| Item 1.01. | Entry into a Material Definitive Agreement. |
Acquisition of AmberLeaf Partners, Inc.
On October 1, 2020 (the “Closing Date”), Mastech Digital, Inc. (the “Company”), through its wholly-owned subsidiary, Mastech Digital Data, Inc. (“Buyer”), completed the acquisition of all of the outstanding shares of capital stock of AmberLeaf Partners, Inc. (“AmberLeaf”), a Chicago-based customer experience consulting company (the “Acquisition”). The Acquisition was made pursuant to the terms of the Share Purchase Agreement among Buyer, AmberLeaf and the shareholders of AmberLeaf party thereto (the “Purchase Agreement”). The Acquisition was previously disclosed in a Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission (the “SEC”) on October 2, 2020.
As previously disclosed, Buyer paid at the closing of the Acquisition $9.5 million in cash, subject to customary adjustments, for the shares of AmberLeaf (the “Closing Date Payment”).
Pursuant to the terms of the Purchase Agreement, Buyer is also required to pay to the shareholders of AmberLeaf $4.5 million in deferred cash payments, contingent upon AmberLeaf achieving specific revenue and EBITDA targets during the period beginning on January 1, 2021, and ending on December 31, 2022, as described more fully in the Purchase Agreement.
The Company funded the Closing Date Payment using borrowings under the Credit Agreement (discussed below).
The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the Purchase Agreement filed herewith as Exhibit 10.1 which is incorporated herein by reference.
Third Amendment to Credit Agreement
On the Closing Date, the Company entered into (i) a Third Amendment (the “Third Amendment”) to its Credit Agreement, dated as of July 13, 2017, and amended by that certain First Amendment, dated as of November 14, 2017, and Second Amendment, dated as of April 20, 2018 (the “Credit Agreement”), by and among the Company, certain of its subsidiaries (collectively with the Company, the “Company Entities”), PNC Bank, National Association, as administrative agent, swing loan lender and issuing lender, PNC Capital Markets LLC, as sole lead arranger and sole bookrunner, and certain financial institutions party thereto as lenders (“PNC”); and (ii) a term loan facility for certain of the Company Entities by PNC (the “Term Loan Facility”).
The Third Amendment amends the Credit Agreement by, among other things, (i) increasing the aggregate commitment amount of the revolving credit facility to the Company Entities (the “Revolving Credit Facility”) to $30 million; (ii) providing for the Term Loan Facility in the aggregate amount of $17.5 million, a portion of the proceeds of which repaid in full the term loan outstanding under the Credit Agreement prior to the Closing Date; (iii) providing for an increase to the total aggregate commitment amount of the Term Loan Facility and revolving credit facility to the Company Entities in an aggregate amount not to exceed $15 million, upon satisfaction of certain conditions; and (iv) amending the financial covenant in the Credit Agreement related to the Company’s Fixed Charge Coverage Ratio (as defined in the Credit Agreement) by increasing the minimum permitted Fixed Charge Coverage Ratio for each of the fiscal quarters ending on or after to September 30, 2020.
The foregoing summary of the Third Amendment does not purport to be complete and is qualified in its entirety by reference to the Third Amendment and the Credit Agreement. The Third Amendment is filed herewith as Exhibit 10.2 and is incorporated herein by reference.
