DEFA14A: Focus Impact BH3 Acquisition Company Announces Business Combination Agreement Updates and Executive Management Changes

Focus Impact BH3 Acquisition Company provides updates on its business combination agreement with XCF Global Capital, including details on a promissory note, the acquisition of New Rise Renewables, a consulting agreement, executive management changes, and waiver of lock-ups.

Summary

• Focus Impact BH3 Acquisition Company and XCF Global Capital, Inc. have filed a definitive proxy statement/prospectus for a special meeting of Focus Impact's stockholders to vote on the business combination agreement.
• XCF entered into a $1.2 million promissory note with GL Part SPV I, LLC, with net proceeds of $1.0 million, bearing interest of $0.2 million and issuing 200,000 shares of its common stock to GL.
• XCF completed the acquisition of New Rise Renewables for an aggregate purchase price of $1.1 billion, reduced by $118.7 million for debt obligations, resulting in the issuance of 88,126,200 shares of XCF common stock to RESC Renewables Holdings, LLC.
• XCF entered into a strategic consulting agreement with Focus Impact Partners, LLC, providing an annual consulting fee of $1,500,000 payable in monthly installments of $125,000.
• Simon Oxley joined XCF as Chief Financial Officer, while Joseph Cunningham and Stephen Goodwin will retire prior to the completion of the Business Combination, receiving $330,000 in cash payments and 300,000 shares of common stock each.
• XCF entered into employment agreements with its executive officers, including Mihir Dange (CEO), Simon Oxley (CFO), Gregory R. Surette (Chief Strategy Officer), Gregory P. Savarese (Chief Marketing Officer), and Jae Ryu (Head of Land Development), outlining their base salaries, bonus potential, and severance terms.
• Focus Impact, NewCo, and XCF agreed to waive transfer restrictions on NewCo Class A Common Stock upon completion of the Business Combination.
• As of February 20, 2025, there are 5,312,124 shares of Focus Impact Class A Common Stock, 1,608,333 shares of Focus Impact Class B Common Stock, 11,500,000 Public Warrants, 6,400,000 Private Placement Warrants, and 183,872,643 shares of XCF common stock outstanding.
• Post-closing share ownership of NewCo varies based on redemption levels, with XCF Equityholders holding the majority share.
• The document includes forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially.

Sentiment

Score: 6

Explanation: The document contains both positive and negative elements. The completion of the New Rise Renewables acquisition and the establishment of executive employment agreements are positive. However, the promissory note, potential conflicts of interest, and risks associated with forward-looking statements temper the overall sentiment.

Positives

• The acquisition of New Rise Renewables expands XCF's portfolio.
• The consulting agreement with Focus Impact Partners provides strategic guidance.
• Executive employment agreements provide stability and incentives for key personnel.
• Waiver of lock-ups provides flexibility for shareholders.

Negatives

• The promissory note increases XCF's total liabilities by $1.2 million.
• The consulting agreement with Focus Impact Partners involves potential conflicts of interest due to overlapping roles of Carl Stanton and Wray Thorn.
• Retiring executives Joseph Cunningham and Stephen Goodwin are receiving significant compensation packages.
• The document contains forward-looking statements that are subject to risks and uncertainties.

Risks

• Changes in domestic and foreign business, market, financial, political, and legal conditions could impact the business combination.
• The amount of redemptions by Focus Impact's public stockholders could affect the financial structure of the combined company.
• Failure to obtain required regulatory approvals or stockholder approval could prevent the business combination from closing.
• Inability to meet stock exchange listing standards following the consummation of the Business Combination.
• XCF's ability to integrate the operations of New Rise and implement its business plan on its anticipated timeline is uncertain.
• The proposed transactions could disrupt current plans and operations of Focus Impact or XCF.
• Failure to recognize the anticipated benefits of the proposed transactions due to competition or other factors.
• Changes in applicable laws or regulations could adversely affect the business.
• Extensive regulation, compliance obligations, and rigorous enforcement by governmental authorities pose risks.
• The availability of tax credits and other government support is uncertain.
• Risks related to XCF's and New Rise's key intellectual property rights could impact the business.
• General economic conditions and other factors beyond management's control could affect the business.

Future Outlook

The document includes forward-looking statements regarding the business combination, future performance, financial impacts, market opportunities, and the ability to meet stock exchange listing standards, all of which are subject to risks and uncertainties.

Management Comments

• Carl Stanton and Wray Thorn's financial interests may result in a conflict of interest when recommending stockholders vote for the proposals being submitted to Focus Impact's stockholders in connection with the proposed Business Combination.

Industry Context

The announcement reflects the ongoing trend of SPAC mergers and acquisitions in the renewable energy sector, as companies seek to capitalize on growing demand for sustainable solutions and access public markets.

Comparison to Industry Standards

• The consulting fees outlined in the agreement with Focus Impact Partners, LLC are consistent with market practices for similar consulting services.
• The severance packages provided to Joseph Cunningham and Stephen Goodwin are comparable to those offered to executives in similar positions at other companies.
• The employment agreements with executive officers outline compensation and benefits packages that are competitive within the industry.

Management Changes

Related Party Transactions

• The consulting agreement with Focus Impact Partners, LLC, where Carl Stanton and Wray Thorn, co-founders of Focus Impact Partners, are also directors of Focus Impact and expected to become directors of NewCo.
• The convertible promissory note to RESC Renewables Holdings, LLC, of which $51,746,680 in principal amount was subsequently assigned from RESC Renewables to Encore DEC, LLC, an entity 100% owned by Randy Soule.

Stakeholder Impact

• Shareholders: The business combination and related transactions will impact share ownership and potentially the value of their investments.
• Employees: Executive management changes and new employment agreements will affect the leadership and compensation structure of the company.
• Customers and Suppliers: The acquisition of New Rise Renewables could lead to changes in product offerings and supply chain relationships.
• Creditors: The promissory note increases the company's debt obligations.

Next Steps

• Focus Impact's stockholders will vote on the business combination agreement at a special meeting.
• XCF expects to enter into separation agreements with Joseph Cunningham and Stephen Goodwin.
• XCF expects to enter into an EPC and Transition Services Agreement with Encore DEC, LLC as it relates to the development of New Rise Reno 2.

Key Dates

Keywords

business combination, XCF Global Capital, Focus Impact, New Rise Renewables, acquisition, merger, consulting agreement, executive management, employment agreements, share ownership, redemptions, promissory note, SPAC