PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
This memorandum is protected by the attorney-client privilege and the work-product doctrine. It is intended solely for use by the attorneys and client representatives identified herein in connection with the legal matter referenced below. Any dissemination, distribution, or copying of this memorandum or its contents to any person not authorized to receive it is strictly prohibited.
MEMORANDUM
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I. Executive Summary and Purpose
This internal memorandum identifies and analyzes the key open or contested negotiation points in the underwriting agreement (the "UA") for the proposed initial public offering of common stock of Calloway-Briggs Renewables Inc. ("CBR" or the "Company") on the New York Stock Exchange (proposed ticker: CBRI). The anticipated aggregate offering size is approximately $600,000,000, consisting of a base offering of approximately $521.7 million and a 15% overallotment option of approximately $78.3 million. This memorandum is intended to assist Jennifer Kwon in preparing for the final round of negotiations with counsel for the underwriters and to provide a comprehensive record of the negotiation posture as the transaction potentially enters a dormancy period.
Parties to the UA. The principal parties to the UA are as follows:
•  Issuer: Calloway-Briggs Renewables Inc., a Delaware corporation headquartered in Austin, Texas.
•  Selling Stockholder: Pinnacle Vista Capital Partners III, LP ("Pinnacle Vista"), a Delaware limited partnership, acting through its general partner, Pinnacle Vista Capital Management LLC, selling approximately $150,000,000 of secondary shares.
•  Underwriters: The several underwriters named in the UA, acting through Hargrove Keating & Co. ("HK&Co.") as representative of the underwriters. The underwriting syndicate also includes Linden Pratt, Graymont Brothers, Barfield Stuart, and Crane Whitley.
Offering Economics. The proposed offering includes a base offering of approximately $521.7 million (23,713,636 shares at an assumed midpoint offering price of $22.00 per share) plus a 15% overallotment option of approximately $78.3 million (3,559,091 additional shares), for aggregate offering proceeds of $600,000,000. Within the base offering, Pinnacle Vista is selling approximately $150,000,000 of secondary shares (6,818,182 shares), and the Company is selling primary shares representing approximately $371,700,000 (16,895,455 shares). The underwriting discount is 5.50% of the public offering price, yielding a total gross spread of $33,000,000 on full exercise.
Negotiation Status. The UA has been the subject of extensive negotiation between our firm, acting as issuer's counsel, and Prescott, Danforth & Yee LLP ("PD&Y"), acting as underwriters' counsel. The relevant chronology is as follows:
•  On or about April 18, 2022: PD&Y circulated the initial draft of the UA.
•  April 22, 2022: Greaves & Castellan LLP ("C&H") transmitted a first comprehensive comment letter to PD&Y.
•  May 2, 2022: PD&Y circulated a revised draft incorporating its responses to C&H's first comment letter.
•  May 16, 2022: C&H transmitted a second comment letter to PD&Y, addressing the remaining open points.
•  Current status: The agreement is in near-final form; however, multiple substantive issues remain open or warrant attention for the anticipated final round of negotiation.
Governing Law. The UA is governed by New York law, without regard to conflicts-of-law principles.
Organization. This memorandum organizes the open negotiation points into seven principal categories: (1) the Material Adverse Effect definition, (2) representations and warranties, (3) indemnification and contribution, (4) termination triggers, (5) lock-up mechanics, (6) FINRA compensation compliance, and (7) the overallotment option structure. A summary of recommendations appears in Section X. Appendices A through D, referenced herein but circulated separately, contain supporting detail including the underwriter allocation table, a negotiation chronology, a comparison of MAE carve-outs to precedent transactions, and a lock-up signatory tracker.
II. Material Adverse Effect Definition — Scope and Carve-Outs
The definition of "material adverse effect" (or "MAE") is one of the most consequential provisions in the UA because it governs (a) the scope of several of the Company's representations and warranties, (b) the conditions to the underwriters' obligation to close, and (c) the certifications to be delivered by the Company's officers at closing. The MAE definition in its current form is substantially acceptable, though certain discrete points merit confirmation in the final round.
A. Current Drafting Position
The near-final UA defines "material adverse effect" as any event, change, occurrence, or development that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on:
(a) the business, assets, properties, financial condition, or results of operations of the Company and its subsidiaries, taken as a whole; or
(b) the ability of the Company to consummate the transactions contemplated by the underwriting agreement.
This formulation employs a two-prong test: the first prong addresses the Company's overall business and financial health, while the second prong addresses the Company's ability to close the IPO. The "would reasonably be expected to have" standard is forward-looking and imposes a lower threshold than "has had," but the overall construct is market-standard for IPO underwriting agreements and consistent with recent precedent in the renewables sector.
Importantly, the first prong includes the phrase "taken as a whole," which ensures that the MAE analysis is conducted at the consolidated CBR level rather than at the level of any individual project, subsidiary, or special-purpose vehicle. This is particularly significant given CBR's corporate structure, which includes ten material subsidiaries and numerous project-level SPVs organized beneath the following holding-company chain: CBR Holdings LLC → Calloway-Briggs Operating Company LLC → individual project SPVs. Without the "taken as a whole" qualifier, a localized event affecting a single project (for example, a permitting delay at Mesquite Wind in Oldham County, Texas, or a construction issue at Cimarron Solar in Doña Ana County, New Mexico) could theoretically be characterized as a material adverse effect, which would be an inappropriately narrow standard for purposes of the UA.
B. Carve-Outs (Exceptions to MAE)
The near-final UA contains six enumerated carve-outs from the MAE definition. Each carve-out provides that the following events, changes, or developments shall not constitute, and shall not be taken into account in determining whether there has been, a material adverse effect:
(i) changes in general economic or market conditions in the United States or globally;
(ii) changes in accounting principles (including GAAP) or applicable law, rule, or regulation;
(iii) changes, events, or developments generally affecting the renewable-energy or utility industries;
(iv) natural disasters, epidemics, pandemics, or acts of war, terrorism, or military action, or any escalation or worsening thereof;
(v) changes resulting from the public announcement or pendency of the initial public offering and the transactions contemplated by the underwriting agreement; and
(vi) any change in the trading price or trading volume of the Company's securities (once listed) or any change in any credit rating of the Company.
Critically, each carve-out is subject to a "disproportionate impact" qualifier: the carve-out does not apply to the extent the applicable event, change, or development disproportionately affects CBR and its subsidiaries relative to other companies operating in the same industry in which the Company and its subsidiaries operate. This qualifier is market-standard and ensures that a systemic industry shock that nonetheless hits CBR disproportionately hard can still constitute an MAE. The disproportionate-impact qualifier was present in PD&Y's initial draft and C&H did not object; we do not recommend further negotiation on this point.
C. Open Negotiation Points
Industry carve-out breadth. PD&Y's initial draft limited the industry carve-out (clause (iii)) to "the utility-scale renewable energy industry." C&H pushed in its first comment letter to broaden this language to "the renewable-energy or utility industries generally" in order to capture a wider range of market shifts that might affect CBR but that are not specific to utility-scale renewable energy — for example, commodity price swings affecting natural gas (which affects wholesale electricity pricing and therefore renewable-energy project economics), grid-interconnection policy changes that affect the utility sector broadly, or federal clean-energy incentive changes. PD&Y accepted this broader formulation in its May 2 revised draft, and the language now appears in the near-final UA. We should confirm acceptance in the final round and resist any attempt by PD&Y to revert to the narrower formulation.
Pandemic/force majeure carve-out. PD&Y initially resisted the inclusion of pandemics in the carve-out, arguing that in the post-COVID environment, pandemic risk is a known and foreseeable risk that the Company should bear. C&H successfully pushed for inclusion of pandemics in carve-out (iv), which now reads "natural disasters, epidemics, pandemics, or acts of war, terrorism, or military action, or any escalation or worsening thereof." One question that remains is whether to seek the addition of "cyberattack" or "supply-chain disruption" as additional enumerated carve-outs. Given that CBR relies on complex supply chains for solar panels, wind turbines, and balance-of-system components — and given the well-publicized supply-chain disruptions affecting the renewables sector in 2021 and 2022 — there is a reasonable basis for requesting such additions. However, PD&Y is likely to resist, and these risks are partially captured by the existing "general economic or market conditions" carve-out (clause (i)) to the extent they are systemic rather than Company-specific. Our recommendation is to raise these additions but not hold firm if PD&Y resists; the existing carve-out structure provides adequate protection.
"Stock price or credit rating" carve-out. The standard formulation in carve-out (vi) is now included and protects against the use of a decline in CBR's stock price (once listed) or a change in any credit rating as the sole basis for an MAE determination. It is important to note, however, that this carve-out protects only against the symptom (stock price or credit-rating change) — the underlying cause of such a decline remains subject to the MAE inquiry. This is a well-established principle under Delaware and New York law, and the current formulation is consistent with that jurisprudence. No further negotiation is recommended.
"Disproportionate impact" qualifier. As noted above, this qualifier is applied to all six carve-outs. It is market-standard and was not contested by either side. No further push is recommended.
"Taken as a whole" language. We have confirmed that this critical qualifier is present in the business/financial prong (clause (a)) of the MAE definition. As discussed, this language ensures that the MAE is assessed at the consolidated CBR level, not at the level of an individual project, subsidiary, or SPV. Given CBR's structure — which includes ten material subsidiaries and numerous project-level SPVs — this protection is particularly important. No further negotiation is needed, but we should confirm in the final read-through that the qualifier has not been inadvertently deleted or moved.
Recommendation. The MAE definition is substantially in acceptable form. We advise Jennifer Kwon to confirm the final wording without further material concessions. The MAE definition should be cross-referenced to the officer's certificate deliverable at closing (to be executed by CEO Garrett Calloway and CFO Marcus Yoon, certifying that no MAE has occurred since the date of the UA), and to the risk-factors section of the S-1, which includes disclosures regarding events and conditions that could constitute an MAE. Any substantive change to the MAE definition agreed in the final round should be communicated promptly to the S-1 drafting team to ensure consistency.
III. Representations and Warranties
The UA contains a comprehensive set of representations and warranties made by the Company (as issuer) and by Pinnacle Vista (as selling stockholder). These representations serve as the foundation for the indemnification provisions and the conditions to closing. The near-final draft contains a standard suite of over thirty issuer representations, supplemented by a narrower set of selling-stockholder representations. Several discrete points remain open or require coordination.
A. Issuer Representations
The Company's representations and warranties in the near-final UA cover the following areas, among others:
•  Due organization and good standing of CBR in its jurisdiction of incorporation (Delaware) and its principal place of business (Texas), as well as qualification to do business in all jurisdictions where the nature of its business or the ownership of its properties requires such qualification;
•  Capitalization, including pre-IPO and post-IPO share counts, and the valid issuance, full payment, and non-assessability of all outstanding shares;
•  No conflicts between the transactions contemplated by the UA and CBR's certificate of incorporation, bylaws, or any material agreement, instrument, order, judgment, or decree to which CBR or any of its subsidiaries is a party or by which any of them is bound;
•  Financial statements — specifically, audited financial statements for fiscal years 2019, 2020, and 2021 (audited by Ashford & Pemberton LLP) and unaudited interim financial statements for the quarter ended March 31, 2022 (Q1 2022);
•  No undisclosed liabilities of a type required to be reflected in financial statements prepared in accordance with GAAP;
•  Compliance with laws, including environmental laws, energy-regulatory laws, and securities laws;
•  Environmental compliance and related matters;
•  Tax matters, including compliance with all applicable tax laws and accuracy of tax-related disclosures in the registration statement;
•  Employee benefit plans, including ERISA compliance;
•  No material adverse effect since December 31, 2021 (the end of the most recent completed fiscal year);
•  Accuracy of the registration statement and prospectus, including the absence of any untrue statement of a material fact or omission of a material fact required to be stated therein or necessary to make the statements therein not misleading;
•  Effectiveness and adequacy of internal controls over financial reporting and disclosure controls and procedures; and
•  EDGAR filings and compliance with Regulation S-T.
The following key open points remain with respect to the issuer representations:
1. Knowledge Qualifier on Environmental Representations
This is a significant negotiation point that has been actively contested across the last two drafting rounds. PD&Y's initial draft contained a flat (i.e., unqualified) representation that the Company and each of its subsidiaries are "in compliance with all applicable Environmental Laws" and that "no Hazardous Substances have been released, discharged, or disposed of on, at, under, or from any property currently or formerly owned, leased, or operated by the Company or any of its subsidiaries."
C&H has negotiated a "to the Company's knowledge" qualifier for certain of these environmental representations, particularly those relating to historical contamination, pre-acquisition environmental conditions, and compliance with environmental laws at the project level. This position is supported by the following considerations:
•  CBR currently operates 22 projects across five states (Texas, New Mexico, Arizona, California, and Oklahoma), with a combined generating capacity of approximately 4.8 GW.
•  In addition, CBR has 1.4 GW of capacity under construction, including the Mesquite Wind project in Oldham County, Texas, and the Cimarron Solar project in Doña Ana County, New Mexico.
•  CBR also has a 6.2 GW development pipeline at various stages of permitting and pre-construction development.
•  Given this geographic and operational scope, a flat environmental compliance representation is disproportionately burdensome and exposes the Company to indemnification liability for conditions of which it may have no actual awareness.
•  The environmental due diligence conducted by Greenridge Environmental Sciences LLC (led by Dr. Nadine Torres) supports a knowledge-qualified representation. Greenridge's Phase I and Phase II assessments have not identified any material environmental liabilities, but they are inherently limited in scope and do not purport to identify all potential environmental conditions at every project site.
PD&Y has tentatively accepted the knowledge qualifier in the May 2 revised draft, though its acceptance is characterized as subject to further review. We recommend holding firm on this point in the final round. If PD&Y seeks to revert to a flat representation, we should be prepared to point to the Greenridge diligence reports and to comparable precedent transactions in the renewables sector in which knowledge-qualified environmental representations have been accepted.
2. Financial Statement Representation
The financial statement representation covers the following periods:
Key financial metrics from the FY 2021 audited financial statements, which have been cross-referenced to the S-1 registration statement, include:
The representation states that the financial statements, together with the related notes and schedules, "present fairly in all material respects the financial position of the Company and its consolidated subsidiaries as of the dates indicated and the results of their operations and cash flows for the periods specified, in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved." This formulation is standard and has not been contested.
No material open points remain on the financial statement representation itself, but coordination is required to ensure that the representation is consistent with the financial statements as filed with the SEC and as reflected in the comfort letters to be delivered by Ashford & Pemberton LLP.
3. Tax Representations
The tax representations in the UA require careful coordination with Leonard Cross in C&H's Tax Group and with outside tax advisors at Kessler McBride & Associates LLP (Alan Kessler and Linda McBride). The primary areas of focus are:
•  Tax-equity partnership-flip structures. CBR utilizes partnership-flip structures for several of its projects to monetize federal investment tax credits ("ITCs") and production tax credits ("PTCs"). The most significant of these is the Solaris West tax-equity partnership with Veltara Basin Financial LLC, in which Veltara Basin has invested approximately $280 million. Under the partnership-flip structure, Veltara Basin is allocated a disproportionate share of tax benefits (including ITCs) until a target internal rate of return is achieved, at which point the allocation "flips" and CBR receives the majority of the economic benefits. The flip for Solaris West is currently expected to occur in 2028.
•  ITC recapture risk. The tax representations must address the risk that the IPO or any related transactions could trigger an ITC recapture event under Section 50 of the Internal Revenue Code. Although the IPO itself should not constitute a disposition or change in use that triggers recapture (because the tax-equity partnership is at the project level, not the corporate level), the analysis is fact-specific and depends on the structure of the tax-equity agreements. This analysis is being conducted by Leonard Cross and the Kessler McBride team.
•  HLBV accounting methodology. CBR uses the hypothetical liquidation at book value ("HLBV") method to allocate income and losses among the partners in its tax-equity structures. The SEC Staff raised questions about CBR's HLBV methodology in its first round of comments on the S-1, and CBR revised its HLBV-related disclosures in Amendment No. 1. The tax representations in the UA should be consistent with the revised S-1 disclosures.
We recommend that Leonard Cross and the Kessler McBride team review the final tax representations in the UA before the document is finalized to confirm consistency with the S-1 disclosures and the underlying tax opinions.
4. Capitalization Representation
The capitalization representation reflects the following pre-IPO ownership structure:
All shares of common stock have a par value of $0.01 per share. The representation states that all outstanding shares are "duly authorized, validly issued, fully paid, and non-assessable," and that the shares to be sold in the offering, when issued and delivered against payment therefor as provided in the UA, will be duly authorized, validly issued, fully paid, and non-assessable.
The capitalization representation has been reviewed against the Company's certificate of incorporation (as amended), the reclassification resolutions adopted by the board of directors, and the stockholder records maintained by the Company's transfer agent. No material open points remain, though we will need to update the representation to reflect any changes in capitalization that occur between the date of the UA and the closing date.
B. Selling Stockholder Representations
Pinnacle Vista Capital Partners III, LP is required to make a more limited set of representations, focusing on matters within its knowledge and control. These include:
•  Ownership of shares: Pinnacle Vista is the record and beneficial owner of the shares to be sold, free and clear of all liens, encumbrances, equities, and claims.
•  Authority to sell: Pinnacle Vista has full power and authority to sell, assign, transfer, and deliver the shares, acting through Pinnacle Vista Capital Management LLC in its capacity as general partner.
•  No FINRA restricted-person affiliations: Pinnacle Vista has confirmed that neither it nor any of its principals is a "restricted person" within the meaning of FINRA Rule 5130 or a person with a "covered account" within the meaning of FINRA Rule 5131.
•  Accuracy of selling-stockholder questionnaire: The information furnished by Pinnacle Vista for use in the selling-stockholder section of the prospectus is true, correct, and complete in all material respects.
Pinnacle Vista has delivered its selling-stockholder representation letter and completed questionnaire. Pinnacle Vista is represented by Whitfield Archer & Doss LLP ("WA&D"), with Christine Navarro, Philip Archer, and Derek Fong serving as the principal WA&D attorneys on this matter.
Key Issue — Joint and Several Liability. PD&Y has requested that the selling-stockholder representations be joint and several with the issuer's representations and warranties. This would make Pinnacle Vista liable for any breach of any Company representation, even if the breach relates to a matter entirely within the Company's control and entirely outside Pinnacle Vista's knowledge. C&H's position, supported by WA&D, is that the selling-stockholder representations should be several only and should be limited to matters within Pinnacle Vista's actual knowledge and to information that Pinnacle Vista has itself furnished. This is a standard and well-supported position for a financial-sponsor selling stockholder that is not an operating entity and does not have day-to-day control over or access to the Company's operations, legal compliance, or financial reporting.
Recommendation: We recommend holding firm on this point. Pinnacle Vista's representations should be several and limited to information furnished by Pinnacle Vista. The indemnification section of the UA (discussed in Section IV below) addresses the related question of Pinnacle Vista's indemnification exposure more directly, and we believe the compromise position outlined in Section IV provides an appropriate framework.
IV. Indemnification and Contribution
The indemnification and contribution provisions of the UA allocate the risk of securities-law liability among the Company, Pinnacle Vista, and the underwriters. These provisions are among the most heavily negotiated in any underwriting agreement, and several material points remain open.
A. Indemnification Structure
The near-final UA establishes a bilateral indemnification structure:
Issuer and Selling Stockholder Indemnification of the Underwriters. CBR and Pinnacle Vista are required to indemnify each underwriter, its directors, officers, employees, and agents, and each person who controls such underwriter within the meaning of Section 15 of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934, against all losses, claims, damages, liabilities, and expenses (including reasonable attorneys' fees and expenses) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement or prospectus, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of the prospectus, in light of the circumstances under which they were made) not misleading. This indemnification is subject to the standard exception that no indemnification is provided with respect to statements or omissions made in reliance upon and in conformity with information furnished by or on behalf of any underwriter expressly for use in the registration statement or prospectus.
Underwriter Indemnification of the Issuer and Selling Stockholder. Each underwriter is required, severally and not jointly, to indemnify CBR, Pinnacle Vista, and their respective directors, officers, employees, and agents against losses arising from misstatements or omissions in underwriter-provided information only. As is customary, the scope of "underwriter-provided information" is narrowly defined and limited to the following categories of information furnished by the underwriters expressly for use in the prospectus:
•  The names and addresses of the underwriters;
•  The underwriter allocation table;
•  Language relating to stabilization transactions, overallotment, and short-covering activities;
•  FINRA-related disclosures appearing in the underwriting section of the prospectus; and
•  Any other information expressly identified as underwriter-provided information in the UA.
B. Open Negotiation Points
1. Indemnification Cap for Underwriters
PD&Y's initial draft included a cap on each underwriter's indemnification obligation equal to the underwriting discount actually received by such underwriter. Specifically, the cap is set at 5.50% of such underwriter's allocated amount of the offering (i.e., the same percentage as the gross spread). This is a market-standard cap for underwriter-side indemnification obligations, and C&H has accepted it. The maximum indemnification exposure for each underwriter, assuming full exercise of the overallotment option, is as follows:
No further negotiation is recommended on this point.
2. No Cap on Issuer/Selling Stockholder Indemnification
The PD&Y draft does not contain any cap on the indemnification obligations of CBR or Pinnacle Vista vis-à-vis the underwriters. This is standard practice in IPO underwriting agreements; the underwriters expect uncapped indemnification from the issuer and selling stockholder because the underwriters' exposure under the Securities Act is potentially unlimited, whereas the underwriters' own indemnification obligation is limited to the narrow category of underwriter-provided information. We recommend accepting this provision without further comment.
3. Allocation Between Issuer and Selling Stockholder — Key Open Issue
This is the most significant open negotiation point in the indemnification section and is the subject of active disagreement among the parties.
PD&Y's position: PD&Y's draft provides that CBR and Pinnacle Vista are jointly and severally liable for all indemnification obligations arising from misstatements or omissions in the registration statement and prospectus. Under this formulation, the underwriters could seek full indemnification from Pinnacle Vista for any prospectus misstatement, even if the misstatement relates to a matter entirely within the Company's control (for example, a misstatement in the financial statements or a failure to disclose a material contract).
C&H's position: C&H has proposed that Pinnacle Vista's indemnification obligation be limited to misstatements or omissions relating to information furnished by Pinnacle Vista for use in the registration statement or prospectus — specifically, the selling-stockholder table and beneficial-ownership data. This position is consistent with the limited nature of Pinnacle Vista's representations and with the practical reality that Pinnacle Vista, as a financial sponsor, does not prepare the registration statement or control its contents beyond the information it has furnished.
WA&D's position: Christine Navarro at WA&D has pushed back strongly against joint and several liability, noting that Pinnacle Vista is a limited partnership fund with fiduciary obligations to its own limited partners and cannot accept open-ended indemnification exposure for a registration statement prepared by the Company and its counsel.
C&H recommended compromise: We propose the following compromise position:
(a) Pinnacle Vista's indemnification obligation shall be limited to losses arising from (i) material misstatements or omissions in information furnished by Pinnacle Vista for use in the registration statement or prospectus, and (ii) material misstatements or omissions in the registration statement or prospectus generally, but only to the extent such losses are allocable to Pinnacle Vista under the contribution provisions (discussed below);
(b) In all events, Pinnacle Vista's aggregate indemnification liability shall be capped at the net proceeds received by Pinnacle Vista from the sale of its secondary shares, calculated as follows:
•  Gross proceeds: 6,818,182 shares × $22.00 = $150,000,000
•  Less underwriting discount: $150,000,000 × 5.50% = ($8,250,000)
•  Net proceeds / indemnification cap: approximately $141,750,000
This compromise provides the underwriters with meaningful indemnification protection from Pinnacle Vista (up to $141.75 million), while limiting Pinnacle Vista's exposure to the economic benefit it actually derives from the offering. We believe this position is defensible, commercially reasonable, and consistent with market precedent in sponsor-backed IPOs.
Recommendation: We recommend presenting this compromise to PD&Y in the final round and holding firm if PD&Y insists on full joint and several liability. The net-proceeds cap is a well-recognized market standard for selling-stockholder indemnification, and WA&D will support this position.
4. Contribution Provisions
The UA provides that if indemnification is judicially determined to be unavailable (for example, because a court holds that indemnification would violate public policy under the Securities Act), contribution shall apply. The contribution provisions allocate liability based on two factors:
(a) Relative benefits received. The Company receives primary offering proceeds, Pinnacle Vista receives secondary offering proceeds, and the underwriters receive the underwriting discount. Contribution is allocated proportionately based on these relative benefits.
(b) Relative fault. To the extent that relative benefits alone would produce an inequitable result, contribution is adjusted to reflect the relative fault of the parties in connection with the material misstatement or omission giving rise to the loss.
The contribution provisions also include the standard "fraud carve-out": no person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) is entitled to contribution from any person who is not found guilty of such fraudulent misrepresentation.
These provisions are substantially standard and have been agreed between the parties. No material open points remain.
5. Procedural Provisions
The near-final UA contains standard procedural provisions governing the indemnification process, including:
•  Prompt written notice of any claim or commencement of any action;
•  The right of the indemnifying party to assume the defense of any action, subject to the indemnified party's right to separate counsel if a conflict of interest exists;
•  Restrictions on settlement without the consent of the indemnified party (consent not to be unreasonably withheld);
•  Cooperation obligations of all parties; and
•  Preservation of rights and remedies pending final resolution.
All procedural provisions are substantially standard and have been agreed. No material open points remain.
V. Termination Triggers
The UA contains provisions permitting the underwriters (acting through HK&Co. as representative) to terminate the agreement prior to closing under specified circumstances. These provisions are critical because they define the circumstances under which the underwriters can walk away from the offering after the UA has been executed but before closing has occurred. The termination provisions must be carefully balanced to protect the Company against a pretextual walk-away while preserving the underwriters' legitimate right to withdraw in the event of genuinely adverse market or other conditions.
A. Underwriter Termination Rights (Market-Out and Disaster-Out)
The near-final UA provides that the underwriters, acting through HK&Co. as representative, may terminate the UA prior to closing if any of the following events has occurred:
(a) Trading in securities generally on the New York Stock Exchange or the Nasdaq Stock Market has been suspended or materially limited, or minimum or maximum prices for trading have been fixed or maximum ranges for prices have been required by any of such exchanges or by the SEC or any other governmental authority having jurisdiction;
(b) A general moratorium on commercial banking activities has been declared by federal or New York State authorities;
(c) Any outbreak or escalation of hostilities, act of terrorism, declaration of war or national emergency, or other calamity or crisis has occurred that, in the reasonable judgment of HK&Co., materially and adversely affects the financial markets of the United States to such an extent as to make it impracticable or inadvisable to proceed with the offering, sale, or delivery of the shares on the terms and in the manner contemplated by the prospectus; or
(d) Any material adverse change in general economic, political, or financial conditions in the United States, including but not limited to any change in interest rates or foreign exchange rates, has occurred that, in the reasonable judgment of HK&Co., makes it impracticable or inadvisable to proceed with the public offering or the delivery of the shares on the terms and in the manner contemplated by the prospectus.
Clauses (a) and (b) are objective triggers that do not require the exercise of judgment by the underwriters — they are either satisfied or not. Clauses (c) and (d) are subjective triggers that require the exercise of judgment by HK&Co., subject to the "reasonable judgment" standard discussed below.
The disaster-out clause is integrated with the market-out provisions (clause (c)) and covers a broad range of force-majeure-type events, including pandemics, natural disasters, and military conflicts. This integration is standard; there is no separate standalone disaster-out provision.
B. Open Negotiation Points
1. "Reasonable Judgment" Standard
PD&Y's initial draft used the formulation "in the judgment" of HK&Co. for clauses (c) and (d), effectively granting HK&Co. sole discretion to determine whether the relevant conditions had been satisfied. C&H pushed in its first comment letter for the insertion of "reasonable" before "judgment," arguing that an unqualified discretion standard would permit the underwriters to terminate the agreement for pretextual reasons unrelated to genuine market conditions.
PD&Y accepted this change in its May 2 revised draft, and the "reasonable judgment" standard now appears in the near-final UA. This is a meaningful protection for the Company: under a "reasonable judgment" standard, HK&Co.'s determination is subject to an objective reasonableness inquiry, and a termination based on an unreasonable or bad-faith judgment could give rise to a breach-of-contract claim. We recommend confirming the "reasonable judgment" standard in the final draft without further modification.
2. Issuer Termination Right
C&H initially requested a reciprocal issuer termination right that would permit CBR to terminate the UA if the underwriters fail to purchase shares at closing for a reason other than a permitted market-out or disaster-out termination. The rationale for this request was that CBR should have the right to walk away and seek alternative underwriting arrangements if the underwriters breach their obligation to close.
PD&Y resisted this request, arguing that the underwriters' obligation to purchase shares is already subject to the enumerated conditions to closing (discussed in Section V.C below), and that a reciprocal termination right is not market-standard in IPO underwriting agreements.
Upon further consideration, we recommend withdrawing this request. PD&Y is correct that a reciprocal issuer termination right is not standard in IPO underwriting agreements. The Company's remedies in the event of an underwriter breach are adequately protected by its common-law rights to seek damages for breach of contract. Pressing for a non-standard provision at this stage of the negotiation could consume negotiating capital that is better deployed on other open issues (particularly the selling-stockholder indemnification compromise discussed in Section IV.B.3).
3. MAE Termination Trigger
Separate from the market-out and disaster-out provisions, the near-final UA includes a condition to closing that no material adverse effect (as defined in the UA) shall have occurred since the date of the UA. If this condition is not satisfied at closing, the underwriters are not obligated to purchase the shares and may effectively walk away. This is a standard condition to closing in IPO underwriting agreements and is distinct from the market-out and disaster-out clauses in that it looks specifically to Company-specific events rather than market-wide events. No change is recommended.
4. Dormancy Context
It bears noting that the offering was placed in dormant status on June 17, 2022, before the UA was executed, due to deteriorating market conditions in the renewables sector. If the offering is relaunched after the dormancy period ends, the termination provisions will need to be reconsidered in light of then-prevailing market conditions. Any new or reactivated UA will require fresh dating and updated references to financial statements and other time-sensitive information. The termination triggers themselves are unlikely to require substantive modification, but the parties should re-examine the factual predicates for the "reasonable judgment" standard at the time of reactivation.
C. Conditions to Closing
The UA sets forth the following standard conditions to the underwriters' obligation to purchase and pay for the shares at closing:
(a) The registration statement on Form S-1 shall have become effective under the Securities Act of 1933, and no stop order suspending the effectiveness of the registration statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC;
(b) No stop order or SEC proceedings shall be pending or threatened;
(c) No material adverse effect (as defined in the UA) shall have occurred since the date of the UA;
(d) The Company shall have delivered an officer's certificate, signed by the Chief Executive Officer (Garrett Calloway) and the Chief Financial Officer (Marcus Yoon), certifying as to the accuracy of the Company's representations and warranties as of the closing date and the satisfaction of certain conditions;
(e) The Company shall have delivered a secretary's certificate, signed by the Corporate Secretary (Sandra Haverford), certifying as to the resolutions of the board of directors authorizing the offering, the incumbency of officers, and the authenticity of the Company's organizational documents;
(f) Ashford & Pemberton LLP shall have delivered comfort letters (initial and bring-down) addressed to the underwriters covering the periods and financial data specified in the UA (three circle-ups are planned: initial comfort letter, bring-down comfort letter, and pricing comfort letter);
(g) Drummond & Fenwick LLP shall have delivered its legal opinion as issuer's counsel, and Prescott, Danforth & Yee LLP shall have delivered its legal opinion as underwriters' counsel;
(h) Both C&H and PD&Y shall have delivered negative-assurance (10b-5) letters;
(i) FINRA shall have issued a no-objection determination with respect to the fairness and reasonableness of the underwriting terms and arrangements;
(j) The NYSE shall have approved the listing of the shares of common stock, subject only to official notice of issuance;
(k) All lock-up agreements required by the UA shall have been delivered in form and substance satisfactory to HK&Co.; and
(l) Good-standing certificates shall have been delivered for CBR in its jurisdiction of incorporation (Delaware) and principal place of business (Texas), as well as for each material subsidiary.
All conditions to closing are substantially agreed in the near-final draft. No material open issues remain on this point. However, as noted in Section IX.E below, if the offering is reactivated following the dormancy period, several of these conditions will need to be refreshed or re-satisfied.
VI. Lock-Up Mechanics
Lock-up arrangements are a critical component of the offering structure, designed to prevent the sale of shares by Company insiders and significant stockholders for a specified period following the IPO. The lock-up provisions appear in two forms: (1) individual lock-up agreements between each lock-up party and HK&Co. (as representative of the underwriters), and (2) an issuer-level lock-up covenant in the UA itself.
A. Structure of Lock-Up Provisions
Lock-Up Period. The lock-up period is 180 days following the date of the final prospectus (the "Lock-Up Expiration Date"). This is the standard lock-up period for IPOs on the NYSE and is consistent with market practice for renewables-sector offerings.
Lock-Up Parties. The following individuals and entities are required to execute lock-up agreements:
Directors:
1.  Garrett Calloway (Chairman & CEO)
2.  Elaine Briggs (Co-Founder & Director)
3.  Hugh Pemberton (Independent Director)
4.  Diane Kovac (Independent Director)
5.  Warren Okoro (Independent Director)
6.  Catherine Liang (Independent Director)
7.  Richard Estavez (Independent Director)
Executive Officers:
8.  Marcus Yoon (Chief Financial Officer)
9.  Sandra Haverford (Corporate Secretary & General Counsel)
10.  Dale Renfroe (Chief Operating Officer)
11.  Priya Anand (Chief Technology Officer)
12.  Tomás Quintero (SVP, Project Development)
13.  Rachel Whitmore (SVP, Investor Relations)
Significant Stockholders:
14.  Pinnacle Vista Capital Partners III, LP
Other holders of ≥1% of pre-IPO common stock: 15–18. Four additional holders (names in Appendix D)
In total, approximately 18 persons and entities are required to execute lock-up agreements.
Execution Status. As of June 17, 2022 (the date the offering was placed in dormant status), 15 of 18 lock-up agreements had been executed and delivered to HK&Co. Three lock-up agreements remain outstanding, having not been executed due to the offering going dormant before all signatures were collected. A detailed tracker of execution status is set forth in Appendix D.
Form of Agreement. The lock-up agreements are in the form of separate standalone agreements between each lock-up party and HK&Co. (as representative of the underwriters). Although the UA contains a parallel issuer-level lock-up covenant (discussed in Section VI.C below), the individual lock-up agreements provide the underwriters with a direct contractual right against each lock-up party, independent of the UA.
B. Lock-Up Carve-Outs (Individual Lock-Up Agreements)
The individual lock-up agreements contain the following carve-outs permitting certain transfers during the 180-day lock-up period:
(a) Transfers to affiliates. A lock-up party may transfer shares to any affiliate of such party, provided that the transferee executes a lock-up agreement in the same form and substance as the transferor's agreement prior to or concurrently with such transfer.
(b) Estate-planning transfers. A lock-up party may transfer shares to a family trust, estate, or similar vehicle established for bona fide estate-planning purposes, provided that the transferee executes a lock-up agreement and provided that no filing under Section 16(a) of the Exchange Act reporting a reduction in beneficial ownership is required or shall be voluntarily made during the lock-up period (other than a filing on Form 5 made after the lock-up expiration).
(c) Adoption of Rule 10b5-1 trading plans. A lock-up party may adopt (but not execute trades under) a trading plan that complies with Rule 10b5-1(c)(1) of the Exchange Act. For the avoidance of doubt, no sales of shares may be made under any such plan during the lock-up period.
(d) Pledges to lending institutions. A lock-up party may pledge shares to a bank or other financial institution as collateral for indebtedness, provided that the pledgee agrees to be bound by the terms of the lock-up agreement with respect to any shares acquired upon foreclosure or other exercise of remedies.
(e) Transfers in connection with a Change of Control. A lock-up party may transfer shares pursuant to a bona fide third-party tender offer, merger, consolidation, or other similar transaction that constitutes a Change of Control (as defined in the lock-up agreement) and is approved by the board of directors, provided that if such Change of Control is not consummated, the shares shall remain subject to the lock-up restrictions.
Each of these carve-outs is conditioned on the requirement that any transferee execute a lock-up agreement identical in form and substance to the original lock-up agreement, ensuring that the lock-up protections follow the shares through any permitted transfer.
C. Issuer Lock-Up Covenant (in UA)
In addition to the individual lock-up agreements, the UA contains a covenant by CBR not to issue, sell, offer to sell, contract to sell, grant any option, right, or warrant to purchase, or otherwise transfer or dispose of, or register under the Securities Act, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock, for a period of 180 days following the date of the final prospectus, without the prior written consent of HK&Co.
This issuer-level covenant is subject to the following customary exceptions:
(a) Equity incentive plan issuances. Shares issued under the Company's 2022 Omnibus Equity Incentive Plan (with a share reserve of 12,727,273 shares, representing approximately 10% of the 127,272,727 post-IPO fully diluted shares) and the 2022 Employee Stock Purchase Plan (with a share reserve of 2,545,455 shares, representing approximately 2% of the post-IPO fully diluted shares).
(b) Acquisition-related issuances. Shares issued in connection with acquisitions, mergers, or similar transactions, provided that the recipient of such shares executes a lock-up agreement in form and substance satisfactory to HK&Co.
(c) Conversion or exercise of existing rights. Shares issued upon conversion, exercise, or exchange of options, warrants, convertible notes, or other convertible securities that are outstanding as of the date of the final prospectus and disclosed therein.
D. Open Negotiation Points
1. Early Release Mechanics
Under the near-final draft, early release from the lock-up restrictions requires either (a) the written consent of HK&Co. (specifically, Oliver Marchetti, Managing Director, or his designee) or (b) the occurrence of a Change of Control as defined in the lock-up agreement. C&H has negotiated that HK&Co.'s consent to early release not be unreasonably withheld, conditioned, or delayed. PD&Y initially resisted the inclusion of this standard, arguing that the underwriters' right to consent should be in their sole and absolute discretion. However, this issue was resolved in our favor in the near-final draft. We should confirm this language in the final round and resist any attempt to revert.
2. 10b5-1 Plan Carve-Out
The SEC's second-round comments on the S-1 (received June 3, 2022, consisting of 7 comments) specifically raised the issue of lock-up carve-out disclosure. In particular, the Staff requested enhanced disclosure of the carve-out permitting the adoption (but not execution) of Rule 10b5-1 trading plans during the lock-up period. In response, the Company added enhanced disclosure in Amendment No. 2 to the S-1, clarifying the scope of this carve-out and confirming that no trades may be executed under any such plan during the lock-up period.
It is essential that the form of lock-up agreement appended to the UA is consistent with the enhanced disclosure in the S-1. We recommend that Natasha Forbes conduct a line-by-line comparison of the lock-up agreement form and the relevant S-1 disclosure prior to finalization to confirm consistency. Any discrepancy between the two documents could give rise to a comment or enforcement action.
3. Pledge Carve-Out Scope
The scope of the pledge carve-out has been the subject of minor negotiation. C&H initially proposed that pledges be permitted to "financial institutions" broadly, without further limitation. PD&Y countered with a narrower formulation limiting pledges to "nationally recognized lending institutions," which would exclude smaller banks, specialty lenders, and non-bank financial institutions. The parties have agreed on a compromise formulation: "banks or other financial institutions as collateral for indebtedness." This language is sufficiently broad to accommodate the range of lending relationships that CBR's directors and officers may have, while limiting the carve-out to bona fide lending arrangements (as opposed to, for example, pledges in connection with derivative transactions). We recommend accepting this compromise.
4. Inadvertent Transfer Provision
C&H requested the inclusion of a cure period for inadvertent transfers — that is, a provision allowing a lock-up party who inadvertently transfers shares in violation of the lock-up agreement to cure the violation by unwinding the transfer within a specified period. PD&Y accepted a 5-business-day cure period, during which the lock-up party must take commercially reasonable efforts to unwind the inadvertent transfer and restore the shares to the lock-up restrictions. This is a practical provision that protects against technical violations (for example, an automated trade executed by a broker in error) without undermining the substance of the lock-up. No further negotiation is recommended.
5. Binding on Transferees
The near-final draft confirms that all carve-out transfers require the transferee to execute an identical lock-up agreement prior to or concurrently with the transfer. This is a critical protection that ensures the lock-up restrictions travel with the shares and cannot be circumvented through intermediary transfers. This provision has been confirmed and is not subject to further negotiation.
VII. FINRA Compensation Compliance
The underwriting terms and arrangements must comply with the Financial Industry Regulatory Authority's ("FINRA") rules governing underwriting compensation, principally FINRA Rule 5110 (Corporate Financing Rule). FINRA review and a no-objection determination are conditions to closing under the UA.
A. FINRA Rule 5110 Analysis
Total underwriting compensation must not exceed the limits prescribed by FINRA Rule 5110. The following table summarizes the underwriting compensation structure:
The FINRA corporate financing application has been filed under Filing No. 20221129-01. A no-objection from FINRA is a condition to closing under the UA, and the offering cannot proceed until FINRA has completed its review and confirmed that the underwriting terms and arrangements are fair and reasonable and in compliance with FINRA Rule 5110.
B. Items of Value Analysis
FINRA Rule 5110 requires disclosure of all "items of value" received or to be received by the underwriters in connection with the offering, whether in the form of cash, securities, or other consideration. C&H has conducted a comprehensive review of all arrangements between the underwriters and the Company to identify potential items of value. The results of this analysis are as follows:
•  Gross spread: Disclosed in the FINRA filing as the primary component of underwriting compensation. See table above.
•  Expense reimbursement: The $350,000 cap on underwriter expense reimbursement (for FINRA-related expenses only) has been disclosed.
•  Rights of first refusal: C&H review confirms that no rights of first refusal have been granted to any underwriter for future offerings by the Company. This is a frequently scrutinized item of value under FINRA Rule 5110, and the absence of any such right simplifies the FINRA analysis.
•  Tail compensation or advisory fees: No tail compensation, advisory fees, or other deferred compensation arrangements exist between the Company and any underwriter.
•  Finder's fees or non-accountable expense allowances: None.
•  Lock-up agreements with underwriter affiliates: C&H has confirmed that no underwriter or underwriter affiliate holds pre-IPO shares of CBR common stock. Accordingly, no lock-up agreements with underwriter affiliates are required, and no lock-up arrangements constitute items of value.
C. Open Points
5.50% gross spread level. The 5.50% gross spread is at the upper end of the market range for renewables-sector IPOs of this size (approximately $600 million). Comparable transactions in the renewables sector have priced with gross spreads ranging from 4.50% to 5.50%, with most transactions in the 5.00% to 5.50% range. FINRA has not raised any objection to the 5.50% spread in its review to date. PD&Y has confirmed that the FINRA filing accurately reflects the offering economics.
Venture capital exception. Pinnacle Vista Capital Partners III, LP may qualify for the exemption set forth in FINRA Rule 5110(d)(1) for certain venture capital or private equity investors. If Pinnacle Vista qualifies for this exemption, certain of its shares may be excluded from the underwriting compensation calculation, which could provide additional headroom under the FINRA Rule 5110 limits. The analysis of Pinnacle Vista's eligibility for this exemption is set forth in a separate FINRA Rule 5110 compliance memorandum prepared by C&H; based on our preliminary analysis, Pinnacle Vista's eligibility is not expected to be an issue.
Recommendation. No material open issues remain on FINRA compensation compliance. We recommend that the team continue to monitor the FINRA review process and await the issuance of a no-objection determination as a condition to closing.
VIII. Overallotment Option (Greenshoe)
A. Structure
The UA grants the underwriters an option (the "overallotment option" or "greenshoe") to purchase up to 3,559,091 additional shares of common stock from the Company at the public offering price less the underwriting discount. This represents a standard 15% overallotment option relative to the 23,713,636-share base offering.
Key terms of the overallotment option are as follows:
•  Grantor: The Company only. Pinnacle Vista is not granting any overallotment shares. All overallotment shares are newly issued primary shares.
•  Exercise period: The overallotment option is exercisable for a period of 30 days following the date of the final prospectus.
•  Exercise mechanics: The option may be exercised in whole or in part, one or more times, by written notice from HK&Co. (as representative of the underwriters) to the Company.
B. Economics
The economic terms of the overallotment option, assuming full exercise at the midpoint offering price of $22.00 per share, are as follows:
Post-IPO shares outstanding, assuming full exercise of the overallotment option, will be:
Pre-IPO shares: 100,000,000 \+ Base offering shares (primary): 16,895,455 \+ Base offering shares (secondary, Pinnacle Vista): 6,818,182 (no new issuance; existing shares) \+ Overallotment shares: 3,559,091 = Post-IPO shares outstanding (full exercise): 127,272,727 (including 6,818,182 shares resold by Pinnacle Vista, not newly issued; total newly issued = 100,000,000 + 16,895,455 + 3,559,091 + 6,818,182 pre-existing = 127,272,728, reconciled to 127,272,727 post-rounding)
Note: The 6,818,182 shares sold by Pinnacle Vista are existing shares being transferred to public buyers and do not represent new issuances. The total shares outstanding on a post-IPO basis (including the secondary shares that were already outstanding) is approximately 123,713,636 (base only) or 127,272,727 (full exercise), calculated as 100,000,000 pre-IPO shares + 16,895,455 new primary shares (base) + 3,559,091 overallotment shares + 6,818,181 shares that remain in Pinnacle Vista's hands after its sale are already counted in the 100,000,000 pre-IPO base.
C. Open Points
Partial exercise. The UA permits partial exercise of the overallotment option in any amount. This is standard and has not been contested. No issue remains.
Source of shares. All overallotment shares are newly issued primary shares from the Company. C&H has confirmed with Sandra Haverford (Corporate Secretary and General Counsel) and Marcus Yoon (CFO) that the board of directors has adopted resolutions authorizing the issuance of up to 27,272,727 shares of common stock in connection with the offering (encompassing both the base offering primary shares and the overallotment shares). The authorized share capital of CBR is sufficient to accommodate this issuance. No further action is required.
Short-selling and stabilization. The underwriting section of the prospectus includes standard disclosure regarding stabilization transactions, short-covering activities, and penalty bids that may be conducted by HK&Co. in its capacity as stabilization agent. This disclosure has been reviewed by C&H and PD&Y and is in standard form. No open points remain.
Use of proceeds from overallotment. If the overallotment option is fully exercised, the Company will receive incremental net proceeds of approximately $74 million. These proceeds are to be used for general corporate purposes, consistent with the use-of-proceeds disclosure in the S-1. The base offering proceeds are earmarked for the following uses:
•  Repayment of approximately $200 million of outstanding borrowings under the Term Loan B facility with Veltrano National Bank (subject to a prepayment premium of 1.00%, or $2 million);
•  Funding of approximately $100 million toward the Cimarron Solar construction project in Doña Ana County, New Mexico; and
•  General corporate purposes.
The incremental overallotment proceeds are not earmarked for an