DEFM14A 1 s111183_defm14a.htm DEFM14A

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

Filed by the Registrant  x                             Filed by a Party other than the Registrant  ¨

 

Check the appropriate box: 

 

¨ Preliminary Proxy Statement

 

¨Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

x Definitive Proxy Statement

 

¨

Definitive Additional Materials

 

¨Soliciting Material under §240.14a-12

 

M I ACQUISITIONS, INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

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¨Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

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M I ACQUISITIONS, INC.

40 Wall Street, 58th Floor

New York, NY 10005

 

Proxy Statement dated June 29, 2018
and first mailed to stockholders on or about July 3, 2018

 

Dear Stockholders:

 

You are cordially invited to attend the special meeting of stockholders of M I Acquisitions, Inc. (“we,” “us,” “our,” the “Company” or “M I Acquisitions”), which will be held at the offices of Loeb & Loeb LLP, 345 Park Avenue, New York, New York 10154, on July 19, 2018, at 10:00 a.m. M I Acquisitions was formed on April 23, 2015 for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization or other similar business combination with one or more businesses or entities, which we refer to as a “target business.”

  

At the special meeting, holders of M I Acquisitions’ shares of common stock will be asked to approve the contribution agreement, dated as of February 26, 2018, as amended and restated on March 26, 2018 and April 17, 2018, (the “Purchase Agreement”) by and among M I Acquisitions, Priority Investment Holdings, LLC and Priority Incentive Equity Holdings, LLC (collectively, the “Sellers”) to acquire all of the outstanding equity interests of Priority Holdings, LLC (“Priority”), as well as to approve the other proposals described herein.

 

The consideration to be paid by M I Acquisitions to Sellers in the business combination is a number of shares of M I Acquisitions’ common stock equal to Priority’s equity value (which the Purchase Agreement defines as of the signing date as the $947.8 million enterprise value of Priority, less the net debt of Priority, subject to certain adjustments as described in the Purchase Agreement) divided by $10.30.

 

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An additional 9.8 million shares of M I Acquisitions common stock may be issued as earn-out consideration to the Sellers, or at their election, to members of Priority’s management or other service providers post-business combination pursuant to the Priority Technology Holdings, Inc. Earnout Incentive Plan (the “Earnout Incentive Plan”)—4.9 million shares for the first earn out and 4.9 million shares for the second earn out. For the first earn-out, the Earnout Adjusted EBITDA of M I Acquisitions must be no less than $82.5 million for the year ending December 31, 2018 and the M I Acquisitions 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, the Earnout Adjusted EBITDA of M I Acquisitions must be no less than $91.5 million for the year ending December 31, 2019 and the M I Acquisitions 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. Furthermore, pursuant to the Founders Share Agreement, Priority agreed to purchase 421,107 of the units issued to the Founders in a private placement immediately prior to M I Acquisitions’ initial public offering, and 453,210 shares of common stock of M I Acquisitions issued to the Founders, for an aggregate purchase price of approximately $2.1 million. In addition, pursuant to the Founders Share Agreement, the Founders will forfeit 174,863 founder’s shares at the closing of the Business Combination, which shares may be reissued to the Founders if one of the earn outs described herein (and relating to the Purchase Agreement consideration) is achieved. The transactions contemplated under the Purchase Agreement relating to the business combination with Priority are referred to in this proxy statement as the “Business Combination” and the proposal to adopt the Business Combination, including the initial consideration paid to the Sellers and the earn-out consideration, is referred to as the “Business Combination Proposal” or “Proposal No. 1.”

 

As of June 29, 2018, there was approximately $51,829,390.86 in the M I Acquisitions trust account, or approximately $10.507 per share of outstanding common stock issued in M I Acquisitions’ initial public offering. Pursuant to the Current Certificate of Incorporation of M I Acquisitions, a holder of M I Acquisitions common stock may demand that M I Acquisitions redeem such common stock for cash. Under the Purchase Agreement, the Business Combination is conditioned upon, among other things, there being a minimum of $20 million of cash in our trust account after giving effect to the redemption of M I Acquisitions common stock that holders of M I Acquisitions common stock validly elected to redeem in connection with the Business Combination. Therefore, unless these conditions are waived by M I Acquisitions and Priority, the Purchase Agreement could terminate and the proposed Business Combination may not be consummated. On June 29, 2018, the record date for the special meeting of stockholders, the last sale price of M I Acquisitions common stock was $10.50. Our common stock, units and warrants are currently listed on the NASDAQ Capital Market under the symbols “MACQ”, “MACQU”, and “MACQW”, respectively. We have applied to continue the listing of our common stock and warrants on the NASDAQ Capital Market under the symbol(s) “PRTH” and “PRTHW”, respectively, upon closing of the Business Combination.

 

At the special meeting, stockholders will be asked to approve the Purchase Agreement and approve the Business Combination, including the initial consideration paid to the Sellers and the earn-out consideration. In addition, you are being asked to consider and vote upon (i) five separate proposals to approve and adopt amendments to the Company’s Current Certificate of Incorporation, (ii) a proposal to approve the Priority Technology Holdings, Inc. 2018 Equity Incentive Plan (the “2018 Equity Incentive Plan”), a copy of which is attached to this proxy statement as Annex G, including the authorization of the initial share reserve thereunder, (iii) a proposal to approve the Earnout Incentive Plan, which will provide for the earnout consideration contemplated in the Purchase Agreement, a copy of which is attached to this proxy statement as Annex H, including the authorization of the initial share reserve thereunder and (iv) a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal or any of the other proposals described above. A copy of our proposed second amended and restated certificate of incorporation reflecting the proposed amendments, assuming the consummation of the Business Combination, is attached as Annex E to the accompanying proxy statement.

 

Each stockholder’s vote is very important. Whether or not you plan to attend the M I Acquisitions special meeting in person, please submit your proxy card without delay. Stockholders may revoke proxies at any time before they are voted at the meeting. Voting by proxy will not prevent a stockholder from voting in person if such stockholder subsequently chooses to attend the M I Acquisitions special meeting.

 

We encourage you to read this proxy statement carefully. In particular, you should review the matters discussed under the caption “Risk Factors” beginning on page 24.

 

M I Acquisitions’ board of directors unanimously recommends that M I Acquisitions stockholders vote “FOR” approval of each of the proposals described herein.

 

/s/ Joshua Sason

 
Joshua Sason  
Chief Executive Officer  
M I Acquisitions, Inc.  
June 29, 2018
 

 

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HOW TO OBTAIN ADDITIONAL INFORMATION

 

This proxy statement incorporates important business and financial information about M I Acquisitions that is not included or delivered herewith. If you would like to receive additional information or if you would like additional copies of this document, agreements contained in the appendices or any other documents filed by M I Acquisitions with the Securities and Exchange Commission, such information is available without charge upon written or oral request. Please contact the following:

 

M I Acquisitions, Inc.
40 Wall Street, 58th Floor
New York, NY 10005
Attn: Joshua Sason
Telephone: (347) 491-4240

 

If you would like to request documents, please do so no later than July 12, 2018 to receive them before the M I Acquisitions special meeting. Please be sure to include your complete name and address in your request. Please see “Where You Can Find Additional Information” to find out where you can find more information about M I Acquisitions and Priority. You should rely only on the information contained in this proxy statement in deciding how to vote on the Business Combination. Neither M I Acquisitions nor Priority has authorized anyone to give any information or to make any representations other than those contained in this proxy statement. Do not rely upon any information or representations made outside of this proxy statement. The information contained in this proxy statement may change after the date of this proxy statement. Do not assume after the date of this proxy statement that the information contained in this proxy statement is still correct.

 

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M I ACQUISITIONS, INC.
40 Wall Street, 58th Floor
New York, NY 10005
Telephone: (347) 491-4240

 

NOTICE OF SPECIAL MEETING OF THE
STOCKHOLDERS OF M I ACQUISITIONS
To Be Held on July 19, 2018

 

To M I Acquisitions, Inc. (“M I Acquisitions”) Stockholders:

 

A special meeting of stockholders of M I Acquisitions will be held at the offices of Loeb & Loeb, 345 Park Avenue, New York, New York 10154, on July 19, 2018, at 10:00 a.m., for the following purposes: 

 

1.To approve the authorization for M I Acquisitions’ board of directors to acquire all of the issued and outstanding equity interests of Priority, as provided for in the Purchase Agreement, including the initial consideration paid to the Sellers and the earn-out consideration, or the “Business Combination.” This proposal is referred to as the “Business Combination Proposal” or “Proposal No. 1.”

 

2.To approve the amendment of the certificate of incorporation of M I Acquisitions (the “Current Certificate of Incorporation”) to increase the number of authorized shares of common stock and preferred stock. This proposal is referred to as the “Authorized Share Increase Proposal” or “Proposal No. 2.”

 

3.To approve the amendment of the Current Certificate of Incorporation to provide for declassification of the board of directors into one class. This proposal is referred to as the “Board Declassification Proposal” or “Proposal No. 3.”

 

4.To approve the amendment of the Current Certificate of Incorporation to change the stockholder vote required to approve a further amendment thereof. This proposal is referred to as the “Voting Threshold Proposal” or “Proposal No. 4.”

 

5.To approve the amendment of the Current Certificate of Incorporation to elect not to be governed by Section 203 of the Delaware General Corporation Law (the “DGCL”) and, instead, include a provision in our certificate of incorporation that is substantially similar to Section 203 of the DGCL, but excludes the Sellers, certain affiliates and each of their respective transferees from the definition of “interested stockholder,” and to make certain related changes. This proposal is referred to as the “Section 203 Proposal” or “Proposal No. 5.”

 

6.To approve certain other changes to the Current Certificate of Incorporation, including eliminating certain provisions specific to our status as a special purpose acquisition company. This proposal is referred to as the “Additional Amendments Proposal” or “Proposal No. 6.”

 

7.To approve the 2018 Equity Incentive Plan, including the authorization of the initial share reserve under the 2018 Equity Incentive Plan. This proposal is referred to as the “2018 Equity Incentive Plan Proposal” or “Proposal No. 7.”

 

8.To approve the Earnout Incentive Plan, including the authorization of the initial share reserve under the Earnout Incentive Plan. This proposal is referred to as the “Earnout Incentive Plan Proposal” or “Proposal No. 8.”

 

9.To approve the issuance of more than 20% of the issued and outstanding shares of Common stock of M I Acquisitions pursuant to the terms of the Purchase Agreement, as required by Nasdaq Listing Rules 5635(a) and (d). This proposal is referred to as the “Nasdaq Proposal” or “Proposal No. 9.”

 

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10.To approve the adjournment of the special meeting in the event M I Acquisitions does not receive the requisite stockholder vote to approve the Business Combination or the other proposals described above. This proposal is called the “Adjournment Proposal” or “Proposal No. 10.”

 

Proposals 1 through 10 are collectively referred to herein as the “Proposals.”

 

As of June 29, 2018, there were 6,681,512 shares of M I Acquisitions common stock issued and outstanding and entitled to vote. Only M I Acquisitions common stockholders who hold shares of record as of the close of business on June 29, 2018 are entitled to vote at the special meeting or any adjournment of the special meeting. This proxy statement is first being mailed to stockholders on or about July 3, 2018. Approval of the Business Combination Proposal, the 2018 Equity Incentive Plan Proposal, the Earnout Incentive Plan Proposal, the Nasdaq Proposal and the Adjournment Proposal will require the affirmative vote of the holders of a majority of the issued and outstanding shares of common stock of M I Acquisitions present and entitled to vote at the special meeting. Approval of the Authorized Share Increase Proposal, the Board Declassification Proposal, the Voting Threshold Proposal, the Section 203 Proposal and the Additional Amendments Proposal will require the approval of a majority of the issued and outstanding shares of common stock of M I Acquisitions. Attending the special meeting either in person or by proxy and abstaining from voting will have the same effect as voting against all the proposals and, assuming a quorum is present, broker non-votes will have no effect on the Business Combination Proposal, the 2018 Equity Incentive Plan Proposal, the Earnout Incentive Plan Proposal, the Nasdaq Proposal and the Adjournment Proposal, but will be the same as a vote against the Authorized Share Increase Proposal, the Board Declassification Proposal, the Voting Threshold Proposal, the Section 203 Proposal and the Additional Amendments Proposal.

  

Our common stock, units and warrants are currently listed on the NASDAQ Capital Market under the symbols “MACQ”, “MACQU”, and “MACQW”, respectively. We have applied to continue the listing of our common stock and warrants on the NASDAQ Capital Market under the symbol(s) “PRTH” and “PRTHW”, respectively, upon closing of the Business Combination.

 

Holders of M I Acquisitions common stock will not be entitled to appraisal rights under Delaware law in connection with the Business Combination.

 

Whether or not you plan to attend the special meeting in person, please submit your proxy card without delay. Voting by proxy will not prevent you from voting your shares in person if you subsequently choose to attend the special meeting. If you fail to return your proxy card, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the special meeting. You may revoke a proxy at any time before it is voted at the special meeting by executing and returning a proxy card dated later than the previous one, by attending the special meeting in person and casting your vote by ballot or by submitting a written revocation to M I Acquisitions at M I Acquisitions, Inc., 40 Wall Street, 58th Floor, New York, NY 10005, Attention: Joshua Sason, Telephone: (347) 491-4240, that is received by us before we take the vote at the special meeting. If you hold your shares through a bank or brokerage firm, you should follow the instructions of your bank or brokerage firm regarding revocation of proxies.

 

Approval of all of the proposals except for the 2018 Equity Incentive Plan Proposal and the Adjournment Proposal are necessary to complete the Business Combination. M I Acquisitions’ board of directors unanimously recommends that M I Acquisitions stockholders vote “FOR” approval of each of the proposals.

 

By order of the board of directors,

 

 /s/ Joshua Sason

 
Joshua Sason  
Chief Executive Officer  

M I Acquisitions, Inc.

 

 

June 29, 2018

 

 

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Table of Contents

  Page
   
SUMMARY TERM SHEET 1
   
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR M I ACQUISITIONS stockholders 3
   
DELIVERY OF DOCUMENTS TO M I ACQUISITIONS stockholders 11
   
SUMMARY OF THE PROXY STATEMENT 12
   
PRICE RANGE OF SECURITIES AND DIVIDENDS 25
   
RISK FACTORS 26
   
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 49
   
SPECIAL MEETING OF M I Acquisitions STOCKHOLDERS 50
   
PROPOSAL NO. 1 – THE BUSINESS COMBINATION PROPOSAL 55
   
THE PURCHASE AGREEMENT 66
   
PROPOSAL NO. 2 – THE AUTHORIZED SHARE INCREASE PROPOSAL 70
   
PROPOSAL NO. 3 - THE BOARD DECLASSIFICATION PROPOSAL 72
   
PROPOSAL NO. 4 - THE VOTING THRESHOLD PROPOSAL 75
   
PROPOSAL NO. 5 - THE SECTION 203 PROPOSAL 78
   
PROPOSAL NO. 6 - THE ADDITIONAL AMENDMENTS PROPOSAL 83
   
PROPOSAL NO. 7—THE 2018 EQUITY INCENTIVE PLAN PROPOSAL 97
   
PROPOSAL NO. 8 - THE EARNOUT INCENTIVE PLAN PROPOSAL 101
   
PROPOSAL NO. 9 - THE NASDAQ PROPOSAL 104
   
PROPOSAL NO. 10 - THE ADJOURNMENT PROPOSAL 106
   
COMPARATIVE PER SHARE DATA 107
   
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION 109
   
PRIORITY’S BUSINESS 121
   
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF PRIORITY 145
   
M I ACQUISITIONS’ BUSINESS 166
   
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 171
   
DIRECTORS, EXECUTIVE OFFICERS, EXECUTIVE COMPENSATION AND CORPORATE GOVERNANCE 173
   
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT BEFORE THE BUSINESS COMBINATION 177
   
SECURITY OWNERSHIP OF M I ACQUISITIONS AFTER THE BUSINESS COMBINATION 178
   
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS 179
   
DESCRIPTION OF M I ACQUISITIONS’ SECURITIES 181
   
SECURITIES ELIGIBLE FOR FUTURE SALE 185

 

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EXPERTS 186
   
STOCKHOLDER PROPOSALS AND OTHER MATTERS 187
   
WHERE YOU CAN FIND ADDITIONAL INFORMATION 188
   
INDEX TO FINANCIAL STATEMENTS - MI ACQUISITIONS, INC. F-1
   
INDEX TO FINANCIAL STATEMENTS - PRIORITY HOLDINGS, LLC F-1

 

ANNEX A – PURCHASE AGREEMENT ANNEX A-1
ANNEX B – FOUNDERS SHARE AGREEMENT ANNEX B-1
ANNEX C – LETTER AGREEMENT ANNEX C-1
ANNEX D – FORM OF AMENDED AND RESTATED OPERATING AGREEMENT  OF PRIORITY ANNEX D-1
ANNEX E – FORM OF SECOND AMENDED AND RESTATED CERTIFICATE OF  INCORPORATION OF M I ACQUISITIONS ANNEX E-1
ANNEX F – FORM OF AMENDED AND RESTATED BYLAWS OF M I ACQUISITIONS ANNEX F-1
ANNEX G – FORM OF PRIORITY TECHNOLOGY HOLDINGS, INC. 2018 EQUITY INCENTIVE PLAN ANNEX G-1
ANNEX H – FORM OF PRIORITY TECHNOLOGY HOLDINGS, INC. EARNOUT  INCENTIVE PLAN ANNEX H-1

 

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SUMMARY TERM SHEET

 

This summary term sheet, together with the sections entitled “Questions and Answers About the Proposals for M I Acquisitions Stockholders” and “Summary of the Proxy Statement,” summarizes certain information contained in this proxy statement, but does not contain all of the information that is important to you. You should read carefully this entire proxy statement, including the attached Annexes, for a more complete understanding of the matters to be considered at the special meeting of stockholders of M I Acquisitions.

 

·M I Acquisitions is a special purpose acquisition company formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization or other similar business combination with one or more businesses or entities.

 

·M I Acquisitions completed its initial public offering (“IPO”) on September 19, 2016 of 5,000,000 units, which each unit consisting of one share of common stock, par value $0.001 per share, and one warrant, which entitles the holder thereof to purchase one share of common stock. Simultaneously with the consummation of the IPO, we consummated the private placement of 402,500 private units at a price of $10.00 per unit, generating total proceeds of $4,025,000. For more information regarding our common stock and warrants, please see the section entitled “Description of M I Acquisitions’ Securities” on page 174.

 

·Priority is a leading provider of merchant acquiring and commercial payment solutions, offering unique product capabilities to small and mid-sized businesses (“SMBs”), enterprises and distribution partners in the United States. Priority was founded in 2005 with a mission to build a merchant inspired payments platform that would advance the goals of its SMB and enterprise clients and distribution partners. Since 2013, Priority has grown from the 38th largest U.S. merchant acquirer to become the 13th largest as of 2017, measured by Visa and MasterCard purchase volume according to The Nilson Report. Priority is currently the 6th largest non-bank merchant acquirer in the United States. For more information about Priority, please see the sections entitled “Priority’s Business” on page 118, “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Priority” on page 142 and “Directors, Executive Officers, Executive Compensation and Corporate Governance” on page 166.

 

·

Upon the closing of the transactions contemplated by the Contribution Agreement, dated as of February 26, 2018, as amended and restated on March 26, 2018 and April 17, 2018 (the “Purchase Agreement”), by and among M I Acquisitions, Priority Investment Holdings, LLC (“PIH”) and Priority Incentive Equity Holdings, LLC (“PIEH” and, together with PIH, the “Sellers”), M I Acquisitions will acquire 100% of the issued and outstanding equity securities of Priority, which will result in Priority becoming a wholly-owned subsidiary of M I Acquisitions. See “Proposal No. 1 – The Business Combination Proposal – General Description of the Business Combination” on page 53 for more information.

 

·The consideration to be paid by M I Acquisitions to Sellers in the business combination is a number of shares of M I Acquisitions’ common stock equal to Priority’s equity value (which the Purchase Agreement defines as of the signing date as the $947.8 million enterprise value of Priority, less the net debt of Priority, subject to certain adjustments as described in the Purchase Agreement) divided by $10.30. If Priority acquires or contracts to acquire any businesses prior to the closing of the business combination that increase Priority’s Earnout Adjusted EBITDA in aggregate by more than $9.0 million, Priority’s enterprise value will increase by multiplying the incremental increase in Earnout Adjusted EBITDA of such acquisition by 12.5, provided that estimated synergies related to any such acquisitions and proposed acquisitions included in the Earnout Adjusted EBITDA calculation of Priority shall be capped at 20% of the Earnout Adjusted EBITDA of the applicable acquisition with respect to the 12-month period immediately preceding the consummation of such acquisition. In order to be included in the above calculation, any agreements to acquire a business must be subject only to payment of cash and/or other consideration to the target and must close within 30 days following closing of the business combination. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Priority—Certain Non-GAAP Measures—EBITDA, Adjusted EBITDA and Earnout Adjusted EBITDA” for the definitions of EBITDA, Adjusted EBITDA and Earnout Adjusted EBITDA and reconciliations of EBITDA, Adjusted EBITDA and Earnout Adjusted EBITDA to net income (loss). In addition, any cash that Priority spends to acquire any technology assets, up to $5.0 million, to purchase securities from the M I’s founders pursuant to the Founders Share Agreement or to extend the time we have to complete a business combination, will be included in the calculation of net debt as cash and cash equivalents (which would reduce the amount of net debt, effectively increasing the assumed equity value of Priority and increasing the number of shares that would be issued to the Sellers).

  

·An additional 9.8 million shares of M I Acquisitions common stock may be issued as earn out consideration to the Sellers, or at their election, to members of Priority’s management or other service providers post-business combination pursuant to the Earnout Incentive Plan. For more information about the Purchase Agreement please see the section entitled “The Purchase Agreement – Business Combination with Priority; Acquisition Consideration” on page 64.

 

·

After the Business Combination, assuming no redemptions of common stock for cash, M I Acquisitions’ current public stockholders (the “Public Stockholders”) will own approximately 7.4% of the post-Business Combination entity, M I Acquisitions’ current directors, officers and affiliates will own approximately 1.1% of the post-Business Combination entity, and the Sellers will own approximately 91.5% of the post-Business Combination entity. Substantially concurrently with the Business Combination, PIH will distribute its stock of the combined entity to its owners, all of whom will be executive officers of the combined company. Assuming redemption by holders of 61.4% of the 4.9 million shares of M I Acquisitions’ outstanding public common stock, M I Acquisitions’ Public Stockholders will own approximately 3.0% of the post-Business Combination entity, M I Acquisitions’ current directors, officers and affiliates will own approximately 1.1% of the post-Business Combination entity, and the Sellers (including the holders receiving shares distributed by PIH) will own approximately 95.9% of the post-Business Combination entity. See “Unaudited Pro Forma Condensed Combined Financial Information” on page 107.

 

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·M I Acquisitions’ management team and board of directors considered a wide variety of factors in connection with its evaluation of the Business Combination, including that Priority is a leading provider of merchant acquiring and commercial payment solutions with proprietary technology and infrastructure, ranking as the 6th largest non-bank acquirer as per The Nilson Report, that its business model is expected to be easily understood by the investment community and that its relatively low attrition rates in comparison to competitors provides Priority with a sustainable competitive advantage to its peers. See “Proposal No. 1 – The Business Combination Proposal—The Board of Directors’ Reasons for the Approval of the Business Combination” on page 57 for more information about the decision-making process.

 

·Pursuant to the Current Certificate of Incorporation of M I Acquisitions, a holder of M I Acquisitions common stock may demand that M I Acquisitions redeem such common stock for cash. In order to exercise your redemption rights, you must make an election on the applicable proxy card to redeem such shares of M I Acquisitions common stock or submit a request in writing to M I Acquisitions’ transfer agent at the address listed on page 117, and deliver your shares to M I Acquisitions’ transfer agent physically or electronically through DTC prior to the special meeting of M I Acquisitions’ stockholders. Please see the section entitled “Special Meetings of M I Acquisitions Stockholders—Redemption Rights” on page 50.

 

·In addition to voting on the proposal to approve the Purchase Agreement and approve the Business Combination, the M I Acquisitions stockholders will be asked to vote on: (i) five separate proposals to approve and adopt amendments to the M I Acquisitions’ Current Certificate of Incorporation, (ii) a proposal to approve the 2018 Equity Incentive Plan, a copy of which is attached to this proxy statement as Annex G, including the authorization of the initial share reserve thereunder, (iii) a proposal to approve the Earnout Incentive Plan, which will provide for the earnout consideration contemplated in the Purchase Agreement, a copy of which is attached to this proxy statement as Annex H, including the authorization of the initial share reserve thereunder and (iv) a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal or any of the other proposals described above. Each of these proposals is described in greater detail in this proxy statement.

 

·The Purchase Agreement may be terminated and/or abandoned at any time prior to the consummation of the Business Combination in specified circumstances. For more information about the termination rights under the Purchase Agreement, please see the section entitled “The Purchase Agreement—Termination” on page 65.

 

·The proposed Business Combination involves numerous risks. For more information about these risks, please see the section entitled “Risk Factors” on page 24.

 

·After careful consideration of the terms and conditions of the Purchase Agreement and the related agreements, the board of directors of M I Acquisitions has determined that the Business Combination and the transactions contemplated thereby are fair to and in the best interests of M I Acquisitions and its stockholders. The Board unanimously recommends that our stockholders vote “FOR” approval of the Business Combination and “FOR” all other proposals presented to our stockholders in this proxy statement.

 

·When you consider the recommendation of the board of directors in favor of approval of the Business Combination Proposal and other proposals, you should keep in mind that the directors and officers of M I Acquisitions have interests in the Business Combination that are different from, or in addition to, your interests as a stockholder. Please see “Proposal No. 1 – The Business Combination Proposal—Interests of Certain Persons in the Business Combination” on page 59 for more information.

 

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QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR M I ACQUISITIONS stockholders

 

The questions and answers below highlight only selected information from this proxy statement and only briefly address some commonly asked questions about the proposals to be presented at the special meeting of M I Acquisitions stockholders, including with respect to the proposed Business Combination. The following questions and answers do not include all the information that is important to our stockholders. We urge stockholders to read carefully this entire proxy statement, including the Annexes and the other documents referred to herein, to fully understand the proposed Business Combination and the voting procedures for the special meeting, which will be held at the offices of Loeb & Loeb LLP, 345 Park Avenue, New York, New York 10154, on July 19, 2018, at 10:00 a.m. local time.

 

Q:         What is the purpose of this document?

 

A:         M I Acquisitions and the holders of all of the issued and outstanding equity interests of Priority Holdings, LLC (“Priority”), have agreed to a business combination under the terms of a Contribution Agreement, dated as of February 26, 2018, as amended and restated on March 26, 2018 and April 17, 2018 (the “Purchase Agreement”), by and among M I Acquisitions, Priority Investment Holdings, LLC (“PIH”) and Priority Incentive Equity Holdings, LLC (“PIEH” and, together with PIH, the “Sellers”), and other related proposals. The consummation of the transactions contemplated by the Purchase Agreement relating to the business combination with Priority are referred to as the “Business Combination” and the proposal to approve the Business Combination is referred to as the “Business Combination Proposal.” The Purchase Agreement is attached to this proxy statement as Annex A and is incorporated into this proxy statement by reference. You are encouraged to read this proxy statement, including the “Risk Factors” section, and all the annexes hereto.

 

M I Acquisitions stockholders are being asked to consider and vote upon a proposal to adopt the Purchase Agreement, pursuant to which M I Acquisitions will acquire all of the issued and outstanding equity interests of Priority, and related proposals.

 

The units that were issued in M I Acquisitions’ initial public offering each consist of one share of common stock and one warrant. Each warrant entitles the holder thereof to purchase one share of common stock. The warrants are exercisable at a price of $11.50 per share of common stock, subject to adjustment as described in the prospectus filed in connection with the initial public offering, and will become exercisable 30 days after the completion of the Business Combination. The warrants will expire five years after the completion of the Business Combination or earlier upon redemption or liquidation, as described herein.

 

If the Business Combination is consummated, holders of M I Acquisitions common stock (except stockholders who are insiders) will be entitled to redeem their M I Acquisitions common stock for a pro rata share of the trust account (currently anticipated to be no less than approximately $10.507 per share) net of taxes payable.

  

Our common stock, units and warrants are currently listed on the NASDAQ Capital Market under the symbols “MACQ”, “MACQU”, and “MACQW”, respectively. We plan to continue the listing of our common stock and warrants on the NASDAQ Capital Market under the symbol(s) “PRTH” and “PRTHW”, respectively, upon closing of the Business Combination.

 

This proxy statement contains important information about the proposed Business Combination and the other matters to be acted upon at the special meeting of M I Acquisitions stockholders. You should read it carefully.

 

Q:         When and where is the special meeting?

 

A:          The special meeting will be held at the offices of Loeb & Loeb LLP, 345 Park Avenue, New York, New York 10154, on July 19, 2018, at 10:00 a.m. local time.

 

Q:         What is being voted on?

 

A:          Below are the proposals on which M I Acquisitions stockholders are being asked to vote:

 

1.To approve the authorization for M I Acquisitions to acquire all of the issued and outstanding equity interests of Priority, as provided for in the Purchase Agreement, including the initial consideration paid to the Sellers and the earn-out consideration, or the “Business Combination.” This proposal is referred to as the “Business Combination Proposal” or “Proposal No. 1.”

 

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2.To approve the amendment of the certificate of incorporation of M I Acquisitions (the “Current Certificate of Incorporation”) to increase the number of authorized shares of common stock and preferred stock. This proposal is referred to as the “Authorized Share Increase Proposal” or “Proposal No. 2.”

 

3.To approve the amendment of the Current Certificate of Incorporation to provide for declassification of the board of directors into one class. This proposal is referred to as the “Board Declassification Proposal” or “Proposal No. 3.”

 

4.To approve the amendment of the Current Certificate of Incorporation to change the stockholder vote required to approve a further amendment thereof. This proposal is referred to as the “Voting Threshold Proposal” or “Proposal No. 4.”

 

5.To approve the amendment of the Current Certificate of Incorporation to elect not to be governed by Section 203 of the Delaware General Corporation Law (the “DGCL”) and, instead, include a provision in our certificate of incorporation that is substantially similar to Section 203 of the DGCL, but excludes the Sellers, certain affiliates and each of their respective transferees from the definition of “interested stockholder,” and to make certain related changes. This proposal is referred to as the “Section 203 Proposal” or “Proposal No. 5.”

 

6.To approve certain other changes to the Current Certificate of Incorporation, including eliminating certain provisions specific to our status as a special purpose acquisition company. This proposal is referred to as the “Additional Amendments Proposal” or “Proposal No. 6.” The Board Declassification Proposal, the Voting Threshold Proposal, the Section 203 Proposal and the Additional Amendments Proposal are collectively referred to as the “Amendments Proposals.”

 

7.To approve the 2018 Equity Incentive Plan, including the authorization of the initial share reserve under the 2018 Equity Incentive Plan. This proposal is referred to as the “2018 Equity Incentive Plan Proposal” or “Proposal No. 7.”

 

8.To approve the Earnout Incentive Plan. This proposal is referred to as the “Earnout Incentive Plan Proposal” or “Proposal No. 8.”

 

9.To approve the issuance of more than 20% of the issued and outstanding shares of common stock of M I Acquisitions pursuant to the terms of the Purchase Agreement, as required by Nasdaq Listing Rules 5635(a) and (d). This proposal is called the “Nasdaq Proposal” or “Proposal No. 9.”

 

10.To approve the adjournment of the special meeting in the event M I Acquisitions does not receive the requisite stockholder vote to approve the Business Combination or the other proposals described above. This proposal is called the “Adjournment Proposal” or “Proposal No. 10.”

 

Q:         Are the proposals conditioned on one another?

 

A:         Yes. The Business Combination Proposal and the Nasdaq Proposal are conditioned upon the approval of the Amendments Proposals and the Earnout Incentive Plan Proposal. The Amendments Proposals are each conditioned upon the approval of the other Amendments Proposals as well as the Business Combination Proposal and the Nasdaq Proposal. The 2018 Equity Incentive Plan Proposal is conditioned upon the approval of each of the other proposals, aside from the Adjournment Proposal.

 

Q:          Why is the Company providing stockholders with the opportunity to vote on the Business Combination?

 

A:         We are seeking approval of the Business Combination Proposal, including the approval of the Purchase Agreement and the issuances of our common stock thereunder, including both the initial consideration and the earn-out consideration, for purposes of complying with applicable NASDAQ listing rules requiring stockholder approval of issuances of more than 20% of a listed company’s issued and outstanding common stock.

 

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Q:         Why is the Company proposing the Amendments Proposals?

 

A:         Pursuant to Delaware law and the Purchase Agreement, we are required to submit the Amendments Proposals to the Company’s stockholders for approval. For additional information please see “Proposal No. 3 - The Board Declassification Proposal” on page 70 of this proxy statement, “Proposal No. 4 - The Voting Threshold Proposal” on page 73 of this proxy statement, “Proposal No. 5 - The Section 203 Proposal” on page 76 of this proxy statement and “Proposal No. 6 - The Additional Amendments Proposal” on page 81 of this proxy statement for more information.

 

Q:         Why is the Company proposing the 2018 Equity Incentive Plan Proposal?

 

A:         The purpose of the 2018 Equity Incentive Plan is to further align the interests of the eligible participants with those of stockholders by providing long-term incentive compensation opportunities tied to the performance of the post-combination company. Please see “Proposal No. 7 - The 2018 Equity Incentive Plan Proposal” on page 95 of this proxy statement for additional information.

 

Q:         Why is the Company proposing the Adjournment Proposal?

 

A:         We are proposing the Adjournment Proposal to allow our Board to adjourn the special meeting to a later date or dates to permit further solicitation of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of any of the other proposals. Please see “Proposal No. 10 - The Adjournment Proposal” on page 104 of this proxy statement for additional information.

 

Q:         Do any of M I Acquisitions’ directors or officers have interests that may conflict with my interests with respect to the Business Combination?

 

A:         M I Acquisitions’ directors and officers may have interests in the Business Combination that are different from your interests as a stockholder. You should keep in mind the following interests of M I Acquisitions’ directors and officers:

 

In April 2015, we sold an aggregate of 1,437,500 shares of our common stock for $25,000, or approximately $.02 per share, to M SPAC LLC, which is controlled by Joshua Sason. On July 20, 2016, M SPAC LLC sold back 494,480 shares to us at a price equal to the amount paid for such shares. We subsequently sold an aggregate of 494,480 shares of our common stock for $8,600, or approximately $0.02 per share, to M SPAC Holdings I LLC and M SPAC Holdings II LLC, each of which is controlled by Joshua Sason.

 

The underwriters exercised a portion of their over-allotment option. Our insiders forfeited an aggregate of 109,973 insider shares in proportion to the portion of the over-allotment option that was not exercised. We recorded the forfeited shares as treasury stock and simultaneously retired the shares. Such forfeited shares were immediately cancelled which resulted in the retirement of the treasury shares and a corresponding charge to additional paid-in capital.

 

M SPAC LLC, M SPAC Holdings I LLC and M SPAC Holdings II LLC, entities controlled by Joshua Sason, our Chief Executive Officer, purchased, pursuant to written purchase agreements with us, 402,500 private units for a purchase price of $10.00 per private unit, generating total proceeds of $4,025,000. These purchases took place on a private placement basis simultaneously with the consummation of the IPO. Simultaneously with the purchase of units resulting from the exercise of the over-allotment option by the underwriters, M SPAC LLC, M SPAC Holdings I LLC and M SPAC Holdings II LLC purchased an additional 18,607 private units at a price of $10.00 per unit. In light of the of the amount of consideration paid for the foregoing securities, M I Acquisitions’ directors and officers will likely benefit from the completion of the Business Combination, even if the Business Combination causes the market price of M I Acquisitions’ securities to significantly decrease. The likely benefit to M I Acquisitions’ directors and officers may influence their motivation for promoting the Business Combination and/or soliciting proxies for the approval of the Business Combination Proposal.

 

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In the absence of stockholder approval for a further extension, if M I Acquisitions does not consummate the Business Combination by September 17, 2018, we will be required to dissolve and liquidate and the securities held by our insiders will be worthless because such holders have agreed to waive their rights to any liquidation distributions. We previously extended the time to complete an initial business combination to June 19, 2018 by depositing a total of $398,259 into our trust account. On June 15, 2018, M I Acquisitions extended the time to complete a business combination to September 17, 2018, pursuant to a vote of its stockholders. M I Acquisitions’ organizational documents originally provided that the extension would take place no later than June 19, 2018. No additional consideration was paid for the extension of such deadline to September 17, 2018. Shareholders redeemed a total of 377,231 public shares at a price per share of $10.507 (or approximately $3,963,539 in aggregate) in connection with the vote to extend the liquidation date to September 17, 2018.

   

As of the Record Date (as defined below), 1,748,634 shares, or approximately 26.2% of the outstanding shares of M I Acquisitions common stock, were held by M I Acquisitions’ initial stockholders (the “Initial Stockholders”). All of the Initial Stockholders have agreed to vote such shares in favor of each of the proposals.

 

If M I Acquisitions liquidates prior to the consummation of a business combination, our insiders have contractually agreed that they will be personally liable to ensure that the proceeds in the trust account are not reduced by the claims of target business or claims of vendors or other entities that are owed money by us for services rendered or contracted for or products sold to us. Therefore, our directors and officers have a financial interest in consummating the Business Combination, thereby resulting in a conflict of interest.

 

In addition, the exercise of M I Acquisitions’ directors’ and officers’ discretion in agreeing to changes or waivers in the terms of the Business Combination may result in a conflict of interest when determining whether such changes or waivers are appropriate and in the best interests of M I Acquisitions stockholders.

 

Q:         Who may vote at the special meeting of stockholders?

 

A:          Only holders of record of M I Acquisitions common stock as of the close of business on June 29, 2018 (the “Record Date”) may vote at the special meeting of stockholders. As of the Record Date, there were 6,681,512 shares of M I Acquisitions common stock outstanding and entitled to vote. Please see “Special Meeting of M I Acquisitions Stockholders—Record Date; Who is Entitled to Vote” on page 48 of this proxy statement for further information.

 

Q:         What is the quorum requirement for the special meeting of stockholders?

 

A:          Stockholders representing a majority of the M I Acquisitions common stock issued and outstanding as of the record date and entitled to vote at the special meeting must be present in person or represented by proxy in order to hold the special meeting and conduct business. This is called a quorum. M I Acquisitions common stock will be counted for purposes of determining if there is a quorum if the stockholder (i) is present and entitled to vote at the meeting or (ii) has properly submitted a proxy card. In the absence of a quorum, stockholders representing a majority of the votes present in person or represented by proxy at such meeting, may adjourn the meeting until a quorum is present.

 

Q:         What vote is required to approve the proposals?

 

A:         Approval of the Business Combination Proposal, the 2018 Equity Incentive Plan Proposal, the Earnout Incentive Plan Proposal, the Nasdaq Proposal and the Adjournment Proposal will require the affirmative vote of the holders of a majority of the issued and outstanding shares of common stock of M I Acquisitions present and entitled to vote at the special meeting; provided, however, that if, among other things, less than $20 million remains in the trust account immediately after the closing of the Business Combination, after taking into account all redemptions, the Business Combination will not be completed. For more information about the closing conditions to the Business Combination, see the section entitled “The Purchase Agreement—Conditions to Closing” elsewhere in this proxy statement. Approval of each of the Amendments Proposals will require the approval of a majority of the issued and outstanding shares of common stock of M I Acquisitions. Attending the special meeting either in person or by proxy and abstaining from voting will have the same effect as voting against all the proposals and, assuming a quorum is present, broker non-votes will have no effect on the Business Combination Proposal, the 2018 Equity Incentive Plan Proposal, the Earnout Incentive Plan Proposal, the Nasdaq Proposal and the Adjournment Proposal, but will be the same as a vote against each of the Amendments Proposals.

 

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Q:         How will the Initial Stockholders vote?

 

A:         M I Acquisitions’ Initial Stockholders, who as of the Record Date owned 1,748,634 shares of common stock of M I Acquisitions, or approximately 26.2% of the outstanding shares of common stock, have agreed to vote their respective shares acquired by them prior to the initial public offering in favor of the Business Combination Proposal, the Earnout Incentive Plan Proposal and the Amendments Proposals. M I Acquisitions’ Initial Stockholders have also agreed that they will vote any shares they purchase in the open market in or after the IPO in favor of each of the other proposals.

 

Q:         Am I required to vote against the Business Combination Proposal in order to have my shares of common stock converted?

 

A:         No. You are not required to vote against the Business Combination Proposal in order to have the right (the “conversion rights”) to demand that M I Acquisitions convert your shares of common stock for cash equal to your pro rata share of the amount then on deposit in the trust account (before payment of deferred underwriting commissions and including interest earned on their pro rata portion of the trust account, net of taxes payable). If the Business Combination is not completed, then holders of the shares of common stock of M I Acquisitions who elected to exercise their conversion rights will not be entitled to convert their shares for the applicable pro rata share of the trust account. In addition, M I Acquisitions’ Current Certificate of Incorporation provides that an M I Acquisitions’ stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, or the Exchange Act), will be restricted from seeking conversion rights with respect to 20% or more of the shares of common stock sold in the IPO.

 

Q:         How do I exercise my conversion rights?

 

A:         You may demand that M I Acquisitions convert the shares of common stock held by you for cash by physically tendering your share certificates to M I Acquisitions’ transfer agent or delivering your shares to the transfer agent electronically using The Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, in each case, by the business day prior to the consummation of the Business Combination.

 

Any request for conversion, once made, may be withdrawn at any time up to the date of the special meeting of M I Acquisitions stockholders. The actual per share conversion price will be equal to the aggregate amount then on deposit in the trust account (before payment of deferred underwriting commissions and including interest earned on their pro rata portion of the trust account, net of taxes payable) divided by the number of shares of common stock sold in the IPO. Please see the section entitled “Special Meetings of M I Acquisitions Stockholders—Redemption Rights” on page 50 of this proxy statement for the procedures to be followed if you wish to convert your shares of common stock for cash.

 

Q:         How can I vote?

 

A:         If you were a holder of record of M I Acquisitions common stock on the Record Date, you may vote with respect to the applicable proposals in person at the special meeting of M I Acquisitions stockholders, or by submitting a proxy by mail so that it is received prior to 9:00 a.m. on July 19, 2018, in accordance with the instructions provided to you under “Special Meetings of M I Acquisitions Stockholders” on page 48 of this proxy statement. If you hold your shares in “street name,” which means your shares are held of record by a broker, bank or other nominee, your broker or bank or other nominee may provide voting instructions (including any telephone or Internet voting instructions). You should contact your broker, bank or nominee in advance to ensure that votes related to the shares you beneficially own will be properly counted. In this regard, you must provide the record holder of your shares with instructions on how to vote your shares or, if you wish to attend the special meeting of M I Acquisitions stockholders and vote in person, obtain a proxy from your broker, bank or nominee.

 

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Q:         If my shares are held in “street name” by my bank, brokerage firm or nominee, will they automatically vote my shares for me?

 

A:         No. Under the rules of various national and regional securities exchanges, your broker, bank or nominee cannot vote your shares with respect to non-discretionary matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or nominee. M I Acquisitions believes the proposals are non-discretionary and, therefore, your broker, bank or nominee cannot vote your shares without your instruction. Broker non-votes will not be considered present for the purposes of establishing a quorum and will have no effect on the proposals. If you do not provide instructions with your proxy, your bank, broker or other nominee may submit a proxy card expressly indicating that it is NOT voting your shares; this indication that a bank, broker or nominee is not voting your shares is referred to as a “broker non-vote.” Your bank, broker or other nominee can vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your M I Acquisitions shares in accordance with directions you provide.

 

Q:         What if I abstain from voting or fail to instruct my bank, brokerage firm or nominee?

 

A:         M I Acquisitions will count a properly executed proxy marked “ABSTAIN” with respect to a particular proposal as present for the purposes of determining whether a quorum is present at the special meeting of M I Acquisitions stockholders. For purposes of approval, an abstention on any proposals will have the same effect as a vote “AGAINST” such proposal. Additionally, failure to elect to exercise your redemption rights will preclude you from having your shares of common stock redeemed for cash. In order to exercise your redemption rights, you must make an election on the applicable proxy card to redeem such shares of M I Acquisitions common stock or submit a request in writing to M I Acquisitions’ transfer agent at the address listed on page 177, and deliver your shares to M I Acquisitions’ transfer agent physically or electronically through DTC prior to the special meeting of M I Acquisitions’ stockholders.

 

Q:         Can I change my vote after I have mailed my proxy card?

 

A:         Yes. You may change your vote at any time before your proxy is voted at the special meeting. You may revoke your proxy by executing and returning a proxy card dated later than the previous one, or by attending the special meeting in person and casting your vote by ballot or by submitting a written revocation stating that you would like to revoke your proxy that we receive prior to the special meeting. If you hold your shares through a bank, brokerage firm or nominee, you should follow the instructions of your bank, brokerage firm or nominee regarding the revocation of proxies. If you are a record holder, you should send any notice of revocation or your completed new proxy card, as the case may be, to:

 

M I Acquisitions, Inc.

40 Wall Street, 58th Floor
New York, NY 10005
Telephone: (347) 491-4240

 

Q:         Who will solicit and pay the cost of soliciting proxies for the special meeting?

 

A:         Proxies are being solicited on behalf of M I Acquisitions’ board of directors. M I Acquisitions will pay the cost of soliciting proxies for the special meeting. The solicitation is being made by mail but also may be made by telephone or in person. M I Acquisitions and its directors, officers and employees may also solicit proxies in person, by telephone or by other electronic means. Morrow Sodali LLC, a proxy solicitation firm that M I Acquisitions has engaged to assist it in soliciting proxies, will be paid its customary fee of approximately $20,000 and out-of-pocket expenses.

  

Q:         Should I send in my stock certificates now?

 

A:         Yes. M I Acquisitions stockholders who intend to have their shares of common stock redeemed, by electing to have those shares redeemed for cash on the proxy card, should send their certificates by the day prior to the special meeting. Please see “Special Meeting of M I Acquisitions Stockholders—Redemption Rights” on page 50 of this proxy statement for the procedures to be followed if you wish to redeem your shares of common stock for cash.

 

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Q:         When is the Business Combination expected to occur?

 

A:         Assuming the requisite stockholder approvals are received, M I Acquisitions expects that the Business Combination will occur promptly following the special meeting.

 

Q:         What will happen in the Business Combination?

 

A:         Upon the closing of the transactions contemplated by the Purchase Agreement, M I Acquisitions will acquire 100% of the issued and outstanding equity securities of Priority, which will result in Priority becoming a wholly-owned subsidiary of M I Acquisitions. In connection with the Business Combination, the cash held in the trust account will be used to pay for shares that have been converted, to pay cash transaction expenses in connection with the Business Combination, and for working capital and general corporate purposes. A copy of the Purchase Agreement is attached to this proxy statement as Annex A.

 

Q:         What equity stake will current stockholders of M I Acquisitions and Priority equityholders hold in the combined company after the closing of the Business Combination?

 

A:         It is anticipated that, upon the completion of the Business Combination, M I Acquisitions’ Public Stockholders will retain an ownership interest of approximately 7.4% of the combined company, M I Acquisitions’ current directors, officers and affiliates will own approximately 1.1% of the combined company, and current equityholders of Priority will own approximately 91.5% of the combined company. The ownership percentage with respect to the combined company following the Business Combination does not take into account (i) the redemption of any shares by M I Acquisitions’ public stockholders, (ii) the exercise of the units or the warrants outstanding following the Business Combination or (iii) the issuance of any shares upon completion of the Business Combination under the 2018 Equity Incentive Plan or the Earnout Incentive Plan, which are intended to be adopted following the closing of the Business Combination. If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained by M I Acquisitions’ existing stockholders in the combined entity will be different.

 

Q:         What happens if I sell my shares of common stock before the special meeting?

 

A:         The record date is earlier than the date of the special meeting. If you transfer your shares of common stock after the record date, but before the special meeting, unless the transferee obtains from you a proxy to vote those shares, you will retain your right to vote at the special meeting. However, you will not be able to seek redemption of your shares because you will no longer be able to deliver them for cancellation upon consummation of the Business Combination. If you transfer your shares of common stock prior to the record date, you will have no right to vote those shares at the special meeting or redeem those shares for a pro rata portion of the proceeds held in our trust account.

 

Q:         What are the federal income tax consequences of exercising my redemption rights?

 

A:         M I Acquisitions’ stockholders who exercise their redemption rights to receive cash in exchange for their shares of common stock generally will be required to treat the transaction as a sale of such shares and recognize gain or loss upon the redemption in an amount equal to the difference, if any, between the amount of cash received and the tax basis of the shares of common stock redeemed. Such gain or loss should be treated as capital gain or loss if such shares were held as a capital asset on the date of the redemption. The redemption, however, may be treated as a distribution to a redeeming stockholder for U.S. federal income tax purposes if the redemption does not effect a sufficient reduction (as determined under applicable federal income tax law) in the redeeming stockholder’s percentage ownership in us (whether such ownership is direct or through the application of certain attribution and constructive ownership rules). Any amounts treated as such a distribution will constitute a dividend to the extent not in excess of our current and accumulated earnings and profits as measured for U.S. federal income tax purposes. Any amounts treated as a distribution and that are in excess of our current and accumulated earnings and profits will reduce the redeeming stockholder’s basis in his or her redeemed shares of our common stock, and any remaining amount will be treated as gain realized on the sale or other disposition of our common stock. These tax consequences are described in more detail in the section entitled “Certain Material U.S. Federal Income Tax Considerations.” We urge you to consult your tax advisor regarding the tax consequences of exercising your redemption rights.

 

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Q:         If I am a warrant holder, can I exercise redemption rights with respect to my warrants?

 

A:         No. The holders of warrants have no redemption rights with respect to warrants.

 

Q:         If I am a unit holder, can I exercise redemption rights with respect to my units?

 

A:         No. Holders of outstanding units must separate the underlying public shares and public warrants prior to exercising redemption rights with respect to the public shares. If you hold units registered in your own name, you must deliver the certificate for such units to our transfer agent, with written instructions to separate such units into public shares and public warrants. This must be completed far enough in advance to permit the mailing of the public share certificates back to you so that you may then exercise your redemption rights upon the separation of the public shares from the units. The address of our transfer agent is listed under the section “Description of M I Acquisitions’ Securities—M I Acquisitions’ Transfer Agent”.

 

If a broker, dealer, commercial bank, trust company or other nominee holds your units, you must instruct such nominee to separate your units. Your nominee must send written instructions by facsimile to our transfer agent. Such written instructions must include the number of units to be split and the nominee holding such units. Your nominee must also initiate electronically, using DTC’s deposit withdrawal at custodian (DWAC) system, a withdrawal of the relevant units and a deposit of an equal number of public shares and public warrants. This must be completed far enough in advance to permit your nominee to exercise your redemption rights upon the separation of the public shares from the units. While this is typically done electronically the same business day, you should allow at least one full business day to accomplish the separation. If you fail to cause your public shares to be separated in a timely manner, you will likely not be able to exercise your redemption rights.

 

Q:         May I seek statutory appraisal rights or dissenter rights with respect to my shares?

 

A:         No. Appraisal rights are not available to holders of M I Acquisitions common stock in connection with the Business Combination.

 

Q:         What happens if the Business Combination is not consummated?

 

A:         In the absence of stockholder approval for a further extension, if M I Acquisitions does not consummate the Business Combination by September 17, 2018, then pursuant to its amended and restated certificate of incorporation, M I Acquisitions will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days after September 17, 2018, redeem 100% of the outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of M I Acquisitions’ remaining stockholders and board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii)) to our obligations under Delaware law to provide for claims of creditors and the requirements of any other applicable law. Our insiders have agreed to waive their rights to share in any distribution with respect to their insider shares and any private shares.

 

In any liquidation, the funds held in the trust account, plus any interest earned thereon (net of taxes payable), will be distributed pro-rata to holders of shares of M I Acquisitions’ common stock acquired in the IPO or in the aftermarket. If the Business Combination is not consummated within the timeframe discussed above, the warrants will expire worthless. The estimated consideration that each share of common stock would be paid at liquidation is $10.507 per share, based on amounts on deposit in the trust account as of the Record Date. The last sales price of M I Acquisitions’ common stock on the Nasdaq stock market as of the Record Date was $10.50 per share of common stock.

 

Q:         What happens to the funds deposited in the trust account following the Business Combination?

 

A:         As of the Record Date, there was approximately $51,829,390.86 in the trust account, or approximately $10.507 per share of outstanding common stock issued in the IPO.  Following the closing of the Business Combination, funds in the trust account will be released:

 

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·to pay holders of shares of M I Acquisitions’ common stock exercising conversion rights, who will receive their per share conversion price;

 

·to pay certain other fees, costs and expenses (including regulatory fees, legal fees, accounting fees, printer fees, and other professional fees) that were incurred by M I Acquisitions or Priority in connection with the transactions contemplated by the Business Combination and pursuant to the terms of the Purchase Agreement; and

 

·for general corporate purposes including, but not limited to, working capital for operations of the combined entity.

 

Q:         In accordance with which accounting standard will M I Acquisitions prepare its financial statements after the Business Combination?

 

A:         M I Acquisitions intends to continue providing its investors with financial statements prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), and the relevant securities laws.

 

DELIVERY OF DOCUMENTS TO M I ACQUISITIONS stockholders

 

Pursuant to the rules of the SEC, M I Acquisitions and services that it employs to deliver communications to its stockholders are permitted to deliver to two or more stockholders sharing the same address a single copy of the proxy statement, unless M I Acquisitions has received contrary instructions from one or more of such stockholders. Upon written or oral request, M I Acquisitions will deliver a separate copy of the proxy statement to any stockholder at a shared address to which a single copy of the proxy statement was delivered and who wishes to receive separate copies in the future. Stockholders receiving multiple copies of the proxy statement may likewise request that M I Acquisitions deliver single copies of the proxy statement in the future. Stockholders may notify M I Acquisitions of their requests by contacting M I Acquisitions at:

 

M I Acquisitions, Inc.
40 Wall Street, 58th Floor
New York, NY 10005

Attn: Joshua Sason
Telephone: (347) 491-4240

 

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SUMMARY OF THE PROXY STATEMENT

 

This summary highlights selected information from this proxy statement but may not contain all of the information that may be important to you. Accordingly, we encourage you to read carefully this entire proxy statement, including the Purchase Agreement attached as Annex A, as these documents are the legal documents that govern the Business Combination and your rights in the Business Combination. Unless the context otherwise requires, references to “M I Acquisitions,” “we,” “us” or “our” in this proxy statement refers to M I Acquisitions, Inc.

 

The Parties

 

M I Acquisitions, Inc.

 

M I Acquisitions, Inc.
40 Wall Street, 58th Floor
New York, NY 10005
Attn: Joshua Sason
Telephone: (347) 491-4240

 

M I Acquisitions, Inc. is a special purpose acquisition company formed on April 23, 2015 in Delaware for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization or other similar business combination with one or more businesses or entities, which we refer to as a “target business.” M I Acquisitions intended to focus on acquiring a company or companies operating in the technology, media and telecommunications industries, but was not limited to a particular industry or geographic region.

 

M I Acquisitions completed its initial public offering (“IPO”) on September 19, 2016 of 5,000,000 units, which each unit consisting of one share of common stock, par value $0.001 per share, and one warrant, which entitles the holder thereof to purchase one share of common stock. Simultaneously with the consummation of the IPO, we consummated the private placement of 402,500 private units at a price of $10.00 per unit, generating total proceeds of $4,025,000. The private units were purchased by M SPAC LLC, M SPAC Holdings I LLC and M SPAC Holdings II LLC, entities controlled by Joshua Sason, our Chief Executive Officer. M I Acquisitions received gross proceeds of approximately $54,025,000 from the IPO and private placement.

 

The underwriters exercised the over-allotment option in part and, on October 14, 2016, the underwriters purchased 310,109 over-allotment option units, which were sold at an offering price of $10.00 per unit, generating gross proceeds of $3,101,090. On October 14, 2016, simultaneously with the sale of the over-allotment units, we consummated the private sale of an additional 18,607 private units to one of the Initial Stockholders, generating gross proceeds of $186,070.

 

After deducting the underwriting discounts and commissions and the offering expenses, the total net proceeds to us from the IPO (including the over-allotment option units) and private placements on September 19, 2016 and October 14, 2016 were approximately $55,200,000, of which $54,694,127 was deposited into a trust account, and the remaining proceeds became available to be used to provide for business, legal and accounting due diligence on prospective business combinations and continuing general and administrative expenses. Through the Record Date, we have used approximately $500,000 of the net proceeds that were not deposited into the trust account to pay general and administrative expenses. The net proceeds deposited into the trust account and any additional amounts deposited in connection with extensions of the trust account remain on deposit in the trust account earning interest except those certain amounts withdrawn in order to pay tax obligations and to redeem shareholders in connection with our shareholder vote to extend the date of liquidation date. As of the Record Date, there was $51,829,390 held in the trust account.

 

M I Acquisitions’ units, shares of common stock and warrants are each quoted on the Nasdaq stock market under the symbols “MACQU,” “MACQ,” and “MACQW,” respectively. Each of M I Acquisitions’ units consists of one share of common stock and one warrant to purchase one share of common stock. M I Acquisitions’ units commenced trading on September 14, 2016 and M I Acquisitions’ shares of common stock and warrants commenced trading on November 14, 2016.

 

 

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Priority Holdings, LLC

 

2001 Westside Parkway, Suite 155

Alpharetta, GA 30004

Attn: Thomas C. Priore, Executive Chairman

Telephone: (800) 935-5961

 

Priority is a leading provider of merchant acquiring and commercial payment solutions, offering unique product capabilities to SMBs, enterprises and distribution partners in the United States. Priority was founded in 2005 with a mission to build a merchant inspired payments platform that would advance the goals of its SMB and enterprise clients and distribution partners. Since 2013, Priority has grown from the 38th largest U.S. merchant acquirer to become the 13th largest as of 2017, measured by Visa and MasterCard purchase volume according to The Nilson Report. Priority is currently the 6th largest non-bank merchant acquirer in the United States. In 2017, Priority processed over 439 million transactions and over $34 billion in bankcard payment volume for approximately 174,000 merchants. In the three months ended March 31, 2018, Priority processed over 110 million transactions and over $9 billion in bankcard payment volume across approximately the same number of merchants. Headquartered in Alpharetta, GA, Priority has approximately 480 employees and is led by an experienced group of payments executives.

 

The Business Combination and Purchase Agreement

 

Business Combination; Business Combination Consideration

 

Upon the closing of the transactions contemplated by the Purchase Agreement, M I Acquisitions will acquire 100% of the issued and outstanding equity securities of Priority, which will result in Priority becoming a wholly-owned subsidiary of M I Acquisitions.

 

The consideration to be paid by M I Acquisitions to Sellers in the business combination is a number of shares of M I Acquisitions’ common stock equal to Priority’s equity value (which the Purchase Agreement defines as of the signing date as the $947.8 million enterprise value of Priority, less the net debt of Priority, subject to certain adjustments as described in the Purchase Agreement) divided by $10.30. If Priority acquires or contracts to acquire any businesses prior to the closing of the Business Combination that increase Priority’s Earnout Adjusted EBITDA in aggregate by more than $9.0 million, Priority’s enterprise value will increase by multiplying the incremental increase in Earnout Adjusted EBITDA of such acquisition by 12.5, provided that estimated synergies related to any such acquisitions and proposed acquisitions included in the Earnout Adjusted EBITDA calculation of Priority shall be capped at 20% of the Earnout Adjusted EBITDA of the applicable acquisition with respect to the 12-month period immediately preceding the consummation of such acquisition. In order to be included in the above calculation, any agreements to acquire a business must be subject only to payment of cash and/or other consideration to the target and must close within 30 days following closing of the Business Combination. In addition, any cash that Priority spends to acquire any technology assets, up to $5.0 million, to purchase securities from the M I’s founders pursuant to the Founders Share Agreement or to extend the time we have to complete a business combination, will be included in the calculation of net debt as cash and cash equivalents (which would reduce the amount of net debt, effectively increasing the assumed equity value of Priority and increasing the number of shares that would be issued to the Sellers).

 

An additional 9.8 million shares of M I Acquisitions common stock may be issued as earn out consideration to the Sellers, or at their election, to members of Priority’s management or other service providers post-business combination pursuant to the Earnout Incentive Plan—4.9 million shares for the first earn-out and 4.9 million shares for the second earn-out. For the first earn-out, the Earnout Adjusted EBITDA of M I Acquisitions must be no less than $82.5 million for the year ending December 31, 2018 and the M I Acquisitions 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, the Earnout Adjusted EBITDA of M I Acquisitions must be no less than $91.5 million for the year ending December 31, 2019 and the M I Acquisitions 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. Furthermore, pursuant to the Founders Share Agreement, Priority agreed to purchase 421,107 of the units issued to the Founders in a private placement immediately prior to M I Acquisitions’ initial public offering, and 453,210 shares of common stock of M I Acquisitions issued to the Founders, for an aggregate purchase price of approximately $2.1 million. In addition, pursuant to the Founders Share Agreement, the Founders will forfeit 174,863 founder’s shares at the closing of the Business Combination, which shares may be reissued to the Founders if one of the earn outs described herein (and relating to the Purchase Agreement consideration) is achieved.

 

 

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After the Business Combination, assuming no redemptions of common stock for cash, M I Acquisitions’ current public stockholders (the “Public Stockholders”) will own approximately 7.4% of the post-Business Combination entity, M I Acquisitions’ current directors, officers and affiliates will own approximately 1.1% of the post-Business Combination entity, and the Sellers (including the holders receiving shares distributed by PIH) will own approximately 91.5% of the post-Business Combination entity. Assuming redemption by holders of 61.4% of 4.9 million shares of M I Acquisitions outstanding public common stock, M I Acquisitions’ Public Stockholders will own approximately 3.0% of the post-Business Combination entity, M I Acquisitions’ current directors, officers and affiliates will own approximately 1.1% of the post-Business Combination entity, and the Sellers (including the holders receiving shares distributed by PIH) will own approximately 95.9% of the post-Business Combination entity.

 

The consummation of the Business Combination is conditioned upon the majority of the shares of common stock voted by M I Acquisitions’ stockholders present and entitled to vote at the special meeting voting in favor of the Business Combination Proposal and the majority of the outstanding shares of common stock voting in favor of each of the Amendments Proposals. For more information about the closing conditions to the Business Combination, see the section entitled “The Purchase Agreement-Conditions to Closing” elsewhere in this proxy statement.

 

Management

 

Effective as of the closing date, the board of directors of M I Acquisitions will consist of five members, all of whom will be designated by Sellers by written notice to M I Acquisitions immediately prior to the closing. For a period of approximately two years following the closing, the post-closing entity will allow one representative designated by Magna Management, LLC, a company controlled by certain of our insiders (“Magna Management”), to attend and participate in all meetings and other activities of the board of directors as a non-voting observer.

 

Three directors will be deemed to be “independent directors” under Nasdaq rules and Rule 10A-3 under the Exchange Act, including Marc Manuel, our current Chief Financial Officer. Thomas Priore and John Priore, the Executive Chairman and the Chief Executive Officer, respectively, of the combined company after the consummation of the Business Combination, will also be directors. In addition, the Sellers expect to appoint two additional directors after the consummation of the Business Combination, subject to a vote by the board of directors to increase the number of board seats and to fill such newly-created positions. The Sellers have not yet selected who will serve in those two additional board seats, but do not expect that such persons will qualify as “independent directors” under Nasdaq rules. See “Directors, Executive Officers, Executive Compensation and Corporate Governance—Directors and Executive Officers after the Business Combination” elsewhere in this proxy statement. 

 

The Purchase Agreement

 

On February 26, 2018, M I Acquisitions and the Sellers entered into the Purchase Agreement, pursuant to which M I Acquisitions will acquire all of the outstanding equity interests of Priority. The Purchase Agreement was amended and restated on March 26, 2018 and April 17, 2018. Upon the consummation of the Business Combination, Priority will become a wholly-owned subsidiary of M I Acquisitions, and the name of M I Acquisitions will be changed to Priority Technology Holdings, Inc.

 

The consideration for the transactions contemplated by the Purchase Agreement consists of shares of M I Acquisitions common stock, calculated as set forth above in “—The Business Combination and Purchase Agreement—Business Combination; Business Combination Consideration.”

 

The obligations of both parties to consummate the Purchase Agreement and the transactions contemplated thereby 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) holders of a majority of the outstanding shares of common stock approving the Business Combination in accordance with M I Acquisition’s Amended and Restated Certificate of Incorporation; (c) there being no less than $20 million remaining in the trust account immediately after the closing of the acquisition, 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 Acquisitions’ organizational documents.

 

The obligations of Priority to consummate the transactions contemplated by the Purchase Agreement, in addition to the conditions described above, are conditioned upon each of the following (none of which can be satisfied until the closing of the Business Combination), among other things:

 

 

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·M I Acquisitions complying with all of its obligations required to be performed pursuant to the covenants in the Purchase Agreement;

 

·the representations and warranties of M I Acquisitions being true on and as of the closing date of the acquisition; and

 

·M I Acquisitions’ common stock remaining listed for trading on Nasdaq.

 

The obligations of M I Acquisitions to consummate the transactions contemplated by the Purchase Agreement, in addition to the conditions described above in the first paragraph of this section, are conditioned upon each of the following (none of which can be satisfied until the closing of the Business Combination), among other things:

 

·Priority complying with all of its obligations required to be performed pursuant 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 Business Combination.

 

For more information about the closing conditions to the Business Combination, see the section entitled “The Purchase Agreement-Conditions to Closing” elsewhere in this proxy statement.

 

Other Agreements Relating to the Business Combination

 

Founders Share Agreement

 

Concurrently with the Purchase Agreement, the founding stockholders of M I Acquisitions (the “Founders”) and Priority entered into a purchase agreement (the “Founders Share Agreement”), a copy of which is attached hereto as Annex B, pursuant to which Priority agreed to purchase 421,107 of the units issued to the Founders in a private placement immediately prior to M I Acquisitions’ initial public offering, and 453,210 shares of common stock of M I Acquisitions issued to the Founders, for an aggregate purchase price of approximately $2.1 million. In addition, pursuant to the Founders Share Agreement, the Founders will forfeit 174,863 founder’s shares at the closing of the Business Combination, which shares may be reissued to the Founders if one of the earn outs described herein (and relating to the Purchase Agreement consideration) is achieved.

 

Letter Agreement

 

In addition, the Founders and Thomas C. Priore, the Executive Chairman of Priority, entered into a letter agreement (the “Letter Agreement”) pursuant to which the Founders granted Thomas Priore (i) the right to purchase at any time all or some of the Founders’ remaining shares of common stock of M I Acquisitions 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 any proposed transfer of shares by the Founders. A copy of the Letter Agreement is attached hereto as Annex C.

 

Registration Rights Agreement

 

In connection with the Business Combination, M I Acquisitions and the Priority stockholders will enter into a Registration Rights Agreement to provide for the registration of the common stock being issued to the Priority stockholders in connection with the Business Combination. The Priority stockholders will be entitled to “piggy-back” registration rights with respect to registration statements filed following the consummation of the Business Combination, as well as certain demand rights.

 

Recommendations of the Board of Directors and Reasons for the Business Combination

 

After careful consideration of the terms and conditions of the Purchase Agreement and the related agreements, the board of directors of M I Acquisitions has determined that the Business Combination and the transactions contemplated thereby are fair to and in the best interests of M I Acquisitions and its stockholders. The board of directors did not obtain a fairness opinion on which to base its assessment. However, in considering the Business Combination with Priority, our management team and board of directors determined that Priority met, in some fashion, all of the criteria for our target company screening:

 

 

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•       Intelligible business model with public market comparables

 

Priority is a leading provider of merchant acquiring and commercial payment solutions with proprietary technology and infrastructure, ranking as the 6th largest non-bank acquirer as per “The Nilson Report”. Because several of Priority’s peers such as Global Payments Inc. (NYSE: GPN) and Worldpay Inc. (NYSE: WP) have strong public markets followings and support from investors and investment banks, we believe that Priority’s business model will be easily understood by the investment community. Additionally, in 2016, FinTech Acquisition Corp., a $100.0 million special purpose acquisition corporation, completed its acquisition of CardConnect Corp., which was subsequently sold to First Data Corporation at a price per share of $15.00 per share. We believe that this set a strong precedent in the marketplace for electronic payments companies merging with special purpose acquisition companies and will provide further support from the investment community. Furthermore, as further described later in this section, the board believes that the transaction represents an attractive investment opportunity due to the Priority’s post-Business Combination valuation discount to similar publicly-listed comparable companies.

 

•       Proprietary and/or value-added products/services with sustainable competitive advantage

 

Priority’s solutions are delivered through its internally developed enterprise suites, which include: MX Connect, MX Merchant and CPX. MX Connect provides Priority’s consumer payments reselling partners with automated tools that support low friction merchant on-boarding, underwriting and risk management, client service, and commission processing through a single mobile-enabled, web-based interface. The result is a smooth merchant activation onto Priority’s flagship consumer payments offering, MX Merchant, which provides core processing and business solutions to SMB clients, including a flexible and customizable set of business applications that help better manage critical business functions and revenue performance. CPX, like the MX Product line, provides a complete solution suite designed to monetize all types of B2B payments by maximizing automation for buyers and suppliers. Using these value-added product suites and a customer-focused approach, Priority strives to maintain low attrition rates in comparison to competitors. Priority’s attrition is approximately 12%. According to Adil Consulting, competing acquirers in the SMB segment have attrition rates that average 23%. We believe this provides Priority with a sustainable competitive advantage to its peers.

 

•       Active in a positively-viewed industry that may be fragmented with high barriers to entry

 

According to The Nilson Report, the card and electronic consumer payment volume in the United States is projected to increase from $7.5 trillion in 2016 to $10.0 trillion by 2021, representing a 5.9% compound annual growth rate. According to The Nilson Report, purchase volume on credit, debit, electronic benefits transfer and prepaid cards in the United States was approximately $6 trillion in 2016 and is estimated to reach nearly $8.3 trillion by 2021, a CAGR of 6.7%. Priority believes that the larger B2B market is somewhat less penetrated with card and other electronic payments and is poised for continued growth in the future. This long-term trend towards electronic payments and the growth of SMBs provide strong opportunity for Priority to continue to grow through both organic business development and acquisition of select, market participants. Furthermore, the electronic consumer payment industry requires participants to maintain and continuously improve internal technology and infrastructure, keeping barriers to entry relatively high. Therefore, we believe that Priority has positioned itself well to protect against market competition and from losing customers to new companies in the industry.

 

•       Strong and experienced management team supported by a motivated controlling counterparty seeking to take advantage of improved liquidity and access to public markets

 

Priority’s leadership team has extensive expertise in the industry with over 150 years of combined financial technology, payment processing, or other corporate functional expertise. John Priore, Priority’s Chief Executive Officer, has over 26 years of experience including serving as an Executive Vice President of Financial Systems at Ingenico and a Divisional Vice President at First Data Corporation. Bruce Mattox, Priority’s Chief Financial Officer, has over 31 years of experience and is a former Vice President and Divisional Controller at Wachovia Bank of Georgia and is a former Controller and Director at First Data Merchant Services. We expect that all key Priority executives will continue with the combined company following the business combination. Thomas Priore, Priority’s Executive Chairman and its majority owner, has over 25 years of experience in corporate and financial management and over 17 years of experience building companies from start-ups to institutional caliber enterprises. In addition, the Priority equityholders will all receive equity consideration in the transaction. We believe that management and the existing Priority equityholders have aligned their future business strategy to include the benefits of continued access to public markets to support their ongoing development of the business.

 

 

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•       Meaningful business size of at least ~$100.00 million in enterprise value with established and predictable history of revenue and profitability

 

Following closing of the Business Combination, the expected pro forma enterprise value of the company will be approximately $1,003 million, which creates a company well above M I Acquisitions management’s targeted enterprise value minimum threshold of $100.0 million. Furthermore, since 2015, Priority has had consistent and growing annual revenue and Earnout Adjusted EBITDA. Annual revenue and annual Earnout Adjusted EBITDA have both increased for every fiscal year since 2015 and based upon current projections, is expected to continue to increase through 2019, with a 12% net revenue CAGR and a 19% Earnout Adjusted EBITDA CAGR over such period. We believe that Priority’s historic financial performance and projected future financial performance illustrate the strength of Priority as a partner for M I Acquisitions.

 

During several M I Acquisitions meetings of our executive team and in on-going consultation with the board of directors, a substantial amount of time was spent evaluating and reviewing the transaction consideration of $947.8 million to acquire 100% of the equity of Priority that had been negotiated by the management team with Priority equityholders. It was determined in consultation with our board and advisors that the best methodology for evaluating the consideration being paid to Priority would be to use the market comparable method, specifically looking at historical or projected EV/ Adjusted EBITDA multiples (enterprise value to Adjusted EBITDA) of what we viewed as similar publicly listed merchant acquirers or processors in comparison to Priority’s pro forma multiples pre-transaction. It was determined in January 2018, that similar public companies traded at approximately 14.7x Projected 2018 EV/Adjusted EBITDA multiple, representing a strong premium to the consideration being paid in the Priority transaction of 11.8x Priority's 2018 Projected EV/Earnout Adjusted EBITDA. Our executive team and the board consulted with Chardan Capital Markets about the consideration being paid to acquire Priority and about the strength of the company on an EV/Earnout Adjusted EBITDA valuation basis and Earnout Adjusted EBITDA growth basis in comparison to its peers on an EV/ Adjusted EBITDA valuation basis and Adjusted EBITDA growth basis, respectively. Priority projects a 38% Adjusted EBITDA growth rate for 2017 to 2018, in comparison to public company comparables who reflect a 13.0% Adjusted EBITDA growth rate over the same period.

 

For more information about M I Acquisitions’ decision making process, please see the section entitled “Proposal No. 1 – The Business Combination Proposal – The Board of Directors Reasons for the Approval of the Business Combination”. 

 

M I Acquisitions’ board of directors recommends that M I Acquisitions stockholders vote:

 

 

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·FOR the Business Combination Proposal;
·FOR the Authorized Share Increase Proposal;
·FOR the Board Declassification Proposal;
·FOR the Voting Threshold Proposal;
·FOR the Section 203 Proposal;
·FOR the Additional Amendments Proposal;
·FOR the 2018 Equity Incentive Plan Proposal;
·FOR the Earnout Incentive Plan Proposal;
·FOR the Nasdaq Proposal; and
·FOR the Adjournment Proposal.

 

Interests of Certain Persons in the Business Combination

 

When you consider the recommendation of M I Acquisitions’ board of directors in favor of adoption of the Business Combination Proposal and other proposals, you should keep in mind that M I Acquisitions’ directors and officers have interests in the Business Combination that are different from, or in addition to, your interests as a stockholder, including:

 

·

In the absence of stockholder approval for a further extension, if the proposed Business Combination is not completed by September 17, 2018, M I Acquisitions will be forced to liquidate. In such event, the 1,327,527 shares of M I Acquisitions common stock held by M I Acquisitions officers, directors and affiliates, which were acquired prior to the IPO for an aggregate purchase price of $25,000, will be worthless, as will the 421,107 private units that were acquired simultaneously in connection with the IPO for an aggregate purchase price of $4,211,070. Such shares of common stock and units had an aggregate market value of approximately $18,996,529 based on the closing price of M I Acquisitions’ common stock of $10.50 and M I Acquisitions’ warrants $1.51, on the Nasdaq Capital Market as of the Record Date;

 

· Unless M I Acquisitions consummates the Business Combination, its officers, directors and Initial Stockholders will not receive reimbursement for any out-of-pocket expenses incurred by them. As of the Record Date, M I Acquisitions’ officers, directors and Initial Stockholders were entitled to approximately $8,353.52 in reimbursable expenses. As a result, the financial interest of M I Acquisitions’ officers, directors and Initial Stockholders or their affiliates could influence its officers’ and directors’ motivation in selecting Priority as a target and therefore there may be a conflict of interest when it determined that the Business Combination is in the stockholders’ best interest;

 

·If M I Acquisitions liquidates prior to the consummation of a business combination, our insiders have contractually agreed that they will be personally liable to ensure that the proceeds in the trust account are not reduced by the claims of target business or claims of vendors or other entities that are owed money by us for services rendered or contracted for or products sold to us. Therefore, our directors and officers have a financial interest in consummating the Business Combination, thereby resulting in a conflict of interest; and

 

·In addition, the exercise of M I Acquisitions’ directors’ and officers’ discretion in agreeing to changes or waivers in the terms of the Business Combination may result in a conflict of interest when determining whether such changes or waivers are appropriate and in the best interests of M I Acquisitions stockholders.

 

Quorum and Required Vote for Proposals for the Special Meeting

 

As of the Record Date, there were 6,681,512 shares of M I Acquisitions common stock issued and outstanding. Only M I Acquisitions stockholders who hold shares of common stock of record as of the close of business on the Record Date are entitled to vote at the special meeting of stockholders or any adjournment of the special meeting. Approval of each of the Amendments Proposals requires the affirmative vote of the holders of a majority of the outstanding shares of common stock of M I Acquisitions. Approval of each of the other proposals requires the affirmative vote of the holders of a majority of the issued and outstanding shares of common stock entitled to vote thereon as of the record date present in person or represented by proxy at the special meeting. Abstentions are considered present for the purposes of establishing a quorum but will have the same effect as a vote “AGAINST” any proposal. Broker non-votes will not be considered present for the purposes of establishing a quorum. A broker non-vote will have no effect on any of the proposals.

 

 

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Please note that the Business Combination will not be completed unless the Business Combination Proposal and each of the Amendments Proposals are approved by stockholders at the special meeting.

 

As of the Record Date, M I Acquisitions’ Initial Stockholders, either directly or beneficially, owned and were entitled to vote 1,748,634 shares of common stock, or approximately 26.2% of M I Acquisitions’ outstanding shares of common stock. M I Acquisitions’ Initial Stockholders have agreed to vote their respective shares of common stock acquired by them in favor of the Business Combination Proposal, the Earnout Incentive Plan Proposal and the Amendments Proposals. They have indicated that they intend to vote their shares, as applicable, “FOR” the Adjournment Proposal and the other proposals, although there is no agreement in place with respect to these proposals.

 

Appraisal Rights

 

Holders of M I Acquisitions common stock are not entitled to appraisal rights under the DGCL.

 

Emerging Growth Company

 

M I Acquisitions is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (or JOBS Act). It is anticipated that after the consummation of the Business Combination, M I Acquisitions will continue to be an “emerging growth company.” As an emerging growth company, M I Acquisitions will be eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. These include, but are not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and the requirement to obtain stockholder approval of any golden parachute payments not previously approved.

 

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. M I Acquisitions has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, M I Acquisitions, as an emerging growth company, will not adopt the new or revised standard until the time private companies are required to adopt the new or revised standard. This may make comparison of M I Acquisitions’ financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

 

M I Acquisitions could remain an emerging growth company until the last day of its fiscal year following September 19, 2021 (the fifth anniversary of the consummation of its initial public offering). However, if M I Acquisitions’ non-convertible debt issued within a three-year period or its total revenues exceed $1.07 billion or the market value of its shares of common stock that are held by non-affiliates exceeds $700 million on the last day of the second fiscal quarter of any given fiscal year, M I Acquisitions would cease to be an emerging growth company as of the following fiscal year.

 

Anticipated Accounting Treatment

 

The Business Combination will be accounted for as a reverse merger, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, M I Acquisitions will be treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of Priority issuing stock for the net assets of M I Acquisitions, accompanied by a recapitalization. The net assets of M I Acquisitions will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination will be those of Priority.

 

 

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Priority has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances:

 

· The Priority stockholder group will have the greatest voting interest in the combined entity under the no and maximum redemption scenarios with over 91.5% and 95.9% voting interest, respectively;

 

·The largest individual minority stockholder comes from Priority;

 

·

The combined company’s board of directors will initially consist of five directors, all of which will be selected by Priority;

 

·Priority will hold C-suite management roles for the combined company.

 

Other factors were considered, including size of the entities and the location of the combined company’s headquarters, noting that the preponderance of evidence as described above is indicative that Priority is the accounting acquirer in the Business Combination.

 

Regulatory Approvals

 

The Business Combination and the other transactions contemplated by the Purchase Agreement are not subject to any additional federal or state regulatory requirements or approvals, including the Hart-Scott Rodino Antitrust Improvements Act of 1976.

 

 

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summary HISTORICAL FINANCIAL INFORMATION OF PRIORITy

 

The following table shows summary historical financial information of Priority for the periods and as of the dates indicated. The data below as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016, and 2015 has been derived from Priority’s audited historical consolidated financial statements and the data as of March 31, 2018 and for the three-month periods ended March 31, 2018 and 2017 were derived from the unaudited financial statements as of March 31, 2018 and for the three months ended March 31, 2018 and 2017 included elsewhere in this proxy statement. The data below as of December 31, 2015 has been derived from Priority’s audited historical consolidated financial statements not included in this proxy statement. The information presented below should be read in conjunction with “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Priority” and the financial statements and the notes related thereto, included elsewhere in this proxy statement.

 

    Three Months Ended
March 31,
    Year Ended December 31,  
    2018     2017     2017     2016     2015  
Statement of Operations Data:   (in thousands)  
Total revenue   $ 115,596     $ 93,092     $ 425,619     $ 344,114     $ 286,244  
Total operating expenses     (107,718 )     (86,528 )     (390,370 )     (318,274 )     (271,685 )
Income from operations     7,878       6,564       35,249       25,840       14,559  
Total other expenses     (11,055 )     (7,785 )     (30,655 )     (5,654 )     (5,292 )
Net (loss) income     (3,177 )     (1,221 )     4,594       20,186       9,267  
(Loss) earnings per unit - basic and diluted   $ (0.72 )   $ (0.23 )   $ 0.85     $ 2.01     $ 0.92  
Weighted average units outstanding - basic and diluted     4,445       5,289       5,098       10,000       10,000  

 

 

   

As of

March 31,

    As of December 31,  
    2018     2017     2016     2015  
Balance Sheet Data:   (in thousands)  
Total assets   $ 255,925     $ 266,707     $ 256,050     $ 265,707  
Total liabilities     417,996       356,862       140,043       162,182  
Total members' (deficit) equity     (162,071 )     (90,155 )     116,007       103,525  

 

 

 21 

 

 

 

SUMMARY HISTORICAL FINANCIAL INFORMATION OF M I ACQUISITIONS

 

The following table shows summary historical financial information of M I Acquisitions for the periods and as of the dates indicated. The summary historical financial information of M I Acquisitions as of December 31, 2017 and 2016, for the years ended December 31, 2017 and 2016, and for the period from April 23, 2015 (Inception) through December 31, 2015 was derived from the audited historical financial statements of M I Acquisitions and the summary financial information as of March 31, 2018 and for the three-month periods ended March 31, 2018 and 2017 were derived from the unaudited financial statements as of March 31, 2018 and for the three months ended March 31, 2018 and 2017 included elsewhere in this proxy statement. The data below as of December 31, 2015 and for the period from April 23, 2015 (inception) through December 31, 2015 has been derived from M I Acquisitions' audited historical financial statements not included in this proxy statement. The following table should be read in conjunction with “M I Acquisitions Management’s Discussion and Analysis of Financial Condition and Results of Operations of M I Acquisitions” and the historical financial statements and the notes and schedules related thereto, included elsewhere in this proxy statement. 

 

    Three Months Ended March 31,     Year Ended December 31,     Period from April 23, 2015
(Inception) through
 
    2018     2017     2017     2016     December 31, 2015  
Statement of Operations Data:                                        
Total expenses   $ 321,228     $ 245,466     $ 951,721     $ 173,196     $ 10,226  
Operating loss     (321,228 )     (245,466 )     (951,721 )     (173,196 )     (10,226 )
Other income:                                        
Interest income     174,478       56,621       399,166       37,701       -  
Extinguishment of debt     -       -       -       27,500       -  
Settlement income     -       -       427,701       -       -  
Net loss   $ (146,750 )   $ (188,845 )   $ (124,854 )   $ (107,995 )   $ (10,226 )
Net loss per shares of common stock - basic and diluted   $ (0.13 )   $ (0.09 )   $ (0.19 )   $ (0.06 )   $ (0.01 )
Weighted average shares of common stock outstanding - basic and diluted     2,352,922       2,310,710       2,330,884       1,664,794       1,250,000  

 

    As of March 31,     As of December 31,  
    2018     2017     2016     2015  
Balance Sheet Data:                                
Total assets   $ 55,464,473     $ 55,264,031     $ 55,150,604     $ 183,957  
Total liabilities     1,797,622       1,450,430       1,212,149       169,183  
Common stock subject to possible conversion     48,666,845       48,813,595       48,938,449       -  
Total stockholders' equity     5,000,006       5,000,006       5,000,006       14,774  

 

 

 22 

 

 

 

SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

The following summary unaudited pro forma condensed combined financial data (the "summary pro forma data") gives effect to the transaction contemplated by the Business Combination and the other transaction described in the section entitled "Unaudited Pro Forma Condensed Combined Financial Information". The Business Combination will be accounted for as a reverse merger, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, M I Acquisitions will be treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of Priority issuing stock for the net assets of M I Acquisitions, accompanied by a recapitalization. The net assets of M I Acquisitions will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination will be those of Priority. The summary unaudited pro forma condensed combined balance sheet data as of March 31, 2018 gives effect to the Business Combination as if it had occurred on March 31, 2018. The summary unaudited pro forma condensed combined statement of operations data for the three months ended March 31, 2018 and year ended December 31, 2017 gives effect to the Business Combination as if it had occurred on January 1, 2017.

 

The summary pro forma data have been derived from, and should be read in conjunction with, the more detailed unaudited pro forma condensed combined financial information of the combined company appearing elsewhere in this proxy statement and the accompanying notes to the pro forma financial statements. The unaudited pro forma condensed combined financial information is based upon, and should be read in conjunction with, the historical consolidated financial statements and related notes of M I Acquisitions and Priority for the applicable periods included in this proxy statement. The summary pro forma data have been presented for informational purposes only and are not necessarily indicative of what the combined company's financial position or results of operations actually would have been had the Business Combination been completed as of the dates indicated. In addition, the summary pro forma data do not purport to project the future financial position or operating results of the combined company.

 

The unaudited pro forma condensed combined financial information has been prepared assuming four alternative levels of redemption into cash of M I Acquisitions’ common stock:

 

· Assuming No Redemption – GS Warrant Exercised: This presentation assumes that no current M I Acquisitions’ public stockholders exercise redemption rights with respect to their shares for a pro rata portion of the fund in M I Acquisitions’ trust account and the GS Warrant issued by Priority was exercised or is otherwise no longer outstanding at the Closing.

 

· Assuming Maximum Redemption – GS Warrant Exercised: This presentation assumes that stockholders holding 3.4 million of M I Acquisitions’ public shares exercise their redemption rights and that such shares are redeemed for their pro rata share ($10.43 per share) of the funds in its trust account and the GS Warrant issued by Priority was exercised or is otherwise no longer outstanding at the Closing. Per the M I Acquisitions IPO registration statement, a public stockholder, together with any affiliate of his or hers, or any other person with whom he or she is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act) will be restricted from seeking conversion rights with respect to 20% or more of the shares of common stock sold in the IPO. To the knowledge of M I Acquisitions, there were no M I Acquisitions public shareholders holding 20% or more of the shares of common stock sold in the IPO as of the March 31, 2018. Under the Purchase Agreement, the consummation of the Business Combination is conditioned upon, among other things, the amount of Available Cash (defined as the amount of the funds contained in the trust account as of immediately prior to the Closing without giving effect to the redemptions minus the amounts required to consummate any redemptions) not being less than the minimum cash amount of $20 million. Furthermore, the Company will only proceed with the Business Combination if it will have net tangible assets of at least $5,000,001 upon consummation of the Business Combination. This scenario gives effect to M I Acquisitions public share redemptions of approximately 3.4 million shares for aggregate redemption payments of $35.4 million. Aggregate redemption payments of $35.4 million calculated as $55.4 million in the trust account per the pro forma condensed combined balance sheet less $20.0 million required available cash from the trust account. Public redemption shares of approximately 3.4 million shares calculated as $35.4 million redemption payments divided by estimated per share redemption value of $10.43 ($55,383,870 in trust account per the pro forma condensed combined balance sheet divided by 5,310,109 M I Acquisitions public shares).

 

 

 23 

 

 

 

· Assuming No Redemption – GS Warrant Outstanding: This presentation assumes that no current M I Acquisitions’ public stockholders exercise redemption rights with respect to their shares for a pro rata portion of the fund in M I Acquisitions’ trust account and the GS Warrant issued by Priority was not exercised and remains outstanding at the Closing.

 

· Assuming Maximum Redemption – GS Warrant Outstanding: This presentation assumes that stockholders holding 3.4 million of M I Acquisitions’ public shares exercise their redemption rights and that such shares are redeemed for their pro rata share ($10.43 per share) of the funds in its trust account and the GS Warrant issued by Priority was not exercised and remains outstanding at the Closing. Per the M I Acquisitions IPO registration statement, a public stockholder, together with any affiliate of his or hers, or any other person with whom he or she is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act) will be restricted from seeking conversion rights with respect to 20% or more of the shares of common stock sold in the IPO. To the knowledge of M I Acquisitions, there were no M I Acquisitions public shareholders holding 20% or more of the shares of common stock sold in the IPO as of March 31, 2018. Under the Purchase Agreement, the consummation of the Business Combination is conditioned upon, among other things, the amount of Available Cash (defined as the amount of the funds contained in the trust account as of immediately prior to the Closing without giving effect to the redemptions minus the amounts required to consummate any redemptions) not being less than the minimum cash amount of $20 million. Furthermore, the Company will only proceed with the Business Combination if it will have net tangible assets of at least $5,000,001 upon consummation of the Business Combination. This scenario gives effect to M I Acquisitions public share redemptions of approximately 3.4 million shares for aggregate redemption payments of $35.4 million. Aggregate redemption payments of $35.4 million calculated as $55.4 million in trust account per the pro forma condensed combined balance sheet less $20.0 million required available cash from the trust account. Public redemption shares of approximately 3.4 million shares calculated as $35.4 million redemption payments divided by estimated per share redemption value of $10.43 ($55,383,870 in trust account per the pro forma condensed combined balance sheet divided by 5,310,109 M I Acquisitions public shares).

 

    Scenario 1: GS Warrant Outstanding     Scenario 2: GS Warrant Exercised  
          Pro Forma           Pro Forma  
    Pro Forma     Combined     Pro Forma     Combined  
    Combined     (Assuming     Combined     (Assuming  
    (Assuming     Maximum     (Assuming     Maximum  
    No Redemptions)     Redemptions)     No Redemptions)     Redemptions)  
(in thousands, except share and per share data)                        
Summary Unaudited Pro Forma Condensed Combined Statement of Operations Data                                
Three Months Ended March 31, 2018                                
Revenues   $ 115,596     $ 115,596     $ 115,596     $ 115,596  
Net loss per share - basic   $ (0.04 )   $ (0.05 )   $ (0.04 )   $ (0.04 )
Weighted-average shares outstanding - basic     65,514,157       62,121,613       66,747,225       63,354,681  
Net loss per share - diluted   $ (0.04 )   $ (0.04 )   $ (0.04 )   $ (0.04 )
Weighted-average shares outstanding - diluted     66,747,225       63,354,681       66,747,225       63,354,681  
                                 
Summary Unaudited Pro Forma Condensed Combined Statement of Operations Data                                
Year Ended December 31, 2017                                
Revenues   $ 425,619     $ 425,619     $ 425,619     $ 425,619  
Net earnings per share - basic   $ 0.04     $ 0.04     $ 0.04     $ 0.04  
Weighted-average shares outstanding - basic     65,514,157       62,132,126       66,747,225       63,365,194  
Net earnings per share - diluted   $ 0.04     $ 0.04     $ 0.04     $ 0.04  
Weighted-average shares outstanding - diluted     66,747,225       63,365,194       66,747,225       63,365,194  
                                 
Summary Unaudited Pro Forma Condensed Combined Balance Sheet Data as of March 31, 2018                                
Total assets   $ 295,809     $ 260,425     $ 295,809     $ 260,425  
Total liabilities   $ 417,905     $ 417,905     $ 417,905     $ 417,905  
Total deficit   $ (122,096 )   $ (157,480 )   $ (122,096 )   $ (157,480 )

 

 

Subsequent to the period ending March 31, 2018, M I Acquisitions redeemed 377,231 outstanding public shares at a price per share of $10.507 (or approximately $3,963,539 in aggregate) in connection with the stockholder vote to extend the liquidation date to September 17, 2018, resulting in a reduction of M I’s trust account by approximately $3,963,539.

 

 24 

 

 

 

PRICE RANGE OF SECURITIES AND DIVIDENDS

 

M I Acquisitions’ units, shares of common stock and warrants are each quoted on the Nasdaq stock market under the symbols “MACQU,” “MACQ,” and “MACQW,” respectively. Each of M I Acquisitions’ units consists of one share of common stock and one warrant to purchase one share of common stock. M I Acquisitions’ units commenced trading on September 14, 2016 and M I Acquisitions’ shares of common stock and warrants commenced trading on December 6, 2016.

 

The table below sets forth the high and low sale prices of M I Acquisitions’ common stock, warrants, and units as reported on the Nasdaq Stock Market for the period from December 6, 2016 (the date on which our common stock and warrants were first quoted on the Nasdaq Stock Market) through May 15, 2018 and for the period from September 14, 2016 (the date on which our units were first quoted on the Nasdaq Stock Market) through May 15, 2018.

 

    Units     Common Stock     Warrants  
Quarter ended:   High     Low     High     Low     High     Low  
June 30, 2018 (through the Record Date)   $

13.26

  $ 10.72   $ 10.75   $

10.04

  $

1.74

  $ 0.72
March 31, 2018   $ 12.95     $ 10.61     $ 11.41     $ 8.34     $ 0.95     $ 0.31  
December 31, 2017   $ 10.65     $ 10.33     $ 10.30     $ 10.11     $ 0.48     $ 0.30  
September 30, 2017   $ 10.49     $ 10.21     $ 10.20     $ 10.01     $ 0.35     $ 0.30  
June 30, 2017   $ 10.50     $ 10.17     $ 10.24     $ 10.01     $ 0.35     $ 0.28  
March 31, 2017   $ 10.32     $ 10.15     $ 10.25     $ 9.93     $ 0.48     $ 0.20  
December 31, 2016*   $ 10.21     $ 9.97     $ 10.04     $ 10.00     $ 0.29     $ 0.17  
September 30, 2016**   $ 10.05     $ 10.00       -       -       -       -  

 

*Reflects period from December 6, 2016 (the date on which our common stock and warrants were first quoted on the Nasdaq Stock Market) through December 31, 2016

 

**Reflects period from September 14, 2016 (the date on which our units were first quoted on the Nasdaq Stock Market) through December 31, 2016

 

M I Acquisitions has not paid any cash dividends on its common stock to date and does not intend to pay cash dividends prior to the completion of the Business Combination or another business combination. The payment of cash dividends following the Business Combination will be dependent upon the combined company’s revenues and earnings, if any, capital requirements and general financial condition. The payment of any dividends subsequent to the Business Combination will be within the discretion of its then board of directors.

 

Priority’s securities are not publicly traded.

 

 

 25 

 

 

RISK FACTORS

 

You should consider carefully the following risk factors, as well as the other information set forth in this proxy statement, before making a decision with respect to the Business Combination and the proposals to be voted on at the special meeting.

 

Risk Factors Related to Priority’s Business

 

The following risk factors apply to the business and operations of Priority and will also apply to the business and operations of the combined company following the completion of the Business Combination. As used in this section the term “Priority” refers to Priority and the combined company, as applicable. Any of the risk factors described below could significantly and adversely affect Priority’s and/or the combined company’s business, prospects, sales, revenues, gross profit, cash flows, financial condition, and results of operations.

 

The payment processing industry is highly competitive and such competition is likely to increase, which may adversely influence the prices Priority can charge to merchants for its services and the compensation Priority must pay to its distribution partners, and as a result, Priority’s profit margins.

 

The payment processing industry is highly competitive. Priority primarily compete in the small and medium business (“SMB”) merchant industry. Competition has increased recently as other providers of payment processing services have established a sizable market share in the SMB merchant acquiring industry. Priority’s primary competitors for SMB merchants in these markets include financial institutions and their affiliates and well-established payment processing companies that target SMB merchants directly and through third parties, including Bank of America Merchant Services, Chase Merchant Services, Elavon, Inc. (a subsidiary of U.S. Bancorp), Wells Fargo Merchant Services, First Data Corporation, Worldpay, Inc., Global Payments, Inc., TSYS and Square. Priority also competes with many of these same entities for the assistance of distribution partners. For example, many of Priority’s distribution partners are not exclusive to us but also have relationships with Priority’s competitors, such that Priority has to continually expend resources to maintain those relationships. Priority’s growth will depend on the continued growth of payments with credit, debit and prepaid cards (“Electronic Payments”), particularly Electronic Payments to SMB merchants, and Priority’s ability to increase its market share through successful competitive efforts to gain new merchants and distribution partners.

 

In addition, many financial institutions, subsidiaries of financial institutions or well-established payment-enabled technology providers with which we compete, have substantially greater capital, technological, management and marketing resources than Priority has. These factors may allow Priority’s competitors to offer better pricing terms to merchants and more attractive compensation to distribution partners, which could result in a loss of Priority’s potential or current merchants and distribution partners. Competing with financial institutions is also challenging because, unlike Priority, they often bundle processing services with other banking products and services. This competition may effectively limit the prices Priority can charge its merchants, cause Priority to increase the compensation it pays to its distribution partners and require Priority to control costs aggressively in order to maintain acceptable profit margins. Priority’s current and future competitors may also develop or offer services that have price or other advantages over the services Priority provides.

 

Priority is also facing new, well capitalized, competition from emerging technology and non-traditional payment processing companies as well as traditional companies offering alternative electronic payments services and payment enabled software solutions. If these new entrants gain a greater share of total electronic payments transactions, they could impact Priority’s ability to retain and grow its relationships with merchants and distribution partners. Acquirers may be susceptible to the adoption by the broader merchant community of payment enabled software versus terminal based payments.

 

To acquire and retain a segment of Priority’s merchants, Priority depends in part on distribution partners that may not serve it exclusively and are subject to attrition.

 

Priority relies in significant part on the efforts of independent sales organizations (“ISOs”), independent software vendors (“ISVs”) and referral partners to market its services to merchants seeking to establish a merchant acquiring relationship. These distribution partners seek to introduce Priority, as well as its competitors, to newly established and existing SMB merchants, including retailers, restaurants and other businesses. Generally, its agreements with distribution partners (with the exception of a portion of our integrated technology partners and bank referral partners) are not exclusive, and distribution partners retain the right to refer merchants to other merchant acquirers. Gaining and maintaining loyalty or exclusivity can require financial concessions to maintain current distribution partners and merchants or to attract potential distribution partners and merchants from Priority’s competitors. Priority has been required, and expect to be required in the future, to make concessions when renewing contracts with its distribution partners and such concessions can have a material impact on Priority’s financial condition or operating performance. If these distribution partners switch to another merchant acquirer, cease operations or become insolvent, Priority will no longer receive new merchant referrals from them, and it risks losing existing merchants that were originally enrolled by them. Additionally, Priority’s distribution partners are subject to the requirements imposed by its bank sponsors, which may result in fines to them for non-compliance and may, in some cases, result in these entities ceasing to refer merchants to Priority. Priority cannot accurately predict the level of attrition of its distribution partners or merchants in the future, particularly those merchants it acquired as customers in the portfolio acquisitions it has completed in the past five years, which makes it difficult for it to forecast growth. If Priority is unable to establish relationships with new distribution partners or merchants, or otherwise increase its transaction processing volume in order to counter the effect of this attrition, its revenues will decline.

 

 26 

 

 

Unauthorized disclosure of merchant or cardholder data, whether through breach of our computer systems, computer viruses, or otherwise, could expose Priority to liability, protracted and costly litigation and damage its reputation.

 

Priority is responsible for data security for itself and for third parties with whom it partners, including by contract and under the rules and regulations established by the payment networks, such as Visa, MasterCard, Discover and American Express, as well as debit card networks. These third parties include merchants, Priority’s distribution partners and other third-party service providers and agents. Priority and other third parties collect, process, store and/or transmit sensitive data, such as names, addresses, social security numbers, credit or debit card numbers and expiration dates, driver’s license numbers and bank account numbers. Priority has ultimate liability to the payment networks and its bank sponsors that register it with Visa or MasterCard for its failure or the failure of third parties with whom Priority contracts to protect this data in accordance with payment network requirements. The loss, destruction or unauthorized modification of merchant or cardholder data by Priority or its contracted third parties could result in significant fines, sanctions and proceedings or actions against Priority by the payment networks, governmental bodies, consumers or others.

 

Information security risks for Priority and its competitors have substantially increased in recent years in part due to the proliferation of new technologies and the increased sophistication, resources and activities of hackers, terrorists, activists, organized crime, and other external parties, including hostile nation-state actors. Examples of such information security risks are the recent Spectre and Meltdown threats which, rather than acting as viruses, were design flaws in many CPUs that allowed programs to steal data stored in the memory of other running programs and required patch software to correct. The techniques used by these bad actors to obtain unauthorized access, disable or degrade service, sabotage systems or utilize payment systems in an effort to perpetrate financial fraud change frequently and are often difficult to detect. Furthermore, threats may derive from human error, fraud or malice on the part of employees or third parties, or may result from accidental technological failure. For example, certain of Priority’s employees have access to sensitive data that could be used to commit identity theft or fraud. Concerns about security increase when Priority transmits information electronically because such transmissions can be subject to attack, interception or loss. Also, computer viruses can be distributed and spread rapidly over the internet and could infiltrate Priority’s systems or those of its contracted third parties. Denial of service or other attacks could be launched against Priority for a variety of purposes, including interfering with its services or to create a diversion for other malicious activities. These types of actions and attacks and others could disrupt Priority’s delivery of services or make them unavailable. Any such actions or attacks against Priority or its contracted third parties could hurt its reputation, force it to incur significant expenses in remediating the resulting impacts, expose it to uninsured liability, result in the loss of its bank sponsors or its ability to participate in the payment networks, subject it to lawsuits, fines or sanctions, distract its management or increase its costs of doing business. For example, Priority is presently evaluating whether the recent Spectre and Meltdown threats may require it to replace substantial portions of its current technology hardware and infrastructure in order to mitigate the risk associated with those threats. If it is required to replace a substantial portion of our current technology hardware and infrastructure, either as a result of the Spectre and Meltdown threats or similar future threats, it would likely incur substantial capital expenditures, which may materially and adversely affect its free cash flow and results of operations as a result.

 

Priority and its contracted third parties could be subject to breaches of security by hackers. Its encryption of data and other protective measures may not prevent unauthorized access to or use of sensitive data. A breach of a system may subject Priority to material losses or liability, including payment network fines, assessments and claims for unauthorized purchases with misappropriated credit, debit or card information, impersonation or other similar fraud claims. A misuse of such data or a cybersecurity breach could harm Priority’s reputation and deter merchants from using electronic payments generally and its services specifically, thus reducing its revenue. In addition, any such misuse or breach could cause Priority to incur costs to correct the breaches or failures, expose it to uninsured liability, increase its risk of regulatory scrutiny, subject it to lawsuits, and result in the imposition of material penalties and fines under state and federal laws or by the payment networks. While Priority maintains insurance coverage that may, subject to policy terms and conditions, cover certain aspects of cyber risks, its insurance coverage may be insufficient to cover all losses. In addition, a significant cybersecurity breach of Priority’s systems or communications could result in payment networks prohibiting it from processing transactions on their networks or the loss of its bank sponsors that facilitate its participation in the payment networks, either of which could materially impede its ability to conduct business.

 

 27 

 

 

The confidentiality of the sensitive business information and personal consumer information that resides on Priority’s systems and its associated third parties’ systems is critical to its business. While Priority maintains controls and procedures to protect the sensitive data it collects, it cannot be certain that these measures will be successful or sufficient to counter all current and emerging technology threats that are designed to breach these systems in order to gain access to confidential information. For example, although Priority generally requires that our agreements with distribution partners or its service providers which may have access to merchant or cardholder data include confidentiality obligations that restrict these parties from using or disclosing any merchant or cardholder data except as necessary to perform their services under the applicable agreements, Priority cannot guarantee that these contractual measures will prevent the unauthorized use, modification, destruction or disclosure of data or allow it to seek reimbursement from the contracted party. In addition, many of Priority’s merchants are small and medium businesses that may have limited competency regarding data security and handling requirements and may thus experience data breaches. Any unauthorized use, modification, destruction or disclosure of data could result in protracted and costly litigation, and Priority incurring significant losses.

 

In addition, Priority’s agreements with its bank sponsors and its third-party payment processors (as well as payment network requirements) require Priority to take certain protective measures to ensure the confidentiality of merchant and consumer data. Any failure to adequately comply with these protective measures could result in fees, penalties, litigation or termination of Priority’s bank sponsor agreements.

 

Any significant unauthorized disclosure of sensitive data entrusted to Priority would cause significant damage to its reputation and impair its ability to attract new integrated technology and referral partners, and may cause parties with whom Priority already has such agreements to terminate them.

 

As a result of information security risks, Priority must continuously develop and enhance its controls, processes, and practices designed to protect its computer systems, software, data and networks from attack, damage, or unauthorized access. This continuous development and enhancement will require Priority to expend additional resources, including to investigate and remediate significant information security vulnerabilities detected. Despite its investments in security measures, Priority is unable to assure that any security measures will not be subject to system or human error.

 

Priority may experience breakdowns in our processing systems that could damage client relations and expose it to liability.

 

Priority’s core business depends heavily on the reliability of its processing systems. A system outage could have a material adverse effect on its business, financial condition, and results of operations. Not only would Priority suffer damage to its reputation in the event of a system outage, but it may also be liable to third parties. Many of Priority’s contractual agreements with clients require it to pay penalties if its systems do not meet certain operating standards. To successfully operate its business, Priority must be able to protect its processing and other systems from interruption, including from events that may be beyond its control. Events that could cause system interruptions include, but are not limited to, fire, natural disaster, unauthorized entry, power loss, telecommunications failure, computer viruses, terrorist acts, cyber-attacks, and war. Although Priority has taken steps to protect against data loss and system failures, there is still risk that it may lose critical data or experience system failures. To help protect against these events, Priority performs the vast majority of disaster recovery operations itself, but it also utilizes select third parties for certain operations. To the extent Priority outsources its disaster recovery, Priority is at risk of the vendor’s unresponsiveness or other failures in the event of breakdowns in its systems. In addition, Priority’s property and business interruption insurance may not be adequate to compensate it for all losses or failures that may occur.

 

Governmental regulations designed to protect or limit access to or use of consumer information could adversely affect Priority’s ability to effectively provide its services to merchants.

 

Governmental bodies in the United States have adopted, or are considering the adoption of, laws and regulations restricting the use, collection, storage, and transfer of, and requiring safeguarding of, non-public personal information. Priority’s operations are subject to certain provisions of these laws. Relevant federal privacy laws include the Gramm-Leach-Bliley Act of 1999, which applies directly to a broad range of financial institutions and indirectly, or in some instances directly, to companies that provide services to financial institutions. These laws and regulations restrict the collection, processing, storage, use and disclosure of personal information, require notice to individuals of privacy practices and provide individuals with certain rights to prevent the use and disclosure of protected information. These laws also impose requirements for safeguarding and proper destruction of personal information through the issuance of data security standards or guidelines.

 

The Federal Trade Commission’s information safeguarding rules under the Gramm-Leach-Bliley Act require Priority to develop, implement and maintain a written, comprehensive information security program containing safeguards that are appropriate for its size and complexity, the nature and scope of its activities and the sensitivity of any customer information at issue. Priority’s financial institution clients are subject to similar requirements under the guidelines issued by the federal banking regulators. As part of their compliance with these requirements, each of Priority’s financial institution clients is expected to have a program in place for responding to unauthorized access to, or use of, customer information that could result in substantial harm or inconvenience to customers and they are also responsible for Priority’s compliance efforts as a major service provider.  In addition, regulators are proposing new laws or regulations which could require Priority to adopt certain cybersecurity and data handling practices. In many jurisdictions consumers must be notified in the event of a data breach, and such notification requirements continue to increase in scope and cost.  The changing privacy laws in the United States create new individual privacy rights and impose increased obligations on companies handling personal data.

 

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In addition, there are state laws restricting the ability to collect and utilize certain types of information such as Social Security and driver’s license numbers. Certain state laws impose similar privacy obligations as well as obligations to provide notification of security breaches of computer databases that contain personal information to affected individuals, state officers and consumer reporting agencies and businesses and governmental agencies that own data.

 

In connection with providing services to its merchants, Priority is required by regulations and contracts with its merchants and with its financial institution referral partners to provide assurances regarding the confidentiality and security of non-public consumer information. These contracts require periodic audits by independent companies regarding Priority’s compliance with industry standards and also allow for similar audits regarding best practices established by regulatory guidelines. The compliance standards relate to Priority’s infrastructure, components and operational procedures designed to safeguard the confidentiality and security of non-public consumer personal information shared by its merchants with it. Priority’s ability to maintain compliance with these standards and satisfy these audits will affect its ability to attract, grow and maintain business in the future. If Priority fails to comply with the laws and regulations relating to the protection of data privacy, Priority could be exposed to suits for breach of contract or to governmental proceedings. In addition, Priority’s relationships and reputation could be harmed, which could inhibit its ability to retain existing merchants and distribution partners and obtain new merchants and distribution partners.

 

If more restrictive privacy laws or rules are adopted by authorities in the future, Priority’s compliance costs may increase and its ability to perform due diligence on, and monitor the risk of, its current and potential merchants may decrease, which could create liability for it. Additionally, Priority’s opportunities for growth may be curtailed by its compliance capabilities or reputational harm, and its potential liability for security breaches may increase.

 

Potential distribution partners and merchants may be reluctant to switch to a new merchant acquirer, which may adversely affect Priority’s growth.

 

Many potential distribution partners and merchants worry about potential disadvantages associated with switching merchant acquirers, such as a loss of accustomed functionality, increased costs and business disruption. For Priority’s distribution partners, switching to it from another merchant acquirer or integrating with it may be perceived by them as a significant undertaking. As a result, many distribution partners and merchants often resist change. There can be no assurance that Priority’s strategies for overcoming potential reluctance to change vendors or initiate a relationship with Priority will be successful, and this resistance may adversely affect its growth and performance results.

 

Because Priority relies on third-party vendors to provide products and services, it could be adversely impacted if it fails to fulfill their obligations.

 

Priority’s business is dependent on third-party vendors to provide it with certain products and services. For example, Priority utilizes First Data and TSYS to provide authorization and settlement services. Priority's current amended and restated processing agreement with First Data was entered into in December 2014 and will remain in effect through December 2019 and automatically renews for successive one year terms thereafter unless either party provides written notice of non-renewal to the other party. Priority's current processing agreement with TSYS was entered into in November 2014 and will remain in effect through December 2019 and automatically renews for successive one year terms thereafter unless either party provides written notice of non-renewal to the other party. In this regard, Priority has provided TSYS with a notice of its intent to terminate the agreement effective as of April 3, 2019, in connection with its intent to negotiate and enter into a new agreement with TSYS. There can be no assurance, however, that Priority will be successful in negotiating or entering into such a subsequent agreement with TSYS, and in the event it is unable to do so, Priority may determine to shift all or a portion of its current TSYS processing work to other providers.

 

The failure of these vendors, such as First Data and TSYS, to perform their obligations in a timely manner could adversely affect Priority’s operations and profitability. In addition, if Priority is unable to renew its existing contracts with its most significant vendors, such as First Data and TSYS, it might not be able to replace the related product or service at the same cost, which would negatively impact its profitability. Specifically, while Priority believes it would be able to locate alternative vendors to provide substantially similar services at comparable rates, or otherwise replicate such services internally, it is not assured that a change will not be disruptive to Priority's business, which could potentially lead to a material adverse impact on its revenue and profitability until resolved.

 

Changes in card association and debit network fees or products could increase costs or otherwise limit Priority’s operations.

 

From time to time, card associations and debit networks increase the organization and/or processing fees (known as interchange fees) that they charge. It is possible that competitive pressures will result in Priority absorbing a portion of such increases in the future, which would increase its operating costs, reduce its profit margin, and adversely affect its business, operating results, and financial condition. In addition, the various card associations and networks prescribe certain capital requirements. Any increase in the capital level required would further limit Priority’s use of capital for other purposes.

 

Priority is subject to extensive government regulation, and any new laws and regulations, industry standards or revisions made to existing laws, regulations or industry standards affecting the electronic payments industry may have an unfavorable impact on its business, financial condition and results of operations.

 

Priority is subject to numerous regulations that affect electronic payments including, U.S. financial services regulations, consumer protection laws, escheat regulations, and privacy and information security regulations. Regulation and proposed regulation of its industry has increased significantly in recent years. Changes to statutes, regulations or industry standards, including interpretation and implementation of statutes, regulations or standards, could increase its cost of doing business or affect the competitive balance. For example, the Trump Administration has called for changes in existing regulatory requirements, including those applicable to financial services.

 

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Priority cannot predict the impact, if any, of such changes on its business. It is likely that some policies adopted by the new administration will benefit Priority, while others will negatively affect it. Until Priority knows what changes are adopted, it will not know whether in total it benefits from, or is negatively affected by, the changes. Failure to comply with regulations may have an adverse effect on Priority’s business, including the limitation, suspension or termination of services provided to, or by, third parties, and the imposition of penalties or fines.

 

Interchange fees, which are typically paid by the payment processor to the issuer in connection with electronic payments, are subject to increasingly intense legal, regulatory, and legislative scrutiny. In particular, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), significantly changed the United States financial regulatory system, including by regulating and limiting debit card fees charged by certain issuers, allowing merchants to set minimum dollar amounts for the acceptance of credit cards and allowing merchants to offer discounts or other incentives for different payment methods.

 

Rules implementing the Dodd-Frank Act also contain certain prohibitions on payment network exclusivity and merchant routing restrictions. These restrictions could limit the number of debit transactions, and prices charged per transaction, which would negatively affect Priority’s business. The Dodd-Frank Act also created the Consumer Financial Protection Bureau (the “CFPB”), which has assumed responsibility for most federal consumer protection laws, and the Financial Stability Oversight Council, which has the authority to determine whether any non-bank financial company, which may include Priority within the definitional scope, should be supervised by the Board of Governors of the Federal Reserve System (the “Federal Reserve”), because it is systemically important to the United States financial system. Any such designation would result in increased regulatory burdens on Priority’s business, which increases its risk profile and may have an adverse impact on its business, financial condition and results of operations.

 

Priority and many of our merchants are subject to Section 5 of the Federal Trade Commission Act prohibiting unfair or deceptive acts or practices. That statement and other laws, rules and or regulations, including the Telemarketing Sales Act, may directly impact the activities of certain of Priority’s merchants and, in some cases, may subject Priority, as the merchant’s electronic processor or provider of certain services, to investigations, fees, fines and disgorgement of funds if it were deemed to have improperly aided and abetted or otherwise provided the means and instrumentalities to facilitate the illegal or improper activities of the merchant through its services. Various federal and state regulatory enforcement agencies, including the Federal Trade Commission and state attorneys general, have authority to take action against non-banks that engage in unfair or deceptive practices or violate other laws, rules and regulations and to the extent Priority is processing payments or providing services for a merchant that may be in violation of laws, rules and regulations, it may be subject to enforcement actions and as a result may incur losses and liabilities that may impact its business.

 

Priority’s business may also be subject to the Fair Credit Reporting Act (the “FCRA”), which regulates the use and reporting of consumer credit information and also imposes disclosure requirements on entities that take adverse action based on information obtained from credit reporting agencies. Priority could be liable if its practices under the FCRA are not in compliance with the FCRA or regulations under it.

 

Separately, the Housing Assistance Tax Act of 2008 included an amendment to the Internal Revenue Code of 1986, as amended (the “Code”), that requires, the filing of yearly information returns by payment processing entities and third-party settlement organizations with respect to payments made in settlement of electronic payment transactions and third-party payment network transactions occurring in that calendar year. Reportable transactions are also subject to backup withholding requirements. Priority could be liable for penalties if its information returns does not comply with these regulations.

 

These and other laws and regulations, even if not directed at Priority, may require it to make significant efforts to change its products and services and may require that it incurs additional compliance costs and changes how it prices its services to merchants. Implementing new compliance efforts may be difficult because of the complexity of new regulatory requirements, and may cause Priority to devote significant resources to ensure compliance. Furthermore, regulatory actions may cause changes in business practices by Priority and other industry participants which could affect how Priority markets, prices and distributes its products and services, which could limit its ability to grow, reduce its revenues, or increase its costs. In addition, even an inadvertent failure to comply with laws and regulations, as well as rapidly evolving social expectations of corporate fairness, could damage Priority’s business or its reputation.

 

Failure to comply with the rules established by payment networks or standards established by third-party processors could result in those networks or processors imposing fines or the networks suspending or terminating Priority’s registrations through its bank sponsors.

 

In order to provide our merchant acquiring services, Priority is registered through its bank sponsors with the Visa and MasterCard networks as service providers for member institutions. More than $32 billion of Priority’s processing volume in the fiscal year ended December 31, 2017 was attributable to transactions processed on the Visa and MasterCard networks. As such, Priority and its merchants are subject to payment network rules. The payment networks routinely update and modify requirements applicable to merchant acquirers including rules regulating data integrity, third-party relationships (such as those with respect to bank sponsors), merchant chargeback standards and Payment Card Industry and Data Security Standards (the “PCI DSS”). Standards governing Priority’s third-party processing agreements may also impose requirements with respect to compliance with PCI DSS.

 

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If Priority does not comply with the payment network requirements or standards governing its third-party processing agreements, its transaction processing capabilities could be delayed or otherwise disrupted, and recurring non-compliance could result in the payment networks or third-party processors seeking to fine it, the payment networks suspending or terminating Priority’s registrations which allow it to process transactions on their networks, which would make it impossible for Priority to conduct its business on its current scale.

 

A card association has sent Priority an inquiry regarding a subset of merchants representing approximately 2% of 2017 processing volume for potential noncompliance with card association rules. The card association identified at least one merchant as having engaged in deceptive practices with consumers and being noncompliant with their card association requirements, which resulted in excessive chargebacks.  See the discussion below on chargeback risks in the section entitled “Risk Factors—Fraud by merchants or others could cause us to incur losses.” The card association has also found evidence that certain merchants have engaged in activities that violated certain card association rules, including entering transactions that did not represent bona fide business between the merchant of record and the cardholder, and processing sales for the same cardholder under different merchant accounts over time.  The card association also raised concern about data security failures by merchants or merchant non-compliance with PCI DSS and about a customer relationship vendor that some of its merchants use. 

 

As a result of these and other findings, Priority took certain corrective actions, after reviewing these merchant accounts for violations of card association rules and our terms of service, including opening duplicate or multiple accounts to avoid compliance with our chargeback limitations.  For additional information on types of merchant fraud, see “Risk Factors—Fraud by merchants or others could cause us to incur losses.” The corrective actions increase the costs of Priority’s compliance program which were passed along to resellers representing these merchants.  As a result of some of these discrete corrective actions as well as standard risk assessment conducted through Priority’s risk management systems, it has terminated certain merchant accounts. Priority continues to evaluate additional existing and new merchant accounts for similar activity, and the number and type of merchants it will onboard in the future could potentially be affected. In addition, if Priority is in the future forced to close a material number of its merchant accounts as a result of separate inquiries from card associations of its own internal risk assessment process, such closures could have a material adverse effect on its business, financial condition, and results of operations. Priority has not been fined by the credit card association, however, had Priority not resolved the issues presented in such notices, Priority may be required to pay a fine.  If in the future Priority is unable to recover fines from or pass-through costs to its merchants and/or resellers, or recover losses under insurance policies, Priority would experience a financial loss, and any such loss could be significant.

 

Under certain circumstances specified in the payment network rules or our third-party processing agreements, Priority may be required to submit to periodic audits, self-assessments or other assessments of our compliance with the PCI DSS. Such activities may reveal that we have failed to comply with the PCI DSS. In addition, even if Priority complies with the PCI DSS, there is no assurance that Priority will be protected from a security breach. The termination of our registration with the payment networks, or any changes in payment network or issuer rules that limit its ability to provide merchant acquiring services, could have an adverse effect on its payment processing volumes, revenues and operating costs. If an audit or self-assessment under PCI DSS identifies any deficiencies that Priority needs to remediate, the remediation efforts may distract its management team and be expensive and time consuming.

 

Changes in payment network rules or standards could adversely affect Priority’s business, financial condition and results of operations.

 

Payment network rules are established and changed from time to time by each payment network as they may determine in their sole discretion and with or without advance notice to their participants. The timelines imposed by the payment networks for expected compliance with new rules have historically been, and may continue to be, highly compressed, requiring Priority to quickly implement changes to its systems which increases the risk of non-compliance with new standards. In addition, the payment networks could make changes to interchange or other elements of the pricing structure of the merchant acquiring industry that would have a negative impact on Priority’s results of operations.

 

There may be a decline in the use of electronic payments as a payment mechanism for consumers or adverse developments with respect to the electronic payments industry in general which could adversely affect Priority’s business, financial condition and operating results.

 

Maintaining or increasing Priority’s profitability is dependent on consumers and businesses continuing to use credit, debit and prepaid cards at the same or greater rate than previously. If consumers do not continue to use these cards for their transactions or if there is a change in the mix of payments between cash and electronic payments which is adverse to Priority, its business could decline and we could incur material losses. Regulatory changes may also result in merchants seeking to charge customers additional fees for use of electronic payments. Additionally, in recent years, increased incidents of security breaches have caused some consumers to lose confidence in the ability of retailers to protect their information.

 

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In order to remain competitive and to continue to increase our revenues and earnings, Priority must continually update its products and services, a process which could result in increased costs and the loss of revenues, earnings, merchants and distribution partners if the new products and services do not perform as intended or are not accepted in the marketplace.

 

The electronic payments industry in which Priority competes is subject to rapid technological changes and is characterized by new technology, product and service introductions, evolving industry standards, changing merchant needs and the entrance of non-traditional competitors. Priority is subject to the risk that its existing products and services become obsolete, and that it is unable to develop new products and services in response to industry demands. Priority’s future success will depend in part on its ability to develop or adapt to technological changes and the evolving needs of its resellers, merchants and the industry at large. Priority is continually involved in many business and technology projects, such as CPX, MX Connect and MX Merchant. MX Connect and MX Merchant provide resellers and merchant clients, a flexible and customizable set of business applications that help better manage critical business work functions and revenue performance using core payment processing as its leverage point. Additionally, CPX provides Accounts Payable (“AP”) automation solutions that offers enterprise clients a bridge for buyer to supplier payments. These may require investment in products or services that may not directly generate revenue. These projects carry the risks associated with any development effort, including difficulty in determining market demand and timing for delivery of new products and services, cost overruns, delays in delivery and performance problems. In addition, new products and offerings may not perform as intended or generate the business or revenue growth expected. Defects in Priority’s software and errors or delays in its processing of electronic transactions could result in additional development costs, diversion of technical and other resources from its other development efforts, loss of credibility with current or potential distribution partners and merchants, harm to its reputation, fines imposed by card networks, or exposure to liability claims. Any delay in the delivery of new products or services or the failure to differentiate Priority’s products and services could render them less desirable, or possibly even obsolete, to its merchants. Additionally, the market for alternative payment processing products and services is evolving, and it may develop too rapidly or not rapidly enough for Priority to recover the costs it has incurred in developing new products and services.

 

Priority may not be able to continue to expand its share of the existing electronic payments industry or expand into new markets, which would inhibit its ability to grow and increase its profitability.

 

Priority’s future growth and profitability depend, in part, upon its continued expansion within the markets in which it currently operates, the emergence of other markets for electronic payments and its ability to penetrate these markets and its current distribution partners’ merchant base. Future growth and profitability of Priority’s business may depend upon its ability to penetrate new industries and markets for electronic payments.

 

Priority’s ability to expand into new industries and markets also depends upon its ability to adapt its existing technology or to develop new technologies to meet the particular needs of each new industry or market. Priority may not have adequate financial or technological resources to develop effective and secure services or distribution channels that will satisfy the demands of these new industries or markets. Penetrating these new industries or markets may also prove to be more challenging or costly or take longer than Priority may anticipate. If Priority fails to expand into new and existing electronic payments industries and markets, it may not be able to continue to grow our revenues and earnings.

 

Priority’s acquisitions subject it to a variety of risks that could harm its business.

 

Priority reviews and completes selective acquisition opportunities as part of its growth strategy. There can be no assurances that Priority will be able to complete suitable acquisitions for a variety of reasons, including the identification of and competition for acquisition targets, the need for regulatory approvals, the inability of the parties to agree to the structure or purchase price of the transaction and our inability to finance the transaction on commercially acceptable terms. In addition, any potential acquisition will subject Priority to a variety of other risks:

 

·Priority may need to allocate substantial operational, financial and management resources in integrating new businesses, technologies and products, and management may encounter difficulties in integrating the operations, personnel or systems of the acquired businesses;

 

·acquisitions may have a material adverse effect on Priority’s business relationships with existing or future merchants or distribution partners, in particular, to the extent it consummates acquisitions that increase its sales and distribution capabilities;

 

·Priority may assume substantial actual or contingent liabilities, known and unknown;

 

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·acquisitions may not meet Priority’s expectations of future financial performance;

 

·counter-parties to the acquisition transactions may fail to perform their obligations under the applicable acquisition related documents, and/or negligently or intentionally commit misrepresentations as to the condition of the acquired business, asset, or go-forward enterprise;

 

·Priority may experience delays or reductions in realizing expected synergies or benefits;

 

·Priority may incur substantial unanticipated costs or encounter other problems associated with acquired businesses or devote time and capital investigating a potential acquisition and not complete the transaction;

 

·Priority may be unable to achieve its intended objectives for the transaction; and

 

·Priority may not be able to retain the key personnel, customers and suppliers of the acquired business.

 

Additionally, Priority may be unable to maintain uniform standards, controls, procedures and policies as it attempts to integrate the acquired businesses, and this may lead to operational inefficiencies. These factors related to Priority’s acquisition strategy, among others, could have a material adverse effect on its business, financial condition and results of operations.

 

Potential changes in the competitive landscape, including disintermediation from other participants in the payments value chain, could harm Priority’s business.

 

Priority expects that the competitive landscape will continue to change, including the following developments:

 

·Rapid and significant changes in technology may result in technology-led marketing that is focused on business solutions rather than pricing, new and innovative payment methods and programs that could place Priority at a competitive disadvantage and reduce the use of our services;

 

·Competitors, distribution partners, and other industry participants may develop products that compete with or replace Priority’s value-added products and services;

 

·Participants in the financial services, payments and technology industries may merge, create joint ventures or form other business combinations that may strengthen their existing business services or create new payment services that compete with Priority; and

 

·New services and technologies that Priority develops may be impacted by industry-wide solutions and standards related to migration to EMV chip technology, tokenization or other security-related technologies.

 

Failure to compete effectively against any of these competitive threats could have a material adverse effect on Priority’s business, financial condition and results of operations.

 

Priority may not be able to successfully manage its intellectual property and may be subject to infringement claims.

 

Priority relies on a combination of contractual rights and copyright, trademark, patent and trade secret laws to establish and protect its proprietary technology. Third parties may challenge, circumvent, infringe or misappropriate Priority’s intellectual property, or such intellectual property may not be sufficient to permit it to take advantage of current market trends or otherwise to provide competitive advantages, which could result in costly redesign efforts, discontinuance of service offerings or other competitive harm. Others, including Priority’s competitors, may independently develop similar technology, duplicate Priority’s services or design around its intellectual property and, in such cases, Priority could not assert its intellectual property rights against such parties. Further, Priority’s contractual arrangements may not effectively prevent disclosure of its confidential information or provide an adequate remedy in the event of unauthorized disclosure of its confidential information. Priority may have to litigate to enforce or determine the scope and enforceability of our intellectual property rights and know-how, which is expensive, could cause a diversion of resources and may not prove successful. Also, because of the rapid pace of technological change in Priority’s industry, aspects of its business and its services rely on technologies developed or licensed by third parties, and Priority may not be able to obtain or continue to obtain licenses and technologies from these third parties on reasonable terms or at all. The loss of intellectual property protection or the inability to license or otherwise use third-party intellectual property could harm Priority’s business and ability to compete.

 

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Priority may also be subject to costly litigation if its services and technology are alleged to infringe upon or otherwise violate a third-party’s proprietary rights. Third parties may have, or may eventually be issued, patents that could be infringed by Priority’s products, services or technology. Any of these third parties could make a claim of infringement against Priority with respect to its products, services or technology. Priority may also be subject to claims by third parties for patent, copyright or trademark infringement, breach of license or violation of other third-party intellectual property rights. Any claim from third parties may result in a limitation on Priority’s ability to use the intellectual property subject to these claims. Additionally, in recent years, individuals and groups have been purchasing intellectual property assets for the sole purpose of making claims of infringement or other violations and attempting to extract settlements from companies like Priority’s. Even if Priority believes that intellectual property related claims are without merit, defending against such claims is time consuming and expensive and could result in the diversion of the time and attention of Priority’s management and employees. Claims of intellectual property infringement or violation also might require Priority to redesign affected products or services, enter into costly settlement or license agreements, pay costly damage awards, or face a temporary or permanent injunction prohibiting Priority from marketing or selling certain of its products or services. Even if Priority has an agreement for indemnification against such costs, the indemnifying party, if any in such circumstances, may be unable to uphold its contractual obligations. If Priority cannot or does not license the infringed technology on reasonable terms or substitute similar technology from another source, Priority’s revenue and earnings could be adversely impacted.

 

Priority is subject to economic and political risk, the business cycles of its merchants and distribution partners and the overall level of consumer and commercial spending, which could negatively impact its business, financial condition and results of operations.

 

The electronic payments industry depends heavily on the overall level of consumer, commercial and government spending. Priority is exposed to general economic conditions that affect consumer confidence, consumer spending, consumer discretionary income and changes in consumer purchasing habits. A sustained deterioration in general economic conditions or increases in interest rates could adversely affect Priority’s financial performance by reducing the number or aggregate dollar volume of transactions made using electronic payments. If Priority’s merchants make fewer sales of their products and services using electronic payments, or consumers spend less money through electronic payments, Priority will have fewer transactions to process at lower dollar amounts, resulting in lower revenue. In addition, a weakening in the economy could force merchants to close at higher than historical rates, resulting in exposure to potential losses and a decline in the number of transactions that Priority processes. Priority also has material fixed and semi-fixed costs, including rent, debt service, contractual minimums and salaries, which could limit its ability to quickly adjust costs and respond to changes in its business and the economy.

 

Global economic, political and market conditions affecting the U.S. markets may adversely affect Priority’s business, results of operations and financial condition, including our revenue growth and profitability.

 

The current worldwide financial market situation, as well as various social and political tensions in the United States and around the world, may contribute to increased market volatility, may have long-term effects on the United States and may cause economic uncertainties or deterioration in the United States. The U.S. markets experienced extreme volatility and disruption during the economic downturn that began in mid-2007, and the U.S. economy was in a recession for several consecutive calendar quarters during the same period. In addition, the fiscal and monetary policies of foreign nations, such as Russia and China, may have a severe impact on U.S. financial markets.

 

As a result of the 2016 U.S. election, the Republican Party currently controls both the executive and legislative branches of government, which increases the likelihood that legislation may be adopted that could significantly affect the regulation of U.S. financial markets. Areas subject to potential change, amendment or repeal include the Dodd-Frank Act and the authority of the Federal Reserve and the Financial Stability Oversight Council. The United States may also potentially withdraw from or renegotiate various trade agreements and take other actions that would change current trade policies of the United States. Priority cannot predict which, if any, of these actions will be taken or, if taken, their effect on the financial stability of the United States. Such actions could have a significant adverse effect on Priority’s business, financial condition and results of operations, particularly in view of the regulatory oversight Priority presently faces. Priority cannot predict the effects of these or similar events in the future on the U.S. economy in general, or specifically on its business model or growth strategy, which typically involves the use of debt financing. To the extent a downturn in the U.S. economy impacts Priority’s merchant accounts, regulatory changes increase the burden it faces in operating its business, or disruptions in the credit markets prevent Priority from using debt to finance future acquisitions, Priority’s financial condition and results of operations may be materially and adversely impacted.

 

A substantial portion of all of Priority’s merchants are small- and medium-sized businesses, which may increase the impact of economic fluctuations and merchant attrition on it.

 

Priority markets and sells its solutions primarily to SMB merchants. SMB merchants are typically more susceptible to the adverse effects of economic fluctuations than larger businesses. Priority experiences attrition in merchants and merchant charge volume in the ordinary course of business resulting from several factors, including business closures, transfers of merchants’ accounts to its competitors and account closures that it initiates due to heightened credit risks relating to, or contract breaches by, a merchant. Adverse changes in the economic environment or business failures of our SMB merchants may have a greater impact on Priority than on its competitors who do not focus on SMB merchants to the extent that Priority does. Priority cannot accurately predict the level of SMB merchant attrition in the future. If Priority is unable to establish accounts with new merchants or otherwise increase its payment processing volume in order to counter the effect of this attrition, its revenues will decline.

 

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Priority’s systems and its third-party providers’ systems may fail due to factors beyond its control, which could interrupt its service, resulting in its inability to process, cause it to lose business, increase its costs and expose us to liability.

 

We depend on the efficient and uninterrupted operation of numerous systems, including Priority’s computer network systems, software, data centers and telecommunication networks, as well as the systems and services of its bank sponsors, the payment networks, third-party providers of processing services and other third parties. Priority’s systems and operations or those of its third-party providers, such as its provider of dial-up authorization services, or the payment networks themselves, could be exposed to damage or interruption from, among other things, fire, natural disaster, power loss, telecommunications failure, unauthorized entry, computer viruses, denial-of-service attacks, acts of terrorism, human error or sabotage, financial insolvency and similar events. Priority’s property and business interruption insurance may not be adequate to compensate it for all losses or failures that may occur. At present, Priority’s critical operational systems, such as its payment gateway, are fully redundant, while certain of its less critical systems are not. Therefore, certain aspects of Priority’s operations may be subject to interruption. Also, while Priority has disaster recovery policies and arrangements in place, they have not been tested under actual disasters or similar events.

 

Defects in Priority’s systems or those of third parties, errors or delays in the processing of payment transactions, telecommunications failures or other difficulties could result in failure to process transactions, additional operating and development costs, diversion of technical and other resources, loss of revenue, merchants and distribution partners, loss of merchant and cardholder data, harm to Priority’s business or reputation, exposure to fraud losses or other liabilities and fines and other sanctions imposed by payment networks.

 

Priority relies on other service and technology providers. If they fail or discontinue providing their services or technology generally or to Priority specifically, its ability to provide services to merchants may be interrupted, and, as a result, its business, financial condition and results of operations could be adversely impacted.

 

Priority relies on third parties to provide or supplement bankcard processing services and for infrastructure hosting services. Priority also relies on third parties for specific software and hardware used in providing our products and services. The termination by Priority’s service or technology providers of their arrangements with it or their failure to perform their services efficiently and effectively may adversely affect Priority’s relationships with its merchants and, if Priority cannot find alternate providers quickly, may cause those merchants to terminate their relationship with it.

 

Priority also relies in part on third parties for the development and access to new technologies, or updates to existing products and services for which third parties provide ongoing support, which increases the cost associated with new and existing product and service offerings. Failure by these third-party providers to devote an appropriate level of attention to Priority’s products and services could result in delays in introducing new products or services, or delays in resolving any issues with existing products or services for which third-party providers provide ongoing support.

 

Fraud by merchants or others could cause Priority to incur losses.

 

Priority faces potential liability for fraudulent electronic payment transactions initiated by merchants or others. Merchant fraud occurs when a merchant opens a fraudulent merchant account and conducts fraudulent transactions or when a merchant, rather than a customer (though sometimes working together with a customer engaged in fraudulent activities), knowingly uses a stolen or counterfeit card or card number to record a false sales transaction, or intentionally fails to deliver the merchandise or services sold in an otherwise valid transaction. Any time a merchant is unable to fund a chargeback, Priority has a number of contractual arrangements and other means of recourse to mitigate those risks. Nonetheless, there still is loss exposure in the event a merchant is unable to fund a chargeback. Additionally, merchant fraud occurs when employees of merchants change the merchant demand deposit accounts to their personal bank account numbers, so that payments are improperly credited to the employee’s personal account. Priority has established systems and procedures to detect and reduce the impact of merchant fraud, but it cannot be sure that these measures are or will be effective. Failure to effectively manage risk and prevent fraud could increase Priority’s chargeback or other liability.

 

Priority also has potential liability for losses caused by fraudulent card-based payment transactions. Card fraud occurs when a merchant’s customer uses a stolen card (or a stolen card number in a card-not-present transaction) to purchase merchandise or services. In a card-present transaction, where a merchant has an EMV, or “chip reader”, compliant machine, if the merchant swipes the card and receives authorization for the transaction from the issuer, the issuer remains liable for any loss. In a card-not-present transaction, or where a merchant lacks an EMV-capable machine even if the merchant receives authorization for the transaction, the merchant is liable for any loss arising from the transaction. Many of the merchants that Priority serves transact a substantial percentage of their sales in card-not-present transactions over the internet or in response to telephone or mail orders, which makes these merchants more vulnerable to fraud than merchants whose transactions are conducted largely in card-present transactions.

 

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Priority incurs liability when its merchants refuse or cannot reimburse it for chargebacks resolved in favor of their customers.

 

Priority has potential liability for chargebacks associated with the transactions it process. If a billing dispute between a merchant and a cardholder is not ultimately resolved in favor of the merchant, the disputed transaction is “charged back” to the merchant’s bank and credited or otherwise refunded to the cardholder. The risk of chargebacks is typically greater with those merchants that promise future delivery of goods and services rather than delivering goods or rendering services at the time of payment. If Priority or its bank sponsors are unable to collect the chargeback from the merchant’s account or reserve account (if applicable), or if the merchant refuses or is financially unable (due to bankruptcy or other reasons) to reimburse the merchant’s bank for the chargeback, Priority may bear the loss for the amount of the refund paid to the cardholder. Any increase in chargebacks not paid by Priority’s merchants could increase its costs and decrease its revenues. Priority has policies to manage merchant-related credit risk and often mitigate such risk by requiring collateral and monitoring transaction activity. Notwithstanding Priority’s programs and policies for managing credit risk, it is possible that a default on such obligations by one or more of Priority’s merchants could have a material adverse effect on its business.

 

Priority relies on bank sponsors, which have substantial discretion with respect to certain elements of its business practices, in order to process electronic payment transactions. If these sponsorships are terminated and Priority is not able to secure new bank sponsors, Priority will not be able to conduct its business.

 

Because Priority is not a bank, it is not eligible for membership in the Visa, MasterCard and other payment networks. These networks’ operating regulations require Priority to be sponsored by a member bank in order to process Electronic Payment transactions. Priority is currently registered with Visa and MasterCard through Citizens Bank, Wells Fargo and Synovus Bank. Priority is also subject to network operating rules promulgated by the National Automated Clearing House Association relating to payment transactions processed by it using the Automated Clearing House Network. For ACH payments, Priority’s ACH network (ACH.com) is sponsored by Atlantic Capital Bank, BB&T Bank and MB Financial Bank. From time to time, Priority may enter into other sponsorship relationships as well.

 

Priority’s bank sponsors may terminate their agreements with us if we materially breach the agreements and do not cure the breach within an established cure period, if our membership with Visa and/or MasterCard terminates, if we enter bankruptcy or file for bankruptcy, or if applicable laws or regulations, including Visa and/or MasterCard regulations, change to prevent either the applicable bank or Priority from performing services under the agreement. If these sponsorships are terminated and Priority is unable to secure a replacement bank sponsor within the applicable wind down period, Priority will not be able to process electronic payment transactions.

 

Furthermore, Priority’s agreements with its bank sponsors provide the bank sponsors with substantial discretion in approving certain elements of its business practices, including its solicitation, application and underwriting procedures for merchants. Priority cannot guarantee that its bank sponsors’ actions under these agreements will not be detrimental to it, nor can Priority provide assurance that any of its bank sponsors will not terminate their sponsorship of Priority in the future. Priority’s bank sponsors have broad discretion to impose new business or operational requirements on Priority, which may materially adversely affect its business. If Priority’s sponsorship agreements are terminated and Priority is unable to secure another bank sponsor, Priority will not be able to offer Visa or MasterCard transactions or settle transactions which would likely cause Priority to terminate its operations.

 

Priority’s bank sponsors also provide or supplement authorization, funding and settlement services in connection with its bankcard processing services. If Priority’s sponsorships agreements are terminated and it is unable to secure another bank sponsor, Priority will not be able to process Visa and MasterCard transactions which would have a material adverse effect on its business, financial condition and results of operations.

 

Since December 2016, the Office of the Comptroller of the Currency (the “OCC”) has been considering whether to issue a special purpose national bank charter for financial technology companies (“FinTech Charter”). OCC Comptroller Otting has recently suggested that the OCC could publish its position on the proposed charter by July 2018. In the event the OCC begins issuing FinTech Charters, Priority cannot predict which, if any, of its current or future competitors would take advantage of the charter, but such a development could increase the competitive risks discussed above, create new competitive risks such as Priority’s nonbank competitors being able to more easily access the payment networks without the requirement of a bank sponsor, which could provide them with a competitive advantage.

 

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Priority’s risk management policies and procedures may not be fully effective in mitigating its risk exposure in all market environments or against all types of risks.

 

Priority operates in a rapidly changing industry. Accordingly, its risk management policies and procedures may not be fully effective to identify, monitor, manage and remediate its risks. Some of its risk evaluation methods depend upon information provided by others and public information regarding markets, merchants or other matters that are otherwise inaccessible by Priority. In some cases, that information may not be accurate, complete or up-to-date. Additionally, Priority’s risk detection system is subject to a high degree of “false positive” risks being detected, which makes it difficult for Priority to identify real risks in a timely manner. If Priority’s policies and procedures are not fully effective or Priority is not always successful in capturing all risks to which it is or may be exposed, it may suffer harm to its reputation or be subject to litigation or regulatory actions that materially increase its costs and subject it to reputational damage that could limit its ability to grow and cause it to lose existing merchant clients.

 

Legal proceedings could have a material adverse effect on Priority’s business, financial condition or results of operations.

 

In the ordinary course of business, Priority may become involved in various litigation matters, including but not limited to commercial disputes and employee claims, and from time to time may be involved in governmental or regulatory investigations or similar matters arising out of Priority’s current or future business. Any claims asserted against Priority, regardless of merit or eventual outcome, could harm its reputation and have an adverse impact on its relationship with its merchants, distribution partners and other third parties and could lead to additional related claims. Certain claims may seek injunctive relief, which could disrupt the ordinary conduct of Priority’s business and operations or increase its cost of doing business. Priority’s insurance or indemnities may not cover all claims that may be asserted against Priority, and any claims asserted against it, regardless of merit or eventual outcome, may harm its reputation and cause it to expend resources in its defense. Furthermore, there is no guarantee that Priority will be successful in defending itself in future litigation. Should the ultimate judgments or settlements in any pending litigation or future litigation or investigation significantly exceed Priority’s insurance coverage, they could have a material adverse effect on its business, financial condition and results of operations.

 

Priority’s Executive Chairman, Thomas Priore, is presently subject to an SEC civil order pertaining to his prior involvement with a registered investment adviser, which could heighten the regulatory scrutiny of the combined company, and also raise concerns among prospective investors subsequent to completion of the Business Combination.

 

On June 21, 2010, the SEC filed a civil lawsuit against ICP Asset Management ("ICP") and Thomas Priore in his role as majority owner, President and Chief Investment Officer of ICP’s registered investment advisor. The SEC principally alleged that portfolio rebalancing trades executed by ICP at the height of the credit crisis, in connection with its management of the assets of four collateralized debt obligation vehicles (the Triaxx “CDOs"), violated certain fiduciary duties and obligations under the CDOs' trust indentures. The SEC contended that certain trades executed by ICP at purchase prices between the CDO trusts, should have been executed at then prevailing market prices and on an arms' length basis, and, by failing to do so, ICP caused the CDOs to overpay for securities in violation of its fiduciary duty. The SEC further alleged that the nature of certain trades were mischaracterized to investors and executed without requisite approvals from the CDOs' trustee. On August 14, 2012 Mr. Priore and ICP agreed to a civil settlement with regulators without admitting or denying the allegations, consenting to the entry of a civil order by the SEC. On March 11, 2015 the administrative settlement was entered pertaining to the SEC Order that barred Mr. Priore from associating with any broker, dealer, investment adviser, municipal securities dealer or transfer agent, and from participating in any offering involving a penny stock, for a minimum of five years from the date of the SEC Order with the right to apply to the applicable regulatory body for reentry thereafter.  The SEC Order does not, nor has it ever, prohibited Thomas Priore’s involvement with Priority, or his service as Executive Chairman of the combined company subsequent to the Business Combination. Nevertheless, it could serve to heighten the regulatory scrutiny faced by the combined company or investor sentiment pertaining to the Business Combination. During such time that the SEC bar remains in effect, the combined company will be required to monitor if any future offerings of its stock might be considered an offering of “penny stock” which would be prohibited under the bar. In addition, while the SEC bar remains in effect, Mr. Priore is prohibited from owning a controlling equity stake in or operating a securities broker dealer, investment adviser, municipal securities dealer or transfer agent. The SEC bar does not, however, impact Priority's current business, or any of its contemplated operations subsequent to completion of the Business Combination.

 

The loss of, for example, key personnel or of Priority’s ability to attract, recruit, retain and develop qualified employees could adversely affect its business, financial condition and results of operations.

 

Priority’s success depends upon the continued services of its senior management and other key personnel who have substantial experience in the electronic payments industry and the markets in which Priority offers its services. In addition, Priority’s success depends in large part upon the reputation within the industry of its senior managers who have developed relationships with its distribution partners, payment networks and other payment processing and service providers. Further, in order for Priority to continue to successfully compete and grow, it must attract, recruit, develop and retain personnel who will provide Priority with expertise across the entire spectrum of its intellectual capital needs. Priority’s success is also dependent on the skill and experience of its sales force, which Priority must continuously work to maintain. While Priority has many key personnel who have substantial experience with its operations, Priority must also develop its personnel to provide succession plans capable of maintaining the continuity of its operations. The market for qualified personnel is competitive, and Priority may not succeed in recruiting additional personnel or may fail to effectively replace current personnel who depart with qualified or effective successors.

 

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In addition, Priority relies heavily on several senior key directors and executive officers, including its Executive Chairman, Thomas Priore, and its Chief Executive Officer, John Priore, each of whom helped found Priority. Priority’s future success will continue to depend on the diligence, skill, network of business contacts and continued service of Thomas Priore and John Priore, together with members of our senior management team. Priority cannot assure you that unforeseen business, medical, personal or other circumstances would not lead any such individual to terminate his relationship with Priority. The loss of Thomas Priore or John Priore, or any of the members of our senior management team, could have a material adverse effect on Priority’s ability to achieve its growth strategy as well as on its future financial condition and results of operations. Failure to retain or attract key personnel could impede Priority’s ability to grow and could result in its inability to operate its business profitably. In addition, contractual obligations related to confidentiality, assignment of intellectual property rights, and non-solicitation may be ineffective or unenforceable and departing employees may share Priority’s proprietary information with competitors in ways that could adversely impact Priority or seek to solicit its distribution partners or merchants or recruit its key personnel to competing businesses.

 

Priority’s business and operations could be negatively affected if it becomes subject to any securities litigation or shareholder activism, which could cause it to incur significant expense, hinder execution of business and growth strategy and impact its stock price.

 

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Shareholder activism, which could take many forms or arise in a variety of situations, has been increasing recently. Once Priority becomes publicly listed, volatility in its stock price or other reasons may in the future cause it to become the target of securities litigation or shareholder activism. Securities litigation and shareholder activism, including potential proxy contests, could result in substantial costs and divert Priority’s management’s and board of directors’ attention and resources from its business. Additionally, such securities litigation and shareholder activism could give rise to perceived uncertainties as to Priority’s future, adversely affect its relationships with service providers and make it more difficult to attract and retain qualified personnel. Also, Priority may be required to incur significant legal fees and other expenses related to any securities litigation and activist shareholder matters. Further, Priority’s stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation and shareholder activism.

 

Changes in tax laws and regulations could adversely affect Priority’s results of operations and cash flows from operations.

 

Priority’s operations are subject to tax by federal, state, local, and international taxing jurisdictions. Changes in tax laws in Priority’s significant tax jurisdictions could materially increase the amount of taxes it owes, thereby negatively impacting its results of operations as well as its cash flows from operations. For example, restrictions on the deductibility of interest expense in a U.S. jurisdiction without a corresponding reduction in statutory tax rates could negatively impact Priority’s effective tax rate, financial position, results of operations, and cash flows in the period that such a change occurs and future periods.

 

Risk Relating to Indebtedness of the Combined Company

 

The combined company will face risks related to its substantial indebtedness.

 

In connection with the Business Combination, all of Priority’s existing indebtedness will be assumed by the combined company. As of March 31, 2018, Priority had $351.1 million of indebtedness. Long-term debt increased by $68.0 million as of March 31, 2018, from $283.1 million as of December 31, 2017. The increased debt was attributable to a debt upsizing in January 2018. In addition, Priority has $25 million of availability under its revolving credit facility, which was undrawn and fully available as of March 31, 2018. Priority’s total interest expense was $23.8 million, $4.1 million and $3.5 million in 2017, 2016 and 2015, respectively. In the future, we may elect to use additional forms of indebtedness, including publicly or privately offered notes, which may further increase our levels of indebtedness. See Management’s Discussion and Analysis of Financial Condition and Results of Operations of Priority — Liquidity and Capital Resources for a description of Priority’s existing credit facilities.

 

The combined company’s current and future levels of indebtedness could have important consequences to the combined company, including, but not limited to:

 

·increasing the combined company’s vulnerability to, and reducing its flexibility to respond to, general adverse economic and industry conditions;

 

·requiring the dedication of a substantial portion of the combined company’s cash flow from operations to the payment of principal of, and interest on, its indebtedness, thereby reducing the availability of such cash flow to fund working capital, capital expenditures, acquisitions, joint ventures or other general corporate purposes;

 

·limiting the combined company’s flexibility in planning for, or reacting to, changes in its business and the competitive environment; and

 

·limiting the combined company’s ability to borrow additional funds and increasing the cost of any such borrowing.

 

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Substantially all of our indebtedness is floating rate debt. As a result, an increase in interest rates generally, such as those we have recently experienced, would adversely affect the combined company’s profitability. We may enter into pay-fixed interest rate swaps to limit our exposure to changes in floating interest rates. Such instruments may result in economic losses should interest rates decline to a point lower than our fixed rate commitments. We would be exposed to credit-related losses, which could impact the results of operations in the event of fluctuations in the fair value of the interest rate swaps due to a change in the credit worthiness or non-performance by the counterparties to the interest rate swaps.

 

Priority and, following the Business Combination, the combined company will be able to incur substantial additional indebtedness in the future. Although the agreements governing Priority’s existing indebtedness contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to several significant qualifications and exceptions and, under certain circumstances, the amount of indebtedness that could be incurred in compliance with these restrictions could be substantial.

 

Upon the occurrence of an event of default under the credit agreements relating to Priority’s credit facilities or any future debt instruments we may issue, the lenders thereunder could elect to accelerate payments due and terminate all commitments to extend further credit. Consequently, we may not have sufficient assets to repay amounts then outstanding under any such indebtedness.

 

Under the terms of Priority’s existing credit facilities, upon the occurrence of an event of default, the lenders will be able to elect to declare all amounts outstanding under such credit facilities to be immediately due and payable and terminate all commitments to lend additional funds. Among other reasons, an event of default could be declared by the lenders in the event we fail to pay when due the interest, principal of or premium on any loan, we fail to comply with certain financial and operational covenants or any negative covenant, or event of default with respect to certain other credit facilities or debt instruments we may issue in the future.

 

Any future credit facilities or debt instruments we may issue will likely contain similar, or potentially more expansive, events of default as compared to those set forth in the terms of Priority’s existing credit facilities, including those breach or defaults with respect to any of our other outstanding debt instruments. Priority’s existing credit facilities are secured by a pledge of substantially all of its assets and any indebtedness we incur in the future may also be secured.

 

The credit agreements governing Priority’s existing credit facilities and any other debt instruments we may issue in the future will contain restrictive covenants that may impair our ability to conduct business.

 

The credit agreements governing Priority’s existing credit facilities contain operating covenants and financial covenants that may limit management’s discretion with respect to certain business matters after completion of the Business Combination. In addition, any debt instruments we may issue in the future will likely contain similar operating and financial covenants restricting the combined company’s business. Among other things, these covenants will restrict our ability to:

 

·pay dividends, or redeem or purchase equity interests;

 

·incur additional debt;

 

·incur liens;

 

·change the nature of our business;

 

·engage in transactions with affiliates;

 

·sell or otherwise dispose of assets;

 

·make acquisitions or other investments; and

 

·merge or consolidate with other entities.

 

In addition, we will be required to comply with certain restrictions on the ratio of our indebtedness to our Earnout Adjusted EBITDA (as defined in the credit agreements governing Priority’s existing credit facilities). As a result of these covenants and restrictions, we will be limited in our ability to pay dividends or buy back stock and how we conduct our business, and we may be unable to raise additional debt or other financings to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness we may incur could also include even more restrictive covenants. Failure to comply with such restrictive covenants may lead to default and acceleration and may impair our ability to conduct business. We may not be able to maintain compliance with these covenants in the future and, if we fail to do so, that we will be able to obtain waivers from the lenders and/or amend the covenants, which may result in foreclosure on our assets and our common stock becoming worthless. See Management’s Discussion and Analysis of Financial Condition and Results of Operations of Priority — Liquidity and Capital Resources for a description of Priority’s existing credit facilities.

 

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Risk Factors Relating to M I Acquisitions

 

M I Acquisitions will be forced to liquidate the trust account if it cannot consummate a business combination by September 17, 2018, absent the approval of M I Acquisitions’ stockholders for a further extension. In the event of a liquidation, M I Acquisitions’ stockholders will receive $10.507 per share and the M I Acquisitions’ warrants will expire worthless.

 

We previously extended the time to complete an initial business combination to June 19, 2018 by depositing a total of $398,259 into our trust account. On June 15, 2018, M I Acquisitions further extended the time to complete a business combination to September 17, 2018, pursuant to a vote of its stockholders. No additional consideration was paid for the extension of such deadline to September 17, 2018. If M I Acquisitions is unable to complete a business combination by September 17, 2018 and is forced to liquidate, the per-share liquidation distribution will be approximately $10.507. Furthermore, there will be no distribution with respect to the M I Acquisitions’ warrants, which will expire worthless as a result of M I Acquisitions’ failure to complete a business combination.

 

If third parties bring claims against M I Acquisitions, the proceeds held in trust could be reduced and the per-share liquidation price received by M I Acquisitions’ stockholders may be less than $10.507.

 

M I Acquisitions’ placing of funds in trust may not protect those funds from third-party claims against M I Acquisitions. Although M I Acquisitions has received from many of the vendors, service providers (other than its independent accountants) and prospective target businesses with which it does business executed agreements waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of M I Acquisitions’ Public Stockholders, they may still seek recourse against the trust account. Additionally, a court may not uphold the validity of such agreements. Accordingly, the proceeds held in trust could be subject to claims which could take priority over those of M I Acquisitions’ Public Stockholders. If M I Acquisitions liquidates the trust account before the completion of a business combination and distributes the proceeds held therein to its Public Stockholders, its insiders have contractually agreed that they will be liable to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by us for services rendered or contracted for or products sold to us, but only if such a vendor or prospective target business does not execute such a waiver. However, M I Acquisitions cannot assure you that they will be able to meet such obligation. Therefore, the per-share distribution from the trust account for our stockholders may be less than $10.507 due to such claims.

 

Additionally, if M I Acquisitions is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it which is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in M I Acquisitions’ bankruptcy estate and subject to the claims of third parties with priority over the claims of its stockholders. To the extent any bankruptcy claims deplete the trust account, M I Acquisitions may not be able to return $10.507 to our Public Stockholders.

 

Any distributions received by M I Acquisitions stockholders could be viewed as an unlawful payment if it was proved that immediately following the date on which the distribution was made, M I Acquisitions was unable to pay its debts as they fell due in the ordinary course of business.

 

Our Current Certificate of Incorporation provides that M I Acquisitions will continue in existence only until September 17, 2018. We previously extended the time to complete an initial business combination to June 19, 2018 by depositing a total of $398,259 into our trust account. On June 15, 2018, M I Acquisitions further extended the time to complete a business combination to September 17, 2018, pursuant to a vote of its stockholders. No additional consideration was paid for the extension of such deadline to September 17, 2018. Shareholders redeemed a total of 377,231 public shares at a price per share of $10.507 (or approximately $3,963,539 in aggregate) in connection with the vote to extend the liquidation date to September 17, 2018.

 

If M I Acquisitions is unable to consummate a transaction within the required time periods, upon notice from M I Acquisitions, the trustee of the trust account will distribute the amount in its trust account to its Public Stockholders. Concurrently, M I Acquisitions shall pay, or reserve for payment, from funds not held in trust, its liabilities and obligations, although M I Acquisitions cannot assure you that there will be sufficient funds for such purpose. If there are insufficient funds held outside the trust account for such purpose, M I Acquisitions’ insiders have contractually agreed that, if it liquidates prior to the consummation of a business combination, they will be liable to ensure that the proceeds in the trust account are not reduced by the claims of Target businesses or claims of vendors or other entities that are owed money by M I Acquisitions for services rendered or contracted for or products sold to it, but only if such a vendor or prospective target business does not execute such a waiver.

 

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Thereafter, M I Acquisitions’ sole business purpose will be to dissolve through the voluntary liquidation procedure under the DGCL. In such a situation under the DGCL, a liquidator would be appointed and would give at least 21 days’ notice to creditors of his intention to make a distribution by notifying known creditors (if any) and by placing a public advertisement, although in practice this notice requirement need not necessarily delay the distribution of assets as the liquidator may be satisfied that no creditors would be adversely affected as a consequence of a distribution before this time period has expired. As soon as the affairs of M I Acquisitions are fully wound-up, the liquidator must lay his final report and accounts before a final general meeting which must be called by a public notice at least one month before it takes place. After the final meeting, the liquidator must make a return to the Registrar confirming the date on which the meeting was held and three months after the date of such filing the company is dissolved. It is M I Acquisitions’ intention to liquidate the trust account to its Public Stockholders as soon as reasonably possible and M I Acquisitions’ insiders have agreed to take any such action necessary to liquidate the trust account and to dissolve the company as soon as reasonably practicable if M I Acquisitions does not complete a business combination within the required time period. Pursuant to our Current Certificate of Incorporation, failure to consummate a business combination by September 17, 2018, will trigger an automatic winding up of M I Acquisitions.

 

If M I Acquisitions is forced to enter into an insolvent liquidation, any distributions received by M I Acquisitions stockholders could be viewed as an unlawful payment if it was proved that immediately following the date on which the distribution was made, M I Acquisitions was unable to pay its debts as they fall due in the ordinary course of business. As a result, a liquidator could seek to recover all amounts received by M I Acquisitions’ stockholders. Furthermore, M I Acquisitions’ board may be viewed as having breached their fiduciary duties to its creditors and/or may have acted in bad faith, and thereby exposing itself and M I Acquisitions to claims of damages, by paying Public Stockholders from the trust account prior to addressing the claims of creditors. M I Acquisitions cannot assure you that claims will not be brought against it for these reasons.

 

If M I Acquisitions’ due diligence investigation of Priority was inadequate, then stockholders of M I Acquisitions following the Business Combination could lose some or all of their investment.

 

Even though M I Acquisitions conducted a due diligence investigation of Priority, it cannot be sure that this diligence uncovered all material issues that may be present inside Priority or its business, or that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of Priority and its business and outside of its control will not later arise.

 

All of M I Acquisitions’ officers and directors own M I Acquisitions common stock and M I Acquisitions units which will not participate in liquidation distributions and, therefore, they may have a conflict of interest in determining whether the business combination is appropriate.

 

All of M I Acquisitions’ officers and directors own an aggregate of 1,748,634 shares of M I Acquisitions common stock, but have agreed to sell 453,210 shares of common stock, 421,107 shares of units, and forfeit 174,863 founder’s shares, after which point such individuals will own an aggregate of 699,454 shares of M I Acquisitions common stock. Furthermore, M I Acquisitions’ offers and directors have waived their right to redeem these shares, or to receive distributions with respect to these shares upon the liquidation of the trust account if M I Acquisitions is unable to consummate a business combination. Accordingly, the M I Acquisitions common stock, as well as the M I Acquisitions units purchased by our officers or directors, will be worthless if M I Acquisitions does not consummate a business combination. Based on a closing sales price of $10.50 per M I Acquisitions share of common stock and $1.51 per warrant on the Record Date, the value of these shares and units was approximately $18,996,529. The M I Acquisitions common stock acquired prior to the IPO, as well as the M I Acquisitions units will be worthless if M I Acquisitions does not consummate a business combination. Consequently, our directors’ and officers’ discretion in identifying and selecting Priority as a suitable target business may result in a conflict of interest when determining whether the terms, conditions and timing of the Business Combination are appropriate and in M I Acquisitions’ stockholders’ best interest.

 

M I Acquisitions’ stockholders, together with any affiliates of theirs or any other person with whom they are acting in concert or as a “group” with, are restricted from seeking redemption rights with respect to more than 20% of the shares of M I Acquisitions common stock sold in the IPO.

 

M I Acquisitions is offering each of its Public Stockholders (but not its Initial Stockholders) the right to have his, her, or its common stock redeemed for cash. Notwithstanding the foregoing, a public stockholder of M I Acquisitions, together with any affiliate of his or any other person with whom he is acting in concert or as a “group” will be restricted from seeking redemption rights with respect to more than 20% of the M I Acquisitions common stock sold in the IPO. Accordingly, if you beneficially own more than 20% of the M I Acquisitions common stock sold in the IPO and the Business Combination is approved, you will not be able to seek redemption rights with respect to the full amount of your M I Acquisitions common stock and may be forced to hold such additional shares of M I Acquisitions common stock or sell them in the open market. M I Acquisitions cannot assure you that the value of such additional shares of M I Acquisitions common stock will appreciate over time following the Business Combination or that the market price of M I Acquisitions’ common stock will exceed the redemption price.

 

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M I Acquisitions is requiring stockholders who wish to redeem their common stock in connection with a proposed business combination to comply with specific requirements for redemption that may make it more difficult for them to exercise their redemption rights prior to the deadline for exercising their rights.

 

M I Acquisitions is requiring stockholders who wish to redeem their common stock to (x) in the case of certificated shares, tender their certificates to our transfer agent or (y) in the case of shares held in book-entry form, deliver their shares to the transfer agent electronically using the Depository Trust Company’s, or DTC, DWAC (Deposit/Withdrawal At Custodian) System, in each case by the business day immediately preceding the consummation of the proposed Business Combination. In order to obtain a physical certificate, a stockholder’s broker and/or clearing broker, DTC and M I Acquisitions’ transfer agent will need to act to facilitate this request. It is M I Acquisitions’ understanding that stockholders should generally allot at least two weeks to obtain physical certificates from the transfer agent. However, because we do not have any control over this process or over the brokers or DTC, it may take significantly longer than two weeks to obtain a physical stock certificate. While we have been advised that it takes a short time to deliver shares through the DWAC System, we cannot assure you of this fact. Accordingly, if it takes longer than M I Acquisitions anticipates for stockholders to deliver their common stock, stockholders who wish to redeem may be unable to meet the deadline for exercising their redemption rights and thus may be unable to redeem their common stock.

 

M I Acquisitions will require its stockholders who wish to tender their common stock for redemption in connection with the Business Combination to comply with specific requirements for redemption described above, such redeeming stockholders may be unable to sell their securities when they wish to in the event that the Business Combination is not consummated.

 

If M I Acquisitions requires Public Stockholders who wish to redeem their common stock in connection with the proposed Business Combination to comply with specific requirements for redemption as described above and the Business Combination is not consummated, M I Acquisitions will promptly return such certificates to its Public Stockholders. Accordingly, investors who attempted to redeem their common stock in such a circumstance will be unable to sell their securities after the failed acquisition until M I Acquisitions has returned their securities to them. The market price for M I Acquisitions’ common stock may decline during this time and you may not be able to sell your securities when you wish to, even while other stockholders that did not seek redemption may be able to sell their securities.

 

M I Acquisitions’ Initial Stockholders, including its officers and directors, control a substantial interest in M I Acquisitions and thus may influence certain actions requiring a stockholder vote.

 

M I Acquisitions’ Initial Stockholders, including all of its officers and directors, collectively own approximately 26.2% of its issued and outstanding common stock, but have agreed to sell 453,210 shares of common stock, 421,107 shares of units, and forfeit 174,863 founder’s shares, after which point such individuals will own approximately 10.5% of M I Acquisitions issued and outstanding common stock. However, if a significant number of stockholders vote, or indicate an intention to vote, against the Business Combination, M I Acquisitions’ officers, directors, Initial Stockholders or their affiliates could make such purchases in the open market or in private transactions in order to influence the vote. M I Acquisitions’ Initial Stockholders have agreed to vote any shares they own in favor of the Business Combination.

 

If M I Acquisitions’ security holders exercise their registration rights with respect to their securities, it may have an adverse effect on the market price of M I Acquisitions’ securities.

 

M I Acquisitions’ Initial Stockholders are entitled to make a demand that it register the resale of their initial shares at any time commencing three months prior to the date on which their shares may be released from escrow. Additionally, the purchasers of M I Acquisitions units sold in an offering that was consummated simultaneously with the IPO or the M I Acquisitions unit offering, are entitled to demand that M I Acquisitions register the resale of their units and underlying common stock at any time after M I Acquisitions consummates a business combination. If such persons exercise their registration rights with respect to all of their securities, then there will be an additional 2,169,741 shares of M I Acquisitions common stock eligible for trading in the public market. The presence of these additional shares of common stock trading in the public market may have an adverse effect on the market price of M I Acquisitions’ securities.

 

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M I Acquisitions will not obtain an opinion from an unaffiliated third-party as to the fairness of the Business Combination to its stockholders.

 

M I Acquisitions is not required to obtain an opinion from an unaffiliated third-party that the price it is paying is fair to its Public Stockholders from a financial point of view. M I Acquisitions’ Public Stockholders, therefore, must rely solely on the judgment of the board of directors. However, the members of M I Acquisitions’ management team and board of directors are not experts in conducting valuation analysis and, therefore, it is possible that they have inaccurately determined Priority’s value.

 

In addition, M I Acquisitions’ management and directors have interests in and arising from the Business Combination that are different from, or in addition to, your interests as a stockholder, which could result in a real or perceived conflict of interest. Therefore, in the absence of a fairness opinion, no independent third party has conducted an analysis of the value of Priority.

 

If the Business Combination’s benefits do not meet the expectations of financial or industry analysts, the market price of M I Acquisitions’ securities may decline.

 

The market price of M I Acquisitions’ securities may decline as a result of the Business Combination if:

 

·M I Acquisitions does not achieve the perceived benefits of the acquisition as rapidly as, or to the extent anticipated by, financial or industry analysts; or

 

·The effect of the Business Combination on the financial statements is not consistent with the expectations of financial or industry analysts.

 

Accordingly, investors may experience a loss as a result of decreasing stock prices.

 

M I Acquisitions’ directors and officers may have certain conflicts in determining to recommend the acquisition of Priority, since certain of their interests, and certain interests of their affiliates and associates, are different from, or in addition to, your interests as a stockholder.

 

M I Acquisitions’ management and directors have interests in and arising from the Business Combination that are different from, or in addition to, your interests as a stockholder, which could result in a real or perceived conflict of interest. These interests include the fact that certain of the M I Acquisitions common stock owned by M I Acquisitions’ management and directors, or their affiliates and associates, would become worthless if the Business Combination Proposal and related proposals are not approved and M I Acquisitions otherwise fails to consummate a business combination prior to its liquidation date.

 

M I Acquisitions will incur significant transaction costs in connection with transactions contemplated by the Purchase Agreement.

 

M I Acquisitions will incur significant transaction costs in connection with the Business Combination. If the Business Combination is not consummated, M I Acquisitions may not have sufficient funds to seek an alternative business combination and may be forced to liquidate and dissolve.

 

Risk Factors Relating to the Business Combination and the Ownership of Our Common stock

 

M I Acquisitions and Priority have incurred and expect to incur significant costs associated with the Business Combination. Upon the completion of the Business Combination, the incurrence of these costs will reduce the amount of cash available to be used for other corporate purposes by the combined company when the Business Combination is completed.

 

M I Acquisitions and Priority expect to incur significant costs associated with the Business Combination. Upon the completion of the Business Combination, M I Acquisitions expects to incur approximately $12.3 million in fees and expenses. These expenses will reduce the amount of cash available to be used for other corporate purposes by the combined company when the Business Combination is completed.

 

In the event that a significant number of shares of M I Acquisitions common stock are redeemed, its stock may become less liquid following the Business Combination.

 

If a significant number of shares of M I Acquisitions common stock are redeemed, M I Acquisitions may be left with a significantly smaller number of stockholders. As a result, trading in the shares of the post-transaction entity following the Business Combination may be limited and your ability to sell your shares in the market could be adversely affected.

 

A market for our securities may not continue, which would adversely affect the liquidity and price of our securities.

 

Following the Business Combination, the price of our securities may fluctuate significantly due to the market’s reaction to the Business Combination and general market and economic conditions. An active trading market for our securities following the Business Combination may never develop or, if developed, it may not be sustained. In addition, the price of our securities after the Business Combination can vary due to general economic conditions and forecasts, our general business condition and the release of our financial reports. Additionally, if our securities are not listed on, or become delisted from, NASDAQ for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of our securities may be more limited than if we were quoted or listed on NASDAQ or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.

 

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M I Acquisitions may waive one or more of the conditions to the Business Combination without resoliciting stockholder approval for the Business Combination.

 

M I Acquisitions may agree to waive, in whole or in part, some of the conditions to its obligations to complete the Business Combination, to the extent permitted by applicable laws. The board of directors of M I Acquisitions will evaluate the materiality of any waiver to determine whether amendment of this proxy statement and re-solicitation of proxies is warranted. In some instances, if the board of directors of M I Acquisitions determines that a waiver is not sufficiently material to warrant re-solicitation of stockholders, M I Acquisitions has the discretion to complete the Business Combination without seeking further stockholder approval. For example, it is a condition to M I Acquisitions’ obligations to close the Business Combination that there be no restraining order, injunction or other order restricting Priority’s conduct of its business, however, if the board of directors of M I Acquisitions determines that any such order or injunction is not material to the business of Priority, then the board may elect to waive that condition and close the Business Combination.

 

There will be a substantial number of shares of M I Acquisitions’ common stock available for sale in the future that may adversely affect the market price of M I Acquisitions common stock.

 

There may be a large number of shares of common stock sold in the market following the completion of the Business Combination or shortly thereafter. Assuming there are no adjustments to the consideration payable to Sellers at the closing of the Business Combination, we will have approximately 66,369,994 shares of common stock outstanding after the Business Combination. The 4,932,878 shares (assuming no redemptions) held by the Company’s public stockholders will continue to be freely tradeable.

 

The shares held by our Initial Stockholders and the shares that will be issued to the Sellers in the Business Combination will be subject to certain restrictions on resale. However, we have granted our Initial Stockholders and Sellers rights under registration rights agreements that will require us to register the shares of common stock and warrants held by such persons. See “Special Meeting of M I Acquisitions Stockholders — M I Acquisitions Initial Stockholders” and “The Purchase Agreement — Registration Rights Agreement.” The availability of such a significant number of securities for trading in the public market may have an adverse effect on the market price of M I Acquisitions’ shares.

 

M I Acquisitions’ stockholders ownership interests will be diluted as a consequence of the issuance of common stock as consideration in the Business Combination.

 

After the Business Combination, assuming no redemptions of common stock for cash, M I Acquisitions’ current Public Stockholders will own approximately 7.4% of the combined company, M I Acquisitions’ current directors, officers and affiliates will own approximately 1.1% of the combined company, and the Sellers (including the holders receiving shares distributed by PIH) will own approximately 91.5% of the combined company. These ownership percentages take into account the vested Founder Shares and assume that no shares of common stock are elected to be redeemed by the Company’s Public Stockholders, 59,863,345 shares of common stock are issued to the Sellers at Closing, and M I Acquisitions does not issue any additional common stock between the date of the Purchase Agreement and the Closing Date. The above-stated ownership percentages with respect to the combined company do not take into account (a) warrants that will remain outstanding immediately following the Business Combination or (b) the issuance of any shares under the 2018 Equity Incentive Plan, a copy of which is attached to this proxy statement as Annex G. If the actual facts are different from these assumptions (which they are likely to be), the ownership percentage retained by M I Acquisitions’ Public Stockholders in the combined company will be different from the above-stated ownership percentage. Please see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” for further information. To the extent that any shares of common stock are issued pursuant to the earn-out contemplated by the Purchase Agreement, upon exercise of the public warrants or the private warrants or under the 2018 Equity Incentive Plan, current stockholders may experience substantial additional dilution. Such dilution could, among other things, limit the ability of our current stockholders to influence management of the combined company.

 

Our stock price may change significantly following the Business Combination, and you may not be able to resell shares of our common stock at or above the price you paid or at all, and you could lose all or part of your investment as a result.

 

The trading price of our common stock is likely to be volatile. The stock market recently has experienced volatility. This volatility often has been unrelated or disproportionate to the operating performance of particular companies. You may not be able to resell your shares at or above the initial price you paid due to a number of factors such as those listed in “—Risks Related to Priority’s Business” and the following:

 

·results of operations that vary from the expectations of securities analysts and investors;

 

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·results of operations that vary from those of our competitors;

 

·changes in expectations as to our future financial performance, including financial estimates and investment recommendations by securities analysts and investors;

 

·declines in the market prices of stocks generally;

 

·strategic actions by us or our competitors;

 

·announcements by us or our competitors of significant contracts, new products, acquisitions, joint marketing relationships, joint ventures, other strategic relationships, or capital commitments;

 

·changes in general economic or market conditions or trends in our industry or markets;

 

·changes in business or regulatory conditions;

 

·future sales of our common stock or other securities;

 

·investor perceptions or the investment opportunity associated with our common stock relative to other investment alternatives;

 

·the public’s response to press releases or other public announcements by us or third parties, including our filings with the Securities and Exchange Commission (the “SEC”);

 

·announcements relating to litigation;

 

·guidance, if any, that we provide to the public, any changes in this guidance, or our failure to meet this guidance;

 

·the development and sustainability of an active trading market for our stock;

 

·changes in accounting principles;

 

·occurrences of extreme or inclement weather; and

 

·other events or factors, including those resulting from natural disasters, war, acts of terrorism, or responses to these events.

 

These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance. In addition, price volatility may be greater if the public float and trading volume of our common stock is low.

 

In the past, following periods of market volatility, stockholders have instituted securities class action litigation. If we were involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from our business regardless of the outcome of such litigation.

 

Because we have no current plans to pay cash dividends on our common stock for the foreseeable future, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it.

 

We intend to retain future earnings, if any, for future operations, expansion, and debt repayment and have no current plans to pay any cash dividends for the foreseeable future. The declaration, amount, and payment of any future dividends on shares of common stock will be at the sole discretion of our board of directors. Our board of directors may take into account general and economic conditions, our financial condition, and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax, and regulatory restrictions, implications on the payment of dividends by us to our stockholders or by our subsidiaries to us, and such other factors as our board of directors may deem relevant. In addition, our ability to pay dividends is limited by covenants of our existing and outstanding indebtedness and may be limited by covenants of any future indebtedness we or our subsidiaries incur. As a result, you may not receive any return on an investment in our common stock unless you sell our common stock for a price greater than that which you paid for it.

 

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If securities analysts do not publish research or reports about our business or if they downgrade our stock or our sector, our stock price and trading volume could decline.

 

The trading market for our common stock will rely in part on the research and reports that industry or financial analysts publish about us or our business. We do not control these analysts. Furthermore, if one or more of the analysts who do cover us downgrades our stock or our industry, or the stock of any of our competitors, or publish inaccurate or unfavorable research about our business, the price of our stock could decline. If one or more of these analysts ceases coverage of the combined company or fails to publish reports on us regularly, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline.

 

Anti-takeover provisions in our organizational documents could delay or prevent a change of control.

 

Certain provisions of our Proposed Amended and Restated Certificate of Incorporation and our Proposed Amended and Restated Bylaws may have an anti-takeover effect and may delay, defer, or prevent a merger, acquisition, tender offer, takeover attempt, or other change of control transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by our stockholders.

 

These provisions provide for, among other things:

 

·the ability of our board of directors to issue one or more series of preferred stock;

 

·advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at our annual meetings;

 

·certain limitations on convening special stockholder meetings;

 

·the removal of directors only for cause and only upon the affirmative vote of holders of at least 66 2⁄3% of the shares of common stock entitled to vote generally in the election of directors if the Priority Holders hold less than 40% of our outstanding shares of common stock; and

 

·that certain provisions may be amended only by the affirmative vote of at least 66 2⁄3% of the shares of common stock entitled to vote generally in the election of directors if the Priority Holders hold less than 40% of our outstanding shares of common stock.

 

The provisions requiring 66 2⁄3% approval if the Priority Holders hold less than 40% of our outstanding shares of common stock will give the Priority Holders significant influence over the vote on these items even after the Priority Holders own less than a majority of our outstanding shares of common stock.

 

In addition, these anti-takeover provisions could make it more difficult for a third-party to acquire us, even if the third-party’s offer may be considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium for their shares. For further information, please see “Description of M I Acquisitions’ Securities,” “Proposal No. 2 – The Authorized Share Increase Proposal,” “Proposal No. 3 – The Board Declassification Proposal,” “Proposal No. 5 – The Voting Threshold Proposal,” “Proposal No. 5 – The Section 203 Proposal” and “Proposal No. 6 – The Additional Amendments Proposal.”

 

Our Proposed Amended and Restated Certificate of Incorporation will designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.

 

Our Proposed Amended and Restated Certificate of Incorporation will provide that, subject to limited exceptions, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any (i) derivative action or proceeding brought on behalf of our Company, (ii) action asserting a claim of breach of a fiduciary duty owed by any director, officer or stockholder of our Company to the Company or the Company’s stockholders, (iii) action asserting a claim against the Company or any director, officer or stockholder of the Company arising pursuant to any provision of the DGCL or our Proposed Amended and Restated Certificate of Incorporation or our Proposed Amended and Restated Bylaws, or (iv) action asserting a claim against the Company or any director, officer or stockholder of the Company governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our Proposed Amended and Restated Certificate of Incorporation described above. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find these provisions of our Proposed Amended and Restated Certificate of Incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.

 

We believe that our stockholders will benefit from having any such disputes litigated in the Court of Chancery of the State of Delaware. Although some plaintiffs might prefer to litigate matters in a forum outside of Delaware because another court may be more convenient or because they believe another court would be more favorable to their claims, we believe that the benefits to the Company and its stockholders outweigh these concerns. Delaware offers a system of specialized courts to deal with corporate law questions, with streamlined procedures and processes which help provide relatively quick decisions. These courts have developed considerable expertise in dealing with corporate law issues, as well as a substantial and influential body of case law construing Delaware’s corporate law and long-standing precedent regarding corporate governance. In addition, the adoption of this provision would reduce the risk that the Company could be involved in duplicative litigation in more than one forum, as well as the risk that the outcome of cases in multiple forums could be inconsistent, even though each forum purports to follow Delaware law. The enforceability of similar exclusive jurisdiction provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any action, a court could find the exclusive jurisdiction provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in such action. However, given the decisions of the Court of Chancery of the State of Delaware in 2013 upholding similar provisions in Boilermakers Local 154 Retirement Fund v. Chevron Corp., et al. and IClub Investment Partnership v. FedEx Corp., et al., we believe that the Court of Chancery of the State of Delaware would find our exclusive forum provisions to be enforceable as well.

 

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Affiliates of the Sellers will control us after completion of the Business Combination, and their interests may conflict with ours or yours in the future.

 

Immediately following the Business Combination, the Sellers (including the holders receiving shares distributed by PIH) will beneficially own approximately 91.5% of our common stock as a combined company. As a result, the Sellers and its controlling equityholder, Thomas Priore, will have the ability to elect all of the members of our board of directors and thereby control our policies and operations, including the appointment of management, future issuances of our common stock or other securities, the payment of dividends, if any, on our common stock, the incurrence or modification of debt by us, amendments to our Proposed Amended and Restated Certificate of Incorporation and our Proposed Amended and Restated Bylaws, and the entering into of extraordinary transactions, and their interests may not in all cases be aligned with your interests. In addition, Thomas Priore may have an interest in pursuing acquisitions, divestitures, and other transactions that, in his judgment, could enhance his investment, even though such transactions might involve risks to you. For example, he could cause us to make acquisitions that increase our indebtedness or cause us to sell revenue-generating assets. Additionally, in certain circumstances, acquisitions of debt at a discount by purchasers that are related to a debtor can give rise to cancellation of indebtedness income to such debtor for U.S. federal income tax purposes.

 

Our Proposed Amended and Restated Certificate of Incorporation will provide that none of the Priority Holders, any of their respective affiliates, or any director who is not employed by us (including any non-employee director who serves as one of our officers in both his director and officer capacities) or his or her affiliates will have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate. So long as Thomas Priore continues to own a significant amount of our combined voting power, even if such amount is less than 50%, he will continue to be able to strongly influence or effectively control our decisions. Furthermore, so long as the Priority Holders, including Thomas Priore, and their respective affiliates collectively own at least 50% of all outstanding shares of our stock entitled to vote generally in the election of directors, they will be able to appoint individuals to our board of directors under a stockholders agreement which we expect to adopt in connection with this Business Combination. In addition, given his level of control over the Sellers, Thomas Priore will be able to determine the outcome of all matters requiring stockholder approval and will be able to cause or prevent a change of control of the combined company or a change in the composition of our board of directors and could preclude any unsolicited acquisition of the combined company. The concentration of ownership could deprive you of an opportunity to receive a premium for your shares of common stock as part of a sale of the combined company and ultimately might affect the market price of our common stock.

 

We will be a “controlled company” within the meaning of the rules of The NASDAQ Stock Market and, as a result, expect to qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections as those afforded to stockholders of companies that are subject to such governance requirements.

 

After completion of the Business Combination, Thomas Priore will continue to control a majority of the voting power of our outstanding common stock. As a result, we will be a “controlled company” within the meaning of the corporate governance standards of The NASDAQ Stock Market. Under these rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:

 

·the requirement that a majority of our board of directors consist of independent directors;

 

·the requirement that we have a Nominating/Corporate Governance Committee that is composed entirely of independent directors with a written charter addressing the Committee’s purpose and responsibilities; and

 

·the requirement that we have a Compensation Committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities

 

Following the Business Combination, we intend to utilize these exemptions. As a result, we will not have a majority of independent directors and our Compensation Committee and Nominating/Corporate Governance Committee will not consist entirely of independent directors. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of The NASDAQ Stock Market.

 

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The combined company is an “emerging growth company” and the reduced disclosure requirements applicable to emerging growth companies may make its securities less attractive to investors.

 

The combined company is an “emerging growth company,” as defined in the JOBS Act. It may remain an “emerging growth company” until the fiscal year ended December 31, 2021. However, if its non-convertible debt issued within a three-year period or revenues exceeds $1.07 billion, or the market value of its common stock that are held by non-affiliates exceeds $700 million on the last day of the second fiscal quarter of any given fiscal year, the combined company would cease to be an emerging growth company as of the following fiscal year. As an emerging growth company, the combined company is not required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act, has reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and is exempt from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Additionally, as an emerging growth company, the combined company has elected to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As such, the combined company’s financial statements may not be comparable to companies that comply with public company effective dates. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active market for our common stock, our share price may be more volatile and the price at which our securities trade could be less than if we did not use these exemptions.

 

Material weaknesses have been identified in Priority’s internal control over financial reporting.

 

Priority is currently a private company and is not subject to the internal control provisions of the Sarbanes-Oxley Act. As such, Priority has limited accounting personnel and other resources with which to address its internal controls and procedures consistent with PCAOB standards.

 

Priority has identified material weaknesses in internal controls over its financial reporting that remain unremediated. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.

 

The material weaknesses identified were (1) lack of sufficient resources with appropriate depth and experience to interpret complex accounting guidance and prepare financial statements and related disclosures in accordance with US GAAP and (2) deficiencies in certain aspects of the financial statement close process and specifically lacks processes and procedures to ensure critical evaluation and review of various account reconciliations, analyses and journal entries.

 

Priority is not and was not required to perform an evaluation of internal control over financial reporting as of December 31, 2017 and 2016 in accordance with the provisions of the Sarbanes-Oxley Act. Had such an evaluation been performed, additional control deficiencies may have been identified by Priority management, and those control deficiencies could have also represented one or more material weaknesses.

Priority has taken steps to enhance its internal control environment and plans to take additional steps to remediate the material weaknesses. Although Priority plans to complete this remediation process as quickly as possible, we cannot at this time estimate how long it will take.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This proxy statement contains forward-looking statements. Forward-looking statements provide our current expectations or forecasts of future events. Forward-looking statements include statements about our expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Words or phrases such as “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “will” or similar words or phrases, or the negatives of those words or phrases, may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. Examples of forward-looking statements in this proxy statement include, but are not limited to, statements regarding our disclosure concerning Priority’s operations, cash flows, financial position and dividend policy, statements regarding our initial business combination, including the anticipated initial enterprise value and post-closing equity value of the combined company, the benefits of the Business Combination, integration plans, expected synergies and revenue opportunities, anticipated future financial and operating performance and results, including estimates for growth, the expected management and governance of the combined company, and the expected timing of the transactions contemplated by the Purchase Agreement. Furthermore, statements regarding our management’s expectations, hopes, beliefs, intentions or strategies regarding the future are forward-looking statements. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements.

 

Forward-looking statements appear in a number of places in this proxy statement, including, without limitation, in the sections entitled “Dividend Policy,” “Management’s Discussion and Analysis of Financial Conditions and Results of Operations of Priority” and “Priority’s Business.” Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements for many reasons, including:

 

·the timing to complete the Business Combination;

 

·success in retaining or recruiting, or changes required in, our officers, key employees or directors following the Business Combination;

 

·officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination, as a result of which they would then receive expense reimbursements;

 

·stock performance and Priority’s continued access to the public markets to raise capital in the future;

 

·the potential liquidity and trading of our securities;

 

·future operating or financial results;

 

·future payments of dividends and the availability of cash for payment of dividends;

 

·future acquisitions, business strategy and expected capital spending;

 

·assumptions regarding interest rates and inflation;

 

·the combined company’s financial condition and liquidity, including its ability to obtain additional financing in the future to fund capital expenditures, acquisitions and other general corporate activities;

 

·the ability of the combined company to affect future acquisitions and to meet target returns;

 

·changes in applicable laws or regulations;

 

·the possibility that Priority may be adversely affected by other general, macro-economic, business and/or other competitive factors; and

 

·other factors discussed in “Risk Factors”.

 

The forward-looking statements speak only as of the date of this proxy statement. We undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this proxy statement or to reflect the occurrence of unanticipated events.

 

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SPECIAL MEETING OF M I ACQUISITIONS STOCKHOLDERS

 

General

 

We are furnishing this proxy statement to the M I Acquisitions stockholders as part of the solicitation of proxies by our board of directors for use at the special meeting of M I Acquisitions stockholders to be held on July 19, 2018, and at any adjournment or postponement thereof. This proxy statement is first being furnished to our stockholders on or about July 3, 2018 in connection with the vote on the Business Combination Proposal, the Authorized Share Increase Proposal, the Board Declassification Proposal, Voting Threshold Proposal, the Section 203 Proposal, the Additional Amendments Proposal, the 2018 Equity Incentive Plan Proposal, the Earnout Incentive Plan Proposal, the Nasdaq Proposal and the Adjournment Proposal. This document provides you with the information you need to know to be able to vote or instruct your vote to be cast at the special meeting.

 

Date, Time and Place

 

The special meeting of stockholders will be held at the offices of Loeb & Loeb LLP, 345 Park Avenue, New York, New York 10154, on July 19, 2018, at 10:00 a.m. local time, or such other date, time and place to which such meeting may be adjourned or postponed.

  

Purpose of the Special Meeting of M I Acquisitions Stockholders

 

At the special meeting of stockholders, we are asking holders of M I Acquisitions common stock to approve the following proposals:

 

1.Business Combination Proposal—to approve the Business Combination.

 

2.Authorized Share Increase Proposal—to approve the amendment of the Current Certificate of Incorporation to increase the number of authorized shares of common stock and preferred stock.

 

3.Board Declassification Proposal—to approve the amendment of the Current Certificate of Incorporation to provide for declassification of the board of directors into one class.

 

4.Voting Threshold Proposal—to approve the amendment of the Current Certificate of Incorporation to change the stockholder vote required to approve a further amendment thereof.

 

5.Section 203 Proposal—to approve the amendment of the Current Certificate of Incorporation to elect not to be governed by Section 203 of the DGCL.

 

6.Additional Amendments Proposal—to approve the amendment to the Current Certificate of Incorporation to change M I Acquisitions’ name from “M I Acquisitions, Inc.” to “Priority Technology Holdings, Inc.”, and make certain further revisions thereto in connection with the Business Combination.

 

7.2018 Equity Incentive Plan Proposal—to approve the 2018 Equity Incentive Plan, including the authorization of the initial share reserve.

 

8.Earnout Incentive Plan Proposal—to approve the Priority Technology Holdings, Inc. Earnout Incentive Plan.

 

9.Nasdaq Proposal—to approve the issuance of more than 20% of the issued and outstanding shares of common stock of M I Acquisitions pursuant to the terms of the Purchase Agreement, as required by Nasdaq Listing Rules 5635(a) and (d).

 

10.Adjournment Proposal—to approve the adjournment of the special meeting in the event M I Acquisitions does not receive the requisite stockholder vote to approve the Business Combination.

 

If any of the proposals other than the 2018 Equity Incentive Plan Proposal and the Adjournment Proposal are not approved, the Business Combination will not be consummated and M I Acquisitions will liquidate and dissolve.

 

Recommendation of the Board of Directors

 

The board of directors:

 

·has determined that each of the Business Combination Proposal and the other proposals is fair to, and in the best interests of, M I Acquisitions and its stockholders;

 

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·has approved the Business Combination Proposal and the other proposals; and

 

·recommends that M I Acquisitions’ stockholders vote “FOR” each of the Business Combination Proposal, the Authorized Share Increase Proposal, the Board Declassification Proposal, Voting Threshold Proposal, the Section 2-3 Proposal, the Additional Amendments Proposal, the 2018 Equity Incentive Plan Proposal, the Earnout Incentive Plan Proposal, the Nasdaq Proposal and the Adjournment Proposal.

 

M I Acquisitions’ board of directors have interests that may be different from or in addition to your interests as a stockholder. See the section entitled “The Business Combination Proposal — Interests of Certain Persons in the Business Combination” for further information.

 

Record Date; Who is Entitled to Vote

 

We have fixed the close of business on June 29, 2018 as the “record date” for determining those M I Acquisitions stockholders entitled to notice of and to vote at the special meeting, which we refer to as the “Record Date”. As of the close of business on the Record Date, there were 6,681,512 shares of M I Acquisitions common stock outstanding and entitled to vote. Each holder of M I Acquisitions common stock is entitled to one vote per share on each of the Business Combination Proposal, the Authorized Share Increase Proposal, the Board Declassification Proposal, Voting Threshold Proposal, the Section 2-3 Proposal, the Additional Amendments Proposal, the 2018 Equity Incentive Plan Proposal, the Earnout Incentive Plan Proposal, the Nasdaq Proposal and the Adjournment Proposal.

 

As of the Record Date, M I Acquisitions’ Initial Stockholders, either directly or beneficially, owned and were entitled to vote 1,748,634 shares of common stock, or approximately 26.2% of M I Acquisitions’ outstanding common stock. With respect to the Business Combination, M I Acquisitions’ Initial Stockholders have agreed to vote their respective M I Acquisitions common stock acquired by them in favor of the Business Combination Proposal, the Earnout Incentive Plan Proposal and the Amendments Proposals. They have indicated that they intend to vote their shares, as applicable, “FOR” each of the other proposals although there is no agreement in place with respect to these proposals.

 

Quorum and Required Vote for Stockholder Proposals

 

A Quorum of M I Acquisitions stockholders is necessary to hold a valid meeting. A Quorum will be present at the special meeting of M I Acquisitions stockholders if a majority of the M I Acquisitions common stock issued and outstanding and entitled to vote at the special meeting is represented in person or by proxy. Abstentions present in person and by proxy will count as present for the purposes of establishing a Quorum but broker non-votes will not.

 

Approval of the Business Combination Proposal, the 2018 Equity Incentive Plan Proposal, the Earnout Incentive Plan Proposal, the Nasdaq Proposal and the Adjournment Proposal will require the affirmative vote of the holders of a majority of the issued and outstanding shares of common stock of M I Acquisitions present and entitled to vote at the special meeting; provided, however, that if more than 3,029,372 of the shares of common stock purchased in the IPO demand redemption of their shares of common stock, then the Business Combination will not be completed. Approval of the Authorized Share Increase Proposal, the Board Declassification Proposal, the Voting Threshold Proposal, the Section 203 Proposal and the Additional Amendments Proposal will require the approval of a majority of the issued and outstanding shares of common stock of M I Acquisitions. Attending the special meeting either in person or by proxy and abstaining from voting will have the same effect as voting against all the proposals and, assuming a Quorum is present, broker non-votes will have no effect on the Business Combination Proposal, the 2018 Equity Incentive Plan Proposal, the Earnout Incentive Plan Proposal, the Nasdaq Proposal and the Adjournment Proposal, but will be the same as a vote against the Authorized Share Increase Proposal, the Board Declassification Proposal, the Voting Threshold Proposal, the Section 203 Proposal and the Additional Amendments Proposal.

 

Voting Your Shares

 

Each share of M I Acquisitions common stock that you own in your name entitles you to one vote for each proposal on which such shares are entitled to vote at the special meeting. Your proxy card shows the number of shares of our common stock that you own.

 

There are two ways to ensure that your shares of M I Acquisitions common stock, as applicable, are voted at the special meeting:

 

·You can cause your shares to be voted by signing and returning the enclosed proxy card. If you submit your proxy card, your “proxy,” whose name is listed on the proxy card, will vote your shares as you instruct on the proxy card. If you sign and return the proxy card but do not give instructions on how to vote your shares, your shares will be voted, as recommended by our board, “FOR” the adoption of the Business Combination Proposal, the Authorized Share Increase Proposal, the Board Declassification Proposal, Voting Threshold Proposal, the Section 2-3 Proposal, the Additional Amendments Proposal, the 2018 Equity Incentive Plan Proposal, the Earnout Incentive Plan Proposal, the Nasdaq Proposal and the Adjournment Proposal. Votes received after a matter has been voted upon at either of the special meetings will not be counted.

 

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·You can attend the special meeting and vote in person. We will give you a ballot when you arrive. However, if your shares are held in the name of your broker, bank or another nominee, you must get a proxy from the broker, bank or other nominee. That is the only way we can be sure that the broker, bank or nominee has not already voted your shares.

 

IF YOU RETURN YOUR PROXY CARD WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOUR SHARES WILL BE VOTED IN FAVOR OF THE BUSINESS COMBINATION PROPOSAL (AS WELL AS THE OTHER PROPOSALS). IN ORDER TO REDEEM YOUR SHARES, YOU MUST CONTINUE TO HOLD YOUR SHARES THROUGH THE CLOSING DATE OF THE BUSINESS COMBINATION AND TENDER YOUR PHYSICAL STOCK CERTIFICATE TO OUR STOCK TRANSFER AGENT AT LEAST ONE BUSINESS DAY PRIOR TO THE CONSUMMATION OF THE BUSINESS COMBINATION. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE SHARES WILL NOT BE REDEEMED FOR CASH. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO ELECTRONICALLY TRANSFER YOUR SHARES TO THE DTC ACCOUNT OF AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC, OUR TRANSFER AGENT, AT LEAST ONE BUSINESS DAY PRIOR TO THE CONSUMMATION OF THE BUSINESS COMBINATION.

 

Revoking Your Proxy

 

If you give a proxy, you may revoke it at any time before it is exercised by doing any one of the following:

 

·you may send another proxy card with a later date;

 

·if you are a record holder, you may notify our corporate secretary in writing before the special meeting that you have revoked your proxy; or

 

·you may attend the special meeting, revoke your proxy, and vote in person, as indicated above.

 

Who Can Answer Your Questions About Voting Your Shares

 

If you have any questions about how to vote or direct a vote in respect of your shares of our common stock, you may call Morrow Sodali LLC, our proxy solicitor, at (800) 662-5200, or M I Acquisitions at (347) 491-4240.

 

Presence of Independent Registered Public Accounting Firm at the Special Meeting

 

Representatives of our independent registered public accounting firm, Marcum LLP, have been invited to the special meeting of the stockholders. If they attend, the representatives will have the opportunity to make a statement if they so desire and they are expected to be available to respond to appropriate questions.

 

No Additional Matters May Be Presented at the Special Meeting

 

This special meeting has been called only to consider the approval of the proposals described herein. Under our Current Certificate of Incorporation, other than procedural matters incident to the conduct of the special meeting, no other matters may be considered at the special meeting if they are not included in the notice of the special meeting.

 

Redemption Rights

 

Pursuant to our Current Certificate of Incorporation, a holder of M I Acquisitions common stock may demand that M I Acquisitions redeem such common stock for cash. Demand may be made by:

 

·Voting for or against the business combination and electing redemption by checking the appropriate box on the proxy card; and

 

·Tendering the shares of M I Acquisitions common stock for which you are electing redemption by the business day prior to the consummation of the Business Combination by either:

 

·Delivering certificates representing the shares of M I Acquisitions’ common stock to M I Acquisitions’ transfer agent, or

 

·Delivering the shares of M I Acquisitions common stock electronically through the DWAC system; and

 

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·Not selling or otherwise transferring the shares of M I Acquisitions common stock until the Closing (tendering your common stock for redemption is not considered selling or transferring your shares).

 

M I Acquisitions stockholders will be entitled to redeem their M I Acquisitions common stock for a full pro rata share of the trust account (currently anticipated to be no less than approximately $10.507 per share), net of taxes payable.

 

In connection with tendering your shares for redemption, you must elect either to physically tender your share certificates to M I Acquisitions’ transfer agent or deliver your shares to the transfer agent electronically using The Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, in each case, by the business day prior to the consummation of the Business Combination.

 

Through the DWAC system, this electronic delivery process can be accomplished by contacting your broker and requesting delivery of your shares through the DWAC system. Delivering shares physically may take significantly longer. In order to obtain a physical stock certificate, a stockholder’s broker and/or clearing broker, DTC, and M I Acquisitions’ transfer agent will need to act together to facilitate this request. There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC system. The transfer agent will typically charge the tendering broker $45 and the broker would determine whether or not to pass this cost on to the redeeming holder. It is M I Acquisitions’ understanding that stockholders should generally allot at least two weeks to obtain physical certificates from the transfer agent. M I Acquisitions does not have any control over this process or over the brokers or DTC, and it may take longer than two weeks to obtain a physical stock certificate. Stockholders who request physical stock certificates and wish to redeem may be unable to meet the deadline for tendering their common stock before exercising their redemption rights and thus will be unable to redeem their common stock.

 

In the event that a stockholder tenders its common stock and decides prior to the consummation of the Business Combination that it does not want to redeem its common stock, the stockholder may withdraw the tender. In the event that a stockholder tenders common stock and the business combination is not completed, these common stock will not be redeemed for cash and the physical certificates representing these common stock will be returned to the stockholder promptly following the determination that the Business Combination will not be consummated. M I Acquisitions anticipates that a stockholder who tenders common stock for redemption in connection with the vote to approve the Business Combination would receive payment of the redemption price for such common stock soon after the completion of the Business Combination.

 

If properly demanded by M I Acquisitions’ Public Stockholders, M I Acquisitions will redeem each share into a pro rata portion of the funds available in the trust account, calculated as of two business days prior to the anticipated consummation of the Business Combination. As of the record date, this would amount to approximately $10.507 per share. If you exercise your redemption rights, you will be exchanging your M I Acquisitions common stock for cash and will no longer own the common stock. If M I Acquisitions is unable to complete the Business Combination by September 17, 2018, it will liquidate and dissolve and Public Stockholders would be entitled to receive approximately $10.507 per share upon such liquidation.

 

Under the Purchase Agreement, the Business Combination is conditioned upon, among other things, there being a minimum of $20 million of cash in our trust account after giving effect to the redemption of M I Acquisitions common stock that holders of M I Acquisitions common stock validly elected to redeem in connection with the Business Combination. Therefore, unless these conditions are waived by M I Acquisitions and Priority, the Purchase Agreement could terminate and the proposed Business Combination may not be consummated.

 

Limitation on Redemption Rights Upon Consummation of the Business Combination

 

Our Current Certificate of Incorporation provide that no M I Acquisitions public stockholder, together with any affiliate of his or any other person with whom he is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act) is permitted from seeking redemption rights, without M I Acquisitions’ prior written consent, with respect to 20% or more of the common stock sold in the IPO. By limiting a stockholder’s ability to redeem no more than 20% of the common stock sold in the IPO, M I Acquisitions believes it has limited the ability of a small group of stockholders to block a transaction which is favored by our other Public Stockholders. However, this limitation also makes it easier for M I Acquisitions to complete a business combination which is opposed by a significant number of Public Stockholders.

 

Tendering Common stock Share Certificates in connection with Redemption Rights

 

M I Acquisitions is requiring the M I Acquisitions Public Stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to M I Acquisitions’ transfer agent, or to deliver their shares to the transfer agent electronically using Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the holder’s option prior to the business day immediately preceding the consummation of the proposed Business Combination. There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC System. The transfer agent will typically charge the tendering broker $45.00 and it would be up to the broker whether to pass this cost on to the redeeming holder. However, this fee would be incurred regardless of whether M I Acquisitions requires holders seeking to exercise redemption rights to tender their common stock. The need to deliver common stock is a requirement of exercising redemption rights regardless of the timing of when such delivery must be effectuated.

 

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Any request for redemption, once made, may be withdrawn at any time up to the business day immediately preceding the consummation of the proposed Business Combination. Furthermore, if a stockholder delivered his certificate for redemption and subsequently decided prior to the date immediately preceding the consummation of the proposed Business Combination not to elect redemption, he may simply request that the transfer agent return the certificate (physically or electronically).

 

A redemption payment will only be made in the event that the proposed Business Combination is consummated. If the proposed Business Combination is not completed for any reason, then Public Stockholders who exercised their redemption rights would not be entitled to receive the redemption payment. In such case, M I Acquisitions will promptly return the share certificates to the public stockholder.

 

Appraisal Rights

 

Appraisal rights are not available to holders of M I Acquisitions common stock in connection with the Business Combination.

 

Proxies and Proxy Solicitation Costs

 

We are soliciting proxies on behalf of our board of directors. This solicitation is being made by mail but also may be made by telephone or in person. M I Acquisitions and its directors, officers and employees may also solicit proxies in person, by telephone or by other electronic means. Any solicitation made and information provided in such a solicitation will be consistent with the written proxy statement and proxy card. Morrow Sodali LLC, a proxy solicitation firm that M I Acquisitions has engaged to assist it in soliciting proxies, will be paid its customary fee of approximately $20,000 and reimbursement of out-of-pocket expenses.

 

M I Acquisitions will ask banks, brokers and other institutions, nominees and fiduciaries to forward its proxy materials to their principals and to obtain their authority to execute proxies and voting instructions. M I Acquisitions will reimburse them for their reasonable expenses.

 

If you send in your completed proxy card, you may still vote your shares in person if you revoke your proxy before it is exercised at the special meeting.

 

M I Acquisitions Initial Stockholders

 

In April 2015, we sold an aggregate of 1,437,500 shares of our common stock for $25,000, or approximately $.02 per share, to M SPAC LLC, which is controlled by Joshua Sason. On July 20, 2016, M SPAC LLC sold back 494,480 shares to us at a price equal to the amount paid for such shares. We subsequently sold an aggregate of 494,480 shares of our common stock for $8,600, or approximately $0.02 per share, to M SPAC Holdings I LLC and M SPAC Holdings II LLC, each of which is controlled by Joshua Sason.

 

The underwriters exercised a portion of their over-allotment option. Our insiders forfeited an aggregate of 109,973 insider shares in proportion to the portion of the over-allotment option that was not exercised. We recorded the forfeited shares as treasury stock and simultaneously retired the shares. Such forfeited shares were immediately cancelled which resulted in the retirement of the treasury shares and a corresponding charge to additional paid-in capital.

 

M SPAC LLC, M SPAC Holdings I LLC and M SPAC Holdings II LLC, entities controlled by Joshua Sason, our Chief Executive Officer, purchased, pursuant to written purchase agreements with us, 402,500 private units for a purchase price of $10.00 per private unit, generating total proceeds of $4,025,000. These purchases took place on a private placement basis simultaneously with the consummation of the IPO. Simultaneously with the purchase of units resulting from the exercise of the over-allotment option by the underwriters, M SPAC LLC, M SPAC Holdings I LLC and M SPAC Holdings II LLC purchased an additional 18,607 private units at a price of $10.00 per unit.

 

Pursuant to a registration rights agreement between us and our Initial Stockholders, our Initial Stockholders are entitled to certain registration rights with respect to the M I Acquisitions units held by them, as well as the underlying securities. The holders of these securities are entitled to make up to two demands that M I Acquisitions register such securities. The holders of the initial shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these common stock are to be released from escrow. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a business combination. M I Acquisitions will bear the expenses incurred in connection with the filing of any such registration statements.

 

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PROPOSAL NO. 1 – THE BUSINESS COMBINATION PROPOSAL

 

The discussion in this proxy statement of the Business Combination and the principal terms of the Purchase Agreement is subject to, and is qualified in its entirety by reference to, the Purchase Agreement. The full text of the Purchase Agreement is attached hereto as Annex A, which is incorporated by reference herein.

 

General Description of the Business Combination

 

Business Combination with Priority; Business Combination Consideration

 

Upon the closing of the transactions contemplated by the Purchase Agreement, M I Acquisitions will acquire 100% of the issued and outstanding equity securities of Priority, which will result in Priority becoming a wholly-owned subsidiary of M I Acquisitions.

 

The consideration to be paid by M I Acquisitions to Sellers in the business combination is a number of shares of M I Acquisitions’ common stock equal to Priority’s equity value (which the Purchase Agreement defines as of the signing date as the $947.8 million enterprise value of Priority, less the net debt of Priority, subject to certain adjustments as described in the Purchase Agreement) divided by $10.30. If Priority acquires or contracts to acquire any businesses prior to the closing of the Business Combination that increase Priority’s Earnout Adjusted EBITDA in aggregate by more than $9.0 million, Priority’s enterprise value will increase by multiplying the incremental increase in Earnout Adjusted EBITDA of such acquisition by 12.5, provided that estimated synergies related to any such acquisitions and proposed acquisitions included in the Earnout Adjusted EBITDA calculation of Priority shall be capped at 20% of the Earnout Adjusted EBITDA of the applicable acquisition with respect to the 12-month period immediately preceding the consummation of such acquisition. In order to be included in the above calculation, any agreements to acquire a business must be subject only to payment of cash and/or other consideration to the target and must close within 30 days following closing of the Business Combination. In addition, any cash that Priority spends to acquire any technology assets, up to $5.0 million, to purchase securities from the M I’s founders pursuant to the Founders Share Agreement or to extend the time we have to complete a business combination, will be included in the calculation of net debt as cash and cash equivalents (which would reduce the amount of net debt, effectively increasing the assumed equity value of Priority and increasing the number of shares that would be issued to the Sellers).

 

An additional 9.8 million shares of M I Acquisitions common stock may be issued as earn-out consideration to the Sellers, or at their election, to members of Priority’s management or other service providers post-business combination pursuant to the Priority Technology Holdings, Inc. Earnout Incentive Plan —4.9 million shares for the first earn-out and 4.9 million shares for the second earn-out. For the first earn-out, the Earnout Adjusted EBITDA of M I Acquisitions must be no less than $82.5 million for the year ending December 31, 2018 and the M I Acquisitions 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, the Earnout Adjusted EBITDA of M I Acquisitions must be no less than $91.5 million for the year ending December 31, 2019 and the M I Acquisitions 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. Furthermore, pursuant to the Founders Share Agreement, Priority agreed to purchase 421,107 of the units issued to the Founders in a private placement immediately prior to M I Acquisitions’ initial public offering, and 453,210 shares of common stock of M I Acquisitions issued to the Founders, for an aggregate purchase price of approximately $2.1 million. In addition, pursuant to the Founders Share Agreement, the Founders will forfeit 174,863 founder’s shares at the closing of the Business Combination, which shares may be reissued to the Founders if one of the earn outs described herein (and relating to the Purchase Agreement consideration) is achieved.

 

After the Business Combination, assuming no redemptions of common stock for cash, M I Acquisitions’ current Public Stockholders will own approximately 7.4% of the combined company, M I Acquisitions’ current directors, officers and affiliates will own approximately 1.1% of the combined company, and the Sellers (including the holders receiving shares distributed by PIH) will own approximately 91.5% of the combined company. Assuming redemption by holders of 61.4% of 4.9 million shares of M I Acquisitions outstanding public common stock, M I Acquisitions’ Public Stockholders will own approximately 3.0% of the combined company, M I Acquisitions’ current directors, officers and affiliates will own approximately 1.1% of the combined company, and the Sellers (including the holders receiving shares distributed by PIH) will own approximately 95.9% of the combined company.

 

If any of the proposals are not approved, the Business Combination will not be consummated and M I Acquisitions will liquidate and dissolve. Assuming all of such proposals are approved, the M I Acquisitions and Priority expect to close the Business Combination promptly following the special meeting.

 

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Background of the Business Combination

 

Background

 

M I Acquisitions, Inc. is a special purpose acquisition company formed on April 23, 2015 in Delaware for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization or other similar business combination with one or more target businesses. M I Acquisitions intended to focus on acquiring a company or companies operating in the technology, media and telecommunications industries, but was not limited to a particular industry or geographic region.

 

M I Acquisitions completed its IPO on September 19, 2016 of 5,000,000 units, with each unit consisting of one share of common stock, par value $0.001 per share, and one warrant, which entitles the holder thereof to purchase one share of common stock. Simultaneously with the consummation of the IPO, we consummated the private placement of 402,500 private units at a price of $10.00 per unit, generating total proceeds of $4,025,000. The private units were purchased by M SPAC LLC, M SPAC Holdings I LLC and M SPAC Holdings II LLC, entities controlled by Joshua Sason, our Chief Executive Officer. M I Acquisitions received gross proceeds of approximately $54,025,000 from the IPO and private placement.

 

The underwriters exercised the over-allotment option in part and, on October 14, 2016, the underwriters purchased 310,109 over-allotment option units, which were sold at an offering price of $10.00 per unit, generating gross proceeds of $3,101,090. On October 14, 2016, simultaneously with the sale of the over-allotment units, we consummated the private sale of an additional 18,607 private units to one of the Initial Stockholders, generating gross proceeds of $186,070.

 

After deducting the underwriting discounts and commissions and the offering expenses, the total net proceeds to us from the IPO (including the over-allotment option units) and private placements on September 19, 2016 and October 14, 2016 were approximately $55,220,000, of which $54,694,127 was deposited into a trust account, and the remaining proceeds became available to be used to provide for business, legal and accounting due diligence on prospective business combinations and continuing general and administrative expenses. Through the Record Date, we have used approximately $500,000 of the net proceeds that were not deposited into the trust account to pay general and administrative expenses. The net proceeds deposited into the trust account and any additional amounts deposited in connection with extensions of the trust account remain on deposit in the trust account earning interest except those certain amounts withdrawn in order to pay tax obligations and to redeem shareholders in connection with our shareholder vote to extend the date of liquidation date. As of the Record Date, there was $51,829,390 held in the trust account.

 

In accordance with M I Acquisitions’ Amended and Restated Certificate of Incorporation, the amounts held in the trust account may only be used by M I Acquisitions upon the consummation of a business combination, except that there can be released to M I Acquisitions, from time to time, any interest earned on the funds in the trust account that it may need to pay its tax obligations. The remaining interest earned on the funds in the trust account will not be released until the earlier of the completion of a business combination and M I Acquisitions’ liquidation. M I Acquisitions executed a definitive agreement on February 26, 2018 and it must liquidate unless a business combination is consummated by September 17, 2018. As of the Record Date, approximately $51,829,390 was held in deposit in M I Acquisitions’ trust account.

  

Promptly after M I Acquisitions’ IPO, the officers and directors of M I Acquisitions commenced the process of locating potential targets. M I Acquisitions management and board established a list of criteria for screening potential targets, including, but not limited to:

 

·Intelligible business model with public market comparables;

 

·Proprietary and/or value-added products/services with sustainable competitive advantage;

 

·Active in a positively-viewed industry that may be fragmented with high barriers to entry;

 

·Strong and experienced management team supported by a motivated controlling counterparty seeking to take advantage of improved liquidity and access to public markets; and

 

·Meaningful business size of at least $100.0 million in enterprise value with established and predictable history of revenue and profitability.

 

Promptly after the IPO, the M I Acquisitions officers and directors began to engage in targeted outreach to gain awareness of the vehicle and its ideal target company candidate. This outreach consisted primarily of reaching out to investment banks, financial advisory firms, merchant banks, deal finders, venture capital funds, private equity firms, industry-specific experts, and other target company service providers including active law firms, accounting firms and consulting firms. 

 

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Immediately following the M I Acquisitions IPO, M I Acquisitions management focused its search on companies in the general technology, media and telecommunications industry. Over the course of M I Acquisitions’ search for target companies, M I Acquisitions management evaluated in excess of 150 target companies. M I Acquisitions entered into advanced discussions with the following three targets in different industries, but did not proceed with these targets for a variety of reasons:

 

1.A restaurant franchising business that M I Acquisitions did not believe would be able to gain the necessary capital markets and investor interest to support a transaction

 

2.An international messaging marketing company that underwent a change of strategic vision from its sole shareholder during transaction negotiations and eventually elected not to proceed with a transaction with M I Acquisitions

 

3.An international travel technology company that was not willing or able to take on the responsibilities and risks associated with being a publicly-traded company

 

During M I Acquisitions’ search of target companies, management was introduced to Zachary Fisher, a Managing Director at Cowen & Company, LLC, regarding an opportunity that M I Acquisitions did not eventually pursue. During the course of M I Acquisitions’ evaluation of the opportunity, M I Acquisitions management met with Mr. Fisher several times, during which Mr. Fisher developed an understanding of M I Acquisitions’ investment thesis for and its ideal target candidate. On numerous occasions thereafter, Mr. Fisher reached out to M I Acquisitions management with potential target companies for M I Acquisitions.

 

On July 6, 2017, Mr. Fisher asked if the M I Acquisitions management would be interested in meeting with an unnamed company in the payments industry. A meeting was then set for July 13, 2017.

 

On July 13, 2017, Marc Manuel and Andrew Reggev went to Cowen’s office in New York City to meet with that company (Priority) and representatives from Cowen and Joshua Sason joined by conference call. They met with Priority’s Executive Chairman, Thomas Priore, Mr. Fisher and other representatives of Cowen. During the meeting, Thomas Priore provided an overview of the business, competitive advantages, recent developments within the Company and its capital structure, as well as future business initiatives, which included acquisitions, and potentially going public.

 

Subsequent to the meeting, M I Acquisitions management began market research of the industry, public market competitors, and any precedent transactions. Of particular interest to M I Acquisitions management was the recent FinTech Acquisition Corp. / CardConnect Corp. business combination and eventual sale of CardConnect Corp. to First Data Corporation, which was announced on May 29, 2017. Furthermore, with CardConnect no longer publicly listed, the acquisition of CardConnect by First Data left a void in the small- and mid-cap payments sector for the investment community.

 

On July 26, 2017, Priority executed a mutual non-disclosure agreement with M I Acquisitions.

 

On August 3, 2017, M I Acquisitions management held a conference call with Thomas Priore and Cowen to discuss the history of M I Acquisitions, developments in the SPAC market and Priority’s present business activity. Subsequent to the call Mr. Reggev sent a financial model to Cowen outlining M I Acquisitions capital ownership. Cowen held additional conversations with Priority over the following weeks discussing the application of a SPAC with Priority. Between August 3, 2017 and October 18, 2017 M I Acquisitions held additional internal meetings and discussions and engaged Chardan Capital Markets on July 14, 2017 to assist in providing advice on Priority, industry analysis and the transaction structure. After these meetings and discussions, M I Acquisitions management agreed internally to proceed with negotiations with Priority.

 

On October 20, 2017, M I Acquisitions, Priority, and Cowen met at Cowen’s office in Midtown, New York City to give a business update and to discuss timeline around a transaction given that M I Acquisitions had a deadline to complete a business combination of March 2018 (without any extensions).

 

On December 7, 2017 M I Acquisitions gave notice to Priority that the board of directors had mandated that M I Acquisitions reach an agreement with Priority in the immediate future. Subsequently, on December 22, 2017 Cowen provided M I Acquisitions with an initial term sheet. Between December 22, 2017 and January 2, 2018, the parties negotiated the terms of the transaction and, on January 2, 2018, Cowen provided the final term sheet, which substantively reflected the high level business understanding of a potential Business Combination.

 

With the general terms understood in principal, on January 3, 2018, M I Acquisitions management held a board meeting and introduced the opportunity to the M I Acquisitions board of directors by providing a walk-through of the business, transaction elements, and the pros and cons of the transaction. Joshua Sason provided an overview of Priority and the transaction highlights as well as management’s rationale for the proposed business combination. M I Acquisitions management then introduced the pros and cons of the transaction and explained the reasons that the transaction was beneficial to M I Acquisitions stockholders. The board subsequently requested a call with Cowen to provide a more in-depth overview of the industry, insight on this specific company and transaction, and the capital markets mechanics of the transaction.

 

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On January 4, 2018, M I Acquisitions, Loeb & Loeb (acting as M I Acquisitions’ legal representative), Priority, Cowen and Schulte Roth & Zabel LLP (“Schulte”) (acting as Priority’s legal representative) held a call to introduce the parties and discuss (i) the potential terms of a transaction, (ii) M I Acquisitions timeline constraints for the transaction, (iii) the timeline and process to reach a definitive documentation, and (iv) due diligence. In advance of the call, M I Acquisitions provided Cowen with an indicative timeline for the transaction, as well as their comprehensive due diligence request list, which was then circulated to the remainder of the participants on the call.

 

On January 8, 2018, Loeb & Loeb provided M I Acquisitions with an initial draft of the transaction documents and outlined major business and legal issues within the documents that still needed to be finalized. After several internal rounds of comments and edits to the documents, Loeb & Loeb provided an initial draft of the merger agreement to Schulte and Cowen on January 10, 2018. Over the ensuing four weeks, M I Acquisitions’ and Priority’s legal counsels exchanged drafts of the agreements to address a variety of critical open business, structural and legal issues including (i) minimum cash requirement for a transaction, (ii) reps and warranties of the buyer and sellers, (iii) treatment of the extension obligations, (iv) conditions to closing, and (v) finalizing of the disclosure schedules for each party among other items.

 

On January 11, 2018, M I Acquisitions management began formal due diligence review of Priority receiving access to the Priority data room based upon the due diligence request list that M I Acquisitions had provided to Cowen.

 

On January 18, 2018, M I Acquisitions management held a meeting with Giovanni Caruso of Loeb & Loeb at Loeb’s offices to go over the due diligence process, and to discuss outstanding business and legal issues. Following this meeting and through the date the agreement was signed, M I Acquisitions management and Loeb & Loeb collectively worked to complete their respective due diligence of the material provided.

 

On January 30, 2018 Mr. Sason visited the Priority headquarters in Alpharetta, GA. During his visit, Mr. Sason sat in on presentations from various divisions of the business to gain more in-depth knowledge of the day-to-day operations. Mr. Sason then conducted several interviews with Priority’s management team to provide further insights on M I Acquisitions’ operations, its vision and the general industry dynamics. Mr. Sason concluded the site visit with a one-on-one meeting with Thomas Priore to discuss remaining business issues in the transaction that still required resolution. Following the conclusion of his trip, Mr. Sason provided a debrief to the rest of M I Acquisitions management and reiterated his support for the transaction.

 

On January 31, 2018, M I Acquisitions held a meeting of the board of directors via conference call. Participants were each of the board of directors, as well as Matthew Kearney, as advisor to the board of directors, and Russell Rieger, and Andrew Reggev, who had been assisting M I Acquisitions management with the transaction. Each participant was provided with a current copy of the draft transaction documents prior to joining the call. During the call, management provided further updates on the transaction, a briefing of Mr. Sason’s visit to Priority’s headquarters, a discussion of the risks of the transaction and a Q&A session on Priority.

 

Between January 31, 2018 and February 9, 2018, M I Acquisitions management and Priority management negotiated remaining open items contained in the legal agreements.

 

On February 9, 2018, M I Acquisitions management provided notice to its board of directors to request formal approval to finalize a transaction with Priority. The information provided to the Board was supplemented with an outline of all recent changes to the transaction terms and legal documents since the prior versions circulated to the board. After the board was provided with time to review the updated agreements and preliminary presentation about Priority, the transaction was unanimously approved by the board of directors, subject to final negotiation and modifications.

 

Between February 9, 2018 and February 26, 2018, the parties finalized the transaction documents, exchanged turns on each party’s disclosure schedules and finalized outstanding due diligence issues.

 

On February 26, 2018, after all business terms and legal documentation was agreed upon, the parties signed the transaction documents. Prior to the market opening on February 27, 2018, M I Acquisitions issued a press release and filed a Current Report on Form 8-K announcing the execution of the transaction documents and providing an investor deck on the transaction and Priority’s business. Subsequently, on March 2, 2018, M I Acquisitions filed a Current Report on Form 8-K disclosing the material terms of the agreement and the transaction documents.

 

On March 26, 2018, the parties entered into an Amended and Restated Contribution Agreement. The revisions:

 

·changed Priority’s enterprise value to $947,835,000;

 

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·amended the language relating to the inclusion of acquisitions between signing and closing in the calculation of Priority’s enterprise value; and

 

·amended the definition of net assumed debt to include the cost of acquisition of technology assets, up to $5,000,000, the amount paid by Priority to purchase securities from the Founders pursuant to the Founders Share Agreement and any amounts paid by Priority to extend the time we have to complete a business combination in the calculation of net debt as cash and cash equivalents.

 

On April 17, 2018, the parties entered into a Second Amended and Restated Contribution Agreement. The revisions:

 

·clarified the calculation of Priority's enterprise value should also take into account any acquisitions for which Priority has contracted to acquire prior to closing of the Business Combination so long as the only factor preventing closing of those acquisitions is that the cash and/or other consideration has not yet been paid and those acquisitions are completed within 30 days of the closing of the Business Combination; and

 

·clarified the treatment of the GS Warrant as it relates to the payment of the Merger Consideration.

 

The Board of Directors Reasons for the Approval of the Business Combination

 

The board of directors held several meetings to discuss, among other things, a potential business combination with Priority. On February 9, 2018, the board of directors unanimously approved the Contribution Agreement, Purchase Agreement, and Letter Agreement and the transactions contemplated thereby, determined that the Business Combination is in the best interests of M I Acquisitions stockholders, directed that the Agreements be submitted to M I Acquisitions’ stockholders for approval and adoption, and recommended that M I Acquisitions’ stockholders approve and adopt the agreements and transactions contemplated thereby. Prior to reaching the decision to approve the agreements and the transaction, our board of directors consulted with our legal and financial advisors, as well as other third-party resources.

 

In order to become more familiar with the industry Priority operates in, our board of directors and management team reviewed various industry-specific research published by third-parties and also analyzed data and material from Priority, including but not limited to, Priority’s existing business model, historic and projected financial statements, valuation analysis, material agreements and other due diligence material. Our management team also coordinated legal due diligence with assistance from Loeb & Loeb and conducted several interviews with Priority’s management and held in-depth conference calls with third-party industry and financial experts including, but not limited to, Chardan Capital Markets.

 

Since M I Acquisitions’ IPO in September of 2016, our management team and board of directors have been conducting a search for potential business combination partners. M I Acquisitions’ management and board of directors considered a wide variety of factors in connection with its evaluation of the Business Combination but did not find it to be practical to quantify or assign weights to the specific factors in reaching its final decision. In considering the Business Combination with Priority, our management team and board of directors determined that Priority met, in some fashion, all of the criteria for our target company screening:

 

·Intelligible business model with public market comparables

 

Priority is a leading provider of merchant acquiring and commercial payment solutions with proprietary technology and infrastructure, ranking as the 6th largest non-bank acquirer as per “The Nilson Report”. Because several of Priority’s peers such as Global Payments Inc. (NYSE: GPN) and Worldpay Inc. (NYSE: WP) have strong public markets followings and support from investors and investment banks, we believe that Priority’s business model will be easily understood by the investment community. Additionally, in 2016, FinTech Acquisition Corp., a $100.0 million special purpose acquisition corporation, completed its acquisition of CardConnect Corp., which was subsequently sold to First Data Corporation at a price per share of $15.00 per share. We believe that this set a strong precedent in the marketplace for electronic payments companies merging with special purpose acquisition companies and will provide further support from the investment community. Furthermore, as further described later in this section, the board believes that the transaction represents an attractive investment opportunity due to the Priority’s post-Business Combination valuation discount to similar publicly-listed comparable companies.

 

·Proprietary and/or value-added products/services with sustainable competitive advantage

 

Priority’s solutions are delivered through its internally developed enterprise suites, which include: MX Connect, MX Merchant and CPX. MX Connect provides Priority’s consumer payments reselling partners with automated tools that support low friction merchant on-boarding, underwriting and risk management, client service, and commission processing through a single mobile-enabled, web-based interface. The result is a smooth merchant activation onto Priority’s flagship consumer payments offering, MX Merchant, which provides core processing and business solutions to SMB clients, including a flexible and customizable set of business applications that help better manage critical business functions and revenue performance. CPX, like the MX Product line, provides a complete solution suite designed to monetize all types of B2B payments by maximizing automation for buyers and suppliers. Using these value-added product suites and a customer-focused approach, Priority strives to maintain low attrition rates in comparison to competitors. Priority’s attrition is approximately 12%. According to Adil Consulting, competing acquirers in the SMB segment have attrition rates that average 23%. We believe this provides Priority with a sustainable competitive advantage to its peers.

 

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·Active in a positively-viewed industry that may be fragmented with high barriers to entry

 

According to The Nilson Report, the card and electronic consumer payment volume in the United States is projected to increase from $7.5 trillion in 2016 to $10.0 trillion by 2021, representing a 5.9% compound annual growth rate. According to The Nilson Report, purchase volume on credit, debit, electronic benefits transfer and prepaid cards in the United States was approximately $6 trillion in 2016 and is estimated to reach nearly $8.3 trillion by 2021, a CAGR of 6.7%. Priority believes that the larger B2B market is somewhat less penetrated with card and other electronic payments and is poised for continued growth in the future. This long-term trend towards electronic payments and the growth of SMBs provide strong opportunity for Priority to continue to grow through both organic business development and acquisition of select, market participants. Furthermore, the electronic consumer payment industry requires participants to maintain and continuously improve internal technology and infrastructure, keeping barriers to entry relatively high. Therefore, we believe that Priority has positioned itself well to protect against market competition and from losing customers to new companies in the industry.

 

·Strong and experienced management team supported by a motivated controlling counterparty seeking to take advantage of improved liquidity and access to public markets

 

Priority’s leadership team has extensive expertise in the industry with over 150 years of combined financial technology, payment processing, or other corporate functional expertise. John Priore, Priority’s Chief Executive Officer, has over 26 years of experience including serving as an Executive Vice President of Financial Systems at Ingenico and a Divisional Vice President at First Data Corporation. Bruce Mattox, Priority’s Chief Financial Officer, has over 31 years of experience and is a former Vice President and Divisional Controller at Wachovia Bank of Georgia and is a former Controller and Director at First Data Merchant Services. We expect that all key Priority executives will continue with the combined company following the business combination. Thomas Priore, Priority’s Executive Chairman and its majority owner, has over 25 years of experience in corporate and financial management and over 17 years of experience building companies from start-ups to institutional caliber enterprises. In addition, the Priority equityholders will all receive equity consideration in the transaction. We believe that management and the existing Priority equityholders have aligned their future business strategy to include the benefits of continued access to public markets to support their ongoing development of the business.

 

·Meaningful business size of at least ~$100.00 million in enterprise value with established and predictable history of revenue and profitability

 

Following closing of the Business Combination, the expected pro forma enterprise value of the company will be approximately $1,003 million, which creates a company well above M I Acquisitions management’s targeted enterprise value minimum threshold of $100.0 million. Furthermore, since 2015, Priority has had consistent and growing annual revenue and Earnout Adjusted EBITDA. Annual revenue and annual Earnout Adjusted EBITDA have both increased for every fiscal year since 2015 and based upon current projections, is expected to continue to increase through 2019, with a 12% net revenue CAGR and a 19% Earnout Adjusted EBITDA CAGR over such period. We believe that Priority’s historic financial performance and projected future financial performance illustrate the strength of Priority as a partner for M I Acquisitions.

 

During several M I Acquisitions meetings of our executive team and in on-going consultation with the board of directors, a substantial amount of time was spent evaluating and reviewing the transaction consideration of $947.8 million to acquire 100% of the equity of Priority that had been negotiated by the management team with Priority equityholders. It was determined in consultation with our board and advisors that the best methodology for evaluating the consideration being paid to Priority would be to use the market comparable method, specifically looking at historical or projected EV/ Adjusted EBITDA multiples (enterprise value to Adjusted EBITDA) of what we viewed as similar publicly listed merchant acquirers or processors in comparison to Priority’s pro forma multiples pre-transaction. It was determined in January 2018, that similar public companies traded at approximately 14.7x Projected 2018 EV/Adjusted EBITDA multiple, representing a strong premium to the consideration being paid in the Priority transaction of 11.8x Priority's 2018 Projected EV/Earnout Adjusted EBITDA. Our executive team and the board consulted with Chardan Capital Markets about the consideration being paid to acquire Priority and about the strength of the company on an EV/Earnout Adjusted EBITDA valuation basis and Earnout Adjusted EBITDA growth basis in comparison to its peers on an EV/ Adjusted EBITDA valuation basis and Adjusted EBITDA growth basis, respectively. Priority projects a 38% Adjusted EBITDA growth rate for 2017 to 2018, in comparison to public company comparables who reflect a 13.0% Adjusted EBITDA growth rate over the same period.

  

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Priority’s Earnout Adjusted EBITDA outlook excludes the impact of certain income and expense items that management believes are not part of underlying operations and also gives effect to certain adjustments related to acquired merchant portfolios and residual streams and other acquisitions. Priority’s management cannot estimate on a forward-looking basis the impact of certain of the excluded items on its reported net income, particularly the impact of interest expense, which could vary based on fluctuations in market interest rates or if Priority elects to change its capital structure in the future by repaying a portion of its debt or incurring additional debt. As a result, Priority does not provide a reconciliation to the closest corresponding GAAP financial measure for its Earnout Adjusted EBITDA outlook. Furthermore, Priority’s projected revenue and Earnout Adjusted EBITDA are forward-looking statements, which are subject to risks as described under “Forward-Looking Statements.”

 

Other Considerations

 

Our board of directors unanimously concluded that the Purchase Agreement with Priority is in the best interests of the M I Acquisitions stockholders. The board of directors did not obtain a fairness opinion on which to base its assessment. Because of the financial skills and background of its members, the board of directors believes it was qualified to perform the valuation analysis discussed in this section.

 

The board of directors focused its analysis on whether the Business Combination is likely to generate a return for its stockholders that is greater than if the trust were to be liquidated.

 

Recommendation of the Board of Directors

 

After careful consideration, the board of directors determined that the Business Combination with Priority is in the best interests of M I Acquisitions and its stockholders. On the basis of the foregoing, the board of directors has approved and declared advisable the Business Combination with Priority and recommends that you vote or give instructions to vote “FOR” each of the Business Combination Proposal and the other proposals.

 

Interests of Certain Persons in the Business Combination

 

When you consider the recommendation of the board of directors in favor of adoption of the Business Combination Proposal and other proposals, you should keep in mind that the directors and officers of M I Acquisitions have interests in the Business Combination that are different from, or in addition to, your interests as a stockholder, including:

 

In the absence of stockholder approval for a further extension, if the proposed Business Combination is not completed by September 17, 2018, M I Acquisitions will be forced to liquidate. In such event, the 1,327,527 shares of M I Acquisitions common stock held by M I Acquisitions officers, directors and affiliates, which were acquired prior to the IPO for an aggregate purchase price of $25,000, will be worthless, as will the 421,107 private units that were acquired simultaneously in connection with the IPO for an aggregate purchase price of $4,211,070. Each of M I Acquisitions’ officers and directors has a pecuniary interest in, as specified in the following table:

 

Name

 

Shares in which such person has
a pecuniary interest

 

Units in which such person has a
pecuniary interest

Joshua Sason   787,909   254,149
Marc Manuel   114,143   34,306
Russell Rieger   34,257   10,296
Donald S. Ienner   47,287   15,000
David Schulhof   23,644   7,500
Samuel S. Holdsworth   47,287   15,000

 

Such shares of common stock and units had an aggregate market value of approximately $18,996,529 based on the last sale price of M I Acquisitions’ common stock of $10.50 and M I Acquisitions’ warrants $1.51, on the Nasdaq Capital Market as of the Record Date;

 

·

Unless M I Acquisitions consummates the Business Combination, its officers, directors and Initial Stockholders will not receive reimbursement for any out-of-pocket expenses incurred by them. As of the Record Date, 2018, M I Acquisitions’ officers, directors and Initial Stockholders were entitled to approximately $8,353.52 in reimbursable expenses, which consist of the following:

 

Expense paid

 

By whom paid

 

Amount

 DTC Fees   Magna Management, LLC   $960.00
 Proxy Fees   Magna Management, LLC   $7,393.52

 

As a result, the financial interest of M I Acquisitions’ officers, directors and Initial Stockholders or their affiliates could influence its officers’ and directors’ motivation in selecting Priority as a target and therefore there may be a conflict of interest when it determined that the Business Combination is in the stockholders’ best interest;

 

·If M I Acquisitions liquidates prior to the consummation of a business combination, our insiders have contractually agreed that they will be personally liable to ensure that the proceeds in the trust account are not reduced by the claims of target business or claims of vendors or other entities that are owed money by us for services rendered or contracted for or products sold to us. Therefore, our directors and officers have a financial interest in consummating the Business Combination, thereby resulting in a conflict of interest; and

 

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·In addition, the exercise of M I Acquisitions’ directors’ and officers’ discretion in agreeing to changes or waivers in the terms of the Business Combination may result in a conflict of interest when determining whether such changes or waivers are appropriate and in the best interests of M I Acquisitions’ stockholders.

 

Certain Material U.S. Federal Income Tax Considerations

 

The following discussion is a summary of certain U.S. federal income tax considerations for holders of our common stock that elect to have their common stock redeemed for cash. This summary is based upon the Code, the regulations promulgated thereunder by the U.S. Treasury Department, current administrative interpretations and practices of the IRS and judicial decisions, all as currently in effect and all of which are subject to differing interpretations or to change, possibly with retroactive effect. No assurance can be given that the IRS would not assert, or that a court would not sustain a position contrary to any of the tax considerations described below. This summary does not discuss all aspects of U.S. federal income taxation that may be important to particular investors in light of their individual circumstances, such as investors subject to special tax rules (e.g., financial institutions, insurance companies, mutual funds, pension plans, S corporations, broker-dealers, traders in securities that elect mark-to-market treatment, regulated investment companies, real estate investment trusts, trusts and estates, partnerships and their partners, tax-exempt organizations (including private foundations), investors that hold our common stock as part of a “straddle,” “hedge,” “conversion,” “synthetic security,” “constructive ownership transaction,” “constructive sale,” or other integrated transaction for U.S. federal income tax purposes, investors subject to the alternative minimum tax provisions of the Code, U.S. Holders (as defined below) that have a functional currency other than the U.S. dollar, expatriates or former long-term residents of the United States, investors that actually or constructively own 5 percent or more of our common stock, and Non-U.S. Holders (as defined below), all of whom may be subject to tax rules that differ materially from those summarized below. In addition, this summary addresses only the federal income tax laws of the United States and does not discuss any state, local, or non-United States tax considerations, any non-income tax (such as gift or estate tax) considerations, alternative minimum tax or the Medicare tax on net investment income. In addition, this summary is limited to investors that hold our Common Stock as “capital assets” (generally, property held for investment) under the Code.

 

If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our common stock, the tax treatment of a partner in such partnership will generally depend upon the status of the partner, the activities of the partnership and certain determinations made at the partner level. If you are a partner of a partnership holding our common stock, you are urged to consult your tax advisor regarding the tax consequences of a redemption.

 

WE URGE HOLDERS OF OUR COMMON STOCK CONTEMPLATING EXERCISE OF THEIR REDEMPTION RIGHTS TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES THEREOF.

 

U.S. Federal Income Tax Considerations to U.S. Holders

 

This section is addressed to U.S. Holders of our common stock that elect to have their common stock redeemed for cash. For purposes of this discussion, a “U.S. Holder” is a beneficial owner of our common stock who or that is:

 

·an individual who is a U.S. citizen or resident of the United States;

 

·a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized (or treated as created or organized) in or under the laws of the United States, any state thereof or the District of Columbia;

 

·an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or

 

·a trust (A) the administration of which is subject to the primary supervision of a U.S. court and which has one or more U.S. persons (within the meaning of the Code) who have the authority to control all substantial decisions of the trust or (B) that has in effect a valid election under applicable Treasury regulations to be treated as a U.S. person.

 

Redemption of Common Stock

 

In the event that a U.S. Holder’s common stock is redeemed, the treatment of the transaction for U.S. federal income tax purposes will depend on whether the redemption qualifies as a sale of the common stock under Section 302 of the Code. Whether the redemption qualifies for sale treatment will depend largely on the total number of shares of our stock treated as held by the U.S. Holder (including any stock constructively owned by the U.S. Holder as a result of owning warrants) relative to all of our shares both before and after the redemption. The redemption generally will be treated as a sale of the common stock (rather than as a distribution) if the redemption (i) is “substantially disproportionate” with respect to the U.S. Holder, (ii) results in a “complete termination” of the U.S. Holder’s interest in us or (iii) is “not essentially equivalent to a dividend” with respect to the U.S. Holder. These tests are explained more fully below.

 

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In determining whether any of the foregoing tests are satisfied, a U.S. Holder takes into account not only stock actually owned by the U.S. Holder, but also shares of our stock that are constructively owned by it. A U.S. Holder may constructively own, in addition to stock owned directly, stock owned by certain related individuals and entities in which the U.S. Holder has an interest or that have an interest in such U.S. Holder, as well as any stock the U.S. Holder has a right to acquire by exercise of an option, which would generally include common stock which could be acquired pursuant to the exercise of the warrants. In order to meet the substantially disproportionate test, the percentage of our outstanding voting stock actually and constructively owned by the U.S. Holder immediately following the redemption must, among other requirements, be less than 80% of our outstanding voting stock actually and constructively owned by the U.S. Holder immediately before the redemption. There will be a complete termination of a U.S. Holder’s interest if either (i) all of the shares of our stock actually and constructively owned by the U.S. Holder are redeemed or (ii) all of the shares of our stock actually owned by the U.S. Holder are redeemed and the U.S. Holder is eligible to waive, and effectively waives in accordance with specific rules, the attribution of stock owned by certain family members and the U.S. Holder does not constructively own any other stock. The redemption will not be essentially equivalent to a dividend if a U.S. Holder’s conversion results in a “meaningful reduction” of the U.S. Holder’s proportionate interest in us. Whether the redemption will result in a meaningful reduction in a U.S. Holder’s proportionate interest in us will depend on the particular facts and circumstances. However, the IRS has indicated in a published ruling that even a small reduction in the proportionate interest of a small minority stockholder in a publicly held corporation who exercises no control over corporate affairs may constitute such a “meaningful reduction.”

 

If none of the foregoing tests are satisfied, then the redemption will be treated as a distribution and the tax effects will be as described below under “U.S. Federal Income Tax Considerations to U.S. Holders—Taxation of Distributions.” U.S. Holders of our common stock considering exercising their redemption rights should consult their own tax advisors as to whether the redemption will be treated as a sale or as a distribution under the Code.

 

Gain or Loss on Sale, Taxable Exchange, or Other Taxable Disposition of Common Stock

 

If the redemption qualifies as a sale of common stock, a U.S. Holder must treat any gain or loss recognized upon a sale, taxable exchange or other taxable disposition of our common stock as capital gain or loss. Any such capital gain or loss will be long-term capital gain or loss if the U.S. Holder’s holding period for the common stock so disposed of exceeds one year. Generally, a U.S. Holder will recognize gain or loss in an amount equal to the difference between (i) the sum of cash and the fair market value of any property received in such disposition and (ii) the U.S. Holder’s adjusted tax basis in its Common Stock so disposed of. A U.S. Holder’s adjusted tax basis in its Common Stock generally will equal the U.S. Holder’s acquisition cost less any prior distributions treated as a return of capital. Long-term capital gain realized by a non-corporate U.S. Holder generally will be taxable at a reduced rate. The deduction of capital losses is subject to limitations.

 

Taxation of Distributions

 

If the redemption does not qualify as a sale of Common Stock, the U.S. Holder will be treated as receiving a distribution. In general, any distributions to U.S. Holders generally will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of current and accumulated earnings and profits will constitute a return of capital that will be applied against and reduce (but not below zero) the U.S. Holder’s adjusted tax basis in our common stock. Any remaining excess will be treated as gain realized on the sale or other disposition of the Common Stock and will be treated as described under “U.S. Federal Income Tax Considerations to U.S. Holders—Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Common Stock.”

 

Dividends we pay to a U.S. Holder that is a taxable corporation generally will qualify for the dividends received deduction if the requisite holding period is satisfied. With certain exceptions, and provided certain holding period requirements are met, dividends we pay to a non-corporate U.S. Holder may constitute “qualified dividends” that will be taxable at a reduced rate.

 

U.S. Federal Income Tax Considerations to Non-U.S. Holders

 

This section is addressed to Non-U.S. Holders of our common stock that elect to have their common stock redeemed pursuant to the redemption. For purposes of this discussion, a “Non U.S.-Holder” is a beneficial owner of our common stock (other than a partnership or other pass-through entity for U.S. federal income tax purposes) that is not a U.S. Holder. The characterization for U.S. federal income tax purposes of the redemption generally will correspond to the U.S. federal income tax characterization of the redemption as described under “U.S. Federal Income Tax Considerations to U.S. Holders.”

 

Non-U.S. Holders of our common stock considering exercising their redemption rights should consult their own tax advisors as to whether the redemption will be treated as a sale or as a distribution under the Code.

 

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Gain on Sale, Taxable Exchange or Other Taxable Disposition of Common Stock

 

If the redemption qualifies as a sale of common stock, a Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax in respect of gain recognized on a sale of its common stock, unless:

 

·the gain is effectively connected with the conduct of a trade or business by the Non-U.S. Holder within the United States (and, under certain income tax treaties, is attributable to a U.S. permanent establishment or fixed base maintained by the Non-U.S. Holder), in which case the Non-U.S. Holder will generally be subject to the same treatment as a U.S. Holder with respect to the redemption, and a corporate Non-U.S. Holder may be subject to the branch profits tax at a 30% rate (or lower rate as may be specified by an applicable income tax treaty);

 

·the Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year in which the redemption takes place and certain other conditions are met, in which case the Non-U.S. Holder will be subject to a 30% tax on the individual’s net capital gain from U.S. sources for the year; or

 

·we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition or the period that the Non-U.S. Holder held our common stock, and, in the case where shares of our common stock are regularly traded on an established securities market, the Non-U.S. Holder has owned, directly or constructively, more than 5% of our common stock at any time within the shorter of the five-year period preceding the disposition or such Non-U.S. Holder’s holding period for the shares of our common stock.

 

Taxation of Distributions

 

If the redemption does not qualify as a sale of common stock, the Non-U.S. Holder will be treated as receiving a distribution. In general, any distributions we make to a Non-U.S. Holder of our common stock, to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles), will constitute dividends for U.S. federal income tax purposes and, provided such dividends are not effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States, we will be required to withhold tax from the gross amount of the dividend at a rate of 30%, unless such Non-U.S. Holder is eligible for a reduced rate of withholding tax under an applicable income tax treaty and provides proper certification of its eligibility for such reduced rate.

 

Any distribution not constituting a dividend will be treated first as reducing (but not below zero) the Non-U.S. Holder’s adjusted tax basis in its shares of our common stock and, to the extent such distribution exceeds the Non-U.S. Holder’s adjusted tax basis, as gain realized from the sale or other disposition of the common stock, which will be treated as described under “U.S. Federal Income Tax Considerations to Non-U.S. Holders—Gain on Sale, Taxable Exchange or Other Taxable Disposition of Common Stock.” If it cannot be determined at the time a distribution is made whether or not such distribution will be in excess of current and accumulated earnings and profits, the distribution will be subject to withholding at the same 30% rate discussed in the last paragraph unless a Non-U.S. Holder is eligible for a reduced rate of withholding tax under an applicable income tax treaty and provides proper certification of its eligibility for such reduced rate (usually on an IRS Form W-8BEN or W-8BEN-E). Because we generally cannot determine at the time we make a distribution whether or not the distribution will exceed our current and accumulated earnings and profits, we normally will withhold tax on the entire amount of any distribution at the 30% rate (subject to reduction by an applicable income tax treaty). However, some or all of any amounts thus withheld may be refundable to the Non-U.S. Holder by the IRS if it is subsequently determined that such distribution was, in fact, in excess of our current and accumulated earnings and profits.

 

Dividends we pay to a Non-U.S. Holder that are effectively connected with such Non-U.S. Holder’s conduct of a trade or business within the United States generally will not be subject to U.S. withholding tax, provided such Non-U.S. Holder complies with certain certification and disclosure requirements. Instead, such dividends generally will be subject to U.S. federal income tax, net of certain deductions, at the same graduated individual or corporate rates applicable to U.S. Holders (subject to an exemption or reduction in such tax as may be provided by an applicable income tax treaty). If the Non-U.S. Holder is a corporation, dividends that are effectively connected income may also be subject to a “branch profits tax” at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty).

 

Information Reporting and Backup Withholding

 

Information returns will be filed with the IRS in connection with payments resulting from a redemption of our common stock. U.S. Holders will have to provide their taxpayer identification number and comply with certain certification requirements to avoid backup withholding. A Non-U.S. holder may have to comply with certification procedures to establish that it is not a U.S. person in order to avoid information reporting and backup withholding requirements. The amount of any backup withholding from a payment to a U.S. Holder or Non-U.S. holder will be allowed as a credit against such holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.

 

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FATCA

 

A 30% withholding tax applies with respect to certain payments on our common stock in each case if paid to a foreign financial institution or a non-financial foreign entity (including, in some cases, when such foreign financial institution or entity is acting as an intermediary), unless (i) in the case of a foreign financial institution, such institution enters into an agreement with the U.S. government to withhold on certain payments, and to collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners), (ii) in the case of a non-financial foreign entity, such entity certifies that it does not have any substantial U.S. owners or provides the withholding agent with a certification identifying the direct and indirect substantial U.S. owners of the entity or (iii) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. The withholding tax may apply to payments made to Non-U.S. Holders pursuant to the redemption if the redemption does not qualify as a sale of common stock described above. Under certain circumstances, a Non-U.S. Holder might be eligible for refunds or credits of such taxes. An intergovernmental agreement between the United States and an applicable foreign country may modify these requirements. Non-U.S. Holders are encouraged to consult their tax advisors regarding the possible implications of such withholding tax.

 

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THE PURCHASE AGREEMENT

 

The following is a summary of the material provisions of the Purchase Agreement. This summary is qualified in its entirety by reference to the Purchase Agreement, which is attached as Annex A to this proxy statement. You are encouraged to read the Purchase Agreement in its entirety for a more complete description of the terms and conditions of the transactions contemplated by the Purchase Agreement.

 

Business Combination with Priority; Acquisition Consideration

 

Upon the closing of the transactions contemplated by the Purchase Agreement, M I Acquisitions will acquire 100% of the issued and outstanding equity securities of Priority, which will result in Priority becoming a wholly-owned subsidiary of M I Acquisitions.

 

The consideration to be paid by M I Acquisitions to Sellers in the business combination is a number of shares of M I Acquisitions’ common stock equal to Priority’s equity value (which the Purchase Agreement defines as of the signing date as the $947.8 million enterprise value of Priority, less the net debt of Priority, subject to certain adjustments as described in the Purchase Agreement) divided by $10.30. If Priority acquires or contracts to acquire any businesses prior to the closing of the Business Combination that increase Priority’s Earnout Adjusted EBITDA in aggregate by more than $9.0 million, Priority’s enterprise value will increase by multiplying the incremental increase in Earnout Adjusted EBITDA of such acquisition by 12.5, provided that estimated synergies related to any such acquisitions and proposed acquisitions included in the Earnout Adjusted EBITDA calculation of Priority shall be capped at 20% of the Earnout Adjusted EBITDA of the applicable acquisition with respect to the 12-month period immediately preceding the consummation of such acquisition. In order to be included in the above calculation, any agreements to acquire a business must be subject only to payment of cash and/or other consideration to the target and must close within 30 days following closing of the Business Combination. In addition, any cash that Priority spends to acquire any technology assets, up to $5.0 million, to purchase securities from the M I’s founders pursuant to the Founders Share Agreement described below or to extend the time we have to complete a business combination, will be included in the calculation of net debt as cash and cash equivalents (which would reduce the amount of net debt, effectively increasing the assumed equity value of Priority and increasing the number of shares that would be issued to the Sellers).

 

An additional 9.8 million shares of M I Acquisitions common stock may be issued as earn-out consideration to the Sellers, or at their election, to members of Priority’s management or other service providers post-business combination pursuant to the Earnout Incentive Plan—4.9 million shares for the first earn-out and 4.9 million shares for the second earn-out. For the first earn-out, the Earnout Adjusted EBITDA of M I Acquisitions must be no less than $82.5 million for the year ending December 31, 2018 and the M I Acquisitions 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, the Earnout Adjusted EBITDA of M I Acquisitions must be no less than $91.5 million for the year ending December 31, 2019 and the M I Acquisitions 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. Furthermore, pursuant to the Founders Share Agreement, Priority agreed to purchase 421,107 of the units issued to the Founders in a private placement immediately prior to M I Acquisitions’ initial public offering, and 453,210 shares of common stock of M I Acquisitions issued to the Founders, for an aggregate purchase price of approximately $2.1 million. In addition, pursuant to the Founders Share Agreement, the Founders will forfeit 174,863 founder’s shares at the closing of the Business Combination, which shares may be reissued to the Founders if one of the earn outs described herein (and relating to the Purchase Agreement consideration) is achieved.

 

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) affiliate transactions; (f) financial statements; (g) no undisclosed liabilities; (h) absence of certain changes or events; (i) real property, (j) proceedings and orders; (k) title to assets and properties; (l) material contracts; (m) insurance; (n) licenses and permits; (o) compliance with laws, including those relating to foreign corrupt practices and money laundering; (p) intellectual property; (q) employment and labor matters; (r) taxes and audits; (s) environmental matters; (t) merchant, ISO and sales agent relationships; (u) brokers and finders; and (v) 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; (h) SEC filing requirements and compliance; (i) proceedings and orders; (j) taxes and audits; (k) affiliate transactions; (l) material contracts; and (m) conduct of the business.

 

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Conduct Prior to Closing; Covenants

 

Both M I Acquisitions and Priority have agreed to operate their respective businesses in the ordinary course prior to the closing of the Business Combination (with certain exceptions) and not to take specified actions without the prior written consent of the other party.

 

The Purchase Agreement also contains certain customary covenants, including covenants relating to:

 

·Each party providing the other with access to its books and records;

 

·Neither party entering into any discussions with any third party relating to any business combination;

 

·M I Acquisitions maintaining the listing of its common stock on Nasdaq;

 

·Mailing of this proxy statement and notice and holding of the stockholders meeting; and

 

·Priority being required to deliver the financial statements required by M I Acquisitions in order to make applicable filings with the SEC.

 

Conditions to Closing

 

General Conditions

 

The obligations of both parties to consummate the transactions contemplated by the Purchase Agreement is conditioned on, among other things, (a) the absence of any order, stay, judgment or decree by any government agency; (b) holders of a majority of the outstanding shares of common stock approving the Business Combination in accordance with M I Acquisition’s Amended and Restated Certificate of Incorporation and Delaware law; (c) there being no less than $20 million remaining in the trust account immediately after the closing of the Business Combination, 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 Acquisitions’ 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 each of the following (none of which have been satisfied as of the date hereof), among other things:

 

·M I Acquisitions complying with all of its obligations required to be performed pursuant to the covenants in the Purchase Agreement, including with respect to the issuance to Goldman Sachs of a warrant (as described below);

 

·the representations and warranties of M I Acquisitions being true on and as of the Closing Date; and

 

·M I Acquisitions’ common stock remaining listed for trading on Nasdaq.

 

M I Acquisitions’ Conditions to Closing

 

The obligations of M I Acquisitions to consummate the transactions contemplated by the Purchase Agreement, in addition to the conditions described above in the first paragraph of this section, are conditioned upon each of the following (none of which have been satisfied as of the date hereof), among other things:

 

·Priority complying with all of its obligations required to be performed pursuant to the covenants in the Purchase Agreement; and

 

·the representations and warranties of Priority being true on and as of the Closing Date.

 

Termination

 

The Purchase Agreement may be terminated and/or abandoned at any time prior to the Closing by:

 

·the mutual written agreement of the Sellers and M I Acquisitions;

 

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· M I Acquisitions, if the closing has not occurred on or prior to September 17, 2018 (or an applicable later date if an extension is obtained pursuant to the terms of the Purchase Agreement), provided that M I Acquisitions is not in material breach of any of its obligations under the Purchase Agreement;

 

· the Sellers, if the closing has not occurred on or prior to September 17, 2018 (or an applicable later date if an extension is obtained pursuant to the terms of the Purchase Agreement), provided that the Sellers are not in material breach of any of their obligations under the Purchase Agreement;

 

·M I Acquisitions, if any Seller 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 Acquisitions’ 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 Seller of written notice of such breach or alleged breach from M I Acquisitions;

 

·the Sellers, if M I Acquisitions 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 Sellers’ 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 Acquisitions of written notice of such breach or alleged breach from the Sellers;

 

·either party if any governmental authority restrains, enjoins, or otherwise prohibits the transactions contemplated by the Purchase Agreement; or

 

·the Sellers, if (i) the requisite M I Acquisitions stockholder approval is not obtained or (ii) the redemptions from the trust account result in less than $20 million remaining in the trust account immediately after the closing of the Business Combination, after taking into account all redemptions.

 

Effect of Termination

 

In the event of termination and abandonment by either M I Acquisitions or Priority, all further obligations of the parties shall terminate, except for the following: (i) the covenant pertaining to both parties regarding to press releases or public announcements; (ii) the mutual confidentiality obligations of the parties; and (iii) the obligations of the parties under Article VIII (Miscellaneous) of the Purchase Agreement such as governing law, jurisdiction and waiver of jury trial.

 

The foregoing summary of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the actual agreement, which is filed as Annex A hereto.

 

Trust Extension

 

The Purchase Agreement provides that M I Acquisitions is responsible for depositing $132,753 into the trust account in the event the closing of the business combination has not taken place on or before the date that is the 18-month anniversary of the IPO, and that Priority is responsible for depositing $132,753 into the trust account (up to 2 times) in the event the closing of the Business Combination has not taken place on or before the date that is the 19-month or 20-month anniversary of the IPO.

 

Goldman Sachs Warrant

 

The Purchase Agreement provides that if the currently outstanding warrant issued by Priority to Goldman Sachs & Co. LLC ("Goldman Sachs") remains outstanding immediately prior to the closing of the Business Combination, the warrant will be canceled and M I Acquisition will issue a warrant to Goldman Sachs (in replacement of the existing warrant) exercisable for a number of shares of M I Acquisitions’ common stock that Goldman Sachs would be entitled to receive at the closing of the Business Combination if it had exercised the existing warrant immediately prior to closing. The existing warrant entitles Goldman Sachs to receive Class A Units of Priority equal to 2.2% of the total Class A Units issued and outstanding at the time of exercise. If the existing warrant has been exercised or is no longer outstanding immediately prior to the closing of the Business Combination; then no replacement warrant shall be issued.

 

Founders Share Agreement

 

Concurrently with the Purchase Agreement, the founding stockholders of M I Acquisitions (the “Founders”) and Priority entered into a purchase agreement (the “Founders Share Agreement”), a copy of which is attached hereto as Annex B, pursuant to which Priority agreed to purchase 421,107 of the units issued to the Founders in a private placement immediately prior to M I Acquisitions’ initial public offering, and 453,210 shares of common stock of M I Acquisitions issued to the Founders, for an aggregate purchase price of approximately $2.1 million. In addition, pursuant to the Founders Share Agreement, the Founders will forfeit 174,863 founder’s shares at the closing of the Business Combination, which shares may be reissued to the Founders if one of the earn outs described herein (and relating to the Purchase Agreement consideration) is achieved.

 

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Letter Agreement

 

In addition, the Founders and Thomas Priore, entered into a letter agreement (the “Letter Agreement”) pursuant to which the Founders granted Thomas Priore (i) the right to purchase at any time all or some of the Founders’ remaining shares of common stock of M I Acquisitions 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 any proposed transfer of the shares by the Founders. A copy of the Letter Agreement is attached hereto as Annex C.

 

Registration Rights Agreement

 

In connection with the Business Combination, M I Acquisitions and the Priority stockholders will enter into a Registration Rights Agreement to provide for the registration of the common stock being issued to the Priority stockholders in connection with the Business Combination. The Priority stockholders will be entitled to “piggy-back” registration rights with respect to registration statements filed following the consummation of the Business Combination, as well as certain demand rights.

 

Vote Required for Approval

 

Approval of the Business Combination Proposal requires the affirmative vote of the holders of a majority of the shares of M I Acquisitions common stock represented in person or by proxy at the special meeting of M I Acquisitions stockholders and entitled to vote thereon. Adoption of the Business Combination Proposal is conditioned upon the adoption of the Authorized Share Increase Proposal and the Equity Incentive Plan Proposal.

 

Recommendation of the Board of Directors

 

OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE BUSINESS COMBINATION PROPOSAL.

 

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PROPOSAL NO. 2 – THE AUTHORIZED SHARE INCREASE PROPOSAL

 

Overview

 

In order to effectuate the transactions contemplated by the Purchase Agreement, M I Acquisitions must increase its number of authorized shares from 30,000,000 shares of common stock. The board of directors has requested that M I Acquisitions’ stockholders authorize the issuance of up to 1,000,000,000 shares of common stock and up to 100,000,000 shares of preferred stock. If this proposal is not approved, the transaction with Priority will not be able to be consummated because M I Acquisitions will not have sufficient authorized shares to issue to the Sellers in consideration of the Business Combination.

 

M I Acquisitions will need approximately 60,000,000 shares of common stock to pay the initial consideration to the Sellers at the closing of the Business Combination. By authorizing up to 1,000,000,000 shares, the combined company will have flexibility to execute its business plan by having an adequate number of authorized but unissued shares of common stock available to facilitate potential equity financings, acquisitions, business combinations, stock dividends, stock options, stock splits, recapitalizations and other general corporate purposes, without the expense or delay attendant in seeking stockholder approval at a special or annual meeting at a time when such shares would be needed (except as may be required by law or by any stock exchange on which our securities may then be listed). The additional shares may also be needed for any earn-out consideration payable pursuant to the Purchase Agreement.

 

This summary is qualified by reference to the complete text of the proposed amendment, which is included in our proposed second amended and restated certificate of incorporation of M I Acquisitions, a copy of which is attached to this proxy statement/prospectus as Annex E, which will become the combined company’s certificate of incorporation upon the approval of the Amendments Proposals, assuming the consummation of the Business Combination (the “Proposed Amended and Restated Certificate of Incorporation”). All stockholders are encouraged to read the Proposed Amended and Restated Certificate of Incorporation in its entirety for a more complete description of its terms.

 

Comparison of Current Certificate of Incorporation to Proposed Amended and Restated Certificate of Incorporation, in Connection with the Authorized Stock Proposal

 

The following table sets forth a summary of the change proposed to be made between our Current Certificate of Incorporation and the Proposed Amended and Restated Certificate of Incorporation if the Authorized Stock Proposal is approved. This summary is qualified by reference to the complete text of the Proposed Amended and Restated Certificate of Incorporation, a copy of which is attached to this proxy statement as Annex C. All stockholders are encouraged to read the Proposed Amended and Restated Certificate of Incorporation in its entirety for a more complete description of its terms.

 

    Current Certificate of Incorporation     Proposed Amended and Restated Certificate of Incorporation
         
Article V vs. Article IV.A   Article V. The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is 31,000,000, of which 30,000,000 shares shall be Common Stock of the par value $.001 per share (“Common Stock”) and 1,000,000 shares shall be preferred stock of the par value of $.001 per share (“Preferred Stock”).   Article IV.A. The total number of shares of all classes of stock which the Corporation shall have authority to issue is 1,100,000,000), consisting of 1,000,000,000) shares of Common Stock, par value one cent ($0.001) per share (the “Common Stock”), and (ii) 100,000,000 shares of preferred stock, par value one cent ($0.001) per share (the “Preferred Stock”).

 

If stockholder approval is not obtained for this Authorized Share Increase Proposal, we will not complete the Business Combination because stockholder approval of this Authorized Share Increase Proposal is a condition to completion of the Business Combination and because we do not currently have a sufficient number of authorized shares to consummate the Business Combination.

 

We do not have any arrangements, commitments or understandings to issue any shares of our capital stock except in connection with the Business Combination, the 2018 Equity Incentive Plan and our currently outstanding warrants.

 

While it may be deemed to have potential anti-takeover effects, this proposal to increase our authorized common stock and preferred stock is not prompted by any specific effort or takeover threat currently perceived by management.

 

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Vote Required for Approval

 

The affirmative vote of holders of a majority of the issued and outstanding shares of common stock of M I Acquisitions is required to approve this Authorized Share Increase Proposal. Broker non-votes, abstentions or the failure to vote on this Authorized Share Increase Proposal will have the same effect as a vote “AGAINST” this Authorized Share Increase Proposal.

 

This Authorized Share Increase Proposal is conditioned upon the approval and completion of the Business Combination Proposal. If the Business Combination Proposal is not approved, this Authorized Share Increase Proposal will have no effect even if approved by our stockholders.

 

Recommendation of the Board of Directors

 

OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE AUTHORIZED SHARE INCREASE PROPOSAL.

 

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PROPOSAL NO. 3 - THE BOARD DECLASSIFICATION PROPOSAL

 

Overview

 

Assuming that the Business Combination is approved, our stockholders are also being asked to approve the declassification of the board of directors. Our Current Certificate of Incorporation provides that our board of directors is divided into three classes with only one class of directors being elected in each year and each class (except for those directors appointed prior to our first annual meeting of stockholders) serving a three-year term.

 

Upon consummation of the Business Combination, our board of directors will have five members. We expect that these five members will be: Thomas Priore, John Priore, Marc Manuel, William Gahan and Matthew Kearney. In addition, the Sellers expect to appoint two additional directors after the consummation of the Business Combination, subject to a vote by the board of directors to increase the number of board seats and to fill such newly-created positions. The Sellers have not yet selected who will serve in those two additional board seats, but do not expect that such persons will qualify as “independent directors” under Nasdaq rules. See the section entitled “Directors, Executive Officers, Executive Compensation and Corporate Governance – Directors and Executive Officers after the Business Combination” for additional information.

 

We are asking our stockholders to approve amendments to Article VI of our Current Certificate of Incorporation, as provided in Annex E to this proxy statement/prospectus, to declassify our board of directors so that following the Business Combination there will be one class of directors without staggered terms of office, and to make certain related changes. If this proposal is approved by our stockholders, our Current Certificate of Incorporation will be amended to provide that from and after the date of the Proposed Amended and Restated Certificate of Incorporation our board of directors shall consist of one class of directors only, whose term shall continue to the first annual meeting of stockholders following the date of the Proposed Amended and Restated Certificate of Incorporation, and, thereafter, all directors shall be elected annually and shall be elected for one year terms expiring at the next annual meeting of our stockholders.

 

Comparison of Current Certificate of Incorporation to Proposed Amended and Restated Certificate of Incorporation, in Connection with this Board Declassification Proposal

 

The following table sets forth a summary of the change proposed to be made between our Current Certificate of Incorporation and the Proposed Amended and Restated Certificate of Incorporation, if this Board Declassification Proposal is approved. This summary is qualified by reference to the complete text of the Proposed Amended and Restated Certificate of Incorporation, a copy of which is attached to this proxy statement as Annex E. All stockholders are encouraged to read the Proposed Amended and Restated Certificate of Incorporation in its entirety for a more complete description of its terms.

 

   

Current Certificate of

Incorporation

 

Proposed Amended and Restated

Certificate of Incorporation

         

Article VI.H vs.

Article V.B and V.C

 

Article VI.H. The Board of Directors shall be divided into three classes: First Class, Second Class and Third Class. The number of directors in each class shall be as nearly equal as possible. At the first election of directors by the incorporator, the incorporator shall elect a Third Class director for a term expiring at the Corporation’s third Annual Meeting of Stockholders. The Third Class director shall then appoint additional First Class, Second Class and Third Class directors, as necessary. The directors in First Class shall be elected for a term expiring at the first Annual Meeting of Stockholders, the directors in Second Class shall be elected for a term expiring at the second Annual Meeting of Stockholders and the directors in Third Class shall be elected for a term expiring at the third Annual Meeting of Stockholders. Commencing at the first Annual Meeting of Stockholders, and at each annual meeting thereafter, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election. Except as the GCL may otherwise require, in the interim between annual meetings of stockholders or special meetings of stockholders called for the election of directors and/or the removal of one or more directors and the filling of any vacancy in that connection, newly created directorships and any vacancies in the Board of Directors, including unfilled vacancies resulting from the removal of directors for cause, may be filled by the vote of a majority of the remaining directors then in office, although less than a Quorum (as defined in the Corporation’s Bylaws), or by the sole remaining director. All directors shall hold office until the expiration of their respective terms of office and until their successors shall have been elected and qualified or until his or her earlier resignation, removal or death. A director elected to fill a vacancy resulting from the death, resignation or removal of a director shall serve for the remainder of the full term of the director whose death, resignation or removal shall have created such vacancy and until his or her successor shall have been elected and qualified.

 

Article V.B. Except as otherwise provided for or fixed pursuant to the provisions of Article IV (including any certificate of designation with respect to any series of Preferred Stock) and this Article VI relating to the rights of the holders of any series of Preferred Stock to elect additional directors, the total number of directors shall be determined from time to time exclusively by resolution adopted by the Board of Directors. At the first election of directors by the incorporator, the incorporator shall elect a director for a term expiring at the Corporation’s first annual meeting of stockholders. Such director shall then appoint additional directors, as necessary. The directors (other than those directors elected by the holders of any series of Preferred Stock, voting separately as a series or together with one or more other such series, as the case may be) shall be elected for a one (1) year term and shall hold office until the next annual meeting of stockholders and until their successors shall be elected and shall qualify, subject, however to prior death, resignation, retirement, disqualification or removal from office. At each succeeding annual meeting, successors to the directors whose term expires at that annual meeting shall be elected for a term expiring at the succeeding annual meeting of stockholders and until their successors shall be elected and shall qualify, subject, however to prior death, resignation, retirement, disqualification or removal from office.

 

Article V.C. Vacancies on the Board of Directors by reason of death, resignation, retirement, dis-qualification, removal from office, or otherwise, and newly created directorships resulting from any increase in the authorized number of directors, shall be filled solely by a majority of the directors then in office, although less than a Quorum, or by a sole remaining director, and shall not be filled by the stockholders. Any director elected to fill a vacancy or newly created directorship shall hold office until the next annual meeting of stockholders and until his or her successor shall be elected and qualified, or until his or her earlier death, resignation, retirement, disqualification or removal from office. In no case shall a decrease in the number of authorized directors remove or shorten the term of any incumbent director.

 

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Reasons for this Amendment

 

In determining whether to submit to our stockholders this Board Declassification Proposal, our board of directors considered arguments in favor of and against continuation of a classified board structure and determined that declassification of the board would be in the best interests of us and our stockholders.

 

Specifically, our board of directors recognized that corporate governance standards have continued to evolve, resulting in a majority of S&P 500 companies having implemented annual director elections. Furthermore, a classified structure may appear to reduce director accountability to stockholders, since such structure does not enable stockholders to express a view on each director’s performance by means of an annual vote. Our board of directors also recognized that many institutional investors and commentators now believe that the election of directors is the primary means for stockholders to influence corporate governance policies and to hold the board and management accountable for implementing those policies.

 

Although our board of directors believes that declassifying the board of directors is in the best interests of us and our stockholders, the board is aware that there may be disadvantages to a declassified board structure. For example, a classified board structure may provide increased board continuity and stability and encourages directors to focus on the long term productivity of a company. Additionally, classified boards may provide additional protections against unwanted, and potentially unfair and abusive, takeover attempts and proxy contests, as they make it more difficult for a substantial stockholder to gain control of a board of directors without the cooperation or approval of incumbent directors.

 

After considering the foregoing, our board believes that the amendments declassify the board under this proposal are in the best interests of us and our stockholders.

 

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If this Board Declassification Proposal is approved, the proposed changed in our certificate of incorporation referenced above would become effective upon the filing of the Proposed Amended and Restated Certificate of Incorporation the Secretary of State of the State of Delaware, which we would file on the day of the Closing.

 

Vote Required for Approval

 

The affirmative vote of holders of a majority of the issued and outstanding shares of common stock of M I Acquisitions is required to approve this Board Declassification Proposal. Broker non-votes, abstentions or the failure to vote on this Board Declassification Proposal will have the same effect as a vote “AGAINST” this Board Declassification Proposal.

 

This Board Declassification Proposal is conditioned upon the approval and completion of the Business Combination Proposal. If the Business Combination Proposal is not approved, this Board Declassification Proposal will have no effect even if approved by our stockholders.

 

Recommendation of the Board of Directors

 

OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE BOARD DECLASSIFICATION PROPOSAL.

 

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PROPOSAL NO. 4 - THE VOTING THRESHOLD PROPOSAL

 

Overview

 

Assuming the Business Combination Proposal is approved, our stockholders are also being asked to approve additional amendments to our Current Certificate of Incorporation, which are in the judgment of our Board, necessary to adequately address the needs of the post-combination company.

 

The additional amendments would require that at any time when the Sellers or their affiliates (collectively, the “Priority Holders”) beneficially own, in the aggregate, less than 40% in voting power of the stock of the corporation entitled to vote generally in the election of directors, in addition to any vote required by applicable law, the following provisions in the Proposed Amended and Restated Certificate of Incorporation would be able to be amended, altered, repealed or rescinded, in whole or in part, or any provision inconsistent therewith or herewith may be adopted, only by the affirmative vote of the holders of at least 66 2/3% in voting power of all the then-outstanding shares of stock of the company entitled to vote thereon, voting together as a single class: Articles V, VI, VII, VIII, IX, XI and XII. Furthermore, as per the proposed amendments to the Current Certificate of Incorporation, at any time when the Priority Holders beneficially own, in the aggregate, less than 40% in voting power of the stock of the company entitled to vote generally in the election of directors, in addition to any vote of the holders of any class or series of capital stock of the company required herein (including any certificate of designation relating to any series of Preferred Stock), the Bylaws or applicable law, the affirmative vote of the holders of at least 66 2/3% in voting power of all the then-outstanding shares of stock of the company entitled to vote thereon, voting together as a single class, shall be required in order for the stockholders of the company to alter, amend, repeal or rescind, in whole or in part, any provision of the Bylaws or to adopt any provision inconsistent therewith. This will give the Priority Holders significant influence over the approval of any amendments even after the Priority Holders own less than a majority of our outstanding shares of common stock.

 

Furthermore, the additional amendments provide that the company reserves the right to repeal, alter amend, or rescind any provision contained in the Proposed Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred on stockholders herein are granted subject to this reservation.

 

Comparison of Current Certificate of Incorporation to Proposed Amended and Restated Certificate of Incorporation, in Connection with this Voting Threshold Proposal

 

The following table sets forth a summary of the changes proposed to be made between our Current Certificate of Incorporation and the Proposed Amended and Restated Certificate of Incorporation, if this Voting Threshold Proposal is approved. This summary is qualified by reference to the complete text of the Proposed Amended and Restated Certificate of Incorporation, a copy of which is attached to this proxy statement as Annex E. All stockholders are encouraged to read the Proposed Amended and Restated Certificate of Incorporation in its entirety for a more complete description of its terms.

 

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    Current Certificate of Incorporation   Proposed Amended and Restated Certificate of Incorporation
         
Article VII.B. vs. Article V and Article X   Article VII.B. The Board of Directors shall have the power, without the assent or vote of the stockholders, to make, alter, amend, change, add to or repeal the by-laws of the Corporation as provided in the by-laws of the Corporation.  

Article V

 

A. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, at any time when Priority Investment Holdings, LLC and Priority Incentive Holdings, LLC or their Affiliates (collectively, the “Priority Holders”) beneficially own, in the aggregate, less than 40% in voting power of the stock of the Corporation entitled to vote generally in the election of directors, in addition to any vote required by applicable law, the following provisions in this Certificate of Incorporation may be amended, altered, repealed or rescinded, in whole or in part, or any provision inconsistent therewith or herewith may be adopted, only by the affirmative vote of the holders of at least 66 2/3% in voting power of all the then-outstanding shares of stock of the Corporation entitled to vote thereon, voting together as a single class: this Article V, Article VI, Article VII, Article VIII, Article IX, Article XI and Article XII. For the purposes of this Certificate of Incorporation, beneficial ownership of shares shall be determined in accordance with Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

B. The Board of Directors is expressly authorized to make, repeal, alter, amend and rescind, in whole or in part, the bylaws of the Corporation (as in effect from time to time, the “Bylaws”) without the assent or vote of the stockholders in any manner not inconsistent with the laws of the State of Delaware or this Certificate of Incorporation. Notwithstanding anything to the contrary contained in this Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote of the stockholders, at any time when the Priority Holders beneficially own, in the aggregate, less than 40% in voting power of the stock of the Corporation entitled to vote generally in the election of directors, in addition to any vote of the holders of any class or series of capital stock of the Corporation required herein (including any certificate of designation relating to any series of Preferred Stock), the Bylaws or applicable law, the affirmative vote of the holders of at least 66 2/3% in voting power of all the then-outstanding shares of stock of the Corporation entitled to vote thereon, voting together as a single class, shall be required in order for the stockholders of the Corporation to alter, amend, repeal or rescind, in whole or in part, any provision of the Bylaws or to adopt any provision inconsistent therewith.

 

C. For purposes of this Certificate of Incorporation, “Affiliate” means a person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with another person.

 

Article X

 

The Corporation reserves the right to repeal, alter amend, or rescind any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred on stockholders herein are granted subject to this reservation.

 

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Reasons for the Amendments

 

The amendments relating to the proposed changes in the voting thresholds set forth in this Voting Threshold Proposal are intended to protect key provisions of the Proposed Amended and Restated Certificate of Incorporation from arbitrary amendment and to prevent, under certain circumstances, a simple majority of stockholders from taking actions that may be harmful to other stockholders or making changes to provisions that are intended to protect all stockholders.

 

Vote Required for Approval

 

The affirmative vote of holders of a majority of the issued and outstanding shares of common stock of M I Acquisitions is required to approve this Voting Threshold Proposal. Broker non-votes, abstentions or the failure to vote on this Voting Threshold Proposal will have the same effect as a vote “AGAINST” this Voting Threshold Proposal.

 

This Voting Threshold Proposal is conditioned upon the approval and completion of the Business Combination Proposal. If the Business Combination Proposal is not approved, this Voting Threshold Proposal will have no effect even if approved by our stockholders.

 

Recommendation of the Board of Directors

 

OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
OUR STOCKHOLDERS VOTE “FOR” THE VOTING THRESHOLD PROPOSAL. 

 

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PROPOSAL NO. 5 - THE SECTION 203 PROPOSAL

 

Overview

 

Assuming the Business Combination Proposal is approved, our stockholders are also being asked to approve an additional amendment to our Current Certificate of Incorporation, which, in the judgment of our Board of Directors, is necessary to adequately address the needs of the combined company.

 

The additional amendment would cause the combined company not to be governed by Section 203 of the DGCL but, instead, include a provision in our Proposed Certificate of Incorporation that is substantially similar to Section 203 of the DGCL, but that excludes the Sellers and each of their respective successors, affiliates and transferees from the definition of “interested stockholder,” and to make certain related changes.

 

Comparison of Current Certificate of Incorporation to Proposed Amended and Restated Certificate of Incorporation, in Connection with this Section 203 Proposal

 

The following table sets forth a summary of the change proposed to be made between our Current Certificate of Incorporation and the Proposed Amended and Restated Certificate of Incorporation, if this Section 203 Proposal is approved. This summary is qualified by reference to the complete text of the Proposed Amended and Restated Certificate of Incorporation, a copy of which is attached to this proxy statement as Annex E. All stockholders are encouraged to read the Proposed Amended and Restated Certificate of Incorporation in its entirety for a more complete description of its terms.

 

    Current Certificate of Incorporation   Proposed Amended and Restated Certificate of Incorporation
         
Article XI   There is no applicable language in the Current Certificate of Incorporation.  

Article XI

A. The Corporation hereby expressly elects not to be governed by Section 203 of the DGCL.

 

B. Notwithstanding the foregoing, the Corporation shall not engage in any business combination (as defined below), at any point in time at which the Corporation’s common stock is registered under Section 12(b) or 12(g) of the Exchange Act, with any interested stockholder (as defined below) for a period of three (3) years following the time that such stockholder became an interested stockholder, unless:

 

1. prior to such time, the Board of Directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder, or

 

2. upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock (as defined below) of the Corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned (i) by persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer, or

 

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3. at or subsequent to such time, the business combination is approved by the Board of Directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock of the Corporation which is not owned by the interested stockholder.

 

C. For purposes of this Article XI, references to:

 

1. “Affiliate” means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, another person.

 

2. “associate,” when used to indicate a relationship with any person, means: (i) any corporation, partnership, unincorporated association or other entity of which such person is a director, officer or partner or is, directly or indirectly, the owner of 20% or more of any class of voting stock; (ii) any trust or other estate in which such person has at least a 20% beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity; and (iii) any relative or spouse of such person, or any relative of such spouse, who has the same residence as such person.

 

3. “business combination,” when used in reference to the Corporation and any interested stockholder of the Corporation, means:

 

(i) any merger or consolidation of the Corporation or any direct or indirect majority-owned subsidiary of the Corporation (a) with the interested stockholder, or (b) with any other corporation, partnership, unincorporated association or other entity if the merger or consolidation is caused by the interested stockholder and as a result of such merger or consolidation Section (B) of this Article XI is not applicable to the surviving entity;

 

(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions), except proportionately as a stockholder of the Corporation, to or with the interested stockholder, whether as part of a dissolution or otherwise, of assets of the Corporation or of any direct or indirect majority-owned subsidiary of the Corporation which assets have an aggregate market value equal to 10% or more of either the aggregate market value of all the assets of the Corporation determined on a consolidated basis or the aggregate market value of all the outstanding stock of the Corporation;

 

(iii) any transaction which results in the issuance or transfer by the Corporation or by any direct or indirect majority-owned subsidiary of the Corporation of any stock of the Corporation or of such subsidiary to the interested stockholder, except: (a) pursuant to the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into stock of the Corporation or any such subsidiary which securities were outstanding prior to the time that the interested stockholder became such; (b) pursuant to a merger under Section 251(g) of the GCL; (c) pursuant to a dividend or distribution paid or made, or the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into stock of the Corporation or any such subsidiary which security is distributed, pro rata to all holders of a class or series of stock of the Corporation subsequent to the time the interested stockholder became such; (d) pursuant to an exchange offer by the Corporation to purchase stock made on the same terms to all holders of said stock; or (e) any issuance or transfer of stock by the Corporation; provided, however, that in no case under items (c)-(e) of this subsection (iii) shall there be an increase in the interested stockholder’s proportionate share of the stock of any class or series of the Corporation or of the voting stock of the Corporation (except as a result of immaterial changes due to fractional share adjustments);

 

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(iv) any transaction involving the Corporation or any direct or indirect majority-owned subsidiary of the Corporation which has the effect, directly or indirectly, of increasing the proportionate share of the stock of any class or series, or securities convertible into the stock of any class or series, of the Corporation or of any such subsidiary which is owned by the interested stockholder, except as a result of immaterial changes due to fractional share adjustments or as a result of any purchase or redemption of any shares of stock not caused, directly or indirectly, by the interested stockholder; or

 

(v) any receipt by the interested stockholder of the benefit, directly or indirectly (except proportionately as a stockholder of the Corporation), of any loans, advances, guarantees, pledges, or other financial benefits (other than those expressly permitted in subsections (i)-(iv) above) provided by or through the Corporation or any direct or indirect majority-owned subsidiary.

 

4. “control,” including the terms “controlling,” “controlled by” and “under common control with,” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting stock, by contract, or otherwise. A person who is the owner of 20% or more of the outstanding voting stock of the Corporation, partnership, unincorporated association or other entity shall be presumed to have control of such entity, in the absence of proof by a preponderance of the evidence to the contrary. Notwithstanding the foregoing, a presumption of control shall not apply where such person holds voting stock, in good faith and not for the purpose of circumventing this Section, as an agent, bank, broker, nominee, custodian or trustee for one or more owners who do not individually or as a group have control of such entity.

 

5. “Priority Holder Direct Transferee” means any person that acquires (other than in a registered public offering) directly from the Priority Holders or any of their successors or any “group,” or any member of any such group, of which such persons are a party under Rule 13d-5 of the Exchange Act beneficial ownership of 15% or more of the then outstanding voting stock of the Corporation.

 

6. “Priority Holder Indirect Transferee” means any person that acquires (other than in a registered public offering) directly from any Priority Holder Direct Transferee or any other Priority Holder Indirect Transferee beneficial ownership of 15% or more of the then outstanding voting stock of the Corporation.

 

7. “interested stockholder” means any person (other than the Corporation or any direct or indirect majority-owned subsidiary of the Corporation) that (i) is the owner of 15% or more of the outstanding voting stock of the Corporation, or (ii) is an Affiliate or associate of the Corporation and was the owner of 15% or more of the outstanding voting stock of the Corporation at any time within the three (3) year period immediately prior to the date on which it is sought to be determined whether such person is an interested stockholder; and the Affiliates and associates of such person; but “interested stockholder” shall not include (a) the Priority Holders, any Priority Holder Transferee, any Priority Holder Indirect Transferee, or any of their respective Affiliates or successors or any “group,” or any member of any such group, to which such persons are a party under Rule 13d-5 of the Exchange Act, or (b) any person whose ownership of shares in excess of the 15% limitation set forth herein is the result of any action taken solely by the Corporation, provided that such person shall be an interested stockholder if thereafter such person acquires additional shares of voting stock of the Corporation, except as a result of further corporate action not caused, directly or indirectly, by such person. For the purpose of determining whether a person is an interested stockholder, the voting stock of the Corporation deemed to be outstanding shall include stock deemed to be owned by the person through application of the definition of “owner” below but shall not include any other unissued stock of the Corporation which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.

 

8. “owner,” including the terms “own” and “owned,” when used with respect to any stock, means a person that individually or with or through any of its Affiliates or associates:

 

(i) beneficially owns such stock, directly or indirectly; or

 

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(ii) has (a) the right to acquire such stock (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; provided, however, that a person shall not be deemed the owner of stock tendered pursuant to a tender or exchange offer made by such person or any of such person’s Affiliates or associates until such tendered stock is accepted for purchase or exchange; or (b) the right to vote such stock pursuant to any agreement, arrangement or understanding; provided, however, that a person shall not be deemed the owner of any stock because of such person’s right to vote such stock if the agreement, arrangement or understanding to vote such stock arises solely from a revocable proxy or consent given in response to a proxy or consent solicitation made to ten (10) or more persons; or

 

(iii) has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except voting pursuant to a revocable proxy or consent as described in item (b) of subsection (ii) above), or disposing of such stock with any other person that beneficially owns, or whose Affiliates or associates beneficially own, directly or indirectly, such stock.

 

9. “person” means any individual, corporation, partnership, unincorporated association or other entity.

 

10. “stock” means, with respect to any corporation, capital stock and, with respect to any other entity, any equity interest.

 

11. “voting stock” means stock of any class or series entitled to vote generally in the election of directors.

 

Reasons for the Amendment Relating to the Section 203 Proposal

 

The amendment relating to the Section 203 Proposal is intended to shield stockholders from the coerciveness of front-end loaded two-tier offers by preventing the offeror from effecting the second step of the offer unless the target’s board of directors approves such transaction.

 

The post-combination company will not be subject to Section 203 of the DGCL, an anti-takeover law. Section 203 is a default provision of the DGCL that prohibits a publicly held Delaware corporation from engaging in a business combination, such as a merger, with “interested stockholders” (a person or group owning fifteen percent (15%) or more of the corporation’s voting stock) for three years following the date that a person becomes an interested stockholder, unless (i) before such stockholder becomes an “interested stockholder,” the board of directors approves the business combination or the transaction that resulted in the stockholder becoming an interested stockholder, (ii) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least eighty-five percent (85%) of the outstanding stock of the corporation at the time of the transaction (excluding stock owned by certain persons), or (iii) at the time or after the stockholder became an interested stockholder, the board of directors and at least two-thirds (66 2/3%) of the disinterested outstanding voting stock of the corporation approves the transaction. While Section 203 is the default provision under the DGCL, the DGCL allows companies to opt out of Section 203 of the DGCL by including a provision in their certificate of incorporation expressly electing not to be governed by Section 203 of the DGCL.

 

The board of directors has elected to opt out of Section 203, but the board of directors believes that it is in the best interests of stockholders to have protections similar to those afforded by Section 203. These provisions will encourage any potential acquirer to negotiate with the Board of Directors and therefore provides an opportunity to possibly obtain a higher purchase price than would otherwise be offered in connection with a proposed acquisition of the post-combination company. Such provisions may make it more difficult for an acquirer to consummate certain types of unfriendly or hostile corporate takeovers or other transactions involving the Company that have not been approved by the board of directors. The board of directors believes that while such provisions will provide some measure of protection against an interested stockholder that is proposing a two-tiered transaction structure that is unduly coercive, it would not ultimately prevent a potential takeover that enjoys the support of stockholders and will also help to prevent a third-party from acquiring “creeping control” of the Company without paying a fair premium to all stockholders. Thus, the board of directors has determined that the provisions included in Article XI of the Proposed Amended and Restated Certificate of Incorporation are in the best interests of the combined company.

 

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Our Proposed Amended and Restated Certificate of Incorporation will contain provisions that have the same effect as Section 203, except that they provide that the Sellers and certain of their respective affiliates and transferees will not be deemed to be “interested stockholders,” regardless of the percentage of our voting stock owned by them, and accordingly will not be subject to such restrictions. The board of directors has determined to exclude the Sellers and certain of their respective affiliates and transferees from the definition of “interested stockholder,” because these parties currently hold voting power in excess of and/or immediately following the Business Combination these parties will hold voting power in excess of the 15% threshold under Section 203, such that “creeping control” without paying a fair premium to all stockholders, which Section 203 of the DGCL is intended to prevent, would not be applicable to the Sellers and certain of their respective affiliates and transferees.

 

Vote Required for Approval

 

The affirmative vote of holders of a majority of the issued and outstanding shares of common stock of M I Acquisitions is required to approve this Section 203 Proposal. Broker non-votes, abstentions or the failure to vote on this Section 203 Proposal will have the same effect as a vote “AGAINST” this Section 203 Proposal.

 

This Section 203 Proposal is conditioned upon the approval and completion of the Business Combination Proposal. If the Business Combination Proposal is not approved, this Section 203 Proposal will have no effect even if approved by our stockholders.

 

Recommendation of the Board of Directors

 

OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR”

THE SECTION 203 PROPOSAL. 

 

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PROPOSAL NO. 6 - THE ADDITIONAL AMENDMENTS PROPOSAL

 

Overview

 

Our stockholders are being asked to approve certain additional amendments to our Current Certificate of Incorporation to better reflect our ongoing operations subsequent to completion of the Business Combination, including to:

 

·reflect that the Proposed Amended and Restated Certificate of Incorporation of the combined company will be the Second Amended and Restated Certificate of Incorporation;

 

·change the combined company’s name to “Priority Technology Holdings, Inc.”;

 

·change the registered office and address of the combined company;

 

·delete prior provisions relevant to the incorporator;

 

·amend general terms relating to the combined company’s preferred and common stock;

 

·remove certain provisions related to our status as a special purpose acquisition company and make certain related changes;

 

·amend general terms relating to the election and removal of directors;

 

·add certain terms with respect to meetings and special meetings;

 

·add certain terms with respect to the appointment of officers of the combined company;

 

·amend certain terms with respect to the indemnity and liability of the combined company’s officers and directors, including authorizing the combined company to purchase insurance, as well as to delete certain terms with respect to paying for indemnity and liability in advance;

 

·add certain terms with respect to certain directors of the combined company pursuing outside business activities and corporate opportunities;

 

·add certain terms with respect to the survival of certain certificate of incorporation provisions if some are held to be invalid; and

 

·add certain terms with respect to the certificate of incorporation’s forum selection clause.

 

The amended provisions that become effective if the Priority Holders hold less than 40% of our outstanding shares of common stock will allow the Priority Holders to have significant influence over us even after the Priority Holders own less than a majority of our outstanding shares of common stock.

 

Comparison of Current Certificate of Incorporation to Proposed Amended and Restated Certificate of Incorporation, in Connection with this Additional Amendments Proposal

 

The following table sets forth a summary of the additional material differences between our Current Certificate of Incorporation and the Proposed Amended and Restated Certificate of Incorporation relating to this Additional Amendments Proposal, a copy of which is attached to this proxy statement/prospectus as Annex E. We urge all stockholders to read the Proposed Amended and Restated Certificate of Incorporation in its entirety for a more complete description of its terms.

      Current Certificate of Incorporation   Proposed Amended and Restated Certificate of Incorporation
  Title of Certificate   The title was “Amended and Restate Certificate of Incorporation of M I Acquisitions, Inc.”   The title is “Second Amended and Restated Certificate of Incorporation of Priority Technology Holdings, Inc.”
           
  Name of Corporation   Our name is “M I Acquisitions, Inc.”   Our name is “Priority Technology Holdings, Inc.”
           

 

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  Registered Office and Address  

The Current Certificate of Incorporation provides as follows:

 

Article II. The registered office of the Corporation is to be located at 28 Old Rudnick Lane, in the City of Dover, in the County of Kent, in the State of Delaware 19901. The name of its registered agent at that address is Corp1, Inc.

 

The Proposed Amended and Restated Certificate of Incorporation provides as follows:

 

Article II. The address of the registered office of the Corporation in the State of Delaware is 615 South DuPont Highway, in the City of Dover, in the County of Kent, in the State of Delaware 19901. The name of its registered agent at that address is National Corporate Research, Ltd.

           
  Incorporator Information  

The Current Certificate of Incorporation provides as follows:

 

Article IV. The name and mailing address of the incorporator is: Jaszick Maldonado, c/o Loeb & Loeb LLP, 345 Park Avenue, New York NY 10154.

  There is no applicable language in the Proposed Amended and Restated Certificate of Incorporation.
           
  General Terms Relating to Preferred and Common Stock  

The Current Certificate of Incorporation provides as follows:

 

Article V.

 

A. Preferred Stock. The Board of Directors is expressly granted authority to issue shares of the Preferred Stock, in one or more series, and to fix for each such series such voting powers, full or limited, and such designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issue of such series (a “Preferred Stock Designation”) and as may be permitted by the GCL. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, without a separate vote of the holders of the Preferred Stock, or any series thereof, unless a vote of any such holders is required pursuant to any Preferred Stock Designation.

 

The Proposed Amended and Restated Certificate of Incorporation provides as follows:

 

Article IV.

A. The Board of Directors is hereby expressly authorized, by resolution or resolutions, to provide, out of the unissued shares of Preferred Stock, for one or more series of Preferred Stock and, with respect to each such series, to fix, without further stockholder approval, the designation, powers, preferences and relative, participating, optional or other special rights, including voting powers and rights, and the qualifications, limitations or restrictions thereof, of each series of Preferred Stock pursuant to Section 151 of the GCL.

 

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      B. Common Stock. Except as otherwise required by law or as otherwise provided in any Preferred Stock Designation, the holders of the Common Stock shall exclusively possess all voting power and each share of Common Stock shall have one vote.  

B. Each holder of record of Common Stock, as such, shall have one vote for each share of Common Stock which is outstanding in his, her or its name on the books of the Corporation on all matters on which stockholders are entitled to vote generally. Except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any certificate of designation relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Certificate of Incorporation (including any certificate of designation relating to any series of Preferred Stock) or pursuant to the GCL.

 

C. Except as otherwise required by law, holders of any series of Preferred Stock shall be entitled to only such voting rights, if any, as shall expressly be granted thereto by this Certificate of Incorporation (including any certificate of designation relating to such series of Preferred Stock).

 

D. Subject to applicable law and the rights, if any, of the holders of any outstanding series of Preferred Stock or any class or series of stock having a preference over or the right to participate with the Common Stock with respect to the payment of dividends, dividends may be declared and paid ratably on the Common Stock out of the assets of the Corporation which are legally available for this purpose at such times and in such amounts as the Board of Directors in its discretion shall determine.

 

E. Upon the dissolution, liquidation or winding up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation and subject to the rights, if any, of the holders of any outstanding series of Preferred Stock or any class or series of stock having a preference over or the right to participate with the Common Stock with respect to the distribution of assets of the Corporation upon such dissolution, liquidation or winding up of the Corporation, the holders of Common Stock shall be entitled to receive the remaining assets of the Corporation available for distribution to its stockholders ratably in proportion to the number of shares held by them.

 

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          F. The number of authorized shares of Preferred Stock or Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority in voting power of the stock of the Corporation entitled to vote thereon irrespective of the provisions of Section 242(b)(2) of the GCL (or any successor provision thereto), and no vote of the holders of any of the Common Stock or the Preferred Stock voting separately as a class shall be required therefor, unless a vote of any such holder is required pursuant to this Certificate of Incorporation (including any certificate of designation relating to any series of Preferred Stock).
           
  Provisions Specific to a Special Purpose Acquisition Company   Article VI sets forth various provisions related to our operations as a special purpose acquisition company prior to the consummation of an initial business combination, including provisions relating to our Trust Account and distributions from our Trust Account, stockholder redemption rights in connection with an initial business combination, stockholder approval of an initial business combination in certain circumstances, affiliate transactions in connection with an initial business combination and the minimum value of a target in an initial business combination and a provision stating that if we do not consummate an initial business combination within 18 months or the Termination Date, we will cease all operations, liquidate the Trust Account and dissolve and liquidate.  

The Proposed Amended and Restated Certificate of Incorporation will not include provisions similar to Article VI of the Current Certificate of Incorporation.

 

A result of this omission is that the duration of the corporation under the Proposed Amended and Restated Certificate of Incorporation is the default of perpetual existence under the DGCL.

 

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  General Terms Relating to the Election and Removal of Directors  

The Current Certificate of Incorporation provides as follows:

 

Article VII. A. Election of directors need not be by ballot unless the by-laws of the Corporation so provide.

 

The Proposed Amended and Restated Certificate of Incorporation provides as follows:

 

Article VI.

 

D. Any or all of the directors (other than the directors elected by the holders of any series of Preferred Stock of the Corporation, voting separately as a series or together with one or more other such series, as the case may be) may be removed at any time either with or without cause by the affirmative vote of a majority in voting power of all outstanding shares of stock of the Corporation entitled to vote thereon, voting as a single class; provided, however, that at any time when the Priority Holders beneficially own, in the aggregate, less than 40% in voting power of the stock of the Corporation entitled to vote generally in the election of directors, any such director or all such directors may be removed only for cause and only by the affirmative vote of the holders of at least 66 2/3% in voting power of all the then-outstanding shares of stock of the Corporation entitled to vote thereon, voting together as a single class.

 

E. Elections of directors need not be by written ballot unless the Bylaws shall so provide.

 

F. During any period when the holders of any series of Preferred Stock have the right to elect additional directors, then upon commencement and for the duration of the period during which such right continues: (i) the then otherwise total authorized number of directors of the Corporation shall automatically be increased by such specified number of directors, and the holders of such Preferred Stock shall be entitled to elect the additional directors so provided for or fixed pursuant to said provisions, and (ii) each such additional director shall serve until such director’s successor shall have been duly elected and qualified, or until such director’s right to hold such office terminates pursuant to said provisions, whichever occurs earlier, subject to his or her earlier death, resignation, retirement, disqualification or removal. Except as otherwise provided by the Board of Directors in the resolution or resolutions establishing such series, whenever the holders of any series of Preferred Stock having such right to elect additional directors are divested of such right pursuant to the provisions of such stock, the terms of office of all such additional directors elected by the holders of such stock, or elected to fill any vacancies resulting from the death, resignation, disqualification or removal of such additional directors, shall forthwith terminate and the total authorized number of directors of the Corporation shall be reduced accordingly.

 

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  Meetings and Special Meetings   The Current Certificate of Incorporation does not have applicable language.  

The Proposed Amended and Restated Certificate of Incorporation provides as follows:

 

Article VII.

A. Special meetings of the stockholders of the Corporation for any purpose or purposes (i) may be called at any time by the Board of Directors, and (ii) shall be called by the Secretary upon the written request of stockholders owning at least twenty-five percent (25%) in amount of the entire capital stock of the Corporation issued and outstanding, and entitled to vote at the special meeting.

 

B. At any time when the Priority Holders beneficially own, in the aggregate, at least 40% in voting power of the stock of the Corporation entitled to vote generally in the election of directors, any action required or permitted by the GCL to be taken at a stockholders’ meeting may be taken without a meeting and without prior notice and without a vote, if a consent or consents in writing, setting forth the action to be so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the books in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be made by hand, overnight courier or by certified or registered mail, return receipt requested. At any time when the Priority Holders beneficially own, in the aggregate, less than 40% in voting power of the stock of the Corporation entitled to vote generally in the election of directors, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders; provided, however, that any action required or permitted to be taken by the holders of Preferred Stock, voting separately as a series or separately as a class with one or more other such series, may be taken without a meeting, without prior notice and without a vote, to the extent expressly so provided by the applicable certificate of designation relating to such series of Preferred Stock.

 

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  Appointment of Officers   The Current Certificate of Incorporation does not have applicable language.  

The Proposed Amended and Restated Certificate of Incorporation provides as follows:

 

Article VIII

 

The officers of the Corporation shall be chosen in such a manner, shall hold their offices for such terms and shall carry out such duties as are determined by the Board of Directors, subject to the right of the Board of Directors to remove any officer or officers at any time with or without cause.

 

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  Indemnification and Liability  

The Current Certificate of Incorporation does not include a provision similar to Article IX.C of the Proposed Amended and Restated Certificate of Incorporation (authorizing the Corporation to purchase insurance for directors and officers).

 

The Current Certificate of Incorporation provides as follows with respect to indemnification, which the Proposed Amended and Restated Certificate of Incorporation does not provide:

 

Article VIII.

 

B. The Corporation, to the full extent permitted by Section 145 of the GCL, as amended from time to time, shall indemnify all persons whom it may indemnify pursuant thereto. Expenses (including attorneys’ fees) incurred by an officer or director in defending any civil, criminal, administrative, or investigative action, suit or proceeding for which such officer or director may be entitled to indemnification hereunder shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized hereby.

 

C. Notwithstanding the foregoing provisions of this Article Eighth, no indemnification nor advancement of expenses will extend to any claims made by the Company’s officers and directors to cover any loss that such individuals may sustain as a result of such individuals’ agreement to pay debts and obligations to target businesses or vendors or other entities that are owed money by the Corporation for services rendered or contracted for or products sold to the Corporation, as described in the Registration Statement.

 

 

The Proposed Amended and Restated Certificate of Incorporation does not include provisions similar to Article VIII.B (particularly with regard to advance payments) and Article VIII.C.

 

The Proposed Amended and Restated Certificate of Incorporation includes the provisions of Article IX.C, (authorizing the Corporation to purchase insurance for directors and officers), which the Current Certificate of Incorporation does not provide.

 

Article IX.

 

C. In furtherance and not in limitation of the powers conferred by statute:

 

(i) the Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of law; and

 

(ii) the Corporation may create a trust fund, grant a security interest and/or use other means (including, without limitation, letters of credit, surety bonds and/or other similar arrangements), as well as enter into contracts providing indemnification to the full extent authorized or permitted by law and including as part thereof provisions with respect to any or all of the foregoing to ensure the payment of such amounts as may become necessary to effect indemnification as provided therein, or elsewhere.

 

 

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  Outside Business Activities and Corporate Opportunities   The Current Certificate of Incorporation does not have similar provisions to Article XII.  

Article XII of the Proposed Amended and Restated Certificate of Incorporation grants certain rights to certain directors with respect to the pursuit of corporate opportunities and outside business activities. Article XII provides as follows:

A. In recognition and anticipation that members of the Board of Directors who are not employees of the Corporation (“Non-Employee Directors”) and their respective Affiliates may now engage and may continue to engage in the same or similar activities or related lines of business as those in which the Corporation, directly or indirectly, may engage and/or other business activities that overlap with or compete with those in which the Corporation, directly or indirectly, may engage, the provisions of this Article XII are set forth to regulate and define the conduct of certain affairs of the Corporation with respect to certain classes or categories of business opportunities as they may involve any of the Non-Employee Directors or their respective Affiliates and the powers, rights, duties and liabilities of the Corporation and its directors, officers and stockholders in connection therewith.

 

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B. No Non-Employee Director (including any Non-Employee Director who serves as an officer of the Corporation in both his or her director and officer capacities) or his or her Affiliates (such Persons being referred to, collectively, as “Identified Persons” and, individually, as an “Identified Person”) shall, to the fullest extent permitted by law, have any duty to refrain from directly or indirectly (1) engaging in the same or similar business activities or lines of business in which the Corporation or any of its Affiliates now engages or proposes to engage or (2) otherwise competing with the Corporation or any of its Affiliates, and, to the fullest extent permitted by law, no Identified Person shall be liable to the Corporation or its stockholders or to any Affiliate of the Corporation for breach of any fiduciary duty solely by reason of the fact that such Identified Person engages in any such activities. To the fullest extent permitted by law, the Corporation hereby renounces any interest or expectancy in, or right to be offered an opportunity to participate in, any business opportunity which may be a corporate opportunity for an Identified Person and the Corporation or any of its Affiliates, except as provided in Section (C) of this Article XII. Subject to said Section (C) of this Article XII, in the event that any Identified Person acquires knowledge of a potential transaction or other business opportunity which may be a corporate opportunity for itself, herself or himself and the Corporation or any of its Affiliates, such Identified Person shall, to the fullest extent permitted by law, have no duty to communicate or offer such transaction or other business opportunity to the Corporation or any of its Affiliates and, to the fullest extent permitted by law, shall not be liable to the Corporation or its stockholders or to any Affiliate of the Corporation for breach of any fiduciary duty as a stockholder, director or officer of the Corporation solely by reason of the fact that such Identified Person pursues or acquires such corporate opportunity for itself, herself or himself, or offers or directs such corporate opportunity to another Person.

 

C. The Corporation does not renounce its interest in any corporate opportunity offered to any Non-Employee Director (including any Non-Employee Director who serves as an officer of this Corporation) if such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of the Corporation, and the provisions of Section (B) of this Article XII shall not apply to any such corporate opportunity.

 

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D. In addition to and notwithstanding the foregoing provisions of this Article XII, a corporate opportunity shall not be deemed to be a potential corporate opportunity for the Corporation if it is a business opportunity that (i) the Corporation is unable, financially or legally, or is not contractually permitted to undertake, (ii) from its nature, is not in the line of the Corporation’s business or is of no practical advantage to the Corporation or (iii) is one in which the Corporation has no interest or reasonable expectancy.

 

E. For purposes of this Article XII, (i) “Affiliate” shall mean, (a) in respect of each Non-Employee Director, any Person that, directly or indirectly, is controlled by such Non-Employee Director (other than the Corporation and any entity that is controlled by the Corporation) and (b) in respect of the Corporation, any Person that, directly or indirectly, is controlled by the Corporation; and (ii) “Person” shall mean any individual, corporation, general or limited partnership, limited liability company, joint venture, trust, association or any other entity.

 

F. To the fullest extent permitted by law, any Person purchasing or otherwise acquiring any interest in any shares of capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article XII.

         
  Survival of the Certificate of incorporation Provisions where Certain Provisions are Held Invalid, Illegal or Unenforceable   The Current Certificate of Incorporation does not include a provision similar to that of Article XIII.A of the Proposed Amended and Restated Certificate of Incorporation.  

Article XIII.A of the Proposed Amended and Restated Certificate of Incorporation provides as follows with respect to where a provision of the certificate of incorporation is held be invalid, illegal or unenforceable:

 

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          Article XIII.A. If any provision or provisions of this Certificate of Incorporation shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever: (i) the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Certificate of Incorporation (including, without limitation, each portion of any paragraph of this Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (ii) to the fullest extent possible, the provisions of this Certificate of Incorporation (including, without limitation, each such portion of any paragraph of this Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to permit the Corporation to protect its directors, officers, employees and agents from personal liability in respect of their good faith service or for the benefit of the Corporation to the fullest extent permitted by law.
           
  Forum Selection Clauses  

The Current Certificate of Incorporation provides for forum selection and related terms with respect to compromises and arrangements between the Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them. The Current Certificate of Incorporation specifically provides as follows in this regard:

 

Article IX.

 

Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation.

 

Article XIII.B of the Proposed Amended and Restated Certificate of Incorporation provides a more plenary forum selection clause. It specifically provides as follows:

 

Article XIII.B. Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director or officer of the Corporation to the Corporation or the Corporation’s stockholders, creditors or other constituents, (iii) any action asserting a claim against the Corporation or any director or officer of the Corporation arising pursuant to any provision of the GCL or this Amended and Restated Certificate of Incorporation or the Bylaws (as either may be amended and/or restated from time to time), or (iv) any action asserting a claim against the Corporation or any director or officer of the Corporation governed by the internal affairs doctrine, in each such case subject to said court having personal jurisdiction over the indispensable parties named as defendants therein; provided that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state court sitting in the State of Delaware. To the fullest extent permitted by law, any person purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consents to the provisions of this Article XII(B).

 

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Reasons for the Amendments

 

In the judgment of our board of directors, the amendments to our Proposed Amended and Restated Certificate of Incorporation set forth in this Additional Amendments Proposal are desirable for the following reasons:

 

·Our board of directors believes the name of the combined company should reflect the Business Combination with Priority and operating business following the Business Combination.

 

·The Article VI of our Current Certificate of Incorporation relates to our operations as a special purpose acquisition company prior to the consummation of our initial business combination and would not be applicable to the combined company after consummation of the Business Combination. Accordingly, this Article would serve no further purpose. Furthermore, Perpetual existence is the customary period of existence for corporations and our board of directors believes it is the most appropriate duration for the combined company.

 

·Certain administrative changes to our certificate of incorporation are necessary and desirable to conform with those of other public operating companies.

 

Vote Required for Approval

 

The affirmative vote of holders of a majority of the issued and outstanding shares of common stock of M I Acquisitions is required to approve this Additional Amendments Proposal. Broker non-votes, abstentions or the failure to vote on this Additional Amendments Proposal will have the same effect as a vote “AGAINST” this Additional Amendments Proposal.

 

This Additional Amendments Proposal is conditioned upon the approval and completion of the Business Combination Proposal. If the Business Combination Proposal is not approved, this Additional Amendments Proposal will have no effect even if approved by our stockholders.

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Recommendation of the Board of Directors

 

OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE ADDITIONAL AMENDMENTS PROPOSAL.

 

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PROPOSAL NO. 7—THE 2018 EQUITY INCENTIVE PLAN PROPOSAL

 

Overview

 

In connection with the Business Combination, we intend to adopt the 2018 Equity Incentive Plan. The following is a summary of certain terms and conditions of the 2018 Equity Incentive Plan. This summary is qualified in its entirety by reference to the 2018 Equity Incentive Plan, which is attached as Annex G to this proxy statement. You are encouraged to read the entirety of the 2018 Equity Incentive Plan.

 

Summary of the 2018 Equity Incentive Plan

 

Administration

 

The compensation committee of our board of directors (the “compensation committee”) will administer the 2018 Equity Incentive Plan. The compensation committee will have authority, to exercise in its discretion, subject to and not inconsistent with the express provisions of the 2018 Equity Incentive Plan: to administer the 2018 Equity Incentive Plan and to exercise all the powers and authorities either specifically granted to it under the 2018 Equity Incentive Plan or necessary or advisable in the administration of the 2018 Equity Incentive Plan, including, without limitation: the authority to grant awards; to select the recipients of awards may from time to time be granted and the time or times at which awards will be granted; to determine the type and number of awards to be granted, the number of shares of Company Stock or cash or other property to which an award may relate and the terms, conditions, restrictions and performance criteria relating to any award; to determine whether, to what extent, and under what circumstances an award may be settled, cancelled, forfeited, exchanged, or surrendered; to determine whether an award may be settled in cash and/or shares of Priority; to waive any of the terms, conditions, restrictions and performance criteria of any award, including to accelerate the vesting or lapse of restrictions of any outstanding award, based in each case on such considerations as the compensation committee, in its discretion, determines; to construe and interpret the 2018 Equity Incentive Plan and any award; to prescribe, amend and rescind rules and regulations relating to the 2018 Equity Incentive Plan; to determine the terms and provisions of award Agreements; and to make all other determinations that it deems necessary or advisable for the administration of the 2018 Equity Incentive Plan.

 

Eligibility

 

Any current or prospective employees, officers, consultants or advisors that the compensation committee (or, in the case of non-employee directors, the board of directors) selects, from time to time, are eligible to receive awards under to the 2018 Equity Incentive Plan.

 

Number of Shares Authorized

 

The 2018 Equity Incentive Plan provides for the issuance of up to 10% of the number of shares of common stock outstanding immediately following consummation of the Business Combination, all of which may be issued with respect to incentive stock options under the 2018 Equity Incentive Plan. If any award granted under the 2018 Equity Incentive Plan expires, terminates, or is canceled or forfeited without being settled or exercised, or if a SAR is settled in cash or otherwise without the issuance of shares, shares of our common stock subject to such award will again be made available for future grants. In addition, if any shares are surrendered or tendered to pay the exercise price of an award or to satisfy withholding taxes owed, such shares will again be available for grants under the 2018 Equity Incentive Plan.

 

Awards Available for Grant

 

The compensation committee may grant awards of non-qualified stock options, incentive stock options, SARs, restricted stock awards, restricted stock units, other stock-based awards (including cash bonus awards) or any combination of the foregoing.

 

Stock Options

 

The compensation committee will be authorized to grant options to purchase shares of our common stock that are either “qualified,” meaning they are intended to satisfy the requirements of section 422 of the Code for incentive stock options, or “non-qualified,” meaning they are not intended to satisfy the requirements of section 422 of the Code. All options granted under the 2018 Equity Incentive Plan will be non-qualified unless the applicable award agreement expressly states that the option is intended to be an “incentive stock option.” Options granted under the 2018 Equity Incentive Plan will be subject to the terms and conditions established by the compensation committee. Under the terms of the 2018 Equity Incentive Plan, the exercise price of the options will not be less than the fair market value of our common stock at the time of grant (except with respect to Substitute Awards). Options granted under the 2018 Equity Incentive Plan will be subject to such terms, including the exercise price and the conditions and timing of exercise, as may be determined by the compensation committee and specified in the applicable award agreement. The maximum term of an option granted under the 2018 Equity Incentive Plan will be ten years from the date of grant (or five years in the case of a qualified option granted to a 10% stockholder), provided that if the term of a non-qualified option would expire at a time when trading in the shares of our common stock is prohibited by Priority’s insider trading policy, the option’s term will be extended automatically until the 30th day following the expiration of such prohibition (as long as such extension will not violate section 409A of the Code). Payment in respect of the exercise of an option may be made in cash, by check, by cash equivalent and/or by delivery of shares of our common stock valued at the fair market value at the time the option is exercised, provided that such shares are not subject to any pledge or other security interest, or by such other method as the compensation committee may permit in its sole discretion, including (i) by delivery of other property having a fair market value equal to the exercise price and all applicable required withholding taxes, (ii) if there is a public market for the shares of our common stock at such time, by means of a broker-assisted cashless exercise mechanism or (iii) by means of a “net exercise” procedure effected by withholding the number of shares otherwise deliverable in respect of an option that are needed to pay the exercise price and all applicable required withholding taxes. Any fractional shares of common stock will be settled in cash.

 

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SARs

 

The compensation committee will be authorized to award stock appreciation rights (“SARs”) under the 2018 Equity Incentive Plan. SARs will be subject to the terms and conditions established by the compensation committee. A SAR is a contractual right that allows a participant to receive, in the form of either cash, shares or any combination of cash and shares, the appreciation, if any, in the value of a share over a certain period of time. SARs granted in connection with an option will be subject to terms similar to the option corresponding to such SARs, including with respect to vesting and expiration. Except as otherwise provided by the compensation committee, the base price per share of our common stock underlying each SAR will not be less than 100% of the fair market value of such share, determined as of the date of grant and the maximum term of a SAR granted under the 2018 Equity Incentive Plan will be ten years from the date of grant. The remaining terms of each grant of SARs will be established by the compensation committee and reflected in the award agreement.

 

Restricted Stock

 

The compensation committee will be authorized to grant restricted stock under the 2018 Equity Incentive Plan, which will be subject to the terms and conditions established by the compensation committee. Restricted stock is common stock that is generally non-transferable and is subject to other restrictions determined by the compensation committee for a specified period. Any accumulated dividends will be payable at the same time that the underlying restricted stock vests. The compensation committee, in its discretion, may require that any dividends paid on shares of restricted stock be held in escrow until all restrictions on such shares of restricted stock have lapsed.

 

Restricted Stock Unit Awards

 

The compensation committee will be authorized to grant restricted stock unit awards, which will be subject to the terms and conditions established by the compensation committee. A restricted stock unit award, once vested, may be settled in a number of shares of our common stock equal to the number of units earned, or in cash equal to the fair market value of the number of shares of our common stock, earned in respect of such restricted stock unit award of units earned, at the election of the compensation committee. To the extent provided in an award agreement, the holder of outstanding restricted stock units will be entitled to be credited with dividend equivalent payments upon the payment by us of dividends on shares of our common stock, either in cash or, at the sole discretion of the compensation committee, in shares of our common stock having a fair market value equal to the amount of such dividends, which accumulated dividend equivalents (and interest thereon, if applicable) will be payable at the same time that the underlying restricted stock units are settled.

 

Other Stock-Based Awards

 

The compensation committee will be authorized to grant awards of unrestricted shares of our common stock, rights to receive grants of awards at a future date or other awards denominated in shares of our common stock under such terms and conditions as the compensation committee may determine and as set forth in the applicable award agreement.

 

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Effect of a Change in Control

 

In the event of a merger, consolidation, acquisition of property or shares, stock rights offering, liquidation, or similar event affecting Priority or any of its subsidiaries (each, a “corporate event”) or a stock dividend, stock split, reverse stock split, separation, spinoff, reorganization, extraordinary dividend of cash or other property, share combination, or recapitalization or similar event affecting the capital structure of Priority (each, a “share change”), the compensation committee or the Board will make such equitable and appropriate substitutions or adjustments to the aggregate number and kind of shares of common stock or other securities reserved for issuance and delivery under the 2018 Equity Incentive Plan, the various maximum limitations set forth above, (C) the number and kind of shares of common stock or other securities subject to outstanding awards and (D) the exercise price or base price of outstanding awards. In the case of corporate events, such adjustments may include, without limitation, (A) the cancellation of outstanding Awards in exchange for payments of cash, securities or other property or a combination thereof having an aggregate value equal to the value of such Awards, as determined by the compensation committee or the Board, in its discretion (it being understood that in the case of a corporate event with respect to which stockholders receive consideration other than publicly-traded equity securities of the ultimate surviving entity, any such determination by the compensation committee that the value of an option or SAR would for this purpose be deemed to equal the excess, if any, of the value of the consideration being paid for each share pursuant to such corporate event over the exercise price of such option or the base price of such SAR will conclusively be deemed valid), (b) the substitution of securities or other property (including, without limitation, cash or other securities of Priority and securities of entities other than Priority) for the shares of common stock subject to outstanding awards and (c) in connection with a sale of a subsidiary, affiliate, or division, arranging for the assumption of awards, or replacement of awards with new awards based on securities or other property (including, without limitation, other securities of Priority and securities of entities other than Priority), by the affected subsidiary, affiliate, or division or by the entity that controls such subsidiary, affiliate, or division following such corporate event (as well as any corresponding adjustments to awards that remain based upon common stock). Unless otherwise determined by the Committee and provided in the applicable Award Agreement, in the event of a “change in control,” the compensation committee, in its discretion, may take such actions with respect to outstanding awards as determines to be appropriate.

 

Nontransferability

 

Each award may be exercised during the participant’s lifetime by the participant or, if permissible under applicable law, by the participant’s guardian or legal representative. Upon the death of a participant, outstanding Awards granted to such participant may be exercised only by the executor or administrator of the participant’s estate or by a person who shall have acquired the right to such exercise by will or by the laws of descent and distribution.

 

Amendment

 

The 2018 Equity Incentive Plan will have a term of ten years. The Board may, at any time, suspend or terminate the 2018 Equity Incentive Plan or revise or amend it in any respect whatsoever; however, stockholder approval will be required for any such amendment if and to the extent such approval is required in order to comply with applicable law or stock exchange listing requirement. No action hereunder may, without the consent of a participant, reduce the Participant’s rights under any outstanding award. No amendment, suspension or termination will materially and adversely affect the rights of any participant or recipient of any award without the consent of the participant or recipient.

 

U.S. Federal Income Tax Consequences

 

The following is a general summary of the material U.S. federal income tax consequences of the grant, exercise and vesting of awards under the 2018 Equity Incentive Plan and the disposition of shares acquired pursuant to the exercise or settlement of such awards and is intended to reflect the current provisions of the Code and the regulations thereunder. This summary is not intended to be a complete statement of applicable law, nor does it address foreign, state, local or payroll tax considerations. This summary assumes that all awards described in the summary are exempt from, or comply with, the requirement of section 409A of the Code. Moreover, the United States federal income tax consequences to any particular participant may differ from those described herein by reason of, among other things, the particular circumstances of such participant. The summary is intended for the information of stockholders considering how to vote with respect to this proposal and not as tax guidance to participants in the 2018 Equity Incentive Plan. Participants are strongly urged to consult their own tax advisors regarding the federal and other tax consequences to them of participating in the 2018 Equity Incentive Plan.

 

Stock Options

 

Holders of incentive stock options will generally incur no federal income tax liability at the time of grant or upon vesting or exercise of those options. However, the spread at exercise will be an “item of tax preference,” which may give rise to “alternative minimum tax” liability for the taxable year in which the exercise occurs. If the holder does not dispose of the shares before the later of two years following the date of grant and one year following the date of exercise, the difference between the exercise price and the amount realized upon disposition of the shares will constitute long-term capital gain or loss, as the case may be. Assuming the holding period is satisfied, no deduction will be allowed to us for federal income tax purposes in connection with the grant or exercise of the incentive stock option. If, within two years following the date of grant or within one year following the date of exercise, the holder of shares acquired through the exercise of an incentive stock option disposes of those shares, the participant will generally realize taxable compensation at the time of such disposition equal to the difference between the exercise price and the lesser of the fair market value of the share on the date of exercise or the amount realized on the subsequent disposition of the shares, and that amount will generally be deductible by us for federal income tax purposes, subject to the possible limitations on deductibility under sections 280G of the Code for compensation paid to executives designated in those sections. Finally, if an incentive stock option becomes first exercisable in any one year for shares having an aggregate value in excess of $100,000 (based on the grant date value), the portion of the incentive stock option in respect of those excess shares will be treated as a non-qualified stock option for federal income tax purposes.

 

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No income will be realized by a participant upon grant or vesting of an option that does not qualify as an incentive stock option (a “non-qualified stock option”). Upon the exercise of a non-qualified stock option, the participant will recognize ordinary compensation income in an amount equal to the excess, if any, of the fair market value of the underlying exercised shares over the option exercise price paid at the time of exercise, and the participant’s tax basis will equal the sum of the compensation income recognized and the exercise price. We will be able to deduct this same excess amount for U.S. federal income tax purposes, but such deduction may be limited under section 280G of the Code for compensation paid to certain executives designated in those sections. In the event of a sale of shares received upon the exercise of a non-qualified stock option, any appreciation or depreciation after the exercise date generally will be taxed as capital gain or loss and will be long-term gain or loss if the holding period for such shares is more than one year.

 

SARs

 

No income will be realized by a participant upon grant or vesting of a SAR. Upon the exercise of a SAR, the participant will recognize ordinary compensation income in an amount equal to the fair market value of the payment received in respect of the SAR. We will be able to deduct this same amount for U.S. federal income tax purposes, but such deduction may be limited under sections 280G of the Code for compensation paid to certain executives designated in those sections.

 

Restricted Stock

 

On the date an award of restricted stock becomes transferable or is no longer subject to a substantial risk of forfeiture (i.e., the vesting date), the participant will have taxable compensation equal to the difference between the fair market value of the shares on that date over the amount the participant paid for such shares, if any (unless the participant made an election under section 83(b) of the Code to be taxed at the time of grant). We will be able to deduct, at the same time as it is recognized by the participant, the amount of taxable compensation to the participant for U.S. federal income tax purposes, but such deduction may be limited under section 280G of the Code for compensation paid to certain executives designated in those sections.

 

Restricted Stock Units

 

A participant will not be subject to tax upon the grant or vesting of a restricted stock unit award. Rather, upon the delivery of shares or cash pursuant to a restricted stock unit award, the participant will have taxable compensation equal to the fair market value of the number of shares (or the amount of cash) the participant actually receives with respect to the award. We will be able to deduct the amount of taxable compensation to the participant for U.S. federal income tax purposes, but the deduction may be limited under section 280G of the Code for compensation paid to certain executives designated in those sections.

 

New 2018 Plan Benefits

 

Grants under the 2018 Equity Incentive Plan will be made at the discretion of the compensation committee. The grants under the 2018 Equity Incentive Plan are not yet determinable. The value of the awards granted under the 2018 Equity Incentive Plan will depend on a number of factors, including the fair market value of our common stock on future dates, the exercise decisions made by the participants and the extent to which any applicable performance goals necessary for vesting or payment are achieved.

 

Effective Date; Term

 

We expect the 2018 Equity Incentive Plan to be effective upon the completion of the Business Combination. No award will be granted under the 2018 Equity Incentive Plan on or after the tenth anniversary of the 2018 Equity Incentive Plan becoming effective. Any award outstanding under the 2018 Equity Incentive Plan at the time of termination will remain in effect until such award is exercised or has expired in accordance with its terms.

 

Vote Required for Approval

 

The approval of the 2018 Equity Incentive Plan requires the affirmative vote of holders of a majority of the shares of our common stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. Abstentions will have the same effect as a vote “AGAINST” this proposal.

 

Recommendation of the Board of Directors

 

OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE 2018 EQUITY INCENTIVE PLAN PROPOSAL.

 

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PROPOSAL NO. 8 - THE EARNOUT INCENTIVE PLAN PROPOSAL

 

Overview

 

As contemplated by the Purchase Agreement, in connection with the Business Combination, we intend to adopt the Earnout Incentive Plan. The following is a summary of certain terms and conditions of the Earnout Incentive Plan. This summary is qualified in its entirety by reference to the Earnout Incentive Plan, which is attached as Annex H to this proxy statement. You are encouraged to read the entirety of the Earnout Incentive Plan.

 

Summary of the Earnout Incentive Plan

 

Administration.

 

A committee or subcommittee of our Board (the “plan committee”) appointed by the Board will administer the Earnout Incentive Plan. As of the closing of the Business Combination, the plan committee will consist of Mr. Thomas Priore. It will be the duty of compensation committee to conduct the general administration of the Earnout Incentive Plan in accordance with its provisions. The plan committee will have the power to interpret the Earnout Incentive Plan and the award agreements, and to adopt such rules for the administration, interpretation and application of the Earnout Incentive Plan as are consistent therewith, to interpret, amend or revoke any such rules, to delegate authority in accordance with the terms of the Earnout Incentive Plan and to amend any award agreement provided that the rights or obligations of the participant that is the subject of any such award agreement are not affected adversely. Any such grant or award under the Earnout Incentive Plan need not be the same with respect to each participant. The plan committee may, in its sole discretion, adopt special guidelines and provisions for persons who are residing in or employed in, or subject to, the taxes of, any domestic or foreign jurisdictions to comply with applicable tax and securities laws of such domestic or foreign jurisdictions. The plan committee will act by a majority of its members in attendance at a meeting at which a quorum is present or by a memorandum or other written instrument signed by all members of plan committee.

 

Eligibility.

 

Any employee, non-employee director, consultant or advisor that the plan committee selects, from time to time, are eligible to receive awards under to the Earnout Incentive Plan.

 

Number of Shares Authorized.

 

The Earnout Incentive Plan provides that up to 5,880,000 shares of common stock, in the aggregate, may be issued or transferred pursuant to awards under the Earnout Incentive Plan (the “Share Limit”) as follows:

 

·an aggregate of 2,940,000 shares of common stock may be issued pursuant to awards under the Earnout Incentive Plan if: (a) the consolidated adjusted EBITDA during the fiscal year ending December 31, 2018 equals or exceeds $82,500,000 and (b) the fair market value of the common stock equals or exceeds $12.00 per share for any 20 trading days within a consecutive 30-trading day period on or before December 31, 2019 (the “First Earnout Conditions”); and

 

·an aggregate of 2,940,000 shares of common stock may be issued pursuant to awards under the Earnout Incentive Plan if: (a) the consolidated adjusted EBITDA during the Fiscal Year ending December 31, 2019 equals or exceeds $91,500,000 and (b) the fair market value the common stock equals or exceeds $14.00 per share for any 20 trading days within a consecutive 30-trading day period during the period beginning on January 1, 2019 and ending on December 31, 2020 (the “Second Earnout Conditions”).

 

However, if the First Earnout Conditions are not attained but the Second Earnout Conditions are attained, an aggregate of 5,880,000 shares of common stock (in lieu of 2,940,000) may be issued pursuant to awards under the Earnout Incentive Plan.

 

Awards Available for Grant.

 

The plan committee may grant stock payment awards, deferred stock awards and/or restricted stock unit awards or any combination of the foregoing.

 

Stock Payment.

 

The plan committee will be authorized to grant stock payments which consist of unrestricted, fully transferable shares of common stock.

 

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Deferred Stock.

 

The plan committee will be authorized to grant restricted stock under the Earnout Incentive Plan, which will be subject to the terms and conditions established by the plan committee. Deferred stock is common stock that is generally non-transferable and is subject to other restrictions determined by the plan committee for a specified period.

 

Restricted Stock Unit.

 

The plan committee will be authorized to grant restricted stock units in such amounts and subject to such terms and conditions as determined by the plan committee, including such vesting conditions as it deems appropriate. On the distribution date, the Company will issue to the participant one unrestricted, fully transferable share of common stock for each restricted stock unit.

 

Changes in Common Stock or Assets of the Company, Acquisition or Liquidation of the Company and Other Corporate Events.

 

In the event of any dividend or other extraordinary distribution (whether in the form of cash, common stock, other securities or other property), recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of common stock or other securities of the Company, issuance of warrants or other rights to purchase common stock or other securities of the Company, or other similar corporate transaction or event that affects the common stock (a “Corporate Event”), then plan committee will make equitably adjustments of to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Earnout Incentive Plan or with respect to an award including, the number of shares of common stock with respect to which awards may be granted or awarded (including, without limitation, adjustments to the Share Limit and kind of shares which may be issued under the Earnout Incentive Plan) and the number of shares of common stock (or other securities or property) subject to outstanding awards. In general, in the event of any Corporate Event or any unusual or nonrecurring transactions or events affecting the Company any of its subsidiaries, or the financial statements of the Company or any of its subsidiaries, or of changes in applicable laws, regulations or accounting principles, the plan committee, in its discretion, and on such terms and conditions as it deems appropriate, is authorized to take any one or more of the following actions: (i) to provide for the purchase of any such award for an amount of cash equal to the amount that could have been attained upon the realization of the participant’s rights had such award been currently payable or fully vested, or for the cancellation of such award if no amount could have been attained upon the realization of the participant’s rights had such award been currently payable or fully vested; (ii) to provide for the replacement of such award with other rights or property selected by plan committee in its discretion having an aggregate value not exceeding the amount that could have been attained upon the realization of the participant’s rights had such award been currently payable or fully vested; (iii) to provide that the award cannot vest or become payable after such event; (iv) to provide that such award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or will be substituted for by similar rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; (v) to make adjustments in the number and type of shares of common stock subject to outstanding awards, and/or in the terms and conditions of (including the grant or purchase price), and the criteria included in, outstanding rights and awards and rights and awards which may be granted in the future; and/or (vi) to provide that, for a specified period of time prior to such event, the restrictions imposed under an award agreement upon some or all restricted stock units or deferred stock may be terminated.

 

Nontransferability.

 

Each award may be exercised during the participant’s lifetime by the participant or, if permissible under applicable law, by the participant’s guardian or legal representative. Upon the death of a participant, outstanding awards granted to such participant may be exercised only by the executor or administrator of the participant’s estate or by a person who will have acquired the right to such exercise by will or by the laws of descent and distribution.

 

Amendment.

 

The Earnout Incentive Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board or the plan committee, retroactively or otherwise. However, neither the Board or the plan committee may not take any action without stockholder approval that, except as otherwise provided in the Earnout Incentive Plan, would require stockholder approval in accordance with applicable law or applicable stock exchange rule. The Board or the plan committee may amend the terms of any award theretofore granted, prospectively or retroactively, however, except as otherwise provided in the Earnout Incentive Plan, no such amendment may, without the consent of the participant, alter or impair any rights of the participant under such award without the consent of the participant unless the award itself otherwise expressly so provides.

 

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U.S. Federal Income Tax Consequences

 

The following is a general summary of the material U.S. federal income tax consequences of the grant, exercise and vesting of awards under the Earnout Incentive Plan and the disposition of shares acquired pursuant to the exercise or settlement of such awards and is intended to reflect the current provisions of the Code and the regulations thereunder. This summary is not intended to be a complete statement of applicable law, nor does it address foreign, state, local or payroll tax considerations. This summary assumes that all awards described in the summary are exempt from, or comply with, the requirement of section 409A of the Code. Moreover, the U.S. federal income tax consequences to any particular participant may differ from those described herein by reason of, among other things, the particular circumstances of such participant. The summary is intended for the information of stockholders considering how to vote with respect to this proposal and not as tax guidance to participants in the Earnout Incentive Plan. Participants are strongly urged to consult their own tax advisors regarding the federal and other tax consequences to them of participating in the Earnout Incentive Plan.

 

Restricted stock.

 

On the date an award of restricted stock becomes transferable or is no longer subject to a substantial risk of forfeiture (i.e., the vesting date), the participant will have taxable compensation equal to the difference between the fair market value of the shares on that date over the amount the participant paid for such shares, if any (unless the participant made an election under section 83(b) of the Code to be taxed at the time of grant). We will be able to deduct, at the same time as it is recognized by the participant, the amount of taxable compensation to the participant for U.S. federal income tax purposes, but such deduction may be limited under section 280G of the Code for compensation paid to certain executives designated in those sections.

 

Restricted stock units.

 

A participant will not be subject to tax upon the grant or vesting of a restricted stock unit award. Rather, upon the delivery of shares pursuant to the restricted stock award, the participant will have taxable compensation equal to the fair market value of the number of shares (or the amount of cash) the participant actually receives with respect to the award. We will be able to deduct the amount of taxable compensation to the participant for U.S. federal income tax purposes, but the deduction may be limited under section 280G of the Code for compensation paid to certain executives designated in those sections.

 

New 2018 Plan Benefits.

 

Grants under the Earnout Incentive Plan will be made at the discretion of the plan committee. The grants under the Earnout Incentive Plan are not yet determinable. The value of the awards granted under the Earnout Incentive Plan will depend on a number of factors, including the fair market value of our common stock on future dates, and the extent to which any applicable performance goals necessary for vesting or payment are achieved.

 

Effective Date; Term.

 

We expect the Earnout Incentive Plan to be effective upon the completion of the Business Combination.

 

Vote Required for Approval

 

The approval of the Earnout Incentive Plan requires the affirmative vote of holders of a majority of the shares of our common stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. Abstentions will have the same effect as a vote “AGAINST” this proposal.

 

Recommendation of the Board of Directors

 

OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE Earnout Incentive Plan.

 

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PROPOSAL NO. 9 - THE NASDAQ PROPOSAL

 

Overview

 

Under the terms of the Purchase Agreement, M I Acquisitions is required to issue more than 20% of its issued and outstanding shares of common stock to the Sellers. Because of the issuance of in excess of 20% of the outstanding shares of common stock of M I Acquisitions, we are required to obtain stockholder approval in order to comply with Nasdaq Listing Rules 5635(a) and (d).

 

Under Nasdaq Listing Rule 5635(a), stockholder approval is required prior to the issuance of securities in connection with the acquisition of another company if such securities are not issued in a public offering and (A) such securities have, or will have upon issuance, voting power equal to or in excess of 20% of the voting power outstanding before the issuance of common stock (or securities convertible into or exercisable for common stock); or (B) the number of shares of common stock to be issued is or will be equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of the stock or securities.

 

Under Nasdaq Listing Rule 5635(d), stockholder approval is required for a transaction other than a public offering involving the sale, issuance or potential issuance by an issuer of common stock (or securities convertible into or exercisable for common stock) at a price that is less than the greater of book or market value of the stock if the number of shares of common stock to be issued is or may be equal to 20% or more of the common stock, or 20% or more of the voting power, outstanding before the issuance.

 

Effect of Proposal on Current Stockholders

 

If the Nasdaq Proposal is adopted, M I Acquisitions would issue shares representing more than 20% of its outstanding common stock in connection with the Business Combination. The issuance of such shares would result in significant dilution to the M I Acquisition stockholders and would afford such stockholders a smaller percentage interest in the voting power, liquidation value and aggregate book value of M I Acquisitions.

 

If the Nasdaq Proposal is not approved and we consummate the Business Combination on its current terms, M I Acquisitions would be in violation of Nasdaq Listing Rule 5635(a) and potentially Nasdaq Listing Rule 5635(d), which could result in the delisting of our securities from the Nasdaq Capital Market. If Nasdaq delists our securities from trading on its exchange, we could face significant material adverse consequences, including:

 

·a limited availability of market quotations for our securities;

 

·reduced liquidity with respect to our securities;

 

·a determination that our shares are a “penny stock,” which will require brokers trading in our securities to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our securities;

 

·a limited amount of news and analyst coverage for the post-transaction company; and

 

·a decreased ability to issue additional securities or obtain additional financing in the future.

 

It is a condition to the obligations of the Sellers to close the Business Combination that M I Acquisitions’ common stock remain listed on the Nasdaq Capital Market. As a result, if the Nasdaq Proposal is not adopted, the Business Combination may not be completed.

 

Required Vote

 

Approval of the Nasdaq Proposal requires the affirmative vote of the holders of a majority of the shares of M I Acquisitions common stock represented in person or by proxy at the special meeting of M I Acquisitions stockholders and entitled to vote thereon. Adoption of the Nasdaq Proposal is conditioned upon the adoption of the Authorized Share Increase Proposal, the 2018 Equity Incentive Plan Proposal and the Earnout Incentive Plan Proposal.

 

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Recommendation of the Board of Directors

 

OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE NASDAQ PROPOSAL.

 

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PROPOSAL NO. 10 - THE ADJOURNMENT PROPOSAL

 

Purpose of the Adjournment Proposal

 

In the event there are not sufficient votes for, or otherwise in connection with, the adoption of the Purchase Agreement and the transactions contemplated thereby, the board of directors may adjourn the special meeting to a later date, or dates, if necessary, to permit further solicitation of proxies. In no event will M I Acquisitions seek adjournment which would result in soliciting of proxies, having a stockholder vote, or otherwise consummating a business combination after the termination date specified in the M I Acquisitions certificate of incorporation. Unless the certificate of incorporation is amended, the termination date can be no later than September 17, 2018.

 

Required Vote

 

Approval of the Adjournment Proposal requires the affirmative vote of the holders of a majority of the shares of M I Acquisitions common stock as of the record date represented in person or by proxy at the special meeting of M I Acquisitions stockholders and entitled to vote thereon. Adoption of the Adjournment Proposal is not conditioned upon the adoption of any of the other Proposals.

 

Recommendation of the Board of Directors

 

OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE ADJOURNMENT PROPOSAL.

 

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COMPARATIVE PER SHARE DATA

 

The following table sets forth summary historical comparative share and unit information for M I Acquisitions and Priority and unaudited pro forma condensed combined per share information of M I Acquisitions after giving effect to the Business Combination, assuming four redemption scenarios as follows:

 

·Assuming No Redemption – GS Warrant Exercised: This presentation assumes that no current M I Acquisitions’ public stockholders exercise redemption rights with respect to their shares for a pro rata portion of the fund in M I Acquisitions’ trust account and the GS Warrant issued by Priority was exercised or is otherwise no longer outstanding at the Closing.

 

· Assuming Maximum Redemption – GS Warrant Exercised: This presentation assumes that stockholders holding 3.4 million of M I Acquisitions’ public shares exercise their redemption rights and that such shares are redeemed for their pro rata share ($10.43 per share) of the funds in its trust account and the GS Warrant issued by Priority was exercised or is otherwise no longer outstanding at the Closing. Per the M I Acquisitions IPO registration statement, a public stockholder, together with any affiliate of his or hers, or any other person with whom he or she is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act) will be restricted from seeking conversion rights with respect to 20% or more of the shares of common stock sold in the IPO. To the knowledge of M I Acquisitions, there were no M I Acquisitions public shareholders holding 20% or more of the shares of common stock sold in the IPO as of March 31,2018. Under the Purchase Agreement, the consummation of the Business Combination is conditioned upon, among other things, the amount of Available Cash (defined as the amount of the funds contained in the trust account as of immediately prior to the Closing without giving effect to the redemptions minus the amounts required to consummate any redemptions) not being less than the minimum cash amount of $20 million. Furthermore, the Company will only proceed with the Business Combination if it will have net tangible assets of at least $5,000,001 upon consummation of the Business Combination. This scenario gives effect to M I Acquisitions public share redemptions of approximately 3.4 million shares for aggregate redemption payments of $35.4 million. Aggregate redemption payments of $35.4 million calculated as $55.4 million in the trust account per the pro forma condensed combined balance sheet less $20.0 million required available cash from the trust account. Public redemption shares of approximately 3.4 million shares calculated as $35.4 million redemption payments divided by estimated per share redemption value of $10.43 ($55,383,870 in trust account per the pro forma condensed combined balance sheet divided by 5,310,109 M I Acquisitions public shares).

 

·Assuming No Redemption – GS Warrant Outstanding: This presentation assumes that no current M I Acquisitions’ public stockholders exercise redemption rights with respect to their shares for a pro rata portion of the fund in M I Acquisitions’ trust account and the GS Warrant issued by Priority was not exercised and remains outstanding at the Closing.

 

· Assuming Maximum Redemption – GS Warrant Outstanding: This presentation assumes that stockholders holding 3.4 million of M I Acquisitions’ public shares exercise their redemption rights and that such shares are redeemed for their pro rata share ($10.43 per share) of the funds in its trust account and the GS Warrant issued by Priority was not exercised and remains outstanding at the Closing. Per the M I Acquisitions IPO registration statement, a public stockholder, together with any affiliate of his or hers, or any other person with whom he or she is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act) will be restricted from seeking conversion rights with respect to 20% or more of the shares of common stock sold in the IPO. To the knowledge of M I Acquisitions, there were no M I Acquisitions public shareholders holding 20% or more of the shares of common stock sold in the IPO as of March 31, 2018. Under the Purchase Agreement, the consummation of the Business Combination is conditioned upon, among other things, the amount of Available Cash (defined as the amount of the funds contained in the trust account as of immediately prior to the Closing without giving effect to the redemptions minus the amounts required to consummate any redemptions) not being less than the minimum cash amount of $20 million. Furthermore, the Company will only proceed with the Business Combination if it will have net tangible assets of at least $5,000,001 upon consummation of the Business Combination. This scenario gives effect to M I Acquisitions public share redemptions of approximately 3.4 million shares for aggregate redemption payments of $35.4 million. Aggregate redemption payments of $35.4 million calculated as $55.4 million in trust account per the pro forma condensed combined balance sheet less $20.0 million required available cash from the trust account. Public redemption shares of approximately 3.4 million shares calculated as $35.4 million redemption payments divided by estimated per share redemption value of $10.43 ($55,383,870 in trust account per the pro forma condensed combined balance sheet divided by 5,310,109 M I Acquisitions public shares).

 

The pro forma book value information reflects the Business Combination as if it had occurred on March 31, 2018. The weighted average shares outstanding and net earnings per share information reflect the Business Combination as if they had occurred on January 1, 2017.

 

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This information is only a summary and should be read together with the historical financial information summary included elsewhere in this proxy statement, and the historical financial statements of M I Acquisitions and Priority and related notes that are included elsewhere in this proxy statement. The unaudited M I Acquisitions and Priority pro forma combined per share information is derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial statements and related notes included elsewhere in this proxy statement.

 

The unaudited pro forma combined earnings per share information below does not purport to represent the earnings per share which would have occurred had the companies been combined during the periods presented, nor earnings per share for any future date or period. The unaudited pro forma combined book value per share information below does not purport to represent what the value of M I Acquisitions and Priority would have been had the companies been combined during the period presented.

 

    Historical     Scenario 1: GS Warrant Outstanding     Scenario 2: GS Warrant Exercised  
                   
                Pro Forma     Pro Forma Combined     Pro Forma     Pro Forma Combined  
    Ml           Combined     (Assuming     Combined     (Assuming  
    Acquisitions     Priority     (Assuming     Maximum     (Assuming     Maximum  
    Historical     Historical     No Redemptions)