CONFIDENTIAL — ATTORNEY WORK PRODUCT — SUBJECT TO ATTORNEY-CLIENT PRIVILEGE
UNDERWRITING AGREEMENT
Calloway-Briggs Renewables Inc.
Common Stock
NEAR-FINAL DRAFT — [●], 2022
This draft has not been executed and remains subject to further review and negotiation.
Calderwood & Harkness LLP Matter No. 1015-00001
UNDERWRITING AGREEMENT
This Underwriting Agreement (this "Agreement") is entered into as of [●], 2022, among:
(1) Calloway-Briggs Renewables Inc., a Delaware corporation (the "Company"), with its principal offices located at 4200 Ridgeline Parkway, Suite 1100, Austin, Texas 78746;
(2) Pinnacle Vista Capital Partners III, LP, a Delaware limited partnership (the "Selling Stockholder"), with its principal offices located at 900 Park Avenue, 38th Floor, New York, New York 10021; and
(3) The several Underwriters named in Schedule I hereto (each individually, an "Underwriter" and collectively, the "Underwriters"), for whom Hargrove Keating & Co. is acting as representative (in such capacity, the "Representative").
RECITALS
WHEREAS, the Company proposes to issue and sell certain shares of its common stock, par value $0.01 per share (the "Common Stock"), and the Selling Stockholder proposes to sell certain shares of Common Stock beneficially owned by it, in each case to the several Underwriters as herein provided;
WHEREAS, the Company has confidentially submitted a draft registration statement on Form S-1 (File No. [●]; CIK 0001948372) to the U.S. Securities and Exchange Commission (the "Commission" or "SEC") under the Securities Act of 1933, as amended (the "Act"), which registration statement, including all amendments thereto and exhibits thereto, relates to the public offering of Common Stock as described herein;
WHEREAS, the Company qualifies as an "emerging growth company" as such term is defined in Section 2(a)(19) of the Act and Section 3(a)(80) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as established in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"), and the Company has availed itself of, and intends to continue to avail itself of, certain provisions applicable to emerging growth companies under the Act, the Exchange Act, and the JOBS Act;
WHEREAS, the registration statement, as amended at the time it becomes effective, together with all exhibits thereto, is referred to herein as the "Registration Statement," and the final prospectus included as part of the Registration Statement, as supplemented from time to time, is referred to herein as the "Prospectus"; and
WHEREAS, the Company has applied for listing of the Common Stock on the New York Stock Exchange (the "NYSE") under the proposed ticker symbol "CBRI";
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1: DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set forth below:
"Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
"Applicable Time" means the time of sale of the Shares to the Underwriters, as determined by the Representative and the Company by agreement.
"Base Shares" means 23,713,636 shares of Common Stock, consisting of the Company Shares and the Selling Stockholder Shares, based on an assumed public offering price of $22.00 per share (the midpoint of the estimated price range set forth on the cover page of the preliminary Prospectus).
"Closing Date" means the third business day after the date of pricing of the Shares (i.e., T+3), or such other date as the Representative and the Company shall agree in writing.
"Commission" or "SEC" means the U.S. Securities and Exchange Commission.
"Company Shares" means 16,895,455 shares of Common Stock to be issued and sold by the Company to the Underwriters pursuant to this Agreement, representing aggregate gross proceeds to the Company of approximately $371,700,000 (based on an assumed public offering price of $22.00 per share, before deduction of the underwriting discount and offering expenses).
"Effective Date" means the date on which the Registration Statement is declared effective by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
"FINRA" means the Financial Industry Regulatory Authority, Inc.
"Free Writing Prospectus" has the meaning assigned to such term in Rule 405 under the Act.
"General Disclosure Package" means the Prospectus, together with any Issuer Free Writing Prospectuses, as supplemented by the pricing information set forth in the Pricing Agreement, considered collectively.
"Issuer Free Writing Prospectus" means each Free Writing Prospectus that the Company or the Selling Stockholder has filed or is required to file pursuant to Rule 433(d) under the Act.
"Lock-up Period" means the period commencing on the date of the Prospectus and ending at the close of business on the date that is 180 days after the date of the Prospectus.
"Material Adverse Effect" has the meaning set forth in Section 1.1 below.
"Option Shares" means up to an additional 3,559,091 shares of Common Stock (representing aggregate gross proceeds of approximately $78,300,000 at an assumed public offering price of $22.00 per share), which the Representative, on behalf of the several Underwriters, shall have the option to purchase from the Company pursuant to Section 2.3 of this Agreement at any time, in whole or in part, within 30 days from the date of the Prospectus. The Option Shares consist entirely of shares to be issued and sold by the Company, and the overallotment option represents approximately 15% of the Base Shares.
"Post-IPO Shares Outstanding" means (a) 123,713,636 shares of Common Stock (assuming no exercise of the overallotment option), or (b) 127,272,727 shares of Common Stock (assuming full exercise of the overallotment option).
"Pre-IPO Shares Outstanding" means 100,000,000 shares of Common Stock outstanding immediately prior to the closing of the offering contemplated hereby (on a fully diluted basis, giving effect to the reclassification of all outstanding equity interests into shares of Common Stock).
"Pricing Agreement" means the pricing agreement to be entered into among the Company, the Selling Stockholder, and the Representative on behalf of the several Underwriters on the date of pricing of the Shares, substantially in the form attached hereto as Exhibit A, with such terms and conditions (including the final public offering price, the number of Company Shares, the number of Selling Stockholder Shares, and the number of Option Shares, if any, to be purchased) to be completed at the time of execution thereof.
"Prospectus" means the final prospectus included as part of the Registration Statement, as filed with the Commission pursuant to Rule 424(b) under the Act, including all documents incorporated by reference therein.
"Purchase Price" means the public offering price per share less the underwriting discount per share, as set forth in the Pricing Agreement.
"Registration Statement" means the registration statement on Form S-1 (EDGAR Accession No. 0001948372-22-000001, as amended by Accession Nos. 0001948372-22-000002 and 0001948372-22-000003) prepared and filed by the Company with the Commission under the Act, including all amendments thereto and all exhibits thereto, and including any information deemed to be part thereof pursuant to Rule 430A under the Act.
"Shares" means, collectively, the Base Shares and, to the extent the overallotment option described in Section 2.3 is exercised, the Option Shares. If the overallotment option is exercised in full, the total number of Shares shall be 27,272,727, representing an aggregate offering size of approximately $600,000,000 (at an assumed public offering price of $22.00 per share).
"Selling Stockholder Shares" means 6,818,182 shares of Common Stock to be sold by the Selling Stockholder to the Underwriters pursuant to this Agreement, representing aggregate gross proceeds to the Selling Stockholder of approximately $150,000,000 (based on an assumed public offering price of $22.00 per share, before deduction of the underwriting discount).
"Subsidiary" or "Subsidiaries" means each of CBR Holdings LLC, Calloway-Briggs Operating Company LLC, Solaris West Solar LLC, Red Mesa Wind Energy LLC, Painted Rock Solar LLC, Pronghorn Wind LLC, Brazos Energy Storage LLC, Mesquite Wind Holdings LLC, Cimarron Solar Development LLC, and CBR Development Co. LLC, and each other direct and indirect subsidiary of the Company, whether now existing or hereafter formed or acquired.
"Transfer Agent" means Continental Shareowner Services, Inc., as transfer agent and registrar for the Common Stock.
1.1 Definition of "Material Adverse Effect"
For purposes of this Agreement, "Material Adverse Effect" means any event, change, occurrence, condition, circumstance, 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 this Agreement, the Pricing Agreement, or the Registration Statement.
Notwithstanding the foregoing, none of the following shall be deemed to constitute, and none of the following shall be taken into account in determining whether there has been, a Material Adverse Effect; provided, however, that the exceptions set forth in clauses (i) through (v) below shall not apply to the extent that any such event, change, occurrence, condition, circumstance, or development disproportionately affects the Company and its Subsidiaries, taken as a whole, relative to other similarly situated companies operating in the renewable-energy, utility, or independent-power-producer industries:
(i) changes in general economic or financial market conditions, including changes in prevailing interest rates, foreign-currency exchange rates, stock market performance (including changes in the level or volatility of indices), or credit markets;
(ii) changes in generally accepted accounting principles in the United States ("GAAP") or in applicable law, statute, rule, regulation, order, or policy of any governmental authority, in each case after the date hereof;
(iii) changes or conditions generally affecting the renewable-energy, utility, or independent-power-producer industries in the United States, including changes in commodity prices (including the price of electricity, natural gas, renewable energy credits, or carbon credits), government subsidy or incentive programs, or regulatory frameworks applicable to such industries;
(iv) natural disasters (including earthquakes, hurricanes, tornadoes, floods, and wildfires), pandemics, epidemics, public-health emergencies, disease outbreaks, acts of war (whether or not declared), armed hostilities, terrorism, sabotage, cyberattacks, civil unrest, or any escalation or worsening of any of the foregoing; and
(v) changes resulting from the announcement or pendency of the transactions contemplated by this Agreement, including the initial public offering of the Common Stock (including any loss of, or adverse change in, the relationship of the Company or any Subsidiary with any of its customers, suppliers, employees, contractors, lenders, or governmental authorities resulting therefrom).
For the avoidance of doubt, the exception set forth in clause (v) above shall not apply to any representation or warranty to the extent the purpose of such representation or warranty is to address the consequences of the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. In addition, any change in the trading price or credit rating of the Company's securities or debt instruments shall not, in and of itself, constitute a Material Adverse Effect; provided, that the underlying causes of any such change shall not be excluded from the determination of whether a Material Adverse Effect has occurred.
SECTION 2: SALE AND DELIVERY OF SHARES; CLOSING
2.1 Agreement to Sell and Purchase
(a) On the basis of the representations, warranties, and covenants herein contained, and subject to the terms and conditions set forth in this Agreement and the Pricing Agreement, the Company agrees to issue and sell the Company Shares to the several Underwriters, and the Selling Stockholder agrees to sell the Selling Stockholder Shares to the several Underwriters. Each Underwriter, severally and not jointly, agrees to purchase from the Company and the Selling Stockholder, at the Purchase Price, the number of Base Shares set forth opposite the name of such Underwriter in Schedule I hereto.
(b) The obligation of each Underwriter to purchase the Base Shares shall be subject to the conditions set forth in Section 8 of this Agreement and to the execution and delivery of the Pricing Agreement. The public offering price per share and the Purchase Price per share shall be as set forth in the Pricing Agreement.
(c) The Company and the Selling Stockholder are not obligated to sell any Shares unless all Base Shares are purchased by the Underwriters. The Underwriters are not obligated to purchase any Shares unless all Base Shares are purchased.
2.2 Offering Price and Underwriting discount
(a) Public Offering Price. The public offering price shall be $[●] per share, as set forth in the Pricing Agreement. For purposes of the estimated economics set forth in this Agreement and in the Registration Statement, an assumed midpoint public offering price of $22.00 per share has been used.
(b) Underwriting discount. The underwriting discount shall be equal to 5.50% of the public offering price per share, yielding a Purchase Price per share equal to the public offering price per share less such discount. Based on an assumed public offering price of $22.00 per share, the underwriting discount would be $1.21 per share, and the Purchase Price would be $20.79 per share.
(c) Aggregate Economics. Based on the assumed public offering price of $22.00 per share:
(i) Base offering: 23,713,636 shares × $22.00 = $521,700,010 aggregate public offering price; underwriting discount = $521,700,010 × 5.50% = approximately $28,693,501.
(ii) Overallotment (if fully exercised): 3,559,091 shares × $22.00 = $78,300,002 aggregate public offering price; underwriting discount = $78,300,002 × 5.50% = approximately $4,306,500.
(iii) Total (full exercise): 27,272,727 shares × $22.00 = $600,000,000 (rounded) aggregate public offering price; total underwriting discount = approximately $33,000,000.
(d) Allocation of Gross Spread. The total underwriting discount (the "gross spread") shall be allocated among the Underwriters as follows:
(i) Management fee: 20% of the gross spread (approximately $6,600,000 assuming full exercise at $22.00 per share);
(ii) Underwriting fee: 20% of the gross spread (approximately $6,600,000 assuming full exercise at $22.00 per share); and
(iii) Selling concession: 60% of the gross spread (approximately $19,800,000 assuming full exercise at $22.00 per share).
The specific allocation of the management fee and underwriting fee among the Underwriters shall be as set forth in a separate agreement among the Underwriters (the "Agreement Among Underwriters"), a copy of which shall be provided to the Company upon request. The selling concession shall be allocated in proportion to the number of Shares sold by each Underwriter.
(e) Expense Reimbursement. In addition to the underwriting discount, the Company agrees to reimburse the Underwriters for their FINRA-related expenses incurred in connection with the offering, in an aggregate amount not to exceed $350,000, which amount shall be within FINRA compensation limits.
2.3 Overallotment Option
(a) The Company hereby grants to the several Underwriters an option (the "Overallotment Option") to purchase up to 3,559,091 additional shares of Common Stock (the "Option Shares") from the Company at the Purchase Price per share, solely for the purpose of covering overallotments, if any, made in connection with the offering of the Base Shares.
(b) The Overallotment Option may be exercised in whole or in part at any time and from time to time within 30 days from the date of the Prospectus. Notice of any exercise of the Overallotment Option shall be given in writing (or by facsimile or electronic mail confirmed in writing) by the Representative to the Company, which notice shall specify the aggregate number of Option Shares to be purchased and the proposed closing date for the purchase and sale of the Option Shares (the "Option Closing Date"). The Option Closing Date shall be no earlier than one business day and no later than three business days after the date of such notice of exercise (or such other date as the Representative and the Company shall agree). If the Overallotment Option is exercised after the Closing Date, the Option Closing Date need not be the same as the Closing Date.
(c) Each Underwriter, severally and not jointly, agrees to purchase the number of Option Shares (subject to adjustment to eliminate fractional shares) determined by multiplying the aggregate number of Option Shares to be purchased by the ratio that the number of Base Shares set forth opposite the name of such Underwriter in Schedule I hereto bears to the total number of Base Shares, unless the Representative shall otherwise agree to a different allocation with the consent of the Company.
(d) Payment for the Option Shares shall be made by wire transfer of immediately available funds on the Option Closing Date against delivery of the Option Shares through the facilities of The Depository Trust Company ("DTC") in the same manner as is provided for the Base Shares in Section 2.4.
2.4 Delivery and Payment
(a) Time and Place of Closing. The closing of the purchase and sale of the Base Shares (the "Closing") shall take place at the offices of Prescott, Danforth & Yee LLP, 1271 Avenue of the Americas, New York, New York 10020, at 10:00 a.m. (New York City time) on the Closing Date, or at such other place, time, or date as the Representative and the Company shall agree in writing.
(b) Delivery of Shares. The Company and the Selling Stockholder shall cause the Shares to be delivered in book-entry form through the facilities of DTC, registered in the names of the several Underwriters or their respective nominees, against payment of the aggregate Purchase Price. The Company shall instruct Continental Shareowner Services, Inc. (the Transfer Agent) to credit the Shares to the accounts designated by the Underwriters at DTC.
(c) Payment. Payment of the aggregate Purchase Price for the Base Shares shall be made by the several Underwriters by wire transfer of immediately available funds to one or more accounts designated by the Company (with respect to the Company Shares) and one or more accounts designated by the Selling Stockholder (with respect to the Selling Stockholder Shares), in each case, on the Closing Date. Payment for any Option Shares shall be made in the same manner on the applicable Option Closing Date.
(d) Cross-Receipt. At the Closing (and at each Option Closing, if applicable), the Company and the Selling Stockholder shall execute and deliver a cross-receipt acknowledging receipt of payment for the applicable Shares, and the Representative, on behalf of the several Underwriters, shall execute and deliver a cross-receipt acknowledging receipt of such Shares.
2.5 Underwriter Share Allocations
The number of Base Shares to be purchased by each Underwriter, and the related allocation percentages and dollar amounts (based on an assumed public offering price of $22.00 per share), are set forth below and in Schedule I hereto:
If the Overallotment Option is exercised, the Option Shares shall be allocated among the Underwriters in the same proportions as set forth above, unless the Representative and the Company shall otherwise agree in writing.
SECTION 3: REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each Underwriter as of the date hereof, as of the Applicable Time, as of the Effective Date, and as of the Closing Date (and, if applicable, as of each Option Closing Date), as follows:
3.1 Organization, Good Standing, and Qualification
(a) The Company is a corporation duly incorporated, validly existing, and in good standing under the laws of the State of Delaware, with Employer Identification Number 83-4027615. The Company has all requisite corporate power and authority to own, lease, and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus.
(b) Each Subsidiary is duly organized, validly existing, and in good standing under the laws of its respective jurisdiction of formation, as set forth in Schedule III hereto. Each Subsidiary has all requisite organizational power and authority to own, lease, and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus.
(c) The Company and each Subsidiary are duly qualified to do business and in good standing as a foreign corporation or limited liability company (as applicable) in each jurisdiction where the nature of their respective businesses or properties requires such qualification, including the States of Texas, New Mexico, Arizona, California, Oklahoma, and Delaware. Neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any such qualification, and no such proceeding is, to the knowledge of the Company, pending or threatened.
3.2 Capitalization. (a) The authorized capital stock of the Company consists of [●] shares of Common Stock, par value $0.01 per share, and [●] shares of preferred stock, par value $0.01 per share. As of the date hereof, immediately prior to the closing of the offering contemplated hereby, 100,000,000 shares of Common Stock are issued and outstanding on a fully diluted basis (after giving effect to the reclassification of all outstanding equity interests into shares of Common Stock), and no shares of preferred stock are issued and outstanding.
(b) Upon the issuance and delivery of the Company Shares and, to the extent the Overallotment Option is exercised, the Option Shares, there will be 123,713,636 shares of Common Stock outstanding (assuming no exercise of the Overallotment Option) or 127,272,727 shares of Common Stock outstanding (assuming full exercise of the Overallotment Option).
(c) The Company has reserved 12,727,273 shares of Common Stock for issuance under the Calloway-Briggs Renewables Inc. 2022 Omnibus Equity Incentive Plan (the "Equity Plan") and 2,545,455 shares of Common Stock for issuance under the Calloway-Briggs Renewables Inc. 2022 Employee Stock Purchase Plan (the "ESPP"). Each of the Equity Plan and the ESPP has been duly authorized by the Board of Directors and the stockholders of the Company.
(d) All outstanding shares of Common Stock have been duly authorized, are validly issued, fully paid, and non-assessable, and have been issued in compliance with all applicable federal and state securities laws. The Shares, when issued and delivered against payment therefor as provided in this Agreement, will be duly authorized, validly issued, fully paid, and non-assessable, and will be free and clear of all liens, encumbrances, equities, security interests, pledges, charges, and claims whatsoever, and will not be subject to any preemptive rights, rights of first refusal, or other similar rights of any stockholder or other person.
(e) Except as described in the Registration Statement and the Prospectus and except for the Overallotment Option, there are no outstanding options, warrants, rights to subscribe, calls, commitments, agreements, arrangements, or understandings of any kind relating to the Common Stock or any other equity securities of the Company, and there are no outstanding securities convertible into or exchangeable for any shares of Common Stock or any other equity securities of the Company.
3.3 Authorization. (a) The Company has all requisite corporate power and authority to execute and deliver this Agreement and the Pricing Agreement, to perform its obligations hereunder and thereunder, to issue and sell the Company Shares and the Option Shares as contemplated hereby, and to consummate the transactions contemplated by the Registration Statement.
(b) All corporate action required to be taken by the Board of Directors of the Company and by the stockholders of the Company for the authorization of (i) the offering and the sale of the Shares, (ii) the execution, delivery, and performance of this Agreement and the Pricing Agreement, (iii) the filing of the Registration Statement and the Prospectus, (iv) the adoption of the Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws of the Company, (v) the adoption of the Equity Plan and the ESPP, and (vi) the other transactions contemplated by this Agreement and the Registration Statement, has been duly and validly taken.
(c) The Board of Directors of the Company has adopted resolutions approving the initial public offering, this Agreement, the Pricing Agreement, the Amended and Restated Certificate of Incorporation, the Amended and Restated Bylaws, the Equity Plan, the ESPP, and all related matters. The written consent of stockholders representing more than 90% of the outstanding voting power of the Company (including Pinnacle Vista Capital Partners III, LP and the Founders (as defined in the Registration Statement)) has been duly executed and delivered in connection with such authorization.
(d) This Agreement has been duly authorized, and when executed and delivered by the Company, will constitute a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or similar laws affecting creditors' rights generally and by general equitable principles.
3.4 Registration Statement and Prospectus
(a) The Registration Statement on Form S-1 (EDGAR Accession No. 0001948372-22-000001, as amended by Accession Nos. 0001948372-22-000002 and 0001948372-22-000003) has been prepared by the Company in conformity with the requirements of the Act and the rules and regulations of the Commission thereunder. The draft registration statement was submitted confidentially to the Commission pursuant to Title I, Section 106 of the JOBS Act on April 11, 2022.
(b) The Registration Statement, on the Effective Date, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading.
(c) The Prospectus, as of its date and as of the Closing Date (and, if applicable, as of each Option Closing Date), will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
(d) The General Disclosure Package, as of the Applicable Time, will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
(e) Each Issuer Free Writing Prospectus, as of its date and as of the Applicable Time, will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
(f) The Company is an "emerging growth company" as defined in Section 2(a)(19) of the Act, and the Company has not taken any action that would cause it to lose such status prior to the Closing Date.
(g) The representations and warranties set forth in this Section 3.4 do not apply to statements or omissions made in reliance upon and in conformity with information furnished by any Underwriter in writing specifically for use in the Registration Statement, the Prospectus, or any Issuer Free Writing Prospectus.
3.5 Financial Statements
(a) The audited consolidated financial statements of the Company and its Subsidiaries for the fiscal years ended December 31, 2019, December 31, 2020, and December 31, 2021, including the related notes and schedules thereto, audited by Ashford & Pemberton LLP and included or incorporated in the Registration Statement and the Prospectus, present fairly in all material respects the consolidated financial condition, results of operations, changes in stockholders' equity, and cash flows of the Company and its Subsidiaries at the dates and for the periods indicated, and have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"), applied on a consistent basis throughout the periods involved.
(b) The unaudited interim condensed consolidated financial statements of the Company and its Subsidiaries for the three-month period ended March 31, 2022, including the related notes thereto, included in the Registration Statement and the Prospectus, present fairly in all material respects the consolidated financial condition, results of operations, and cash flows of the Company and its Subsidiaries at the date and for the period indicated, subject to normal year-end audit adjustments and the absence of certain footnote disclosures, and have been prepared in conformity with GAAP applied on a consistent basis with the audited financial statements referred to in clause (a) above.
(c) For reference, key financial data of the Company and its Subsidiaries, as presented in the Registration Statement, is as follows:
(i) Fiscal year ended December 31, 2021: Revenue of $487.3 million; Adjusted EBITDA of $218.6 million; Net Income of $41.7 million; Total Assets of $3.94 billion; Total Debt of $1.71 billion.
(ii) Three months ended March 31, 2022 (unaudited): Revenue of $131.4 million.
(d) Ashford & Pemberton LLP, whose reports on the audited consolidated financial statements of the Company and its Subsidiaries are included in the Registration Statement and the Prospectus, are independent registered public accountants with respect to the Company within the meaning of the Act and the applicable rules and regulations adopted by the Commission and the Public Company Accounting Oversight Board.
3.6 No Material Adverse Effect
Since December 31, 2021 (the date of the most recent audited financial statements of the Company included in the Registration Statement), there has been no Material Adverse Effect, nor has any event, change, occurrence, condition, circumstance, or development occurred that, individually or in the aggregate, would reasonably be expected to result in a Material Adverse Effect, except as set forth in or contemplated by the Registration Statement and the Prospectus.
3.7 No Undisclosed Liabilities
Neither the Company nor any Subsidiary has any liabilities or obligations, whether absolute, accrued, contingent, or otherwise, that are required to be disclosed under GAAP or that are otherwise material to the Company and its Subsidiaries, taken as a whole, other than (a) liabilities or obligations disclosed, reflected, or reserved against in the financial statements included in the Registration Statement and the Prospectus or described in the notes thereto, (b) liabilities or obligations incurred in the ordinary course of business since December 31, 2021 that are not, individually or in the aggregate, material to the Company and its Subsidiaries, taken as a whole, and (c) liabilities or obligations otherwise disclosed in the Registration Statement and the Prospectus.
3.8 Compliance with Laws; Permits
(a) The Company and each Subsidiary are, and at all relevant times have been, in compliance in all material respects with all applicable federal, state, local, and foreign laws, statutes, rules, regulations, orders, decrees, judgments, and governmental requirements applicable to them or their respective businesses, properties, or assets.
(b) The Company and each Subsidiary possess all permits, licenses, authorizations, registrations, certificates, orders, consents, and approvals of all federal, state, local, and foreign governmental or regulatory authorities (collectively, "Permits") that are necessary for the ownership, lease, and operation of their respective properties and assets and for the conduct of their respective businesses as described in the Registration Statement and the Prospectus, including, without limitation, all authorizations of the Federal Energy Regulatory Commission ("FERC"), all filings with and approvals from applicable state public utility commissions ("PUCs"), all compliance certifications required by the North American Electric Reliability Corporation ("NERC") and applicable regional entities, all environmental permits and approvals, and all construction permits and operating permits for all of the Company's and its Subsidiaries' operational and development-stage projects. All such Permits are valid and in full force and effect.
(c) No proceedings are pending or, to the knowledge of the Company, threatened to revoke, suspend, cancel, terminate, modify, or limit any such Permits, and neither the Company nor any Subsidiary has received any notice of any such proceedings.
3.9 Litigation. Except as disclosed in the Registration Statement and the Prospectus, there is no litigation, arbitration, claim, governmental investigation, or other proceeding (including any proceeding in any court, before any arbitrator, or before or by any governmental authority) pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary or any of their respective properties, assets, officers, or directors that, individually or in the aggregate, would reasonably be expected to (a) have a Material Adverse Effect or (b) prevent, delay, or materially impair the ability of the Company to consummate the transactions contemplated by this Agreement. Neither the Company nor any Subsidiary is a party to or subject to the provisions of any order, writ, injunction, judgment, or decree of any court or governmental authority that would reasonably be expected to have a Material Adverse Effect.
3.10 Title to Properties; Real Property
(a) The Company and each Subsidiary have good and marketable title to, or valid leasehold interests in, all real and personal properties described in the Registration Statement and the Prospectus as being owned or leased by them, free and clear of all liens, encumbrances, defects, or other restrictions, except such as are described in the Registration Statement and the Prospectus or such as do not materially interfere with the use made and proposed to be made of such properties by the Company and its Subsidiaries.
(b) The foregoing representation covers, without limitation, all land leases, surface-use agreements, easements, rights-of-way, and access agreements relating to the Company's and its Subsidiaries' project sites in Texas, New Mexico, Arizona, California, and Oklahoma, including those relating to the Solaris West, Red Mesa, Painted Rock, Pronghorn, Brazos, Mesquite, and Cimarron projects and all related interconnection facilities and transmission infrastructure.
3.11 intellectual Property
The Company and its Subsidiaries own or possess adequate rights to use all trademarks, service marks, trade names, copyrights, patents, domain names, licenses, proprietary software (including supervisory control and data acquisition ("SCADA") systems and proprietary monitoring and asset-management software), trade secrets, know-how, and other intellectual property rights (collectively, "Intellectual Property") necessary for the conduct of their respective businesses as described in the Registration Statement and the Prospectus, without, to the knowledge of the Company, any infringement upon or conflict with the rights of others. Neither the Company nor any Subsidiary has received any written notice of any claim of infringement by any third party with respect to any intellectual Property owned or used by the Company or any Subsidiary.
3.12 Tax Matters
(a) The Company and each Subsidiary have timely filed (taking into account all extensions) all federal, state, local, and foreign tax returns required to be filed by them, and all such tax returns are true, correct, and complete in all material respects. The Company and each Subsidiary have paid all taxes (including estimated taxes and withholding taxes) shown as due on such returns and all taxes otherwise assessed against them that are due and payable, except for any taxes that are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP.
(b) All tax-equity structures involving the Company or any Subsidiary, including, without limitation, the Solaris West partnership-flip arrangement with Veltara Basin Financial LLC, are in compliance in all material respects with applicable federal, state, and local tax laws, regulations, and rulings, and are in compliance with the terms of the relevant partnership agreements and other governing documents.
(c) No material investment tax credit ("ITC") recapture events or production tax credit ("PTC") recapture events have occurred or are reasonably expected to occur as a result of the offering contemplated by this Agreement or any of the other transactions contemplated hereby or by the Registration Statement.
(d) There are no pending or, to the knowledge of the Company, threatened tax audits, examinations, claims, assessments, or proceedings against the Company or any Subsidiary that would reasonably be expected to have a Material Adverse Effect.
3.13 Employee Benefit Plans
Each employee benefit plan (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and each other compensation or benefit plan, program, arrangement, or agreement, sponsored, maintained, or contributed to by the Company or any Subsidiary for the benefit of current or former employees, directors, or consultants of the Company or any Subsidiary, has been established, maintained, operated, and administered in all material respects in compliance with ERISA, the Internal Revenue Code of 1986, as amended (the "Code"), and all applicable laws. All equity awards granted by the Company or any Subsidiary have been granted in compliance with Section 409A of the Code and the regulations promulgated thereunder, and no such awards are subject to any penalty or additional tax under Section 409A.
3.14 Insurance. The Company and its Subsidiaries maintain insurance with financially sound and reputable insurance companies in such amounts and covering such risks as the Company reasonably considers adequate for the conduct of the business of the Company and its Subsidiaries and as is customary for companies engaged in similar businesses in similar industries. The Company's directors' and officers' liability insurance program provides aggregate coverage of $50,000,000 under the following insurance tower:
(i) Primary policy: Meridian National Assurance Company, Policy No. DNO-22-048871;
(ii) Excess Layer 1: Stonebridge Indemnity Corp.; and
(iii) Excess Layer 2: Commonwealth Omnivrel Insurance Ltd.
All such insurance policies are in full force and effect, all premiums due thereon have been timely paid, and neither the Company nor any Subsidiary has received any written notice of cancellation or non-renewal of any such policy.
3.15 Indebtedness. (a) All indebtedness of the Company and its Subsidiaries, and all material terms thereof, are as described in the Registration Statement and the Prospectus, including, without limitation:
(i) Corporate Revolving Credit Facility: $400,000,000 aggregate commitment, with Veltrano National Bank as Administrative Agent, maturing January 2027;
(ii) Term Loan B: $650,000,000 original principal amount ($612,500,000 outstanding as of the date hereof), with Veltrano National Bank as Administrative Agent, maturing January 2029;
(iii) Mesquite Wind construction-to-term facility: $165,000,000, with Prairie Commercial Bank, N.A. as Administrative Agent;
(iv) Cimarron Solar construction-to-term facility: $143,000,000, with Prairie Commercial Bank, N.A. as Administrative Agent; and
(v) Solaris West tax-equity partnership: $280,000,000, with Veltara Basin Financial LLC as tax-equity investor.
(b) The Company is not, and no Subsidiary is, in default (and no event has occurred that, with the giving of notice or lapse of time or both, would constitute a default) in the payment of any principal of or premium or interest on any indebtedness for borrowed money or under any agreement, mortgage, indenture, or instrument under or pursuant to which any indebtedness for borrowed money has been issued or by which the Company or any Subsidiary or any of their respective properties or assets is bound or affected.
3.16 Environmental Matters
(a) The Company and each Subsidiary are in compliance in all material respects with all applicable federal, state, local, and foreign environmental laws, statutes, rules, regulations, orders, decrees, and requirements (collectively, "Environmental Laws"), including, without limitation, the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation, and Liability Act, the Toxic Substances Control Act, and all analogous state laws.
(b) The Company and each Subsidiary have obtained all environmental permits, licenses, authorizations, and approvals required under applicable Environmental Laws for the ownership, lease, and operation of their respective properties and assets and for the conduct of their respective businesses as described in the Registration Statement and the Prospectus.
(c) Neither the Company nor any Subsidiary has received any written notice from any governmental authority or any third party alleging any actual or potential violation of, or liability under, any Environmental Law that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.
(d) Phase I and Phase II environmental site assessments have been conducted by Greenridge Environmental Sciences LLC with respect to the Company's and its Subsidiaries' material project sites, and the results of such assessments have not revealed any conditions or circumstances that, individually or in the aggregate, would reasonably be expected to give rise to any material environmental liability.
3.17 Related-Party Transactions
Except as disclosed in the Registration Statement and the Prospectus, there are no transactions, agreements, or arrangements between or among the Company or any Subsidiary, on the one hand, and any affiliate, director, officer, or stockholder (or any immediate family member of any of the foregoing) of the Company, on the other hand, that are required to be disclosed pursuant to the Act and the rules and regulations of the Commission thereunder that have not been so disclosed. The transactions disclosed in the Registration Statement and the Prospectus include, without limitation, the management-services agreement between the Company and Pinnacle Vista Capital Partners III, LP (providing for annual management fees of $2,400,000), which agreement is to terminate upon the consummation of the initial public offering, and the employment agreements with the Company's founders and certain executive officers.
3.18 No Stabilization or Manipulation
Neither the Company nor any person acting on behalf of the Company has taken, directly or indirectly, any action designed to, or that has constituted or might reasonably be expected to cause or result in, the stabilization or manipulation of the price of any securities of the Company to facilitate the sale or resale of the Shares, and the Company will not take any such action prior to, during, or following the offering.
3.19 FINRA Compliance
(a) All information provided by the Company or its representatives to FINRA in connection with the filing of information relating to the offering (FINRA Filing No. 20221129-01), including all information provided on Form BR, Form U4, and all questionnaires and supplemental submissions, is true, correct, and complete in all material respects.
(b) The terms and arrangements of the offering and the compensation to be received by the Underwriters in connection therewith comply with all applicable rules and regulations of FINRA, including FINRA Rule 5110 (the "FINRA Corporate Financing Rule").
3.20 Internal Controls and SOX Compliance
(a) The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
(b) The Company maintains disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that comply with the requirements of the Exchange Act.
(c) As an emerging growth company under the JOBS Act, the Company is not currently required to comply with Section 404(b) of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") regarding the attestation report of the Company's registered public accounting firm on internal control over financial reporting. The Company is developing procedures and controls designed to enable the Company to comply with Section 404 of the Sarbanes-Oxley Act in connection with the Company's first annual report filed under the Exchange Act following loss of emerging growth company status.
3.21 NYSE Listing
The shares of Common Stock (including the Shares) have been approved for listing on the New York Stock Exchange, subject to official notice of issuance (NYSE Application No. NYSE-2022-04218; proposed ticker symbol "CBRI"). The Company is not aware of any reason why such listing would not be maintained following the consummation of the offering.
3.22 Transfer Agent
Continental Shareowner Services, Inc. has been duly appointed as transfer agent and registrar for the Common Stock, and such appointment is in full force and effect. The Company has no reason to believe that Continental Shareowner Services, Inc. is unable to fulfill its obligations as transfer agent and registrar.
SECTION 4: REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDER
The Selling Stockholder represents and warrants to each Underwriter and the Company as of the date hereof, as of the Applicable Time, and as of the Closing Date, as follows:
4.1 Organization and Authority
(a) Pinnacle Vista Capital Partners III, LP is a limited partnership duly organized, validly existing, and in good standing under the laws of the State of Delaware. The general partner of the Selling Stockholder is Pinnacle Vista Capital Management LLC, a Delaware limited liability company.
(b) The Selling Stockholder has all requisite partnership power and authority to execute and deliver this Agreement and the Pricing Agreement, to perform its obligations hereunder and thereunder, and to sell, assign, transfer, and deliver the Selling Stockholder Shares as contemplated hereby.
(c) All partnership action required to be taken by the Selling Stockholder (including all actions required by its general partner) for the authorization of the execution, delivery, and performance of this Agreement and the Pricing Agreement and the consummation of the transactions contemplated hereby and thereby has been duly and validly taken.
(d) This Agreement has been duly authorized, and when executed and delivered by the Selling Stockholder, will constitute a valid and binding obligation of the Selling Stockholder, enforceable against the Selling Stockholder in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or similar laws affecting creditors' rights generally and by general equitable principles.
4.2 Title to Shares
The Selling Stockholder has, and on the Closing Date will have, good and valid title to the Selling Stockholder Shares (6,818,182 shares of Common Stock), free and clear of all liens, encumbrances, security interests, claims, restrictions, equities, and defects of any nature whatsoever, other than (a) restrictions arising under federal and state securities laws, (b) restrictions described in the Registration Statement and the Prospectus, and (c) any liens or restrictions that will be released prior to or simultaneously with the delivery of the Selling Stockholder Shares on the Closing Date. Upon the sale and delivery of the Selling Stockholder Shares to the Underwriters as contemplated hereby, the Underwriters will receive good and valid title to the Selling Stockholder Shares, free and clear of all liens, encumbrances, and restrictions (other than restrictions imposed by the Underwriters).
4.3 Disclosure. All information furnished by the Selling Stockholder or on its behalf in writing to the Company specifically for inclusion in the Registration Statement, the Prospectus, the General Disclosure Package, or any Issuer Free Writing Prospectus (including, without limitation, the information in the "Principal and Selling Stockholders" section of the Prospectus) is true, correct, and complete in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Selling Stockholder has completed and delivered to the Company and the Representative the selling stockholder questionnaire and the selling stockholder representation letter, each in form satisfactory to the Company and the Representative.
4.4 No Registration Required
No consent, approval, authorization, order, filing, registration, or qualification of or with any court or governmental authority or body, or any self-regulatory organization, is required to be obtained by the Selling Stockholder for the sale and delivery of the Selling Stockholder Shares as contemplated by this Agreement, other than (a) such as have been obtained and are in full force and effect, (b) such as may be required under state securities or blue sky laws, and (c) the effectiveness of the Registration Statement under the Act.
4.5 No FINRA-Restricted Person Affiliation
Neither the Selling Stockholder nor any of its affiliates is a "restricted person" within the meaning of FINRA Rule 5130, and neither the Selling Stockholder nor any of its affiliates has any relationship with any member firm of FINRA that would cause the offering to be subject to FINRA Rule 5121.
4.6 Power of Attorney; Custody
(a) The Selling Stockholder has duly executed and delivered a power of attorney (the "Selling Stockholder Power of Attorney") appointing Hugh Pemberton and Diane Kovac, severally, as its true and lawful attorneys-in-fact, with full power of substitution, to execute and deliver this Agreement, the Pricing Agreement, and any amendment or supplement hereto or thereto, and to take such other actions as may be necessary or appropriate in connection with the transactions contemplated hereby.
(b) The Selling Stockholder has duly executed and delivered a custody agreement (the "Custody Agreement") with Hargrove Keating & Co., as custodian (the "Custodian"), with respect to the Selling Stockholder Shares. The Selling Stockholder Shares are held in custody by the Custodian during the offering period for delivery to the Underwriters against payment therefor on the Closing Date.
SECTION 5: COVENANTS OF THE COMPANY
The Company covenants and agrees with each Underwriter as follows:
5.1 SEC Filings and Compliance
(a) The Company will use its best efforts to cause the Registration Statement to become effective under the Act at the earliest practicable time and to take all actions required by the Act or the rules and regulations of the Commission thereunder in connection therewith.
(b) The Company will promptly notify the Representative upon the receipt of any written or oral comments from the staff of the Commission relating to the Registration Statement, the Prospectus, or any Issuer Free Writing Prospectus, including any request by the Commission for any amendment or supplement to the Registration Statement or the Prospectus or for additional information. The Company will promptly prepare and file with the Commission any required amendments or supplements to the Registration Statement or the Prospectus.
(c) The Company will not file any amendment or supplement to the Registration Statement or the Prospectus (other than documents that are deemed to be incorporated by reference therein) without providing the Representative a reasonable opportunity to review and comment on such amendment or supplement prior to filing and without the prior written consent of the Representative (which consent shall not be unreasonably withheld, conditioned, or delayed).
(d) For reference, the timeline for the Registration Statement and related filings is as follows: the Company's confidential draft registration statement on Form S-1 (DRS-1) was submitted to the Commission on April 11, 2022; Amendment No. 1 was filed with the Commission on May 20, 2022; Amendment No. 2 was filed with the Commission on June 10, 2022; and the Commission's staff provided oral indication of clearance of comments on June 14, 2022.
5.2 Blue Sky Compliance
The Company will cooperate with the Underwriters and their counsel in connection with the qualification or registration of the Shares for offering and sale under the securities or blue sky laws of such jurisdictions as the Representative shall reasonably request. The Company acknowledges that the Shares, upon listing on the NYSE, will constitute "covered securities" as defined in Section 18 of the Act, and accordingly are exempt from state securities registration requirements pursuant to the National Securities Markets Improvement Act of 1996 ("NSMIA"), except to the extent that state notice filings or fees may be required.
5.3 Use of Proceeds
The Company will apply the net proceeds received by the Company from the sale of the Company Shares substantially as described in the Prospectus under the caption "Use of Proceeds," and specifically as follows:
(a) Approximately $200,000,000 will be used to repay a portion of the outstanding principal under the Term Loan B with Veltrano National Bank (as Administrative Agent), which prepayment will be subject to a prepayment premium of 1.00%, or approximately $2,000,000;
(b) Approximately $100,000,000 will be used to fund the construction and development of the Cimarron Solar project, a 200 MW (dc) solar photovoltaic generating facility located in Doña Ana County, New Mexico, as more fully described in the Registration Statement and the Prospectus; and
(c) The remaining net proceeds (approximately $71,700,000, based on an assumed public offering price of $22.00 per share and before deduction of the underwriting discount and estimated offering expenses) will be used for general corporate purposes, which may include working capital, capital expenditures, future project development, and potential acquisitions.