UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2014
or
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
COMMISSION FILE NUMBER 001-35872
EVERTEC, Inc.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Puerto Rico | 66-0783622 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. employer identification number) | |
Cupey Center Building, Road 176, Kilometer 1.3, San Juan, Puerto Rico |
00926 | |
(Address of principal executive offices) | (Zip Code) |
(787) 759-9999
(Registrants telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in rule 12b-2 of the Exchange Act).
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | x (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.
At August 1, 2014, there were 78,657,848 outstanding shares of common stock of EVERTEC, Inc.
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Part I. FINANCIAL INFORMATION |
1 | |||||
Item 1. |
Financial Statements |
1 | ||||
Unaudited Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013 |
1 | |||||
2 | ||||||
3 | ||||||
Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013 |
4 | |||||
6 | ||||||
Item 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
17 | ||||
Item 3. |
29 | |||||
Item 4. |
29 | |||||
30 | ||||||
Item 1. |
30 | |||||
Item 1A. |
30 | |||||
Item 2. |
Unregistered Sales of Equity in Securities and Use of Proceeds |
30 | ||||
Item 3. |
30 | |||||
Item 4. |
30 | |||||
Item 5. |
30 | |||||
Item 6. |
30 | |||||
S-1 |
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of, and subject to the protection of, the Private Securities Litigation Reform Act of 1995. Such statements can be identified by the use of forward-looking terminology such as believes, expects, may, estimates, will, should, plans or anticipates or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and may involve significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements as a result of various factors. Among the factors that significantly impact our business and could impact our business in the future are:
| our reliance on our relationship with Popular, Inc. (Popular) for a significant portion of our revenue and with Banco Popular de Puerto Rico (Banco Popular), Populars principal banking subsidiary, to grow our Merchant Acquiring business; |
| our ability to renew our client contracts on terms favorable to us; |
| the effectiveness of our risk management procedures; |
| our dependence on our processing systems, technology infrastructure, security systems and fraudulent payment detection systems, as well as on our personnel and certain third parties with whom we do business; |
| the risk that our technology infrastructure and systems may experience breakdowns or fail to prevent security breaches or fraudulent transfers; |
| our ability to develop, install and adopt new software, technology and computing systems; |
| a decreased client base due to consolidations and failures in the financial services industry; |
| the credit risk of our merchant clients, for which we may also be liable; |
| the continuing market position of the ATH network despite competition and potential shifts in consumer payment preferences; |
| our dependence on credit card associations, including any adverse changes in credit card association or network rules or fees; |
| regulatory limitations on our activities due to our relationship with Popular and our role as a service provider to financial institutions; |
| changes in the regulatory environment and changes in international, legal, political, administrative or economic conditions; |
| the geographical concentration of our business in Puerto Rico; |
| operating an international business in multiple regions with potential political and economic instability, including Latin America; |
| operating in countries and with counterparties that put us at risk of violating U.S. sanctions laws; |
| our ability to execute our geographic expansion and acquisition strategies; |
| our ability to protect our intellectual property rights against infringement and to defend ourselves against claims of infringement brought by third parties; |
| our ability to recruit and retain the qualified personnel necessary to operate our business; |
| our ability to comply with U.S. federal, state, local and foreign regulatory requirements; |
| evolving industry standards and adverse changes in global economic, political and other conditions; |
| our high level of indebtedness and restrictions contained in our debt agreements, including the senior secured credit facilities, as well as debt that could be incurred in the future; |
| our ability to generate sufficient cash to service our indebtedness and to generate future profits; and |
| other factors discussed in this Report, including in the section entitled Risk Factors. |
These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. The Company does not undertake, and specifically disclaims any obligation, to update any of the forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements except as required by the federal securities laws.
Investors should refer to the Companys Form 10-K for the year ended December 31, 2013 (the 2013 Form 10-K) for a discussion of factors that could cause events to differ from those suggested by the forward-looking statements, including factors set forth in the sections entitled Risk Factors and Managements Discussion and Analysis of Financial Condition and Results of Operations.
EVERTEC, Inc. (Unaudited) Consolidated Balance Sheets
(Dollar amounts in thousands, except for share information)
June 30, 2014 | December 31, 2013 | |||||||
Assets |
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Current Assets: |
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Cash |
$ | 27,831 | $ | 22,485 | ||||
Restricted cash |
5,195 | 5,433 | ||||||
Accounts receivable, net |
71,479 | 68,434 | ||||||
Deferred tax asset |
2,812 | 2,537 | ||||||
Prepaid expenses and other assets |
21,846 | 17,524 | ||||||
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Total current assets |
129,163 | 116,413 | ||||||
Investment in equity investee |
11,287 | 10,639 | ||||||
Property and equipment, net |
29,371 | 33,240 | ||||||
Goodwill |
369,203 | 373,119 | ||||||
Other intangible assets, net |
347,114 | 367,780 | ||||||
Other long-term assets |
13,745 | 18,162 | ||||||
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Total assets |
$ | 899,883 | $ | 919,353 | ||||
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Liabilities and stockholders equity |
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Current Liabilities: |
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Accrued liabilities |
$ | 29,159 | $ | 26,571 | ||||
Accounts payable |
14,256 | 18,630 | ||||||
Unearned income |
8,498 | 5,595 | ||||||
Income tax payable |
1,801 | 259 | ||||||
Current portion of long-term debt |
19,000 | 19,000 | ||||||
Short-term borrowings |
23,000 | 51,200 | ||||||
Deferred tax liability, net |
461 | 543 | ||||||
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Total current liabilities |
96,175 | 121,798 | ||||||
Long-term debt |
656,626 | 665,680 | ||||||
Long-term deferred tax liability, net |
20,702 | 20,212 | ||||||
Other long-term liabilities |
251 | 333 | ||||||
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Total liabilities |
773,754 | 808,023 | ||||||
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Commitments and contingencies (Note 10) |
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Stockholders equity |
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Preferred stock, par value $0.01; 2,000,000 shares authorized; none issued |
| | ||||||
Common stock, par value $0.01; 206,000,000 shares authorized; 78,631,847 shares issued and outstanding at June 30, 2014 (December 31, 2013- 78,286,465) |
786 | 783 | ||||||
Additional paid-in capital |
82,167 | 80,718 | ||||||
Accumulated earnings |
49,701 | 29,403 | ||||||
Accumulated other comprehensive (loss) income, net of tax |
(6,525 | ) | 426 | |||||
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Total stockholders equity |
126,129 | 111,330 | ||||||
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Total liabilities and stockholders equity |
$ | 899,883 | $ | 919,353 | ||||
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
1
EVERTEC, Inc. (Unaudited) Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(Dollar amounts in thousands, except per share information)
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Revenues |
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Merchant acquiring, net |
$ | 19,827 | $ | 18,165 | $ | 39,118 | $ | 35,624 | ||||||||
Payment processing (from affiliates: $7,303, $7,298, $14,407 and $14,508) |
26,406 | 24,285 | 51,408 | 48,397 | ||||||||||||
Business solutions (from affiliates: $34,243, $35,051, $67,601 and $69,496) |
44,888 | 46,725 | 87,805 | 92,493 | ||||||||||||
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Total revenues |
91,121 | 89,175 | 178,331 | 176,514 | ||||||||||||
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Operating costs and expenses |
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Cost of revenues, exclusive of depreciation and amortization shown below |
38,839 | 41,771 | 76,484 | 82,273 | ||||||||||||
Selling, general and administrative expenses |
10,463 | 12,624 | 18,525 | 21,487 | ||||||||||||
Depreciation and amortization |
16,390 | 17,842 | 33,004 | 35,417 | ||||||||||||
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Total operating costs and expenses |
65,692 | 72,237 | 128,013 | 139,177 | ||||||||||||
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Income from operations |
25,429 | 16,938 | 50,318 | 37,337 | ||||||||||||
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Non-operating (expenses) income |
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Interest income |
79 | 49 | 154 | 93 | ||||||||||||
Interest expense |
(6,501 | ) | (9,747 | ) | (13,410 | ) | (25,011 | ) | ||||||||
Earnings of equity method investment |
343 | 348 | 664 | 625 | ||||||||||||
Other income (expenses): |
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Loss on extinguishment of debt |
| (58,464 | ) | | (58,464 | ) | ||||||||||
Termination of consulting agreements |
| (16,718 | ) | | (16,718 | ) | ||||||||||
Other income (expenses) |
385 | (2,353 | ) | 2,376 | (2,286 | ) | ||||||||||
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Total other income (expenses) |
385 | (77,535 | ) | 2,376 | (77,468 | ) | ||||||||||
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Total non-operating (expenses) income |
(5,694 | ) | (86,885 | ) | (10,216 | ) | (101,761 | ) | ||||||||
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Income (loss) before income taxes |
19,735 | (69,947 | ) | 40,102 | (64,424 | ) | ||||||||||
Income tax expense (benefit) |
1,962 | (5,012 | ) | 4,123 | (4,961 | ) | ||||||||||
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Net income (loss) |
17,773 | (64,935 | ) | 35,979 | (59,463 | ) | ||||||||||
Other comprehensive income (loss), net of tax of $48, $18, $54 and $18 |
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Foreign currency translation adjustments |
794 | (394 | ) | (6,951 | ) | 1,960 | ||||||||||
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Total comprehensive income (loss) |
$ | 18,567 | $ | (65,329 | ) | $ | 29,028 | $ | (57,503 | ) | ||||||
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Net income (loss) per common share - basic |
$ | 0.23 | $ | (0.82 | ) | $ | 0.46 | $ | (0.78 | ) | ||||||
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Net income (loss) per common share - diluted |
$ | 0.22 | $ | (0.82 | ) | $ | 0.45 | $ | (0.78 | ) | ||||||
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
2
EVERTEC, Inc. (Unaudited) Consolidated Statement of Changes in Stockholders Equity
(Dollar amounts in thousands, except share information)
Number of Shares of Common Stock |
Common Stock |
Additional Paid-in Capital |
Accumulated Earnings |
Accumulated Other Comprehensive Income (Loss) |
Total Stockholders Equity |
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Balance at December 31, 2013 |
78,286,465 | $ | 783 | $ | 80,718 | $ | 29,403 | $ | 426 | $ | 111,330 | |||||||||||||
Share-based compensation recognized |
665 | 665 | ||||||||||||||||||||||
Tax windfall benefit on exercises of stock options |
1,482 | 1,482 | ||||||||||||||||||||||
Stock options exercised, net of cashless exercise |
345,382 | 3 | (719 | ) | (716 | ) | ||||||||||||||||||
Dividend(1) |
21 | 21 | ||||||||||||||||||||||
Net income |
35,979 | 35,979 | ||||||||||||||||||||||
Cash dividends declared on common stock |
| (15,681 | ) | (15,681 | ) | |||||||||||||||||||
Other comprehensive loss |
(6,951 | ) | (6,951 | ) | ||||||||||||||||||||
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Balance at June 30, 2014 |
78,631,847 | 786 | 82,167 | 49,701 | (6,525 | ) | 126,129 | |||||||||||||||||
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(1) | Related to dividend declared in 2012 and accrued upon vesting of stock options. Such options were forfeited during the six months ended June 30, 2014. |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
EVERTEC, Inc. (Unaudited) Consolidated Statements of Cash Flows
(Dollar amounts in thousands)
Six months ended June 30, | ||||||||
2014 | 2013 | |||||||
Cash flows from operating activities |
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Net income (loss) |
$ | 35,979 | $ | (59,463 | ) | |||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
33,004 | 35,417 | ||||||
Amortization of debt issue costs and premium and accretion of discount |
1,538 | 2,369 | ||||||
Write-off of debt issue costs, premium and discount accounted as loss on extinguishment |
| 16,555 | ||||||
Provision for doubtful accounts and sundry losses |
1,058 | 826 | ||||||
Deferred tax benefit |
(430 | ) | (6,251 | ) | ||||
Share-based compensation |
665 | 5,483 | ||||||
Unrealized loss (gain) of indemnification assets |
173 | (19 | ) | |||||
Loss on disposition of property and equipment and other intangibles |
64 | 32 | ||||||
Earnings of equity method investment |
(664 | ) | (625 | ) | ||||
Dividend received from equity method investment |
326 | 500 | ||||||
(Increase) decrease in assets: |
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Accounts receivable, net |
(2,045 | ) | 492 | |||||
Prepaid expenses and other assets |
(4,267 | ) | (5,417 | ) | ||||
Other long-term assets |
1,811 | (323 | ) | |||||
(Decrease) increase in liabilities: |
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Accounts payable and accrued liabilities |
(4,120 | ) | (3,347 | ) | ||||
Income tax payable |
1,542 | (1,867 | ) | |||||
Unearned income |
2,903 | 1,736 | ||||||
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Total adjustments |
31,558 | 45,561 | ||||||
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Net cash provided by (used in) operating activities |
67,537 | (13,902 | ) | |||||
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Cash flows from investing activities |
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Net decrease (increase) in restricted cash |
238 | (44 | ) | |||||
Intangible assets acquired |
(5,841 | ) | (7,927 | ) | ||||
Property and equipment acquired |
(3,895 | ) | (4,384 | ) | ||||
Proceeds from sales of property and equipment |
3 | 11 | ||||||
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Net cash used in investing activities |
(9,495 | ) | (12,344 | ) | ||||
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Cash flows from financing activities |
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Proceeds from initial public offering, net of offering costs of $12,567 |
| 112,432 | ||||||
Proceeds from issuance of long-term debt |
| 700,000 | ||||||
Statutory minimum withholding taxes paid on cashless exercises of stock options |
(770 | ) | (16,688 | ) | ||||
Debt issuance costs |
| (12,077 | ) | |||||
Net decrease in short-term borrowing |
(27,000 | ) | (14,000 | ) | ||||
Repayment of short-term borrowing for purchase of equipment |
(1,200 | ) | (4,332 | ) | ||||
Dividends paid |
(15,680 | ) | | |||||
Tax windfall benefits on exercises of stock options |
1,482 | 470 | ||||||
Issuance of common stock, net |
54 | 28 | ||||||
Repayment of other financing agreement |
(82 | ) | (112 | ) | ||||
Repayment of long-term debt |
(9,500 | ) | (745,522 | ) | ||||
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Net cash (used in) provided by financing activities |
(52,696 | ) | 20,199 | |||||
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Net increase (decrease) in cash |
5,346 | (6,047 | ) | |||||
Cash at beginning of the period |
22,485 | 25,634 | ||||||
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Cash at end of the period |
$ | 27,831 | $ | 19,587 | ||||
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Supplemental disclosure of non-cash activities: |
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Dividend declared not received from equity method investment |
$ | 325 | $ | 500 | ||||
Foreign currency translation adjustments |
(6,951 | ) | 2,354 |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
Notes to Unaudited Consolidated Financial Statements
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16 |
5
EVERTEC, Inc. Notes to Unaudited Consolidated Financial Statements
Note 1 The Company and Basis of Presentation
The Company
EVERTEC, Inc. (formerly known as Carib Latam Holdings, Inc.) and its subsidiaries (collectively the Company, or EVERTEC) is the leading full-service transaction processing business in Latin America and the Caribbean. The Company is based in Puerto Rico and provides a broad range of merchant acquiring, payment processing and business process management services across 19 countries in the region. EVERTEC owns and operates the ATH network, one of the leading automated teller machine (ATM) and personal identification number (PIN) debit networks in Latin America. In addition, EVERTEC provides a comprehensive suite of services for core bank processing, cash processing and technology outsourcing in the regions the Company serves. EVERTEC serves a broad and diversified customer base of leading financial institutions, merchants, corporations and government agencies with mission-critical technology solutions that are essential to their operations, enabling them to issue, process and accept transactions securely, and Management believes that the Companys business is well-positioned to continue to expand across the fast-growing Latin American region.
On April 13, 2012, EVERTEC was formed in order to act as the new parent company of EVERTEC Intermediate Holdings, LLC (formerly known as Carib Holdings, LLC and Carib Holdings, Inc., hereinafter Holdings) and its subsidiaries, including EVERTEC Group, LLC (formerly known as EVERTEC, LLC and EVERTEC, Inc., hereinafter EVERTEC Group). The Companys subsidiaries include Holdings, EVERTEC Group, EVERTEC Dominicana, SAS, EVERTEC Panamá, S.A., EVERTEC Costa Rica, S.A. (EVERTEC CR), EVERTEC Guatemala, S.A. and EVERTEC México Servicios de Procesamiento, S.A. de C.V.
Basis of Presentation
The unaudited consolidated financial statements of EVERTEC have been prepared in accordance with accounting principles generally accepted in the United Stated of America (GAAP). The preparation of the accompanying unaudited consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the unaudited consolidated financial statements. Actual results could differ from these estimates.
Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted from these statements pursuant to the rules and regulations of the SEC and, accordingly, these financial statements should be read in conjunction with the Audited Consolidated Financial Statements of the Company for the year ended December 31, 2013, included in the Companys 2013 Form 10-K. In the opinion of management, the accompanying consolidated financial statements, prepared in accordance with GAAP, contain all adjustments, all of which are normal and recurring in nature, necessary for a fair presentation. All significant intercompany accounts and transactions have been eliminated in consolidation.
Certain reclassifications have been made to the June 30, 2013 unaudited consolidated financial statements and related notes to conform with the presentation in 2014.
Note 2 Recent Accounting Pronouncements
The Financial Accounting Standards Board (FASB) has issued the following accounting pronouncements and guidance relevant to the Companys operations:
In May 2014, the FASB issued updated guidance for revenue recognition. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: identify the contract(s) with a customer; identify the performance obligations in the contract; determine the transaction price; allocate the transaction price to the performance obligations in the contract; and recognize revenue when (or as) the entity satisfies a performance obligation. The guidance also specifies the accounting for some costs to obtain or fulfill a contract with a customer. In addition, the updated guidance enhances and expands disclosures regarding revenue recognition. The amendments in this Update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The Company is currently evaluating the impact of the adoption of this guidance on its financial statements.
6
EVERTEC, Inc. Notes to Unaudited Consolidated Financial Statements
Note 3 Property and Equipment, net
Property and equipment, net consists of the following:
(Dollar amounts in thousands) | Useful life in years |
June 30, 2014 | December 31, 2013 | |||||||
Buildings |
30 | $ | 1,590 | $ | 1,726 | |||||
Data processing equipment |
3 - 5 | 70,243 | 68,273 | |||||||
Furniture and equipment |
3 - 20 | 7,500 | 6,385 | |||||||
Leasehold improvements |
5 - 10 | 2,878 | 2,880 | |||||||
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82,211 | 79,264 | |||||||||
Less - accumulated depreciation and amortization |
(54,250 | ) | (47,555 | ) | ||||||
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Depreciable assets, net |
27,961 | 31,709 | ||||||||
Land |
1,410 | 1,531 | ||||||||
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Property and equipment, net |
$ | 29,371 | $ | 33,240 | ||||||
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Depreciation and amortization expense related to property and equipment for the three and six months ended June 30, 2014 amounted to $3.8 million and $7.7 million, respectively, compared to $4.1 million and $8.1 million, respectively, for the same periods in 2013.
Note 4 Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill, allocated by reportable segments, were as follows (See Note 12):
(Dollar amounts in thousands) | Merchant Acquiring, net |
Payment Processing |
Business Solutions |
Total | ||||||||||||
Balance at December 31, 2013 |
$ | 138,121 | $ | 187,622 | $ | 47,376 | $ | 373,119 | ||||||||
Foreign currency translation adjustments |
| (2,923 | ) | (993 | ) | (3,916 | ) | |||||||||
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Balance at June 30, 2014 |
$ | 138,121 | $ | 184,699 | $ | 46,383 | $ | 369,203 | ||||||||
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Goodwill is tested for impairment at least annually, or more often if events or circumstances indicate there may be impairment, using the qualitative assessment option or step zero process. Using this process, the Company first assesses whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
During the third quarter of 2013, the Company completed the qualitative assessment described above and determined that there were no impairment losses to be recognized during the period. There were no triggering events or changes in circumstances that subsequent to the impairment test would have required an additional impairment evaluation. As part of the Companys qualitative assessment, EVERTEC considered the results for the 2011 impairment test (which indicated that the fair value of each reporting unit was in excess of 30% of its carrying amount) as well as current market conditions and changes in the carrying amount of the Companys reporting units that occurred subsequent to the 2011 impairment test.
7
EVERTEC, Inc. Notes to Unaudited Consolidated Financial Statements
The carrying amount of other intangible assets for the six months ended June 30, 2014 and the year ended December 31, 2013 consisted of the following:
(Dollar amounts in thousands) | June 30, 2014 | |||||||||||||
Useful life in years | Gross amount |
Accumulated amortization |
Net carrying amount |
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Customer relationships |
14 | $ | 312,747 | $ | (84,336 | ) | $ | 228,411 | ||||||
Trademark |
10 - 15 | 39,950 | (12,990 | ) | 26,960 | |||||||||
Software packages |
3 - 10 | 125,508 | (76,169 | ) | 49,339 | |||||||||
Non-compete agreement |
15 | 56,539 | (14,135 | ) | 42,404 | |||||||||
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Other intangible assets, net |
$ | 534,744 | $ | (187,630 | ) | $ | 347,114 | |||||||
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(Dollar amounts in thousands) | December 31, 2013 | |||||||||||||
Useful life in years | Gross amount |
Accumulated amortization |
Net carrying amount |
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Customer relationships |
14 | $ | 314,036 | $ | (73,180 | ) | $ | 240,856 | ||||||
Trademark |
10 -15 | 39,950 | (11,258 | ) | 28,692 | |||||||||
Software packages |
3 - 10 | 119,598 | (65,655 | ) | 53,943 | |||||||||
Non-compete agreement |
15 | 56,539 | (12,250 | ) | 44,289 | |||||||||
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Other intangible assets, net |
$ | 530,123 | $ | (162,343 | ) | $ | 367,780 | |||||||
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For the three and six months ended June 30, 2014, the Company recorded amortization expense related to other intangibles of $12.6 million and $25.3 million, respectively, compared to $13.7 million and $27.3 million for the corresponding 2013 periods.
The estimated amortization expense of the balances outstanding at June 30, 2014 for the next five years is as follows:
(Dollar amounts in thousands) | ||||
Remaining 2014 |
$ | 24,698 | ||
2015 |
45,742 | |||
2016 |
35,741 | |||
2017 |
32,988 | |||
2018 |
31,336 | |||
2019 |
30,609 |
Note 5 Debt and Short-Term Borrowings
Total debt as of June 30, 2014 and December 31, 2013 was as follows:
(Dollar amounts in thousands) | June 30, 2014 | December 31, 2013 | ||||||
Senior Secured Credit Facility (Term A) due on April 17, 2018 paying interest at a variable interest rate (London InterBank Offered Rate (LIBOR) plus applicable margin(1)(3)) |
$ | 284,697 | $ | 292,153 | ||||
Senior Secured Credit Facility (Term B) due on April 17, 2020 paying interest at a variable interest rate (LIBOR plus applicable margin(2)(3)) |
390,929 | 392,527 | ||||||
Senior Secured Revolving Credit Facility expiring on April 17, 2018 paying interest at a variable interest rate |
23,000 | 50,000 | ||||||
Other short-term borrowing |
| 1,200 | ||||||
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Total debt |
$ | 698,626 | $ | 735,880 | ||||
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(1) | Applicable margin of 2.50% at June 30, 2014 and December 31, 2013. |
(2) | Subject to a minimum rate (LIBOR floor) of 0.75% plus applicable margin of 2.75% at June 30, 2014 and December 31, 2013. |
(3) | Includes unamortized discount. |
8
EVERTEC, Inc. Notes to Unaudited Consolidated Financial Statements
On April 17, 2013, EVERTEC Group entered into a credit agreement (the 2013 Credit Agreement) governing the senior secured credit facilities, consisting of a $300.0 million term loan A facility (the Term A Loan) which matures on April 17, 2018, a $400.0 million term loan B facility (the Term B Loan) which matures on April 17, 2020 and a $100.0 million revolving credit facility which matures on April 17, 2018.
Term A Loan
As of June 30, 2014, the unpaid principal balance of the Term A Loan was $285.0 million. The Term A Loan requires principal payments on the last business day of each quarter equal to (a) 1.250% of the original principal amount commencing on September 30, 2013 through June 30, 2016; (b) 1.875% of the original principal amount from September 30, 2016 through June 30, 2017; (c) 2.50% of the original principal amount from September 30, 2017 through March 31, 2018; and (d) the remaining outstanding principal amount on the maturity of the Term A Loan on April 17, 2018. Interest is based on EVERTEC Groups first lien secured net leverage ratio and payable at a rate equal to, at the Companys option, either (a) LIBOR plus an applicable margin ranging from 2.00% to 2.50%, or (b) Base Rate, as defined in the 2013 Credit Agreement, plus an applicable margin ranging from 1.00% to 1.50%. Term A Loan has no LIBOR or Base Rate minimum or floor.
Term B Loan
As of June 30, 2014, the unpaid principal balance of the Term B Loan was $396.0 million. The Term B Loan requires principal payments on the last business day of each quarter equal to 0.250% of the original principal amount commencing on September 30, 2013 and the remaining outstanding principal amount on the maturity of the Term B Loan on April 17, 2020. Interest is based on EVERTEC Groups first lien secured net leverage ratio and payable at a rate equal to, at the Companys option, either (a) LIBOR plus an applicable margin ranging from 2.50% to 2.75%, or (b) Base Rate plus an applicable margin ranging from 1.50% to 1.75%. The LIBOR and Base Rate are subject to floors of 0.75% and 1.75%, respectively.
Revolving Credit Facility
The revolving credit facility has an available balance up to $100.0 million, with an interest rate on loans calculated the same as the applicable Term A Loan rate. The facility matures on April 17, 2018 and has a commitment fee payable one business day after the last business day of each quarter calculated based on the daily unused commitment during the preceding quarter. The commitment fee for the unused portion of this facility ranges from 0.125% to 0.375% and is based on EVERTEC Groups first lien secured net leverage ratio.
The senior secured credit facilities contain various restrictive covenants. The Term A Loan and the revolving credit facility (subject to certain exceptions) require us to maintain on a quarterly basis a specified maximum senior secured leverage ratio of up to 6.60 to 1.00 as defined in the 2013 Credit Agreement (total first lien secured debt to adjusted EBITDA). In addition, the 2013 Credit Agreement, among other things: (a) limits our ability and the ability of our subsidiaries to incur additional indebtedness, incur liens, pay dividends or make certain other restricted payments and enter into certain transactions with affiliates; (b) restricts our ability to enter into agreements that would limit the ability of our subsidiaries to pay dividends or make certain payments to us; and (c) places restrictions on our ability and the ability of our subsidiaries to merge or consolidate with any other person or sell, assign, transfer, convey or otherwise dispose of all or substantially all of our assets. As of June 30, 2014, the Company was in compliance with the applicable restrictive covenants under the 2013 Credit Agreement.
Note 6 Financial Instruments and Fair Value Measurements
Recurring Fair Value Measurements
Fair value measurement provisions establish a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. These provisions describe three levels of input that may be used to measure fair value:
Level 1: Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
Level 2: Inputs, other than quoted prices included in Level 1, that are observable for the asset or liability through corroboration with market data at the measurement date.
Level 3: Unobservable inputs that reflect managements best estimate of what market participants would use in pricing the asset or liability at the measurement date.
9
EVERTEC, Inc. Notes to Unaudited Consolidated Financial Statements
The Company uses observable inputs when available. Fair value is based upon quoted market prices when available. If market prices are not available, the Company may employ internally-developed models that mostly use market-based inputs including yield curves, interest rates, volatilities, and credit curves, among others. The Company limits valuation adjustments to those deemed necessary to ensure that the financial instruments fair value adequately represents the price that would be received or paid in the marketplace. Valuation adjustments may include consideration of counterparty credit quality and liquidity as well as other criteria. The estimated fair value amounts are subjective in nature and may involve uncertainties and matters of significant judgment for certain financial instruments. Changes in the underlying assumptions used in estimating fair value could affect the results. The fair value measurement levels are not indicative of risk of investment.
The following table summarizes fair value measurements by level at June 30, 2014 and December 31, 2013 for assets measured at fair value on a recurring basis:
(Dollar amounts in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
June 30, 2014 |
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Financial assets: |
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Indemnification assets: |
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Software cost reimbursement |
$ | | $ | | $ | 2,114 | $ | 2,114 | ||||||||
December 31, 2013 |
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Financial assets: |
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Indemnification assets: |
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Software cost reimbursement |
$ | | $ | | $ | 3,586 | $ | 3,586 |
The fair value of financial instruments is the amount at which an asset or obligation could be exchanged in a current transaction between willing parties, other than in a forced liquidation sale. Fair value estimates are made at a specific point in time based on the type of financial instrument and relevant market information. Many of these estimates involve various assumptions and may vary significantly from amounts that could be realized in actual transactions.
For those financial instruments with no quoted market prices available, fair values have been estimated using present value calculations or other valuation techniques, as well as managements best judgment with respect to current economic conditions, including discount rates and estimates of future cash flows.
Indemnification assets include the present value of the expected future cash flows of certain expense reimbursement agreements with Popular. These contracts have termination dates up to September 2015 and were entered into in connection with the merger transaction completed on September 30, 2010 (the Merger). Management prepared estimates of the expected reimbursements to be received from Popular until the termination of the contracts, discounted the estimated future cash flows and recorded the indemnification assets as of the Merger closing date. Payments received during the quarters reduced the indemnification asset balance. The remaining balance was adjusted to reflect its fair value as of June 30, 2014, therefore resulting in a net unrealized gain of approximately $6,000 and a net unrealized loss of approximately $0.2 million for the three and six months ended June 30, 2014, respectively, and a net unrealized gain of approximately $3,000 and $19,000 for the three and six months ended June 30, 2013, respectively, which are reflected within the other expenses caption in the unaudited consolidated statements of income (loss) and comprehensive income (loss). The current portion of the indemnification assets is included within accounts receivable, net, and the other long-term portion is included within other long-term assets in the accompanying unaudited consolidated balance sheets.
The unobservable inputs related to the Companys indemnification assets as of June 30, 2014 using the discounted cash flow model include the discount rate of 5.33% and the projected cash flows of $2.3 million.
For indemnification assets a significant increase or decrease in market rates or cash flows could result in a significant change to the fair value. Also, the credit rating and/or the non-performance credit risk of Popular, which is subjective in nature, also could increase or decrease the sensitivity of the fair value of these assets.
10
EVERTEC, Inc. Notes to Unaudited Consolidated Financial Statements
The following table presents the carrying value, as applicable, and estimated fair values for financial instruments at June 30, 2014 and December 31, 2013:
June 30, 2014 | December 31, 2013 | |||||||||||||||
(Dollar amounts in thousands) | Carrying Amount |
Fair Value |
Carrying Amount |
Fair Value |
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Financial assets: |
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Indemnification assets: |
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Software cost reimbursement |
$ | 2,114 | $ | 2,114 | $ | 3,586 | $ | 3,586 | ||||||||
Financial liabilities: |
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Senior secured term loan A |
$ | 284,697 | $ | 280,905 | $ | 292,153 | $ | 284,091 | ||||||||
Senior secured term loan B |
390,929 | 389,565 | 392,527 | 387,055 |
The fair value of the senior secured term loans at June 30, 2014 and December 31, 2013 were obtained using prices supplied by third party service providers. Their pricing is based on various inputs such as: market quotes, recent trading activity in a non-active market or imputed prices. The pricing inputs also may include the use of an algorithm that could take into account movement in the general high-yield market, among other variants.
The senior secured term loans, which are not measured at fair value in the balance sheets, if measured, could be categorized as Level 3 in the fair value hierarchy.
The following table provides a summary of the change in fair value of the Companys Level 3 assets:
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Dollar amounts in thousands) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Indemnification assets: |
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Beginning balance |
$ | 2,947 | $ | 5,558 | $ | 3,586 | $ | 6,099 | ||||||||
Payments received |
(839 | ) | (1,021 | ) | (1,299 | ) | (1,578 | ) | ||||||||
Unrealized gain (loss) recognized in other expenses |
6 | 3 | (173 | ) | 19 | |||||||||||
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Ending balance |
$ | 2,114 | $ | 4,540 | $ | 2,114 | $ | 4,540 | ||||||||
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Note 7 Share-based Compensation
The following table summarizes stock options activity for the six months ended June 30, 2014:
Shares | Weighted-average exercise prices |
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Outstanding at December 31, 2013 |
1,285,536 | $ | 4.77 | |||||
Granted |
100,000 | 24.01 | ||||||
Forfeited |
31,164 | 1.30 | ||||||
Exercised |
406,999 | 1.95 | ||||||
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Outstanding at June 30, 2014 |
947,373 | $ | 8.12 | |||||
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Exercisable at June 30, 2014 |
49,374 | $ | 1.30 | |||||
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Management uses the fair value method of recording stock-based compensation as described in the guidance for stock compensation in ASC topic 718.
11
EVERTEC, Inc. Notes to Unaudited Consolidated Financial Statements
The following table summarizes nonvested restricted shares activity for the six months ended June 30, 2014:
Nonvested restricted shares |
Shares | Weighted-average grant date fair value |
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Nonvested at December 31, 2013 |
9,133 | $ | 24.64 | |||||
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Nonvested at June 30, 2014 |
9,133 | $ | 24.64 | |||||
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For the three and six months ended June 30, 2014 and June 30, 2013, the Company recognized $0.3 million and $0.7 million and $5.2 million and $5.5 million of share-based compensation expense, respectively. As of June 30, 2014, there was $2.2 million of total unrecognized compensation cost related to stock options, which is expected to be recognized over the next 2.3 years. In addition, for the same period, there was approximately $25,000 of total unrecognized compensation cost related to nonvested shares of restricted stock. That cost is expected to be fully recognized during 2014.
The components of income tax expense (benefit) for the three and six months ended June 30, 2014 and 2013 consisted of the following:
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Dollar amounts in thousands) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Current tax provision |
$ | 964 | $ | 1,005 | $ | 4,553 | $ | 1,290 | ||||||||
Deferred tax provision (benefit) |
998 | (6,017 | ) | (430 | ) | (6,251 | ) | |||||||||
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Income tax expense (benefit) |
$ | 1,962 | $ | (5,012 | ) | $ | 4,123 | $ | (4,961 | ) | ||||||
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The Company conducts operations in Puerto Rico and certain countries in Latin America. As a result, the income tax expense includes the effect of taxes paid to the Puerto Rico government as well as foreign jurisdictions. The following table presents the components of income tax expense (benefit) for the three and six months ended June 30, 2014 and 2013 and its segregation based on location of operations:
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Dollar amounts in thousands) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Current tax provision (benefit) |
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Puerto Rico |
$ | 423 | $ | (122 | ) | $ | 1,360 | $ | 256 | |||||||
United States |
217 | 210 | 415 | 429 | ||||||||||||
Foreign countries |
324 | 917 | 2,778 | 605 | ||||||||||||
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Total current tax provision (benefit) |
$ | 964 | $ | 1,005 | $ | 4,553 | $ | 1,290 | ||||||||
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Deferred tax provision (benefit) |
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Puerto Rico |
$ | 805 | $ | (5,880 | ) | $ | 832 | $ | (5,956 | ) | ||||||
United States |
(2 | ) | | (3 | ) | (2 | ) | |||||||||
Foreign countries |
195 | (137 | ) | (1,259 | ) | (293 | ) | |||||||||
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Total deferred tax provision (benefit) |
$ | 998 | $ | (6,017 | ) | $ | (430 | ) | $ | (6,251 | ) | |||||
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Taxes payable to foreign countries by EVERTECs subsidiaries will be paid by such subsidiary and the corresponding liability and expense will be presented in EVERTECs consolidated financial statements.
As of June 30, 2014, the gross deferred tax asset amounted to $11.0 million and the gross deferred tax liability amounted to $29.4 million, compared with $13.5 million and $31.7 million as of December 31, 2013. At June 30, 2014, the recorded value of the Companys net operating loss (NOL) carryforwards was $15.1 million. The recorded value of the NOL carryforwards is approximately $7.0 million lower than the total NOL carryforwards available because of a windfall tax benefit. The windfall tax benefit is available to offset future taxable income and is considered an off-balance sheet item until the deduction reduces taxes payable. This windfall tax benefit results from tax deductions that were in excess of previously recorded compensation expense because the fair value of stock options at the time they were granted differed from their fair value when they were exercised. The total gross NOL carryforwards available, including the windfall benefit, amounted to $58.2 million as of June 30, 2014.
There are no open uncertain tax positions as of June 30, 2014.
12
EVERTEC, Inc. Notes to Unaudited Consolidated Financial Statements
Note 9 Net Income (Loss) Per Common Share
The reconciliation of the numerator and denominator of the income (loss) per common share is as follows:
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Dollar amounts in thousands, except per share data) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Net income (loss) |
$ | 17,773 | $ | (64,935 | ) | $ | 35,979 | $ | (59,463 | ) | ||||||
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Weighted average common shares outstanding |
78,410,554 | 78,928,780 | 78,393,042 | 75,849,551 | ||||||||||||
Weighted average potential dilutive common shares(1)(2) |
789,410 | | 811,600 | | ||||||||||||
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Weighted average common shares outstanding - assuming dilution |
79,199,964 | 78,928,780 | 79,204,642 | 75,849,551 | ||||||||||||
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Net income (loss) per common share - basic |
$ | 0.23 | $ | (0.82 | ) | $ | 0.46 | $ | (0.78 | ) | ||||||
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Net income (loss) per common share - diluted |
$ | 0.22 | $ | (0.82 | ) | $ | 0.45 | $ | (0.78 | ) | ||||||
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(1) | Potential common shares consist of common stock issuable under the assumed exercise of stock options and restricted stock awards using the treasury stock method. |
(2) | For the three and six months ended June 30, 2013, 3,818,727 and 4,227,114 potential common shares, respectively, consisting of common stock under the assumed exercise of stock options and restricted stock awards using the treasury stock method were not included in the computation of the diluted net income (loss) per share since their inclusion would have an antidilutive effect. |
On February 12, 2014, our Board declared a quarterly cash dividend of $0.10 per share of common stock, which was paid on March 14, 2014 to stockholders of record as of February 25, 2014. On May 7, 2014, our Board declared a quarterly cash dividend of $0.10 per share of common stock, which was paid on June 6, 2014 to stockholders of record as of May 19, 2014.
Note 10 Commitments and Contingencies
Certain lease agreements contain provisions for future rent increases. The total amount of rental payments due over the lease term is being charged to rent expense on the straight-line method over the term of the lease. The difference between rent expense recorded and the amount paid is recorded as a deferred rent obligation. Total deferred rent obligation as of June 30, 2014 and December 31, 2013 amounted to $0.2 million and $0.3 million, respectively, and is included within the accounts receivable, net caption in the accompanying unaudited consolidated balance sheets.
Rent expense of office facilities and real estate for the three and six months ended June 30, 2014 amounted to $2.1 million and $4.1 million, respectively, compared to $2.0 million and $4.0 million for the corresponding 2013 periods. Rent expense for telecommunications and other equipment for the three and six months ended June 30, 2014 amounted to $1.6 million and $3.0 million, respectively, compared to $1.8 million and $3.5 million for the corresponding 2013 periods.
In the ordinary course of business, the Company may enter into commercial commitments. As of June 30, 2014, EVERTEC has an outstanding letter of credit of $1.1 million with a maturity of less than three months.
EVERTEC is a defendant in a number of legal proceedings arising in the ordinary course of business. Based on the opinion of legal counsel and other factors, management believes that the final disposition of these matters will not have a material adverse effect on the business, results of operations, financial condition, or cash flows of the Company. The Company has identified certain claims as a result of which a loss may be incurred, but in the aggregate the loss would be minimal. For other claims regarding which proceedings are in an initial phase, the Company is unable to estimate the range of possible loss but at this time believes that any loss related to such claims will not be material.
13
EVERTEC, Inc. Notes to Unaudited Consolidated Financial Statements
Note 11 Related Party Transactions
The following table presents the Companys transactions with related parties for the three and six months ended June 30, 2014 and 2013:
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Dollar amounts in thousands) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Total revenues(1)(2) |
$ | 41,546 | $ | 42,349 | $ | 82,008 | $ | 84,004 | ||||||||
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Cost of revenues |
$ | 528 | $ | 2,506 | $ | 619 | $ | 5,110 | ||||||||
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Rent and other fees(3)(4) |
$ | 2,084 | $ | 27,212 | $ | 4,001 | $ | 30,072 | ||||||||
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Interest earned from and charged by affiliate |
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Interest income |
$ | 50 | $ | 23 | $ | 102 | $ | 42 | ||||||||
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Interest expense(5) |
$ | | $ | 577 | $ | | $ | 2,471 | ||||||||
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(1) | Total revenues from Popular as a percentage of revenues were 45%, 47%, 45% and 47% for each of the periods presented above. |
(2) | Includes revenues generated from investee accounted for under the equity method of $0.7 million and $1.4 million for the three and six months ended June 30, 2014, respectively, and $0.8 million and $1.7 million for the corresponding 2013 periods. |
(3) | Includes management fees to equity sponsors amounting to $19.4 million and $20.3 million for the three and six months ended June 30, 2013, respectively. Management fees paid during 2013 includes $16.7 million resulting from the termination of the consulting agreements as explained below. Rent and other fees also includes $5.9 million paid to Popular in connection with the redemption premium on the senior notes for the three and six months ended June 30, 2013. |
(4) | For the periods presented above, $2.1 million, $4.6 million, $4.0 million and $7.5 million were recorded as selling, general and administrative expenses, and $22.6 million was recorded as non-operating expenses for the three and six months ended June 30, 2013 in the unaudited consolidated statement of income (loss) and comprehensive income (loss). |
(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, Populars participation in such debt was extinguished. |
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 our initial public offering in April 2013 (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 June 30, 2014 and December 31, 2013, EVERTEC had the following balances arising from transactions with related parties:
(Dollar amounts in thousands) | June 30, 2014 | December 31, 2013 | ||||||
Cash and restricted cash deposits in affiliated bank |
$ | 14,847 | $ | 13,933 | ||||
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Indemnification assets from Popular reimbursement(1) |
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Accounts receivable |
$ | 1,941 | $ | 1,900 | ||||
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Other long-term assets |
$ | 173 | $ | 1,686 | ||||
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Other due/to from affiliate |
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Accounts receivable |
$ | 20,078 | $ | 18,799 | ||||
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Prepaid expenses and other assets |
$ | 322 | $ | 216 | ||||
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Accounts payable(2) |
$ | 4,088 | $ | 8,886 | ||||
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Unearned income |
$ | 6,964 | $ | 4,100 | ||||
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Other long-term liabilities(2) |
$ | 253 | $ | 333 | ||||
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(1) | Recorded in connection with reimbursements from Popular regarding certain software license fees. |
(2) | Includes an account payable of $0.2 million for both periods and a long-term liability of $0.2 million and $0.3 million for June 30, 2014 and December 31, 2013, respectively, related to the unvested portion of stock options as a result of the equitable adjustment approved by our Board of Directors on December 18, 2012 that will be payable to executive officers and employees upon vesting of stock options. |
At June 30, 2014, 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.
14
EVERTEC, Inc. Notes to Unaudited Consolidated Financial Statements
The Company operates in three business segments: Merchant Acquiring, Payment Processing and Business Solutions.
The Merchant Acquiring segment consists of revenue from services that allow merchants to accept electronic methods of payment. In the Merchant Acquiring segment, revenue includes a discount fee (generally a percentage of the transaction value) and membership fees charged to merchants, debit network fees and rental fees from point of sales (POS) devices and other equipment, net of credit card interchange and assessment fees charged by credit cards associations (such as VISA or MasterCard) or payment networks.
Payment Processing segment revenue comprises income related to providing financial institutions access to the ATH network and other card networks, including related services such as authorization, processing, management and recording of ATM and POS transactions, and ATM management and monitoring. Payment Processing revenue also includes income from card processing services for debit or credit issuers such as credit and debit card processing, authorization and settlement, and fraud monitoring and control services, payment processing services (such as payment and billing products for merchants, businesses and financial institutions) and electronic benefit transfer (EBT), which principally consists of services to the government of Puerto Rico for the delivery of benefits to participants.
For ATH network and processing services, revenue is driven mainly by the number of transactions processed. Revenue is derived mainly from network fees, transaction switching and processing fees, and the leasing of POS devices. For card issuer processing, revenue is mostly dependent upon the number of cardholder accounts on file, transactions and authorizations processed, the number of cards embossed and other processing services. For EBT services, revenue is derived mainly from the number of beneficiaries on file.
The Business Solutions segment consists of revenue from a full suite of business process management solutions in various product areas, such as core bank processing, network hosting and management, IT professional services, business process outsourcing, item processing, cash processing, and fulfillment. Core bank processing and network services revenues are derived in part from a recurrent fee and from fees based on the number of accounts on file (i.e.; savings or checking accounts, loans, etc.) or computer resources utilized. Revenue from other processing services within the Business Solutions segment is generally volume-based and depend on factors such as the number of accounts processed. In addition, EVERTEC is a reseller of hardware and software products and these resale transactions are generally one-time transactions.
The Companys business segments are organized based on the nature of products and services. The Chief Operating Decision Maker (CODM) reviews their individual financial information to assess performance and to allocate resources.
The following tables set forth information about the Companys operations by its three business segments for the periods indicated:
(Dollar amounts in thousands) | Merchant Acquiring, net |
Payment Processing |
Business Solutions |
Other | Total | |||||||||||||||
Three months ended June 30, 2014 |
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Revenues |
19,827 | 33,040 | 44,888 | (6,634 | )(1) | 91,121 | ||||||||||||||
Income from operations |
8,777 | 15,314 | 12,113 | (10,774 | )(2) | 25,429 | ||||||||||||||
Three months ended June 30, 2013 |
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Revenues |
18,165 | 30,603 | 46,725 | (6,318 | )(1) | 89,175 | ||||||||||||||
Income from operations |
8,161 | 11,720 | 8,784 | (11,727 | )(2) | 16,938 |
(1) | Represents the elimination of intersegment revenues for services provided by the Payment Processing segment to the Merchant Acquiring segment, and other miscellaneous intersegment revenues. |
(2) | Primarily represents non-operating depreciation and amortization expenses generated as a result of the Merger and certain non-recurring fees and expenses. |
(Dollar amounts in thousands) | Merchant Acquiring, net |
Payment Processing |
Business Solutions |
Other | Total | |||||||||||||||
Six months ended June 30, 2014 |
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Revenues |
39,118 | 64,659 | 87,805 | (13,251 | )(1) | 178,331 | ||||||||||||||
Income from operations |
17,181 | 30,031 | 23,537 | (20,431 | )(2) | 50,318 | ||||||||||||||
Six months ended June 30, 2013 |
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Revenues |
35,624 | 59,826 | 92,493 | (11,429 | )(1) | 176,514 | ||||||||||||||
Income from operations |
17,395 | 24,480 | 19,318 | (23,856 | )(2) | 37,337 |
(1) | Represents the elimination of intersegment revenues for services provided by the Payment Processing segment to the Merchant Acquiring segment, and other miscellaneous intersegment revenues. |
(2) | Primarily represents non-operating depreciation and amortization expenses generated as a result of the Merger and certain non-recurring fees and expenses. |
15
EVERTEC, Inc. Notes to Unaudited Consolidated Financial Statements
The reconciliation of income from operations to consolidated net income for the three and six months ended June 30, 2014 and 2013 is as follows:
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Dollar amounts in thousands) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Segment income from operations |
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Merchant acquiring |
$ | 8,777 | $ | 8,161 | $ | 17,181 | $ | 17,395 | ||||||||
Payment processing |
15,314 | 11,720 | 30,031 | 24,480 | ||||||||||||
Business solutions |
12,113 | 8,784 | 23,537 | 19,318 | ||||||||||||
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Total segment income from operations |
36,204 | 28,665 | 70,749 | 61,193 | ||||||||||||
Merger related depreciation and amortization and other unallocated expenses(1) |
(10,775 | ) | (11,727 | ) | (20,431 | ) | (23,856 | ) | ||||||||
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Income from operations |
$ | 25,429 | $ | 16,938 | $ | 50,318 | $ | 37,337 | ||||||||
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Interest expense, net |
(6,422 | ) | (9,698 | ) | (13,256 | ) | (24,918 | ) | ||||||||
Earnings of equity method investment |
343 | 348 | 664 | 625 | ||||||||||||
Other income (expenses) |
385 | (77,535 | ) | 2,376 | (77,468 | ) | ||||||||||
Income tax (expense) benefit |
(1,962 | ) | 5,012 | (4,123 | ) | 4,961 | ||||||||||
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Net income (loss) |
$ | 17,773 | $ | (64,935 | ) | $ | 35,979 | $ | (59,463 | ) | ||||||
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(1) | Primarily represents non-operating depreciation and amortization expenses generated as a result of the Merger and certain non-recurring fees and expenses. |
On August 6, 2014, the Companys Board of Directors (the Board) declared a regular quarterly cash dividend of $0.10 per share on the Companys outstanding shares of common stock. The Board anticipates declaring this dividend in future quarters on a regular basis, however future declarations of dividends are subject to Board approval and may be adjusted as business needs or market conditions change. The cash dividend of $0.10 per share will be paid on September 5, 2014 to stockholders of record as of the close of business on August 18, 2014.
The Company performed an evaluation of all other events occurring subsequent to June 30, 2014, Management has determined that there are no additional events occurring in this period that require disclosure in or adjustment to the accompanying unaudited financial statements.
16
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
The following Managements Discussion and Analysis (MD&A) covers: (i) the results of operations for the three and six months ended June 30, 2014 and 2013, respectively; and (ii) the financial condition as of June 30, 2014. You should read the following discussion and analysis in conjunction with the audited consolidated financial statements and related notes for the fiscal year ended December 31, 2013, included in the Companys annual report on Form 10-K (the 2013 Form 10-K) and with the unaudited consolidated financial statements and related notes appearing elsewhere herein. This MD&A contains forward-looking statements that involve risks and uncertainties. Our actual results may differ from those indicated in the forward-looking statements. See Forward-Looking Statements for a discussion of the risks, uncertainties and assumptions associated with these statements.
Except as otherwise indicated or unless the context otherwise requires, (a) the terms EVERTEC, we, us, our, our Company and the Company refer to EVERTEC, Inc. and its subsidiaries on a consolidated basis, (b) the term Holdings refers to EVERTEC Intermediate Holdings, LLC, but not any of its subsidiaries and (c) the term EVERTEC Group refers to EVERTEC Group, LLC and its predecessor entities and their subsidiaries on a consolidated basis, including the operations of its predecessor entities prior to the Merger (as defined below). EVERTEC Inc.s subsidiaries include Holdings, EVERTEC Group, EVERTEC Dominicana, SAS, EVERTEC Panamá, S.A., EVERTEC Costa Rica, S.A. (EVERTEC CR), EVERTEC Guatemala, S.A. and EVERTEC México Servicios de Procesamiento, S.A. de C.V. Neither EVERTEC nor Holdings conducts any operations other than with respect to its indirect or direct ownership of EVERTEC Group.
Executive Summary
EVERTEC is the leading full-service transaction processing business in Latin America, providing a broad range of merchant acquiring, payment processing and business process management services. According to the July 2013 Nilson Report, we are the largest merchant acquirer in the Caribbean and Central America and one of the largest in Latin America, based on total number of transactions. We serve 19 countries in the region from our base in Puerto Rico. We manage a system of electronic payment networks that process more than 2.1 billion transactions annually, and offer a comprehensive suite of services for core bank processing, cash processing and technology outsourcing. In addition, we own and operate the ATH network, one of the leading personal identification number (PIN) debit networks in Latin America. We serve a diversified customer base of leading financial institutions, merchants, corporations and government agencies with mission-critical technology solutions that enable them to issue, process and accept transactions securely. We believe our business is well-positioned to continue to expand across the fast-growing Latin American region.
We are differentiated, in part, by our diversified business model, which enables us to provide our varied customer base with a broad range of transaction-processing services from a single source across numerous channels and geographic markets. We believe this single-source capability provides several competitive advantages that will enable us to continue to penetrate our existing customer base with complementary new services, win new customers, develop new sales channels and enter new markets. We believe these competitive advantages include:
| Our ability to provide in one package a range of services that traditionally had to be sourced from different vendors; |
| Our ability to serve customers with disparate operations in several geographies with a single integrated technology solution that enables them to manage their business as one enterprise; and |
| Our ability to capture and analyze data across the transaction processing value chain and use that data to provide value-added services that are differentiated from those offered by pure-play vendors that only have the technology, capabilities and products to serve just one portion of the transaction processing value chain (such as only merchant acquiring or payment processing). |
Our broad suite of services spans the entire transaction processing value chain and includes a range of front-end customer-facing solutions such as the electronic capture and authorization of transactions at the point-of-sale, as well as back-end support services such as the clearing and settlement of transactions and account reconciliation for card issuers. These include: (i) merchant acquiring services, which enable point of sales (POS) and e-commerce merchants to accept and process electronic methods of payment such as debit, credit, prepaid and electronic benefit transfer (EBT) cards; (ii) payment processing services, which enable financial institutions and other issuers to manage, support and facilitate the processing for credit, debit, prepaid, automated teller machines (ATM) and EBT card programs; and (iii) business process management solutions, which provide mission-critical technology solutions such as core bank processing, as well as IT outsourcing and cash management services to financial institutions, corporations and governments. We provide these services through a highly scalable, end-to-end technology platform that we manage and operate in-house and that generates significant operating efficiencies that enable us to maximize profitability.
17
We sell and distribute our services mainly through a proprietary direct sales force with strong customer relationships. We are also building a variety of indirect sales channels that enable us to leverage the distribution capabilities of partners in adjacent markets, including value-added resellers. Also, we continue to pursue joint ventures and merchant acquiring alliances.
We benefit from an attractive business model, the hallmarks of which are recurring revenue, scalability, significant operating margins and low capital expenditure requirements. Our revenue is recurring in nature because of the mission-critical and embedded nature of the services we provide, the high switching costs associated with these services and the multi-year contracts we negotiate with our customers. Our business model enables us to continue to grow our business organically without significant additional capital expenditures.
Corporate Background
EVERTEC, Inc. (formerly known as Carib Latam Holdings, Inc.) is a Puerto Rico corporation organized in April 2012. Our main operating subsidiary, EVERTEC Group, LLC (formerly known as EVERTEC, LLC and EVERTEC, Inc., hereinafter EVERTEC Group), was organized in Puerto Rico in 1988. EVERTEC Group was formerly a wholly-owned subsidiary of Popular. On September 30, 2010, pursuant to an Agreement and Plan of Merger (as amended, the Merger Agreement), AP Carib Holdings, Ltd. (Apollo) acquired a 51% indirect ownership interest in EVERTEC Group as part of a merger (the Merger) and EVERTEC Group became a wholly-owned subsidiary of Holdings.
On April 17, 2012, EVERTEC Group was converted from a Puerto Rico corporation to a Puerto Rico limited liability company (the Conversion) for the purpose of improving its consolidated tax efficiency by taking advantage of changes to the Puerto Rico Internal Revenue Code, as amended (the PR Code), that permit limited liability companies to be treated as partnerships that are pass-through entities for Puerto Rico tax purposes. Concurrent with the Conversion, Holdings, which is our direct subsidiary, was also converted from a Puerto Rico corporation to a Puerto Rico limited liability company. Prior to these conversions, EVERTEC, Inc. was formed in order to act as the new parent company of Holdings and its subsidiaries, including EVERTEC Group. The transactions described above in this paragraph are collectively referred to as the Reorganization.
Separation From and Key Relationship with Popular
Prior to the Merger on September 30, 2010, EVERTEC Group was 100% owned by Popular, the largest financial institution in the Caribbean, and operated substantially as an independent entity within Popular. After the consummation of the Merger, Popular retained an indirect ownership interest in EVERTEC Group and remains our largest customer. In connection with, and upon consummation of the Merger, EVERTEC Group entered into a 15-year Master Services Agreement (the MSA), and several related agreements with Popular. Under the terms of the MSA, Popular agreed to continue to use EVERTEC services on an ongoing and exclusive basis, for the duration of the agreement, on commercial terms consistent with those of our historical relationship. Additionally, Popular granted us a right of first refusal on the development of certain new financial technology products and services for the duration of the MSA.
Factors and Trends Affecting the Results of Our Operations
The ongoing migration from cash and paper methods of payment to electronic payments continues to benefit the transaction processing industry globally. We believe that the penetration of electronic payments in the markets in which we operate is significantly lower relative to the U.S. market, and that this ongoing shift will continue to generate substantial growth opportunities for our business. For example, currently the adoption of banking products, including electronic payments, in the Latin American region is lower relative to the more mature U.S. and European markets. We believe that the unbanked and underbanked population in our markets will continue to shrink, therefore driving incremental penetration and growth of electronic payments in Puerto Rico and other Latin American regions. We also benefit from the trend for financial institutions and government agencies to outsource technology systems and processes. Many medium- and small-size institutions in the Latin American markets in which we operate have outdated computer systems and updating these IT legacy systems is financially and logistically challenging. We believe that our technology and business outsourcing solutions cater to the evolving needs of the financial institution customer base we target, providing integrated, open, flexible, customer-centric and efficient IT products and services.
Our results of operations may be affected by regulatory changes that will occur as the payments industry has come under increased scrutiny from lawmakers and regulators.
Finally, our financial condition and results of operations are, in part, dependent on the economic and general conditions of the geographies in which we operate.
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Overview of Results of Operations
The following briefly describes the components of revenue and expenses as presented in the unaudited consolidated statements of income (loss) and comprehensive income (loss). Descriptions of the revenue recognition policies are detailed in Note 1 of the Notes to the Audited Consolidated Financial Statements included in our 2013 Form 10-K.
Merchant Acquiring, net. Merchant Acquiring revenue consists of income from services that allow merchants to accept electronic methods of payment. Our standard merchant contract has an initial term of one or three years, with automatic one-year renewal periods. In the Merchant Acquiring segment, sources of revenue include a discount fee (generally a percentage of the sales amount of a credit or debit card transaction value) and membership fees charged to merchants, debit network fees and rental income from POS devices and other equipment, net of credit card interchange and assessment fees charged by credit cards associations (such as VISA or MasterCard) or payment networks.
Merchant Acquiring accounted for $19.8 million, or 21.7% of total revenues, and $8.8 million or 24.2% of total segment income from operations for the three months ended June 30, 2014, compared with $18.2 million, or 20.4%, of total revenues and $8.2 million, or 28.5% of total segment income from operations for the comparable period in 2013. For the six months ended June 30, 2014, our Merchant Acquiring business accounted for $39.1 million, or 21.9% of total revenues and $17.2 million or 24.3% of total segment income from operations compared with $35.6 million, or 20.2%, of total revenues and $17.4 million, or 28.4%, of total segment income from operations for the six months ended June 30, 2013.
Payment Processing. Payment Processing revenue comprises income related to providing financial institutions access to the ATH network and other card networks, including related services such as authorization, processing, management and recording of ATM and POS transactions, and ATM management and monitoring. Payment Processing revenue also includes income from card processing services for debit or credit issuers, such as credit and debit card processing, authorization and settlement and fraud monitoring and control services; payment processing services such as payment and billing products for merchants, businesses and financial institutions and EBT; which principally consists of services to the Puerto Rico government for the delivery of government benefits to participants. Payment products include electronic check processing, automated clearing house (ACH), lockbox, interactive voice response and web-based payments through personalized websites, among others.
We generally enter into one to five year contracts with our private payment processing clients and one year contracts with our government payment processing clients. For ATH network and processing services, revenue is driven mainly by the number of transactions processed. Revenue is derived mainly from network fees, transaction switching and processing fees, and leasing of POS devices. For card issuer processing, revenue is dependent mostly upon the number of cardholder accounts on file, transactions and authorizations processed, the number of cards embossed and other processing services. For EBT services, revenue is derived mainly from the number of beneficiaries on file.
Payment Processing accounted for $26.4 million, or 29.0%, of total revenues and $15.3 million, or 42.3%, of total segment income from operations for the three months ended June 30, 2014, compared with $24.3 million, or 27.2%, of total revenues and $11.7 million, or 40.9%, of total segment income from operations for the three months ended June 30, 2013. For the six months ended June 30, 2014, our Payment Processing business accounted for $51.4 million, or 28.8%, of total revenues and $30.0 million, or 42.4%, of total segment income from operations, compared with $48.4 million, or 27.4%, of total revenues and $24.5 million, or 40.0%, of total segment income from operations for the six months ended June 30, 2013.
Business Solutions. Business Solutions revenue consists of income from a full suite of business process management solutions including core bank processing, network hosting and management, IT consulting services, business process outsourcing, item and cash processing, and fulfillment. We generally enter into one to five year contracts with our private Business Solutions clients and one year contracts with our government Business Solutions clients.
In addition, we are a reseller of hardware and software products and these resale transactions are generally one-time transactions. Revenue from sales of hardware or software products is recognized once the following four criteria are met: (i) evidence of an agreement exists, (ii) delivery and acceptance has occurred or services have been rendered, (iii) the selling price is fixed or determinable, and (iv) collection of the selling price is reasonably assured or probable, as applicable.
Business Solutions accounted for $44.9 million, or 49.3%, of total revenues and $12.1 million, or 33.5%, of total segment income from operations for the three months ended June 30, 2014, compared with $46.7 million, or 52.4%, of total revenues and $8.8 million, or 30.6%, of total segment income from operations for the three months ended June 30, 2013. For the six months ended June 30, 2014, Business Solutions accounted for $87.8 million, or 49.2%, of total revenues and $23.5 million, or 33.3%, of total segment income from operations, compared with $92.5 million, or 52.4%, of total revenues and $19.3 million, or 31.6%, of total segment income from operations for the six months ended June 30, 2013.
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Cost of revenues. This caption includes the costs directly associated with providing services to customers, as well as, product and software sales, including software licensing and maintenance costs; telecommunications costs; personnel and infrastructure costs to develop and maintain applications, operate computer networks and provide associated customer support; and other operating expenses.
Selling, general and administrative. This caption consists mainly of salaries, wages and related expenses paid to sales personnel, administrative employees and management, advertising and promotional costs, audit and legal fees, and other selling expenses.
Depreciation and amortization. This caption consists of our depreciation and amortization expense. Following the completion of the Merger, our depreciation and amortization expense increased as a result of the purchase price allocation adjustments to reflect the fair market value and revised useful life assigned to property and equipment and intangible assets in connection with the Merger.
Results of Operations
The following tables set forth certain consolidated financial information for the three and six months ended June 30, 2014 and 2013. The following tables and discussion should be read in conjunction with the information contained in our unaudited consolidated financial statements and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q.
Comparison of the three months ended June 30, 2014 and 2013
The following tables present the components of our unaudited consolidated statements of income (loss) and comprehensive income (loss) by business segment and the change in those amounts for the three months ended June 30, 2014 and 2013.
Revenues
Three months ended June 30, | ||||||||||||||||
(Dollar amounts in thousands) | 2014 | 2013 | Variance | |||||||||||||
Merchant Acquiring, net |
$ | 19,827 | $ | 18,165 | $ | 1,662 | 9 | % | ||||||||
Payment Processing |
26,406 | 24,285 | 2,121 | 9 | % | |||||||||||
Business Solutions |
44,888 | 46,725 | (1,837 | ) | -4 | % | ||||||||||
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Total revenues |
$ | 91,121 | $ | 89,175 | $ | 1,946 | 2 | % | ||||||||
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Total revenues for the three months ended June 30, 2014 increased by $1.9 million or 2% as compared to the corresponding 2013 period, driven by revenue growth of 9% in each our Merchant Acquiring and Payment Processing businesses, partially offset by a reduction in revenue of 4% in our Business Solutions segment.
Merchant Acquiring revenue for the three months ended June 30, 2014 increased by $1.7 million or 9% compared with the corresponding 2013 period. The revenue growth was due mainly to an increase in transaction volumes.
Payment Processing revenues for the three months ended June 30, 2014 increased $2.1 million or 9% compared with the corresponding 2013 period. Revenue growth was driven mainly by an increase in ATH and POS network and processing transactions and an increase in card products business resulting from new customer additions and more accounts on file in our Latin America operations. As well, during the second quarter of 2014, we provided a service related to a Department of Education program; in 2013 the Department of Education service was provided in the first, rather than the second, quarter.
Business Solutions revenues for the three months ended June 30, 2014 decreased $1.8 million or 4% compared with the corresponding 2013 period. The decrease is almost entirely attributable to a decline in hardware and software sales of $2.9 million, partially offset by an increase in demand for other services.
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Operating costs and expenses
Three months ended June 30, | ||||||||||||||||
(Dollar amounts in thousands) | 2014 | 2013 | Variance | |||||||||||||
Cost of revenues, exclusive of depreciation and amortization shown below |
$ | 38,839 | $ | 41,771 | $ | (2,932 | ) | -7 | % | |||||||
Selling, general and administrative expenses |
10,463 | 12,624 | (2,161 | ) | -17 | % | ||||||||||
Depreciation and amortization |
16,390 | 17,842 | (1,452 | ) | -8 | % | ||||||||||
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Total operating costs and expenses |
$ | 65,692 | $ | 72,237 | $ | (6,545 | ) | -9 | % | |||||||
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Total operating costs and expenses for the three months ended June 30, 2014 decreased $6.5 million or 9% as compared to the corresponding 2013 period.
Cost of revenues for the three months ended June 30, 2014 decreased $2.9 million or 7% as compared with the corresponding 2013 period. The reduction was due mainly to lower cost of sales incurred as a result of the aforementioned decrease in hardware and software sales.
Selling, general and administrative expenses for the three months ended June 30, 2014 decreased $2.2 million or 17% as compared with the corresponding 2013 period. This decrease was due primarily to a $3.1 million non-cash charge taken last year in connection with the vesting of all Tranche B and C stock options. This decrease was partially offset by $1.1 million in professional expenses related to a debt offering in the second quarter of 2014 which was withdrawn.
Depreciation and amortization expense for the three months ended June 30, 2014 decreased $1.5 million or 8% as compared with the corresponding 2013 period. The decrease is related primarily to lower amortization of software packages that became fully depreciated.
Income from operations
The following table presents income from operations by reportable segments.
Three months ended June 30, | ||||||||||||||||
(Dollar amounts in thousands) | 2014 | 2013 | Variance | |||||||||||||
Segment income from operations |
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Merchant acquiring, net |
$ | 8,777 | $ | 8,161 | $ | 616 | 8 | % | ||||||||
Payment processing |
15,314 | 11,720 | 3,594 | 31 | % | |||||||||||
Business solutions |
12,113 | 8,784 | 3,329 | 38 | % | |||||||||||
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Total segment income from operations |
36,204 | 28,665 | 7,539 | 26 | % | |||||||||||
Merger related depreciation and amortization and other unallocated expenses(1) |
(10,775 | ) | (11,727 | ) | 952 | 8 | % | |||||||||
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Income from operations |
$ | 25,429 | $ | 16,938 | $ | 8,491 | 50 | % | ||||||||
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(1) | Primarily represents non-operating depreciation and amortization expenses generated as a result of the Merger and certain non-recurring fees and expenses. |
Income from operations for the three months ended June 30, 2014 increased $8.5 million or 50% compared with the corresponding 2013 period. The increase in income from operations was the result of the aforementioned factors affecting our revenues and operating costs and expenses.
See Note 12 of the Notes to Unaudited Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information on the Companys reportable segments and for a reconciliation of income from operations to net income (loss).
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Non-operating (expenses) income
Three months ended June 30, | ||||||||||||||||
(Dollar amounts in thousands) | 2014 | 2013 | Variance | |||||||||||||
Non-operating (expenses) income |
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Interest income |
$ | 79 | $ | 49 | $ | 30 | 61 | % | ||||||||
Interest expense |
(6,501 | ) | (9,747 | ) | 3,246 | 33 | % | |||||||||
Earnings of equity method investment |
343 | 348 | (5 | ) | -1 | % | ||||||||||
Other income (expense) |
385 | (77,535 | ) | 77,920 | 101 | % | ||||||||||
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Total non-operating (expenses) income |
$ | (5,694 | ) | $ | (86,885 | ) | $ | 81,191 | 93 | % | ||||||
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Total non-operating expenses for the three months ended June 30, 2014 decreased $81.2 million compared with the corresponding 2013 period. This decrease in non-operating expenses was mostly a result of two extraordinary expenses incurred in the second quarter of 2013, a $58.5 million charge related to the extinguishment of debt and a $16.7 million expense related to the termination of the consulting agreements with Apollo and Popular. In addition, interest expense decreased by $3.2 million as a result of the debt refinancing in April 2013.
Income tax expense (benefit)
Income tax expense for the three months ended June 30, 2014 amounted to $2.0 million compared with an income tax benefit of $5.0 million in the prior year period, mainly as a result of an increase in taxable income. The prior year tax benefit was attributable to a taxable loss as a result of higher non-operating expenses related to the aforementioned extinguishment of debt, the termination of the consulting agreements and the vesting of all Tranche B and C stock options.
See Note 8 of the Notes to Unaudited Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information regarding income taxes.
Comparison of the six months ended June 30, 2014 and 2013
The following tables present the components of our unaudited consolidated statements of income (loss) and comprehensive income (loss) by business segment and the change in those amounts for the six months ended June 30, 2014 and 2013.
Revenues
Six months ended June 30, | ||||||||||||||||
(Dollar amounts in thousands) | 2014 | 2013 | Variance | |||||||||||||
Merchant Acquiring, net |
$ | 39,118 | $ | 35,624 | $ | 3,494 | 10 | % | ||||||||
Payment Processing |
51,408 | 48,397 | 3,011 | 6 | % | |||||||||||
Business Solutions |
87,805 | 92,493 | (4,688 | ) | -5 | % | ||||||||||
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Total revenues |
$ | 178,331 | $ | 176,514 | $ | 1,817 | 1 | % | ||||||||
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Total revenues for the six months ended June 30, 2014 increased $1.8 million or 1% compared with the corresponding 2013 period, driven by revenue growth of 10% and 6% in our Merchant Acquiring and Payment Processing segments, respectively, partially offset by a reduction in revenue of 5% in our Business Solutions segment.
Merchant Acquiring revenue for the six months ended June 30, 2014 increased $3.5 million or 10% as compared to the corresponding 2013 period. The revenue growth for 2014 was primarily a result of an increase in transaction volumes.
Payment Processing revenue for the six months ended June 30, 2014 increased $3.0 million or 6% compared with the corresponding 2013 period. Revenue growth was driven mainly by an increase in our card products business resulting from higher accounts on file due to new customer additions in our Latin America operations and by an increase in ATH and POS network and processing transactions.
Business Solutions revenues for the six months ended June 30, 2014 decreased $4.7 million or 5% compared with the corresponding 2013 period. The decrease is almost entirely attributable to a decline in hardware and software sales of $6.4 million, partially offset by an increase in demand for core banking and other services.
22
Operating costs and expenses
Six months ended June 30, | ||||||||||||||||
(Dollar amounts in thousands) | 2014 | 2013 | Variance | |||||||||||||
Cost of revenues, exclusive of depreciation and amortization shown below |
$ | 76,484 | $ | 82,273 | $ | (5,789 | ) | -7 | % | |||||||
Selling, general and administrative expenses |
18,525 | 21,487 | (2,962 | ) | -14 | % | ||||||||||
Depreciation and amortization |
33,004 | 35,417 | (2,413 | ) | -7 | % | ||||||||||
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Total operating costs and expenses |
$ | 128,013 | $ | 139,177 | $ | (11,164 | ) | -8 | % | |||||||
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Total operating costs and expenses for the six months ended June 30, 2014 decreased $11.2 million or 8% as compared with the corresponding 2013 period.
Cost of revenue for the six months ended June 30, 2014 decreased $5.8 million or 7% compared with the corresponding 2013 period. The decrease was due mainly to lower cost of sales incurred as a result of the aforementioned decrease in hardware and software sales.
Selling, general and administrative expenses for the six months ended June 30, 2014 decreased $3.0 million or 14% compared with the corresponding 2013 period. The decrease was due mainly to the impact in the prior year of a $3.1 million non-cash charge taken in connection with the vesting of all Tranche B and C stock options.
Depreciation and amortization expense for the six months ended June 30, 2014 decreased $2.4 million or 7% compared with the corresponding 2013 period. The decrease resulted from lower amortization of software packages that became fully depreciated.
Income from operations
The following table presents income from operations by reportable segments.
Six months ended June 30, | ||||||||||||||||
(Dollar amounts in thousands) | 2014 | 2013 | Variance | |||||||||||||
Segment income from operations |
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Merchant acquiring, net |
$ | 17,181 | $ | 17,395 | $ | (214 | ) | -1 | % | |||||||
Payment processing |
30,031 | 24,480 | 5,551 | 23 | % | |||||||||||
Business solutions |
23,537 | 19,318 | 4,219 | 22 | % | |||||||||||
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Total segment income from operations |
70,749 | 61,193 | 9,556 | 16 | % | |||||||||||
Merger related depreciation and amortization and other unallocated expenses(1) |
(20,431 | ) | (23,856 | ) | 3,425 | 14 | % | |||||||||
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Income from operations |
$ | 50,318 | $ | 37,337 | $ | 12,981 | 35 | % | ||||||||
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(1) | Primarily represents non-operating depreciation and amortization expenses generated as a result of the Merger and certain non-recurring fees and expenses. |
Income from operations for the six months ended June 30, 2014 increased $13.0 million or 35% as compared to the corresponding 2013 period. The increase in income from operations was the result of the aforementioned factors affecting revenues and operating costs and expenses.
See Note 12 of the Notes to Unaudited Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information on the Companys reportable segments and for a reconciliation of income from operations to net income (loss).
23
Non-operating (expenses) income
Six months ended June 30, | ||||||||||||||||
(Dollar amounts in thousands) | 2014 | 2013 | Variance | |||||||||||||
Non-operating (expenses) income |
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Interest income |
$ | 154 | $ | 93 | $ | 61 | 66 | % | ||||||||
Interest expense |
(13,410 | ) | (25,011 | ) | 11,601 | 46 | % | |||||||||
Earnings of equity method investment |
664 | 625 | 39 | 6 | % | |||||||||||
Other income (expense) |
2,376 | (77,468 | ) | 79,844 | 103 | % | ||||||||||
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Total non-operating (expenses) income |
$ | (10,216 | ) | $ | (101,761 | ) | $ | 91,545 | 90 | % | ||||||
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Total non-operating expenses for the six months ended June 30, 2014 decreased $91.5 million compared with the corresponding 2013 period. Non-operating expenses in 2013 were driven mainly by the aforementioned factors affecting our quarterly results in non-operating (expenses) income related to expenses incurred in the prior year, coupled with a decrease in interest expense of $11.6 million as a result of the debt refinancing transaction completed during the second quarter of 2013.
Income tax expense (benefit)
Income tax expense for the six months ended June 30, 2014 amounted to $4.1 million compared with an income tax benefit of $5.0 million for the corresponding 2013 period. The income tax expense for 2014 is a result of taxable income, while the income tax benefit in the 2013 period was attributable to a taxable loss resulting from higher non-operating expenses related to the extinguishment of debt, the termination of the consulting agreements and the vesting of all Tranche B and C stock options, as explained above.
See Note 8 of the Notes to Unaudited Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information regarding income taxes.
Liquidity and Capital Resources
Our principal source of liquidity is cash generated from operations, and our primary liquidity requirements are the funding of capital expenditures and working capital needs. We also have a $100.0 million revolving credit facility, of which $77.0 million was available as of June 30, 2014.
At June 30, 2014, we had cash of $27.8 million, of which $17.7 million resides in our subsidiaries located outside of Puerto Rico for purposes of (i) funding the respective subsidiarys current business operations and (ii) funding potential future investment outside of Puerto Rico. We intend to indefinitely reinvest these funds outside of Puerto Rico, and based on our liquidity forecast, we will not need to repatriate this cash to fund the Puerto Rico operations or to meet debt-service obligations. However, if in the future we determine that we no longer need to maintain such cash balances within our foreign subsidiaries, we may elect to distribute such cash to the Company in Puerto Rico. Distributions from the foreign subsidiaries to Puerto Rico may be subject to tax withholding and other tax consequences.
Our primary use of cash is for operating expenses, working capital requirements, capital expenditures, dividend payments and debt service.
Based on our current level of operations, we believe our cash flows from operations and the available senior secured revolving credit facility will be adequate to meet our liquidity needs for the next twelve months. However, our ability to fund future operating expenses, dividend payments and capital expenditures and our ability to make scheduled payments of interest, to pay principal on or refinance our indebtedness and to satisfy any other of our present or future debt obligations will depend on our future operating performance, which will be affected by general economic, financial and other factors beyond our control.
24
Six months ended June 30, | ||||||||
(Dollar amounts in thousands) | 2014 | 2013 | ||||||
Cash provided by (used in) operating activities |
$ | 67,537 | $ | (13,902 | ) | |||
Cash used in investing activities |
(9,495 | ) | (12,344 | ) | ||||
Cash (used in) provided by financing activities |
(52,696 | ) | 20,199 | |||||
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Increase (decrease) in cash |
$ | 5,346 | $ | (6,047 | ) | |||
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Net cash provided by operating activities for the six months ended June 30, 2014 was $67.5 million compared with cash used in operating activities of $13.9 million for the corresponding 2013 period. The increase of $81.4 million was driven by an increase in income from operations, while cash used in operating activities in the prior year includes cash used to pay certain amounts related to the redemption of the senior notes and the extinguishment of debt of $41.9 million, and a $16.7 million payment related to the termination of the consulting agreements with Popular and Apollo.
Net cash used in investing activities for the six months ended June 30, 2014 was $9.5 million compared with $12.3 million for the corresponding period in 2013. The decrease was mainly attributable to lower purchases of intangible assets and property and equipment in 2014.
Net cash used in financing activities for the six months ended June 30, 2014 was $52.7 million as compared to cash provided by financing activities of $20.2 million in the corresponding 2013 period. Cash used in financing activities consisted of $37.7 million in debt repayment and $15.7 million in quarterly dividends paid. Cash provided by financing activities in 2013 consisted of proceeds from the Initial Public Offering and from the issuance of additional debt amounting to $812.4 million, partially offset by $763.9 million of debt repayment, $12.1 million of debt issuance costs and $16.7 million in taxes paid as a result of cashless exercise of stock options.
Capital Resources
Our principal capital expenditures are for hardware and computer software (purchased and internally developed) and additions to property and equipment. We invested approximately $9.7 million and $12.3 million for the six months ended June 30, 2014 and 2013, respectively. Capital expenditures are expected to be funded by cash flow from operations and, if necessary, borrowings under our revolving credit facility.
Dividend Payments
We currently have a policy under which we pay a regular quarterly dividend on our common stock, subject to the declaration thereof by our Board each quarter. On February 12, 2014, our Board declared a quarterly cash dividend of $0.10 per share of common stock, which was paid on March 14, 2014 to stockholders of record as of February 25, 2014.
On May 7, 2014, our Board declared a quarterly cash dividend of $0.10 per share of common stock. The cash dividend of $0.10 per share was paid on June 6, 2014 to stockholders of record as of close of business on May 19, 2014.
On August 6, 2014, our Board declared a quarterly cash dividend of $0.10 per share of common stock. The cash dividend of $0.10 per share will be paid on September 5, 2014 to stockholders of record as of close of business on August 18, 2014.
Financial Obligations
Senior Secured Credit Facilities
Term A Loan
As of June 30, 2014, the unpaid principal balance of the Term A Loan was $285.0 million. The Term A Loan requires principal payments on the last business day of each quarter equal to (a) 1.250% of the original principal amount commencing on September 30, 2013 through June 30, 2016; (b) 1.875% of the original principal amount from September 30, 2016 through June 30, 2017; (c) 2.50% of the original principal amount from September 30, 2017 through March 31, 2018; and (d) the remaining outstanding principal amount on the maturity of the Term A Loan on April 17, 2018. For the six months ended June 30, 2014, the Company made principal payments amounting to $7.5 million on the Term A Loan. Interest is based on EVERTEC Groups first lien secured net leverage ratio and payable at a rate equal to, at the Companys option, either (a) LIBOR plus an applicable margin ranging from 2.00% to 2.50% or (b) Base Rate, as defined in our 2013 Credit Agreement, plus an applicable margin ranging from 1.00% to 1.50%. The Term A Loan has no LIBOR or Base Rate minimum or floor.
25
Term B Loan
As of June 30, 2014, the unpaid principal balance of the Term B Loan was $396.0 million. The Term B Loan requires principal payments on the last business day of each quarter equal to 0.250% of the original principal amount commencing on September 30, 2013 and the remaining outstanding principal amount on the maturity of the Term B Loan on April 17, 2020. For the six months ended June 30, 2014, the Company made principal payments amounting to $2.0 million on the Term B Loan. Interest is based on EVERTEC Groups first lien secured net leverage ratio and payable at a rate equal to, at the Companys option, either (a) LIBOR plus an applicable margin ranging from 2.50% to 2.75%, or (b) Base Rate plus an applicable margin ranging from 1.50% to 1.75%. The LIBOR and Base Rate are subject to floors of 0.75% and 1.75%, respectively.
Revolving Credit Facility
The revolving credit facility has a balance up to $100.0 million, with an interest rate on loans calculated the same as the applicable Term A Loan rate. The facility matures on April 17, 2018 and has a commitment fee payable one business day after the last business day of each quarter calculated based on the daily unused commitment during the preceding quarter. The commitment fee for the unused portion of this facility ranges from 0.125% to 0.375% based on EVERTEC Groups first lien secured net leverage ratio. As of June 30, 2014, the outstanding balance of the revolving credit facility was $23.0 million. For the six months ended June 30, 2014, the Company made payments amounting to $27.0 million on the revolving credit facility.
All loans may be prepaid without premium or penalty. The new senior secured credit facilities allow EVERTEC Group to obtain, on an uncommitted basis at the sole discretion of participating lenders, an incremental amount of term loan and/or revolving credit facility commitments not to exceed the greater of (i) $200.0 million and (ii) maximum amount of debt that would not cause EVERTEC Groups pro forma first lien secured net leverage ratio to exceed 4.25 to 1.00.
The senior secured revolving credit facility is available for general corporate purposes and includes borrowing capacity available for letters of credit and for short-term borrowings referred to as swing line borrowings. All obligations under the new senior secured credit facilities are unconditionally guaranteed by Holdings and, subject to certain exceptions, each of EVERTEC Groups existing and future wholly-owned subsidiaries. All obligations under the new senior secured credit facilities, and the guarantees of those obligations, are secured by substantially all of EVERTEC Groups assets and the assets of the guarantors, subject to certain exceptions.
See Note 5 of the Notes to Unaudited Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information.
Other Short-Term Borrowing
In August 2013, we entered into a financing agreement in the ordinary course of business to purchase certain hardware, software and maintenance and related services in the amount of $1.8 million to be repaid in three installments over a term of eight months. As of June 30, 2014, this other short-term borrowing had been fully repaid.
Covenant Compliance
The credit facilities contain various restrictive covenants. The Term A Loan and the revolving facility (subject to certain exceptions) require EVERTEC Group to maintain on a quarterly basis a specified maximum senior secured leverage ratio of up to 6.60 to 1.00 as defined in the 2013 Credit Agreement (total first lien senior secured debt to Adjusted EBITDA). In addition, the 2013 Credit Agreement, among other things: (a) limits EVERTEC Groups ability and the ability of its subsidiaries to incur additional indebtedness, incur liens, pay dividends or make certain other restricted payments and enter into certain transactions with affiliates; (b) restricts EVERTEC Groups ability to enter into agreements that would limit the ability of its subsidiaries to pay dividends or make certain payments to its parent company; and (c) places restrictions on EVERTEC Groups ability and the ability of its subsidiaries to merge or consolidate with any other person or sell, assign, transfer, convey or otherwise dispose of all or substantially all of their assets. However, all of the covenants in these agreements are subject to significant exceptions. As of June 30, 2014, the senior secured leverage ratio was 3.69 to 1.00 and we were in compliance with the applicable restrictive covenants under the 2013 Credit Agreement.
26
In this Quarterly Report on Form 10-Q, we refer to the term Adjusted EBITDA to mean EBITDA as so defined and calculated for purposes of determining compliance with the senior secured leverage ratio based on the financial information for the last twelve months at the end of each quarter.
Net Income Reconciliation to EBITDA, Adjusted EBITDA and Adjusted Net Income
We define EBITDA as earnings before interest, taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA further adjusted to exclude unusual items and other adjustments described below. We define Adjusted Net Income as net income adjusted to exclude unusual items and other adjustments described below.
We present EBITDA and Adjusted EBITDA because we consider them important supplemental measures of our performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. In addition, our presentation of Adjusted EBITDA is consistent with the equivalent measurements that are contained in the senior secured credit facilities in testing EVERTEC Groups compliance with covenants therein, such as the senior secured leverage ratio. We use Adjusted Net Income to measure our overall profitability because it better reflects our cash flows generation by capturing the actual cash taxes paid rather than our tax expense as calculated under GAAP and excludes the impact of the non-cash amortization and depreciation that was created as a result of the Merger. In evaluating EBITDA, Adjusted EBITDA and Adjusted Net Income, you should be aware that in the future we may incur expenses such as those excluded in calculating them. Further, our presentation of these measures should not be construed as an inference that our future operating results will not be affected by unusual or nonrecurring items.
Some of the limitations of EBITDA, Adjusted EBITDA and Adjusted Net Income are as follows:
| they do not reflect cash outlays for capital expenditures or future contractual commitments; |
| they do not reflect changes in, or cash requirements for, working capital; |
| although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect cash requirements for such replacements; |
| in the case of EBITDA and Adjusted EBITDA, they do not reflect interest expense, or the cash requirements necessary to service interest, or principal payments, on indebtedness; |
| in the case of EBITDA and Adjusted EBITDA, they do not reflect income tax expense or the cash necessary to pay income taxes; and |
| other companies, including other companies in our industry, may not use EBITDA, Adjusted EBITDA and Adjusted Net Income or may calculate EBITDA, Adjusted EBITDA and Adjusted Net Income differently than as presented in this Report, limiting their usefulness as a comparative measure. |
EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per common share are not measurements of liquidity or financial performance under GAAP. You should not consider EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per common share as alternatives to cash flows from operating activities or any other performance measures determined in accordance with GAAP, as an indicator of cash flows, as a measure of liquidity or as an alternative to operating or net income determined in accordance with GAAP.
27
A reconciliation of net income to EBITDA, Adjusted EBITDA and Adjusted Net Income is provided below:
(Dollar amounts in thousands) | Three months ended June 30, 2014 |
Six months ended June 30, 2014 |
Twelve months ended June 30, 2014 |
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Net income |
$ | 17,773 | $ | 35,979 | $ | 70,821 | ||||||
Income tax expense |
1,962 | 4,123 | 7,094 | |||||||||
Interest expense, net |
6,422 | 13,256 | 25,963 | |||||||||
Depreciation and amortization |
16,390 | 33,004 | 67,953 | |||||||||
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EBITDA |
42,547 | 86,362 | 171,831 | |||||||||
Software maintenance reimbursement and other costs(1) |
563 | 1,109 | 2,316 | |||||||||
Equity income(2) |
(15 | ) | (338 | ) | (165 | ) | ||||||
Compensation and benefits(3) |
437 | 925 | 1,845 | |||||||||
Pro forma cost reduction adjustments(4) |
| | 25 | |||||||||
Transaction, refinancing and other non-recurring fees(5) |
1,999 | 2,516 | 6,886 | |||||||||
Purchase accounting(6) |
(8 | ) | 173 | 542 | ||||||||
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Adjusted EBITDA |
45,523 | 90,747 | 183,280 | |||||||||
Pro forma cost reduction adjustments(7) |
| | (25 | ) | ||||||||
Operating depreciation and amortization(8) |
(7,281 | ) | (14,764 | ) | (30,515 | ) | ||||||
Cash interest expense, net(9) |
(5,655 | ) | (11,410 | ) | (22,582 | ) | ||||||
Cash income taxes(10) |
(402 | ) | (402 | ) | (1,074 | ) | ||||||
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Adjusted net income |
$ | 32,185 | $ | 64,171 | $ | 129,084 | ||||||
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Adjusted net income per common share: |
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Basic |
$ | 0.41 | $ | 0.82 | ||||||||
Diluted |
$ | 0.41 | $ | 0.81 | ||||||||
Shares used in computing adjusted net income per common share: |
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Basic |
78,410,554 | 78,393,042 | ||||||||||
Diluted |
79,199,964 | 79,204,642 |
(1) | Primarily represents reimbursements received for certain software maintenance expenses as part of the Merger. |
(2) | Represents the elimination of non-cash equity earnings from our 19.99% equity investment in CONTADO, net of cash dividends received. |
(3) | Primarily represents non-cash equity based compensation expense. |
(4) | Represents the pro forma effect of the expected net savings mainly in compensation and benefits from the reduction of certain employees. This pro forma amount was calculated using the net amount of actual expenses for the twelve-month period prior to their separation. |
(5) | Represents fees and expenses associated with non-recurring corporate transactions, including the withdrawn senior secured notes offering in the second quarter of 2014 and refinancing and debt extinguishment in the second quarter of 2013. |
(6) | Represents the elimination of the effects of purchase accounting in connection with certain software related arrangements where EVERTEC receives reimbursements from Popular. |
(7) | Represents the elimination of the pro-forma benefits described in note (4) above. |
(8) | Represents operating depreciation and amortization expense which excludes amortization generated as a result of the Merger. |
(9) | Represents interest expense, less interest income, as they appear on our consolidated statement of income (loss) and comprehensive income (loss), adjusted to exclude non-cash amortization of the debt issuance costs, premium and accretion of discount and other adjustment related to interest expense. |
(10) | Represents cash taxes paid for each period presented. |
Off Balance Sheet Arrangements
In the ordinary course of business the Company may enter into commercial commitments. As of June 30, 2014, we had an outstanding letter of credit of $1.1 million with a maturity of less than three months. Also, as of June 30, 2014 we had an off balance sheet item of $36.6 million related to the unused amount of the windfall that is available to offset future taxable income.
See Note 8 of the Unaudited Consolidated Financial Statements within Item I of this Quarterly Report on Form 10-Q for additional information related to this off balance sheet item.
28
Seasonality
Our payment businesses generally experiences increased activity during the traditional holiday shopping periods and around other nationally recognized holidays.
Effect of Inflation
While inflationary increases in certain input costs, such as occupancy, labor and benefits, and general administrative costs, have an impact on our operating results, inflation has had minimal net effect on our operating results during the last three years as overall inflation has been offset by increased selling process and cost reduction actions. We cannot assure you, however, that we will not be affected by general inflation in the future.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risks arising from our normal business activities. These market risks principally involve the possibility of changes in interest rates that will adversely affect the value of our financial assets and liabilities or future cash flows and earnings. Market risk is the potential loss arising from adverse changes in market rates and prices.
Interest rate risks
We issued floating-rate debt which is subject to fluctuations in interest rates. Our senior secured credit facilities accrue interest at variable rates and only the Term B Loan is subject to floors or minimum rates. A 100 basis point increase in interest rates over our floor(s) on our debt balances outstanding as of June 30, 2014 under the senior secured credit facilities would increase our annual interest expense by approximately $6.8 million, excluding the revolving credit facility. The impact on future interest expense as a result of future changes in interest rates will depend largely on the gross amount of our borrowings at that time.
Foreign exchange risk
We conduct business in certain countries in Latin America. Some of this business is conducted in the countries local currencies. The resulting foreign currency translation adjustments, from operations for which the functional currency is other than the U.S. dollar, are reported in accumulated other comprehensive (loss) income in the unaudited consolidated balance sheet, except for highly inflationary environments in which the effects would be included in Other operating income in the consolidated statements of income (loss) and comprehensive income (loss). At June 30, 2014, the Company had $6.5 million in an unfavorable foreign currency translation adjustment as part of accumulated other comprehensive (loss) income compared with a favorable foreign currency translation adjustment of $0.4 million at December 31, 2013.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company, under the direction of the Chief Executive Officer and the Chief Financial Officer, has established disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act) that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms.
An evaluation was performed under the supervision and with the participation of the Companys management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act. Based upon their evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of June 30, 2014, the Companys disclosure controls and procedures are effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There have not been any changes in the Companys internal control over financial reporting (as such term is defined in Rule 13a -15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended June 30, 2014 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.
29
We are defendants in various lawsuits or arbitration proceedings arising in the ordinary course of business. Management believes, based on the opinion of legal counsel and other factors, that the aggregated liabilities, if any, arising from such actions will not have a material adverse effect on the financial condition, results of operations and the cash flows of the Company.
There have been no material changes from the risk factors previously disclosed under Item 1A. of the Companys 2013 Form 10-K.
The risks described in our 2013 Form 10-K and in this report are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
None.
10.61* | Amended and Restated Employment agreement dated July 1, 2014, by and between EVERTEC Group, LLC and Carlos J. Ramírez | |
10.62* | Amended and Restated Employment agreement dated July 1, 2014, by and between EVERTEC Group, LLC and Eduardo Franco de Camargo | |
10.63* | Amended and Restated Employment agreement dated July 1, 2014, by and between EVERTEC Group, LLC and Juan J. Román Jiménez | |
10.64* | Amended and Restated Employment agreement dated July 1, 2014, by and between EVERTEC Group, LLC and Miguel Vizcarrondo | |
10.65* | Amended and Restated Employment agreement dated July 1, 2014, by and between EVERTEC Group, LLC and Peter Harrington | |
10.66* | Amended and Restated Employment agreement dated July 1, 2014, by and between EVERTEC Group, LLC and Phil Steurer | |
31.1* | CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2* | CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1** | CEO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2** | CFO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS XBRL*** | Instance document |
30
101.SCH XBRL*** | Taxonomy Extension Schema | |
101.CAL XBRL*** | Taxonomy Extension Calculation Linkbase | |
101.DEF XBRL*** | Taxonomy Extension Definition Linkbase | |
101.LAB XBRL*** | Taxonomy Extension Label Linkbase | |
101.PRE XBRL*** | Taxonomy Extension Presentation Linkbase |
* | Filed herewith. |
** | Furnished herewith. |
*** | Pursuant to applicable securities laws and regulations, the Company is deemed to have complied with the reporting obligation relating to the submission of interactive data files in such exhibits and is not subject to liability under any anti-fraud provisions of the federal securities laws as long as the Company has made a good faith attempt to comply with the submission requirements and promptly amends the interactive data files after becoming aware that the interactive data files fail to comply with the submission requirements. Users of this data are advised that, pursuant to Rule 406T, these interactive data files are deemed not filed and otherwise are not subject to liability. |
31
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
EVERTEC, Inc. (Registrant) | ||||||
Date: August 7, 2014 | By: | /s/ Peter Harrington | ||||
Peter Harrington Chief Executive Officer | ||||||
Date: August 7, 2014 | By: | /s/ Juan J. Román | ||||
Juan J. Román Chief Financial Officer |
S-1
Exhibit 10.61
EXECUTION COPY
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the Agreement) by and between EVERTEC GROUP, LLC, a Puerto Rico limited liability company (the Company), and Carlos J. Ramírez (Executive, and collectively, the Parties) is made as of this 1st day of July, 2014 (the Effective Date).
WHEREAS, Executive and the Company previously entered into an employment agreement dated April 14, 2011 (the Original Effective Date); and
WHEREAS, the Parties desire to amend and restate the employment agreement pursuant to the terms, provisions and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants, understandings, representations, warranties, undertakings and promises hereinafter set forth, intending to be legally bound thereby, the Parties agree as follows:
1. | Employment Period. |
Subject to earlier termination in accordance with Section 3 of this Agreement, Executive shall continue to be employed by the Company until the fifth (5th) anniversary of the Original Effective Date (the Employment Period) unless the parties mutually agree to extend the term at least 90 calendar days prior to the end of the Employment Period. Upon Executives termination of employment with the Company for any reason, Executive shall immediately resign all positions with the Company or any of its subsidiaries or affiliates, including any position as a member of the Companys Board of Directors.
2. | Terms of Employment. |
(a) Position. During the Employment Period, Executive shall serve as Executive Vice President of the Company and will perform such duties and exercise such supervision with regard to the business of the Company as are associated with such positions, including such duties as may be prescribed from time to time by the President and Chief Executive Officer of the Company (the CEO). Executive shall report directly to the CEO and if reasonably requested by the CEO, Executive hereby agrees to serve (without additional compensation) as an officer and director of the Company or any affiliate or subsidiary thereof.
(b) Duties. During the Employment Period, Executive shall have such responsibilities, duties, and authority that are customary for his position, subject at all times to the control of the CEO, and shall perform such services as customarily are provided by an executive of a corporation with his position and such other services consistent with his position, as shall be assigned to him from time to time by the CEO. During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled in accordance with Company policies, the Executive agrees to devote all of his business time to the business and affairs of the Company and to use Executives commercially reasonable efforts to perform faithfully, effectively and efficiently his responsibilities and obligations hereunder. The Executive shall be entitled to engage in charitable and educational activities and to manage his personal and family investments, to the extent such activities are not competitive with the business of the Company, do not interfere with the performance of his duties for the Company and are otherwise consistent with the Companys governance policies.
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(c) Principal Work Location. Executives principal work location, subject to travel on Company business, shall be the Companys headquarters in Puerto Rico.
(d) Compensation.
(i) Base Salary. During the Employment Period, Executive shall receive an annual base salary in an amount equal to Three Hundred Thousand Dollars ($300,000), less all applicable withholdings, which shall be paid in accordance with the customary payroll practices of the Company (as in effect from time to time, the Annual Base Salary). The Annual Base Salary shall be prorated for partial calendar years of employment and shall be subject to annual review and possible increase as determined by the Board, in its sole discretion; any such increased Annual Base Salary shall constitute Annual Base Salary for purposes of this Agreement.
(ii) Annual Bonus. During the Employment Period, with respect to each completed fiscal year of the Company, Executive shall be eligible to receive a bonus (the Bonus) pursuant to the terms and conditions set forth in the EVERTEC Annual Performance Incentive Guidelines in effect on the date eligibility for a bonus is determined.
(iii) Options. To the extent that Executive was granted options to purchase shares of common stock of EVERTEC, Inc., such options shall be subject to the terms of the applicable award agreement and the applicable Equity Incentive Plan.
(iv) Benefits. During the Employment Period, Executive shall be eligible to participate in all retirement, compensation and employee benefit plans, practices, policies and programs provided by the Company to the extent applicable generally to other executives of the Company (except severance plans, policies, practices, or programs) subject to the eligibility criteria set forth therein, as such may be amended or terminated from time to time. In addition, the Company shall provide Executive with directors and officers insurance coverage at least equal to that provided to other Company directors and officers.
(v) Expenses. During the Employment Period, Executive shall be entitled to receive reimbursement for all reasonable business expenses incurred by Executive in performance of his duties hereunder provided that Executive provides all necessary documentation in accordance with the Companys policies.
3. | Termination of Employment. |
(a) Death or Disability. Executives employment shall terminate automatically upon Executives death. If Executive becomes subject to a Disability (as defined below) during the Employment Period, the Company may give Executive written notice in accordance with Sections 3(g) and 9(g) of its intention to terminate Executives employment. For purposes of this Agreement, Disability means Executives inability to perform his duties hereunder by reason of any medically determinable physical or mental impairment for a period of six (6) months or more in any twelve (12) month period.
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(b) Cause. Executives employment may be terminated at any time by the Company for Cause (as defined below). For purposes of this Agreement, Cause shall mean Executives (i) commission of a felony or a crime of moral turpitude, (ii) engaging in conduct that constitutes fraud or embezzlement, (iii) engaging in conduct that constitutes gross negligence or willful misconduct that results or could reasonably be expected to result in harm to the Companys business or reputation, (iv) breach of any material terms of Executives employment, including this Agreement, which results or could reasonably be expected to result in harm to the Companys business or reputation or (v) continued willful failure to substantially perform duties as executive vice president. Executives employment shall not be terminated for Cause within the meaning of clauses (iv) and (v) above unless Executive has been given written notice by the Board stating the basis for such termination and Executive is given fifteen (15) calendar days to cure, to the extent curable, the neglect or conduct that is the basis of any such claim.
(c) Termination Without Cause. The Company may terminate Executives employment hereunder without Cause at any time.
(d) Good Reason. Executives employment may be terminated at any time by Executive for Good Reason upon thirty (30) calendar days prior written notice following the occurrence of the event giving rise to the termination for Good Reason. For purposes of this Agreement, Good Reason means voluntary resignation after any of the following actions taken by the Company without Executives written consent: (i) any material failure of the Company to fulfill its obligations under this Agreement, (ii) a material and adverse change to, or a material reduction of, Executives duties and responsibilities to the Company, (iii) a material reduction in Executives then current Annual Base Salary (not including any diminution related to a broader compensation reduction that is not limited to Executive specifically and that is not more than 10% in the aggregate), (iv) the relocation of Executives primary office to a location more than 25 miles from the prior location that materially increases Executives commute to work or (v) the failure of any successor (whether by sale, reorganization, consolidation, merger or other corporate transaction) to assume this Agreement, whether in writing or by operation of law; provided, that any such event shall not constitute Good Reason unless and until Executive shall have provided the Company with notice thereof no later than 30 calendar days following Executives knowledge of the occurrence of such event and the Company shall have failed to remedy such event within 30 calendar days of receipt of such notice.
(e) Voluntary Termination. Executives employment may be terminated at any time by Executive without Good Reason upon 30 calendar days prior written notice.
(f) Termination as a Result of Expiration of the Employment Period. Unless otherwise agreed between the parties, Executives employment shall automatically terminate upon expiration of the Employment Period.
(g) Notice of Termination. Any termination by the Company for Cause or without Cause, or by Executive for Good Reason or without Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 9(g). For
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purposes of this Agreement, a Notice of Termination means a written notice that (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executives employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date. The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company hereunder or preclude Executive or the Company from asserting such fact or circumstance in enforcing Executives or the Companys rights hereunder.
(h) Date of Termination. Date of Termination means (i) if Executives employment is terminated by the Company for Cause, without Cause or by reason of Disability, or by Executive for Good Reason or without Good Reason, the date of receipt of the Notice of Termination (in the case of a termination with or without Good Reason, provided such Date of Termination is in accordance with Section 3(d) or Section 3(e)) or any later date specified therein pursuant to Section 3(g), as the case may be, (ii) if Executives employment is terminated by reason of death, the date of death, and (iii) the expiration of the Employment Period, and the termination of Executives employment upon the date of such expiration.
4. | Obligations of the Company upon Termination. |
(a) With Good Reason; Without Cause. If during the Employment Period, the Company shall terminate Executives employment without Cause or Executive shall terminate his employment for Good Reason, then the Company will provide Executive with the following payments and/or benefits:
(i) The Company shall pay to Executive as soon as reasonably practicable but no later than the 15th day of the third month following the end of the calendar year that contains the Date of Termination in a lump sum to the extent not previously paid, (A) the Annual Base Salary through the Date of Termination, (B) the Bonus earned for any fiscal year ended prior to the year in which the Date of Termination occurs, provided that Executive was employed on the last day of such fiscal year, (C) the amount of any unpaid expense reimbursements to which Executive may be entitled pursuant to Section 2(d)(vi) hereof and (D) any other vested payments or benefits to which Executive or Executives estate may be entitled to receive under any of the Companys benefit plans or applicable law, in accordance with the terms of such plans or law (clauses (A)-(D), the Accrued Obligations), and (E) in the event that the termination occurs after September 30 of a given year, a prorated amount of the Annual Bonus for such year based on the number of days elapsed, determined and payable in such manner and at such time as annual bonuses in respect of such year are generally paid (the Prorated Bonus); and
(ii) Subject to Section 4(e) below, after the Date of Termination, the Company will pay Executive severance in an amount equal to the greater of (a) Executives Annual Base Salary and (b) amounts due under applicable laws (the Severance Payment). The Severance Payment shall be made in a lump sum on the date that is 60 calendar days following the Date of Termination, subject to the terms and conditions in Section 4(e) below.
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(b) Death or Disability. If Executives employment shall be terminated by reason of the Executives death or Disability, then the Company will provide Executive with the Accrued Obligations. Thereafter, the Company shall have no further obligation to Executive, his estate, his beneficiaries or his legal representatives.
(c) Cause; Other than for Good Reason. If Executives employment shall be terminated by the Company for Cause or by Executive without Good Reason, then the Company shall have no further obligations to Executive other than for payment of the Accrued Obligations.
(d) Expiration of the Employment Period. If Executives employment shall be terminated by reason of the expiration of the Employment Period as result of the Companys non-extension, then the Company will provide Executive with the Accrued Obligations, the Prorated Bonus and the greater of (i) continued payment of Base Salary for a period of six months in accordance with the Companys payroll practices (the Salary Continuation) and (ii) amounts due under applicable law. If Executives employment shall be terminated by reason of the expiration of the Employment Period as result of the Executives non-extension, then the Company will provide Executive with the Accrued Obligations. Thereafter, in either event, the Company shall have no further obligation to Executive or his legal representatives.
(e) Separation Agreement and General Release. The Companys obligation to make the Severance Payment or to pay the Salary Continuation is conditioned on Executives or his legal representatives executing a separation agreement and general release of claims related to or arising from Executives employment with the Company or the termination of employment, against the Company and its affiliates (and their respective officers and directors) in a form reasonably determined by the Company, which shall be provided by the Company to Executive within five (5) calendar days following the Date of Termination; provided, that, if Executive should fail to execute (or revokes) such release within 45 calendar days following the Date of Termination, the Company shall not have any obligation to provide the Severance Payment or the Salary Continuation. If Executive executes the release within such 45-calendar day period and does not revoke the release within seven (7) calendar days following the execution of the release, the Severance Payment will be made in accordance with Section 4(a)(ii) or the Salary Continuation shall commence at such time, as applicable.).
5. | Restrictive Covenants. |
(a) In consideration of Executives employment and receipt of payments hereunder, including, without limitation, the grant of options under Section 2(d), during the period commencing on the Original Effective Date and ending twelve (12) months after the Date of Termination, Executive shall not directly, or indirectly through another person, (i) induce or attempt to induce any employee, representative, agent or consultant of the Company or any of its Affiliates or subsidiaries to leave the employ or services of the Company or any of its affiliates or subsidiaries, or in any way interfere with the relationship between the Company or any of its affiliates or subsidiaries and any employee, representative, agent or consultant thereof or (ii) hire any person who was an employee, representative, agent or consultant of the Company or any of its affiliates or subsidiaries at any time during the twelve-month period immediately prior to the date on which such hiring would take place. No action by another person or entity shall be deemed to be a breach of this provision unless the Executive directly or indirectly assisted, encouraged or otherwise counseled such person or entity to engage in such activity.
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(b) Non-Competition. Executive hereby acknowledges that it is familiar with the Confidential Information (as defined below) of the Company and its subsidiaries. Executive acknowledges and agrees that the Company would be irreparably damaged if Executive were to provide services to any person competing with the Company or any of its affiliates or subsidiaries or engaged in a Similar Business (as defined below) and that such competition by Executive would result in a significant loss of goodwill by the Company. Therefore, Executive agrees that the following are reasonable restrictions:
i) Similar Business: During the Employment Period, and for a term of twelve (12) months immediately after the termination of such relationship (voluntarily or involuntarily), Executive shall not, directly or indirectly, engage in Similar Business services or activities within the Commonwealth of Puerto Rico; provided, that nothing herein shall prohibit Executive from being a passive owner of not more than 5% of the outstanding stock of any class of a corporation which is publicly traded so long as none of such persons has any active participation in the business of such corporation.
ii) Clients: For a period of twelve (12) months after the termination the Executives employment relationship with the Company (voluntarily or involuntarily) Executive shall not, directly or indirectly, solicit or provide, without the written consent from the Company, any service for any Client, such as those Similar Business services or activities provided by Executive during his employment relationship.
For purposes of this Section 5(b) of the Agreement, the following terms shall have these meanings:
Similar Business shall mean the same or substantially the same business activity or activities performed or engaged by Executive for, or on behalf, of the Company.
Client shall mean any person or entity that was a client or customer of the Company at the time of termination of Executives employment relationship with the Company and for whom Executive provided any services on behalf of the Company or any of its affiliates or subsidiaries at any time, during the term of five (5) years prior to such termination.
Executive warrants and represents that the nature and extent of this non-competition clause has been fully explained to Executive by the Company, and that Executives decision to accept the same is made voluntarily, knowingly, intelligently and free from any undue pressure or coercion. Executive further warrants and represents that he has agreed to this non-competition clause in exchange for the increase in Base Salary Executive is receiving under this Agreement.
(c) Non-Disclosure; Non-Use of Confidential Information. Executive shall not disclose or use at any time, either during his employment with the Company or at any time thereafter, any Confidential Information of which Executive is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and required by Executives performance in good faith of duties assigned to Executive
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by the Company. Executive will take all appropriate steps to safeguard Confidential Information in his possession and to protect it against disclosure, misuse, espionage, loss and theft. Executive shall deliver to the Company at the termination of his employment with the Company, or at any time the Company may request, all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information or the Work Product (as defined in Section 5(e)(ii)) of the business of the Company that Executive may then possess or have under his control.
(d) Proprietary Rights. Executive recognizes that the Company possesses a proprietary interest in all Confidential Information and Work Product and has the exclusive right and privilege to use, protect by copyright, patent or trademark, or otherwise exploit the processes, ideas and concepts described therein to the exclusion of Executive, except as otherwise agreed between the Company and Executive in writing. Executive expressly agrees that any Work Product made or developed by Executive or his agents during the course of Executives employment, including any Work Product which is based on or arises out of Work Product, shall be the property of and inure to the exclusive benefit of the Company. Executive further agrees that all Work Product developed by Executive (whether or not able to be protected by copyright, patent or trademark) during the course of his employment with the Company, or involving the use of the time, materials or other resources of the Company, shall be promptly disclosed to the Company and shall become the exclusive property of the Company, and Executive shall execute and deliver any and all documents necessary or appropriate to implement the foregoing.
(e) Certain Definitions.
(i) As used herein, the term Confidential Information means information that is not generally known to the public (but for purposes of clarity, Confidential Information shall never exclude any such information that becomes known to the public because of Executives unauthorized disclosure) and that is used, developed or obtained by the Company in connection with its business, including, but not limited to, information, observations and data obtained by Executive while employed by the Company concerning (A) the business or affairs of the Company, (B) products or services, (C) fees, costs and pricing structures, (D) designs, (E) analyses, (F) drawings, photographs and reports, (G) computer software, including operating systems, applications and program listings, (H) flow charts, manuals and documentation, (I) databases, (J) accounting and business methods, (K) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice, (L) customers and clients and customer or client lists, (M) other copyrightable works, (N) all production methods, processes, technology and trade secrets, and (O) all similar and related information in whatever form. Confidential Information will not include any information that has been published in a form generally available to the public (except as a result of Executives unauthorized disclosure) prior to the date Executive proposes to disclose or use such information. Confidential Information will not be deemed to have been published or otherwise disclosed merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination.
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(ii) As used herein, the term Work Product means all inventions, innovations, improvements, technical information, systems, software developments, methods, designs, analyses, drawings, reports, service marks, trademarks, trade names, logos and all similar or related information (whether patentable or unpatentable) that relates to the Companys actual or anticipated business, research and development or existing or future products or services and that are conceived, developed or made by Executive (whether or not during usual business hours and whether or not alone or in conjunction with any other person) while employed by the Company together with all patent applications, letters patent, trademark, trade name and service mark applications or registrations, copyrights and reissues thereof that may be granted for or upon any of the foregoing.
6. | Non-Disparagement. |
During the Employment Period and at all times thereafter, neither Executive nor his agents, on the one hand, nor the Company formally, or its executives or board of directors, on the other hand, shall directly or indirectly issue or communicate any public statement, or statement likely to become public, that maligns, denigrates or disparages the other (including, in the case of communications by Executive or his agents, the Company or any of the Companys officers, directors or employees. The foregoing shall not be violated by truthful responses to (i) legal process or governmental inquiry or (ii) by private statements to the Company or any of Companys officers, directors or employees; provided, that in the case of Executive, with respect to clause (ii), such statements are made in the course of carrying out his duties pursuant to this Agreement.
7. | Confidentiality of Agreement. |
The Parties agree that the consideration furnished under this Agreement, the discussions and correspondence that led to this Agreement, and the terms and conditions of this Agreement are private and confidential. Except as may be required by applicable law, regulation, or stock exchange requirement, neither Party may disclose the above information to any other person or entity without the prior written approval of the other.
8. | Executives Representations, Warranties and Covenants. |
(a) Executive hereby represents and warrants to the Company that:
(i) Executive has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and this Agreement has been duly executed by Executive;
(ii) the execution, delivery and performance of this Agreement by Executive does not and will not, with or without notice or the passage of time, conflict with, breach, violate or cause a default under any agreement, contract or instrument to which Executive is a party or any judgment, order or decree to which Executive is subject;
(iii) Executive is not a party to or bound by any employment agreement, consulting agreement, non-compete agreement, fee for services agreement, confidentiality agreement or similar agreement with any other person;
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(iv) upon the execution and delivery of this Agreement by the Company and Executive, this Agreement will be a legal, valid and binding obligation of Executive, enforceable in accordance with its terms;
(v) Executive understands that the Company will rely upon the accuracy and truth of the representations and warranties of Executive set forth herein and Executive consents to such reliance; and
(vi) as of the date of execution of this Agreement, Executive is not in breach of any of its terms, including having committed any acts that would form the basis for a Cause termination if such act had occurred after the Original Effective Date.
(b) The Company hereby represents and warrants to Executive that:
(i) the Company has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and this Agreement has been duly executed by the Company;
(ii) the execution, delivery and performance of this Agreement by the Company does not and will not, with or without notice or the passage of time, conflict with, breach, violate or cause a default under any agreement, contract or instrument to which the Company is a party or any judgment, order or decree to which the Company is subject;
(iii) upon the execution and delivery of this Agreement by the Company and Executive, this Agreement will be a legal, valid and binding obligation of the Company, enforceable in accordance with its terms; and
(iv) the Company understands that Executive will rely upon the accuracy and truth of the representations and warranties of the Company set forth herein and the Company consents to such reliance.
9. | General Provisions. |
(a) Severability. It is the desire and intent of the Parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Upon a determination that any term or provision (or any portion thereof with the exception of the Non-Competition covenant contained in Section 5(b) of this Agreement) is invalid, illegal, or incapable of being enforced, the Parties agree that a reviewing court shall have the authority to blue pencil or modify this agreement so as to render it enforceable and effect the original intent of the parties to the fullest extent permitted by applicable law.
(b) Entire Agreement and Effectiveness. Effective as of the Effective Date, this Agreement embodies the complete agreement and understanding among the Parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the Parties, written or oral, which may have related to the subject matter hereof in any way (excluding any stock options or awards granted under any equity compensation plans maintained by the Company).
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(c) Successors and Assigns.
(i) This Agreement is personal to Executive and without the prior written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executives legal representatives.
(ii) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, Company shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law, or otherwise.
(d) Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PUERTO RICO, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE COMMONWEALTH OF PUERTO RICO OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE COMMONWEALTH OF PUERTO RICO TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE COMMONWEALTH OF PUERTO RICO WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTIONS CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
(e) Enforcement.
(i) Arbitration. Except for disputes arising under Sections 5 and 6 of this Agreement (including, without limitation, any claim for injunctive relief), any controversy, dispute or claim arising out of or relating to this Agreement, or its interpretation, application, implementation, breach or enforcement which the Parties are unable to resolve by mutual agreement, shall be settled by submission by either Executive or the Company of the controversy, claim or dispute to binding arbitration in San Juan, Puerto Rico (unless the Parties agree in writing to a different location), before a single arbitrator in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association then in effect. In any such arbitration proceeding the Parties agree to provide all discovery deemed necessary by the arbitrator. The decision and award made by the arbitrator shall be accompanied by a reasoned opinion, and shall be final, binding and conclusive on all Parties hereto for all purposes, and judgment may be entered thereon in any court having jurisdiction thereof. The Company will bear the totality of the arbitrators and administrative fees and costs. Each party shall bear its or his litigation costs and expenses; provided, however, that the arbitrator shall have the discretion to award the prevailing party reimbursement of its or his reasonable attorneys fees and costs. Upon the request of any of the parties, at any time prior to the beginning of the arbitration hearing the parties may attempt in good faith to settle the dispute by mediation administered by the American Arbitration Association. The Company will bear the totality of the mediators and administrative fees and costs.
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(ii) Remedies. All remedies hereunder are cumulative, are in addition to any other remedies provided for by law and may, to the extent permitted by law, be exercised concurrently or separately, and the exercise of any one remedy shall not be deemed to be an election of such remedy or to preclude the exercise of any other remedy.
(iii) Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(f) Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and Executive and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall be construed as a waiver of such provisions or affect the validity, binding effect or enforceability of this Agreement or any provision hereof.
(g) Notices. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) in an envelope marked confidential to the recipient at the address below indicated or at such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Notices will be deemed to have been given hereunder and received when delivered personally, five calendar days after deposit in the U.S. mail and one calendar day after deposit for overnight delivery with a reputable overnight courier service.
If to the Company, to:
EVERTEC GROUP, LLC
GENERAL COUNSEL AND HUMAN RESOURCES SENIOR VICE PRESIDENT
Carr #176, Km 1.3
Cupey Bajo, Rio Piedras Puerto Rico 00926
P.O. Box 364527
San Juan, Puerto Rico 00936-4527
Telephone: (787) 759-9999
with a copy (which shall not constitute notice) to:
McConnell Valdés LLC
EVERTEC GROUP, LLCS CLIENT SERVICE COORDINATOR (CSC)
PO Box 364225
San Juan, Puerto Rico 00936-4225
Telephone: (787) 759-9292
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If to Executive, to:
Executives home address most recently on file with the Company.
(h) Withholdings Taxes. The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.
(i) Survival of Representations, Warranties and Agreements. All representations, warranties and agreements contained herein shall survive the consummation of the transactions contemplated hereby indefinitely.
(j) Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. All references to a Section in this Agreement are to a section of this Agreement unless otherwise noted.
(k) Construction. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party.
(l) Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.
(m) Section 409A. Notwithstanding anything herein to the contrary, this Agreement is intended to be interpreted and applied so that the payment of the benefits set forth herein either shall either be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the Code), or shall comply with the requirements of such provision. Notwithstanding anything in this Agreement or elsewhere to the contrary, distributions upon termination of Executives employment may only be made upon a separation from service as determined under Section 409A of the Code. Each payment under this Agreement or otherwise shall be treated as a separate payment for purposes of Section 409A of the Code. In no event may Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement or otherwise which constitutes a deferral of compensation within the meaning of Section 409A of the Code. All reimbursements and in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A of the Code. To the extent that any reimbursements pursuant to this Agreement or otherwise are taxable to Executive, any reimbursement payment due to Executive shall be paid to Executive on or before the last calendar day of Executives taxable year following the taxable year in which the related expense was incurred; provided, that, Executive has provided the Company written documentation of such expenses in a timely fashion and such expenses otherwise satisfy the Company expense reimbursement policies. Reimbursements pursuant to this Agreement or otherwise are not subject to liquidation or exchange for another benefit and the amount of such reimbursements that Executive receives in one taxable year shall not affect the amount of such reimbursements that Executive receives in any other taxable year. Notwithstanding any provision
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in this Agreement to the contrary, if on the date of his termination from employment with the Company Executive is deemed to be a specified employee within the meaning of Code Section 409A and the Final Treasury Regulations using the identification methodology selected by the Company from time to time, or if none, the default methodology under Code Section 409A, any payments or benefits due upon a termination of Executives employment under any arrangement that constitutes a deferral of compensation within the meaning of Code Section 409A shall be delayed and paid or provided (or commence, in the case of installments) on the first payroll date on or following the earlier of (i) the date which is six (6) months and one (1) calendar day after Executives termination of employment for any reason other than death, and (ii) the date of Executives death, and any remaining payments and benefits shall be paid or provided in accordance with the normal payment dates specified for such payment or benefit. Notwithstanding any of the foregoing to the contrary, the Company and its respective officers, directors, employees, or agents make no guarantee that the terms of this Agreement as written comply with, or are exempt from, the provisions of Code Section 409A, and none of the foregoing shall have any liability for the failure of the terms of this Agreement as written to comply with, or be exempt from, the provisions of Code Section 409A.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties hereto have executed this Amended and Restatement Employment Agreement as of the date first written above.
EVERTEC GROUP, LLC | ||
/s/ Peter Harrington | ||
Name: | Peter Harrington | |
Title: | President & Chief Executive Officer | |
CARLOS J. RAMIREZ | ||
/s/ Carlos J. Ramírez | ||
Title: | Executive Vice President |
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Exhibit 10.62
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AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the Agreement) by and between EVERTEC GROUP, LLC, a Puerto Rico limited liability company (the Company), and Eduardo Franco de Camargo (Executive, and collectively, the Parties) is made as of this 1st day of July, 2014 (the Effective Date).
WHEREAS, Executive and the Company previously entered into an employment agreement dated November 5, 2013 (the Original Effective Date); and
WHEREAS, the Parties desire to amend and restate the employment agreement pursuant to the terms, provisions and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants, understandings, representations, warranties, undertakings and promises hereinafter set forth, intending to be legally bound thereby, the Parties agree as follows:
1. | Employment Period. |
Subject to earlier termination in accordance with Section 3 of this Agreement, Executive shall continue to be employed by the Company until the 30th day of November, 2018 (the Employment Period) unless the parties mutually agree to extend the term at least 90 calendar days prior to the end of the Employment Period. Upon Executives termination of employment with the Company for any reason, Executive shall immediately resign all positions with the Company or any of its subsidiaries or affiliates.
2. | Terms of Employment. |
(a) Position. During the Employment Period, Executive shall serve as Executive Vice President and Chief Information Officer of the Company and will perform such duties and exercise such supervision with regard to the business of the Company as are associated with such positions, including such duties as may be prescribed from time to time by the President and Chief Executive Officer of the Company (the CEO). Executive shall report directly to the CEO and if requested by the CEO, Executive hereby agrees to serve (without additional compensation) as an officer and director of the Company or any affiliate or subsidiary thereof.
(b) Duties. During the Employment Period, Executive shall have such responsibilities, duties, and authority that are customary for his position, subject at all times to the control of the CEO, and shall perform such services as customarily are provided by an executive of a corporation with his position and such other services consistent with his position, as shall be assigned to him from time to time by the CEO. During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled in accordance with Company policies, the Executive agrees to devote all of his business time to the business and affairs of the Company and to use Executives commercially reasonable efforts to perform faithfully, effectively and efficiently his responsibilities and obligations hereunder.
(c) Principal Work Location. As soon as Executive obtains all applicable work permits required by the United States Immigration Service, Executives principal work location,
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subject to travel on Company business, shall be the Companys headquarters in Puerto Rico at which time Executive shall be required to relocate his primary residence to Puerto Rico. Until such time, Executive will work at the Companys main offices in Costa Rica, or at such other location as reasonably requested by the Companys Chief Executive Officer.
(d) Compensation.
(i) Base Salary. During the Employment Period, Executive shall receive an initial annual base salary in an amount equal to Two Hundred and Sixty Thousand Dollars ($260,000), less all applicable withholdings, which shall be paid in accordance with the customary payroll practices of the Company (as in effect from time to time, the Annual Base Salary). The Annual Base Salary shall be prorated for partial calendar years of employment and shall be subject to annual review and possible increase as determined by the Board, in its sole discretion.
(ii) Annual Bonus. During the Employment Period, with respect to each completed fiscal year of the Company, Executive shall be eligible to receive a bonus (the Bonus) pursuant to the terms and conditions set forth in the EVERTEC Annual Performance Incentive Guidelines in effect on the date eligibility for a bonus is determined;
(iii) Options. To the extent that Executive was granted options to purchase shares of common stock of EVERTEC, Inc., such options shall be subject to the terms of the applicable award agreement and the applicable Equity Incentive Plan.
(iv) Benefits. During the Employment Period, Executive shall be eligible to participate in all retirement, compensation and employee benefit plans, practices, policies and programs provided by the Company to other executives of the Company (except severance plans, policies, practices, or programs) subject to the eligibility criteria set forth therein, as such may be amended or terminated from time to time.
(v) Expenses. During the Employment Period, Executive shall be entitled to receive reimbursement for all reasonable business expenses incurred by Executive in performance of his duties hereunder provided that Executive provides all necessary documentation in accordance with the Companys policies.
(vi) Relocation. The Company will reimburse Executive for reasonable costs incurred in connection with his relocation to Puerto Rico, including (A) reasonable travel in connection with finding a residence in Puerto Rico, (B) temporary lodging to the extent reasonably necessary and (C) reasonable incidental expenses, in each case, upon reasonable substantiation and subject to a maximum amount of $50,000.
3. | Termination of Employment. |
(a) Death or Disability. Executives employment shall terminate automatically upon Executives death. If Executive becomes subject to a Disability (as defined below) during the Employment Period, the Company may give Executive written notice in accordance with Sections 3(g) and 9(g) of its intention to terminate Executives employment. For purposes of this
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Agreement, Disability means Executives inability to perform his duties hereunder by reason of any medically determinable physical or mental impairment for a period of six (6) months or more in any twelve (12) month period, subject to reasonable accommodation.
(b) Cause. Executives employment may be terminated at any time by the Company for Cause (as defined below). For purposes of this Agreement, Cause shall mean Executives (i) commission of a felony or a crime of moral turpitude, (ii) engaging in conduct that constitutes fraud or embezzlement, (iii) engaging in conduct that constitutes gross negligence or willful misconduct that results or could reasonably be expected to result in harm to the Companys business or reputation, (iv) breach of any material terms of Executives employment, including this Agreement, which results or could reasonably be expected to result in harm to the Companys business or reputation, (v) continued willful failure to substantially perform duties as Executive Vice President and Chief Information Officer or (vi) failure to relocate his primary residence to Puerto Rico within six (6) months following the Original Effective Date (unless such failure to relocate shall be due to the failure to have obtained all applicable work permits required by the United States Immigration Service through no fault of Executive). Executives employment shall not be terminated for Cause within the meaning of clauses (iv) and (v) above unless Executive has been given written notice by the Board stating the basis for such termination and Executive is given fifteen (15) calendar days to cure, to the extent curable, the neglect or conduct that is the basis of any such claim.
(c) Termination Without Cause. The Company may terminate Executives employment hereunder without Cause at any time.
(d) Good Reason. Executives employment may be terminated at any time by Executive for Good Reason upon thirty (30) calendar days prior written notice following the occurrence of the event giving rise to the termination for Good Reason. For purposes of this Agreement, Good Reason means voluntary resignation after any of the following actions taken by the Company without Executives written consent: (i) any material failure of the Company to fulfill its obligations under this Agreement, (ii) a material and adverse change to, or a material reduction of, Executives duties and responsibilities to the Company, (iii) a material reduction in Executives then current Annual Base Salary (not including any diminution related to a broader compensation reduction that is not limited to Executive specifically and that is not more than 10% in the aggregate), or (iv) the failure of any successor (whether by sale, reorganization, consolidation, merger or other corporate transaction) to assume this Agreement, whether in writing or by operation of law; provided, that any such event shall not constitute Good Reason unless and until Executive shall have provided the Company with notice thereof no later than 30 calendar days following Executives knowledge of the occurrence of such event and the Company shall have failed to remedy such event within 30 calendar days of receipt of such notice.
(e) Voluntary Termination. Executives employment may be terminated at any time by Executive without Good Reason upon 30 calendar days prior written notice.
(f) Termination as a Result of Expiration of the Employment Period. Unless otherwise agreed between the parties, Executives employment shall automatically terminate upon expiration of the Employment Period.
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(g) Notice of Termination. Any termination by the Company for Cause or without Cause, or by Executive for Good Reason or without Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 9(g). For purposes of this Agreement, a Notice of Termination means a written notice that (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executives employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date. The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company hereunder or preclude Executive or the Company from asserting such fact or circumstance in enforcing Executives or the Companys rights hereunder.
(h) Date of Termination. Date of Termination means (i) if Executives employment is terminated by the Company for Cause, without Cause or by reason of Disability, or by Executive for Good Reason or without Good Reason, the date of receipt of the Notice of Termination (in the case of a termination with or without Good Reason, provided such Date of Termination is in accordance with Section 3(d) or Section 3(e)) or any later date specified therein pursuant to Section 3(g), as the case may be, (ii) if Executives employment is terminated by reason of death, the date of death, and (iii) the expiration of the Employment Period, and the termination of Executives employment upon the date of such expiration.
4. | Obligations of the Company upon Termination. |
(a) With Good Reason; Without Cause. If during the Employment Period, the Company shall terminate Executives employment without Cause or Executive shall terminate his employment for Good Reason, then the Company will provide Executive with the following payments and/or benefits:
(i) The Company shall pay to Executive as soon as reasonably practicable but no later than the 15th day of the third month following the end of the calendar year that contains the Date of Termination in a lump sum to the extent not previously paid, (A) the Annual Base Salary through the Date of Termination, (B) the Bonus earned for any fiscal year ended prior to the year in which the Date of Termination occurs, provided that Executive was employed on the last day of such fiscal year, (C) the amount of any unpaid expense reimbursements to which Executive may be entitled pursuant to Section 2(d)(vi) hereof and (D) any other vested payments or benefits to which Executive or Executives estate may be entitled to receive under any of the Companys benefit plans or applicable law, in accordance with the terms of such plans or law (clauses (A)-(D), the Accrued Obligations); and
(ii) Subject to Section 4(e) below, after the Date of Termination, the Company will pay Executive severance in an amount equal to the greater of (a) Executives Annual Base Salary and (b) amounts due under applicable laws (the Severance Payment) . The Severance Payment shall be made in a lump sum on the date that is 60 calendar days following the Date of Termination, subject to the terms and conditions in Section 4(e) below.
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(b) Death or Disability. If Executives employment shall be terminated by reason of the Executives death or Disability, then the Company will provide Executive with the Accrued Obligations. Thereafter, the Company shall have no further obligation to Executive, his estate, his beneficiaries or his legal representatives.
(c) Cause; Other than for Good Reason. If Executives employment shall be terminated by the Company for Cause or by Executive without Good Reason, then the Company shall have no further obligations to Executive other than for payment of the Accrued Obligations.
(d) Expiration of the Employment Period. If Executives employment shall be terminated by reason of the expiration of the Employment Period, then the Company will provide Executive with the Accrued Obligations. Thereafter, the Company shall have no further obligation to Executive or his legal representatives.
(e) Separation Agreement and General Release. The Companys obligation to make the Severance Payment is conditioned on Executives or his legal representatives executing a separation agreement and general release of claims related to or arising from Executives employment with the Company or the termination of employment, against the Company and its affiliates (and their respective officers and directors) in a form reasonably determined by the Company, which shall be provided by the Company to Executive within five (5) calendar days following the Date of Termination; provided, that, if Executive should fail to execute (or revokes) such release within 45 calendar days following the Date of Termination, the Company shall not have any obligation to provide the Severance Payment. If Executive executes the release within such 45-calendar day period and does not revoke the release within seven (7) calendar days following the execution of the release, the Severance Payment will be made in accordance with Section 4(a)(ii).
5. | Restrictive Covenants. |
(a) In consideration of Executives employment and receipt of payments hereunder, including, without limitation, the grant of options under Section 2(d), during the period commencing on the Original Effective Date and ending twelve (12) months after the Date of Termination, Executive shall not directly, or indirectly through another person, (i) induce or attempt to induce any employee, representative, agent or consultant of the Company or any of its Affiliates or subsidiaries to leave the employ or services of the Company or any of its affiliates or subsidiaries, or in any way interfere with the relationship between the Company or any of its affiliates or subsidiaries and any employee, representative, agent or consultant thereof or (ii) hire any person who was an employee, representative, agent or consultant of the Company or any of its affiliates or subsidiaries at any time during the twelve-month period immediately prior to the date on which such hiring would take place. No action by another person or entity shall be deemed to be a breach of this provision unless the Executive directly or indirectly assisted, encouraged or otherwise counseled such person or entity to engage in such activity.
(b) Non-Competition. Executive hereby acknowledges that it is familiar with the Confidential Information (as defined below) of the Company and its subsidiaries. Executive acknowledges and agrees that the Company would be irreparably damaged if Executive were to provide services to any person competing with the Company or any of its affiliates or
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subsidiaries or engaged in a Similar Business (as defined below) and that such competition by Executive would result in a significant loss of goodwill by the Company. Therefore, Executive agrees that the following are reasonable restrictions:
i) Similar Business: During the Employment Period, and for a term of twelve (12) months immediately after the termination of such relationship (voluntarily or involuntarily), Executive shall not, directly or indirectly, engage in Similar Business services or activities within the Commonwealth of Puerto Rico; provided, that nothing herein shall prohibit Executive from being a passive owner of not more than 5% of the outstanding stock of any class of a corporation which is publicly traded so long as none of such persons has any active participation in the business of such corporation.
ii) Clients: For a period of twelve (12) months after the termination the Executives employment relationship with the Company (voluntarily or involuntarily) Executive shall not, directly or indirectly, solicit or provide, without the written consent from the Company, any service for any Client, such as those Similar Business services or activities provided by Executive during his employment relationship.
For purposes of this Section 5(b) of the Agreement, the following terms shall have these meanings:
Similar Business shall mean the same or substantially the same business activity or activities performed or engaged by Executive for, or on behalf, of the Company.
Client shall mean any person or entity that was a client or customer of the Company at the time of termination of Executives employment relationship with the Company and for whom Executive provided any services on behalf of the Company or any of its affiliates or subsidiaries at any time, during the term of five (5) years prior to such termination.
Executive warrants and represents that the nature and extent of this non-competition clause has been fully explained to Executive by the Company, and that Executives decision to accept the same is made voluntarily, knowingly, intelligently and free from any undue pressure or coercion. Executive further warrants and represents that he has agreed to this non-competition clause in exchange for the increase in Base Salary Executive is receiving under this Agreement.
(c) Non-Disclosure; Non-Use of Confidential Information. Executive shall not disclose or use at any time, either during his employment with the Company or at any time thereafter, any Confidential Information of which Executive is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and required by Executives performance in good faith of duties assigned to Executive by the Company. Executive will take all appropriate steps to safeguard Confidential Information in his possession and to protect it against disclosure, misuse, espionage, loss and theft. Executive shall deliver to the Company at the termination of his employment with the Company, or at any time the Company may request, all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information or the Work Product (as defined in Section 5(e)(ii)) of the business of the Company that Executive may then possess or have under his control.
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(d) Proprietary Rights. Executive recognizes that the Company possesses a proprietary interest in all Confidential Information and Work Product and has the exclusive right and privilege to use, protect by copyright, patent or trademark, or otherwise exploit the processes, ideas and concepts described therein to the exclusion of Executive, except as otherwise agreed between the Company and Executive in writing. Executive expressly agrees that any Work Product made or developed by Executive or his agents during the course of Executives employment, including any Work Product which is based on or arises out of Work Product, shall be the property of and inure to the exclusive benefit of the Company. Executive further agrees that all Work Product developed by Executive (whether or not able to be protected by copyright, patent or trademark) during the course of his employment with the Company, or involving the use of the time, materials or other resources of the Company, shall be promptly disclosed to the Company and shall become the exclusive property of the Company, and Executive shall execute and deliver any and all documents necessary or appropriate to implement the foregoing.
(e) Certain Definitions.
(i) As used herein, the term Confidential Information means information that is not generally known to the public (but for purposes of clarity, Confidential Information shall never exclude any such information that becomes known to the public because of Executives unauthorized disclosure) and that is used, developed or obtained by the Company in connection with its business, including, but not limited to, information, observations and data obtained by Executive while employed by the Company concerning (A) the business or affairs of the Company, (B) products or services, (C) fees, costs and pricing structures, (D) designs, (E) analyses, (F) drawings, photographs and reports, (G) computer software, including operating systems, applications and program listings, (H) flow charts, manuals and documentation, (I) databases, (J) accounting and business methods, (K) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice, (L) customers and clients and customer or client lists, (M) other copyrightable works, (N) all production methods, processes, technology and trade secrets, and (O) all similar and related information in whatever form. Confidential Information will not include any information that has been published in a form generally available to the public (except as a result of Executives unauthorized disclosure) prior to the date Executive proposes to disclose or use such information. Confidential Information will not be deemed to have been published or otherwise disclosed merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination.
(ii) As used herein, the term Work Product means all inventions, innovations, improvements, technical information, systems, software developments, methods, designs, analyses, drawings, reports, service marks, trademarks, trade names, logos and all similar or related information (whether patentable or unpatentable) that relates to the Companys actual or anticipated business, research and development or existing or future products or services and that are conceived, developed or made by Executive (whether or not during usual business hours and whether or not alone or in conjunction with any other person) while employed by the Company together with all patent applications, letters patent, trademark, trade name and service mark applications or registrations, copyrights and reissues thereof that may be granted for or upon any of the foregoing.
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6. | Non-Disparagement. |
During the Employment Period and at all times thereafter, neither Executive nor his agents, on the one hand, nor the Company formally, or its executives or board of directors, on the other hand, shall directly or indirectly issue or communicate any public statement, or statement likely to become public, that maligns, denigrates or disparages the other (including, in the case of communications by Executive or his agents, the Company or any of the Companys officers, directors or employees. The foregoing shall not be violated by truthful responses to (i) legal process or governmental inquiry or (ii) by private statements to the Company or any of Companys officers, directors or employees; provided, that in the case of Executive, with respect to clause (ii), such statements are made in the course of carrying out his duties pursuant to this Agreement.
7. | Confidentiality of Agreement. |
The Parties agree that the consideration furnished under this Agreement, the discussions and correspondence that led to this Agreement, and the terms and conditions of this Agreement are private and confidential. Except as may be required by applicable law, regulation, or stock exchange requirement, neither Party may disclose the above information to any other person or entity without the prior written approval of the other.
8. | Executives Representations, Warranties and Covenants. |
(a) Executive hereby represents and warrants to the Company that:
(i) Executive has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and this Agreement has been duly executed by Executive;
(ii) the execution, delivery and performance of this Agreement by Executive does not and will not, with or without notice or the passage of time, conflict with, breach, violate or cause a default under any agreement, contract or instrument to which Executive is a party or any judgment, order or decree to which Executive is subject;
(iii) Executive is not a party to or bound by any employment agreement, consulting agreement, non-compete agreement, fee for services agreement, confidentiality agreement or similar agreement with any other person;
(iv) upon the execution and delivery of this Agreement by the Company and Executive, this Agreement will be a legal, valid and binding obligation of Executive, enforceable in accordance with its terms;
(v) Executive understands that the Company will rely upon the accuracy and truth of the representations and warranties of Executive set forth herein and Executive consents to such reliance; and
(vi) as of the date of execution of this Agreement, Executive is not in breach of any of its terms, including having committed any acts that would form the basis for a Cause termination if such act had occurred after the Original Effective Date.
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(b) The Company hereby represents and warrants to Executive that:
(i) the Company has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and this Agreement has been duly executed by the Company;
(ii) the execution, delivery and performance of this Agreement by the Company does not and will not, with or without notice or the passage of time, conflict with, breach, violate or cause a default under any agreement, contract or instrument to which the Company is a party or any judgment, order or decree to which the Company is subject;
(iii) upon the execution and delivery of this Agreement by the Company and Executive, this Agreement will be a legal, valid and binding obligation of the Company, enforceable in accordance with its terms; and
(iv) the Company understands that Executive will rely upon the accuracy and truth of the representations and warranties of the Company set forth herein and the Company consents to such reliance.
9. | General Provisions. |
(a) Severability. It is the desire and intent of the Parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Upon a determination that any term or provision (or any portion thereof with the exception of the Non-Competition covenant contained in Section 5(b) of this Agreement) is invalid, illegal, or incapable of being enforced, the Parties agree that a reviewing court shall have the authority to blue pencil or modify this agreement so as to render it enforceable and effect the original intent of the parties to the fullest extent permitted by applicable law.
(b) Entire Agreement and Effectiveness. Effective as of the Effective Date, this Agreement embodies the complete agreement and understanding among the Parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the Parties, written or oral, which may have related to the subject matter hereof in any way (excluding any stock options or awards granted under any equity compensation plans maintained by the Company).
(c) Successors and Assigns.
(i) This Agreement is personal to Executive and without the prior written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executives legal representatives.
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(ii) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, Company shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law, or otherwise.
(d) Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PUERTO RICO, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE COMMONWEALTH OF PUERTO RICO OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE COMMONWEALTH OF PUERTO RICO TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE COMMONWEALTH OF PUERTO RICO WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTIONS CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
(e) Enforcement.
(i) Arbitration. Except for disputes arising under Sections 5 and 6 of this Agreement (including, without limitation, any claim for injunctive relief), any controversy, dispute or claim arising out of or relating to this Agreement, or its interpretation, application, implementation, breach or enforcement which the Parties are unable to resolve by mutual agreement, shall be settled by submission by either Executive or the Company of the controversy, claim or dispute to binding arbitration in San Juan, Puerto Rico (unless the Parties agree in writing to a different location), before a single arbitrator in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association then in effect. In any such arbitration proceeding the Parties agree to provide all discovery deemed necessary by the arbitrator. The decision and award made by the arbitrator shall be accompanied by a reasoned opinion, and shall be final, binding and conclusive on all Parties hereto for all purposes, and judgment may be entered thereon in any court having jurisdiction thereof. The Company will bear the totality of the arbitrators and administrative fees and costs. Each party shall bear its or his litigation costs and expenses; provided, however, that the arbitrator shall have the discretion to award the prevailing party reimbursement of its or his reasonable attorneys fees and costs. Upon the request of any of the parties, at any time prior to the beginning of the arbitration hearing the parties may attempt in good faith to settle the dispute by mediation administered by the American Arbitration Association. The Company will bear the totality of the mediators and administrative fees and costs.
(ii) Remedies. All remedies hereunder are cumulative, are in addition to any other remedies provided for by law and may, to the extent permitted by law, be exercised concurrently or separately, and the exercise of any one remedy shall not be deemed to be an election of such remedy or to preclude the exercise of any other remedy.
(iii) Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.
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(f) Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and Executive and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall be construed as a waiver of such provisions or affect the validity, binding effect or enforceability of this Agreement or any provision hereof.
(g) Notices. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) in an envelope marked confidential to the recipient at the address below indicated or at such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Notices will be deemed to have been given hereunder and received when delivered personally, five calendar days after deposit in the U.S. mail and one calendar day after deposit for overnight delivery with a reputable overnight courier service.
If to the Company, to:
EVERTEC GROUP, LLC
GENERAL COUNSEL AND HUMAN RESOURCES SENIOR VICE PRESIDENT
Carr #176, Km 1.3
Cupey Bajo, Rio Piedras Puerto Rico 00926
P.O. Box 364527
San Juan, Puerto Rico 00936-4527
Telephone: (787) 759-9999
with a copy (which shall not constitute notice) to:
McConnell Valdés LLC
EVERTEC GROUP, LLCS CLIENT SERVICE COORDINATOR (CSC)
PO Box 364225
San Juan, Puerto Rico 00936-4225
Telephone: (787) 759-9292
If to Executive, to:
Executives home address most recently on file with the Company.
(h) Withholdings Taxes. The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.
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(i) Survival of Representations, Warranties and Agreements. All representations, warranties and agreements contained herein shall survive the consummation of the transactions contemplated hereby indefinitely.
(j) Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. All references to a Section in this Agreement are to a section of this Agreement unless otherwise noted.
(k) Construction. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party.
(l) Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.
(m) Section 409A. Notwithstanding anything herein to the contrary, this Agreement is intended to be interpreted and applied so that the payment of the benefits set forth herein either shall either be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the Code), or shall comply with the requirements of such provision. Notwithstanding anything in this Agreement or elsewhere to the contrary, distributions upon termination of Executives employment may only be made upon a separation from service as determined under Section 409A of the Code. Each payment under this Agreement or otherwise shall be treated as a separate payment for purposes of Section 409A of the Code. In no event may Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement or otherwise which constitutes a deferral of compensation within the meaning of Section 409A of the Code. All reimbursements and in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A of the Code. To the extent that any reimbursements pursuant to this Agreement or otherwise are taxable to Executive, any reimbursement payment due to Executive shall be paid to Executive on or before the last calendar day of Executives taxable year following the taxable year in which the related expense was incurred; provided, that, Executive has provided the Company written documentation of such expenses in a timely fashion and such expenses otherwise satisfy the Company expense reimbursement policies. Reimbursements pursuant to this Agreement or otherwise are not subject to liquidation or exchange for another benefit and the amount of such reimbursements that Executive receives in one taxable year shall not affect the amount of such reimbursements that Executive receives in any other taxable year. Notwithstanding any provision in this Agreement to the contrary, if on the date of his termination from employment with the Company Executive is deemed to be a specified employee within the meaning of Code Section 409A and the Final Treasury Regulations using the identification methodology selected by the Company from time to time, or if none, the default methodology under Code Section 409A, any payments or benefits due upon a termination of Executives employment under any arrangement that constitutes a deferral of compensation within the meaning of Code Section 409A shall be delayed and paid or provided (or commence, in the case of installments) on the first payroll date on or following the earlier of (i) the date which is six (6) months and one (1) calendar day after
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Executives termination of employment for any reason other than death, and (ii) the date of Executives death, and any remaining payments and benefits shall be paid or provided in accordance with the normal payment dates specified for such payment or benefit. Notwithstanding any of the foregoing to the contrary, the Company and its respective officers, directors, employees, or agents make no guarantee that the terms of this Agreement as written comply with, or are exempt from, the provisions of Code Section 409A, and none of the foregoing shall have any liability for the failure of the terms of this Agreement as written to comply with, or be exempt from, the provisions of Code Section 409A.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties hereto have executed this Amended and Restatement Employment Agreement as of the date first written above.
EVERTEC GROUP, LLC | ||
/s/ Peter Harrington | ||
Name: | Peter Harrington | |
Title: | President & Chief Executive Officer | |
EDUARDO FRANCO DE CAMARGO | ||
/s/ Eduardo Franco de Camargo | ||
Title: | Executive Vice President & Chief Information Officer |
Exhibit 10.63
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AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the Agreement) by and between EVERTEC GROUP, LLC, a Puerto Rico limited liability company (the Company), and Juan José Román Jiménez (Executive, and (collectively, the Parties) is made as of this 1st day of July, 2014 (the Effective Date).
WHEREAS, Executive and the Company previously entered into an employment agreement dated June 30, 2011 (the Original Effective Date); and
WHEREAS, the Parties desire to amend and restate the employment agreement pursuant to the terms, provisions and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants, understandings, representations, warranties, undertakings and promises hereinafter set forth, intending to be legally bound thereby, the Parties agree as follows:
1. | Employment Period. |
Subject to earlier termination in accordance with Section 3 of this Agreement, Executive shall continue to be employed by the Company until the fifth (5th) anniversary of the Original Effective Date (the Employment Period) unless the parties mutually agree to extend the term at least 90 calendar days prior to the end of the Employment Period. Upon Executives termination of employment with the Company for any reason, Executive shall immediately resign all positions with the Company or any of its subsidiaries or affiliates, including any position as a member of the Companys or any of its subsidiaries respective Board of Directors.
2. | Terms of Employment. |
(a) Position. During the Employment Period, Executive shall serve as Executive Vice President and Chief Financial Officer of the Company and will perform such duties and exercise such supervision with regard to the business of the Company as are associated with such positions, including such duties as may be prescribed from time to time by the Board of Directors of the Company (the Board) or the Companys President and Chief Executive Officer of the Company (the CEO). Executive shall report directly to the CEO and if reasonably requested by the CEO or the Board, Executive hereby agrees to serve (without additional compensation) as an officer and director of the Company or any affiliate or subsidiary thereof.
(b) Duties. During the Employment Period, Executive shall have such responsibilities, duties, and authority that are customary for his position, subject at all times to the control of the Board, and shall perform such services as customarily are provided by an executive of a corporation with his position and such other services consistent with his position, as shall be assigned to him from time to time by the Board. During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled in accordance with Company policies, the Executive agrees to devote all of his business time to the business and affairs of the Company and to use Executives commercially reasonable efforts to perform faithfully, effectively and efficiently his responsibilities and obligations hereunder. The
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Executive shall be entitled to engage in charitable and educational activities and to manage his personal and family investments, to the extent such activities are not competitive with the business of the Company, do not interfere with the performance of his duties for the Company and are otherwise consistent with the Companys governance policies.
(c) Principal Work Location. Executives principal work location, subject to travel on Company business, shall be the Companys headquarters in Puerto Rico.
(d) Compensation.
(i) Base Salary. During the Employment Period, Executive shall receive an annual base salary in an amount equal to Four Hundred Thousand Dollars ($400,000) , less all applicable withholdings, which shall be paid in accordance with the customary payroll practices of the Company (as in effect from time to time, the Annual Base Salary). The Annual Base Salary shall be prorated for partial calendar years of employment and shall be subject to annual review and possible increase as determined by the Board, in its sole discretion; for possible increase and any such increased Annual Base Salary shall constitute Annual Base Salary for purposes of this Agreement.
(ii) Annual Bonus. During the Employment Period, with respect to each completed fiscal year of the Company, Executive shall be eligible to receive a bonus (the Bonus) pursuant to the terms and conditions set forth in the EVERTEC Annual Performance Incentive Guidelines in effect on the date eligibility for a bonus is determined;
(iii) Options. To the extent that Executive was granted options to purchase shares of common stock of EVERTEC, Inc., such options shall be subject to the terms of the applicable award agreement and the applicable Equity Incentive Plan.
(iv) Benefits. During the Employment Period, Executive shall be eligible to participate in all retirement, compensation and employee benefit plans, practices, policies and programs provided by the Company to the extent applicable generally to other executives of the Company (except severance plans, policies, practices, or programs) subject to the eligibility criteria set forth therein, as such may be amended or terminated from time to time. In addition, the Company shall provide Executive with directors and officers insurance coverage at least equal to that provided to other Company directors and officers.
(v) Expenses. During the Employment Period, Executive shall be entitled to receive reimbursement for all reasonable business expenses incurred by Executive in performance of his duties hereunder provided that Executive provides all necessary documentation in accordance with the Companys policies.
3. | Termination of Employment. |
(a) Death or Disability. Executives employment shall terminate automatically upon Executives death. If Executive becomes subject to a Disability (as defined below) during the Employment Period, the Company may give Executive written notice in accordance with Sections 3(g) and 9(g) of its intention to terminate Executives employment. For purposes of this
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Agreement, Disability means Executives inability to perform his duties hereunder by reason of any medically determinable physical or mental impairment for a period of six (6) months or more in any twelve (12) month period.
(b) Cause. Executives employment may be terminated at any time by the Company for Cause (as defined below). For purposes of this Agreement, Cause shall mean Executives (i) commission of a felony or a crime of moral turpitude, (ii) engaging in conduct that constitutes fraud or embezzlement, (iii) engaging in conduct that constitutes gross negligence or willful misconduct that results or could reasonably be expected to result in harm to the Companys business or reputation, (iv) breach of any material terms of Executives employment, including this Agreement, which results or could reasonably be expected to result in harm to the Companys business or reputation or (v) continued willful failure to substantially perform duties as executive vice president and chief financial officer. Executives employment shall not be terminated for Cause within the meaning of clauses (iv) and (v) above unless Executive has been given written notice by the Board stating the basis for such termination and Executive is given fifteen (15) calendar days to cure, to the extent curable, the neglect or conduct that is the basis of any such claim.
(c) Termination Without Cause. The Company may terminate Executives employment hereunder without Cause at any time.
(d) Good Reason. Executives employment may be terminated at any time by Executive for Good Reason upon sixty (60) calendar days prior written notice following the occurrence of the event giving rise to the termination for Good Reason. For purposes of this Agreement, Good Reason means voluntary resignation after any of the following actions taken by the Company without Executives written consent: (i) any material failure of the Company to fulfill its obligations under this Agreement, (ii) a material and adverse change to, or a material reduction of, Executives duties and responsibilities to the Company, including, without limitation, removing Executive from the position of Chief Financial Officer, (iii) a material reduction in Executives then current Annual Base Salary (not including any diminution related to a broader compensation reduction that is not limited to Executive specifically and that is not more than 10% in the aggregate), or (iv) the relocation of Executives primary office to a location more than 50 miles from the prior location that materially increases Executives commute to work or (v) the failure of any successor (whether by sale, reorganization, consolidation, merger or other corporate transaction) to assume this Agreement, whether in writing or by operation of law; provided, that any such event shall not constitute Good Reason unless and until Executive shall have provided the Company with notice thereof no later than 30 calendar days following Executives knowledge of the occurrence of such event and the Company shall have failed to remedy such event within 30 calendar days of receipt of such notice.
(e) Voluntary Termination. Executives employment may be terminated at any time by Executive without Good Reason upon 30 calendar days prior written notice.
(f) Termination as a Result of Expiration of the Employment Period. Unless otherwise agreed between the parties, Executives employment shall automatically terminate upon expiration of the Employment Period.
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(g) Notice of Termination. Any termination by the Company for Cause or without Cause, or by Executive for Good Reason or without Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 9(g). For purposes of this Agreement, a Notice of Termination means a written notice that (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executives employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date. The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company hereunder or preclude Executive or the Company from asserting such fact or circumstance in enforcing Executives or the Companys rights hereunder.
(h) Date of Termination. Date of Termination means (i) if Executives employment is terminated by the Company for Cause, without Cause or by reason of Disability, or by Executive for Good Reason or without Good Reason, the date of receipt of the Notice of Termination (in the case of a termination with or without Good Reason, provided such Date of Termination is in accordance with Section 3(d) or Section 3(e)) or any later date specified therein pursuant to Section 3(g), as the case may be, (ii) if Executives employment is terminated by reason of death, the date of death, and (iii) the expiration of the Employment Period, and the termination of Executives employment upon the date of such expiration.
4. | Obligations of the Company upon Termination. |
(a) With Good Reason; Without Cause. If during the Employment Period, the Company shall terminate Executives employment without Cause or Executive shall terminate his employment for Good Reason, then the Company will provide Executive with the following payments and/or benefits:
(i) The Company shall pay to Executive as soon as reasonably practicable but no later than the 15th day of the third month following the end of the calendar year that contains the Date of Termination in a lump sum to the extent not previously paid, (A) the Annual Base Salary through the Date of Termination, (B) the Bonus earned for any fiscal year ended prior to the year in which the Date of Termination occurs, provided that Executive was employed on the last day of such fiscal year, (C) the amount of any unpaid expense reimbursements to which Executive may be entitled pursuant to Section 2(d)(vi) hereof and (D) any other vested payments or benefits to which Executive or Executives estate may be entitled to receive under any of the Companys benefit plans or applicable law, in accordance with the terms of such plans or law (clauses (A)-(D), the Accrued Obligations), and (E) in the event that the termination occurs after September 30 of a given year, a prorated amount of the Annual Bonus for such year based on the number of days elapsed, determined and payable in such manner and at such time as annual bonuses in respect of such year are generally paid (the Prorated Bonus); and
(ii) Subject to Section 4(e) below, after the Date of Termination, the Company will pay Executive severance in an amount equal to the greater of (a) Executives Annual Base Salary and (b) amounts due under applicable laws (the Severance Payment) . The Severance Payment shall be made in a lump sum on the date that is 60 calendar days following the Date of Termination, subject to the terms and conditions in Section 4(e) below.
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(b) Death or Disability. If Executives employment shall be terminated by reason of the Executives death or Disability, then the Company will provide Executive with the Accrued Obligations. Thereafter, the Company shall have no further obligation to Executive, his estate, his beneficiaries or his legal representatives.
(c) Cause; Other than for Good Reason. If Executives employment shall be terminated by the Company for Cause or by Executive without Good Reason, then the Company shall have no further obligations to Executive other than for payment of the Accrued Obligations.
(d) Expiration of the Employment Period. If Executives employment shall be terminated by reason of the expiration of the Employment Period as result of the Companys non-extension, then the Company will provide Executive with the Accrued Obligations, the Prorated Bonus and the greater of (i) continued payment of Base Salary for a period of six months in accordance with the Companys payroll practices (the Salary Continuation) and (ii) amounts due under applicable law. If Executives employment shall be terminated by reason of the expiration of the Employment Period as result of the Executives non-extension, then the Company will provide Executive with the Accrued Obligations. Thereafter, in either event, the Company shall have no further obligation to Executive or his legal representatives.
(e) Separation Agreement and General Release. The Companys obligation to make the Severance Payment or to pay the Salary Continuation is conditioned on Executives or his legal representatives executing a separation agreement and general release of claims related to or arising from Executives employment with the Company or the termination of employment, against the Company and its affiliates (and their respective officers and directors) in a form reasonably determined by the Company, which shall be provided by the Company to Executive within five (5) calendar days following the Date of Termination; provided, that, if Executive should fail to execute (or revokes) such release within 45 calendar days following the Date of Termination, the Company shall not have any obligation to provide the Severance Payment or the Salary Continuation. If Executive executes the release within such 45-calendar day period and does not revoke the release within seven (7) calendar days following the execution of the release, the Severance Payment will be made in accordance with Section 4(a)(ii) or the Salary Continuation shall commence at such time, as applicable.
5. | Restrictive Covenants. |
(a) In consideration of Executives employment and receipt of payments hereunder, including, without limitation, the grant of options under Section 2(d), during the period commencing on the Original Effective Date and ending twelve (12) months after the Date of Termination, Executive shall not directly, or indirectly through another person, (i) induce or attempt to induce any employee, representative, agent or consultant of the Company or any of its Affiliates or subsidiaries to leave the employ or services of the Company or any of its affiliates or subsidiaries, or in any way interfere with the relationship between the Company or any of its affiliates or subsidiaries and any employee, representative, agent or consultant thereof or (ii) hire any person who was an employee, representative, agent or consultant of the Company or any of
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its affiliates or subsidiaries at any time during the twelve-month period immediately prior to the date on which such hiring would take place. No action by another person or entity shall be deemed to be a breach of this provision unless the Executive directly or indirectly assisted, encouraged or otherwise counseled such person or entity to engage in such activity.
(b) Non-Competition. Executive hereby acknowledges that it is familiar with the Confidential Information (as defined below) of the Company and its subsidiaries. Executive acknowledges and agrees that the Company would be irreparably damaged if Executive were to provide services to any person competing with the Company or any of its affiliates or subsidiaries or engaged in a Similar Business (as defined below) and that such competition by Executive would result in a significant loss of goodwill by the Company. Therefore, Executive agrees that the following are reasonable restrictions:
i) Similar Business: During the Employment Period, and for a term of twelve (12) months immediately after the termination of such relationship (voluntarily or involuntarily), Executive shall not, directly or indirectly, engage in Similar Business services or activities within the Commonwealth of Puerto Rico; provided, that nothing herein shall prohibit Executive from being a passive owner of not more than 5% of the outstanding stock of any class of a corporation which is publicly traded so long as none of such persons has any active participation in the business of such corporation.
ii) Clients: For a period of twelve (12) months after the termination the Executives employment relationship with the Company (voluntarily or involuntarily) Executive shall not, directly or indirectly, solicit or provide, without the written consent from the Company, any service for any Client, such as those Similar Business services or activities provided by Executive during his employment relationship.
For purposes of this Section 5(b) of the Agreement, the following terms shall have these meanings:
Similar Business shall mean the same or substantially the same business activity or activities performed or engaged by Executive for, or on behalf, of the Company.
Client shall mean any person or entity that was a client or customer of the Company at the time of termination of Executives employment relationship with the Company and for whom Executive provided any services on behalf of the Company or any of its affiliates or subsidiaries at any time, during the term of five (5) years prior to such termination.
Executive warrants and represents that the nature and extent of this non-competition clause has been fully explained to Executive by the Company, and that Executives decision to accept the same is made voluntarily, knowingly, intelligently and free from any undue pressure or coercion. Executive further warrants and represents that he has agreed to this non-competition clause in exchange for the increase in Base Salary Executive is receiving under this Agreement.
(c) Non-Disclosure; Non-Use of Confidential Information. Executive shall not disclose or use at any time, either during his employment with the Company or at any time thereafter, any Confidential Information of which Executive is or becomes aware, whether or not
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such information is developed by him, except to the extent that such disclosure or use is directly related to and required by Executives performance in good faith of duties assigned to Executive by the Company. Executive will take all appropriate steps to safeguard Confidential Information in his possession and to protect it against disclosure, misuse, espionage, loss and theft. Executive shall deliver to the Company at the termination of his employment with the Company, or at any time the Company may request, all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information or the Work Product (as defined in Section 5(e)(ii)) of the business of the Company that Executive may then possess or have under his control.
(d) Proprietary Rights. Executive recognizes that the Company possesses a proprietary interest in all Confidential Information and Work Product and has the exclusive right and privilege to use, protect by copyright, patent or trademark, or otherwise exploit the processes, ideas and concepts described therein to the exclusion of Executive, except as otherwise agreed between the Company and Executive in writing. Executive expressly agrees that any Work Product made or developed by Executive or his agents during the course of Executives employment, including any Work Product which is based on or arises out of Work Product, shall be the property of and inure to the exclusive benefit of the Company. Executive further agrees that all Work Product developed by Executive (whether or not able to be protected by copyright, patent or trademark) during the course of his employment with the Company, or involving the use of the time, materials or other resources of the Company, shall be promptly disclosed to the Company and shall become the exclusive property of the Company, and Executive shall execute and deliver any and all documents necessary or appropriate to implement the foregoing.
(e) Certain Definitions.
(i) As used herein, the term Confidential Information means information that is not generally known to the public (but for purposes of clarity, Confidential Information shall never exclude any such information that becomes known to the public because of Executives unauthorized disclosure) and that is used, developed or obtained by the Company in connection with its business, including, but not limited to, information, observations and data obtained by Executive while employed by the Company concerning (A) the business or affairs of the Company, (B) products or services, (C) fees, costs and pricing structures, (D) designs, (E) analyses, (F) drawings, photographs and reports, (G) computer software, including operating systems, applications and program listings, (H) flow charts, manuals and documentation, (I) databases, (J) accounting and business methods, (K) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice, (L) customers and clients and customer or client lists, (M) other copyrightable works, (N) all production methods, processes, technology and trade secrets, and (O) all similar and related information in whatever form. Confidential Information will not include any information that has been published in a form generally available to the public (except as a result of Executives unauthorized disclosure) prior to the date Executive proposes to disclose or use such information. Confidential Information will not be deemed to have been published or otherwise disclosed merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination.
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(ii) As used herein, the term Work Product means all inventions, innovations, improvements, technical information, systems, software developments, methods, designs, analyses, drawings, reports, service marks, trademarks, trade names, logos and all similar or related information (whether patentable or unpatentable) that relates to the Companys actual or anticipated business, research and development or existing or future products or services and that are conceived, developed or made by Executive (whether or not during usual business hours and whether or not alone or in conjunction with any other person) while employed by the Company together with all patent applications, letters patent, trademark, trade name and service mark applications or registrations, copyrights and reissues thereof that may be granted for or upon any of the foregoing.
6. | Non-Disparagement. |
During the Employment Period and at all times thereafter, neither Executive nor his agents, on the one hand, nor the Company formally, or its executives or board of directors, on the other hand, shall directly or indirectly issue or communicate any public statement, or statement likely to become public, that maligns, denigrates or disparages the other (including, in the case of communications by Executive or his agents, the Company or any of the Companys officers, directors or employees. The foregoing shall not be violated by truthful responses to (i) legal process or governmental inquiry or (ii) by private statements to the Company or any of Companys officers, directors or employees; provided, that in the case of Executive, with respect to clause (ii), such statements are made in the course of carrying out his duties pursuant to this Agreement.
7. | Confidentiality of Agreement. |
The Parties agree that the consideration furnished under this Agreement, the discussions and correspondence that led to this Agreement, and the terms and conditions of this Agreement are private and confidential. Except as may be required by applicable law, regulation, or stock exchange requirement, neither Party may disclose the above information to any other person or entity without the prior written approval of the other.
8. | Executives Representations, Warranties and Covenants. |
(a) Executive hereby represents and warrants to the Company that:
(i) Executive has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and this Agreement has been duly executed by Executive;
(ii) the execution, delivery and performance of this Agreement by Executive does not and will not, with or without notice or the passage of time, conflict with, breach, violate or cause a default under any agreement, contract or instrument to which Executive is a party or any judgment, order or decree to which Executive is subject;
(iii) Executive is not a party to or bound by any employment agreement, consulting agreement, non-compete agreement, fee for services agreement, confidentiality agreement or similar agreement with any other person;
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(iv) upon the execution and delivery of this Agreement by the Company and Executive, this Agreement will be a legal, valid and binding obligation of Executive, enforceable in accordance with its terms;
(v) Executive understands that the Company will rely upon the accuracy and truth of the representations and warranties of Executive set forth herein and Executive consents to such reliance; and
(vi) as of the date of execution of this Agreement, Executive is not in breach of any of its terms, including having committed any acts that would form the basis for a Cause termination if such act had occurred after the Original Effective Date.
(b) The Company hereby represents and warrants to Executive that:
(i) the Company has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and this Agreement has been duly executed by the Company;
(ii) the execution, delivery and performance of this Agreement by the Company does not and will not, with or without notice or the passage of time, conflict with, breach, violate or cause a default under any agreement, contract or instrument to which the Company is a party or any judgment, order or decree to which the Company is subject;
(iii) upon the execution and delivery of this Agreement by the Company and Executive, this Agreement will be a legal, valid and binding obligation of the Company, enforceable in accordance with its terms; and
(iv) the Company understands that Executive will rely upon the accuracy and truth of the representations and warranties of the Company set forth herein and the Company consents to such reliance.
9. | General Provisions. |
(a) Severability. It is the desire and intent of the Parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Upon a determination that any term or provision (or any portion thereof with the exception of the Non-Competition covenant contained in Section 5(b) of this Agreement) is invalid, illegal, or incapable of being enforced, the Parties agree that a reviewing court shall have the authority to blue pencil or modify this agreement so as to render it enforceable and effect the original intent of the parties to the fullest extent permitted by applicable law.
(b) Entire Agreement and Effectiveness. Effective as of the Effective Date, this Agreement embodies the complete agreement and understanding among the Parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the Parties, written or oral, which may have related to the subject matter hereof in any way (excluding any stock options or awards granted under any equity compensation plans maintained by the Company).
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(c) Successors and Assigns.
(i) This Agreement is personal to Executive and without the prior written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executives legal representatives.
(ii) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, Company shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law, or otherwise.
(d) Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PUERTO RICO, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE COMMONWEALTH OF PUERTO RICO OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE COMMONWEALTH OF PUERTO RICO TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE COMMONWEALTH OF PUERTO RICO WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTIONS CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
(e) Enforcement.
(i) Arbitration. Except for disputes arising under Sections 5 and 6 of this Agreement (including, without limitation, any claim for injunctive relief), any controversy, dispute or claim arising out of or relating to this Agreement, or its interpretation, application, implementation, breach or enforcement which the Parties are unable to resolve by mutual agreement, shall be settled by submission by either Executive or the Company of the controversy, claim or dispute to binding arbitration in San Juan, Puerto Rico (unless the Parties agree in writing to a different location), before a single arbitrator in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association then in effect. In any such arbitration proceeding the Parties agree to provide all discovery deemed necessary by the arbitrator. The decision and award made by the arbitrator shall be accompanied by a reasoned opinion, and shall be final, binding and conclusive on all Parties hereto for all purposes, and judgment may be entered thereon in any court having jurisdiction thereof. The Company will bear the totality of the arbitrators and administrative fees and costs. Each party shall bear its or his litigation costs and expenses; provided, however, that the arbitrator shall have the discretion to award the prevailing party reimbursement of its or his reasonable attorneys fees and costs. Upon the request of any of the parties, at any time prior to the beginning of the arbitration hearing the parties may attempt in good faith to settle the dispute by mediation administered by the American Arbitration Association. The Company will bear the totality of the mediators and administrative fees and costs.
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(ii) Remedies. All remedies hereunder are cumulative, are in addition to any other remedies provided for by law and may, to the extent permitted by law, be exercised concurrently or separately, and the exercise of any one remedy shall not be deemed to be an election of such remedy or to preclude the exercise of any other remedy.
(iii) Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(f) Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and Executive and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall be construed as a waiver of such provisions or affect the validity, binding effect or enforceability of this Agreement or any provision hereof.
(g) Notices. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) in an envelope marked confidential to the recipient at the address below indicated or at such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Notices will be deemed to have been given hereunder and received when delivered personally, five calendar days after deposit in the U.S. mail and one calendar day after deposit for overnight delivery with a reputable overnight courier service.
If to the Company, to:
EVERTEC GROUP, LLC
GENERAL COUNSEL AND HUMAN RESOURCES SENIOR VICE PRESIDENT
Carr #176, Km 1.3
Cupey Bajo, Rio Piedras Puerto Rico 00926
P.O. Box 364527
San Juan, Puerto Rico 00936-4527
Telephone: (787) 759-9999
with a copy (which shall not constitute notice) to:
McConnell Valdés LLC
EVERTEC GROUP, LLCS CLIENT SERVICE COORDINATOR (CSC)
PO Box 364225
San Juan, Puerto Rico 00936-4225
Telephone: (787) 759-9292
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If to Executive, to:
Executives home address most recently on file with the Company.
(h) Withholdings Taxes. The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.
(i) Survival of Representations, Warranties and Agreements. All representations, warranties and agreements contained herein shall survive the consummation of the transactions contemplated hereby indefinitely.
(j) Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. All references to a Section in this Agreement are to a section of this Agreement unless otherwise noted.
(k) Construction. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party.
(l) Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.
(m) Section 409A. Notwithstanding anything herein to the contrary, this Agreement is intended to be interpreted and applied so that the payment of the benefits set forth herein either shall either be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the Code), or shall comply with the requirements of such provision. Notwithstanding anything in this Agreement or elsewhere to the contrary, distributions upon termination of Executives employment may only be made upon a separation from service as determined under Section 409A of the Code. Each payment under this Agreement or otherwise shall be treated as a separate payment for purposes of Section 409A of the Code. In no event may Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement or otherwise which constitutes a deferral of compensation within the meaning of Section 409A of the Code. All reimbursements and in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A of the Code. To the extent that any reimbursements pursuant to this Agreement or otherwise are taxable to Executive, any reimbursement payment due to Executive shall be paid to Executive on or before the last calendar day of Executives taxable year following the taxable year in which the related expense was incurred; provided, that, Executive has provided the Company written documentation of such expenses in a timely fashion and such expenses otherwise satisfy the Company expense reimbursement policies. Reimbursements pursuant to this Agreement or otherwise are not subject to liquidation or exchange for another benefit and the amount of such reimbursements that Executive receives in one taxable year shall not affect the amount of such reimbursements that Executive receives in any other taxable year. Notwithstanding any provision
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in this Agreement to the contrary, if on the date of his termination from employment with the Company Executive is deemed to be a specified employee within the meaning of Code Section 409A and the Final Treasury Regulations using the identification methodology selected by the Company from time to time, or if none, the default methodology under Code Section 409A, any payments or benefits due upon a termination of Executives employment under any arrangement that constitutes a deferral of compensation within the meaning of Code Section 409A shall be delayed and paid or provided (or commence, in the case of installments) on the first payroll date on or following the earlier of (i) the date which is six (6) months and one (1) calendar day after Executives termination of employment for any reason other than death, and (ii) the date of Executives death, and any remaining payments and benefits shall be paid or provided in accordance with the normal payment dates specified for such payment or benefit. Notwithstanding any of the foregoing to the contrary, the Company and its respective officers, directors, employees, or agents make no guarantee that the terms of this Agreement as written comply with, or are exempt from, the provisions of Code Section 409A, and none of the foregoing shall have any liability for the failure of the terms of this Agreement as written to comply with, or be exempt from, the provisions of Code Section 409A.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties hereto have executed this Amended and Restatement Employment Agreement as of the date first written above.
EVERTEC GROUP, LLC | ||
/s/ Peter Harrington | ||
Name: | Peter Harrington | |
Title: | President & Chief Executive Officer | |
JUAN JOSÉ ROMÁN JIMÉNEZ | ||
/s/ Juan José Román Jiménez | ||
Title: | Executive Vice President & Chief Financial Officer |
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Exhibit 10.64
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AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the Agreement) by and between EVERTEC GROUP, LLC, a Puerto Rico limited liability company (the Company), and Miguel Vizcarrondo (Executive, and collectively, the Parties) is made as of this 1st day of July, 2014 (the Effective Date).
WHEREAS, Executive and the Company previously entered into an employment agreement dated October 1, 2010 (as amended from time to time, the Original Effective Date); and
WHEREAS, the Parties desire to amend and restate the employment agreement pursuant to the terms, provisions and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants, understandings, representations, warranties, undertakings and promises hereinafter set forth, intending to be legally bound thereby, the Parties agree as follows:
1. | Employment Period. |
Subject to earlier termination in accordance with Section 3 of this Agreement, Executive shall continue to be employed by the Company until the fifth (5th) anniversary of the Original Effective Date (the Employment Period) unless the parties mutually agree to extend the term at least 90 calendar days prior to the end of the Employment Period. Upon Executives termination of employment with the Company for any reason, Executive shall immediately resign all positions with the Company or any of its subsidiaries or affiliates, including any position as a member of the Companys Board of Directors.
2. | Terms of Employment. |
(a) Position. During the Employment Period, Executive shall serve as of the Company and will perform such duties and exercise such supervision with regard to the business of the Company as are associated with such positions, including such duties as may be prescribed from time to time by the President and Chief Executive Officer of the Company (the CEO). Executive shall report directly to the CEO and if reasonably requested by the CEO, Executive hereby agrees to serve (without additional compensation) as an officer and director of the Company or any affiliate or subsidiary thereof.
(b) Duties. During the Employment Period, Executive shall have such responsibilities, duties, and authority that are customary for his position, subject at all times to the control of the CEO, and shall perform such services as customarily are provided by an executive of a corporation with his position and such other services consistent with his position, as shall be assigned to him from time to time by the CEO. During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled in accordance with Company policies, the Executive agrees to devote all of his business time to the business and affairs of the Company and to use Executives commercially reasonable efforts to perform faithfully, effectively and efficiently his responsibilities and obligations hereunder. The Executive shall be entitled to engage in charitable and educational activities and to manage his
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personal and family investments, to the extent such activities are not competitive with the business of the Company, do not interfere with the performance of his duties for the Company and are otherwise consistent with the Companys governance policies.
(c) Principal Work Location. Executives principal work location, subject to travel on Company business, shall be the Companys headquarters in Puerto Rico.
(d) Compensation.
(i) Base Salary. During the Employment Period, Executive shall receive an annual base salary in an amount equal to Three Hundred Thousand Dollars ($300,000), less all applicable withholdings, which shall be paid in accordance with the customary payroll practices of the Company (as in effect from time to time, the Annual Base Salary). The Annual Base Salary shall be prorated for partial calendar years of employment and shall be subject to annual review and possible increase as determined by the Board, in its sole discretion and any such increased Annual Base Salary shall constitute Annual Base Salary for purposes of this Agreement.
(ii) Annual Bonus. During the Employment Period, with respect to each completed fiscal year of the Company, Executive shall be eligible to receive a bonus (the Bonus) pursuant to the terms and conditions set forth in the EVERTEC Annual Performance Incentive Guidelines in effect on the date eligibility for a bonus is determined.
(iii) Options. To the extent that Executive was granted options to purchase shares of common stock of EVERTEC, Inc., such options shall be subject to the terms of the applicable award agreement and the applicable Equity Incentive Plan.
(iv) Benefits. During the Employment Period, Executive shall be eligible to participate in all retirement, compensation and employee benefit plans, practices, policies and programs provided by the Company to the extent applicable generally to other executives of the Company (except severance plans, policies, practices, or programs) subject to the eligibility criteria set forth therein, as such may be amended or terminated from time to time. In addition, the Company shall provide Executive with directors and officers insurance coverage at least equal to that provided to other Company directors and officers.
(v) Expenses. During the Employment Period, Executive shall be entitled to receive reimbursement for all reasonable business expenses incurred by Executive in performance of his duties hereunder provided that Executive provides all necessary documentation in accordance with the Companys policies.
3. | Termination of Employment. |
(a) Death or Disability. Executives employment shall terminate automatically upon Executives death. If Executive becomes subject to a Disability (as defined below) during the Employment Period, the Company may give Executive written notice in accordance with Sections 3(g) and 9(g) of its intention to terminate Executives employment. For purposes of this Agreement, Disability means Executives inability to perform his duties hereunder by reason of any medically determinable physical or mental impairment for a period of six (6) months or more in any twelve (12) month period.
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(b) Cause. Executives employment may be terminated at any time by the Company for Cause (as defined below). For purposes of this Agreement, Cause shall mean Executives (i) commission of a felony or a crime of moral turpitude, (ii) engaging in conduct that constitutes fraud or embezzlement, (iii) engaging in conduct that constitutes gross negligence or willful misconduct that results or could reasonably be expected to result in harm to the Companys business or reputation, (iv) breach of any material terms of Executives employment, including this Agreement, which results or could reasonably be expected to result in harm to the Companys business or reputation, (v) continued willful failure to substantially perform duties as Executive Vice President, or (vi) failure to relocate his primary residence to Puerto Rico within six (6) months following the Original Effective Date. Executives employment shall not be terminated for Cause within the meaning of clauses (iv) and (v) above unless Executive has been given written notice by the Board stating the basis for such termination and Executive is given fifteen (15) calendar days to cure, to the extent curable, the neglect or conduct that is the basis of any such claim.
(c) Termination Without Cause. The Company may terminate Executives employment hereunder without Cause at any time.
(d) Good Reason. Executives employment may be terminated at any time by Executive for Good Reason upon sixty (60) calendar days prior written notice following the occurrence of the event giving rise to the termination for Good Reason. For purposes of this Agreement, Good Reason means voluntary resignation after any of the following actions taken by the Company without Executives written consent: (i) any material failure of the Company to fulfill its obligations under this Agreement, (ii) a material and adverse change to, or a material reduction of, Executives duties and responsibilities to the Company, (iii) a material reduction in Executives then current Annual Base Salary (not including any diminution related to a broader compensation reduction that is not limited to Executive specifically and that is not more than 10% in the aggregate), (iv) the relocation of Executives primary office to a location more than 25 miles from the prior location that materially increases Executives commute to work or (v) the failure of any successor (whether by sale, reorganization, consolidation, merger or other corporate transaction) to assume this Agreement, whether in writing or by operation of law; provided, that any such event shall not constitute Good Reason unless and until Executive shall have provided the Company with notice thereof no later than 30 calendar days following Executives knowledge of the occurrence of such event and the Company shall have failed to remedy such event within 30 calendar days of receipt of such notice.
(e) Voluntary Termination. Executives employment may be terminated at any time by Executive without Good Reason upon 30 calendar days prior written notice.
(f) Termination as a Result of Expiration of the Employment Period. Unless otherwise agreed between the parties, Executives employment shall automatically terminate upon expiration of the Employment Period.
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(g) Notice of Termination. Any termination by the Company for Cause or without Cause, or by Executive for Good Reason or without Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 9(g). For purposes of this Agreement, a Notice of Termination means a written notice that (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executives employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date. The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company hereunder or preclude Executive or the Company from asserting such fact or circumstance in enforcing Executives or the Companys rights hereunder.
(h) Date of Termination. Date of Termination means (i) if Executives employment is terminated by the Company for Cause, without Cause or by reason of Disability, or by Executive for Good Reason or without Good Reason, the date of receipt of the Notice of Termination (in the case of a termination with or without Good Reason, provided such Date of Termination is in accordance with Section 3(d) or Section 3(e)) or any later date specified therein pursuant to Section 3(g), as the case may be, (ii) if Executives employment is terminated by reason of death, the date of death, and (iii) the expiration of the Employment Period, and the termination of Executives employment upon the date of such expiration.
4. | Obligations of the Company upon Termination. |
(a) With Good Reason; Without Cause. If during the Employment Period, the Company shall terminate Executives employment without Cause or Executive shall terminate his employment for Good Reason, then the Company will provide Executive with the following payments and/or benefits:
(i) The Company shall pay to Executive as soon as reasonably practicable but no later than the 15th day of the third month following the end of the calendar year that contains the Date of Termination in a lump sum to the extent not previously paid, (A) the Annual Base Salary through the Date of Termination, (B) the Bonus earned for any fiscal year ended prior to the year in which the Date of Termination occurs, provided that Executive was employed on the last day of such fiscal year, (C) the amount of any unpaid expense reimbursements to which Executive may be entitled pursuant to Section 2(d)(vi) hereof and (D) any other vested payments or benefits to which Executive or Executives estate may be entitled to receive under any of the Companys benefit plans or applicable law, in accordance with the terms of such plans or law (clauses (A)-(D), the Accrued Obligations), and (E) in the event that the termination occurs after September 30 of a given year, a prorated amount of the Annual Bonus for such year based on the number of days elapsed, determined and payable in such manner and at such time as annual bonuses in respect of such year are generally paid (the Prorated Bonus); and
(ii) Subject to Section 4(e) below, after the Date of Termination, the Company will pay Executive severance in an amount equal to the greater of (a) Executives Annual Base Salary and (b) amounts due under applicable laws (the Severance Payment). The Severance Payment shall be made in a lump sum on the date that is 60 calendar days following the Date of Termination, subject to the terms and conditions in Section 4(e) below.
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(b) Death or Disability. If Executives employment shall be terminated by reason of the Executives death or Disability, then the Company will provide Executive with the Accrued Obligations. Thereafter, the Company shall have no further obligation to Executive, his estate, his beneficiaries or his legal representatives.
(c) Cause; Other than for Good Reason. If Executives employment shall be terminated by the Company for Cause or by Executive without Good Reason, then the Company shall have no further obligations to Executive other than for payment of the Accrued Obligations.
(d) Expiration of the Employment Period. If Executives employment shall be terminated by reason of the expiration of the Employment Period as result of the Companys non-extension, then the Company will provide Executive with the Accrued Obligations, the Prorated Bonus and the greater of (i) continued payment of Base Salary for a period of six months in accordance with the Companys payroll practices (the Salary Continuation) and (ii) amounts due under applicable laws. If Executives employment shall be terminated by reason of the expiration of the Employment Period as result of the Executives non-extension, then the Company will provide Executive with the Accrued Obligations. Thereafter, in either event, the Company shall have no further obligation to Executive or his legal representatives.
(e) Separation Agreement and General Release. The Companys obligation to make the Severance Payment or to pay the Salary Continuation is conditioned on Executives or his legal representatives executing a separation agreement and general release of claims related to or arising from Executives employment with the Company or the termination of employment, against the Company and its affiliates (and their respective officers and directors) in a form reasonably determined by the Company, which shall be provided by the Company to Executive within five (5) calendar days following the Date of Termination; provided, that, if Executive should fail to execute (or revokes) such release within 45 calendar days following the Date of Termination, the Company shall not have any obligation to provide the Severance Payment or the Salary Continuation. If Executive executes the release within such 45-calendar day period and does not revoke the release within seven (7) calendar days following the execution of the release, the Severance Payment will be made in accordance with Section 4(a)(ii) or the Salary Continuation shall commence at such time, as applicable.).
5. | Restrictive Covenants. |
(a) In consideration of Executives employment and receipt of payments hereunder, including, without limitation, the grant of options under Section 2(d), during the period commencing on the Original Effective Date and ending twelve (12) months after the Date of Termination, Executive shall not directly, or indirectly through another person, (i) induce or attempt to induce any employee, representative, agent or consultant of the Company or any of its Affiliates or subsidiaries to leave the employ or services of the Company or any of its affiliates or subsidiaries, or in any way interfere with the relationship between the Company or any of its affiliates or subsidiaries and any employee, representative, agent or consultant thereof or (ii) hire any person who was an employee, representative, agent or consultant of the Company or any of
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its affiliates or subsidiaries at any time during the twelve-month period immediately prior to the date on which such hiring would take place. No action by another person or entity shall be deemed to be a breach of this provision unless the Executive directly or indirectly assisted, encouraged or otherwise counseled such person or entity to engage in such activity.
(b) Non-Competition. Executive hereby acknowledges that it is familiar with the Confidential Information (as defined below) of the Company and its subsidiaries. Executive acknowledges and agrees that the Company would be irreparably damaged if Executive were to provide services to any person competing with the Company or any of its affiliates or subsidiaries or engaged in a Similar Business (as defined below) and that such competition by Executive would result in a significant loss of goodwill by the Company. Therefore, Executive agrees that the following are reasonable restrictions:
i) Similar Business: During the Employment Period, and for a term of twelve (12) months immediately after the termination of such relationship (voluntarily or involuntarily), Executive shall not, directly or indirectly, engage in Similar Business services or activities within the Commonwealth of Puerto Rico; provided, that nothing herein shall prohibit Executive from being a passive owner of not more than 5% of the outstanding stock of any class of a corporation which is publicly traded so long as none of such persons has any active participation in the business of such corporation.
ii) Clients: For a period of twelve (12) months after the termination the Executives employment relationship with the Company (voluntarily or involuntarily) Executive shall not, directly or indirectly, solicit or provide, without the written consent from the Company, any service for any Client, such as those Similar Business services or activities provided by Executive during his employment relationship.
For purposes of this Section 5(b) of the Agreement, the following terms shall have these meanings:
Similar Business shall mean the same or substantially the same business activity or activities performed or engaged by Executive for, or on behalf, of the Company.
Client shall mean any person or entity that was a client or customer of the Company at the time of termination of Executives employment relationship with the Company and for whom Executive provided any services on behalf of the Company or any of its affiliates or subsidiaries at any time, during the term of five (5) years prior to such termination.
Executive warrants and represents that the nature and extent of this non-competition clause has been fully explained to Executive by the Company, and that Executives decision to accept the same is made voluntarily, knowingly, intelligently and free from any undue pressure or coercion. Executive further warrants and represents that he has agreed to this non-competition clause in exchange for the increase in Base Salary Executive is receiving under this Agreement.
(c) Non-Disclosure; Non-Use of Confidential Information. Executive shall not disclose or use at any time, either during his employment with the Company or at any time thereafter, any Confidential Information of which Executive is or becomes aware, whether or not
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such information is developed by him, except to the extent that such disclosure or use is directly related to and required by Executives performance in good faith of duties assigned to Executive by the Company. Executive will take all appropriate steps to safeguard Confidential Information in his possession and to protect it against disclosure, misuse, espionage, loss and theft. Executive shall deliver to the Company at the termination of his employment with the Company, or at any time the Company may request, all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information or the Work Product (as defined in Section 5(e)(ii)) of the business of the Company that Executive may then possess or have under his control.
(d) Proprietary Rights. Executive recognizes that the Company possesses a proprietary interest in all Confidential Information and Work Product and has the exclusive right and privilege to use, protect by copyright, patent or trademark, or otherwise exploit the processes, ideas and concepts described therein to the exclusion of Executive, except as otherwise agreed between the Company and Executive in writing. Executive expressly agrees that any Work Product made or developed by Executive or his agents during the course of Executives employment, including any Work Product which is based on or arises out of Work Product, shall be the property of and inure to the exclusive benefit of the Company. Executive further agrees that all Work Product developed by Executive (whether or not able to be protected by copyright, patent or trademark) during the course of his employment with the Company, or involving the use of the time, materials or other resources of the Company, shall be promptly disclosed to the Company and shall become the exclusive property of the Company, and Executive shall execute and deliver any and all documents necessary or appropriate to implement the foregoing.
(e) Certain Definitions.
(i) As used herein, the term Confidential Information means information that is not generally known to the public (but for purposes of clarity, Confidential Information shall never exclude any such information that becomes known to the public because of Executives unauthorized disclosure) and that is used, developed or obtained by the Company in connection with its business, including, but not limited to, information, observations and data obtained by Executive while employed by the Company concerning (A) the business or affairs of the Company, (B) products or services, (C) fees, costs and pricing structures, (D) designs, (E) analyses, (F) drawings, photographs and reports, (G) computer software, including operating systems, applications and program listings, (H) flow charts, manuals and documentation, (I) databases, (J) accounting and business methods, (K) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice, (L) customers and clients and customer or client lists, (M) other copyrightable works, (N) all production methods, processes, technology and trade secrets, and (O) all similar and related information in whatever form. Confidential Information will not include any information that has been published in a form generally available to the public (except as a result of Executives unauthorized disclosure) prior to the date Executive proposes to disclose or use such information. Confidential Information will not be deemed to have been published or otherwise disclosed merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination.
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(ii) As used herein, the term Work Product means all inventions, innovations, improvements, technical information, systems, software developments, methods, designs, analyses, drawings, reports, service marks, trademarks, trade names, logos and all similar or related information (whether patentable or unpatentable) that relates to the Companys actual or anticipated business, research and development or existing or future products or services and that are conceived, developed or made by Executive (whether or not during usual business hours and whether or not alone or in conjunction with any other person) while employed by the Company together with all patent applications, letters patent, trademark, trade name and service mark applications or registrations, copyrights and reissues thereof that may be granted for or upon any of the foregoing.
6. | Non-Disparagement. |
During the Employment Period and at all times thereafter, neither Executive nor his agents, on the one hand, nor the Company formally, or its executives or board of directors, on the other hand, shall directly or indirectly issue or communicate any public statement, or statement likely to become public, that maligns, denigrates or disparages the other (including, in the case of communications by Executive or his agents, the Company or any of the Companys officers, directors or employees. The foregoing shall not be violated by truthful responses to (i) legal process or governmental inquiry or (ii) by private statements to the Company or any of Companys officers, directors or employees; provided, that in the case of Executive, with respect to clause (ii), such statements are made in the course of carrying out his duties pursuant to this Agreement.
7. | Confidentiality of Agreement. |
The Parties agree that the consideration furnished under this Agreement, the discussions and correspondence that led to this Agreement, and the terms and conditions of this Agreement are private and confidential. Except as may be required by applicable law, regulation, or stock exchange requirement, neither Party may disclose the above information to any other person or entity without the prior written approval of the other.
8. | Executives Representations, Warranties and Covenants. |
(a) Executive hereby represents and warrants to the Company that:
(i) Executive has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and this Agreement has been duly executed by Executive;
(ii) the execution, delivery and performance of this Agreement by Executive does not and will not, with or without notice or the passage of time, conflict with, breach, violate or cause a default under any agreement, contract or instrument to which Executive is a party or any judgment, order or decree to which Executive is subject;
(iii) Executive is not a party to or bound by any employment agreement, consulting agreement, non-compete agreement, fee for services agreement, confidentiality agreement or similar agreement with any other person;
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(iv) upon the execution and delivery of this Agreement by the Company and Executive, this Agreement will be a legal, valid and binding obligation of Executive, enforceable in accordance with its terms;
(v) Executive understands that the Company will rely upon the accuracy and truth of the representations and warranties of Executive set forth herein and Executive consents to such reliance; and
(vi) as of the date of execution of this Agreement, Executive is not in breach of any of its terms, including having committed any acts that would form the basis for a Cause termination if such act had occurred after the Original Effective Date.
(b) The Company hereby represents and warrants to Executive that:
(i) the Company has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and this Agreement has been duly executed by the Company;
(ii) the execution, delivery and performance of this Agreement by the Company does not and will not, with or without notice or the passage of time, conflict with, breach, violate or cause a default under any agreement, contract or instrument to which the Company is a party or any judgment, order or decree to which the Company is subject;
(iii) upon the execution and delivery of this Agreement by the Company and Executive, this Agreement will be a legal, valid and binding obligation of the Company, enforceable in accordance with its terms; and
(iv) the Company understands that Executive will rely upon the accuracy and truth of the representations and warranties of the Company set forth herein and the Company consents to such reliance.
9. | General Provisions. |
(a) Severability. It is the desire and intent of the Parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Upon a determination that any term or provision (or any portion thereof with the exception of the Non-Competition covenant contained in Section 5(b) of this Agreement) is invalid, illegal, or incapable of being enforced, the Parties agree that a reviewing court shall have the authority to blue pencil or modify this agreement so as to render it enforceable and effect the original intent of the parties to the fullest extent permitted by applicable law.
(b) Entire Agreement and Effectiveness. Effective as of the Effective Date, this Agreement embodies the complete agreement and understanding among the Parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the Parties, written or oral, which may have related to the subject matter hereof in any way (excluding any stock options or awards granted under any equity compensation plans maintained by the Company).
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(c) Successors and Assigns.
(i) This Agreement is personal to Executive and without the prior written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executives legal representatives.
(ii) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, Company shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law, or otherwise.
(d) Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PUERTO RICO, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE COMMONWEALTH OF PUERTO RICO OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE COMMONWEALTH OF PUERTO RICO TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE COMMONWEALTH OF PUERTO RICO WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTIONS CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
(e) Enforcement.
(i) Arbitration. Except for disputes arising under Sections 5 and 6 of this Agreement (including, without limitation, any claim for injunctive relief), any controversy, dispute or claim arising out of or relating to this Agreement, or its interpretation, application, implementation, breach or enforcement which the Parties are unable to resolve by mutual agreement, shall be settled by submission by either Executive or the Company of the controversy, claim or dispute to binding arbitration in San Juan, Puerto Rico (unless the Parties agree in writing to a different location), before a single arbitrator in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association then in effect. In any such arbitration proceeding the Parties agree to provide all discovery deemed necessary by the arbitrator. The decision and award made by the arbitrator shall be accompanied by a reasoned opinion, and shall be final, binding and conclusive on all Parties hereto for all purposes, and judgment may be entered thereon in any court having jurisdiction thereof. The Company will bear the totality of the arbitrators and administrative fees and costs. Each party shall bear its or his litigation costs and expenses; provided, however, that the arbitrator shall have the discretion to award the prevailing party reimbursement of its or his reasonable attorneys fees and costs. Upon the request of any of the parties, at any time prior to the beginning of the arbitration hearing the parties may attempt in good faith to settle the dispute by mediation administered by the American Arbitration Association. The Company will bear the totality of the mediators and administrative fees and costs.
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(ii) Remedies. All remedies hereunder are cumulative, are in addition to any other remedies provided for by law and may, to the extent permitted by law, be exercised concurrently or separately, and the exercise of any one remedy shall not be deemed to be an election of such remedy or to preclude the exercise of any other remedy.
(iii) Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(f) Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and Executive and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall be construed as a waiver of such provisions or affect the validity, binding effect or enforceability of this Agreement or any provision hereof.
(g) Notices. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) in an envelope marked confidential to the recipient at the address below indicated or at such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Notices will be deemed to have been given hereunder and received when delivered personally, five calendar days after deposit in the U.S. mail and one calendar day after deposit for overnight delivery with a reputable overnight courier service.
If to the Company, to:
EVERTEC GROUP, LLC
GENERAL COUNSEL AND HUMAN RESOURCES SENIOR VICE PRESIDENT
Carr #176, Km 1.3
Cupey Bajo, Rio Piedras Puerto Rico 00926
P.O. Box 364527
San Juan, Puerto Rico 00936-4527
Telephone: (787) 759-9999
with a copy (which shall not constitute notice) to:
McConnell Valdés LLC
EVERTEC GROUP, LLCS CLIENT SERVICE COORDINATOR (CSC)
PO Box 364225
San Juan, Puerto Rico 00936-4225
Telephone: (787) 759-9292
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If to Executive, to:
Executives home address most recently on file with the Company.
(h) Withholdings Taxes. The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.
(i) Survival of Representations, Warranties and Agreements. All representations, warranties and agreements contained herein shall survive the consummation of the transactions contemplated hereby indefinitely.
(j) Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. All references to a Section in this Agreement are to a section of this Agreement unless otherwise noted.
(k) Construction. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party.
(l) Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.
(m) Section 409A. Notwithstanding anything herein to the contrary, this Agreement is intended to be interpreted and applied so that the payment of the benefits set forth herein either shall either be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the Code), or shall comply with the requirements of such provision. Notwithstanding anything in this Agreement or elsewhere to the contrary, distributions upon termination of Executives employment may only be made upon a separation from service as determined under Section 409A of the Code. Each payment under this Agreement or otherwise shall be treated as a separate payment for purposes of Section 409A of the Code. In no event may Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement or otherwise which constitutes a deferral of compensation within the meaning of Section 409A of the Code. All reimbursements and in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A of the Code. To the extent that any reimbursements pursuant to this Agreement or otherwise are taxable to Executive, any reimbursement payment due to Executive shall be paid to Executive on or before the last calendar day of Executives taxable year following the taxable year in which the related expense was incurred; provided, that, Executive has provided the Company written documentation of such expenses in a timely fashion and such expenses otherwise satisfy the Company expense reimbursement policies. Reimbursements pursuant to this Agreement or otherwise are not subject to liquidation or exchange for another benefit and the amount of such reimbursements that Executive receives in one taxable year shall not affect the amount of such reimbursements that Executive receives in any other taxable year. Notwithstanding any provision
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in this Agreement to the contrary, if on the date of his termination from employment with the Company Executive is deemed to be a specified employee within the meaning of Code Section 409A and the Final Treasury Regulations using the identification methodology selected by the Company from time to time, or if none, the default methodology under Code Section 409A, any payments or benefits due upon a termination of Executives employment under any arrangement that constitutes a deferral of compensation within the meaning of Code Section 409A shall be delayed and paid or provided (or commence, in the case of installments) on the first payroll date on or following the earlier of (i) the date which is six (6) months and one (1) calendar day after Executives termination of employment for any reason other than death, and (ii) the date of Executives death, and any remaining payments and benefits shall be paid or provided in accordance with the normal payment dates specified for such payment or benefit. Notwithstanding any of the foregoing to the contrary, the Company and its respective officers, directors, employees, or agents make no guarantee that the terms of this Agreement as written comply with, or are exempt from, the provisions of Code Section 409A, and none of the foregoing shall have any liability for the failure of the terms of this Agreement as written to comply with, or be exempt from, the provisions of Code Section 409A.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties hereto have executed this Amended and Restatement Employment Agreement as of the date first written above.
EVERTEC GROUP, LLC | ||
/s/ Peter Harrington | ||
Name: | Peter Harrington | |
Title: | President & Chief Executive Officer | |
MIGUEL VIZCARRONDO | ||
/s/ Miguel Vizcarrondo | ||
Title: | Executive Vice President |
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Exhibit 10.65
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AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the Agreement) by and between EVERTEC GROUP, LLC, a Puerto Rico limited liability company (the Company), and Peter Harrington (Executive, and collectively, the Parties) is made as of this 1st day of July, 2014 (the Effective Date).
WHEREAS, Executive and the Company previously entered into an employment agreement dated February 22, 2012 (the Original Effective Date); and
WHEREAS, the Parties desire to amend and restate the employment agreement pursuant to the terms, provisions and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants, understandings, representations, warranties, undertakings and promises hereinafter set forth, intending to be legally bound thereby, the Parties agree as follows:
1. | Employment Period. |
Subject to earlier termination in accordance with Section 3 of this Agreement, Executive shall be employed by the Company for a period commencing on February 22, 2012 (the Start Date) and ending on the fifth (5th) anniversary of the Start Date (the Employment Period); provided, that the Employment Period shall automatically renew for additional successive one-year periods upon such fifth (5th) anniversary and on each anniversary thereof unless either party gives the other party at least 90 calendar days prior advanced written notice of its intent not to renew the Employment Period. Upon Executives termination of employment with the Company for any reason, Executive shall immediately resign all positions with the Company or any of its subsidiaries or affiliates.
2. | Terms of Employment. |
(a) Position. During the Employment Period, Executive shall serve as President and Chief Executive Officer of the Company and will perform such duties and exercise such supervision with regard to the business of the Company as are associated with such positions, including such duties as may be prescribed from time to time by the Board of Directors of the Company (the Board). Executive shall report directly to the Board and if requested by the Board, Executive hereby agrees to serve (without additional compensation) as an officer and director of the Company or any affiliate or subsidiary thereof.
(b) Duties. During the Employment Period, Executive shall have such responsibilities, duties, and authority that are customary for his position, subject at all times to the control of the Board, and shall perform such services as customarily are provided by an executive of a corporation with his position and such other services consistent with his position, as shall be assigned to him from time to time by the Board. During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled in accordance with Company policies, the Executive agrees to devote all of his business time to the business and affairs of the Company and to use Executives commercially reasonable efforts to perform faithfully, effectively and efficiently his responsibilities and obligations hereunder.
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(c) Principal Work Location. Executives principal work location, subject to travel on Company business, shall be the Companys headquarters in Puerto Rico.
(d) Compensation.
(i) Base Salary. During the Employment Period, Executive shall receive an annual base salary in an amount equal to Six Hundred and Fifty Thousand Dollars ($650,000), less all applicable withholdings, which shall be paid in accordance with the customary payroll practices of the Company (as in effect from time to time, the Annual Base Salary). The Annual Base Salary shall be prorated for partial calendar years of employment and shall be subject to annual review and possible increase as determined by the Board, in its sole discretion.
(ii) Annual Bonus. During the Employment Period, with respect to each completed fiscal year of the Company, Executive shall be eligible to receive a bonus (the Bonus) of up to 100% of Annual Base Salary (the Maximum Bonus) pursuant to the terms and conditions set forth in the EVERTEC Annual Performance Incentive Guidelines in effect on the date eligibility for a bonus is determined.
(iii) Options. To the extent that Executive was granted options to purchase shares of common stock of EVERTEC, Inc., such options shall be subject to the terms of the applicable award agreement and the applicable Equity Incentive Plan.
(iv) Benefits. During the Employment Period, Executive shall be eligible to participate in all retirement, compensation and employee benefit plans, practices, policies and programs, including any health and dental insurance, vacation pay, and life insurance and long-term disability insurance benefits provided by the Company to other executives of the Company (except severance plans, policies, practices, or programs) subject to the eligibility criteria set forth therein, as such may be amended or terminated from time to time. In addition, during the Employment Period, Executive shall be provided a car in accordance with Company policy.
(v) Expenses. During the Employment Period, Executive shall be entitled to receive reimbursement for all reasonable business expenses incurred by Executive in performance of his duties hereunder provided that Executive provides all necessary documentation in accordance with the Companys policies.
3. | Termination of Employment. |
(a) Death or Disability. Executives employment shall terminate automatically upon Executives death. If Executive becomes subject to a Disability (as defined below) during the Employment Period, the Company may give Executive written notice in accordance with Sections 3(g) and 9(g) of its intention to terminate Executives employment. For purposes of this Agreement, Disability means Executives inability to perform his duties hereunder by reason of any medically determinable physical or mental impairment for a period of six (6) months or more in any twelve (12) month period.
(b) Cause. Executives employment may be terminated at any time by the Company for Cause (as defined below). For purposes of this Agreement, Cause shall mean Executives
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(i) commission of a felony or a crime of moral turpitude, (ii) engaging in conduct that constitutes fraud or embezzlement, (iii) engaging in conduct that constitutes gross negligence or willful misconduct that results or could reasonably be expected to result in harm to the Companys business or reputation, (iv) breach of any material terms of Executives employment, including this Agreement, which results or could reasonably be expected to result in harm to the Companys business or reputation, (v) continued willful failure to substantially perform duties as President and Chief Executive Officer or (vi) failure to relocate his primary residence to Puerto Rico within six (6) months following the Original Effective Date. Executives employment shall not be terminated for Cause within the meaning of clauses (iv) and (v) above unless Executive has been given written notice by the Board stating the basis for such termination and Executive is given fifteen (15) calendar days to cure, to the extent curable, the neglect or conduct that is the basis of any such claim.
(c) Termination Without Cause. The Company may terminate Executives employment hereunder without Cause at any time.
(d) Good Reason. Executives employment may be terminated at any time by Executive for Good Reason upon thirty (30) calendar days prior written notice following the occurrence of the event giving rise to the termination for Good Reason. For purposes of this Agreement, Good Reason means voluntary resignation after any of the following actions taken by the Company without Executives written consent: (i) any material failure of the Company to fulfill its obligations under this Agreement, (ii) a material and adverse change to, or a material reduction of, Executives duties and responsibilities to the Company, (iii) a material reduction in Executives then current Annual Base Salary (not including any diminution related to a broader compensation reduction that is not limited to Executive specifically and that is not more than 10% in the aggregate), or (iv) the failure of any successor (whether by sale, reorganization, consolidation, merger or other corporate transaction) to assume this Agreement, whether in writing or by operation of law; provided, that any such event shall not constitute Good Reason unless and until Executive shall have provided the Company with notice thereof no later than 30 calendar days following Executives knowledge of the occurrence of such event and the Company shall have failed to remedy such event within 30 calendar days of receipt of such notice.
(e) Voluntary Termination. Executives employment may be terminated at any time by Executive without Good Reason upon 30 calendar days prior written notice.
(f) Notice of Termination. Any termination by the Company for Cause or without Cause, or by Executive for Good Reason or without Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 9(g). For purposes of this Agreement, a Notice of Termination means a written notice that (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executives employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date. The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company hereunder or preclude Executive or the Company from asserting such fact or circumstance in enforcing Executives or the Companys rights hereunder.
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(g) Date of Termination. Date of Termination means (i) if Executives employment is terminated by the Company for Cause, without Cause or by reason of Disability, or by Executive for Good Reason or without Good Reason, the date of receipt of the Notice of Termination (in the case of a termination with or without Good Reason, provided such Date of Termination is in accordance with Section 3(d) or Section 3(e)) or any later date specified therein pursuant to Section 3(g), as the case may be, (ii) if Executives employment is terminated by reason of death, the date of death, and (iii) the expiration of the Employment Period, and the termination of Executives employment upon the date of such expiration.
4. | Obligations of the Company upon Termination. |
(a) With Good Reason; Without Cause. If during the Employment Period the Company shall terminate Executives employment without Cause or Executive shall terminate his employment for Good Reason, then the Company will provide Executive with the following payments and/or benefits:
(i) The Company shall pay to Executive as soon as reasonably practicable but no later than the 15th day of the third month following the end of the calendar year that contains the Date of Termination in a lump sum to the extent not previously paid, (A) the Annual Base Salary through the Date of Termination, (B) the Bonus earned for any fiscal year ended prior to the year in which the Date of Termination occurs, provided that Executive was employed on the last day of such fiscal year, (C) the amount of any unpaid expense reimbursements to which Executive may be entitled pursuant to Section 2(d)(vi) hereof and (D) any other vested payments or benefits to which Executive or Executives estate may be entitled to receive under any of the Companys benefit plans or applicable law, in accordance with the terms of such plans or law (clauses (A)-(D), the Accrued Obligations); and
(ii) Subject to Section 4(e) below, after the Date of Termination, the Company will pay Executive severance in an amount equal to one times (1x) the sum of Executives Annual Base Salary and Maximum Bonus (the Severance Payment). The Severance Payment shall be made in a lump sum on the date that is 60 calendar days following the Date of Termination, subject to the terms and conditions in Section 4(e) below.
(b) Death or Disability. If Executives employment shall be terminated by reason of the Executives death or Disability, then the Company will provide Executive with the Accrued Obligations. Thereafter, the Company shall have no further obligation to Executive, his estate, his beneficiaries or his legal representatives.
(c) Cause; Other than for Good Reason. If Executives employment shall be terminated by the Company for Cause or by Executive without Good Reason, then the Company shall have no further obligations to Executive other than for payment of the Accrued Obligations.
(d) Non-Renewal of the Employment Period. If Executives employment shall be terminated by reason of the non-renewal of the Employment Period by either party, then the Company will provide Executive with the Accrued Obligations. Thereafter, the Company shall have no further obligation to Executive or his legal representatives.
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(e) Separation Agreement and General Release. The Companys obligation to make the Severance Payment is conditioned on Executives or his legal representatives executing a separation agreement and general release of claims related to or arising from Executives employment with the Company or the termination of employment, against the Company and its affiliates (and their respective officers and directors) in a form reasonably determined by the Company, which shall be provided by the Company to Executive within five (5) calendar days following the Date of Termination; provided, that, if Executive should fail to execute (or revokes) such release within 45 calendar days following the Date of Termination, the Company shall not have any obligation to provide the Severance Payment. If Executive executes the release within such 45-calendar day period and does not revoke the release within seven (7) calendar days following the execution of the release, the Severance Payment will be made in accordance with Section 4(a)(ii).
5. | Restrictive Covenants. |
(a) In consideration of Executives employment and receipt of payments hereunder, including, without limitation, the grant of options under Section 2(d), during the period commencing on the Original Effective Date and ending twelve (12) months after the Date of Termination, Executive shall not directly, or indirectly through another person, (i) induce or attempt to induce any employee, representative, agent or consultant of the Company or any of its Affiliates or subsidiaries to leave the employ or services of the Company or any of its affiliates or subsidiaries, or in any way interfere with the relationship between the Company or any of its affiliates or subsidiaries and any employee, representative, agent or consultant thereof or (ii) hire any person who was an employee, representative, agent or consultant of the Company or any of its affiliates or subsidiaries at any time during the twelve-month period immediately prior to the date on which such hiring would take place. No action by another person or entity shall be deemed to be a breach of this provision unless the Executive directly or indirectly assisted, encouraged or otherwise counseled such person or entity to engage in such activity.
(b) Non-Competition. Executive hereby acknowledges that it is familiar with the Confidential Information (as defined below) of the Company and its subsidiaries. Executive acknowledges and agrees that the Company would be irreparably damaged if Executive were to provide services to any person competing with the Company or any of its affiliates or subsidiaries or engaged in a Similar Business (as defined below) and that such competition by Executive would result in a significant loss of goodwill by the Company. Therefore, Executive agrees that the following are reasonable restrictions:
i) Similar Business: During the Employment Period, and for a term of twelve (12) months immediately after the termination of such relationship (voluntarily or involuntarily), Executive shall not, directly or indirectly, engage in Similar Business services or activities within the Commonwealth of Puerto Rico; provided, that nothing herein shall prohibit Executive from being a passive owner of not more than 5% of the outstanding stock of any class of a corporation which is publicly traded so long as none of such persons has any active participation in the business of such corporation.
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ii) Clients: For a period of twelve (12) months after the termination the Executives employment relationship with the Company (voluntarily or involuntarily) Executive shall not, directly or indirectly, solicit or provide, without the written consent from the Company, any service for any Client, such as those Similar Business services or activities provided by Executive during his employment relationship.
For purposes of this Section 5(b) of the Agreement, the following terms shall have these meanings:
Similar Business shall mean the same or substantially the same business activity or activities performed or engaged by Executive for, or on behalf, of the Company.
Client shall mean any person or entity that was a client or customer of the Company at the time of termination of Executives employment relationship with the Company and for whom Executive provided any services on behalf of the Company or any of its affiliates or subsidiaries at any time, during the term of five (5) years prior to such termination.
Executive warrants and represents that the nature and extent of this non-competition clause has been fully explained to Executive by the Company, and that Executives decision to accept the same is made voluntarily, knowingly, intelligently and free from any undue pressure or coercion. Executive further warrants and represents that he has agreed to this non-competition clause in exchange for the increase in Base Salary Executive is receiving under this Agreement.
(c) Non-Disclosure; Non-Use of Confidential Information. Executive shall not disclose or use at any time, either during his employment with the Company or at any time thereafter, any Confidential Information of which Executive is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and required by Executives performance in good faith of duties assigned to Executive by the Company. Executive will take all appropriate steps to safeguard Confidential Information in his possession and to protect it against disclosure, misuse, espionage, loss and theft. Executive shall deliver to the Company at the termination of his employment with the Company, or at any time the Company may request, all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information or the Work Product (as defined in Section 5(e)(ii)) of the business of the Company that Executive may then possess or have under his control.
(d) Proprietary Rights. Executive recognizes that the Company possesses a proprietary interest in all Confidential Information and Work Product and has the exclusive right and privilege to use, protect by copyright, patent or trademark, or otherwise exploit the processes, ideas and concepts described therein to the exclusion of Executive, except as otherwise agreed between the Company and Executive in writing. Executive expressly agrees that any Work Product made or developed by Executive or his agents during the course of Executives employment, including any Work Product which is based on or arises out of Work Product, shall be the property of and inure to the exclusive benefit of the Company. Executive further agrees that all Work Product developed by Executive (whether or not able to be protected by copyright, patent or trademark) during the course of his employment with the Company, or
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involving the use of the time, materials or other resources of the Company, shall be promptly disclosed to the Company and shall become the exclusive property of the Company, and Executive shall execute and deliver any and all documents necessary or appropriate to implement the foregoing.
(e) Certain Definitions.
(i) As used herein, the term Confidential Information means information that is not generally known to the public (but for purposes of clarity, Confidential Information shall never exclude any such information that becomes known to the public because of Executives unauthorized disclosure) and that is used, developed or obtained by the Company in connection with its business, including, but not limited to, information, observations and data obtained by Executive while employed by the Company concerning (A) the business or affairs of the Company, (B) products or services, (C) fees, costs and pricing structures, (D) designs, (E) analyses, (F) drawings, photographs and reports, (G) computer software, including operating systems, applications and program listings, (H) flow charts, manuals and documentation, (I) databases, (J) accounting and business methods, (K) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice, (L) customers and clients and customer or client lists, (M) other copyrightable works, (N) all production methods, processes, technology and trade secrets, and (O) all similar and related information in whatever form. Confidential Information will not include any information that has been published in a form generally available to the public (except as a result of Executives unauthorized disclosure) prior to the date Executive proposes to disclose or use such information. Confidential Information will not be deemed to have been published or otherwise disclosed merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination.
(ii) As used herein, the term Work Product means all inventions, innovations, improvements, technical information, systems, software developments, methods, designs, analyses, drawings, reports, service marks, trademarks, trade names, logos and all similar or related information (whether patentable or unpatentable) that relates to the Companys actual or anticipated business, research and development or existing or future products or services and that are conceived, developed or made by Executive (whether or not during usual business hours and whether or not alone or in conjunction with any other person) while employed by the Company together with all patent applications, letters patent, trademark, trade name and service mark applications or registrations, copyrights and reissues thereof that may be granted for or upon any of the foregoing.
6. | Non-Disparagement. |
During the Employment Period and at all times thereafter, neither Executive nor his agents, on the one hand, nor the Company formally, or its executives or board of directors, on the other hand, shall directly or indirectly issue or communicate any public statement, or statement likely to become public, that maligns, denigrates or disparages the other (including, in the case of communications by Executive or his agents, the Company or any of the Companys officers, directors or employees. The foregoing shall not be violated by truthful responses to (i) legal
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process or governmental inquiry or (ii) by private statements to the Company or any of Companys officers, directors or employees; provided, that in the case of Executive, with respect to clause (ii), such statements are made in the course of carrying out his duties pursuant to this Agreement.
7. | Confidentiality of Agreement. |
The Parties agree that the consideration furnished under this Agreement, the discussions and correspondence that led to this Agreement, and the terms and conditions of this Agreement are private and confidential. Except as may be required by applicable law, regulation, or stock exchange requirement, neither Party may disclose the above information to any other person or entity without the prior written approval of the other.
8. | Executives Representations, Warranties and Covenants. |
(a) Executive hereby represents and warrants to the Company that:
(i) Executive has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and this Agreement has been duly executed by Executive;
(ii) the execution, delivery and performance of this Agreement by Executive does not and will not, with or without notice or the passage of time, conflict with, breach, violate or cause a default under any agreement, contract or instrument to which Executive is a party or any judgment, order or decree to which Executive is subject;
(iii) Executive is not a party to or bound by any employment agreement, consulting agreement, non-compete agreement, fee for services agreement, confidentiality agreement or similar agreement with any other person;
(iv) upon the execution and delivery of this Agreement by the Company and Executive, this Agreement will be a legal, valid and binding obligation of Executive, enforceable in accordance with its terms;
(v) Executive understands that the Company will rely upon the accuracy and truth of the representations and warranties of Executive set forth herein and Executive consents to such reliance; and
(vi) as of the date of execution of this Agreement, Executive is not in breach of any of its terms, including having committed any acts that would form the basis for a Cause termination if such act had occurred after the Original Effective Date.
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(b) The Company hereby represents and warrants to Executive that:
(i) the Company has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and this Agreement has been duly executed by the Company;
(ii) the execution, delivery and performance of this Agreement by the Company does not and will not, with or without notice or the passage of time, conflict with, breach, violate or cause a default under any agreement, contract or instrument to which the Company is a party or any judgment, order or decree to which the Company is subject;
(iii) upon the execution and delivery of this Agreement by the Company and Executive, this Agreement will be a legal, valid and binding obligation of the Company, enforceable in accordance with its terms; and
(iv) the Company understands that Executive will rely upon the accuracy and truth of the representations and warranties of the Company set forth herein and the Company consents to such reliance.
9. | General Provisions. |
(a) Severability. It is the desire and intent of the Parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Upon a determination that any term or provision (or any portion thereof with the exception of the Non-Competition covenant contained in Section 5(b) of this Agreement) is invalid, illegal, or incapable of being enforced, the Parties agree that a reviewing court shall have the authority to blue pencil or modify this agreement so as to render it enforceable and effect the original intent of the parties to the fullest extent permitted by applicable law.
(b) Entire Agreement and Effectiveness. Effective as of the Effective Date, this Agreement embodies the complete agreement and understanding among the Parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the Parties, written or oral, which may have related to the subject matter hereof in any way (excluding any stock options or awards granted under any equity compensation plans maintained by the Company).
(c) Successors and Assigns.
(i) This Agreement is personal to Executive and without the prior written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executives legal representatives.
(ii) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, Company shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law, or otherwise.
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(d) Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PUERTO RICO, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE COMMONWEALTH OF PUERTO RICO OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE COMMONWEALTH OF PUERTO RICO TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE COMMONWEALTH OF PUERTO RICO WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTIONS CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
(e) Enforcement.
(i) Arbitration. Except for disputes arising under Sections 5 and 6 of this Agreement (including, without limitation, any claim for injunctive relief), any controversy, dispute or claim arising out of or relating to this Agreement, or its interpretation, application, implementation, breach or enforcement which the Parties are unable to resolve by mutual agreement, shall be settled by submission by either Executive or the Company of the controversy, claim or dispute to binding arbitration in San Juan, Puerto Rico (unless the Parties agree in writing to a different location), before a single arbitrator in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association then in effect. In any such arbitration proceeding the Parties agree to provide all discovery deemed necessary by the arbitrator. The decision and award made by the arbitrator shall be accompanied by a reasoned opinion, and shall be final, binding and conclusive on all Parties hereto for all purposes, and judgment may be entered thereon in any court having jurisdiction thereof. The Company will bear the totality of the arbitrators and administrative fees and costs. Each party shall bear its or his litigation costs and expenses; provided, however, that the arbitrator shall have the discretion to award the prevailing party reimbursement of its or his reasonable attorneys fees and costs. Upon the request of any of the parties, at any time prior to the beginning of the arbitration hearing the parties may attempt in good faith to settle the dispute by mediation administered by the American Arbitration Association. The Company will bear the totality of the mediators and administrative fees and costs.
(ii) Remedies. All remedies hereunder are cumulative, are in addition to any other remedies provided for by law and may, to the extent permitted by law, be exercised concurrently or separately, and the exercise of any one remedy shall not be deemed to be an election of such remedy or to preclude the exercise of any other remedy.
(iii) Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.
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(f) Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and Executive and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall be construed as a waiver of such provisions or affect the validity, binding effect or enforceability of this Agreement or any provision hereof.
(g) Notices. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) in an envelope marked confidential to the recipient at the address below indicated or at such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Notices will be deemed to have been given hereunder and received when delivered personally, five calendar days after deposit in the U.S. mail and one calendar day after deposit for overnight delivery with a reputable overnight courier service.
If to the Company, to:
EVERTEC GROUP, LLC
GENERAL COUNSEL AND HUMAN RESOURCES SENIOR VICE PRESIDENT
Carr #176, Km 1.3
Cupey Bajo, Rio Piedras Puerto Rico 00926
P.O. Box 364527
San Juan, Puerto Rico 00936-4527
Telephone: (787) 759-9999
with a copy (which shall not constitute notice) to:
McConnell Valdés LLC
EVERTEC GROUP, LLCS CLIENT SERVICE COORDINATOR (CSC)
PO Box 364225
San Juan, Puerto Rico 00936-4225
Telephone: (787) 759-9292
If to Executive, to:
Executives home address most recently on file with the Company.
(h) Withholdings Taxes. The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.
(i) Survival of Representations, Warranties and Agreements. All representations, warranties and agreements contained herein shall survive the consummation of the transactions contemplated hereby indefinitely.
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(j) Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. All references to a Section in this Agreement are to a section of this Agreement unless otherwise noted.
(k) Construction. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party.
(l) Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.
(m) Section 409A. Notwithstanding anything herein to the contrary, this Agreement is intended to be interpreted and applied so that the payment of the benefits set forth herein either shall either be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the Code), or shall comply with the requirements of such provision. Notwithstanding anything in this Agreement or elsewhere to the contrary, distributions upon termination of Executives employment may only be made upon a separation from service as determined under Section 409A of the Code. Each payment under this Agreement or otherwise shall be treated as a separate payment for purposes of Section 409A of the Code. In no event may Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement or otherwise which constitutes a deferral of compensation within the meaning of Section 409A of the Code. All reimbursements and in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A of the Code. To the extent that any reimbursements pursuant to this Agreement or otherwise are taxable to Executive, any reimbursement payment due to Executive shall be paid to Executive on or before the last calendar day of Executives taxable year following the taxable year in which the related expense was incurred; provided, that, Executive has provided the Company written documentation of such expenses in a timely fashion and such expenses otherwise satisfy the Company expense reimbursement policies. Reimbursements pursuant to this Agreement or otherwise are not subject to liquidation or exchange for another benefit and the amount of such reimbursements that Executive receives in one taxable year shall not affect the amount of such reimbursements that Executive receives in any other taxable year. Notwithstanding any provision in this Agreement to the contrary, if on the date of his termination from employment with the Company Executive is deemed to be a specified employee within the meaning of Code Section 409A and the Final Treasury Regulations using the identification methodology selected by the Company from time to time, or if none, the default methodology under Code Section 409A, any payments or benefits due upon a termination of Executives employment under any arrangement that constitutes a deferral of compensation within the meaning of Code Section 409A shall be delayed and paid or provided (or commence, in the case of installments) on the first payroll date on or following the earlier of (i) the date which is six (6) months and one (1) calendar day after Executives termination of employment for any reason other than death, and (ii) the date of Executives death, and any remaining payments and benefits shall be paid or provided in accordance with the normal payment dates specified for such payment or benefit. Notwithstanding any of the foregoing to the contrary, the Company and its respective officers,
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directors, employees, or agents make no guarantee that the terms of this Agreement as written comply with, or are exempt from, the provisions of Code Section 409A, and none of the foregoing shall have any liability for the failure of the terms of this Agreement as written to comply with, or be exempt from, the provisions of Code Section 409A.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties hereto have executed this Amended and Restated Employment Agreement as of the date first written above.
EVERTEC GROUP, LLC | ||
/s/ Frank G. DAngelo | ||
Name: | Frank G. DAngelo | |
Title: | Chairman of the Board of Directors | |
PETER HARRINGTON | ||
/s/ Peter Harrington | ||
Title: | President & Chief Executive Officer |
Exhibit 10.66
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AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the Agreement) by and between EVERTEC GROUP, LLC, a Puerto Rico limited liability company (the Company), and Philip E. Steurer (Executive, and collectively, the Parties) is made as of this 1st day of July, 2014 (the Effective Date).
WHEREAS, Executive and the Company previously entered into an employment agreement dated August 1, 2012 (the Original Effective Date); and
WHEREAS, the Parties desire to amend and restate the employment agreement pursuant to the terms, provisions and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants, understandings, representations, warranties, undertakings and promises hereinafter set forth, intending to be legally bound thereby, the Parties agree as follows:
1. | Employment Period. |
Subject to earlier termination in accordance with Section 3 of this Agreement, Executive shall continue to be employed by the Company until the fifth (5th) anniversary of the Original Effective Date (the Employment Period) unless the parties mutually agree to extend the term at least 90 calendar days prior to the end of the Employment Period. Upon Executives termination of employment with the Company for any reason, Executive shall immediately resign all positions with the Company or any of its subsidiaries or affiliates.
2. | Terms of Employment. |
(a) Position. During the Employment Period, Executive shall serve as Executive Vice President and Chief Operating Officer of the Company and will perform such duties and exercise such supervision with regard to the business of the Company as are associated with such positions, including such duties as may be prescribed from time to time by the President and Chief Executive Officer of the Company (the CEO). Executive shall report directly to the CEO and if requested by the CEO, Executive hereby agrees to serve (without additional compensation) as an officer and director of the Company or any affiliate or subsidiary thereof.
(b) Duties. During the Employment Period, Executive shall have such responsibilities, duties, and authority that are customary for his position, subject at all times to the control of the CEO, and shall perform such services as customarily are provided by an executive of a corporation with his position and such other services consistent with his position, as shall be assigned to him from time to time by the CEO. During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled in accordance with Company policies, the Executive agrees to devote all of his business time to the business and affairs of the Company and to use Executives commercially reasonable efforts to perform faithfully, effectively and efficiently his responsibilities and obligations hereunder.
(c) Principal Work Location. Executives principal work location, subject to travel on Company business, shall be the Companys headquarters in Puerto Rico.
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(d) Compensation.
(i) Base Salary. During the Employment Period, Executive shall receive an annual base salary in an amount equal to Two Hundred and Eighty-Five Thousand Dollars ($285,000), less all applicable withholdings, which shall be paid in accordance with the customary payroll practices of the Company (as in effect from time to time, the Annual Base Salary). The Annual Base Salary shall be prorated for partial calendar years of employment and shall be subject to annual review and possible increase as determined by the Board, in its sole discretion.
(ii) Annual Bonus. During the Employment Period, with respect to each completed fiscal year of the Company, Executive shall be eligible to receive a bonus (the Bonus) pursuant to the terms and conditions set forth in the EVERTEC Annual Performance Incentive Guidelines in effect on the date eligibility for a bonus is determined.
(iii) Options. To the extent that Executive was granted options to purchase shares of common stock of EVERTEC, Inc., such options shall be subject to the terms of the applicable award agreement and the applicable Equity Incentive Plan.
(iv) Benefits. During the Employment Period, Executive shall be eligible to participate in all retirement, compensation and employee benefit plans, practices, policies and programs provided by the Company to other executives of the Company (except severance plans, policies, practices, or programs) subject to the eligibility criteria set forth therein, as such may be amended or terminated from time to time.
(v) Expenses. During the Employment Period, Executive shall be entitled to receive reimbursement for all reasonable business expenses incurred by Executive in performance of his duties hereunder provided that Executive provides all necessary documentation in accordance with the Companys policies.
3. | Termination of Employment. |
(a) Death or Disability. Executives employment shall terminate automatically upon Executives death. If Executive becomes subject to a Disability (as defined below) during the Employment Period, the Company may give Executive written notice in accordance with Sections 3(g) and 9(g) of its intention to terminate Executives employment. For purposes of this Agreement, Disability means Executives inability to perform his duties hereunder by reason of any medically determinable physical or mental impairment for a period of six (6) months or more in any twelve (12) month period.
(b) Cause. Executives employment may be terminated at any time by the Company for Cause (as defined below). For purposes of this Agreement, Cause shall mean Executives (i) commission of a felony or a crime of moral turpitude, (ii) engaging in conduct that constitutes fraud or embezzlement, (iii) engaging in conduct that constitutes gross negligence or willful misconduct that results or could reasonably be expected to result in harm to the Companys business or reputation, (iv) breach of any material terms of Executives employment, including this Agreement, which results or could reasonably be expected to result in harm to the
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Companys business or reputation, (v) continued willful failure to substantially perform duties as Executive Vice President and Chief Operating Officer or (vi) failure to relocate his primary residence to Puerto Rico within six (6) months following the Original Effective Date. Executives employment shall not be terminated for Cause within the meaning of clauses (iv) and (v) above unless Executive has been given written notice by the Board stating the basis for such termination and Executive is given fifteen (15) calendar days to cure, to the extent curable, the neglect or conduct that is the basis of any such claim.
(c) Termination Without Cause. The Company may terminate Executives employment hereunder without Cause at any time.
(d) Good Reason. Executives employment may be terminated at any time by Executive for Good Reason upon thirty (30) calendar days prior written notice following the occurrence of the event giving rise to the termination for Good Reason. For purposes of this Agreement, Good Reason means voluntary resignation after any of the following actions taken by the Company without Executives written consent: (i) any material failure of the Company to fulfill its obligations under this Agreement, (ii) a material and adverse change to, or a material reduction of, Executives duties and responsibilities to the Company, (iii) a material reduction in Executives then current Annual Base Salary (not including any diminution related to a broader compensation reduction that is not limited to Executive specifically and that is not more than 10% in the aggregate), or (iv) the failure of any successor (whether by sale, reorganization, consolidation, merger or other corporate transaction) to assume this Agreement, whether in writing or by operation of law; provided, that any such event shall not constitute Good Reason unless and until Executive shall have provided the Company with notice thereof no later than 30 calendar days following Executives knowledge of the occurrence of such event and the Company shall have failed to remedy such event within 30 calendar days of receipt of such notice.
(e) Voluntary Termination. Executives employment may be terminated at any time by Executive without Good Reason upon 30 calendar days prior written notice.
(f) Termination as a Result of Expiration of the Employment Period. Unless otherwise agreed between the parties, Executives employment shall automatically terminate upon expiration of the Employment Period.
(g) Notice of Termination. Any termination by the Company for Cause or without Cause, or by Executive for Good Reason or without Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 9(g). For purposes of this Agreement, a Notice of Termination means a written notice that (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executives employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date. The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company hereunder or preclude Executive or the Company from asserting such fact or circumstance in enforcing Executives or the Companys rights hereunder.
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(h) Date of Termination. Date of Termination means (i) if Executives employment is terminated by the Company for Cause, without Cause or by reason of Disability, or by Executive for Good Reason or without Good Reason, the date of receipt of the Notice of Termination (in the case of a termination with or without Good Reason, provided such Date of Termination is in accordance with Section 3(d) or Section 3(e)) or any later date specified therein pursuant to Section 3(g), as the case may be, (ii) if Executives employment is terminated by reason of death, the date of death, and (iii) the expiration of the Employment Period, and the termination of Executives employment upon the date of such expiration.
4. | Obligations of the Company upon Termination. |
(a) With Good Reason; Without Cause. If during the Employment Period, the Company shall terminate Executives employment without Cause or Executive shall terminate his employment for Good Reason, then the Company will provide Executive with the following payments and/or benefits:
(i) The Company shall pay to Executive as soon as reasonably practicable but no later than the 15th day of the third month following the end of the calendar year that contains the Date of Termination in a lump sum to the extent not previously paid, (A) the Annual Base Salary through the Date of Termination, (B) the Bonus earned for any fiscal year ended prior to the year in which the Date of Termination occurs, provided that Executive was employed on the last day of such fiscal year, (C) the amount of any unpaid expense reimbursements to which Executive may be entitled pursuant to Section 2(d)(vi) hereof and (D) any other vested payments or benefits to which Executive or Executives estate may be entitled to receive under any of the Companys benefit plans or applicable law, in accordance with the terms of such plans or law (clauses (A)-(D), the Accrued Obligations); and
(ii) Subject to Section 4(e) below, after the Date of Termination, the Company will pay Executive severance in an amount equal to the greater of (a) Executives Annual Base Salary and (b) amounts due under applicable laws (the Severance Payment). The Severance Payment shall be made in a lump sum on the date that is 60 calendar days following the Date of Termination, subject to the terms and conditions in Section 4(e) below.
(b) Death or Disability. If Executives employment shall be terminated by reason of the Executives death or Disability, then the Company will provide Executive with the Accrued Obligations. Thereafter, the Company shall have no further obligation to Executive, his estate, his beneficiaries or his legal representatives.
(c) Cause; Other than for Good Reason. If Executives employment shall be terminated by the Company for Cause or by Executive without Good Reason, then the Company shall have no further obligations to Executive other than for payment of the Accrued Obligations.
(d) Expiration of the Employment Period. If Executives employment shall be terminated by reason of the expiration of the Employment Period, then the Company will provide Executive with the Accrued Obligations. Thereafter, the Company shall have no further obligation to Executive or his legal representatives.
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(e) Separation Agreement and General Release. The Companys obligation to make the Severance Payment is conditioned on Executives or his legal representatives executing a separation agreement and general release of claims related to or arising from Executives employment with the Company or the termination of employment, against the Company and its affiliates (and their respective officers and directors) in a form reasonably determined by the Company, which shall be provided by the Company to Executive within five (5) calendar days following the Date of Termination; provided, that, if Executive should fail to execute (or revokes) such release within 45 calendar days following the Date of Termination, the Company shall not have any obligation to provide the Severance Payment. If Executive executes the release within such 45-calendar day period and does not revoke the release within seven (7) calendar days following the execution of the release, the Severance Payment will be made in accordance with Section 4(a)(ii).
5. | Restrictive Covenants. |
(a) In consideration of Executives employment and receipt of payments hereunder, including, without limitation, the grant of options under Section 2(d), during the period commencing on the Original Effective Date and ending twelve (12) months after the Date of Termination, Executive shall not directly, or indirectly through another person, (i) induce or attempt to induce any employee, representative, agent or consultant of the Company or any of its Affiliates or subsidiaries to leave the employ or services of the Company or any of its affiliates or subsidiaries, or in any way interfere with the relationship between the Company or any of its affiliates or subsidiaries and any employee, representative, agent or consultant thereof or (ii) hire any person who was an employee, representative, agent or consultant of the Company or any of its affiliates or subsidiaries at any time during the twelve-month period immediately prior to the date on which such hiring would take place. No action by another person or entity shall be deemed to be a breach of this provision unless the Executive directly or indirectly assisted, encouraged or otherwise counseled such person or entity to engage in such activity.
(b) Non-Competition. Executive hereby acknowledges that it is familiar with the Confidential Information (as defined below) of the Company and its subsidiaries. Executive acknowledges and agrees that the Company would be irreparably damaged if Executive were to provide services to any person competing with the Company or any of its affiliates or subsidiaries or engaged in a Similar Business (as defined below) and that such competition by Executive would result in a significant loss of goodwill by the Company. Therefore, Executive agrees that the following are reasonable restrictions:
i) Similar Business: During the Employment Period, and for a term of twelve (12) months immediately after the termination of such relationship (voluntarily or involuntarily), Executive shall not, directly or indirectly, engage in Similar Business services or activities within the Commonwealth of Puerto Rico; provided, that nothing herein shall prohibit Executive from being a passive owner of not more than 5% of the outstanding stock of any class of a corporation which is publicly traded so long as none of such persons has any active participation in the business of such corporation.
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ii) Clients: For a period of twelve (12) months after the termination the Executives employment relationship with the Company (voluntarily or involuntarily) Executive shall not, directly or indirectly, solicit or provide, without the written consent from the Company, any service for any Client, such as those Similar Business services or activities provided by Executive during his employment relationship.
For purposes of this Section 5(b) of the Agreement, the following terms shall have these meanings:
Similar Business shall mean the same or substantially the same business activity or activities performed or engaged by Executive for, or on behalf, of the Company.
Client shall mean any person or entity that was a client or customer of the Company at the time of termination of Executives employment relationship with the Company and for whom Executive provided any services on behalf of the Company or any of its affiliates or subsidiaries at any time, during the term of five (5) years prior to such termination.
Executive warrants and represents that the nature and extent of this non-competition clause has been fully explained to Executive by the Company, and that Executives decision to accept the same is made voluntarily, knowingly, intelligently and free from any undue pressure or coercion. Executive further warrants and represents that he has agreed to this non-competition clause in exchange for the increase in Base Salary Executive is receiving under this Agreement.
(c) Non-Disclosure; Non-Use of Confidential Information. Executive shall not disclose or use at any time, either during his employment with the Company or at any time thereafter, any Confidential Information of which Executive is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and required by Executives performance in good faith of duties assigned to Executive by the Company. Executive will take all appropriate steps to safeguard Confidential Information in his possession and to protect it against disclosure, misuse, espionage, loss and theft. Executive shall deliver to the Company at the termination of his employment with the Company, or at any time the Company may request, all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information or the Work Product (as defined in Section 5(e)(ii)) of the business of the Company that Executive may then possess or have under his control.
(d) Proprietary Rights. Executive recognizes that the Company possesses a proprietary interest in all Confidential Information and Work Product and has the exclusive right and privilege to use, protect by copyright, patent or trademark, or otherwise exploit the processes, ideas and concepts described therein to the exclusion of Executive, except as otherwise agreed between the Company and Executive in writing. Executive expressly agrees that any Work Product made or developed by Executive or his agents during the course of Executives employment, including any Work Product which is based on or arises out of Work Product, shall be the property of and inure to the exclusive benefit of the Company. Executive further agrees that all Work Product developed by Executive (whether or not able to be protected by copyright, patent or trademark) during the course of his employment with the Company, or
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involving the use of the time, materials or other resources of the Company, shall be promptly disclosed to the Company and shall become the exclusive property of the Company, and Executive shall execute and deliver any and all documents necessary or appropriate to implement the foregoing.
(e) Certain Definitions.
(i) As used herein, the term Confidential Information means information that is not generally known to the public (but for purposes of clarity, Confidential Information shall never exclude any such information that becomes known to the public because of Executives unauthorized disclosure) and that is used, developed or obtained by the Company in connection with its business, including, but not limited to, information, observations and data obtained by Executive while employed by the Company concerning (A) the business or affairs of the Company, (B) products or services, (C) fees, costs and pricing structures, (D) designs, (E) analyses, (F) drawings, photographs and reports, (G) computer software, including operating systems, applications and program listings, (H) flow charts, manuals and documentation, (I) databases, (J) accounting and business methods, (K) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice, (L) customers and clients and customer or client lists, (M) other copyrightable works, (N) all production methods, processes, technology and trade secrets, and (O) all similar and related information in whatever form. Confidential Information will not include any information that has been published in a form generally available to the public (except as a result of Executives unauthorized disclosure) prior to the date Executive proposes to disclose or use such information. Confidential Information will not be deemed to have been published or otherwise disclosed merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination.
(ii) As used herein, the term Work Product means all inventions, innovations, improvements, technical information, systems, software developments, methods, designs, analyses, drawings, reports, service marks, trademarks, trade names, logos and all similar or related information (whether patentable or unpatentable) that relates to the Companys actual or anticipated business, research and development or existing or future products or services and that are conceived, developed or made by Executive (whether or not during usual business hours and whether or not alone or in conjunction with any other person) while employed by the Company together with all patent applications, letters patent, trademark, trade name and service mark applications or registrations, copyrights and reissues thereof that may be granted for or upon any of the foregoing.
6. | Non-Disparagement. |
During the Employment Period and at all times thereafter, neither Executive nor his agents, on the one hand, nor the Company formally, or its executives or board of directors, on the other hand, shall directly or indirectly issue or communicate any public statement, or statement likely to become public, that maligns, denigrates or disparages the other (including, in the case of communications by Executive or his agents, the Company or any of the Companys officers, directors or employees. The foregoing shall not be violated by truthful responses to (i) legal
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process or governmental inquiry or (ii) by private statements to the Company or any of Companys officers, directors or employees; provided, that in the case of Executive, with respect to clause (ii), such statements are made in the course of carrying out his duties pursuant to this Agreement.
7. | Confidentiality of Agreement. |
The Parties agree that the consideration furnished under this Agreement, the discussions and correspondence that led to this Agreement, and the terms and conditions of this Agreement are private and confidential. Except as may be required by applicable law, regulation, or stock exchange requirement, neither Party may disclose the above information to any other person or entity without the prior written approval of the other.
8. | Executives Representations, Warranties and Covenants. |
(a) Executive hereby represents and warrants to the Company that:
(i) Executive has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and this Agreement has been duly executed by Executive;
(ii) the execution, delivery and performance of this Agreement by Executive does not and will not, with or without notice or the passage of time, conflict with, breach, violate or cause a default under any agreement, contract or instrument to which Executive is a party or any judgment, order or decree to which Executive is subject;
(iii) Except as set forth on Schedule I attached hereto, Executive is not a party to or bound by any employment agreement, consulting agreement, non-compete agreement, fee for services agreement, confidentiality agreement or similar agreement with any other person;
(iv) upon the execution and delivery of this Agreement by the Company and Executive, this Agreement will be a legal, valid and binding obligation of Executive, enforceable in accordance with its terms;
(v) Executive understands that the Company will rely upon the accuracy and truth of the representations and warranties of Executive set forth herein and Executive consents to such reliance; and
(vi) as of the date of execution of this Agreement, Executive is not in breach of any of its terms, including having committed any acts that would form the basis for a Cause termination if such act had occurred after the Original Effective Date.
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(b) The Company hereby represents and warrants to Executive that:
(i) the Company has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and this Agreement has been duly executed by the Company;
(ii) the execution, delivery and performance of this Agreement by the Company does not and will not, with or without notice or the passage of time, conflict with, breach, violate or cause a default under any agreement, contract or instrument to which the Company is a party or any judgment, order or decree to which the Company is subject;
(iii) upon the execution and delivery of this Agreement by the Company and Executive, this Agreement will be a legal, valid and binding obligation of the Company, enforceable in accordance with its terms; and
(iv) the Company understands that Executive will rely upon the accuracy and truth of the representations and warranties of the Company set forth herein and the Company consents to such reliance.
9. | General Provisions. |
(a) Severability. It is the desire and intent of the Parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Upon a determination that any term or provision (or any portion thereof with the exception of the Non-Competition covenant contained in Section 5(b) of this Agreement) is invalid, illegal, or incapable of being enforced, the Parties agree that a reviewing court shall have the authority to blue pencil or modify this agreement so as to render it enforceable and effect the original intent of the parties to the fullest extent permitted by applicable law.
(b) Entire Agreement and Effectiveness. Effective as of the Effective Date, this Agreement embodies the complete agreement and understanding among the Parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the Parties, written or oral, which may have related to the subject matter hereof in any way (excluding any stock options or awards granted under any equity compensation plans maintained by the Company).
(c) Successors and Assigns.
(i) This Agreement is personal to Executive and without the prior written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executives legal representatives.
(ii) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, Company shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law, or otherwise.
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(d) Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PUERTO RICO, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE COMMONWEALTH OF PUERTO RICO OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE COMMONWEALTH OF PUERTO RICO TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE COMMONWEALTH OF PUERTO RICO WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTIONS CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
(e) Enforcement.
(i) Arbitration. Except for disputes arising under Sections 5 and 6 of this Agreement (including, without limitation, any claim for injunctive relief), any controversy, dispute or claim arising out of or relating to this Agreement, or its interpretation, application, implementation, breach or enforcement which the Parties are unable to resolve by mutual agreement, shall be settled by submission by either Executive or the Company of the controversy, claim or dispute to binding arbitration in San Juan, Puerto Rico (unless the Parties agree in writing to a different location), before a single arbitrator in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association then in effect. In any such arbitration proceeding the Parties agree to provide all discovery deemed necessary by the arbitrator. The decision and award made by the arbitrator shall be accompanied by a reasoned opinion, and shall be final, binding and conclusive on all Parties hereto for all purposes, and judgment may be entered thereon in any court having jurisdiction thereof. The Company will bear the totality of the arbitrators and administrative fees and costs. Each party shall bear its or his litigation costs and expenses; provided, however, that the arbitrator shall have the discretion to award the prevailing party reimbursement of its or his reasonable attorneys fees and costs. Upon the request of any of the parties, at any time prior to the beginning of the arbitration hearing the parties may attempt in good faith to settle the dispute by mediation administered by the American Arbitration Association. The Company will bear the totality of the mediators and administrative fees and costs.
(ii) Remedies. All remedies hereunder are cumulative, are in addition to any other remedies provided for by law and may, to the extent permitted by law, be exercised concurrently or separately, and the exercise of any one remedy shall not be deemed to be an election of such remedy or to preclude the exercise of any other remedy.
(iii) Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.
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(f) Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and Executive and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall be construed as a waiver of such provisions or affect the validity, binding effect or enforceability of this Agreement or any provision hereof.
(g) Notices. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) in an envelope marked confidential to the recipient at the address below indicated or at such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Notices will be deemed to have been given hereunder and received when delivered personally, five calendar days after deposit in the U.S. mail and one calendar day after deposit for overnight delivery with a reputable overnight courier service.
If to the Company, to:
EVERTEC GROUP, LLC
GENERAL COUNSEL AND HUMAN RESOURCES SENIOR VICE PRESIDENT
Carr #176, Km 1.3
Cupey Bajo, Rio Piedras Puerto Rico 00926
P.O. Box 364527
San Juan, Puerto Rico 00936-4527
Telephone: (787) 759-9999
with a copy (which shall not constitute notice) to:
McConnell Valdés LLC
EVERTEC GROUP, LLCS CLIENT SERVICE COORDINATOR (CSC)
PO Box 364225
San Juan, Puerto Rico 00936-4225
Telephone: (787) 759-9292
If to Executive, to:
Executives home address most recently on file with the Company.
(h) Withholdings Taxes. The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.
(i) Survival of Representations, Warranties and Agreements. All representations, warranties and agreements contained herein shall survive the consummation of the transactions contemplated hereby indefinitely.
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(j) Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. All references to a Section in this Agreement are to a section of this Agreement unless otherwise noted.
(k) Construction. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party.
(l) Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.
(m) Section 409A. Notwithstanding anything herein to the contrary, this Agreement is intended to be interpreted and applied so that the payment of the benefits set forth herein either shall either be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the Code), or shall comply with the requirements of such provision. Notwithstanding anything in this Agreement or elsewhere to the contrary, distributions upon termination of Executives employment may only be made upon a separation from service as determined under Section 409A of the Code. Each payment under this Agreement or otherwise shall be treated as a separate payment for purposes of Section 409A of the Code. In no event may Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement or otherwise which constitutes a deferral of compensation within the meaning of Section 409A of the Code. All reimbursements and in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A of the Code. To the extent that any reimbursements pursuant to this Agreement or otherwise are taxable to Executive, any reimbursement payment due to Executive shall be paid to Executive on or before the last calendar day of Executives taxable year following the taxable year in which the related expense was incurred; provided, that, Executive has provided the Company written documentation of such expenses in a timely fashion and such expenses otherwise satisfy the Company expense reimbursement policies. Reimbursements pursuant to this Agreement or otherwise are not subject to liquidation or exchange for another benefit and the amount of such reimbursements that Executive receives in one taxable year shall not affect the amount of such reimbursements that Executive receives in any other taxable year. Notwithstanding any provision in this Agreement to the contrary, if on the date of his termination from employment with the Company Executive is deemed to be a specified employee within the meaning of Code Section 409A and the Final Treasury Regulations using the identification methodology selected by the Company from time to time, or if none, the default methodology under Code Section 409A, any payments or benefits due upon a termination of Executives employment under any arrangement that constitutes a deferral of compensation within the meaning of Code Section 409A shall be delayed and paid or provided (or commence, in the case of installments) on the first payroll date on or following the earlier of (i) the date which is six (6) months and one (1) calendar day after Executives termination of employment for any reason other than death, and (ii) the date of Executives death, and any remaining payments and benefits shall be paid or provided in accordance with the normal payment dates specified for such payment or benefit. Notwithstanding any of the foregoing to the contrary, the Company and its respective officers,
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directors, employees, or agents make no guarantee that the terms of this Agreement as written comply with, or are exempt from, the provisions of Code Section 409A, and none of the foregoing shall have any liability for the failure of the terms of this Agreement as written to comply with, or be exempt from, the provisions of Code Section 409A.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties hereto have executed this Amended and Restated Employment Agreement as of the date first written above.
EVERTEC Group, LLC | ||
/s/ Peter Harrington | ||
Name: | Peter Harrington | |
Title: | President & Chief Executive Officer | |
PHILIP E. STEURER | ||
/s/ Philip E. Steurer | ||
Title: | Executive Vice President & Chief Operating Officer |
EXECUTION COPY
SCHEDULE I
Other Agreements
Restrictive Covenant Agreement (for Employees in Other States) between Philip E. Steurer and First Data Corporation
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EXHIBIT 31.1
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a)
I, Peter Harrington, certify that:
1. | I have reviewed this report on Form 10-Q of EVERTEC, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and |
c. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 7, 2014 | /s/ Peter Harrington | |||
Peter Harrington | ||||
Chief Executive Officer |
EXHIBIT 31.2
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a)
I, Juan J. Román, certify that:
1. | I have reviewed this report on Form 10-Q of EVERTEC, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and |
c. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 7, 2014 | /s/ Juan J. Román | |||
Juan J. Román | ||||
Chief Financial Officer |
EXHIBIT 32.1
Certification Pursuant to 18 U.S.C. Section 1350
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 , the undersigned officer of EVERTEC, Inc. (the Company), does hereby certify, to such officers knowledge, that:
The Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 (the Form 10-Q) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 7, 2014 | /s/ Peter Harrington | |||
Peter Harrington | ||||
Chief Executive Officer |
EXHIBIT 32.2
Certification Pursuant to 18 U.S.C. 1350
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of EVERTEC, Inc. (the Company), does hereby certify, to such officers knowledge, that:
The Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 (the Form 10-Q) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 7, 2014 | /s/ Juan J. Román | |||
Juan J. Román | ||||
Chief Financial Officer |
Total Debt (Detail) (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2014
|
Dec. 31, 2013
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Debt Instrument [Line Items] | ||||||||||
Other short-term borrowing | $ 1,200 | |||||||||
Total debt | 698,626 | 735,880 | ||||||||
Term A due on April 17, 2018 [Member] | Senior Secured Credit Facility [Member]
|
||||||||||
Debt Instrument [Line Items] | ||||||||||
Credit facility | 284,697 | [1],[2] | 292,153 | [1],[2] | ||||||
Term B due on April 17, 2020 [Member] | Senior Secured Credit Facility [Member]
|
||||||||||
Debt Instrument [Line Items] | ||||||||||
Credit facility | 390,929 | [1],[3] | 392,527 | [1],[3] | ||||||
Expiring on April 17, 2018 [Member] | Revolving Credit Facility [Member]
|
||||||||||
Debt Instrument [Line Items] | ||||||||||
Credit facility | $ 23,000 | $ 50,000 | ||||||||
|
Net Income (Loss) Per Common Share - Additional Information (Detail) (USD $)
|
0 Months Ended | 6 Months Ended | |
---|---|---|---|
May 07, 2014
|
Feb. 12, 2014
|
Jun. 30, 2014
|
|
Earnings Per Share [Abstract] | |||
Cash dividend paid per common share | $ 0.10 | ||
Cash dividend declared per common share | $ 0.10 | $ 0.10 | $ 0.10 |
Share-based Compensation - Additional Information (Detail) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2014
|
Jun. 30, 2013
|
Jun. 30, 2014
|
Jun. 30, 2013
|
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share based compensation expenses | $ 300,000 | $ 5,200,000 | $ 700,000 | $ 5,500,000 |
Total unrecognized cost for stock options | 2,200,000 | 2,200,000 | ||
Unrecognized compensation cost, weighted average period of recognition | 2 years 3 months 18 days | |||
Restricted Shares [Member]
|
||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total unrecognized cost for stock options | $ 25,000 | $ 25,000 |
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