Note 19—Related Party Transactions

The following table presents the Company’s transactions with related parties for each of the periods presented below:


	Years ended December 31,
(Dollar amounts in thousands)	2013		2012		2011
Total revenues ⁽¹⁾⁽²⁾	$	166,770	$	155,112	$	149,670

Cost of revenues	$	8,290	$	426	$	205

Rent and other fees ⁽³⁾⁽⁴⁾	$	27,762	$	11,319	$	11,841

Interest earned from and charged by affiliate
Interest income	$	130	$	222	$	627

Interest expense⁽⁵⁾	$	2,471	$	7,476	$	8,440

Other expenses ⁽⁶⁾	$	—	$	—	$	1,700

⁽¹⁾	Total revenues from Popular as a percentage of revenues were 46%, 44% and 46% for each of the periods presented above.

⁽²⁾	Includes revenues generated from investee accounted for under the equity method of $3.0 million, $3.7 million and $2.5 million for the years ended December 31, 2013, 2012 and 2011, respectively.

⁽³⁾

Includes management fees to equity sponsors amounting to $3.5 million, $3.7 million and $3.2 million for the years ended December 31, 2013, 2012 and 2011, respectively. Management fees paid during 2013 also includes $16.7 million resulting from the termination of the consulting agreements as explained below. Rent and other fees also include $5.9 million paid in connection with the redemption premium on the senior notes during the first half of 2013.

⁽⁴⁾

Includes $11.1 million, $11.3 million and $11.8 million recorded as selling, general and administrative expenses for each of the periods presented above, and $16.7 million recorded as non-operating expenses for the year ended December 31, 2013 in the audited consolidated statement of (loss) income and comprehensive (loss) income.

⁽⁵⁾

Interest expense relates to interest accrued on the senior secured term loan and senior notes held by Popular. As a result of the debt refinancing and the redemption of the senior notes in April 2013, Popular’s participation in such debt was extinguished. See Note 11 for additional information related to the extinguishment of this debt.

⁽⁶⁾

On December 31, 2011, EVERTEC Group entered into a (“Settlement Agreement”) with Popular in order to settle any claims among the parties related to the Closing Statement or the Working Capital True-Up Amount. In accordance with the Settlement Agreement, EVERTEC made a payment of $1.7 million to Popular.

On April 17, 2013, EVERTEC entered into a termination agreement with Holdings, EVERTEC Group and Popular and a termination agreement with Holdings, EVERTEC Group and Apollo Management VII, L.P. in connection with the initial public offering (the “Termination Agreements”). The Termination Agreements terminated the consulting agreements (the “Consulting Agreements”), each dated September 30, 2010, entered into by Holdings and EVERTEC Group with each of Popular and Apollo Management, pursuant to which Holdings and EVERTEC Group received certain advisory services from each of Popular and Apollo Management. The Consulting Agreements were terminated in their entirety upon payment of termination fees of approximately $8.5 million to Apollo Management and $8.2 million to Popular, in each case, plus any unreimbursed expenses payable in accordance with the terms of the Termination Agreements.

At December 31, 2013 and 2012, the Company had the following balances arising from transactions with related parties:


	December 31,
(Dollar amounts in thousands)	2013		2012
Cash and restricted cash deposits in affiliated bank	$	13,933	$	19,438

Indemnification assets from Popular reimbursement ⁽¹⁾
Accounts receivable	$	1,900	$	2,157

Other long-term assets	$	1,686	$	3,942

Other due/to from affiliate
Accounts receivable	$	18,799	$	19,252

Prepaid expenses and other assets	$	216	$	—

Accounts payable⁽²⁾	$	8,886	$	3,845

Unearned income	$	4,100	$	—

Other long-term liabilities ⁽²⁾	$	333	$	2,847

Long-term debt	$	—	$	90,186

⁽¹⁾	Recorded in connection with reimbursement from Popular regarding certain software license fees.

⁽²⁾

Includes an account payable of $0.2 million and $0.4 million and a long-term liability of $0.3 million and $2.8 million for December 31, 2013 and 2012, respectively, related to the unvested portion of stock options as a result of the equitable adjustment approved by the Company’s Board of Directors on December 18, 2012 that will be payable to executive officers and employees upon vesting of stock options.

The balance of cash and restricted cash deposits in an affiliated bank was included within the cash and restricted cash line items in the accompanying consolidated balance sheets. Due from affiliates mainly included the amounts outstanding related to processing and information technology services billed to Popular subsidiaries according to the terms of the Master Services Agreement (“MSA”) under which EVERTEC Group has a contract to provide such services for at least 15 years on an exclusive basis for the duration of the agreement on commercial terms consistent with historical pricing practices among the parties. This amount was included in the accounts receivable, net in the consolidated balance sheets.

The Company is entitled to receive reimbursements from Popular regarding certain software license fees if such amounts exceed certain amounts for a period of five years from the closing date of the Merger. As a result of this agreement, the Company recorded approximately $11.2 million as a software reimbursement asset at fair value as of the Merger date. At December 31, 2013 and 2012, the current portion of said asset of $1.9 million and $2.2 million, respectively, is included within the accounts receivable, net caption and the long-term portion of $1.7 million and $3.9 million, respectively, is included in the other long-term assets caption in the accompanying consolidated balance sheets. Gains and losses related to the asset are included within the other expenses caption in the accompanying consolidated statements of (loss) income and comprehensive (loss) income. See Note 12 and 16.

From time to time, EVERTEC Group obtains performance bonds from insurance companies covering the obligations of EVERTEC Group under certain contracts. Under the Merger Agreement, Popular is required to, subject to certain exceptions, cause the then outstanding performance bonds to remain outstanding or replace such bonds as needed for five years from the closing date of the Merger. EVERTEC Group entered into a reimbursement agreement with Popular to mirror Popular’s obligations. As a result, EVERTEC Group is required to reimburse Popular for payment of premiums and related charges and indemnification of Popular for certain losses, in case EVERTEC Group fails to perform or otherwise satisfy its obligations covered by such performance bonds.

As of December 31, 2013, EVERTEC Group has a credit facility with Popular for $3.6 million, on behalf of EVERTEC CR, under which a letter of credit of a similar amount was issued.