Item 1.01 Entry into a Material Definitive Agreement
First Lien Credit Facility – Equity Issuance Agreement, Warrant and Registration Rights Agreement
As previously disclosed in the Company’s Form 10-Q filed on November 15, 2021 (the “Form 10-Q”), AgileThought, Inc. (the “Company”) agreed to issue $30 million worth of the Company’s Class A Common Stock by December 17, 2021, which date was subsequently extended, to the Administrative Agent under the Amended and Restated Credit Agreement by and among IT Global Holding LLC, 4th Source LLC, AgileThought, LLC, AN Extend, S.A. de C.V., AN Evolution S. de R.L. de C.V., AN Global LLC, AgileThought, Inc., the financial institutions party thereto as lenders, and Monroe Capital Management Advisors, LLC, as Administrative Agent (the “First Lien Credit Facility”). Pursuant to an equity issuance agreement (the “Equity Issuance Agreement”), dated December 28, 2021, between the Company and the Administrative Agent, the Company issued 4,439,333 shares of Class A Common Stock to the Administrative Agent on December 29, 2021 (the “First Lien Shares”).
For purposes of calculating compliance with the Company’s maximum total leverage ratio under the First Lien Credit Facility for the quarters ended December 31, 2021, March 31, 2022 and June 30, 2022 (but not for any quarter thereafter), the amount of the Company’s debt will be deemed to be reduced by the market value of the First Lien Shares at the applicable quarter-end. Subject to regulatory restrictions, the Company may issue additional First Lien Shares from time to time to reduce the amount of debt for purposes of the maximum total leverage ratio to the extent necessary to comply with such financial ratio.
Upon the earlier of August 29, 2022 and the occurrence of an event of default under the First Lien Credit Facility (the “Lock-up Period”), the Administrative Agent may sell the First Lien Shares and apply 100% of the net proceeds to the outstanding obligations under the First Lien Credit Facility. If such proceeds exceed the then-existing obligations under the First Lien Facility, the Administrative Agent shall remit such excess amount to the Company. In addition, upon payment in full of the First Lien Credit Facility, the Administrative Agent shall return to the Company any of the First Lien Shares that have not been sold. Under the terms of the Equity Agreement, the Administrative Agent shall not exercise any voting rights with respect to the First Lien Shares.
Also as previously disclosed in the Form 10-Q, the Company agreed to issue warrants to the Administrative Agent or its affiliates to purchase $7 million worth of the Company’s Class A Common Stock on the date the First Lien Credit Facility is paid in full (the “First Lien Warrants”); this amount will reduce to $5 million if the First Lien Credit Facility is paid in full on or before February 28, 2022. The First Lien Warrants, when issued, shall be immediately exercisable at $0.0001 per share and have a term of five years. The number of shares issuable under the First Lien Warrant (the “Warrant Shares”) is subject to the cap described in Item 3.02 below.
On December 28, 2021, the Company also entered into a registration rights agreement (the “First Lien Registration Rights Agreement”) with Monroe Capital Management Advisors, LLC with respect to the First Lien Shares and the Class A Common Stock underlying the First Lien Warrants (the “Warrant Shares”). As a result, at the expiration of the Lock-Up Period, the Administrative Agent and the holders of Warrant Shares (when issued) will be able to make a written demand for registration under the Securities Act of 1933, as amended (the “Securities Act”) of all or a portion of their registrable securities, subject to a maximum of five such demand registrations. Any such demand
may be in the form of an underwritten offering and will be subject to customary restrictions and conditions as contemplated in the First Lien Registration Rights Agreement. In addition, the holders of registrable securities will have “piggy-back” registration rights to include the First Lien Shares and the Warrant Shares in other registration statements filed by the Company subsequent to the end of the Lock-Up Period. To the extent it is eligible to do so, the Company also agreed to file a resale shelf registration statement covering the resale of all registrable securities upon the expiration of the Lock-Up Period.
Second Lien Credit Facility – Registration Rights Agreement
On December 30, 2021, the Company entered into a registration rights agreement (the “Second Lien Registration Rights Agreement”) with the lenders under the Credit Agreement, dated November 22, 2021, by and among the Company, AgileThought Mexico, S.A. DE C.V., AN Global LLC, entities affiliated with CS Investors and Nexxus Funds (both of which are existing AgileThought shareholders and have representation on AgileThought’s Board of Directors), Manuel Senderos, AgileThought’s Chief Executive Officer and Chairman of the Board of Directors (“Mr. Senderos”), and Kevin Johnston, AgileThought’s Chief Revenue Officer and Global Chief Operating Officer (“Mr. Johnston”), as lenders (the “Second Lien Lenders”), GLAS USA LLC, as administrative agent, and GLAS AMERICAS LLC, as collateral agent (as amended, the “Second Lien Credit Facility”). The Second Lien Registration Rights Agreement covers shares of Class A Common Stock currently held by the Second Lien Lenders and shares issuable upon conversion of the loans under the Second Lien Credit Facility.
As a result, at the expiration of the lock-up agreements applicable to such lenders, the Second Lien Lenders will be able to make a written demand for registration under the Securities Act of all or a portion of their registrable securities, subject to a maximum of three such demand registrations, as long as such demand includes a number of registrable securities with a total offering price in excess of $10.0 million. Any such demand may be in the form of an underwritten offering and will be subject to customary restrictions and conditions as contemplated in the Second Lien Registration Rights Agreement. In addition, the Second Lien Lenders will have “piggy-back” registration rights to include their registrable securities in other registration statements filed by the Company subsequent to the expiration of the lock-up agreements applicable to such lenders. The Company also agreed to file a resale shelf registration statement covering the resale of all registrable securities upon the expiration of the lock-up agreements applicable to such lenders.
The foregoing descriptions of the material terms of the First Lien Warrants, the Equity Agreement, the First Lien Registration Rights Agreement and the Second Lien Registration Rights Agreement do not purport to be complete and are qualified in their entirety by reference to such agreements, copies of which are filed as Exhibits 4.1, 10.1, 10.2 and 10.3, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.