EXECUTIVE COMPENSATION
The following discussion relates to the executive compensation of Calloway-Briggs Renewables Inc. ("CBR," the "Company," "we," "us," or "our") in connection with the Registration Statement on Form S-1 filed with the Securities and Exchange Commission (the "SEC") relating to the proposed initial public offering (the "IPO") of shares of our common stock, par value $0.001 per share. Except as otherwise indicated, or unless the context otherwise requires, references to fiscal year 2021 or "FY 2021" refer to the fiscal year ended December 31, 2021.
The Company is an "emerging growth company" as defined in Section 2(a) of the Securities Act of 1933, as amended, as modified by the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). For the fiscal year ended December 31, 2021, the Company had total revenue of $487.3 million, which is below the $1.235 billion revenue threshold applicable for purposes of determining emerging growth company status. Accordingly, we are providing scaled executive compensation disclosure as permitted for emerging growth companies under Item 402 of Regulation S-K promulgated by the SEC. We are not required to include a Compensation Discussion and Analysis pursuant to Item 402(b) of Regulation S-K. However, we have elected to provide a voluntary narrative discussion of our compensation philosophy and programs below, which we believe will assist investors in understanding the material elements of our executive compensation.
In connection with the IPO, our Board of Directors (the "Board") established a Compensation Committee comprised entirely of independent directors. The Compensation Committee retained Clarendon Rowe Advisory Group LLC ("Clarendon Rowe"), located at 300 Atlantic Street, Suite 800, Stamford, Connecticut 06901, as its independent compensation consultant. Patricia Voss, Senior Managing Director at Clarendon Rowe, led the engagement team. Clarendon Rowe was retained to provide independent executive compensation benchmarking and equity-plan design advice in connection with the IPO, including peer-group analysis, total compensation benchmarking, equity-plan share reserve modeling, and post-IPO director compensation program design.
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1. Compensation Discussion and Analysis (Voluntary Narrative)
1.1 Overview of Compensation Philosophy
Calloway-Briggs Renewables Inc. was founded in 2014 by Garrett Calloway and Elaine Briggs with a mission to develop, own, and operate utility-scale renewable energy generation and storage assets across the United States. Since our founding, we have grown from a two-person development shop into a vertically integrated platform with approximately 1,240 employees as of the first quarter of 2022, managing an operating portfolio of approximately 4.2 GW of wind, solar, and battery storage capacity with an additional 6.8 GW in various stages of development.
Our executive compensation program has been designed to attract, retain, and motivate the talented executive leadership necessary to execute on our growth strategy in the highly competitive renewable energy industry. We compete for executive talent not only with other publicly traded and privately held renewable energy companies, but also with independent power producers, regulated utilities, energy-focused private equity firms, and infrastructure funds. We believe that our ability to recruit and retain top-tier leadership has been — and will continue to be — a critical factor in our success.
Our compensation philosophy is grounded in the following core principles:
• Pay-for-Performance. A significant portion of each named executive officer's total compensation opportunity is variable and contingent upon the achievement of financial, operational, and strategic objectives that are aligned with the creation of long-term stockholder value.
• Market Competitiveness. We seek to provide total compensation opportunities that are competitive with those offered by companies of similar size, complexity, and industry focus, enabling us to attract and retain the caliber of executive leadership required to execute our business plan.
• Alignment with Stockholder Interests. We emphasize equity-based compensation as a significant component of total compensation, ensuring that our executives have a meaningful ownership stake in the Company and that their economic interests are closely aligned with those of our stockholders over the long term.
• Balanced Risk-Taking. Our compensation structure is designed to reward prudent risk-taking that drives sustainable growth without encouraging excessive or imprudent risk that could jeopardize the Company's long-term health.
Our compensation program is structured around three primary pillars:
1. Base Salary — fixed cash compensation designed to provide a stable foundation commensurate with each executive's experience, responsibilities, and contributions;
2. Annual Cash Incentive — performance-based annual bonus opportunities tied to pre-established financial and operational metrics that drive near-term execution; and
3. Long-Term Equity-Based Incentives — equity awards that vest over multi-year periods and are tied to long-term value creation, creating meaningful retention incentives and ensuring alignment with stockholder interests.
Prior to the IPO, our executive compensation program was administered by the full Board with significant input from representatives of Pinnacle Vista Capital Partners ("Pinnacle Vista"), our pre-IPO majority stockholder. Pinnacle Vista, through its affiliated funds, holds approximately 62% of our fully diluted common stock prior to the offering. Hugh Pemberton, a Managing Partner of Pinnacle Vista Capital Management LLC, and Diane Kovac, a Principal of Pinnacle Vista Capital Management LLC, have served as investor-designee directors on our Board since 2017 and have participated in Board deliberations regarding executive compensation matters. In connection with the IPO, the Board established a Compensation Committee comprised entirely of independent directors to oversee all aspects of executive compensation going forward.
1.2 Role of the Compensation Committee
In connection with the IPO, our Board established a Compensation Committee consisting of three independent directors:
• Catherine Liang (Chair) — Ms. Liang has served as a director since March 2022. She is the former Chief Financial Officer of Meridian Power Holdings, Inc., a publicly traded independent power producer, and has extensive experience in executive compensation matters.
• Richard Estavez — Mr. Estavez has served as a director since March 2022. He is a Managing Director at Verdant Capital Advisors and has served on the compensation committees of two other publicly traded companies.
• Warren Okoro — Mr. Okoro has served as a director since March 2022. He is the former Chief Executive Officer of Tidewater Infrastructure Group, Inc. and brings broad experience in corporate governance and executive compensation.
Each member of the Compensation Committee satisfies the independence requirements under Section 303A.02 of the NYSE Listed Company Manual and qualifies as a "non-employee director" within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
The Compensation Committee is responsible for, among other things:
• reviewing and approving the compensation of our Chief Executive Officer and other executive officers;
• reviewing and recommending to the Board the compensation of our non-employee directors;
• administering our equity compensation plans, including the 2022 Omnibus Equity Incentive Plan and the 2022 Employee Stock Purchase Plan;
• reviewing and approving the design and terms of annual cash incentive programs;
• reviewing and assessing compensation risk;
• engaging and overseeing compensation consultants, legal counsel, and other advisors; and
• preparing the Compensation Committee report required by SEC rules for inclusion in our annual proxy statement following the IPO.
The Compensation Committee retained Clarendon Rowe Advisory Group LLC as its independent compensation consultant. The Compensation Committee assessed the independence of Clarendon Rowe under SEC rules and NYSE listing standards and determined that Clarendon Rowe's work does not raise any conflict of interest. Clarendon Rowe does not provide any services to the Company or its management other than executive and director compensation consulting services provided at the direction of the Compensation Committee.
At the direction of the Compensation Committee, Clarendon Rowe conducted a comprehensive peer-group benchmarking analysis. The peer group was selected based on the following criteria: (i) publicly traded companies operating primarily in the renewable energy, independent power production, or energy infrastructure sectors; (ii) annual revenues in the range of $300 million to $800 million; and (iii) enterprise values in the range of $2 billion to $6 billion. The peer group used for compensation benchmarking purposes consisted of the following companies:
• Sterling Reach Enterprises
• Dunmore Partners LLC
• Greaves Partners LLC
• Sterling Reach Corporation
• Hollowell Holdings
• Penmark Holdings
• Brightwater Industries
• Dunmore Corporation
• Northgate Holdings
• Ashgrove Enterprises
• Crestline Group
• Meridian Partners LLC
Clarendon Rowe analyzed publicly available compensation data for the named executive officers of these peer companies, focusing on total direct compensation (base salary, annual cash incentive, and long-term equity incentives) at the 25th, 50th, and 75th percentiles. The Compensation Committee reviewed Clarendon Rowe's market data and recommendations and used this information, together with its own judgment and assessment of individual performance, in setting IPO-related compensation levels and equity grant awards for our named executive officers.
1.3 Elements of Compensation
1.3.1 Base Salary. Base salary represents the fixed component of each named executive officer's total compensation. Base salary levels are intended to reflect each executive's experience, qualifications, responsibilities, and contributions, as well as competitive market data derived from the Clarendon Rowe peer-group analysis. For FY 2021, base salary levels for our named executive officers were set by the full Board in consultation with Pinnacle Vista representatives, as the Compensation Committee had not yet been established.
Base salaries for our named executive officers are designed to provide a stable and predictable source of income that appropriately reflects each executive's position and market value. The Board considered a number of factors in establishing FY 2021 base salary levels, including the executive's tenure with the Company, scope of responsibilities, individual performance, internal pay equity considerations, and competitive market data. The specific FY 2021 base salary for each named executive officer is set forth in the Summary Compensation Table below.
In connection with the IPO, the Compensation Committee reviewed base salary levels for each named executive officer and determined that certain adjustments would be appropriate to bring base salaries into closer alignment with peer-group median levels. Any base salary adjustments effective upon or following the completion of the IPO will be disclosed in future proxy filings.
1.3.2 Annual Cash Incentive. Our named executive officers participate in an annual cash incentive program that provides performance-based bonus opportunities tied to the achievement of pre-established financial and operational metrics. For FY 2021, the annual cash incentive program was administered by the full Board. Each named executive officer's target annual bonus opportunity is expressed as a percentage of base salary, with the actual payout determined by reference to the level of achievement of the applicable performance metrics.
For FY 2021, the performance metrics used to determine annual cash incentive payouts included the following:
• Revenue Targets (30% weighting). Revenue performance was measured against a target of $475.0 million for FY 2021. The Company achieved actual revenue of $487.3 million, representing 102.6% of target.
• Adjusted EBITDA Targets (30% weighting). Adjusted EBITDA performance was measured against a target of $210.0 million for FY 2021. The Company achieved actual Adjusted EBITDA of $218.6 million, representing 104.1% of target. Adjusted EBITDA is a non-GAAP financial measure and is defined and reconciled to the most directly comparable GAAP measure in the section of this Registration Statement entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures."
• Project COD Milestones (25% weighting). The Board established project commercial operation date ("COD") milestones for certain key projects in the development pipeline. In FY 2021, two significant project milestones were achieved: the Pronghorn Wind project (248 MW) achieved COD in the second quarter of 2021, and the Brazos Storage project (150 MW / 600 MWh) achieved COD in the fourth quarter of 2021. Both milestones were achieved on or ahead of schedule.
• Safety Performance (15% weighting). Safety performance was measured based on Total Recordable Incident Rate ("TRIR") and Lost Time Incident Rate ("LTIR") for the Company's construction and operations workforce. The Company achieved a TRIR of 0.68 and an LTIR of 0.12 for FY 2021, both of which exceeded the applicable threshold performance levels established by the Board.
Based on the foregoing performance results, the Board determined that overall performance for FY 2021 warranted payouts at approximately 115% of target for the annual cash incentive program. The specific FY 2021 annual cash incentive amounts earned by each named executive officer are set forth in the "Non-Equity Incentive Plan Compensation" column of the Summary Compensation Table below.
1.3.3 Long-Term Equity Incentive Compensation. We believe that equity-based compensation is a critical tool for aligning the interests of our executive officers with those of our stockholders and for providing meaningful retention incentives. Our equity compensation program has evolved as the Company has grown from an early-stage developer to a large-scale operating platform.
Pre-IPO Equity Awards. Prior to the IPO, our named executive officers received equity compensation in the form of profits interests in CBR Holdings LLC, the Company's predecessor entity, and restricted equity interests that converted into shares of common stock of Calloway-Briggs Renewables Inc. in connection with the corporate reorganization effected prior to the IPO. These pre-IPO equity awards were designed to provide our executives with a direct economic interest in the long-term growth of the business and were subject to time-based vesting and, in certain cases, performance-based vesting conditions. The pre-IPO equity awards held by each named executive officer are reflected in the Outstanding Equity Awards at Fiscal Year-End table below.
Post-IPO Equity Awards — 2022 Omnibus Equity Incentive Plan. In connection with the IPO, we intend to grant equity awards to our named executive officers under the 2022 Omnibus Equity Incentive Plan (the "2022 Plan"), which is described in detail below under "Equity Compensation Plans." The IPO equity grant recommendations were developed with the assistance of Clarendon Rowe Advisory Group LLC based on its peer-group benchmarking analysis, and were reviewed and approved by the Compensation Committee. The following IPO equity grants in the form of restricted stock units ("RSUs") have been approved, contingent upon the completion of this offering:
Each of the foregoing IPO RSU grants is subject to four-year ratable vesting, with 25% of the RSUs vesting on each anniversary of the grant date, subject to the executive's continued service through each applicable vesting date. The RSU awards are subject to the terms and conditions of the 2022 Plan and the applicable Form of Restricted Stock Unit Agreement. In addition, Rachel Whitmore, our Chief People Officer, has been approved for a grant of 150,000 RSUs on the same terms as described above.
The Compensation Committee determined that these IPO equity grant levels were appropriate based on Clarendon Rowe's peer-group benchmarking data, which indicated that the recommended grant values were generally positioned between the 50th and 75th percentiles of long-term incentive grant values for comparable positions at peer-group companies. The Compensation Committee believes that positioning IPO equity grants at these levels is appropriate to recognize the significant contributions our named executive officers have made in building the Company to this stage and to provide strong retention incentives during the critical post-IPO period.
1.3.4 Other Benefits. Our named executive officers participate in the same benefit programs available to all of our employees, including:
• Health and Welfare Benefits. Medical, dental, and vision insurance, as well as life insurance and accidental death and dismemberment insurance, short-term and long-term disability insurance, and health savings account and flexible spending account programs.
• 401(k) Plan. Our 401(k) retirement savings plan is available to all eligible employees, including our named executive officers. The Company provides a matching contribution of 100% of the first 3% of eligible compensation contributed by each participant and 50% of the next 2% of eligible compensation contributed, for a maximum Company matching contribution of 4% of eligible compensation.
We do not maintain any supplemental executive retirement plans, deferred compensation plans, or pension plans for our named executive officers or any other employees.
Our named executive officers receive limited perquisites. During FY 2021, Mr. Calloway and Ms. Briggs each received a monthly automobile allowance of $1,500 per month ($18,000 annually). No other named executive officer received perquisites with an aggregate value exceeding $10,000 during FY 2021. The value of any perquisites is included in the "All Other Compensation" column of the Summary Compensation Table.
1.4 Employment Agreements and Severance Arrangements
Each of our named executive officers has entered into an employment agreement with the Company that provides for, among other things, base salary, target annual bonus opportunity, eligibility for equity awards, severance benefits upon a qualifying termination of employment, and restrictive covenant obligations. The material terms of each named executive officer's employment agreement are described below under "Employment Agreements."
In addition, each of our named executive officers is entitled to receive severance benefits and, in certain cases, enhanced benefits in connection with a change of control of the Company, as described below under "Potential Payments Upon Termination or Change of Control." The Compensation Committee believes that these severance and change-of-control protections serve the important purpose of providing our executives with financial security, thereby enabling them to focus on the Company's business without undue concern about their personal financial circumstances, particularly during periods of strategic uncertainty. The change-of-control benefits for equity awards under the 2022 Plan are subject to "double-trigger" provisions, meaning that acceleration of vesting requires both a change of control and a qualifying termination of employment, as described in further detail below.
1.5 Tax Considerations — Section 409A Compliance
All equity compensation arrangements and deferred compensation arrangements have been reviewed for compliance with Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"), which imposes certain restrictions on the timing of deferrals and payments of deferred compensation. The Company has obtained periodic independent common stock valuations (commonly referred to as "409A valuations") from Cascade Consulting Group and subsequently from Kestrel Consulting Group (now Ashgrove Strategy Partners) at regular intervals from 2019 through the first quarter of 2022 for purposes of establishing the fair market value of the Company's common stock for equity compensation and tax compliance purposes.
In connection with the IPO, the Company also conducted a comprehensive "cheap-stock" analysis with the assistance of Westmark Consulting Group and our independent auditors, Penrose Firth CPAs LLP, to evaluate whether any pre-IPO equity awards were granted at exercise prices or valuations below the fair market value of the underlying common stock at the time of grant for purposes of financial reporting under ASC 718 and for tax purposes under Section 409A. This analysis did not result in any material adverse findings, and no additional compensation expense or tax charges were required.
2. Named Executive Officers
For purposes of this disclosure, and in accordance with the scaled disclosure requirements applicable to emerging growth companies under the JOBS Act, the Company's named executive officers ("NEOs") for the fiscal year ended December 31, 2021 are the following individuals:
In addition to the named executive officers listed above, Rachel Whitmore (Chief People Officer) and Sandra Haverford (General Counsel & Corporate Secretary) are executive officers of the Company. However, consistent with the scaled disclosure requirements available to emerging growth companies, Ms. Whitmore and Ms. Haverford are not included as named executive officers in this Registration Statement. Compensation information for Ms. Whitmore and Ms. Haverford may be included in future proxy filings following the IPO, as required by applicable SEC rules.
3. Summary Compensation Table
3.1 Summary Compensation Table for FY 2021
The following table sets forth information regarding the compensation paid to, earned by, or awarded to each of our named executive officers for the fiscal year ended December 31, 2021.
3.2 Narrative Footnotes to Summary Compensation Table
(1) Bonus. No discretionary bonuses were paid to any named executive officer for FY 2021. All performance-based annual cash incentive awards earned for FY 2021 are reported in the "Non-Equity Incentive Plan Compensation" column.
(2) Stock Awards. Amounts in this column represent the aggregate grant date fair value of pre-IPO restricted equity awards granted during FY 2021, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation ("ASC 718"). For purposes of computing grant date fair value, the Company utilized the fair market value of its common stock as determined by the most recent independent 409A valuation as of the applicable grant date. The assumptions used in the valuation of these awards are set forth in Note 14 to the Company's consolidated financial statements included elsewhere in this Registration Statement. These amounts do not reflect the IPO equity grants described above under "Long-Term Equity Incentive Compensation," which will be made upon or following the completion of this offering under the 2022 Omnibus Equity Incentive Plan.
(3) Non-Equity Incentive Plan Compensation. Amounts represent annual cash incentive awards earned for FY 2021 performance under the Company's annual incentive program. As described above under "Annual Cash Incentive," FY 2021 performance against the established metrics resulted in payouts at approximately 115% of each executive's target bonus opportunity. Target bonus percentages for FY 2021 were as follows: Mr. Calloway — 100% of base salary; Ms. Briggs — 100% of base salary; Mr. Yoon — 75% of base salary; Mr. Renfroe — 70% of base salary; Ms. Anand — 60% of base salary; and Mr. Quintero — 60% of base salary. The actual payout amounts reflect the application of the 115% payout factor to each executive's target bonus amount.
(4) All Other Compensation. Amounts in this column for FY 2021 consist of the following:
Salary Levels. FY 2021 base salaries were established by the Board in the first quarter of 2021 based on a review of each executive's role, experience, individual performance, and internal pay equity considerations. The Board also considered informal benchmarking data provided by Pinnacle Vista Capital Management LLC based on the compensation levels of executive officers at certain of its other portfolio companies operating in the energy sector. Mr. Calloway's and Ms. Briggs' base salaries were established at levels that reflect their roles as co-founders and their significant contributions to building the Company's platform since inception.
Pre-IPO Equity Awards. The stock awards reported in the Summary Compensation Table represent grants of restricted equity interests in the Company's predecessor entity, CBR Holdings LLC, which were converted into shares of restricted common stock of Calloway-Briggs Renewables Inc. in connection with the corporate reorganization effected prior to the IPO. These restricted equity awards are subject to time-based vesting, with 25% vesting on each anniversary of the original grant date, generally subject to the executive's continued employment through each vesting date. As of December 31, 2021, a significant portion of these awards remained unvested, as reflected in the Outstanding Equity Awards at Fiscal Year-End table below.
4. Grants of Plan-Based Awards Table
4.1 Grants of Plan-Based Awards for FY 2021
The following table sets forth information regarding grants of plan-based awards to our named executive officers during the fiscal year ended December 31, 2021. This table does not reflect the IPO equity grants described above under "Long-Term Equity Incentive Compensation," which will be made upon or following the completion of this offering under the 2022 Omnibus Equity Incentive Plan.
(1) Represents shares of restricted common stock (or restricted equity interests in the Company's predecessor entity that were converted into shares of restricted common stock in connection with the corporate reorganization), subject to time-based vesting over four years (25% per year).
(2) Represents the grant date fair value of stock awards computed in accordance with ASC 718, based on a per-share fair market value of $11.90 as determined by the most recent independent 409A valuation as of the grant date.
The threshold payout levels for non-equity incentive plan awards represent 50% of the target bonus opportunity, reflecting the minimum level of performance required for any payout under the annual incentive program. The maximum payout levels represent 200% of the target bonus opportunity, reflecting the maximum level of performance-based payout available under the program. Actual FY 2021 payouts are reflected in the "Non-Equity Incentive Plan Compensation" column of the Summary Compensation Table above.
5. Outstanding Equity Awards at Fiscal Year-End
5.1 Outstanding Equity Awards as of December 31, 2021
The following table sets forth information regarding outstanding equity awards held by each of our named executive officers as of December 31, 2021. All equity awards reflected in this table are pre-IPO awards. Valuations are based on the most recent independent 409A valuation as of December 31, 2021, which established a per-share fair market value of $14.75.
(1) Reflects pre-IPO equity awards including restricted common stock and converted profits interests. In connection with the corporate reorganization effected prior to the IPO, all outstanding equity interests in CBR Holdings LLC were reclassified into shares of common stock of Calloway-Briggs Renewables Inc. on the basis of 100,000,000 shares of common stock on a pre-IPO fully diluted basis. The unvested share amounts reported in this table reflect the shares resulting from such reclassification.
(2) Market value calculated by multiplying the number of unvested shares by $14.75, the per-share fair market value as of December 31, 2021, as determined by the most recent independent 409A valuation.
(3) Unexercisable options vest in equal annual installments over the remaining vesting period. For Mr. Calloway and Ms. Briggs, the remaining unexercisable options vest in two equal annual installments on June 15, 2022 and June 15, 2023. For Mr. Yoon and Mr. Renfroe, the remaining unexercisable options vest in equal annual installments on March 1, 2022, March 1, 2023, and (in the case of Mr. Yoon's additional tranche) March 1, 2024. For Ms. Anand and Mr. Quintero, the remaining unexercisable options vest in two equal annual installments on September 15, 2022 and September 15, 2023.
(4) Includes all unvested restricted common stock and converted restricted equity interests. The unvested shares vest in equal annual installments on each anniversary of the original grant date, subject to the executive's continued employment through each vesting date.
6. Option Exercises and Stock Vested Table
6.1 Option Exercises and Stock Vested for FY 2021
The following table sets forth information regarding the exercise of stock options and the vesting of restricted stock awards for each of our named executive officers during the fiscal year ended December 31, 2021.
(1) No named executive officer exercised stock options during FY 2021. The Company's common stock was not publicly traded during FY 2021, and there was no established market for the shares. As a result, the named executive officers generally elected to defer the exercise of vested options.
(2) Value realized on vesting of restricted stock awards is calculated by multiplying the number of shares that vested by the fair market value of the Company's common stock on the applicable vesting date, as determined by the most recent independent 409A valuation as of such date. The fair market value used for vesting events occurring during FY 2021 was $11.90 per share (for vesting events prior to September 30, 2021) and $14.75 per share (for vesting events on or after September 30, 2021), based on the 409A valuations in effect on each respective vesting date.
7. Employment Agreements
7.1 Garrett Calloway — Employment Agreement
The Company entered into an Amended and Restated Employment Agreement with Garrett Calloway, effective as of January 1, 2021, as further amended effective as of March 15, 2022 in connection with the IPO (the "Calloway Employment Agreement"). The material terms of the Calloway Employment Agreement are as follows:
• Position and Duties. Mr. Calloway serves as Co-Founder, Chairman of the Board, and Chief Executive Officer of the Company. He reports directly to the Board of Directors and is responsible for the overall strategic direction and management of the Company.
• Base Salary. Mr. Calloway's annual base salary for FY 2021 was $625,000. In connection with the IPO, the Compensation Committee approved an increase in Mr. Calloway's annual base salary to $700,000, effective upon the completion of the offering.
• Target Bonus. Mr. Calloway is eligible to earn an annual performance-based cash bonus with a target opportunity equal to 100% of his base salary, subject to the achievement of performance metrics established by the Compensation Committee (or, prior to the establishment of the Compensation Committee, the Board). The actual bonus payout may range from 0% to 200% of the target bonus, based on actual performance relative to the established metrics.
• Equity Compensation. Mr. Calloway is eligible to receive equity awards under the Company's equity compensation plans, as determined by the Compensation Committee. In connection with the IPO, Mr. Calloway has been approved for a grant of 500,000 RSUs under the 2022 Plan, subject to four-year ratable vesting.
• Severance. In the event of a termination of Mr. Calloway's employment by the Company without "cause" or by Mr. Calloway for "good reason" (each as defined in the Calloway Employment Agreement), Mr. Calloway will be entitled to receive: (i) continued payment of his then-current base salary for a period of 24 months following the date of termination; (ii) a prorated bonus for the year of termination based on actual performance; (iii) continued health insurance benefits (COBRA subsidy) for up to 18 months following the date of termination; and (iv) accelerated vesting of any unvested equity awards that would have vested during the 24-month period following the date of termination, subject to Mr. Calloway's execution and non-revocation of a general release of claims.
• Change-of-Control Severance. In the event of a termination of Mr. Calloway's employment by the Company without cause or by Mr. Calloway for good reason within 12 months following a "change of control" (as defined in the Calloway Employment Agreement), Mr. Calloway will be entitled to receive: (i) a lump-sum cash severance payment equal to 2.5 times the sum of his then-current base salary and target bonus; (ii) a prorated bonus for the year of termination at target; (iii) continued health insurance benefits (COBRA subsidy) for up to 24 months; and (iv) full accelerated vesting of all unvested equity awards.
• Restrictive Covenants. The Calloway Employment Agreement contains the following restrictive covenant obligations: (i) a non-competition covenant for 24 months following termination of employment, prohibiting Mr. Calloway from engaging in a competing business within the United States; (ii) a non-solicitation covenant for 24 months following termination, prohibiting Mr. Calloway from soliciting employees, customers, or business partners of the Company; (iii) perpetual confidentiality obligations with respect to the Company's proprietary information and trade secrets; and (iv) an intellectual property assignment provision requiring Mr. Calloway to assign to the Company all inventions, works, and discoveries made during his employment.
• Related-Party Disclosure. Mr. Calloway is a co-founder of the Company and holds approximately 12% of the Company's pre-IPO common stock on a fully diluted basis. Together with Ms. Briggs, the founders collectively hold approximately 24% of the Company's pre-IPO common stock (as part of the founders/management ownership block). See "Certain Relationships and Related-Party Transactions" and "Principal Stockholders" for additional information.
7.2 Elaine Briggs — Employment Agreement
The Company entered into an Amended and Restated Employment Agreement with Elaine Briggs, effective as of January 1, 2021, as further amended effective as of March 15, 2022 in connection with the IPO (the "Briggs Employment Agreement"). The material terms of the Briggs Employment Agreement are substantially similar to those of the Calloway Employment Agreement, with the following key provisions:
• Position and Duties. Ms. Briggs serves as Co-Founder and President, Development. She is responsible for overseeing the Company's project development pipeline and origination activities and reports to the Chief Executive Officer.
• Base Salary. Ms. Briggs' annual base salary for FY 2021 was $575,000. In connection with the IPO, the Compensation Committee approved an increase in Ms. Briggs' annual base salary to $650,000, effective upon the completion of the offering.
• Target Bonus. Ms. Briggs is eligible to earn an annual performance-based cash bonus with a target opportunity equal to 100% of her base salary. The actual bonus payout may range from 0% to 200% of the target bonus, based on actual performance relative to the established metrics.
• Equity Compensation. In connection with the IPO, Ms. Briggs has been approved for a grant of 400,000 RSUs under the 2022 Plan, subject to four-year ratable vesting.
• Severance. Substantially identical to Mr. Calloway's severance provisions, including 24 months of base salary continuation, prorated bonus, 18 months of COBRA subsidy, and acceleration of equity vesting that would have occurred during the 24-month period following termination, in each case upon a termination without cause or for good reason, subject to execution and non-revocation of a release.
• Change-of-Control Severance. Substantially identical to Mr. Calloway's change-of-control severance provisions, including a lump-sum payment equal to 2.5 times the sum of base salary and target bonus, prorated target bonus, 24 months of COBRA subsidy, and full equity acceleration.
• Restrictive Covenants. The Briggs Employment Agreement contains 24-month non-competition and non-solicitation covenants, perpetual confidentiality obligations, and an intellectual property assignment provision, each substantially identical to those contained in the Calloway Employment Agreement.
• Related-Party Disclosure. Ms. Briggs is a co-founder of the Company and holds approximately 12% of the Company's pre-IPO common stock on a fully diluted basis.
7.3 Marcus Yoon — Employment Agreement
The Company entered into an Amended and Restated Employment Agreement with Marcus Yoon, effective as of January 1, 2021, as further amended effective as of March 15, 2022 in connection with the IPO (the "Yoon Employment Agreement"). The material terms of the Yoon Employment Agreement are as follows:
• Position and Duties. Mr. Yoon serves as Chief Financial Officer. He is responsible for overseeing the Company's finance, accounting, treasury, tax, investor relations, and financial planning and analysis functions and reports to the Chief Executive Officer.
• Base Salary. Mr. Yoon's annual base salary for FY 2021 was $475,000. In connection with the IPO, the Compensation Committee approved an increase in Mr. Yoon's annual base salary to $525,000, effective upon the completion of the offering.
• Target Bonus. Mr. Yoon is eligible to earn an annual performance-based cash bonus with a target opportunity equal to 75% of his base salary. The actual bonus payout may range from 0% to 200% of the target bonus.
• Equity Compensation. In connection with the IPO, Mr. Yoon has been approved for a grant of 300,000 RSUs under the 2022 Plan, subject to four-year ratable vesting.
• Severance. In the event of a termination without cause or for good reason, Mr. Yoon will be entitled to: (i) continued payment of his then-current base salary for 18 months following the date of termination; (ii) a prorated bonus for the year of termination based on actual performance; (iii) continued health insurance benefits (COBRA subsidy) for up to 18 months; and (iv) accelerated vesting of any unvested equity awards that would have vested during the 18-month period following the date of termination, subject to execution and non-revocation of a release.
• Change-of-Control Severance. In the event of a qualifying termination within 12 months following a change of control, Mr. Yoon will be entitled to: (i) a lump-sum cash severance payment equal to 2.0 times the sum of his then-current base salary and target bonus; (ii) a prorated bonus at target; (iii) 18 months of COBRA subsidy; and (iv) full equity acceleration.
• Restrictive Covenants. 18-month non-competition and non-solicitation covenants, perpetual confidentiality obligations, and an intellectual property assignment provision.
7.4 Dale Renfroe — Employment Agreement
The Company entered into an Amended and Restated Employment Agreement with Dale Renfroe, effective as of January 1, 2021, as further amended effective as of March 15, 2022 in connection with the IPO (the "Renfroe Employment Agreement"). The material terms of the Renfroe Employment Agreement are as follows:
• Position and Duties. Mr. Renfroe serves as Chief Operating Officer. He is responsible for overseeing the Company's construction, operations and maintenance, asset management, and commercial operations functions and reports to the Chief Executive Officer.
• Base Salary. Mr. Renfroe's annual base salary for FY 2021 was $450,000. In connection with the IPO, the Compensation Committee approved an increase in Mr. Renfroe's annual base salary to $500,000, effective upon the completion of the offering.
• Target Bonus. Mr. Renfroe is eligible to earn an annual performance-based cash bonus with a target opportunity equal to 70% of his base salary. The actual bonus payout may range from 0% to 200% of the target bonus.
• Equity Compensation. In connection with the IPO, Mr. Renfroe has been approved for a grant of 200,000 RSUs under the 2022 Plan, subject to four-year ratable vesting.
• Severance. In the event of a termination without cause or for good reason, Mr. Renfroe will be entitled to: (i) continued payment of his then-current base salary for 18 months following the date of termination; (ii) a prorated bonus based on actual performance; (iii) COBRA subsidy for up to 18 months; and (iv) accelerated vesting of unvested equity awards that would have vested during the 18-month period following termination, subject to execution and non-revocation of a release.
• Change-of-Control Severance. In the event of a qualifying termination within 12 months following a change of control, Mr. Renfroe will be entitled to: (i) a lump-sum cash severance payment equal to 2.0 times the sum of base salary and target bonus; (ii) a prorated bonus at target; (iii) 18 months of COBRA subsidy; and (iv) full equity acceleration.
• Restrictive Covenants. 18-month non-competition and non-solicitation covenants, perpetual confidentiality obligations, and an intellectual property assignment provision.
7.5 Priya Anand — Employment Agreement
The Company entered into an Amended and Restated Employment Agreement with Priya Anand, effective as of January 1, 2021, as further amended effective as of March 15, 2022 in connection with the IPO (the "Anand Employment Agreement"). The material terms of the Anand Employment Agreement are as follows:
• Position and Duties. Ms. Anand serves as Senior Vice President, Finance & Treasurer. She is responsible for treasury operations, capital markets activities, tax planning, and financial risk management and reports to the Chief Financial Officer.
• Base Salary. Ms. Anand's annual base salary for FY 2021 was $375,000. In connection with the IPO, the Compensation Committee approved an increase in Ms. Anand's annual base salary to $400,000, effective upon the completion of the offering.
• Target Bonus. Ms. Anand is eligible to earn an annual performance-based cash bonus with a target opportunity equal to 60% of her base salary. The actual bonus payout may range from 0% to 200% of the target bonus.
• Equity Compensation. In connection with the IPO, Ms. Anand has been approved for a grant of 175,000 RSUs under the 2022 Plan, subject to four-year ratable vesting.
• Severance. In the event of a termination without cause or for good reason, Ms. Anand will be entitled to: (i) continued payment of her then-current base salary for 12 months following the date of termination; (ii) a prorated bonus based on actual performance; (iii) COBRA subsidy for up to 12 months; and (iv) accelerated vesting of unvested equity awards that would have vested during the 12-month period following termination, subject to execution and non-revocation of a release.
• Change-of-Control Severance. In the event of a qualifying termination within 12 months following a change of control, Ms. Anand will be entitled to: (i) a lump-sum cash severance payment equal to 1.5 times the sum of base salary and target bonus; (ii) a prorated bonus at target; (iii) 12 months of COBRA subsidy; and (iv) full equity acceleration.
• Restrictive Covenants. 12-month non-competition and non-solicitation covenants, perpetual confidentiality obligations, and an intellectual property assignment provision.
7.6 Tomás Quintero — Employment Agreement
The Company entered into an Amended and Restated Employment Agreement with Tomás Quintero, effective as of January 1, 2021, as further amended effective as of March 15, 2022 in connection with the IPO (the "Quintero Employment Agreement"). The material terms of the Quintero Employment Agreement are substantially identical to those of the Anand Employment Agreement, with the following key provisions:
• Position and Duties. Mr. Quintero serves as Senior Vice President, Project Development. He is responsible for leading the Company's greenfield project development activities, including site identification, permitting, interconnection, and offtake contracting, and reports to the President, Development.
• Base Salary. Mr. Quintero's annual base salary for FY 2021 was $375,000. In connection with the IPO, the Compensation Committee approved an increase in Mr. Quintero's annual base salary to $400,000, effective upon the completion of the offering.
• Target Bonus. Mr. Quintero is eligible to earn an annual performance-based cash bonus with a target opportunity equal to 60% of his base salary. The actual bonus payout may range from 0% to 200% of the target bonus.
• Equity Compensation. In connection with the IPO, Mr. Quintero has been approved for a grant of 175,000 RSUs under the 2022 Plan, subject to four-year ratable vesting.
• Severance and Change-of-Control Severance. Substantially identical to those described above for Ms. Anand, including 12-month base salary continuation, prorated bonus, 12-month COBRA subsidy, and partial equity acceleration upon a qualifying termination, and 1.5x lump-sum severance and full equity acceleration upon a qualifying termination following a change of control.
• Restrictive Covenants. 12-month non-competition and non-solicitation covenants, perpetual confidentiality obligations, and an intellectual property assignment provision.
7.7 General Terms Applicable to All NEO Employment Agreements
The following general terms and provisions are applicable to all of the employment agreements described above:
• At-Will Employment. Each named executive officer's employment is at-will, meaning that either the Company or the executive may terminate the employment relationship at any time, with or without cause, subject to the severance protections described above. The severance provisions in the employment agreements are designed to provide a bridge of financial support in the event of a qualifying termination, while preserving the Company's flexibility to make changes in its executive leadership team as the Board and the Compensation Committee deem appropriate.
• Non-Competition Provisions. Each employment agreement contains a post-termination non-competition covenant, the duration of which varies based on the executive's level and role. For the co-founders (Mr. Calloway and Ms. Briggs), the non-competition period is 24 months following termination. For Mr. Yoon and Mr. Renfroe, the non-competition period is 18 months. For Ms. Anand and Mr. Quintero, the non-competition period is 12 months. During the applicable non-competition period, the executive is prohibited from directly or indirectly engaging in, or providing services to, any person or entity engaged in a business that competes with the Company's business in the development, ownership, or operation of utility-scale renewable energy generation and storage assets within the United States.
• Non-Solicitation Provisions. Each employment agreement contains a post-termination non-solicitation covenant of the same duration as the applicable non-competition covenant, prohibiting the executive from soliciting, recruiting, or hiring any employees or independent contractors of the Company, or soliciting or diverting any customers, suppliers, or business relationships of the Company.
• Confidentiality and intellectual Property Assignment. Each employment agreement contains perpetual confidentiality obligations with respect to the Company's proprietary information, trade secrets, and confidential business information. Each executive is also required to assign to the Company all inventions, works of authorship, discoveries, improvements, and other intellectual property conceived, developed, or reduced to practice during the period of employment that relate to the Company's business or result from the use of the Company's resources.
• Indemnification. In addition to the indemnification provisions contained in the Company's amended and restated certificate of incorporation and amended and restated bylaws, each named executive officer has entered into an individual indemnification agreement with the Company in the form attached as Exhibit 10.7 to this Registration Statement (the "Form of Indemnification Agreement"). The indemnification agreements provide for indemnification and advancement of expenses to the fullest extent permitted by Delaware law in connection with any threatened, pending, or completed action, suit, or proceeding arising from the executive's service as an officer or director of the Company.
• Section 409A Compliance. Each employment agreement has been reviewed and is intended to comply with, or be exempt from, Section 409A of the Internal Revenue Code. To the extent that any severance payments constitute nonqualified deferred compensation subject to Section 409A, payment is subject to a six-month delay following separation from service to the extent required by Section 409A(a)(2)(B)(i) of the Code.
8. Potential Payments Upon Termination or Change of Control
8.1 Narrative Description
The following is a summary of the severance and change-of-control benefits payable to each named executive officer upon various termination scenarios, as provided under the terms of their respective employment agreements and the Company's equity compensation plans.
Voluntary Resignation (Without Good Reason). In the event that a named executive officer voluntarily resigns without "good reason" (as defined in the applicable employment agreement), the executive is entitled to receive only: (i) any earned but unpaid base salary through the date of termination; (ii) any accrued but unused vacation pay; (iii) any vested benefits under the Company's benefit plans; and (iv) reimbursement of any business expenses incurred prior to the date of termination in accordance with Company policy. No severance benefits, bonus proration, or accelerated equity vesting is provided in this scenario.
Termination Without Cause or Resignation for Good Reason (Outside of Change-of-Control Period). As described in detail above under "Employment Agreements," each named executive officer is entitled to enhanced severance benefits if his or her employment is terminated by the Company without "cause" or if the executive resigns for "good reason," in each case outside of the 12-month period following a change of control. The severance benefits include continued base salary payments (24 months for Mr. Calloway and Ms. Briggs; 18 months for Mr. Yoon and Mr. Renfroe; 12 months for Ms. Anand and Mr. Quintero), prorated bonus for the year of termination based on actual performance, continued health insurance benefits, and partial acceleration of unvested equity awards, in each case subject to the executive's execution and non-revocation of a general release of claims within the time period specified in the applicable employment agreement.
Termination for Cause. In the event that a named executive officer's employment is terminated for "cause" (as defined in the applicable employment agreement, which generally includes material breach of the employment agreement, conviction of a felony, willful misconduct, gross negligence, and similar grounds), the executive is entitled to receive only the same accrued obligations as described above for a voluntary resignation. No severance benefits, bonus proration, or accelerated equity vesting is provided in this scenario. In addition, upon a termination for cause, any unvested equity awards are immediately forfeited and any vested but unexercised stock options are subject to a shortened post-termination exercise period (generally 30 days).
Termination in Connection with a Change of Control (Double-Trigger). Each named executive officer is entitled to enhanced severance benefits in the event of a qualifying termination (termination without cause or resignation for good reason) within 12 months following a "change of control" of the Company. The change-of-control severance benefits include a lump-sum cash payment (2.5x for Mr. Calloway and Ms. Briggs; 2.0x for Mr. Yoon and Mr. Renfroe; 1.5x for Ms. Anand and Mr. Quintero, in each case applied to the sum of base salary and target bonus), prorated bonus at target, extended health insurance benefits, and full accelerated vesting of all unvested equity awards. These benefits are subject to the executive's execution and non-revocation of a general release of claims.
Equity awards granted under the 2022 Omnibus Equity Incentive Plan are subject to double-trigger change-of-control provisions, meaning that awards do not automatically vest upon a change of control of the Company. Accelerated vesting of equity awards requires both (i) a change of control and (ii) a qualifying termination of the award holder's employment (termination without cause or resignation for good reason) within a specified period (generally 12 months) following the change of control. The Compensation Committee believes that double-trigger provisions are consistent with best practices in corporate governance and appropriately balance the interests of executives and stockholders in change-of-control transactions.
Death or Disability. In the event of a named executive officer's death or "disability" (as defined in the applicable employment agreement, generally meaning a physical or mental incapacity that prevents the executive from performing his or her essential duties for a period of 180 consecutive days), the executive (or the executive's estate or beneficiaries, as applicable) is entitled to receive: (i) any accrued obligations; (ii) a prorated bonus for the year of termination based on actual performance (or at target, in the case of death); (iii) continued health insurance benefits for up to 12 months; and (iv) accelerated vesting of all unvested equity awards.
Lock-Up Agreements. Investors should note that the lock-up agreements entered into by directors and officers in connection with the IPO provide for a 180-day lock-up period following the date of the final prospectus relating to this offering. During the lock-up period, our directors and officers may not sell, transfer, or otherwise dispose of any shares of common stock or securities convertible into or exercisable for common stock, subject to certain limited exceptions. The lock-up restrictions may affect the timing at which named executive officers can monetize equity awards that vest or become exercisable during the lock-up period.
8.2 Estimated Payments Upon Termination or Change of Control
The following table sets forth estimated payments and benefits that would be payable to each named executive officer under the various termination scenarios described above, assuming a hypothetical termination date of December 31, 2021 and based on compensation levels and equity award values as of such date. The per-share fair market value used for purposes of estimating equity acceleration values is $14.75, based on the most recent independent 409A valuation as of December 31, 2021.
Garrett Calloway
Elaine Briggs
Marcus Yoon
Dale Renfroe
Priya Anand
Tomás Quintero
The estimated equity acceleration values set forth above are based on the spread between the per-share fair market value of the Company's common stock as of December 31, 2021 ($14.75 per share, based on the most recent 409A valuation) and, with respect to stock options, the applicable exercise price, multiplied by the number of shares subject to acceleration. Actual values will depend on the fair market value of the Company's common stock at the time of any future termination and the number and terms of equity awards outstanding at such time.
9. Director Compensation
9.1 Overview. In connection with the IPO, the Board adopted a non-employee director compensation program designed to attract and retain qualified independent directors and align their interests with those of our stockholders. The non-employee director compensation program was developed with the assistance of Clarendon Rowe Advisory Group LLC based on its analysis of non-employee director compensation practices at the peer-group companies described above.
The following non-employee directors serve on our Board:
• Warren Okoro — Independent Director
• Catherine Liang — Independent Director
• Richard Estavez — Independent Director
• Hugh Pemberton — Investor-Designee Director (Pinnacle Vista Capital Partners)
• Diane Kovac — Investor-Designee Director (Pinnacle Vista Capital Partners)
Mr. Pemberton and Ms. Kovac, as representatives of Pinnacle Vista Capital Partners, have waived and will not receive any compensation from the Company for their service on the Board. Mr. Pemberton and Ms. Kovac are compensated for their services by Pinnacle Vista Capital Management LLC, the management company of the Pinnacle Vista affiliated funds.
Garrett Calloway and Elaine Briggs serve on the Board as employee directors and do not receive any additional compensation for their Board service. Their compensation as executive officers of the Company is described above in this Executive Compensation section.
9.2 Director Compensation Table for FY 2021