M I Acquisitions, Inc. (NASDAQ:MACQ) Files An 8-K Entry into a Material Definitive AgreementItem 1.01. Entry Into a Material Definitive Agreement
On February 26, 2018, M I Acquisitions, Inc. (“M I”) entered into a contribution agreement (the “Purchase Agreement”) with Priority Investment Holdings, LLC and Priority Incentive Equity Holdings, LLC (collectively, the “Interest Holders”) to acquire all of the outstanding equity interests of Priority Holdings, LLC (“Priority” or the “Company”), a leading provider of B2C and B2B payment processing solutions.
Acquisition of Priority; Acquisition Consideration
Upon the closing of the transactions contemplated in the Purchase Agreement, M I will acquire (the “Acquisition”) 50% of the issued and outstanding equity securities of Priority, as well as assume certain of Priority’s debt, in exchange for a number of shares of M I’s common stock equal to Priority’s equity value (which the Purchase Agreement defines as of the signing date as $1,003.0 million enterprise value of Priority less the net debt of Priority at closing, subject to certain adjustments as described below) divided by $10.30. If Priority acquires any businesses prior to the closing of the Acquisition that increase Priority’s Adjusted EBITDA in aggregate by more than $9 million, the cost of such acquisitions to Priority will be added to Priority’s enterprise value, subject to a cap of 12.5x the incremental increase in Adjusted EBITDA of such acquisition. In connection with the Acquisition, M I will change its name to Priority Technology Holdings, Inc.
An additional 9.8 million shares may be issued as earn out consideration to the Interest Holders and members of management or other service providers of the post-Acquisition company—4.9 million shares for the first earn out and 4.9 million shares for the second earn out. For the first earn out, Adjusted EBITDA must be no less than $82.5 million for the year ending December 31, 2018 and the stock price must have traded in excess of $12.00 for any 20 trading days within any consecutive 30-day trading period at any time on or before December 31, 2019. For the second earn out, Adjusted EBITDA must be no less than $91.5 million for the year ending December 31, 2019 and the stock price must have traded in excess of $14.00 for any 20 trading days within any consecutive 30-day trading period at any time between January 1, 2019 and December 31, 2020. In the event that the first earn out targets are not met, the entire 9.8 million shares may be issued if the second earn out targets are met.
to the terms of a voting agreement to be entered into at closing, the parties agreed that immediately following the closing of the Acquisition, M I’s board of directors will consist of seven directors, all of whom will be designated by Priority. Magna Management LLC will have the right to name one observer to the board of directors for a period of up to approximately two years after the closing of the Acquisition.
Private Units and Founder Shares
Concurrently with the Purchase Agreement, the founding stockholders of M I (the “Founders”) and Priority entered into a purchase agreement (the “Promote Agreement”) to which Priority agreed to purchase 421,107 of the units issued to the Founders in a private placement immediately prior to M I’s initial public offering, and 453,210 shares of common stock of M I issued to the Founders for an aggregate purchase price of approximately $2.1 million. In addition, to the Promote Agreement, the Founders will forfeit 174,863 founder’s shares at the closing of the Acquisition, which shares may be reissued to the Founders if one of the earn outs described above is achieved.
In addition, the Founders and Thomas C. Priore, the Executive Chairman of Priority (“TCP”), entered into a letter agreement (the “Letter Agreement”) to which the Founders granted TCP (i) the right to purchase the Founders’ remaining shares of common stock of M I at the prevailing market price subject to certain conditions including a floor of $10.30 per share and (ii) a right of first refusal on the shares.
Stockholder Approval
Prior to the consummation of the Acquisition, the holders of a majority of M I’s common stock attending a stockholder’s meeting (at which there is a quorum) must approve the transactions contemplated by the Purchase Agreement (the “Stockholder Approval”). In connection with obtaining the Stockholder Approval, M I must call a special meeting of its common stockholders and must prepare and file with the Securities and Exchange Commission a Proxy Statement on Schedule 14A, which will be mailed to all stockholders entitled to vote at the meeting.
Representations and Warranties
In the Purchase Agreement, Priority makes certain representations and warranties (with certain exceptions set forth in the disclosure schedule to the Purchase Agreement) relating to, among other things: (a) proper corporate organization of Priority and its subsidiaries and similar corporate matters; (b) authorization, execution, delivery and enforceability of the Purchase Agreement and other transaction documents; (c) absence of conflicts; (d) capital structure; (e) accuracy of charter and governing documents; (f) affiliate transactions; (g) required consents and approvals; (h) financial information; (i) absence of certain changes or events; (j) title to assets and properties; (k) material contracts; (l) insurance; (m) licenses and permits; (n) compliance with laws, including those relating to foreign corrupt practices and money laundering; (o) ownership of intellectual property; (p) employment and labor matters; (q) taxes and audits; (r) environmental matters; (s) brokers and finders; and (t) other customary representations and warranties.
In the Purchase Agreement, M I makes certain representations and warranties relating to, among other things: (a) proper corporate organization and similar corporate matters; (b) authorization, execution, delivery and enforceability of the Purchase Agreement and other transaction documents; (c) brokers and finders; (d) capital structure; (e) validity of share issuance; (f) minimum trust fund amount; (g) Nasdaq listing; and (h) SEC filing requirements.
Conduct Prior to Closing; Covenants
Priority has agreed to operate its business in the ordinary course prior to the closing of the Acquisition (with certain exceptions) and not to take certain specified actions without the prior written consent of M I.
M I has agreed to operate its business in the ordinary course prior to the closing of the Acquisition (with certain exceptions) and not to take certain specified actions without the prior written consent of Priority.
The Agreement also contains certain customary covenants, including covenants relating to:
| ● | Each party providing access to their books and records; |
| ● | M I maintaining the listing of its common stock on Nasdaq; and |
| ● | Priority being required to deliver the financial statements required by M I to make applicable filings with the SEC. |
Conditions to Closing
General Conditions
Consummation of the Acquisition is conditioned on, among other things, (a) the absence of any order, stay, judgment or decree by any government agency or any litigation seeking to enjoin, modify, amend or prohibit the Acquisition; (b) M I having obtained the Stockholder Approval; (c) there being no less than $20 million remaining in the trust account immediately after the closing of the Acquisition (the “Cash Minimum”), after taking into account all redemptions; and (d) all redemptions from the trust account being consummated in accordance with the Purchase Agreement and M I’s organizational documents.
Priority’s Conditions to Closing
The obligations of Priority to consummate the transactions contemplated by the Purchase Agreement, in addition to the conditions described above, are conditioned upon, among other things, each of the following:
| ● | M I complying with all of its obligations required to be performed to the covenants in the Purchase Agreement; |
| ● | the representations and warranties of M I being true on and as of the closing date of the Acquisition; and |
| ● | M I’s common stock remaining listed for trading on Nasdaq. |
M I’s Conditions to Closing
The obligations of M I to consummate the transactions contemplated by the Agreement, in addition to the conditions described above in the first paragraph of this section, are conditioned upon, among other things, each of the following:
| ● | Priority complying with all of its obligations required to be performed to the covenants in the Purchase Agreement; and |
| ● | the representations and warranties of Priority being true on and as of the closing date of the Acquisition. |
Termination
The Purchase Agreement may be terminated and/or abandoned at any time prior to the closing by:
| ● | the mutual written agreement of the Interest Holders and M I; |
| ● | M I, if the closing has not occurred on or prior to June 19, 2018 (or an applicable later date if an extension is obtained to the terms of the Purchase Agreement), provided that M I is not in material breach of any of its obligations under the Purchase Agreement; |
| ● | the Interest Holders, if the closing has not occurred on or prior to June 19, 2018 (or an applicable later date if an extension is obtained to the terms of the Purchase Agreement), provided that the Interest Holders are not in material breach of any of their obligations under the Purchase Agreement; |
| ● | M I, if any Interest Holder has breached any representation, warranty, covenant or agreement contained in the Purchase Agreement and the effect of such breach would be to cause the conditions to M I’s obligation to consummate the closing not to be capable of being satisfied, provided that such breach has not been cured within thirty days following receipt by any such Interest Holder of written notice of such breach or alleged breach from M I; |
| ● | the Interest Holders, if M I has breached any representation, warranty, covenant or agreement contained in the Purchase Agreement and the effect of such breach would be to cause the conditions to the Interest Holders’ obligation to consummate the closing not to be capable of being satisfied, provided that such breach has not been cured within thirty days following receipt by M I of written notice of such breach or alleged breach from the Interest Holders; |
| ● | either party if any governmental authority restrains, enjoins, or otherwise prohibits the transactions contemplated by the Purchase Agreement; or |
| ● | the Interest Holders, if (i) the Stockholder Approval is not obtained or (ii) the redemptions from the trust account result in the Cash Minimum not being met. |
The foregoing summary of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the actual Purchase Agreement, the Promote Agreement and the Letter Agreement, which are filed as Exhibits 2.1, 10.1 and 10.2 hereto, and which are incorporated by reference in this report. Terms used herein as defined terms and not otherwise defined herein shall have the meanings ascribed to them in the Purchase Agreement.
Item 9.01. Financial Statements and Exhibits
*Schedules and exhibits have been omitted to Item 601(b)(2) of Regulation S-K. The registrant hereby undertakes to furnish copies of any of the omitted schedules and exhibits upon request by the U.S. Securities and Exchange Commission.
M I Acquisitions, Inc. ExhibitEX-2.1 2 s109224_ex2-1.htm EXHIBIT 2.1 Exhibit 2.1 EXECUTION VERSION CONTRIBUTION AGREEMENT dated as of February 26,…To view the full exhibit click here