The lock-up agreements will contain the following permitted carve-outs from the foregoing restrictions:
(a) Transfers to affiliates: A lock-up party may transfer shares of common stock to any affiliate of such lock-up party, provided that the transferee agrees in writing to be bound by the terms of the lock-up agreement for the remainder of the lock-up period;
(b) Estate-planning transfers: A lock-up party may transfer shares of common stock for bona fide estate-planning purposes (including transfers to trusts, family limited partnerships, or similar vehicles for the benefit of the lock-up party or the lock-up party's immediate family members), provided that the transferee agrees in writing to be bound by the terms of the lock-up agreement for the remainder of the lock-up period;
(c) Rule 10b5-1 trading plans: A lock-up party may adopt (but not execute during the lock-up period) a trading plan established in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, provided that no sales or other dispositions of shares of common stock may occur under such plan during the lock-up period; and
(d) Pledges to lenders: A lock-up party may pledge shares of common stock to a bona fide lending institution as collateral for a loan or other credit facility, provided that no disposition of shares of common stock may occur during the lock-up period as a result of the exercise of remedies by such lender upon a default, unless such disposition is consented to by the Representative.
6.3 Early Release / Waiver
The lock-up agreements will be subject to early release or waiver under the following circumstances:
(a) Prior written consent of the Representative: The Representative (Hargrove Keating & Co.) will have sole discretion over the early release of any lock-up party from its lock-up obligations, in whole or in part. The Representative may, in its sole and absolute discretion, release any or all of the shares held by any lock-up party from the restrictions of the lock-up agreement at any time during the lock-up period, with or without conditions. The Representative's consent will not be unreasonably withheld with respect to de minimis transfers or dispositions (e.g., to cover tax withholding obligations).
(b) Change of Control: Each lock-up agreement will provide for the automatic release of the lock-up restrictions upon the occurrence of a "Change of Control" (as defined in the underwriting agreement), which generally includes (i) any acquisition by a person or group of more than 50% of the voting power of the Company's outstanding securities, (ii) a merger or consolidation of the Company with or into another entity (other than a merger in which the Company's stockholders retain a majority of the voting power of the surviving entity), or (iii) a sale of all or substantially all of the Company's assets.
6.4 Issuer Lock-Up
In addition to the individual lock-up agreements described above, the Company will agree in the underwriting agreement that, for a period of 180 days following the date of the final prospectus, it will not, without the prior written consent of the Representative:
(a) issue, sell, or offer to sell any shares of common stock or any securities convertible into or exchangeable or exercisable for shares of common stock;
(b) file any registration statement with the SEC relating to the offer and sale of any shares of common stock or any securities convertible into or exchangeable or exercisable for shares of common stock; or
(c) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of shares of common stock.
The Company's lock-up will be subject to the following customary exceptions:
(a) Employee equity compensation plans: The Company may issue shares of common stock (or grant options, restricted stock units, or other awards with respect to shares of common stock) under the 2022 Omnibus Equity Incentive Plan and the 2022 Employee Stock Purchase Plan, each as described in Section 8 of this filing;
(b) Acquisitions: The Company may issue shares of common stock as consideration in connection with acquisitions of businesses, assets, or technologies, provided that the recipients of such shares agree in writing to be bound by lock-up agreements with the Representative for the remainder of the lock-up period on terms substantially similar to those described in this Section 6; and
(c) Exercise or conversion of existing securities: The Company may issue shares of common stock upon the exercise or conversion of outstanding warrants, options, convertible notes, or other convertible or exchangeable securities that are outstanding as of the date of the final prospectus and are described in the Registration Statement.
6.5 Lock-Up Execution Status
As of the date of this filing, the lock-up execution status is as follows:
The Representative and issuer's counsel are in the process of obtaining the remaining executed lock-up agreements. The three remaining lock-up parties have been identified, and their counsel has confirmed that the lock-up agreements are under review and are expected to be executed prior to the commencement of the road show. A complete lock-up tracking sheet is maintained by the Representative and will be made available to FINRA upon request. The Representative confirms that no shares of common stock will be offered or sold in the offering unless all 18 lock-up agreements have been executed and delivered.
SECTION 7: RELATED PERSONS AND AFFILIATIONS — RULE 5110 / RULE 5121
7.1 Relationships Between Underwriters and Issuer
In accordance with FINRA Rule 5110, the Representative has made inquiries regarding any material relationships between the participating underwriters (and their respective affiliates) and the Issuer, the Selling Stockholder, and their respective affiliates that have existed within the three-year period prior to the date of this filing. The results of such inquiries are set forth below.
Lending Relationships. Veltrano National Bank serves as Administrative Agent for the Company's $400,000,000 revolving credit facility and $650,000,000 Term Loan B credit facility. The Company intends to use approximately $200,000,000 of the net proceeds from the primary offering to repay a portion of the outstanding Term Loan B. The Representative confirms that Veltrano National Bank is a nationally chartered bank regulated by the Office of the Comptroller of the Currency and is not a FINRA member. Veltrano National Bank is not a participating underwriter in this offering, and no FINRA member participating in this offering is an affiliate of Veltrano National Bank. Accordingly, the receipt of a portion of the offering proceeds by Veltrano National Bank in repayment of the Term Loan B does not give rise to a conflict of interest under FINRA Rule 5121.
Advisory Relationships. No investment banking, financial advisory, or other client relationship exists or has existed between any participating FINRA-member underwriter (or any affiliate thereof) and the Company, other than the engagement of the underwriters in connection with this offering. The engagement letters between the Company and each of the participating underwriters are dated March 10, 2022, and relate solely to the proposed initial public offering.
Other Material Relationships. Based on the inquiries conducted, no other material relationships have been identified between the participating underwriters (or their affiliates) and the Company, the Selling Stockholder, or their respective affiliates within the prior three-year period.
7.2 Affiliations of Participating Members
Each participating underwriter has confirmed, in its respective joinder agreement or in response to inquiries by the Representative and underwriters' counsel, that neither such underwriter nor any of its associated persons:
(a) is an affiliate of, or has a conflict of interest (as defined in FINRA Rule 5121) with, the Issuer;
(b) will receive, directly or indirectly, more than 5% of the net offering proceeds (other than as underwriting compensation disclosed in Section 4 of this filing);
(c) has any financial interest in the Issuer (other than the underwriting discount described in Section 4 of this filing); or
(d) has any arrangement or understanding with any person that would constitute a conflict of interest requiring disclosure or compliance with the additional requirements of FINRA Rule 5121.
As noted in Section 7.1 above, Veltrano National Bank (the recipient of approximately $200,000,000 in Term Loan B repayment proceeds) is not a FINRA member and is not affiliated with any participating underwriter. Accordingly, no FINRA Rule 5121 conflict of interest has been identified with respect to the proposed use of proceeds, and the offering is not subject to the additional requirements of FINRA Rule 5121 (including the requirement for a qualified independent underwriter or the segregation of offering proceeds).
7.3 Pinnacle Vista — FINRA Affiliation Analysis
In connection with this filing, issuer's counsel and underwriters' counsel have conducted an analysis of the FINRA affiliation status of Pinnacle Vista Capital Partners III, LP and its general partner, Pinnacle Vista Capital Management LLC, with respect to the provisions of FINRA Rules 5110, 5121, 5130, and 5131. The results of such analysis are as follows:
(a) FINRA Membership Status. Pinnacle Vista Capital Partners III, LP is a Delaware limited partnership organized as a private equity investment fund. It is not registered as a broker-dealer with the SEC and is not a FINRA member. Its general partner, Pinnacle Vista Capital Management LLC, is likewise not registered as a broker-dealer and is not a FINRA member. Neither entity holds any broker-dealer license or engages in any activity that would require registration as a broker-dealer under Section 15 of the Securities Exchange Act of 1934.
(b) Associated Person Status. Hugh Pemberton and Diane Kovac are Managing Partners of Pinnacle Vista Capital Management LLC and serve as directors of the Issuer pursuant to the Investors' Rights Agreement. Neither Mr. Pemberton nor Ms. Kovac is a registered representative or associated person of any FINRA member. Based on the representations of Pinnacle Vista and the inquiries conducted, no officer, director, partner, managing member, or employee of Pinnacle Vista Capital Partners III, LP or Pinnacle Vista Capital Management LLC is a registered representative or associated person of any FINRA member.
(c) Venture Capital Exception — FINRA Rule 5110(d)(1). Pinnacle Vista Capital Partners III, LP is a private equity fund and not a venture capital fund within the meaning of Rule 203(l)-1 under the Investment Advisers Act of 1940. However, the venture capital exception under FINRA Rule 5110(d)(1) relates to the receipt of securities by underwriters or their related persons as items of underwriting compensation. Because the shares being sold by Pinnacle Vista are shares acquired by Pinnacle Vista in the ordinary course of its investment activities and are not items of underwriting compensation, the venture capital exception analysis under FINRA Rule 5110(d)(1) is not applicable to the Selling Stockholder's sale. The restriction and escrow provisions of FINRA Rule 5110(e) apply to securities received by underwriters and their related persons as underwriting compensation, which does not include the shares being sold by Pinnacle Vista.
(d) Conclusion. Based on the foregoing analysis, no FINRA affiliation or conflict of interest has been identified with respect to Pinnacle Vista Capital Partners III, LP or any of its affiliates, officers, partners, or associated persons.
7.4 Insider and Related-Party Transactions
The following related-party transactions between the Issuer and its affiliates are disclosed for purposes of this filing:
Pinnacle Vista Management-Services Agreement. The Company and Pinnacle Vista Capital Management LLC are parties to a management-services agreement pursuant to which Pinnacle Vista provides certain strategic advisory, management, and monitoring services to the Company in exchange for an annual management fee of $2,400,000. The management-services agreement will be terminated upon the closing of the IPO, and no further payments will be made thereunder following such termination. The management fee under the management-services agreement is an arm's-length commercial arrangement between the Company and its majority stockholder and does not constitute underwriting compensation within the meaning of FINRA Rule 5110. No participating underwriter or associated person of any participating underwriter has received or will receive any portion of the management fee.
Founder Employment Agreements. The Company has entered into employment agreements with Garrett Calloway (CEO) and Elaine Briggs (President, Development), each of which provides for customary executive compensation arrangements, including base salary, annual cash bonus opportunities, and equity compensation. The terms of such employment agreements are described in the Draft Registration Statement. No portion of the compensation payable under such employment agreements constitutes underwriting compensation within the meaning of FINRA Rule 5110.
SECTION 8: EQUITY COMPENSATION PLANS
8.1 2022 Omnibus Equity Incentive Plan
In connection with the proposed offering, the Board of Directors has approved, and the Company's stockholders have consented to, the adoption of the Calloway-Briggs Renewables Inc. 2022 Omnibus Equity Incentive Plan (the "2022 Equity Plan"). The material terms of the 2022 Equity Plan are summarized below, and the full text of the plan is attached as Schedule G to this filing.
The shares reserved under the 2022 Equity Plan, and any shares of common stock issued thereunder, are not items of underwriting compensation within the meaning of FINRA Rule 5110. No participating underwriter or associated person of any participating underwriter will receive any award under the 2022 Equity Plan in connection with the offering.
8.2 2022 Employee Stock Purchase Plan
The Board of Directors has also approved, and the Company's stockholders have consented to, the adoption of the Calloway-Briggs Renewables Inc. 2022 Employee Stock Purchase Plan (the "2022 ESPP"). The material terms of the 2022 ESPP are summarized below, and the full text of the plan is attached as Schedule H to this filing.
The shares reserved under the 2022 ESPP, and any shares of common stock issued thereunder, are not items of underwriting compensation within the meaning of FINRA Rule 5110.
8.3 IPO Equity Grants (Proposed)
In connection with the completion of the offering, the Company intends to make the following equity grants to its named executive officers under the 2022 Equity Plan, in each case effective upon and contingent upon the pricing of the offering:
The total number of RSUs to be granted in the IPO grants is 2,050,000, representing approximately 16.1% of the initial share reserve under the 2022 Equity Plan. Each RSU represents the right to receive one share of common stock upon vesting, subject to the grantee's continued employment with the Company. The RSUs will vest in four equal annual installments on each of the first four anniversaries of the grant date, subject to acceleration upon certain qualifying terminations of employment or a change of control (as set forth in the individual award agreements and the 2022 Equity Plan).
The IPO equity grants are compensatory in nature and are being made in connection with the Company's transition to a publicly traded company. The equity plan shares and IPO equity grants are not items of underwriting compensation within the meaning of FINRA Rule 5110, and no participating underwriter or associated person of any participating underwriter will receive any such grant.
SECTION 9: OTHER SERVICE PROVIDERS
Set forth below is a description of the other service providers engaged by the Company in connection with the proposed offering.
9.1 Transfer Agent and Registrar
Continental Shareowner Services, Inc. has been appointed as the transfer agent and registrar for the Company's shares of common stock. Continental will be responsible for maintaining the stock transfer records of the Company, processing transfers of shares, and administering the book-entry system for shares held in street name through The Depository Trust Company.