QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. employer identification number) | ||
(Address of principal executive offices) | (Zip Code) | ||
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
☒ | Accelerated filer | ☐ | ||||
Non-accelerated filer | ☐ | Smaller reporting company | ||||
Emerging growth company | ||||||
Page | ||
Part I. FINANCIAL INFORMATION | ||
Item 1. | Financial Statements | |
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
• | our reliance on our relationship with Popular, Inc. (“Popular”) for a significant portion of our revenues pursuant to our master services agreement with them, and to grow our merchant acquiring business; |
• | as a regulated institution, the likelihood we will be required to obtain regulatory approval before engaging in certain new activities or businesses, whether organically or by acquisition, and our potential inability to obtain such approval on a timely basis or at all, which may make transactions more expensive or impossible to complete, or make us less attractive to potential sellers; |
• | our ability to renew our client contracts on terms favorable to us, including our contract with Popular, and any significant concessions we may have to grant to Popular with respect to pricing or other key terms in anticipation of the negotiation of the extension of the MSA, both in respect of the current term and any extension of the MSA; |
• | 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, and the risks to our business if our systems are hacked or otherwise compromised; |
• | 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; |
• | a reduction in consumer confidence, whether as a result of a global economic downturn or otherwise, which leads to a decrease in consumer spending; |
• | our dependence on credit card associations, including any adverse changes in credit card association or network rules or fees; |
• | changes in the regulatory environment and changes in international, legal, tax, political, administrative or economic conditions; |
• | the geographical concentration of our business in Puerto Rico, including our business with the government of Puerto Rico and its instrumentalities, which are facing severe political and fiscal challenges; |
• | additional adverse changes in the general economic conditions in Puerto Rico, whether as a result of the government’s debt crisis or otherwise, including the continued migration of Puerto Ricans to the U.S. mainland, which could negatively affect our customer base, general consumer spending, our cost of operations and our ability to hire and retain qualified employees; |
• | a protracted federal government shutdown may affect our financial performance; |
• | operating an international business in Latin America and the Caribbean, in jurisdictions with potential political and economic instability; |
• | our ability to execute our geographic expansion and acquisition strategies, including challenges in successfully acquiring new businesses and integrating and growing acquired businesses; |
• | 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 prevent a cybersecurity attack or breach in our information security; |
• | our ability to generate sufficient cash to service our indebtedness and to generate future profits; |
• | our ability to refinance our debt; |
• | the possibility that we could lose our preferential tax rate in Puerto Rico; |
• | the risk that the counterparty to our interest rate swap agreements fail to satisfy its obligations under the agreement; |
• | uncertainty of the pending debt restructuring process under Title III of the Puerto Rico Oversight, Management and Economic Stability Act (“PROMESA”), as well as actions taken by the Puerto Rico government or by the PROMESA Board to address the fiscal crisis in Puerto Rico; |
• | the aftermath of Hurricanes Irma and Maria and their continued impact on the economies of Puerto Rico and the Caribbean; |
• | the possibility of future catastrophic hurricanes affecting Puerto Rico and/or the Caribbean, as well as other potential natural disasters; and |
• | the nature, timing and amount of any restatement. |
September 30, 2019 | December 31, 2018 | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Restricted cash | ||||||||
Accounts receivable, net | ||||||||
Prepaid expenses and other assets | ||||||||
Total current assets | ||||||||
Investment in equity investee | ||||||||
Property and equipment, net | ||||||||
Operating lease right-of-use asset | ||||||||
Goodwill | ||||||||
Other intangible assets, net | ||||||||
Deferred tax asset | ||||||||
Net investment in lease | ||||||||
Other long-term assets | ||||||||
Total assets | $ | $ | ||||||
Liabilities and stockholders’ equity | ||||||||
Current Liabilities: | ||||||||
Accrued liabilities | $ | $ | ||||||
Accounts payable | ||||||||
Unearned income | ||||||||
Income tax payable | ||||||||
Current portion of long-term debt | ||||||||
Current portion of operating lease liability | ||||||||
Total current liabilities | ||||||||
Long-term debt | ||||||||
Deferred tax liability | ||||||||
Unearned income - long term | ||||||||
Operating lease liability - long-term | ||||||||
Other long-term liabilities | ||||||||
Total liabilities | ||||||||
Commitments and contingencies (Note 12) | ||||||||
Stockholders’ equity | ||||||||
Preferred stock, par value $0.01; 2,000,000 shares authorized; none issued | ||||||||
Common stock, par value $0.01; 206,000,000 shares authorized; 71,947,563 shares issued and outstanding at September 30, 2019 (December 31, 2018 - 72,378,710) | ||||||||
Additional paid-in capital | ||||||||
Accumulated earnings | ||||||||
Accumulated other comprehensive loss, net of tax | ( | ) | ( | ) | ||||
Total EVERTEC, Inc. stockholders’ equity | ||||||||
Non-controlling interest | ||||||||
Total equity | ||||||||
Total liabilities and equity | $ | $ | ||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenues (affiliates Note 13) | $ | $ | $ | $ | ||||||||||||
Operating costs and expenses | ||||||||||||||||
Cost of revenues, exclusive of depreciation and amortization shown below | ||||||||||||||||
Selling, general and administrative expenses | ||||||||||||||||
Depreciation and amortization | ||||||||||||||||
Total operating costs and expenses | ||||||||||||||||
Income from operations | ||||||||||||||||
Non-operating income (expenses) | ||||||||||||||||
Interest income | ||||||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Earnings of equity method investment | ||||||||||||||||
Other income (expenses) | ( | ) | ||||||||||||||
Total non-operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Income before income taxes | ||||||||||||||||
Income tax expense | ||||||||||||||||
Net income | ||||||||||||||||
Less: Net income attributable to non-controlling interest | ||||||||||||||||
Net income attributable to EVERTEC, Inc.’s common stockholders | ||||||||||||||||
Other comprehensive income (loss), net of tax of $(278), $180, $(1,279) and $348 | ||||||||||||||||
Foreign currency translation adjustments | ( | ) | ( | ) | ( | ) | ||||||||||
(Loss) gain on cash flow hedges | ( | ) | ( | ) | ||||||||||||
Total comprehensive income attributable to EVERTEC, Inc.’s common stockholders | $ | $ | $ | $ | ||||||||||||
Net income per common share - basic attributable to EVERTEC, Inc.’s common stockholders | $ | $ | $ | $ | ||||||||||||
Net income per common share - diluted attributable to EVERTEC, Inc.’s common stockholders | $ | $ | $ | $ | ||||||||||||
Number of Shares of Common Stock | Common Stock | Additional Paid-in Capital | Accumulated Earnings | Accumulated Other Comprehensive Loss | Non-Controlling Interest | Total Stockholders’ Equity | |||||||||||||||||||||
Balance at December 31, 2018 | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||
Share-based compensation recognized | — | — | — | — | — | ||||||||||||||||||||||
Repurchase of common stock | ( | ) | ( | ) | ( | ) | ( | ) | — | — | ( | ) | |||||||||||||||
Restricted stock units delivered, net of cashless | ( | ) | — | — | — | ( | ) | ||||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||
Cash dividends declared on common stock, $0.05 per share | — | — | — | ( | ) | — | — | ( | ) | ||||||||||||||||||
Other comprehensive loss | — | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||
Balance at March 31, 2019 | ( | ) | |||||||||||||||||||||||||
Share-based compensation recognized | — | — | — | — | — | ||||||||||||||||||||||
Repurchase of common stock | ( | ) | ( | ) | ( | ) | ( | ) | — | — | ( | ) | |||||||||||||||
Restricted stock units delivered, net of cashless | ( | ) | — | — | — | ( | ) | ||||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||
Cash dividends declared on common stock, $0.05 per share | — | — | — | ( | ) | — | — | ( | ) | ||||||||||||||||||
Other comprehensive loss | — | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||
Balance at June 30, 2019 | ( | ) | |||||||||||||||||||||||||
Share-based compensation recognized | — | — | — | — | — | ||||||||||||||||||||||
Repurchase of common stock | ( | ) | — | ( | ) | — | — | — | ( | ) | |||||||||||||||||
Restricted stock units delivered, net of cashless | — | ( | ) | — | — | — | ( | ) | |||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||
Cash dividends declared on common stock, $0.05 per share | — | — | — | ( | ) | — | — | ( | ) | ||||||||||||||||||
Other comprehensive loss | — | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Balance at September 30, 2019 | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||
Number of Shares of Common Stock | Common Stock | Additional Paid-in Capital | Accumulated Earnings | Accumulated Other Comprehensive Loss | Non-Controlling Interest | Total Stockholders’ Equity | |||||||||||||||||||||
Balance at December 31, 2017 | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||
Cumulative adjustment from implementation of ASC 606 | — | — | — | — | ( | ) | |||||||||||||||||||||
Share-based compensation recognized | — | — | — | — | — | ||||||||||||||||||||||
Restricted stock units delivered, net of cashless | ( | ) | — | — | — | ( | ) | ||||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | ||||||||||||||||||||||
Balance at March 31, 2018 | ( | ) | |||||||||||||||||||||||||
Share-based compensation recognized | — | — | — | — | — | ||||||||||||||||||||||
Restricted stock units delivered, net of cashless | ( | ) | — | — | — | ( | ) | ||||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||
Balance at June 30, 2018 | ( | ) | |||||||||||||||||||||||||
Share-based compensation recognized | — | — | — | — | — | ||||||||||||||||||||||
Restricted stock units delivered, net of cashless | — | ( | ) | — | — | — | ( | ) | |||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||
Cash dividends declared on common stock | ( | ) | ( | ) | |||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||
Balance at September 30, 2018 | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||
Nine months ended September 30, | ||||||||
2019 | 2018 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | $ | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | ||||||||
Amortization of debt issue costs and accretion of discount | ||||||||
Operating lease amortization | ||||||||
Provision for doubtful accounts and sundry losses | ||||||||
Deferred tax benefit | ( | ) | ( | ) | ||||
Share-based compensation | ||||||||
Loss on disposition of property and equipment and other intangibles | ||||||||
Earnings of equity method investment | ( | ) | ( | ) | ||||
Dividend received from equity method investment | ||||||||
(Increase) decrease in assets: | ||||||||
Accounts receivable, net | ( | ) | ||||||
Prepaid expenses and other assets | ( | ) | ( | ) | ||||
Other long-term assets | ( | ) | ( | ) | ||||
Increase (decrease) in liabilities: | ||||||||
Accounts payable and accrued liabilities | ( | ) | ( | ) | ||||
Income tax payable | ( | ) | ||||||
Unearned income | ||||||||
Operating lease liabilities | ( | ) | ||||||
Other long-term liabilities | ||||||||
Total adjustments | ||||||||
Net cash provided by operating activities | ||||||||
Cash flows from investing activities | ||||||||
Additions to software | ( | ) | ( | ) | ||||
Property and equipment acquired | ( | ) | ( | ) | ||||
Proceeds from sales of property and equipment | ||||||||
Net cash used in investing activities | ( | ) | ( | ) | ||||
Cash flows from financing activities | ||||||||
Statutory withholding taxes paid on share-based compensation | ( | ) | ( | ) | ||||
Net decrease in short-term borrowings | ( | ) | ||||||
Repayment of short-term borrowings for purchase of equipment and software | ( | ) | ( | ) | ||||
Dividends paid | ( | ) | ( | ) | ||||
Repurchase of common stock | ( | ) | ||||||
Repayment of long-term debt | ( | ) | ( | ) | ||||
Net cash used in financing activities | ( | ) | ( | ) | ||||
Net increase in cash, cash equivalents and restricted cash | ||||||||
Cash, cash equivalents and restricted cash at beginning of the period | ||||||||
Cash, cash equivalents and restricted cash at end of the period | $ | $ | ||||||
Reconciliation of cash, cash equivalents and restricted cash | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Restricted cash | ||||||||
Cash, cash equivalents and restricted cash | $ | $ | ||||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | $ | ||||||
Cash paid for income taxes | ||||||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
Operating cash flows from operating leases | ||||||||
Supplemental disclosure of non-cash activities: | ||||||||
Payable due to vendor related to equipment and software acquired | ||||||||
(Dollar amounts in thousands) | Useful life in years | September 30, 2019 | December 31, 2018 | |||||||
Buildings | $ | $ | ||||||||
Data processing equipment | 3 - 5 | |||||||||
Furniture and equipment | 3 - 20 | |||||||||
Leasehold improvements | 5 -10 | |||||||||
Less - accumulated depreciation and amortization | ( | ) | ( | ) | ||||||
Depreciable assets, net | ||||||||||
Land | ||||||||||
Property and equipment, net | $ | $ | ||||||||
(In thousands) | Payment Services - Puerto Rico & Caribbean | Payment Services - Latin America | Merchant Acquiring, net | Business Solutions | Total | |||||||||||||||
Balance at December 31, 2018 | $ | $ | $ | $ | $ | |||||||||||||||
Foreign currency translation adjustments | ||||||||||||||||||||
Balance at September 30, 2019 | $ | $ | $ | $ | $ | |||||||||||||||
September 30, 2019 | ||||||||||||||
(Dollar amounts in thousands) | Useful life in years | Gross amount | Accumulated amortization | Net carrying amount | ||||||||||
Customer relationships | 8 - 14 | $ | $ | ( | ) | $ | ||||||||
Trademark | 2 - 15 | ( | ) | |||||||||||
Software packages | 3 - 10 | ( | ) | |||||||||||
Non-compete agreement | ( | ) | ||||||||||||
Other intangible assets, net | $ | $ | ( | ) | $ | |||||||||
December 31, 2018 | ||||||||||||||
(Dollar amounts in thousands) | Useful life in years | Gross amount | Accumulated amortization | Net carrying amount | ||||||||||
Customer relationships | 8 - 14 | $ | $ | ( | ) | $ | ||||||||
Trademark | 2 - 15 | ( | ) | |||||||||||
Software packages | 3 - 10 | ( | ) | |||||||||||
Non-compete agreement | ( | ) | ||||||||||||
Other intangible assets, net | $ | $ | ( | ) | $ | |||||||||
(Dollar amounts in thousands) | ||||
Remaining 2019 | $ | |||
2020 | ||||
2021 | ||||
2022 | ||||
2023 | ||||
(In thousands) | September 30, 2019 | December 31, 2018 | ||||||
Secured Credit Facility (2023 Term A) due on November 27, 2023 paying interest at a variable interest rate (LIBOR plus applicable margin(1)(2)) | $ | $ | ||||||
Senior Secured Credit Facility (2024 Term B) due on November 27, 2024 paying interest at a variable interest rate (LIBOR plus applicable margin(2)(3)) | ||||||||
Senior Secured Revolving Credit Facility(1) | ||||||||
Note Payable due on April 30, 2021(2) | ||||||||
Note Payable due on December 28, 2019 | ||||||||
Total debt | $ | $ | ||||||
(1) | Applicable margin of |
(2) | Net of unaccreted discount and unamortized debt issue costs, as applicable. |
(3) | Subject to a minimum rate ("LIBOR floor") of |
Swap Agreement | Effective date | Maturity Date | Notional Amount | Variable Rate | Fixed Rate | |||||
2015 Swap | January 2017 | April 2020 | $ | 1-month LIBOR | ||||||
2018 Swap | April 2020 | November 2024 | $ | 1-month LIBOR | ||||||
(In thousands) | September 30, 2019 | December 31, 2018 | ||||||
Other long-term assets | $ | $ | ||||||
Other long-term liabilities | $ | $ | ||||||
(In thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
September 30, 2019 | ||||||||||||||||
Financial liability: | ||||||||||||||||
Interest rate swap | $ | $ | $ | $ | ||||||||||||
December 31, 2018 | ||||||||||||||||
Financial asset: | ||||||||||||||||
Interest rate swap | $ | $ | $ | $ | ||||||||||||
Financial liability: | ||||||||||||||||
Interest rate swap | ||||||||||||||||
September 30, 2019 | December 31, 2018 | |||||||||||||||
(In thousands) | Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||
Financial assets: | ||||||||||||||||
Interest rate swap | $ | $ | $ | $ | ||||||||||||
Financial liabilities: | ||||||||||||||||
Interest rate swap | ||||||||||||||||
2023 Term A | ||||||||||||||||
2024 Term B | ||||||||||||||||
(In thousands) | Foreign Currency Translation Adjustments | Cash Flow Hedges | Total | |||||||||
Balance - December 31, 2018, net of tax | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Other comprehensive income (loss) before reclassifications | ( | ) | ( | ) | ||||||||
Effective portion reclassified to Net Income | ( | ) | ( | ) | ||||||||
Balance - September 30, 2019, net of tax | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Nonvested restricted shares and RSUs | Shares | Weighted-average grant date fair value | |||||
Nonvested at December 31, 2018 | $ | ||||||
Forfeited | ( | ) | |||||
Vested | ( | ) | |||||
Granted | |||||||
Nonvested at September 30, 2019 | $ | ||||||
Three months ended September 30, 2019 | |||||||||||||||||||
(In thousands) | Payment Services - Puerto Rico & Caribbean | Payment Services - Latin America | Merchant Acquiring, net | Business Solutions | Total | ||||||||||||||
Timing of revenue recognition | |||||||||||||||||||
Products and services transferred at a point in time | $ | $ | $ | $ | $ | ||||||||||||||
Products and services transferred over time | |||||||||||||||||||
$ | $ | $ | $ | $ | |||||||||||||||
Three months ended September 30, 2018 | |||||||||||||||||||
(In thousands) | Payment Services - Puerto Rico & Caribbean | Payment Services - Latin America | Merchant Acquiring, net | Business Solutions | Total | ||||||||||||||
Timing of revenue recognition | |||||||||||||||||||
Products and services transferred at a point in time | $ | $ | $ | $ | $ | ||||||||||||||
Products and services transferred over time | |||||||||||||||||||
$ | $ | $ | $ | $ | |||||||||||||||
Nine months ended September 30, 2019 | |||||||||||||||||||
(In thousands) | Payment Services - Puerto Rico & Caribbean | Payment Services - Latin America | Merchant Acquiring, net | Business Solutions | Total | ||||||||||||||
Timing of revenue recognition | |||||||||||||||||||
Products and services transferred at a point in time | $ | $ | $ | $ | $ | ||||||||||||||
Products and services transferred over time | |||||||||||||||||||
$ | $ | $ | $ | $ | |||||||||||||||
Nine months ended September 30, 2018 | |||||||||||||||||||
(In thousands) | Payment Services - Puerto Rico & Caribbean | Payment Services - Latin America | Merchant Acquiring, net | Business Solutions | Total | ||||||||||||||
Timing of revenue recognition | |||||||||||||||||||
Products and services transferred at a point in time | $ | $ | $ | $ | $ | ||||||||||||||
Products and services transferred over time | |||||||||||||||||||
$ | $ | $ | $ | $ | |||||||||||||||
(In thousands) | September 30, 2019 | ||
December 31, 2018 | $ | ||
Services transferred to customers | |||
Transfers to accounts receivable | ( | ) | |
September 30, 2019 | $ | ||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(In thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Current tax provision | $ | $ | $ | $ | ||||||||||||
Deferred tax benefit | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Income tax expense | $ | $ | $ | $ | ||||||||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(In thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Current tax provision (benefit) | ||||||||||||||||
Puerto Rico | $ | $ | $ | $ | ||||||||||||
United States | ( | ) | ||||||||||||||
Foreign countries | ||||||||||||||||
Total current tax provision | $ | $ | $ | $ | ||||||||||||
Deferred tax benefit | ||||||||||||||||
Puerto Rico | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
United States | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Foreign countries | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Total deferred tax benefit | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(Dollar amounts in thousands, except per share information) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income attributable to EVERTEC, Inc.’s common stockholders | $ | $ | $ | $ | ||||||||||||
Less: non-forfeitable dividends on restricted stock | ||||||||||||||||
Net income available to EVERTEC, Inc.’s common shareholders | $ | $ | $ | $ | ||||||||||||
Weighted average common shares outstanding | ||||||||||||||||
Weighted average potential dilutive common shares (1) | ||||||||||||||||
Weighted average common shares outstanding - assuming dilution | ||||||||||||||||
Net income per common share - basic | $ | $ | $ | $ | ||||||||||||
Net income per common share - diluted | $ | $ | $ | $ | ||||||||||||
(1) | Potential common shares consist of common stock issuable under the assumed release of restricted stock awards using the treasury stock method. |
Three months ended | Nine months ended | |||||||
September 30, 2019 | September 30, 2019 | |||||||
(in thousands) | ||||||||
Operating lease cost | $ | $ | ||||||
Finance lease cost | — | — | ||||||
Amortization of right-of-use assets | ||||||||
Interest on lease liabilities | ||||||||
Variable lease cost | ||||||||
$ | $ | |||||||
(In thousands) | ||||
Right-of-use assets obtained in exchange for operating lease obligations: | $ | |||
Weighted average remaining lease term, in years | ||||
Operating leases | ||||
Finance leases | ||||
Weighted Average Discount Rate | ||||
Operating leases | % | |||
Finance leases | % | |||
(In thousands) | Operating Leases | Finance Leases | ||||||
Remaining 2019 | $ | $ | ||||||
2020 | ||||||||
2021 | ||||||||
2022 | ||||||||
2023 | ||||||||
Thereafter | ||||||||
Total future minimum lease payments | ||||||||
Less: imputed interest | ( | ) | ( | ) | ||||
$ | $ | |||||||
Reported as of September 30, 2019 | ||||||||
Accrued liabilities | $ | — | $ | |||||
Operating lease payable | — | |||||||
Operating lease liabilities - long term | — | |||||||
Other long-term liabilities | — | |||||||
$ | $ | |||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(Dollar amounts in thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Total revenues (1)(2) | $ | $ | $ | $ | ||||||||||||
Cost of revenues | $ | $ | $ | $ | ||||||||||||
Operating lease cost and other fees | $ | $ | $ | $ | ||||||||||||
Interest earned from affiliate | ||||||||||||||||
Interest income | $ | $ | $ | $ | ||||||||||||
(1) | Popular revenues as a percentage of total revenues were |
(2) | Includes revenues generated from investee accounted for under the equity method of $ |
(Dollar amounts in thousands) | September 30, 2019 | December 31, 2018 | ||||||
Cash and restricted cash deposits in affiliated bank | $ | $ | ||||||
Other due/to from affiliate | ||||||||
Accounts receivable | $ | $ | ||||||
Prepaid expenses and other assets | $ | $ | ||||||
Operating lease right-of use assets | $ | $ | ||||||
Other long-term assets | $ | $ | ||||||
Accounts payable | $ | $ | ||||||
Unearned income | $ | $ | ||||||
Operating lease liabilities | $ | $ | ||||||
• | marketing, |
• | corporate finance and accounting, |
• | human resources, |
• | legal, |
• | risk management functions, |
• | internal audit, |
• | corporate debt related costs, |
• | non-operating depreciation and amortization expenses generated as a result of merger and acquisition activity, |
• | intersegment revenues and expenses, and |
• | other non-recurring fees and expenses that are not considered when management evaluates financial performance at a segment level |
Three months ended September 30, 2019 | |||||||||||||||||||||||
(In thousands) | Payment Services - Puerto Rico & Caribbean | Payment Services - Latin America | Merchant Acquiring, net | Business Solutions | Corporate and Other (1) | Total | |||||||||||||||||
Revenues | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Operating costs and expenses | |||||||||||||||||||||||
Depreciation and amortization | |||||||||||||||||||||||
Non-operating income (expenses) | ( | ) | |||||||||||||||||||||
EBITDA | ( | ) | |||||||||||||||||||||
Compensation and benefits (2) | |||||||||||||||||||||||
Transaction, refinancing and other fees (3) | ( | ) | ( | ) | |||||||||||||||||||
Adjusted EBITDA | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
(1) | Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $ |
(2) | Primarily represents share-based compensation. |
(3) | Primarily represents the elimination of non-cash equity earnings from our |
Three months ended September 30, 2018 | |||||||||||||||||||||||
(In thousands) | Payment Services - Puerto Rico & Caribbean | Payment Services - Latin America | Merchant Acquiring, net | Business Solutions | Corporate and Other (1) | Total | |||||||||||||||||
Revenues | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Operating costs and expenses | |||||||||||||||||||||||
Depreciation and amortization | |||||||||||||||||||||||
Non-operating income (expenses) | ( | ) | |||||||||||||||||||||
EBITDA | ( | ) | |||||||||||||||||||||
Compensation and benefits (2) | |||||||||||||||||||||||
Transaction, refinancing and other fees (3) | ( | ) | |||||||||||||||||||||
Adjusted EBITDA | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
(1) | Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $ |
(2) | Primarily represents share-based compensation. |
(3) | Primarily the elimination of non-cash equity earnings from our |
Nine months ended September 30, 2019 | |||||||||||||||||||||||
(In thousands) | Payment Services - Puerto Rico & Caribbean | Payment Services - Latin America | Merchant Acquiring, net | Business Solutions | Corporate and Other (1) | Total | |||||||||||||||||
Revenues | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Operating costs and expenses | |||||||||||||||||||||||
Depreciation and amortization | |||||||||||||||||||||||
Non-operating income (expenses) | ( | ) | |||||||||||||||||||||
EBITDA | ( | ) | |||||||||||||||||||||
Compensation and benefits (2) | |||||||||||||||||||||||
Transaction, refinancing and other fees (3) | |||||||||||||||||||||||
Adjusted EBITDA | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
(1) | Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $ |
(2) | Primarily represents share-based compensation, other compensation expense and severance payments. |
(3) | Primarily represents the elimination of non-cash equity earnings from our |
Nine months ended September 30, 2018 | |||||||||||||||||||||||
(In thousands) | Payment Services - Puerto Rico & Caribbean | Payment Services - Latin America | Merchant Acquiring, net | Business Solutions | Corporate and Other (1) | Total | |||||||||||||||||
Revenues | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Operating costs and expenses | |||||||||||||||||||||||
Depreciation and amortization | |||||||||||||||||||||||
Non-operating income (expenses) | ( | ) | |||||||||||||||||||||
EBITDA | ( | ) | |||||||||||||||||||||
Compensation and benefits (2) | |||||||||||||||||||||||
Transaction, refinancing and other fees (3) | ( | ) | |||||||||||||||||||||
Adjusted EBITDA | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
(1) | Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $ |
(2) | Primarily represents share-based compensation, other compensation expense and severance payments. |
(3) | Primarily represents fees and expenses associated with corporate transactions as defined in the Credit Agreement and the elimination of non-cash equity earnings from our |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
(In thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Total EBITDA | $ | $ | $ | $ | |||||||||||
Less: | |||||||||||||||
Income tax expense | |||||||||||||||
Interest expense, net | |||||||||||||||
Depreciation and amortization | |||||||||||||||
Net Income | $ | $ | $ | $ | |||||||||||
• | Our ability to provide competitive products; |
• | 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 technology solutions that enable 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 serve only one portion of the transaction processing value chain (such as only merchant acquiring or payment services). |
Three months ended September 30, | ||||||||||||||
In thousands | 2019 | 2018 | Variance 2019 vs. 2018 | |||||||||||
Revenues | $ | 118,804 | $ | 112,017 | $ | 6,787 | 6 | % | ||||||
Operating costs and expenses | ||||||||||||||
Cost of revenues, exclusive of depreciation and amortization shown below | 51,878 | 49,464 | 2,414 | 5 | % | |||||||||
Selling, general and administrative expenses | 15,152 | 14,404 | 748 | 5 | % | |||||||||
Depreciation and amortization | 16,972 | 15,788 | 1,184 | 7 | % | |||||||||
Total operating costs and expenses | 84,002 | 79,656 | 4,346 | 5 | % | |||||||||
Income from operations | $ | 34,802 | $ | 32,361 | $ | 2,441 | 8 | % | ||||||
Three months ended September 30, | ||||||||||||||
In thousands | 2019 | 2018 | Variance 2019 vs. 2018 | |||||||||||
Interest income | $ | 348 | $ | 205 | $ | 143 | 70 | % | ||||||
Interest expense | (7,267 | ) | (7,557 | ) | 290 | (4 | )% | |||||||
Earnings of equity method investment | 371 | 238 | 133 | 56 | % | |||||||||
Other income (expenses) | 252 | 1,130 | (878 | ) | (78 | )% | ||||||||
Total non-operating expenses | $ | (6,296 | ) | $ | (5,984 | ) | $ | (312 | ) | 5 | % | |||
Three months ended September 30, | ||||||||||||||
In thousands | 2019 | 2018 | Variance 2019 vs. 2018 | |||||||||||
Income tax expense | $ | 3,720 | $ | 3,302 | $ | 418 | 13 | % | ||||||
Nine months ended September 30, | ||||||||||||||
In thousands | 2019 | 2018 | Variance 2019 vs. 2018 | |||||||||||
Revenues | $ | 360,188 | $ | 335,638 | $ | 24,550 | 7 | % | ||||||
Operating costs and expenses | ||||||||||||||
Cost of revenues, exclusive of depreciation and amortization shown below | 154,498 | 146,015 | 8,483 | 6 | % | |||||||||
Selling, general and administrative expenses | 45,355 | 45,684 | (329 | ) | (1 | )% | ||||||||
Depreciation and amortization | 50,440 | 47,383 | 3,057 | 6 | % | |||||||||
Total operating costs and expenses | 250,293 | 239,082 | 11,211 | 5 | % | |||||||||
Income from operations | $ | 109,895 | $ | 96,556 | $ | 13,339 | 14 | % | ||||||
Nine months ended September 30, | ||||||||||||||
In thousands | 2019 | 2018 | Variance 2019 vs. 2018 | |||||||||||
Interest income | $ | 864 | $ | 526 | $ | 338 | 64 | % | ||||||
Interest expense | (22,191 | ) | (22,901 | ) | $ | 710 | (3 | )% | ||||||
Earnings of equity method investment | 726 | 612 | $ | 114 | 19 | % | ||||||||
Other (expenses) income | (619 | ) | 1,878 | $ | (2,497 | ) | (133 | )% | ||||||
Total non-operating expenses | $ | (21,220 | ) | $ | (19,885 | ) | $ | (1,335 | ) | 7 | % | |||
Nine months ended September 30, | ||||||||||||||
In thousands | 2019 | 2018 | Variance 2019 vs. 2018 | |||||||||||
Income tax expense | $ | 10,018 | $ | 10,349 | $ | (331 | ) | (3 | )% | |||||
• | marketing, |
• | corporate finance and accounting, |
• | human resources, |
• | legal, |
• | risk management functions, |
• | internal audit, |
• | corporate debt related costs, |
• | non-operating depreciation and amortization expenses generated as a result of merger and acquisition activity, |
• | intersegment revenues and expenses, and |
• | other non-recurring fees and expenses that are not considered when management evaluates financial performance at a segment level |
Three months ended September 30, | |||
In thousands | 2019 | 2018 | |
Revenues | $30,411 | $28,951 | |
Adjusted EBITDA | 18,377 | 19,244 | |
Three months ended September 30, | |||
In thousands | 2019 | 2018 | |
Revenues | $20,596 | $18,907 | |
Adjusted EBITDA | 7,588 | 6,551 | |
Three months ended September 30, | |||
In thousands | 2019 | 2018 | |
Revenues | $26,436 | $24,486 | |
Adjusted EBITDA | 11,208 | 10,948 | |
Three months ended September 30, | |||
In thousands | 2019 | 2018 | |
Revenues | $52,945 | $48,831 | |
Adjusted EBITDA | 25,082 | 21,744 | |
Nine months ended September 30, | |||
In thousands | 2019 | 2018 | |
Revenues | $92,910 | $84,162 | |
Adjusted EBITDA | 59,959 | 54,912 | |
Nine months ended September 30, | |||
In thousands | 2019 | 2018 | |
Revenues | $62,533 | $58,534 | |
Adjusted EBITDA | 23,617 | 18,340 | |
Nine months ended September 30, | |||
In thousands | 2019 | 2018 | |
Revenues | $79,203 | $73,829 | |
Adjusted EBITDA | 35,424 | 34,438 | |
Nine months ended September 30, | |||
In thousands | 2019 | 2018 | |
Revenues | $159,492 | $145,985 | |
Adjusted EBITDA | 72,396 | 68,061 | |
Nine months ended September 30, | ||||||||
(In thousands) | 2019 | 2018 | ||||||
Cash provided by operating activities | $ | 136,167 | $ | 128,443 | ||||
Cash used in investing activities | (49,862 | ) | (24,990 | ) | ||||
Cash used in financing activities | (57,117 | ) | (59,824 | ) | ||||
Increase in cash, cash equivalents and restricted cash | $ | 29,188 | $ | 43,629 | ||||
Swap Agreement | Effective date | Maturity Date | Notional Amount | Variable Rate | Fixed Rate | |||||
2015 Swap | January 2017 | April 2020 | $200 million | 1-month LIBOR | 1.9225% | |||||
2018 Swap | April 2020 | November 2024 | $250 million | 1-month LIBOR | 2.89% | |||||
(In thousands) | September 30, 2019 | December 31, 2018 | ||||||
Other long-term assets | $ | — | $ | 1,683 | ||||
Other long-term liabilities | $ | 16,687 | $ | 4,059 | ||||
• | 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, Adjusted Net Income, and Adjusted Earnings per common share or may calculate EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share differently than as presented in this Report, limiting their usefulness as a comparative measure. |
Three months ended September 30, | Nine months ended September 30, | Twelve months ended | ||||||||||||||||||
(Dollar amounts in thousands, except per share information) | 2019 | 2018 | 2019 | 2018 | September 30, 2019 | |||||||||||||||
Net income | $ | 24,786 | $ | 23,075 | $ | 78,657 | $ | 66,322 | $ | 98,904 | ||||||||||
Income tax expense | 3,720 | 3,302 | 10,018 | 10,349 | 12,265 | |||||||||||||||
Interest expense, net | 6,919 | 7,352 | 21,327 | 22,375 | 28,209 | |||||||||||||||
Depreciation and amortization | 16,972 | 15,788 | 50,440 | 47,383 | 66,124 | |||||||||||||||
EBITDA | 52,397 | 49,517 | 160,442 | 146,429 | 205,502 | |||||||||||||||
Equity income (1) | (372 | ) | (238 | ) | (241 | ) | (179 | ) | (321 | ) | ||||||||||
Compensation and benefits (2) | 3,455 | 2,368 | 10,392 | 10,670 | 13,381 | |||||||||||||||
Transaction, refinancing and other fees (3) | — | 453 | 280 | 2,916 | 4,934 | |||||||||||||||
Adjusted EBITDA | 55,480 | 52,100 | 170,873 | 159,836 | 223,496 | |||||||||||||||
Operating depreciation and amortization (4) | (8,673 | ) | (7,365 | ) | (25,516 | ) | (21,909 | ) | (32,815 | ) | ||||||||||
Cash interest expense, net (5) | (6,644 | ) | (6,473 | ) | (20,774 | ) | (19,396 | ) | (27,481 | ) | ||||||||||
Income tax expense (6) | (5,509 | ) | (4,558 | ) | (15,454 | ) | (15,492 | ) | (19,476 | ) | ||||||||||
Non-controlling interest (7) | (63 | ) | (121 | ) | (287 | ) | (385 | ) | (374 | ) | ||||||||||
Adjusted net income | $ | 34,591 | $ | 33,583 | $ | 108,842 | $ | 102,654 | $ | 143,350 | ||||||||||
Net income per common share (GAAP): | ||||||||||||||||||||
Diluted | $ | 0.34 | $ | 0.31 | $ | 1.07 | $ | 0.89 | ||||||||||||
Adjusted Earnings per common share (Non-GAAP): | ||||||||||||||||||||
Diluted | $ | 0.47 | $ | 0.45 | $ | 1.48 | $ | 1.38 | ||||||||||||
Shares used in computing adjusted earnings per common share: | ||||||||||||||||||||
Diluted | 73,314,704 | 74,657,100 | 73,530,865 | 74,123,431 | ||||||||||||||||
1) | Represents the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A., net of cash dividends received. |
2) | Primarily represents share-based compensation of $3.5 million and $2.4 million for the quarters ended September 30, 2019 and 2018, respectively. Primarily represents share-based compensation and other compensation expense of $10.2 million and $9.7 million for the nine months ended September 30, 2019 and 2018 and severance payments of $0.2 million and $1.0 million for the same periods, respectively. |
3) | Represents fees and expenses associated with corporate transactions as defined in the Credit Agreement, recorded as part of selling, general and administrative expenses and cost of revenues. |
4) | Represents operating depreciation and amortization expense, which excludes amounts generated as a result of merger and acquisition activity. |
5) | Represents interest expense, less interest income, as they appear on our consolidated statements of income and comprehensive income, adjusted to exclude non-cash amortization of the debt issue costs, premium and accretion of discount. |
6) | Represents income tax expense calculated on adjusted pre-tax income using the applicable GAAP tax rate, adjusted for certain discreet items. |
7) | Represents the 35% non-controlling equity interest in Evertec Colombia, net of amortization for intangibles created as part of the purchase. |
Total number of shares | Average price paid | Total number of shares purchased as part of a publicly | Approximate dollar value of shares that may yet be purchased | |||||||||||
Period | purchased | per share | announced program (1) | under the program | ||||||||||
7/1/2019-7/31/2019 | 8,020 | $ | 30.920 | 8,020 | ||||||||||
9/1/2019-9/30/2019 | 100 | 30.970 | 100 | |||||||||||
Total | 8,120 | $ | 30.920 | 8,120 | $ | 33,898,048 | ||||||||
(1) | On February 17, 2016, the Company announced that its Board of Directors approved an increase and extension to the current stock repurchase program, authorizing the purchase of up to $120 million of the Company’s common stock and extended the expiration to December 31, 2017. On November 2, 2017, the Company's Board of Directors approved an extension to the expiration date of the current stock repurchase program to December 31, 2020. |
10.1* | |
31.1* | |
31.2* | |
32.1** | |
32.2** | |
101.INS XBRL** | Instance document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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 |
EVERTEC, Inc. (Registrant) | ||
Date: October 31, 2019 | By: | /s/ Morgan Schuessler |
Morgan Schuessler Chief Executive Officer | ||
Date: October 31, 2019 | By: | /s/ Joaquin A. Castrillo-Salgado |
Joaquin A. Castrillo-Salgado Chief Financial Officer (Principal Financial and Accounting Officer) | ||
1. | Definitions. |
(a) | “Change in Control” means, and shall be deemed to have occurred if, (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than (x) a trustee or other fiduciary holding securities under an employee benefit plan of the Company acting in such capacity or (y) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then outstanding voting stock, (ii) during any period of two (2) consecutive years (not including any period prior to the execution of this Agreement), (x) individuals who at the beginning of such period constitute the Board of Directors of the Company (the “Board”) and (y) any new director nominated by a Principal Stockholder pursuant to the Stockholder Agreement, cease for any reason to constitute a majority thereof, (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation other than a merger or consolidation that would result in the voting stock of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting stock of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting stock of the Company or such surviving |
(b) | “Corporate Status” describes the status of a person who is serving or has served (i) as a director or officer of the Company, (ii) as a Company employee in a fiduciary capacity with respect to an employee benefit plan of the Company or (iii) as a director or officer of any other Entity at the request of the Company. For purposes of subsection (iii) of this Section (b), a director or officer of the Company who is serving or has served as a director or officer of a Subsidiary shall be deemed to be serving at the request of the Company. |
(c) | “Disinterested Director” means a director of the Company who (i) is not and was not a party to the Proceeding in respect of which indemnification is sought by the Indemnitee and (ii) is determined to be “disinterested” under applicable Puerto Rico law. |
(d) | “Entity” shall mean any corporation, partnership (general or limited), limited liability company, joint venture, trust, employee benefit plan, company, foundation, non-profit entity, association, organization or other legal entity, other than the Company. |
(e) | “Expenses” shall be construed broadly to mean all direct and indirect fees of any type or nature whatsoever, costs and expenses incurred in connection with any Proceeding, including, without limitation, all attorneys’ fees and costs, disbursements and retainers (including, without limitation, any fees, disbursements and retainers incurred by the Indemnitee pursuant to Section 11 hereof), fees and disbursements of experts, witnesses, private investigators and professional advisors (including, without limitation, accountants and investment bankers), court costs, filing fees, transcript costs, fees of experts, travel expenses, duplicating, imaging, printing and binding costs, telephone and fax transmission charges, computer legal research costs, postage, delivery service fees, secretarial services, fees and expenses of third party vendors; the premium, security for, and other costs associated with any bond (including supersedeas or appeal bonds, injunction bonds, cost bonds, appraisal bonds or their equivalents), in each case incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding (including, without limitation, any judicial or arbitration Proceeding brought to enforce the Indemnitee’s rights under, or to recover damages for breach of, this Agreement), as well as all other “expenses” within the meaning of that term as used in Section 4.08 (14 L.P.R.A. § 3568) of the General Corporations Law, any federal, state, local, Commonwealth or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, Employment Retirement Income Security Act of 1974 (ERISA) excise taxes and penalties, and all other disbursements or expenses of types customarily and reasonably incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, actions, suits, or proceedings similar to or of the same type as the Proceeding with respect to which such disbursements or expenses were incurred. Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding. |
(f) | “Indemnifiable Expenses,” “Indemnifiable Liabilities” and “Indemnifiable Amounts” shall have the meanings ascribed to those terms in Section 3(a) hereof. |
(g) | “Independent Counsel” means a law firm, or a person admitted to practice law in any State of the United States or the Commonwealth of Puerto Rico, that is experienced in matters of corporation law and neither presently is, nor in the past three years has been, retained to represent: (i) the Company or the Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnities under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any law firm or person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or the Indemnitee in an action to determine the Indemnitee’s rights under this Agreement. |
(h) | “Liabilities” shall be broadly construed to mean, without limitation, all judgments, damages, liabilities, losses, penalties, taxes, fines and amounts paid in settlement, in each case, of any type whatsoever, in connection with a Proceeding. References herein to “fines” shall include any excise tax assessed with respect to any employee benefit plan. |
(i) | “Partial Rights Transferee” shall have the meaning set forth in the Stockholder Agreement. |
(j) | “Principal Stockholder” shall have the meaning set forth in the Stockholder Agreement. |
(k) | “Proceeding” shall be construed broadly to mean, without limitation, any threatened, pending or completed claim, government, regulatory and self-regulatory action, suit, arbitration, mediation, alternate dispute resolution process, investigation (including any internal investigation), inquiry, administrative hearing, appeal, or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil (including intentional or unintentional tort claims), criminal, administrative, arbitrative or investigative nature, whether formal or informal, including a proceeding initiated by the Indemnitee pursuant to Section 11 of this Agreement to enforce the Indemnitee’s rights hereunder. |
(l) | “Stockholder Agreement” shall mean that certain Stockholder Agreement, dated as of April 17, 2012, as amended or supplemented from time to time in accordance with its terms. |
(m) | “Subsidiary” shall mean any Entity of which the Company owns (either directly or indirectly) either (i) a general partner, managing member or other similar interest or (ii) (A) 50% or more of the voting power of the voting capital equity interests of such Entity, or (B) 50% or more of the outstanding voting capital stock or other voting equity interests of such Entity. |
(n) | References herein to a director of any other Entity shall include, in the case of any Entity that is not managed by a board of directors, such other position, such as manager or trustee or member of the board of managers or other governing body of such Entity, that entails responsibility for the management and direction of such Entity’s affairs, including, without limitation, the general partner of any partnership (general or limited) and the manager, managing member or board of managers of any limited liability company. |
2. | Services by the Indemnitee. In consideration of the Company’s covenants and commitments hereunder, the Indemnitee agrees to serve or continue to serve as either a director on the Board of Directors of the Company or as an officer, as applicable, so long as the Indemnitee is duly elected or appointed and until his or her successor has been duly elected and qualified or until his or her earlier death, disability, resignation, termination or other removal. |
3. | Agreement to Indemnify. The Company agrees to indemnify the Indemnitee to the fullest extent permitted, and in the manner permitted, by the General Corporations Law or other applicable law as in effect as of the date hereof or as such laws may, from time to time, be amended (but only if amended in a way that broadens the right to indemnification and advancement of expenses) as follows: |
(a) | Indemnification for Third Party Proceedings. Subject to the exceptions contained in Section 4(a) hereof, if the Indemnitee was or is a party to, threatened to be made a party to or otherwise involved in any capacity in any Proceeding (other than an action initiated by the Company or initiated to protect the interests of the Company) by reason of the Indemnitee’s Corporate Status, the Indemnitee shall be indemnified by the Company against all Expenses and Liabilities incurred in a reasonable manner whether paid by the Indemnitee or on the Indemnitee’s behalf in connection with such a Proceeding (such Expenses and Liabilities are referred to herein as “Indemnifiable Expenses” and “Indemnifiable Liabilities,” respectively, and collectively as “Indemnifiable Amounts”). In addition, the Indemnitee’s Corporate Status may allow for indemnification under certain agreements containing indemnity provisions with another Entity or protections under the organization documents of such other Entity. In those instances, the Company shall remain wholly liable for making any indemnification payments for all Indemnifiable Amounts notwithstanding the payment obligation of such amounts by a third party to the Indemnitee. |
(b) | Indemnification in Derivative Actions and Direct Actions by the Company. Subject to the exceptions contained in Section 4(b) hereof, if the Indemnitee was or is a party to, threatened to be made a party to or otherwise involved in |
(c) | Other Indemnification Rights. Notwithstanding anything to the contrary contained in this Agreement, the Company hereby acknowledges that an Indemnitee may have certain rights to indemnification, insurance and/or advancement of expenses provided by one or more Entities who employ such Indemnitee or of which such Indemnitee is a partner or member or with such Entity’s respective affiliated investment funds, managed funds and management companies, if applicable, or such Entity’s respective affiliates (collectively, the “Secondary Indemnitors”). The Company hereby agrees (i) that it is the indemnitor of first resort—meaning that, its obligations under this Agreement are primary and any obligation of the Secondary Indemnitors to advance expenses and provide indemnification for the same expenses and liabilities incurred by any such Indemnitee are secondary, (ii) that it shall be required to advance the full amount of Indemnifiable Expenses incurred by any such Indemnitee and shall be liable for the full amount of any Indemnifiable Amounts to the extent legally permitted and as required by this Agreement, the certificate of incorporation, the bylaws or any other agreement between the Company and such Indemnitee, without regard to any rights that such Indemnitee may have against the Secondary Indemnitors and (iii) that it irrevocably waives, relinquishes and releases the Secondary Indemnitors from any and all claims that it has or may have against the Secondary Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. The Company further agrees that no advancement or payment by the Secondary Indemnitors shall affect the foregoing and that the Secondary Indemnitors shall be subrogated to the extent of such advancement or payment to all of the rights of recovery of any such Indemnitee against the Company. The Company and each Indemnitee agree that Secondary Indemnitors are express third-party beneficiaries of this Section 3(c). In furtherance and not in limitation of the foregoing, in the event that a Secondary Indemnitor (other than the Company or any of its Subsidiaries) pays, forwards or otherwise satisfies any Indemnifiable Amounts to the Indemnitee, such amounts shall be promptly reimbursed by the Company to such payor to the extent that such Indemnifiable Amounts were required to be paid by the Company to the Indemnitee pursuant to the terms of this Agreement. |
(d) | Employee Benefit Plans. For the avoidance of doubt, the indemnification rights and obligations contained herein shall extend to any Proceeding in which the Indemnitee was of is a party to, was or is threatened to be made a party to or was or is otherwise involved in any capacity in by reason of Indemnitee’s Corporate Status as a fiduciary capacity with respect to an employee benefit plan. In connection therewith, if the Indemnitee has acted in good faith and in a manner which appeared to be consistent with the best interests of the participants and beneficiaries of an employee benefit plan and not opposed thereto, the Indemnitee shall be deemed to have acted in a manner not opposed to the best interests of the Company. |
4. | Exceptions to Indemnification. The Indemnitee shall be entitled to indemnification under Section 3(a) and Section 3(b) hereof in all circumstances other than the following: |
(a) | Exceptions to Indemnification for Third Party Proceedings. If indemnification is requested under Section 3(a) and there has been a final non-appealable judgment by a court of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, (i) the Indemnitee failed to act (x) in good faith and (y) in a manner the Indemnitee deemed to be reasonable and consistent with the best interests of the Company and not opposed thereto or (ii) with respect to any criminal action or proceeding, the Indemnitee had reasonable cause to believe that the Indemnitee’s conduct was unlawful, the Indemnitee shall not be entitled to payment of Indemnifiable Amounts hereunder. |
(b) | Exceptions to Indemnification in Derivative Actions and Direct Actions by the Company. If indemnification is requested under Section 3(b) and (i) there has been a final non-appealable judgment by a court of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, the Indemnitee failed to act (x) in good faith and (y) in a manner the Indemnitee deemed to be reasonable and consistent with the best |
5. | Procedure for Payment of Indemnifiable Amounts. |
(a) | Subject to Section 9, the Indemnitee shall submit to the Company a written request specifying in reasonable detail the Indemnifiable Amounts for which the Indemnitee seeks payment under Section 3, Section 6, or Section 7 hereof and a short description of the basis for the claim. The Company shall pay such Indemnifiable Amounts to the Indemnitee within sixty (60) calendar days of receipt of the request. At the request of the Company, the Indemnitee shall furnish such documentation and information as are reasonably available to the Indemnitee and necessary to establish that the Indemnitee is entitled to indemnification hereunder. |
(b) | Upon written request by the Indemnitee for indemnification pursuant to the first sentence of Section 5(a) hereof, if required by applicable law and to the extent not otherwise provided pursuant to the terms of this Agreement, a determination with respect to the Indemnitee’s entitlement to indemnification shall be made in the specific case as follows: (i) if a Change in Control shall have occurred and if so requested in writing by the Indemnitee, by Independent Counsel in a written opinion to the Board; or (ii) if a Change in Control shall not have occurred (or if a Change in Control shall have occurred but the Indemnitee shall not have requested that indemnification be determined by Independent Counsel as provided in subpart (i) of this Section 5(b)), (A) by a majority vote of the disinterested directors, even though less than a quorum of the Board, or (B) by a committee of disinterested directors designated by majority vote of the disinterested directors, even though less than a quorum of the Board, (C) if there are no such disinterested directors, or if such disinterested directors so direct, by Independent Counsel in a written opinion to the Board, (D) if requested by any Principal Stockholder or Partial Rights Transferee, by Independent Counsel in a written opinion to the Board, or (E) if a quorum of disinterested directors so directs, by the Company’s stockholders in accordance with applicable law. Notice in writing of any determination as to the Indemnitee’s entitlement to indemnification shall be delivered to the Indemnitee promptly after such determination is made, and if such determination of entitlement to indemnification has been made by Independent Counsel in a written opinion to the Board, then such notice shall be accompanied by a copy of such written opinion. If it is determined that the Indemnitee is entitled to indemnification, then payment to the Indemnitee of all amounts to which the Indemnitee is determined to be entitled (other than sums that were already advanced) shall be made within sixty (60) calendar days after such determination. If it is determined that the Indemnitee is not entitled to indemnification, then the written notice to the Indemnitee (or, if such determination has been made by Independent Counsel in a written opinion, the copy of such written opinion delivered to the Indemnitee) shall disclose the basis upon which such determination is based. The Indemnitee shall cooperate with the person, persons, or entity making the determination with respect to the Indemnitee’s entitlement to indemnification, including providing to such person, persons, or entity upon reasonable advance request any documentation or information that is not privileged or otherwise protected from disclosure and that is reasonably available to the Indemnitee and reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification. |
(c) | If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 5(b) hereof, the Independent Counsel shall be selected as provided in this Section 5(c). If a Change in Control shall not have occurred (or if a Change in Control shall have occurred but the Indemnitee shall not have requested that indemnification be determined by Independent Counsel as provided in subpart (i) of Section 5(b)), then the Independent Counsel shall be selected by the Board, and the Company shall give written notice to the Indemnitee advising the Indemnitee of the identity of the Independent Counsel so selected. If a Change in Control shall have occurred and the Indemnitee shall have requested that indemnification be determined by Independent Counsel, then the Independent Counsel shall be selected by the Indemnitee (unless the Indemnitee shall request that such selection be made by the Board, in which case the preceding sentence shall apply), and the Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either case, the Indemnitee or the Company, as applicable, may, |
6. | Indemnification for Expenses if the Indemnitee is Wholly or Partly Successful. Notwithstanding anything contained in this Agreement to the contrary, to the extent that the Indemnitee is or was, or is or was threatened to be made, by reason of the Indemnitee’s Corporate Status, a party to any Proceeding and the Indemnitee is successful (on the merits or otherwise) in defending all claims, issues and matters in such Proceeding, the Indemnitee shall be indemnified against all Indemnifiable Expenses incurred by the Indemnitee or on the Indemnitee’s behalf in connection with the defense of such Proceeding. If the Indemnitee is successful (on the merits or otherwise) in defending one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify, hold harmless and exonerate the Indemnitee for that portion of the Expenses reasonably incurred in connection with defending those claims, issues or matters with respect to which the Indemnitee was successful in defending. For purposes of this Agreement, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter. Notwithstanding any of the foregoing, nothing herein shall be construed to limit the Indemnitee’s right to indemnification which he or she would otherwise be entitled to in accordance with Section 3 and Section 4 hereof, regardless of the Indemnitee’s success in a Proceeding. |
7. | Indemnification for Expenses as a Witness. Anything in this Agreement to the contrary notwithstanding, to the fullest extent permitted by applicable law, to the extent that the Indemnitee, by reason of the Indemnitee’s Corporate Status, is or was, or is or was threatened to be made, a witness in any Proceeding to which the Indemnitee is not a party, the Indemnitee shall be indemnified against all Indemnifiable Expenses incurred by the Indemnitee or on the Indemnitee’s behalf in connection therewith. To the extent permitted by applicable law, the Indemnitee shall be entitled to indemnification for Expenses incurred in connection with being or threatened to be made a witness, as provided in this Section 7, regardless of whether the Indemnitee met the standards of conduct set forth in Sections 4(a) and 4(b) hereof. |
8. | Agreement to Advance Expenses; Conditions. The Company shall pay to the Indemnitee all Indemnifiable Expenses incurred by or on behalf of the Indemnitee in connection with any Proceeding to which the Indemnitee was or is a party or was or is otherwise involved or was or is threatened to be made a party to or was or is otherwise involved in any capacity in any Proceeding by reason of the Indemnitee’s Corporate Status, including a Proceeding by or in the right of the Company, in advance of the final disposition of such Proceeding. The Indemnitee hereby undertakes to repay the amount of Indemnifiable Expenses paid to the Indemnitee if it shall ultimately be determined by final judicial decision of a court of competent jurisdiction, from which decision there is no further right to appeal, that the Indemnitee is not entitled under this Agreement to, or is prohibited by applicable law from, indemnification with respect to such Indemnifiable Expenses. Any advances and undertakings to repay pursuant to this Section 8 shall be unsecured and interest free. Subject to the second |
9. | Procedure for Advance Payment of Expenses. The Indemnitee shall submit to the Company a written request specifying in reasonable detail the Indemnifiable Expenses for which the Indemnitee seeks an advancement under Section 8 hereof, together with documentation reasonably evidencing that the Indemnitee has incurred such Indemnifiable Expenses. Payment of Indemnifiable Expenses under Section 8 hereof shall be made no later than sixty (60) calendar days after the Company’s receipt of such request. |
10. | Burden of Proof; Defenses; and Presumptions. |
(a) | In any Proceeding pursuant to Section 11 hereof brought by the Indemnitee to enforce rights to indemnification or to an advancement of Indemnifiable Expenses hereunder, or in any Proceeding brought by the Company to recover an advancement of Indemnifiable Expenses (whether pursuant to the terms of an undertaking or otherwise), the burden shall be on the Company to prove that the Indemnitee is not entitled to be indemnified, or to such an advancement of Indemnifiable Expenses, as the case may be. |
(b) | It shall be a defense in any Proceeding pursuant to Section 11 hereof to enforce rights to indemnification under Section 3(a) or Section 3(b) hereof (but not in any Proceeding pursuant to Section 11 hereof to enforce a right to an advancement of Indemnifiable Expenses under Sections 8 and 9 hereof) that the Indemnitee has not met the standards of conduct set forth in Section 4(a) or Section 4(b) hereof, as the case may be, but the burden of proving such defense shall be on the Company. With respect to any Proceeding pursuant to Section 11 hereof brought by the Indemnitee to enforce a right to indemnification hereunder, or any Proceeding brought by the Company to recover an advancement of Indemnifiable Expenses (whether pursuant to the terms of an undertaking or otherwise), neither (i) the failure of the Company (including by its directors or Independent Counsel) to have made a determination prior to the commencement of such Proceeding that indemnification is proper in the circumstances because the Indemnitee has met the applicable standards of conduct, nor (ii) an actual determination by the Company (including by its directors or Independent Counsel) that the Indemnitee has not met such applicable standards of conduct, shall create a presumption that the Indemnitee has not met the applicable standards of conduct or, in the case of a Proceeding pursuant to Section 11 hereof brought by the Indemnitee seeking to enforce a right to indemnification, be a defense to such Proceeding. |
(c) | The termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, in and of itself, adversely affect the right of the Indemnitee to indemnification hereunder or create a presumption that the Indemnitee did not act in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal Proceeding, shall not create a presumption that the Indemnitee had reasonable cause to believe that his or her conduct was unlawful. |
(d) | For purposes of any determination of good faith, the Indemnitee shall be deemed to have acted in good faith if the Indemnitee’s action is reasonably based on the records or books of account of the Company or other Entity, including financial statements, or on information supplied to the Indemnitee by the officers of the Company or other Entity in the course of their duties, or on the advice of legal counsel for the Company or other Entity or on information or records given or reports made to the Company or other Entity by an independent certified public accountant or by an appraiser or other expert selected by the Company or other Entity. The provisions of this Section 10(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed or found to have met the applicable standard of conduct set forth in this Agreement. |
(e) | The knowledge and/or actions, or failure to act, of any other director, officer, agent, or employee of the Company or of another Entity shall not be imputed to the Indemnitee for purposes of determining the Indemnitee’s right to indemnification or advancement of Indemnifiable Expenses under this Agreement. |
11. | Remedies of the Indemnitees. |
(a) | Right to Petition Court. In the event that the Indemnitee makes a request for payment of Indemnifiable Amounts under Section 3 or Section 5 hereof or a request for an advancement of Indemnifiable Expenses under Sections 8 or 9 hereof and the Company fails to make such payment or advancement in a timely manner in accordance with the terms of this Agreement, the Indemnitee may petition a court to enforce the Company’s obligations under this Agreement. |
(b) | Expenses. The Company agrees to reimburse the Indemnitee in full for any Expenses actually incurred in a reasonable manner by the Indemnitee in connection with investigating, preparing for, litigating, defending or settling any action brought by the Indemnitee under Section 11(a) hereof; provided, however, that to the extent the Indemnitee is unsuccessful on the merits in such action then the Company shall have no obligation to reimburse the Indemnitee under this Section 11(b). |
(c) | Validity of Agreement. The Company shall be precluded from asserting in any Proceeding, including, without limitation, an action under Section 11(a) hereof, that the provisions of this Agreement are not valid, binding and enforceable or that there is insufficient consideration for this Agreement and shall stipulate in court that the Company is bound by all the provisions of this Agreement. |
(d) | Failure to Act Not a Defense. The failure of the Company (including its Board or any committee thereof, Independent Counsel, or stockholders) to make a determination concerning the permissibility of the payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses under this Agreement shall not be a defense in any action brought under Section 11(a) hereof, and shall not create a presumption that such payment or advancement is not permissible. |
(e) | Entitlement to Indemnification; Independent Counsel. In the event that (i) a determination is made pursuant to Section 5 hereof that the Indemnitee is not entitled to indemnification under this Agreement, (ii) if the determination of entitlement to indemnification is not to be made by Independent Counsel pursuant to Section 5(b) hereof, no determination of entitlement to indemnification shall have been made pursuant to Section 5(b) hereof within sixty (60) calendar days after receipt by the Company of the Indemnitee’s written request for indemnification, (iii) if the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 5(b) hereof, no determination of entitlement to indemnification shall have been made pursuant to Section 5(b) hereof within (A) eighty (80) calendar days after receipt by the Company of the Indemnitee’s written request for indemnification or (B) if an objection to the selection of such Independent Counsel has been made and substantiated and not withdrawn, seventy (70) calendar days after a court of competent jurisdiction in the Commonwealth of Puerto Rico (or such person appointed by such court to make such determination) has determined or appointed the person to act as Independent Counsel pursuant to Section 5(b) hereof, (iv) payment of Indemnified Amounts payable pursuant to Section 6 or Section 7 hereof is not made within sixty (60) calendar days after receipt by the Company of a written request therefor, or (v) payment of Indemnified Amounts payable pursuant to Section 6 or Section 7 hereof is not made within sixty (60) calendar days after a determination has been made pursuant to Section 5(b) hereof that the Indemnitee is entitled to indemnification, then in each instance described in clauses (i) through (v), the Indemnitee shall be entitled to seek an adjudication by a court of competent jurisdiction in the Commonwealth of Puerto Rico of the Indemnitee’s entitlement to such indemnification or advancement of Indemnifiable Expenses. |
(f) | Not Prejudiced by Adverse Determination. In the event that a determination shall have been made pursuant to Section 5(b) hereof that the Indemnitee is not entitled to indemnification, any Proceeding commenced pursuant to this Section 11 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and the Indemnitee shall not be prejudiced by reason of that adverse determination. |
12. | Settlement of Proceedings. |
(a) | The Indemnitee agrees that it will not settle, compromise or consent to the entry of any judgment as to the Indemnitee in any pending or threatened Proceeding (whether or not the Indemnitee is an actual or potential party to such Proceeding) in which Indemnitee has sought indemnification hereunder without the Company’s prior written consent, which consent will not be unreasonably withheld, conditioned or delayed unless such settlement, compromise or consent respecting |
(b) | The Company agrees that it will not settle, compromise or consent to the entry of any judgment as to the Indemnitee in any pending or threatened Proceeding (whether or not the Indemnitee is an actual or potential party to such Proceeding) in which the Indemnitee has sought indemnification hereunder without the Indemnitee’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed unless such settlement, compromise or consent includes an unconditional release of the Indemnitee and does not (i) require or impose any injunctive or other non-monetary remedy on the Indemnitee, (ii) require or impose an admission or consent as to any wrongdoing by the Indemnitee or (iii) otherwise result in a direct or indirect payment by or monetary cost to the Indemnitee personally (as opposed to a payment to be made or cost to be paid by the Company on the Indemnitee’s behalf). |
13. | Notice by the Indemnitee. The Indemnitee agrees to notify the Company promptly upon being served with any summons, citation, subpoena, complaint, indictment, information, or other document relating to any Proceeding which could reasonably be expected to result in the payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses hereunder; provided, however, that the failure to give any such notice shall not disqualify the Indemnitee from the right to receive payments of Indemnifiable Amounts or advancements of Indemnifiable Expenses. |
14. | Representations and Warranties of the Company. The Company hereby represents and warrants to the Indemnitee as follows: |
(a) | Authority. The Company has all necessary power and authority to enter into, and be bound by the terms of, this Agreement, and the execution, delivery and performance of the undertakings contemplated by this Agreement have been duly authorized by the Company. |
(b) | Enforceability. This Agreement, when executed and delivered by the Company in accordance with the provisions hereof, shall be a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by equitable principles and applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the enforcement of creditors’ rights generally. |
(c) | No Conflicts. This Agreement, when executed and delivered by the Company in accordance with the provisions hereof, does not, and the Company’s performance of its obligations under the Agreement will not, violate the Company’s certificate of incorporation, bylaws, other agreements to which the Company is a party to or applicable law. |
(d) | Insurance. The Company shall, if commercially reasonable, obtain and maintain a policy or policies of insurance with reputable insurance companies providing the Company’s directors and officers with coverage for losses from wrongful acts, or to ensure the Company’s performance of its indemnification obligations under this Agreement. The Company shall use its best efforts to cause the Indemnitee, at the Company’s expense, to be covered by such insurance policies or policies providing liability insurance for directors or officers of the Company or of any Subsidiary, if any, in accordance with its or their terms to the same extent as provided to any then-current director or officer of the Company or any Subsidiary under such policy or policies. |
15. | Contract Rights Not Exclusive; Subrogation. The rights to payment of Indemnifiable Amounts and advancement of Indemnifiable Expenses provided by this Agreement shall be in addition to, but not exclusive of, any other rights that the Indemnitee may have at any time under applicable law, the Company’s bylaws or certificate of incorporation, or any other agreement, vote of stockholders or directors (or a committee of directors), or otherwise, both as to action in the Indemnitee’s official capacity and as to action in any other capacity as a result of the Indemnitee’s serving in a Corporate Status. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy, given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy. In the event of any payment to or on behalf of the Indemnitee under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the |
16. | Successors. This Agreement (a) shall be binding upon all successors and assigns of the Company (including any transferee of all or a substantial portion of the business, stock and/or assets of the Company and any direct or indirect successor by merger or consolidation or otherwise by operation of law) and (b) shall inure to the benefit of the heirs, personal representatives, executors and administrators of the Indemnitee. This Agreement shall continue for the benefit of the Indemnitee and such heirs, personal representatives, executors and administrators after the Indemnitee has ceased to have Corporate Status. |
17. | Change in Law. To the extent that a change in Puerto Rico law (whether by statute or judicial decision) shall permit broader indemnification or advancement of expenses than is provided under the terms of the bylaws of the Company and this Agreement, the Indemnitee shall be entitled to such broader indemnification and advancements, and this Agreement shall be deemed to be amended to such extent, but only to the extent such amendment permits the Indemnitee to broader indemnification and advancement rights other than Puerto Rico law permitted prior to the adoption of such amendment. |
18. | Severability. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement, or any clause thereof, shall be determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, in whole or in part, such provision or clause shall be limited or modified in its application to the minimum extent necessary to make such provision or clause valid, legal and enforceable, and the remaining provisions and clauses of this Agreement shall remain fully enforceable and binding on the parties. |
19. | Modifications and Waiver. Except as provided in Section 17 hereof with respect to changes in Puerto Rico law which broaden the right of the Indemnitee to be indemnified by the Company, no supplement, modification or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement (whether or not similar), nor shall such waiver constitute a continuing waiver. No failure or delay of any party in exercising any right or remedy hereunder shall operate as a waiver thereof, and no single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, shall preclude any other or further exercise thereof or the exercise of any other right or power. |
20. | General Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) when transmitted by facsimile and receipt is acknowledged, or (c) if mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed: |
21. | Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever other than any of those set forth in Section 4 hereof, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a |
22. | Governing Law. This Agreement shall be exclusively governed by and construed and enforced under the laws of the Commonwealth of Puerto Rico without giving effect to the provisions thereof relating to conflicts of law of such state. |
23. | Consent to Jurisdiction. |
(a) | Each of the Company and the Indemnitee hereby irrevocably and unconditionally (i) agrees and consents to the exclusive jurisdiction of the courts of the state and federal courts of the State of Delaware and the Commonwealth of Puerto Rico (each, a “Chosen Court”) for all purposes in connection with any action, suit, or proceeding that arises out of or relates to this Agreement and agrees that any such action instituted under this Agreement shall be brought only in one of the Chosen Courts; (ii) consents to submit to the exclusive jurisdiction of the Chosen Courts for purposes of any action or proceeding arising out of or in connection with this Agreement; (iii) waives any objection to the laying of venue of any such action or proceeding in any of the Chosen Courts; and (iv) waives, and agrees not to plead or to make, any claim that any such action or proceeding brought in any of the Chosen Courts has been brought in an improper or otherwise inconvenient forum. |
(b) | Each of the Company and the Indemnitee hereby consents to service of any summons and complaint and any other process that may be served in any action, suit, or proceeding arising out of or relating to this Agreement in any of the Chosen Courts by mailing by certified or registered mail, with postage prepaid, copies of such process to such party at its address for receiving notice pursuant to Section 20 hereof. Nothing herein shall preclude service of process by any other means permitted by applicable law. |
24. | Counterparts. This Agreement may be executed in one or more counterparts (including by PDF or facsimile), each of which shall for all purposes be deemed to be an original but all of which together shall constitute but one and the same Agreement. Only one such counterpart need be produced to evidence the existence of this Agreement. |
25. | Headings. The headings of the sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction hereof. |
26. | Effective Date. The provisions of this Agreement shall cover claims, actions, suits or proceedings whether now pending or hereafter commenced and shall be retroactive to cover acts or omissions or alleged acts or omissions which have taken place between the date when the Indemnitee was duly elected or appointed as a director or officer of the Company and the Effective Date of this Agreement. |
27. | Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings and negotiations, written and oral, between the parties with respect to the subject matter of this Agreement, provided, however, that this Agreement is supplement to and in furtherance of the Company’s certificate of incorporation, bylaws, the General Corporations Law and any other applicable law, and shall not be deemed a substitute therefor, and does not diminish or abrogate any rights of the Indemnitee thereunder. |
EVERTEC, INC. ______________________________________ Morgan M. Schuessler President & Chief Executive Officer | INDEMNITEE ______________________________________ [•] Director |
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 registrant’s 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. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s 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 |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting. |
Date: October 31, 2019 | /s/ Morgan Schuessler | |
Morgan Schuessler | ||
Chief Executive Officer | ||
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 registrant’s 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. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s 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 |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting. |
Date: October 31, 2019 | /s/ Joaquin A. Castrillo-Salgado | |
Joaquin A. Castrillo-Salgado | ||
Chief Financial Officer | ||
Date: October 31, 2019 | /s/ Morgan Schuessler | |
Morgan Schuessler | ||
Chief Executive Officer | ||
Date: October 31, 2019 | /s/ Joaquin A. Castrillo-Salgado | |
Joaquin A. Castrillo-Salgado | ||
Chief Financial Officer | ||
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