EVERTEC, Inc. (Form: 10-Q, Received: 11/06/2015 15:51:39)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

COMMISSION FILE NUMBER 001-35872

EVERTEC, Inc.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


Puerto Rico		66-0783622
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification number)

Cupey Center Building, Road 176, Kilometer 1.3, San Juan, Puerto Rico		00926
(Address of principal executive offices)		(Zip Code)

(787) 759-9999

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in rule 12b-2 of the Exchange Act).

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

At October 30, 2015, there were 76,108,355 outstanding shares of common stock of EVERTEC, Inc.

TABLE OF CONTENTS


		Page

Part I. FINANCIAL INFORMATION			1

Item 1.	Financial Statements		1

	Unaudited Consolidated Condensed Balance Sheets as of September 30, 2015 and December 31, 2014		1

	Unaudited Consolidated Condensed Statements of Income and Comprehensive Income for the three and nine months ended September 30, 2015 and 2014		2

	Unaudited Consolidated Condensed Statement of Changes in Stockholders’ Equity for the nine months ended September 30, 2015		3

	Unaudited Consolidated Condensed Statements of Cash Flows for the nine months ended September 30, 2015 and 2014		4

	Notes to Unaudited Consolidated Condensed Financial Statements		5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		28

Item 4.	Controls and Procedures		28

Part II. OTHER INFORMATION			28

Item 1.	Legal Proceedings		28

Item 1A.	Risk Factors		29

Item 2.	Unregistered Sales of Equity in Securities and Use of Proceeds		29

Item 3.	Defaults Upon Senior Securities		29

Item 4.	Mine Safety Disclosures		30

Item 5.	Other Information		30

Item 6.	Exhibits		30

SIGNATURES

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of, and subject to the protection of, the Private Securities Litigation Reform Act of 1995. Such statements can be identified by the use of forward-looking terminology such as “believes,” “expects,” “may,” “estimates,” “will,” “should,” “plans” or “anticipates” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and may involve significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements as a result of various factors. Among the factors that significantly impact our business and could impact our business in the future are:

•

our reliance on our relationship with Popular, Inc. (“Popular”) for a significant portion of our revenues and with Banco Popular de Puerto Rico (“Banco Popular”), Popular’s principal banking subsidiary, to grow our merchant acquiring business;

•

for as long as we are deemed to be controlled by Popular, we will be subject to supervision and examination by U.S. federal banking regulators, and our activities will be limited to those permissible for Popular. Furthermore, as a technology service provider to regulated financial institutions, we are subject to additional regulatory oversight and examination. As a regulated institution, we most likely will be required to obtain regulatory approval before engaging in certain new activities or businesses, whether organically or by acquisition;

•

our ability to renew our client contracts on terms favorable to us;

•

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 fiscal challenges;

•

additional adverse changes in the general economic conditions in Puerto Rico, 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;

•

operating an international business in multiple regions with potential political and economic instability, including Latin America;

•

our ability to execute our geographic expansion and acquisition strategies;

•

our ability to protect our intellectual property rights against infringement and to defend ourselves against claims of infringement brought by third parties;

•

our ability to recruit and retain the qualified personnel necessary to operate our business;

•

our ability to comply with U.S. federal, state, local and foreign regulatory requirements;

•

evolving industry standards and adverse changes in global economic, political and other conditions;

•

our high level of indebtedness and restrictions contained in our debt agreements, including the senior secured credit facilities, as well as debt that could be incurred in the future; and

•

our ability to generate sufficient cash to service our indebtedness and to generate future profits.

These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. The Company does not undertake, and specifically disclaims any obligation, to update any of the “forward-looking statements” to reflect occurrences or unanticipated events or circumstances after the date of such statements except as required by the federal securities laws.

Investors should refer to the Company’s Form 10-K for the year ended December 31, 2014 (the “2014 Form 10-K”) for a discussion of factors that could cause events to differ from those suggested by the forward-looking statements, including factors set forth in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

EVERTEC, Inc. (Unaudited) Consolidated Condensed Balance Sheets

(Dollar amounts in thousands, except for share information)


	September 30, 2015			December 31, 2014
Assets
Current Assets:
Cash	$	40,401		$	32,114
Restricted cash		13,547			5,718
Accounts receivable, net		68,429			75,810
Deferred tax asset		6,921			399
Prepaid expenses and other assets		20,736			20,565

Total current assets		150,034			134,606
Investment in equity investee		12,281			11,756
Property and equipment, net		33,281			29,535
Goodwill		368,543			368,837
Other intangible assets, net		309,680			334,584
Other long-term assets		9,078			10,917

Total assets	$	882,897		$	890,235

Liabilities and stockholders’ equity
Current Liabilities:
Accrued liabilities	$	32,917		$	26,052
Accounts payable		22,417			22,879
Unearned income		11,683			9,825
Income tax payable		62			1,956
Current portion of long-term debt		20,875			19,000
Short-term borrowings		18,000			23,000
Deferred tax liability, net		—			1,799

Total current liabilities		105,954			104,511
Long-term debt		632,137			647,579
Long-term deferred tax liability, net		23,858			15,674
Other long-term liabilities		2,695			2,898

Total liabilities		764,644			770,662

Commitments and contingencies (Note 10)
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; 76,105,880 shares issued and outstanding at September 30, 2015 (December 31, 2014 - 77,893,144)		762			779
Additional paid-in capital		28,502			59,740
Accumulated earnings		95,038			65,576
Accumulated other comprehensive loss, net of tax		(6,049	)		(6,522	)

Total stockholders’ equity		118,253			119,573

Total liabilities and stockholders’ equity	$	882,897		$	890,235

The accompanying notes are an integral part of these unaudited consolidated condensed financial statements.

EVERTEC, Inc. (Unaudited) Consolidated Condensed Statements of Income and Comprehensive Income

(Dollar amounts in thousands, except per share information)


	Three months ended September 30,						Nine months ended September 30,
	2015			2014			2015			2014
Revenues
Merchant acquiring, net	$	20,784		$	19,227		$	62,041		$	58,345
Payment processing (from affiliates: $7,664, $7,334, $22,680 and $22,040)		27,502			25,848			80,638			77,691
Business solutions (from affiliates: $34,391, $33,688, $103,649 and $101,289)		44,492			43,804			134,672			131,609

Total revenues		92,778			88,879			277,351			267,645


Operating costs and expenses
Cost of revenues, exclusive of depreciation and amortization shown below		44,821			38,862			125,280			115,781
Selling, general and administrative expenses		10,428			7,104			27,079			25,629
Depreciation and amortization		16,934			16,453			49,767			49,457

Total operating costs and expenses		72,183			62,419			202,126			190,867

Income from operations		20,595			26,460			75,225			76,778


Non-operating income (expenses)
Interest income		140			91			371			245
Interest expense		(6,003	)		(6,370	)		(18,414	)		(19,780	)
(Losses) earnings of equity method investment		(3	)		241			196			905
Other income (expenses)		381			(249	)		1,430			2,127

Total non-operating expenses		(5,485	)		(6,287	)		(16,417	)		(16,503	)

Income before income taxes		15,110			20,173			58,808			60,275
Income tax expense		1,687			1,082			6,053			5,205

Net income		13,423			19,091			52,755			55,070
Other comprehensive income (loss), net of tax of $3, $4, $37 and $57
Foreign currency translation adjustments		84			378			473			(6,573	)

Total comprehensive income	$	13,507		$	19,469		$	53,228		$	48,497


Net income per common share - basic	$	0.17		$	0.24		$	0.68		$	0.70

Net income per common share - diluted	$	0.17		$	0.24		$	0.68		$	0.70

The accompanying notes are an integral part of these unaudited consolidated condensed financial statements.

EVERTEC, Inc. (Unaudited) Consolidated Condensed Statement of Changes in Stockholders’ Equity

(Dollar amounts in thousands, except share information)


	Number of Shares of Common Stock			Common Stock			Additional Paid-in Capital			Accumulated Earnings			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity

Balance at December 31, 2014		77,893,144		$	779		$	59,740		$	65,576		$	(6,522	)	$	119,573
Share-based compensation recognized		—			—			3,748			—			—			3,748
Repurchase of common stock		(1,834,228	)		(18	)		(34,955	)		—			—			(34,973	)
Restricted stock grants and units delivered, net of cashless		46,964			1			(31	)		—			—			(30	)
Net income		—			—			—			52,755			—			52,755
Cash dividends declared on common stock		—			—			—			(23,293	)		—			(23,293	)
Other comprehensive income		—			—			—			—			473			473

Balance at September 30, 2015		76,105,880			762			28,502			95,038			(6,049	)	$	118,253

The accompanying notes are an integral part of these unaudited consolidated condensed financial statements.

EVERTEC, Inc. (Unaudited) Consolidated Condensed Statements of Cash Flows

(Dollar amounts in thousands)


	Nine months ended September 30,
	2015			2014
Cash flows from operating activities
Net income	$	52,755		$	55,070
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		49,767			49,457
Amortization of debt issue costs and accretion of discount		2,488			2,315
Provision for doubtful accounts and sundry losses		1,302			1,102
Deferred tax benefit		(113	)		(1,486	)
Share-based compensation		3,748			1,314
Unrealized (gain) loss of indemnification assets		(14	)		459
Loss on disposition of property and equipment and other intangibles		124			23
Earnings of equity method investment		(196	)		(905	)
Dividend received from equity method investment		—			326
Decrease (increase) in assets:
Accounts receivable, net		6,456			309
Prepaid expenses and other assets		(418	)		(4,283	)
Other long-term assets		199			2,497
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities		6,553			(7,357	)
Income tax payable		(1,894	)		1,686
Unearned income		1,858			3,271

Total adjustments		69,860			48,728

Net cash provided by operating activities		122,615			103,798


Cash flows from investing activities
Net increase in restricted cash		(7,828	)		(693	)
Intangible assets acquired		(13,322	)		(9,100	)
Property and equipment acquired		(14,074	)		(7,463	)
Proceeds from sales of property and equipment		14			44

Net cash used in investing activities		(35,210	)		(17,212	)


Cash flows from financing activities
Statutory minimum withholding taxes paid on cashless exercises of stock options and restricted stock		(31	)		(1,004	)
Net decrease in short-term borrowing		(5,000	)		(42,000	)
Repayment of short-term borrowing for purchase of equipment and software		(1,542	)		(1,200	)
Dividends paid		(23,322	)		(23,547	)
Tax windfall benefits on exercises of stock options		—			1,937
Issuance of common stock, net		—			314
Repurchase of common stock		(34,973	)		—
Repayment of other financing agreement		—			(95	)
Repayment of long-term debt		(14,250	)		(14,250	)

Net cash used in financing activities		(79,118	)		(79,845	)


Net increase in cash		8,287			6,741
Cash at beginning of the period		32,114			22,485

Cash at end of the period	$	40,401		$	29,226


Supplemental disclosure of cash flow information:
Cash paid for interest	$	16,383		$	18,736
Cash paid for income taxes		4,600			703

Supplemental disclosure of non-cash activities:
Dividend declared not received from equity method investment	$	—		$	326
Foreign currency translation adjustments		473			(6,573	)
Payable due to vendor related to software acquired		1,125			—

The accompanying notes are an integral part of these unaudited consolidated condensed financial statements.

Notes to Unaudited Consolidated Condensed Financial Statements


Note 1 – The Company and Basis of Presentation			6

Note 2 – Recent Accounting Pronouncements			6

Note 3 – Property and Equipment, net			7

Note 4 – Goodwill and Other Intangible Assets			7

Note 5 – Debt and Short-Term Borrowings			8

Note 6 – Financial Instruments and Fair Value Measurements			9

Note 7 – Share-based Compensation			11

Note 8 – Income Tax			12

Note 9 – Net Income Per Common Share			13

Note 10 – Commitments and Contingencies			14

Note 11 – Related Party Transactions			14

Note 12 – Segment Information			15

Note 13 – Subsequent Events			15

Note 1 – The Company and Basis of Presentation

The Company

EVERTEC, Inc. (formerly known as Carib Latam Holdings, Inc.) and its subsidiaries (collectively the “Company,” or “EVERTEC”) is a leading full-service transaction processing business in Latin America and the Caribbean. The Company is based in Puerto Rico and provides a broad range of merchant acquiring, payment processing and business process management services across 19 countries in the region. EVERTEC owns and operates the ATH network, one of the leading automated teller machine (“ATM”) and personal identification number (“PIN”) debit networks in Latin America. In addition, EVERTEC provides a comprehensive suite of services for core bank processing, cash processing and technology outsourcing in the regions the Company serves. EVERTEC serves a broad and diversified customer base of leading financial institutions, merchants, corporations and government agencies with “mission-critical” technology solutions that are essential to their operations, enabling them to issue, process and accept transactions securely.

Management believes that the Company’s business is well-positioned to continue to expand across the fast-growing Latin American region.

Basis of Presentation

The unaudited consolidated condensed financial statements of EVERTEC have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of the accompanying unaudited consolidated condensed financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the unaudited consolidated condensed financial statements. Actual results could differ from these estimates.

Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted from these statements pursuant to the rules and regulations of the SEC and, accordingly, these financial statements should be read in conjunction with the Audited Consolidated Financial Statements of the Company for the year ended December 31, 2014, included in the Company’s 2014 Form 10-K. In the opinion of management, the accompanying consolidated condensed financial statements, prepared in accordance with GAAP, contain all adjustments, all of which are normal and recurring in nature, necessary for a fair presentation. All significant intercompany accounts and transactions have been eliminated in consolidation.

Note 2—Recent Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) has issued the following accounting pronouncements and guidance relevant to the Company’s operations:

In August 2015, the FASB deferred the effective date for updated guidance on revenue recognition by one year. Previously, Update 2014-09 was effective for annual reporting periods beginning after December 15, 2016. The amendments in the Update provide that the guidance be applied to reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently evaluating the impact of the adoption of this guidance on its financial statements.

In August 2015, the FASB clarified that the presentation of debt issuance costs related to line-of-credit arrangements as an asset is acceptable, regardless of whether there are any outstanding borrowings on the line of credit arrangement. The amendments in this Update are effective for public companies for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this guidance on its financial statements.

In September 2015, the FASB issued updated guidance simplifying the accounting for measurement-period adjustments for business combinations. The amendments in this Update require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this Update require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The amendments in this Update require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The amendments in this Update are effective for fiscal years beginning after December 15, 2015, including interim

periods within those fiscal years. The amendments in this Update should be applied prospectively to adjustments to provisional amounts that occur after the effective date of this Update with earlier application permitted for financial statements that have not been issued. The Company is currently evaluating the impact, if any, of the adoption of this guidance on its financial statements.

Note 3 – Property and Equipment, net

Property and equipment, net consists of the following:


(Dollar amounts in thousands)	Useful life in years	September 30, 2015			December 31, 2014

Buildings	30	$	1,616		$	1,602
Data processing equipment	3 - 5		90,905			77,588
Furniture and equipment	3 - 20		7,603			7,540
Leasehold improvements	5 - 10		3,585			2,964

			103,709			89,694
Less - accumulated depreciation and amortization			(71,861	)		(61,580	)

Depreciable assets, net			31,848			28,114
Land			1,433			1,421

Property and equipment, net		$	33,281		$	29,535

Depreciation and amortization expense related to property and equipment for the three and nine months ended September 30, 2015 amounted to $3.9 million and $11.3 million, respectively, compared to $3.8 million and $11.5 million, respectively, for the same periods in 2014.

Note 4 – Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill, allocated by reportable segments, were as follows (See Note 12):


(Dollar amounts in thousands)	Merchant Acquiring, net		Payment Processing			Business Solutions		Total

Balance at December 31, 2014	$	138,121	$	184,228		$	46,488	$	368,837
Foreign currency translation adjustments		—		(392	)		98		(294	)

Balance at September 30, 2015	$	138,121	$	183,836		$	46,586	$	368,543

Goodwill is tested for impairment at least annually, or more often if events or circumstances indicate there may be impairment, using the qualitative assessment option or step zero process. Using this process, the Company first assesses whether it is “more likely than not” that the fair value of a reporting unit is less than its carrying amount. There were no triggering events or changes in circumstances that, subsequent to the impairment test, would have required an additional impairment evaluation.

The carrying amount of other intangible assets at September 30, 2015 and December 31, 2014 consisted of the following:


(Dollar amounts in thousands)		September 30, 2015
	Useful life in years	Gross amount		Accumulated amortization			Net carrying amount
Customer relationships	14	$	312,727	$	(112,199	)	$	200,528
Trademark	10 - 15		39,950		(17,320	)		22,630
Software packages	3 - 10		151,744		(102,915	)		48,829
Non-compete agreement	15		56,539		(18,846	)		37,693

Other intangible assets, net		$	560,960	$	(251,280	)	$	309,680


(Dollar amounts in thousands)		December 31, 2014
	Useful life in years	Gross amount		Accumulated amortization			Net carrying amount
Customer relationships	14	$	312,735	$	(95,482	)	$	217,253
Trademark	10 - 15		39,950		(14,722	)		25,228
Software packages	3 - 10		138,188		(86,605	)		51,583
Non-compete agreement	15		56,539		(16,019	)		40,520

Other intangible assets, net		$	547,412	$	(212,828	)	$	334,584

For the three and nine months ended September 30, 2015, the Company recorded amortization expense related to other intangibles of $13.0 million and $38.4 million, respectively, compared to $12.7 million and $37.9 million for the corresponding 2014 periods.

The estimated amortization expense of the balances outstanding at September 30, 2015 for the next five years is as follows:


(Dollar amounts in thousands)
Remaining 2015	$	11,158
2016		40,906
2017		37,652
2018		34,467
2019		33,078
2020		31,010

Note 5 – Debt and Short-Term Borrowings

Total debt as of September 30, 2015 and December 31, 2014 was as follows:


(Dollar amounts in thousands)	September 30, 2015		December 31, 2014

Senior Secured Credit Facility (Term A) due on April 17, 2018 paying interest at a variable interest rate (London InterBank Offered Rate (“LIBOR”) plus applicable margin ⁽¹⁾⁽³⁾ )	$	266,052	$	277,239
Senior Secured Credit Facility (Term B) due on April 17, 2020 paying interest at a variable interest rate (LIBOR Rate plus applicable margin ⁽²⁾⁽³⁾ )		386,960		389,340
Senior Secured Revolving Credit Facility expiring on April 17, 2018 paying interest at a variable interest rate		18,000		23,000
Note Payable due on October 1, 2017 ⁽³⁾		3,315		4,333
Note Payable due on July 1, 2017 ⁽³⁾		670		—

Total debt	$	674,997	$	693,912

(1)	Applicable margin of 2.25% at September 30, 2015 and 2.50% at December 31, 2014.

(2)	Subject to a minimum rate (“LIBOR floor”) of 0.75% plus applicable margin of 2.50% at September 30, 2015 and 2.75% December 31, 2014.

(3)	Includes unamortized discount.

Senior Secured Credit Facilities

Term A Loan

As of September 30, 2015, the unpaid principal balance of the Term A Loan was $266.3 million. The Term A Loan requires principal payments on the last business day of each quarter equal to (a) 1.250% of the original principal amount commencing on September 30, 2013 through June 30, 2016; (b) 1.875% of the original principal amount from September 30, 2016 through June 30, 2017; (c) 2.50% of the original principal amount from September 30, 2017 through March 31, 2018; and (d) the remaining outstanding principal amount on the maturity of the Term A Loan on April 17, 2018. Interest is based on EVERTEC Group, LLC’s (“EVERTEC Group”) first lien secured net leverage ratio and payable at a rate equal to, at the Company’s option, either (a) LIBOR Rate plus an applicable margin ranging from 2.00% to 2.50%, or (b) Base Rate, as defined in the 2013 Credit Agreement, plus an applicable margin ranging from 1.00% to 1.50%. Term A Loan has no LIBOR or Base Rate minimum or floor.

Term B Loan

As of September 30, 2015, the unpaid principal balance of the Term B Loan was $391.0 million. The Term B Loan requires principal payments on the last business day of each quarter equal to 0.250% of the original principal amount commencing on September 30, 2013 and the remaining outstanding principal amount on the maturity of the Term B Loan on April 17, 2020. Interest is based on EVERTEC Group’s first lien secured net leverage ratio and payable at a rate equal to, at the Company’s option, either (a) LIBOR plus an applicable margin ranging from 2.50% to 2.75%, or (b) Base Rate plus an applicable margin ranging from 1.50% to 1.75%. The LIBOR and Base Rate are subject to floors of 0.75% and 1.75%, respectively.

Revolving Credit Facility

The revolving credit facility has an available balance up to $100.0 million, with an interest rate on loans calculated the same as the applicable Term A Loan rate. The facility matures on April 17, 2018 and has a “commitment fee” payable one business day after the last business day of each quarter calculated based on the daily unused commitment during the preceding quarter. The commitment fee for the unused portion of this facility ranges from 0.125% to 0.375% and is based on EVERTEC Group’s first lien secured net leverage ratio.

All senior secured credit facility loans may be prepaid without premium or penalty.

The senior secured credit facilities contain various restrictive covenants. The Term A Loan and the revolving credit facility (subject to certain exceptions) require us to maintain on a quarterly basis a specified maximum senior secured leverage ratio of up to 6.60 to 1.00 as defined in the 2013 Credit Agreement (total first lien secured debt to adjusted EBITDA). In addition, the 2013 Credit Agreement, among other things: (a) limits our ability and the ability of our subsidiaries to incur additional indebtedness, incur liens, pay dividends or make certain other restricted payments and enter into certain transactions with affiliates; (b) restricts our ability to enter into agreements that would limit the ability of our subsidiaries to pay dividends or make certain payments to us; and (c) places restrictions on our ability and the ability of our subsidiaries to merge or consolidate with any other person or sell, assign, transfer, convey or otherwise dispose of all or substantially all of our assets.

Note payable

In December 2014 and June 2015, EVERTEC entered into non-interest bearing financing agreements of $4.6 million and $1.1 million, respectively, to purchase software. The notes will be repaid over a 36-month term. As of September 30, 2015 the outstanding principal balance of the notes payable is $4.2 million. The current portion of these notes is recorded as part of accounts payable and the long-term portion is included in other long-term liabilities.

Note 6 – Financial Instruments and Fair Value Measurements

Recurring Fair Value Measurements

Fair value measurement provisions establish a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. These provisions describe three levels of input that may be used to measure fair value:

Level 1 : Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.

Level 2 : Inputs, other than quoted prices included in Level 1, that are observable for the asset or liability through corroboration with market data at the measurement date.

Level 3 : Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

The Company uses observable inputs when available. Fair value is based upon quoted market prices when available. If market prices are not available, the Company may employ internally-developed models that mostly use market-based inputs including yield curves, interest rates, volatilities, and credit curves, among others. The Company limits valuation adjustments to those deemed necessary to ensure that the financial instrument’s fair value adequately represents the price that would be received or paid in the marketplace. Valuation adjustments may include consideration of counterparty credit quality and liquidity as well as other criteria. The estimated fair value amounts are subjective in nature and may involve uncertainties and matters of significant judgment for certain financial instruments. Changes in the underlying assumptions used in estimating fair value could affect the results. The fair value measurement levels are not indicative of risk of investment.

The following table summarizes fair value measurements by level at September 30, 2015 and December 31, 2014 for assets measured at fair value on a recurring basis:


(Dollar amounts in thousands)	Level 1		Level 2		Level 3		Total

September 30, 2015
Financial assets:
Indemnification assets:
Software cost reimbursement	$	—	$	—	$	—	$	—

December 31, 2014
Financial assets:
Indemnification assets:
Software cost reimbursement	$	—	$	—	$	1,428	$	1,428

The fair value of financial instruments is the amount at which an asset or obligation could be exchanged in a current transaction between willing parties, other than in a forced liquidation sale. Fair value estimates are made at a specific point in time based on the type of financial instrument and relevant market information. Many of these estimates involve various assumptions and may vary significantly from amounts that could be realized in actual transactions.

For those financial instruments with no quoted market prices available, fair values have been estimated using present value calculations or other valuation techniques, as well as management’s best judgment with respect to current economic conditions, including discount rates and estimates of future cash flows.

Indemnification assets include the present value of the expected future cash flows of certain expense reimbursement agreements with Popular. These contracts had termination dates up to September 2015 and were entered into in connection with the merger transaction completed on September 30, 2010 (“the Merger”). Management prepared estimates of the expected reimbursements to be received from Popular until the termination of the contracts, discounted the estimated future cash flows and recorded the indemnification assets as of the Merger closing date. Payments received during the quarters reduced the indemnification asset balance. As of September 30, 2015, the indemnification asset has been fully repaid. The balance was adjusted to reflect its fair value as of September 30, 2015, therefore resulting in a net unrealized gain of approximately $2,000 and $14,000 for the three and nine months ended September 30, 2015, respectively, and a net unrealized loss of approximately $0.3 million and $0.5 million for the three and nine months ended September 30, 2014, respectively, which are reflected within the other expenses caption in the unaudited consolidated condensed statements of income and comprehensive income. The indemnification assets were included within accounts receivable, net in the accompanying consolidated condensed balance sheet at December 31, 2014.

The unobservable inputs related to the Company’s indemnification assets as of September 30, 2015 using the discounted cash flow model include the discount rate of 5.01%.

For indemnification assets a significant increase or decrease in market rates or cash flows could have resulted in a significant change to the fair value. Also, the credit rating and/or the non-performance credit risk of Popular, which is subjective in nature, also could have increased or decreased the sensitivity of the fair value of these assets.

The following table presents the carrying value, as applicable, and estimated fair values for financial instruments at September 30, 2015 and December 31, 2014:


	September 30, 2015				December 31, 2014
(Dollar amounts in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Financial assets:
Indemnification assets:
Software cost reimbursement	$	—	$	—	$	1,428	$	1,428

Financial liabilities:
Senior secured term loan A	$	266,052	$	253,382	$	277,239	$	266,400
Senior secured term loan B		386,960		377,561		389,340		385,462

The fair value of the senior secured term loans at September 30, 2015 and December 31, 2014 were obtained using prices supplied by third party service providers. Their pricing is based on various inputs such as: market quotes, recent trading activity in a non-active market or imputed prices. The pricing inputs also may include the use of an algorithm that could take into account movement in the general high-yield market, among other variants.

The senior secured term loans, which are not measured at fair value in the balance sheets, if measured, would be categorized as Level 3 in the fair value hierarchy.

The following table provides a summary of the change in fair value of the Company’s Level 3 assets:


	Three months ended September 30,						Nine months ended September 30,
(Dollar amounts in thousands)	2015			2014			2015			2014

Indemnification assets:
Beginning balance	$	141		$	2,114		$	1,428		$	3,586
Payments received		(143	)		(196	)		(1,442	)		(1,495	)
Unrealized gain (loss) recognized in other expenses		2			(286	)		14			(459	)

Ending balance	$	—		$	1,632		$	—		$	1,632

Note 7 – Share-based Compensation

Long-term Incentive Plan

In the first quarter of 2015, the Compensation Committee of the Board of Directors approved grants of restricted stock units (“RSUs”) to executives and certain employees pursuant to the 2015 Long-Term Incentive Program (“LTIP”) under the terms of our 2013 Equity Incentive Plan. Under the LTIP, the Company granted restricted stock units to eligible participants as time-based awards and/or performance-based awards.

The vesting of the RSUs is dependent upon service, market, and/or performance conditions as defined in the grants. Employees that received time-based awards with service conditions are entitled to receive a specific number of shares of the Company’s common stock on the vesting date if the employee is providing services to the Company on the vesting date. Time-based awards vest over a period of three years in substantially equal installments commencing on the start of the fiscal year during which the RSUs were granted and ending on January 1st of each year. Employees that received awards with market conditions are entitled to receive a specific number of shares of the Company’s common stock on the vesting date if the Company’s total shareholder return (“TSR”) target relative to a specified group of industry peer companies is achieved. Employees that received awards with performance conditions are entitled to receive a specific number of shares of the Company’s common stock on the vesting date if the Cumulative Compound Annual Growth Rate (“CAGR”) of Diluted EPS target is achieved. Performance and market-based awards vest at the end of the performance period which commenced on the start of the fiscal year during which the RSUs were granted and ends on January 1, 2018. Awards are forfeited if the employee voluntarily ceases to be employed by the Company prior to vesting.

The following table summarizes stock options activity for the nine months ended September 30, 2015:


	Shares		Weighted-average exercise prices

Outstanding at December 31, 2014		316,000	$	19.56
Forfeited		126,000		18.81

Outstanding at September 30, 2015		190,000	$	20.06

Exercisable at September 30, 2015		83,333	$	23.62

Management uses the fair value method of recording share-based compensation as described in the guidance for stock compensation in ASC topic 718.

The following table summarizes nonvested restricted shares and RSUs activity for the nine months ended September 30, 2015:


Nonvested restricted shares and RSUs	Shares		Weighted-average grant date fair value

Nonvested at December 31, 2014		23,252	$	22.04
Forfeited		33,214		23.61
Vested		45,084		22.38
Granted		581,238		22.35

Nonvested at September 30, 2015		526,192	$	22.26

For the three and nine months ended September 30, 2015 the Company recognized compensation expense of $1.6 million and $3.7 million, respectively, and for the three months and nine months ended September 30, 2014, the Company recognized $0.6 million and $1.3 million of share-based compensation expense, respectively. As of September 30, 2015, there was $0.4 million of total unrecognized compensation cost related to stock options, which is expected to be recognized over the next 1.4 years. In addition, for the same period, there was approximately $8.9 million of total unrecognized compensation cost related to nonvested shares of restricted stock and RSUs. That cost is expected to be fully recognized over the next 2.3 years.

Note 8 – Income Tax

The components of income tax expense for the three and nine months ended September 30, 2015 and 2014 consisted of the following:


	Three months ended September 30,						Nine months ended September 30,
(Dollar amounts in thousands)	2015			2014			2015			2014

Current tax provision	$	1,811		$	2,138		$	6,166		$	6,691
Deferred tax benefit		(124	)		(1,056	)		(113	)		(1,486	)

Income tax expense	$	1,687		$	1,082		$	6,053		$	5,205

The Company conducts operations in Puerto Rico and certain countries in Latin America. As a result, the income tax expense includes the effect of taxes paid to the Puerto Rico government as well as foreign jurisdictions. The following table presents the components of income tax expense for the three and nine months ended September 30, 2015 and 2014 and its segregation based on location of operations:


	Three months ended September 30,						Nine months ended September 30,
(Dollar amounts in thousands)	2015			2014			2015			2014

Current tax provision (benefit)
Puerto Rico	$	820		$	1,687		$	3,342		$	3,047
United States		118			(923	)		419			(508	)
Foreign countries		873			1,374			2,405			4,152

Total current tax provision	$	1,811		$	2,138		$	6,166		$	6,691


Deferred tax (benefit) provision
Puerto Rico	$	134		$	(518	)	$	544		$	314
United States		(24	)		(138	)		(82	)		(141	)
Foreign countries		(234	)		(400	)		(575	)		(1,659	)

Total deferred tax benefit	$	(124	)	$	(1,056	)	$	(113	)	$	(1,486	)

Taxes payable to foreign countries by EVERTEC’s subsidiaries will be paid by such subsidiary and the corresponding liability and expense will be presented in EVERTEC’s consolidated financial statements.

As of September 30, 2015, the gross deferred tax asset amounted to $7.9 million and the gross deferred tax liability amounted to $24.9 million, compared with $9.7 million and $26.8 million as of December 31, 2014. At September 30, 2015, the recorded value of the Company’s net operating loss (“NOL”) carryforwards was $4.6 million. The recorded value of the NOL carryforwards is approximately $4.2 million lower than the total NOL carryforwards available because of a windfall tax benefit. The windfall tax benefit is available to offset future taxable income and is considered an off-balance sheet item until the deduction reduces taxes payable. This windfall tax benefit results from tax deductions that were in excess of previously recorded compensation expense because the fair value of stock options at the time they were granted differed from their fair value when they were exercised. The total gross NOL carryforwards available, including the windfall benefit, amounted to $22.4 million as of September 30, 2015.

There are no open uncertain tax positions as of September 30, 2015.

Note 9 – Net Income Per Common Share

The reconciliation of the numerator and denominator of the income per common share is as follows:


	Three months ended September 30,				Nine months ended September 30,
(Dollar amounts in thousands, except per share information)	2015		2014		2015		2014

Net income	$	13,423	$	19,091	$	52,755	$	55,070
Less: non-forfeitable dividends on restricted stock		6		—		6		—

Net income available to common shareholders	$	13,417	$	19,091	$	52,749	$	55,070


Weighted average common shares outstanding		77,160,514		78,666,241		77,472,673		78,485,109

Weighted average potential dilutive common shares ⁽¹⁾		132,299		550,683		104,722		708,343


Weighted average common shares outstanding - assuming dilution		77,292,813		79,216,924		77,577,394		79,193,452


Net income per common share - basic	$	0.17	$	0.24	$	0.68	$	0.70

Net income per common share - diluted	$	0.17	$	0.24	$	0.68	$	0.70

⁽¹⁾	Potential common shares consist of common stock issuable under the assumed exercise of stock options and restricted stock awards using the treasury stock method.

On February 18, 2015, our Board declared a quarterly cash dividend of $0.10 per share of common stock, which was paid on March 19, 2015 to stockholders of record as of March 2, 2015. On May 6, 2015, our Board declared a quarterly cash dividend of $0.10 per share of common stock, which was paid on June 5, 2015 to stockholders of record as of May 18, 2015. On August 5, 2015, the Board declared a quarterly cash dividend of $0.10 per share of common stock, which was paid on September 3, 2015 to stockholders of record as of August 17, 2015.

Note 10 – Commitments and Contingencies

Certain lease agreements contain provisions for future rent increases. The total amount of rental payments due over the lease term is being charged to rent expense on the straight-line method over the term of the lease. The difference between rent expense recorded and the amount paid is recorded as a deferred rent obligation.

Rent expense of office facilities and real estate for the three and nine months ended September 30, 2015 amounted to $1.9 million and $6.0 million, respectively, compared to $2.0 million and $6.2 million for the corresponding 2014 periods. Rent expense for telecommunications and other equipment for the three and nine months ended September 30, 2015 amounted to $1.4 million and $4.0 million, respectively, compared to $1.5 million and $4.6 million for the corresponding 2014 periods.

In the ordinary course of business, the Company may enter into commercial commitments. As of September 30, 2015, EVERTEC has an outstanding letter of credit of $1.1 million with a maturity of less than three months.

EVERTEC is a defendant in a number of legal proceedings arising in the ordinary course of business. Based on the opinion of legal counsel and other factors, management believes that the final disposition of these matters will not have a material adverse effect on the business, results of operations, financial condition, or cash flows of the Company. The Company has identified certain claims as a result of which a loss may be incurred, but in the aggregate the loss would be minimal. For other claims for which proceedings are in an initial phase, the Company is unable to estimate the range of possible loss but at this time believes that any loss related to such claims will not be material.

Note 11 – Related Party Transactions

The following table presents the Company’s transactions with related parties for the three and nine months ended September 30, 2015 and 2014:


	Three months ended September 30,				Nine months ended September 30,
(Dollar amounts in thousands)	2015		2014		2015		2014

Total revenues ⁽¹⁾⁽²⁾	$	42,055	$	41,022	$	126,329	$	123,329

Cost of revenues	$	406	$	132	$	1,496	$	888

Rent and other fees	$	1,831	$	1,999	$	5,798	$	6,000

Interest earned from and charged by affiliate
Interest income	$	59	$	48	$	146	$	150

⁽¹⁾	Total revenues from Popular as a percentage of revenues were 45%, 46%, 45% and 45% for each of the periods presented above.

⁽²⁾	Includes revenues generated from investee accounted for under the equity method of $0.5 million and $1.6 million for the three and nine months ended September 30, 2015, respectively, and $0.6 million and $2.0 million for the corresponding 2014 periods.

At September 30, 2015 and December 31, 2014, EVERTEC had the following balances arising from transactions with related parties:


(Dollar amounts in thousands)	September 30, 2015		December 31, 2014

Cash and restricted cash deposits in affiliated bank	$	25,324	$	13,566

Indemnification assets from Popular reimbursement ⁽¹⁾
Accounts receivable	$	—	$	1,428

Other due to/from affiliate
Accounts receivable	$	19,881	$	17,006

Prepaid expenses and other assets	$	2,605	$	1,141

Accounts payable ⁽²⁾	$	2,231	$	5,260

Unearned income	$	10,069	$	8,154

Other long-term liabilities ⁽²⁾	$	14	$	45

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

⁽²⁾

Includes an account payable of $32,000 and a long-term liability of $14,000 at September 30, 2015 and accounts payable of $0.2 million and a long-term liability of $45,000 for December 31, 2014, respectively, related to the unvested portion of stock options as a result of the equitable adjustment approved by our Board of Directors on December 18, 2012 that will be payable to executive officers and employees upon vesting of stock options.

At September 30, 2015, EVERTEC Group has a credit facility with Popular for $4.2 million, on behalf of EVERTEC Costa Rica S.A., under which a letter of credit of a similar amount was issued.

Note 12 – Segment Information

The Company operates in three business segments: Merchant Acquiring, Payment Processing and Business Solutions.

The Company’s business segments are organized based on the nature of products and services. The Chief Operating Decision Maker (“CODM”) reviews the individual segment financial information to assess performance and to allocate resources.

The following tables set forth information about the Company’s operations by its three business segments for the periods indicated:


(Dollar amounts in thousands)	Merchant Acquiring, net		Payment Processing		Business Solutions		Other			Total

Three months ended September 30, 2015
Revenues		20,784		34,298		44,492		(6,796	) ⁽¹⁾		92,778
Income from operations		8,517		12,777		10,308		(11,007	) ⁽²⁾		20,595

Three months ended September 30, 2014
Revenues		19,227		32,492		43,805		(6,645	) ⁽¹⁾		88,879
Income from operations		8,518		14,707		12,696		(9,461	) ⁽²⁾		26,460

⁽¹⁾	Represents the elimination of intersegment revenues for services provided by the Payment Processing segment to the Merchant Acquiring segment, and other miscellaneous intersegment revenues.

⁽²⁾	Primarily represents non-operating depreciation and amortization expenses generated as a result of the Merger and certain non-recurring fees and expenses.


(Dollar amounts in thousands)	Merchant Acquiring, net		Payment Processing		Business Solutions		Other			Total

Nine months ended September 30, 2015
Revenues		62,041		101,101		134,672		(20,463	) ⁽¹⁾		277,351
Income from operations		27,411		40,828		37,841		(30,855	) ⁽²⁾		75,225

Nine months ended September 30, 2014
Revenues		58,345		97,587		131,609		(19,896	) ⁽¹⁾		267,645
Income from operations		25,700		44,738		36,232		(29,892	) ⁽²⁾		76,778

⁽¹⁾	Represents the elimination of intersegment revenues for services provided by the Payment Processing segment to the Merchant Acquiring segment, and other miscellaneous intersegment revenues.

⁽²⁾	Primarily represents non-operating depreciation and amortization expenses generated as a result of the Merger and certain non-recurring fees and expenses.

The reconciliation of income from operations to consolidated net income for the three and nine months ended September 30, 2015 and 2014 is as follows:


	Three months ended September 30,						Nine months ended September 30,
(Dollar amounts in thousands)	2015			2014			2015			2014
Segment income from operations
Merchant Acquiring, net	$	8,517		$	8,518		$	27,411		$	25,700
Payment Processing		12,777			14,707			40,828			44,738
Business Solutions		10,308			12,696			37,841			36,232

Total segment income from operations		31,602			35,921			106,080			106,670
Merger related depreciation and amortization and other unallocated expenses ⁽¹⁾		(11,007	)		(9,461	)		(30,855	)		(29,892	)

Income from operations		20,595			26,460			75,225			76,778


Interest expense, net		(5,863	)		(6,279	)		(18,043	)		(19,535	)
(Losses) earnings of equity method investment		(3	)		241			196			905
Other income (expenses)		381			(249	)		1,430			2,127
Income tax expense		(1,687	)		(1,082	)		(6,053	)		(5,205	)

Net income	$	13,423		$	19,091		$	52,755		$	55,070

⁽¹⁾	Primarily represents non-operating depreciation and amortization expenses generated as a result of the Merger and certain non-recurring fees and expenses.

Note 13 – Subsequent Events

On November 4, 2015, the Company’s Board of Directors (the “Board”) declared a regular quarterly cash dividend of $0.10 per share on the Company’s outstanding shares of common stock. The Board anticipates declaring this dividend in future quarters on a regular basis, however future declarations of dividends are subject to Board approval and may be adjusted as business needs or market conditions change. The cash dividend of $0.10 per share will be paid on December 4, 2015 to stockholders of record as of the close of business on November 16, 2015.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis (“MD&A”) covers: (i) our unaudited results of operations for the three and nine months ended September 30, 2015 and 2014, respectively; and (ii) our financial condition as of September 30, 2015. You should read the following discussion and analysis in conjunction with the audited consolidated financial statements and related notes for the fiscal year ended December 31, 2014, included in the Company’s annual report on Form 10-K (the “2014 Form 10-K”) and with the unaudited consolidated financial statements and related notes appearing elsewhere herein. This MD&A contains forward-looking statements that involve risks and uncertainties. Our actual results may differ from those indicated in the forward-looking statements. See “Forward-Looking Statements” for a discussion of the risks, uncertainties and assumptions associated with these statements.

Except as otherwise indicated or unless the context otherwise requires, (a) the terms “EVERTEC,” “we,” “us,” “our,” “our Company” and “the Company” refer to EVERTEC, Inc. and its subsidiaries on a consolidated basis, (b) the term “Holdings” refers to EVERTEC Intermediate Holdings, LLC, but not any of its subsidiaries and (c) the term “EVERTEC Group” refers to EVERTEC Group, LLC and its predecessor entities and their subsidiaries on a consolidated basis, including the operations of its predecessor entities prior to the Merger (as defined below). EVERTEC Inc.’s subsidiaries include Holdings, EVERTEC Group, EVERTEC Dominicana, SAS, EVERTEC Panamá, S.A., EVERTEC Costa Rica, S.A. (“EVERTEC CR”), EVERTEC Guatemala, S.A. and EVERTEC México Servicios de Procesamiento, S.A. de C.V. Neither EVERTEC nor Holdings conducts any operations other than with respect to its indirect or direct ownership of EVERTEC Group.

“ATH®” and other trademarks of ours appearing in this report are our property. This report contains additional trade names and trademarks of other companies. We do not intend our use or display of other companies’ trade names or trademarks to imply an endorsement or sponsorship of us by such companies, or any relationship with any of these companies.

Executive Summary

EVERTEC is a leading full-service transaction processing business in Latin America, providing a broad range of merchant acquiring, payment processing and business process management services. According to the July 2014 Nilson Report, we are the largest merchant acquirer in the Caribbean and Central America and one of the largest in Latin America, based on total number of transactions. We serve 19 countries in the region from our base in Puerto Rico. We manage a system of electronic payment networks that process more than 2.1 billion transactions annually, and offer a comprehensive suite of services for core bank processing, cash processing and technology outsourcing. In addition, we own and operate the ATH network, one of the leading personal identification number (“PIN”) debit networks in Latin America. We serve a diversified customer base of leading financial institutions, merchants, corporations and government agencies with “mission-critical” technology solutions that enable them to issue, process and accept transactions securely. We believe our business is well-positioned to continue to expand across the fast-growing Latin American region.

We are differentiated, in part, by our diversified business model, which enables us to provide our varied customer base with a broad range of transaction-processing services from a single source across numerous channels and geographic markets. We believe this single-source capability provides several competitive advantages that will enable us to continue to penetrate our existing customer base with complementary new services, win new customers, develop new sales channels and enter new markets. We believe these competitive advantages include:

•

Our ability to provide in one package a range of services that traditionally had to be sourced from different vendors;

•

Our ability to serve customers with disparate operations in several geographies with a single integrated technology solution that enables them to manage their business as one enterprise; and

•

Our ability to capture and analyze data across the transaction processing value chain and use that data to provide value-added services that are differentiated from those offered by pure-play vendors that only have the technology, capabilities and products to serve just one portion of the transaction processing value chain (such as only merchant acquiring or payment processing).

Our broad suite of services spans the entire transaction processing value chain and includes a range of front-end customer-facing solutions such as the electronic capture and authorization of transactions at the point-of-sale, as well as back-end support services such as the clearing and settlement of transactions and account reconciliation for card issuers. These include: (i) merchant acquiring services, which enable point of sales (“POS”) and e-commerce merchants to accept and process electronic methods of payment such as debit, credit, prepaid and electronic benefit transfer (“EBT”) cards; (ii) payment processing services, which enable financial institutions and other issuers to manage, support and facilitate the processing for credit, debit, prepaid, automated teller machines

(“ATM”) and EBT card programs; and (iii) business process management solutions, which provide “mission-critical” technology solutions such as core bank processing, as well as IT outsourcing and cash management services to financial institutions, corporations and governments. We provide these services through a highly scalable, end-to-end technology platform that we manage and operate in-house and that generates significant operating efficiencies that enable us to maximize profitability.

We sell and distribute our services mainly through a proprietary direct sales force with strong customer relationships. We are also building a variety of indirect sales channels that enable us to leverage the distribution capabilities of partners in adjacent markets, including value-added resellers. Also, we continue to pursue joint ventures and merchant acquiring alliances.

We benefit from an attractive business model, the hallmarks of which are recurring revenue, scalability, significant operating margins and low capital expenditure requirements. Our revenue is recurring in nature because of the “mission-critical” and embedded nature of the services we provide, the high switching costs associated with these services and the multi-year contracts we negotiate with our customers. Our business model enables us to leverage off of our operations and as our assets become obsolete, allows us to substitute these assets and would allow us to continue to grow our business and invest in assets as needed.

Corporate Background

EVERTEC, Inc. (formerly known as Carib Latam Holdings, Inc.) is a Puerto Rico corporation organized in April 2012. Our main operating subsidiary, EVERTEC Group, LLC (formerly known as EVERTEC, LLC and EVERTEC, Inc., hereinafter “EVERTEC Group”), was organized in Puerto Rico in 1988. EVERTEC Group was formerly a wholly-owned subsidiary of Popular. On September 30, 2010, pursuant to an Agreement and Plan of Merger (as amended, the “Merger Agreement”), AP Carib Holdings, Ltd. (“Apollo”) acquired 51% indirect ownership interest in EVERTEC Group as part of a merger (the “Merger”) and EVERTEC Group became a wholly-owned subsidiary of EVERTEC Intermediate Holdings, LLC.

On April 17, 2012, EVERTEC Group was converted from a Puerto Rico corporation to a Puerto Rico limited liability company (the “Conversion”) for the purpose of improving its consolidated tax efficiency by taking advantage of recent changes to the Puerto Rico Internal Revenue Code, as amended (the “PR Code”), that permit limited liability companies to be treated as partnerships that are pass-through entities for Puerto Rico tax purposes. Concurrent with the Conversion, Holdings, which is our direct subsidiary, was also converted from a Puerto Rico corporation to a Puerto Rico limited liability company. Prior to these conversions, EVERTEC, Inc. was formed in order to act as the new parent company of Holdings and its subsidiaries, including EVERTEC Group. The transactions described above in this paragraph are collectively referred to as the “Reorganization.”

Separation From and Key Relationship with Popular

Prior to the Merger on September 30, 2010, EVERTEC Group was 100% owned by Popular, the largest financial institution in the Caribbean, and operated substantially as an independent entity within Popular. After the consummation of the Merger, Popular retained an indirect ownership interest in EVERTEC Group and is our largest customer. In connection with, and upon consummation of the Merger, EVERTEC Group entered into a 15-year Master Services Agreement (the “MSA”), and several related agreements with Popular. Under the terms of the MSA, Popular agreed to continue to use EVERTEC services on an ongoing and exclusive basis, for the duration of the agreement, on commercial terms consistent with those of our historical relationship. On the anniversary of the MSA, fees are adjusted for changes in the consumer price index (“CPI”). Additionally, Popular granted us a right of first refusal on the development of certain new financial technology products and services for the duration of the MSA.

Factors and Trends Affecting the Results of Our Operations

The ongoing migration from cash and paper methods of payment to electronic payments continues to benefit the transaction processing industry globally. We believe that the penetration of electronic payments in the markets in which we operate is significantly lower relative to the U.S. market, and that this ongoing shift will continue to generate substantial growth opportunities for our business. For example, currently the adoption of banking products, including electronic payments, in the Latin American region is lower relative to the more mature U.S. and European markets. We believe that the unbanked and underbanked population in our markets will continue to shrink, therefore driving incremental penetration and growth of electronic payments in Puerto Rico and other Latin American regions. We also benefit from the trend for financial institutions and government agencies to outsource technology systems and processes. Many medium- and small-size institutions in the Latin American markets in which we operate have outdated computer systems and updating these IT legacy systems is financially and logistically challenging. We believe that our technology and business outsourcing solutions cater to the evolving needs of the financial institution customer base we target, providing integrated, open, flexible, customer-centric and efficient IT products and services.

Our results of operations may be affected by regulatory changes that will occur as the payments industry has come under increased scrutiny from lawmakers and regulators.

Overview of Results of Operations

The following briefly describes the components of revenue and expenses as presented in the unaudited consolidated condensed statements of income and comprehensive income . Descriptions of the revenue recognition policies are detailed in Note 1 of the Notes to the Audited Consolidated Financial Statements included in our 2014 Form 10-K.

Merchant Acquiring, net . Merchant Acquiring revenue consists of income from services that allow merchants to accept electronic methods of payment. Our standard merchant contract has an initial term of one or three years, with automatic one-year renewal periods. In the Merchant Acquiring segment, sources of revenue include a discount (generally a percentage of the sales amount of a credit or debit card transaction value) and membership fees charged to merchants, debit network fees and rental income from POS devices and other equipment, net of credit card interchange and assessment fees charged by credit cards associations (such as VISA or MasterCard) or payment networks.

Merchant Acquiring accounted for $20.8 million, or 22.4% of total revenues, and $8.5 million or 27.0% of total segment income from operations for the three months ended September 30, 2015, compared with $19.2 million, or 21.7%, of total revenues and $8.5 million, or 23.7% of total segment income from operations for the comparable period in 2014. For the nine months ended September 30, 2015, our Merchant Acquiring business accounted for $62.0 million, or 22.4% of total revenues and $27.4 million or 25.8% of total segment income from operations compared with $58.3 million, or 21.9%, of total revenues and $25.7 million, or 24.1%, of total segment income from operations for the nine months ended September 30, 2014.

Payment Processing . Payment Processing revenue comprises income related to providing financial institutions access to the ATH network and other card networks, including related services such as authorization, processing, management and recording of ATM and POS transactions, and ATM management and monitoring. Payment Processing revenue also includes income from card processing services for debit or credit issuers, such as credit and debit card processing, authorization and settlement and fraud monitoring and control services; payment processing services such as payment and billing products for merchants, businesses and financial institutions and EBT; which principally consists of services to the Puerto Rico government for the delivery of government benefits to participants. Payment products include electronic check processing, automated clearing house (“ACH”), lockbox, interactive voice response and web-based payments through personalized websites, among others.

We generally enter into one to five year contracts with our private payment processing clients and one year contracts with our government payment processing clients. For ATH network and processing services, revenue is driven mainly by the number of transactions processed. Revenue is derived mainly from network fees, transaction switching and processing fees, and leasing of POS devices. For card issuer processing, revenue is dependent mostly upon the number of cardholder accounts on file, transactions and authorizations processed, the number of cards embossed and other processing services. For EBT services, revenue is derived mainly from the number of beneficiaries on file.

Payment Processing accounted for $27.5 million, or 29.6%, of total revenues and $12.8 million, or 40.4%, of total segment income from operations for the three months ended September 30, 2015, compared with $25.8 million, or 29.1%, of total revenues and $14.7 million, or 40.4%, of total segment income from operations for the three months ended September 30, 2014. For the nine months ended September 30, 2015, our Payment Processing business accounted for $80.6 million, or 29.1%, of total revenues and $40.8 million, or 38.5%, of total segment income from operations, compared with $77.7 million, or 29.0%, of total revenues and $44.7 million, or 41.9%, of total segment income from operations for the nine months ended September 30, 2014.

Business Solutions . Business Solutions revenue consists of income from a full suite of business process management solutions including core bank processing, network hosting and management, IT consulting services, business process outsourcing, item and cash processing, and fulfillment. Business Solution services are offered to banks, commercial enterprises and government institutions. We generally enter into one to five year contracts with our private Business Solutions clients and one year contracts with our government Business Solutions clients.

In addition, we are a reseller of hardware and software products and these resale transactions are generally one-time transactions. Revenue from sales of hardware or software products is recognized once the following four criteria are met: (i) evidence of an agreement exists, (ii) delivery and acceptance has occurred or services have been rendered, (iii) the selling price is fixed or determinable, and (iv) collection of the selling price is reasonably assured or probable, as applicable.

Business Solutions accounted for $44.5 million, or 48.0%, of total revenues and $10.3 million, or 32.6%, of total segment income from operations for the three months ended September 30, 2015, compared with $43.8 million, or 49.4%, of total revenues and $12.7 million, or 35.3%, of total segment income from operations for the three months ended September 30, 2014. For the nine months ended September 30, 2015, Business Solutions accounted for $134.7 million, or 48.6%, of total revenues and $37.8 million, or 35.7%, of total segment income from operations, compared with $131.6 million, or 49.2%, of total revenues and $36.2 million, or 34.0%, of total segment income from operations for the nine months ended September 30, 2014.

Cost of revenues . This caption includes the costs directly associated with providing services to customers, as well as, product and software sales, including software licensing and maintenance costs; telecommunications costs; personnel and infrastructure costs to develop and maintain applications, operate computer networks and provide associated customer support; and other operating expenses.

Selling, general and administrative . This caption consists mainly of salaries, wages and related expenses paid to sales personnel, administrative employees and management, advertising and promotional costs, audit and legal fees, and other selling expenses.

Depreciation and amortization . This caption consists of our depreciation and amortization expense. Following the completion of the Merger, our depreciation and amortization expense increased as a result of the purchase price allocation adjustments to reflect the fair market value and revised useful life assigned to property and equipment and intangible assets in connection with the Merger.

Results of Operations

The following tables set forth certain consolidated financial information for the three and nine months ended September 30, 2015 and 2014. The following tables and discussion should be read in conjunction with the information contained in our unaudited consolidated financial statements and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q.

Comparison of the three months ended September 30, 2015 and 2014

The following tables present the components of our unaudited consolidated statements of income and comprehensive income by business segment and the change in those amounts for the three months ended September 30, 2015 and 2014.

Revenues


	Three months ended September 30,
(Dollar amounts in thousands)	2015		2014		Variance

Merchant Acquiring, net	$	20,784	$	19,227	$	1,557	8	%
Payment Processing		27,502		25,848		1,654	6	%
Business Solutions		44,492		43,804		688	2	%


Total revenues	$	92,778	$	88,879	$	3,899	4	%

Total revenues for the three months ended September 30, 2015 increased by $3.9 million or 4% when compared to the corresponding 2014 period.

Merchant Acquiring revenue for the three months ended September 30, 2015 increased by $1.6 million or 8% compared with the corresponding 2014 period. The revenue growth was due mainly to an increase in transaction volumes coupled with an increase in net revenue rate spread.

Payment Processing revenue for the three months ended September 30, 2015 increased $1.7 million or 6% compared with the corresponding 2014 period. Revenue growth in the quarter was primarily driven by an increase in transactions processed over the ATH debit network and card accounts on file within the card products business.

Business Solutions revenues for the three months ended September 30, 2015 increased $0.7 million or 2% compared with the corresponding 2014 period. The increase is primarily related to an increase in core banking revenues partially offset by a decrease in IT Consulting revenues.

Total revenues in Puerto Rico grew 3.3% and outside Puerto Rico grew 12.2% for the quarter ended September 30, 2015 when compared with the same period in 2014.

Operating costs and expenses


	Three months ended September 30,
(Dollar amounts in thousands)	2015		2014		Variance

Cost of revenues, exclusive of depreciation and amortization shown below	$	44,821	$	38,862	$	5,959	15	%
Selling, general and administrative expenses		10,428		7,104		3,324	47	%
Depreciation and amortization		16,934		16,453		481	3	%

Total operating costs and expenses	$	72,183	$	62,419	$	9,763	16	%

Total operating costs and expenses for the three months ended September 30, 2015 increased $9.8 million or 16% as compared to the corresponding 2014 period.

Cost of revenues increased by $6.0 million or 15% when compared with the corresponding 2014 period. The increase was mainly related to an increase in salaries and benefits as a result of certain severance payments made during the quarter primarily related to the previously disclosed voluntary termination offers extended to certain employees which included special termination benefits and an increase in share-based compensation expense. Additionally, other operating expenses increased as a result of an increase in sundry losses and general operating expenses.

Selling, general and administrative expenses for the three months ended September 30, 2015 increased $3.3 million or 47% as compared with the corresponding 2014 period. This increase is almost entirely related to an increase in salaries and benefits as a result of the aforementioned voluntary termination severance payments and an increase in share-based compensation.

Depreciation and amortization expense for the three months ended September 30, 2015 increased $0.5 million or 3% as compared with the corresponding 2014 period. The increase is related to an increase in amortization from software packages as a result of various software projects that were completed and implemented in 2015.

Income from operations

The following table presents income from operations by reportable segments.


	Three months ended September 30,
(Dollar amounts in thousands)	2015			2014			Variance

Segment income from operations
Merchant Acquiring, net	$	8,517		$	8,518		$	(1	)	0	%
Payment Processing		12,777			14,707			(1,930	)	-13	%
Business Solutions		10,308			12,696			(2,388	)	-19	%

Total segment income from operations		31,602			35,921			(4,319	)	-12	%
Merger related depreciation and amortization and other unallocated expenses ⁽¹⁾		(11,007	)		(9,461	)		(1,546	)	-16	%


Income from operations	$	20,595		$	26,460		$	(5,864	)	-22	%

⁽¹⁾	Primarily represents non-operating depreciation and amortization expenses generated as a result of the Merger and certain non-recurring fees and expenses.

Income from operations for the three months ended September 30, 2015 decreased $5.9 million or 22% compared with the corresponding 2014 period. The decrease in income from operations was the result of the aforementioned factors affecting our operating costs and expenses and notably the $5.7 million severance charge pertaining to the voluntary termination program.

See Note 12 of the Notes to Unaudited Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information on the Company’s reportable segments and for a reconciliation of income from operations to net income.

Non-operating income (expenses)


	Three months ended September 30,
(Dollar amounts in thousands)	2015			2014			Variance

Non-operating income (expenses)
Interest income	$	140		$	91		$	49		54	%
Interest expense		(6,003	)		(6,370	)		367		6	%
(Losses) earnings of equity method investment		(3	)		241			(244	)	-101	%
Other income (expenses)		381			(249	)		630		101	%

Total non-operating expenses	$	(5,485	)	$	(6,287	)	$	801		13	%

Total non-operating expenses for the three months ended September 30, 2015 decreased $0.8 million as compared with the corresponding 2014 period. The decrease is mostly driven by a decrease in interest expense as a result of a 25 basis point decrease in the interest rate as a result of lowering the senior secured leverage ratio below 3.50x coupled with a lower outstanding loan balance. In addition, other expenses decreased as a result of negative fair value adjustments made to our software indemnification assets during the prior year. These decreases in expenses were partially offset by a decrease in earnings from our equity method investment, Contado.

Income tax expense

Income tax expense for the three months ended September 30, 2015 amounted to $1.7 million compared with an income tax expense of $1.1 million in the prior year period and an effective tax rate of 11.16% compared to 5.36% in the prior year. The increase was driven by an increase in income tax expense related to our operations in the U.S. Virgin Islands.

See Note 8 of the Notes to Unaudited Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information regarding income taxes.

Comparison of the nine months ended September 30, 2015 and 2014

Revenues


	Nine months ended September 30,
(Dollar amounts in thousands)	2015		2014		Variance

Merchant Acquiring, net	$	62,041	$	58,345	$	3,696	6	%
Payment Processing		80,638		77,691		2,947	4	%
Business Solutions		134,672		131,609		3,063	2	%


Total revenues	$	277,351	$	267,645	$	9,707	4	%

Total revenues for the nine months ended September 30, 2015 increased $9.7 million or 4% compared with the corresponding 2014 period.

Merchant Acquiring revenue for the nine months ended September 30, 2015 increased $3.7 million or 6% as compared to the corresponding 2014 period. The revenue growth was primarily the result of an increase in net revenue spread and higher sales volume.

Payment Processing revenue for the nine months ended September 30, 2015 increased $2.9 million or 4% compared with the corresponding 2014 period. Revenue growth was driven mainly by an increase in ATH and POS network and processing transactions.

Business Solutions revenues for the nine months ended September 30, 2015 increased $3.1 million or 2% compared with the corresponding 2014 period. The increase was primarily related to an increase in income from core banking services and hardware sales, partially offset by a decrease in IT Consulting services and IT Management services.

Total revenues in Puerto Rico grew 2.9% and outside Puerto Rico grew 8.7% for the nine months ended September 30, 2015 when compared with the same period in 2014.

Operating costs and expenses


	Nine months ended September 30,
(Dollar amounts in thousands)	2015		2014		Variance

Cost of revenues, exclusive of depreciation and amortization shown below	$	125,280	$	115,781	$	9,499	8	%
Selling, general and administrative expenses		27,079		25,629		1,450	6	%
Depreciation and amortization		49,767		49,457		310	1	%

Total operating costs and expenses	$	202,126	$	190,867	$	11,260	6	%

Total operating costs and expenses for the nine months ended September 30, 2015 increased $11.3 million or 6% as compared with the corresponding 2014 period.

Cost of revenue for the nine months ended September 30, 2015 increased $9.5 million or 8% compared with the corresponding 2014 period. The increase was driven by an increase in salaries as a result of $4.0 million in severance payments made primarily related to the voluntary termination offers extended to certain employees during the second quarter of 2015 coupled with higher share based compensation. In addition, there was an increase in other operating expenses driven by an increase in general operating expenses and sundry losses.

Selling, general and administrative expenses for the nine months ended September 30, 2015 increased $1.5 million or 6% compared with the corresponding 2014 period. The increase was primarily related to an increase in salaries as a result of an increase in share based compensation and $1.7 million in severance payments made during the year. This increase was partially offset by a decrease in professional fees as a result of a decrease in audit fees, attorney fees and a decrease in professional services primarily related to expenses incurred in 2014 related to the cancelled debt refinancing transaction.

Depreciation and amortization expense for the nine months ended September 30, 2015 increased $0.3 million or 1% compared with the corresponding 2014 period. The increase is primarily related to higher amortization from internally developed software packages.

Income from operations

The following table presents income from operations by reportable segments.


	Nine months ended September 30,
(Dollar amounts in thousands)	2015			2014			Variance

Segment income from operations
Merchant Acquiring, net	$	27,411		$	25,700		$	1,711		7	%
Payment Processing		40,828			44,738			(3,910	)	-9	%
Business Solutions		37,841			36,232			1,609		4	%

Total segment income from operations		106,080			106,670			(589	)	-1	%
Merger related depreciation and amortization and other unallocated expenses ⁽¹⁾		(30,855	)		(29,892	)		(963	)	-3	%


Income from operations	$	75,225		$	76,778		$	(1,552	)	-2	%

⁽¹⁾	Primarily represents non-operating depreciation and amortization expenses generated as a result of the Merger and certain non-recurring fees and expenses.

Income from operations for the nine months ended September 30, 2015 decreased $1.6 million or 2% as compared to the corresponding 2014 period. The decrease in income from operations was the result of the aforementioned factors affecting our operating costs and expenses, notably the $6.2 million in voluntary termination severance payments. The decrease in Payment Processing was impacted by certain vendor credits granted to the Company in the prior year as well as higher costs related to increased investment in the Company’s card issuing product initiatives.

Non-operating income (expenses)


	Nine months ended September 30,
(Dollar amounts in thousands)	2015			2014			Variance

Non-operating income (expenses)
Interest income	$	371		$	245		$	126		52	%
Interest expense		(18,414	)		(19,780	)		1,366		7	%
Earnings of equity method investment		196			905			(709	)	-78	%
Other income		1,430			2,127			(697	)	33	%

Total non-operating expenses	$	(16,417	)	$	(16,503	)	$	85		1	%

Total non-operating expenses for the nine months ended September 30, 2015 remained flat when compared to the corresponding 2014 period. Interest expense decreased by $1.4 million mainly as a result of a decrease of 25 basis points in the interest rate as a result of the senior secured leverage ratio decreasing below 3.50x coupled with a lower outstanding loan balance. The decrease in interest expense was offset by a decrease in earnings from the equity method investment in Contado and a decrease in other income driven by lower foreign currency exchange gains.

Income tax expense

Income tax expense for the nine months ended September 30, 2015 amounted to $6.1 million compared with an income tax expense of $5.2 million for the corresponding 2014 period and an effective tax rate of 10.29% compared with 8.64% in the prior year. The increase in income tax expense was driven by an increase in income tax related to our U.S. Virgin Islands operations.

See Note 8 of the Notes to Unaudited Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information regarding income taxes.

Liquidity and Capital Resources

Our principal source of liquidity is cash generated from operations, and our primary liquidity requirements are the funding of capital expenditures and working capital needs. We also have a $100.0 million revolving credit facility, of which $82.0 million was available as of September 30, 2015.

At September 30, 2015, we had cash of $40.4 million, of which $26.5 million resides in our subsidiaries located outside of Puerto Rico for purposes of (i) funding the respective subsidiary’s current business operations and (ii) funding potential future investment outside of Puerto Rico. We intend to indefinitely reinvest these funds outside of Puerto Rico, and based on our liquidity forecast, we will not need to repatriate this cash to fund the Puerto Rico operations or to meet debt-service obligations. However, if in the future we determine that we no longer need to maintain such cash balances within our foreign subsidiaries, we may elect to distribute such cash to the Company in Puerto Rico. Distributions from the foreign subsidiaries to Puerto Rico may be subject to tax withholding and other tax consequences.

Our primary use of cash is for operating expenses, working capital requirements, capital expenditures, dividend payments, share repurchases, debt service, acquisitions and other transactions as opportunities present themselves.

Based on our current level of operations, we believe our cash flows from operations and the available senior secured revolving credit facility will be adequate to meet our liquidity needs for the next twelve months. However, our ability to fund future operating expenses, dividend payments and capital expenditures and our ability to make scheduled payments of interest, to pay principal on or refinance our indebtedness and to satisfy any other of our present or future debt obligations will depend on our future operating performance, which will be affected by general economic, financial and other factors beyond our control.


	Nine months ended September 30,
(Dollar amounts in thousands)	2015			2014

Cash provided by operating activities	$	122,615		$	103,798
Cash used in investing activities		(35,210	)		(17,212	)
Cash used in financing activities		(79,118	)		(79,845	)

Increase in cash	$	8,287		$	6,741

Net cash provided by operating activities for the nine months ended September 30, 2015 was $122.6 million compared with $103.8 million for the corresponding 2014 period. The increase of $18.8 million was driven by less cash used to pay down accounts payable and accrued liabilities coupled with an increase in cash received from accounts receivable in 2015.

Net cash used in investing activities increased by $18.0 million, as a result of an increase in restricted cash and an increase in purchases of property and equipment and intangible assets.

Net cash used in financing activities for the nine months ended September 30, 2015 was $79.1 million as compared to cash used in financing activities of $79.8 million in the corresponding 2014 period. The slight decrease in cash used in financing activities is primarily related to less cash used to pay down short-term borrowings, $5.0 million in 2015 compared to $42.0 million in 2014, partially offset by $35.0 million in cash used to repurchase common stock during 2015 compared to zero in 2014.

Capital Resources

Our principal capital expenditures are for hardware and computer software (purchased and internally developed), additions to property and equipment and mergers and acquisitions. We invested approximately $27.4 million and $16.6 million for the nine months ended September 30, 2015 and 2014, respectively. Capital expenditures are expected to be funded by cash flow from operations and, if necessary, borrowings under our revolving credit facility.

Dividend Payments

We currently have a policy under which we pay a regular quarterly dividend on our common stock, subject to the declaration thereof by our Board each quarter. On February 18, 2015, our Board declared a quarterly cash dividend of $0.10 per share of common stock, which was paid on March 19, 2015 to stockholders of record as of February 2, 2015.

On May 6, 2015, our Board declared a quarterly cash dividend of $0.10 per share of common stock. The cash dividend of $0.10 per share was paid on June 5, 2015 to stockholders of record as of close of business on May 18, 2015.

On August 5, 2015, our Board declared a quarterly cash dividend of $0.10 per share of common stock. The cash dividend of $0.10 per share was paid on September 3, 2015 to stockholders of record as of close of business on August 17, 2015.

On November 4, 2015, our Board declared a quarterly cash dividend of $0.10 per share of common stock. The cash dividend of $0.10 per share will be paid on December 4, 2015 to stockholders of record as of close of business on November 16, 2015.

Financial Obligations

Senior Secured Credit Facilities

Term A Loan

As of September 30, 2015, the unpaid principal balance of the Term A Loan was $266.3 million. The Term A Loan requires principal payments on the last business day of each quarter equal to (a) 1.250% of the original principal amount commencing on September 30, 2013 through June 30, 2016; (b) 1.875% of the original principal amount from September 30, 2016 through June 30, 2017; (c) 2.50% of the original principal amount from September 30, 2017 through March 31, 2018; and (d) the remaining outstanding principal amount on the maturity of the Term A Loan on April 17, 2018. For the nine months ended September 30, 2015, the Company made principal payments amounting to $11.3 million on the Term A Loan. Interest is based on EVERTEC Group’s first lien secured net leverage ratio and payable at a rate equal to, at the Company’s option, either (a) LIBOR plus an applicable margin ranging from 2.00% to 2.50% or (b) Base Rate, as defined in our 2013 Credit Agreement, plus an applicable margin ranging from 1.00% to 1.50%. The Term A Loan has no LIBOR or Base Rate minimum or floor.

Term B Loan

As of September 30, 2015, the unpaid principal balance of the Term B Loan was $391.0 million. The Term B Loan requires principal payments on the last business day of each quarter equal to 0.250% of the original principal amount commencing on September 30, 2013 and the remaining outstanding principal amount on the maturity of the Term B Loan on April 17, 2020. For the nine months ended September 30, 2015, the Company made principal payments amounting to $3.0 million on the Term B Loan. Interest is based on EVERTEC Group’s first lien secured net leverage ratio and payable at a rate equal to, at the Company’s option, either (a) LIBOR plus an applicable margin ranging from 2.50% to 2.75%, or (b) Base Rate plus an applicable margin ranging from 1.50% to 1.75%. The LIBOR and Base Rate are subject to floors of 0.75% and 1.75%, respectively.

Revolving Credit Facility

The revolving credit facility has a balance up to $100.0 million, with an interest rate equal to the applicable Term A Loan rate. The facility matures on April 17, 2018 and has a “commitment fee” payable one business day after the last business day of each quarter calculated based on the daily unused commitment during the preceding quarter. The commitment fee for the unused portion of this facility ranges from 0.125% to 0.375% based on EVERTEC Group’s first lien secured net leverage ratio. As of September 30, 2015, the outstanding balance of the revolving credit facility was $18.0 million. For the nine months ended September 30, 2015, the Company made payments amounting to $75.5 million on the revolving credit facility.

All senior secured term facility loans may be prepaid without premium or penalty. The senior secured credit facilities allow EVERTEC Group to obtain, on an uncommitted basis at the sole discretion of participating lenders, an incremental amount of term loan and/or revolving credit facility commitments not to exceed the greater of (i) $200.0 million and (ii) maximum amount of debt that would not cause EVERTEC Group’s pro forma first lien secured net leverage ratio to exceed 4.25 to 1.00.

The senior secured revolving credit facility is available for general corporate purposes and includes borrowing capacity available for letters of credit and for short-term borrowings referred to as swing line borrowings. All obligations under the new senior secured credit facilities are unconditionally guaranteed by Holdings and, subject to certain exceptions, each of EVERTEC Group’s existing and future wholly-owned subsidiaries. All obligations under the new senior secured credit facilities, and the guarantees of those obligations, are secured by substantially all of EVERTEC Group’s assets and the assets of the guarantors, subject to certain exceptions.

See Note 5 of the Notes to Unaudited Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information.

Notes payable

In December 2014 and June 2015, EVERTEC entered into non-interest bearing $4.6 million and $1.1 million, respectively, financing agreements to purchase certain software. The notes will be repaid over a 36-month term. As of September 30, 2015, the outstanding principal balance of the notes payable is $4.2 million. The current portion of these notes is recorded as part of accounts payable and the long-term portion is recorded in other long-term liabilities.

Covenant Compliance

The credit facilities contain various restrictive covenants. The Term A Loan and the revolving facility (subject to certain exceptions) require EVERTEC Group to maintain on a quarterly basis a specified maximum senior secured leverage ratio of up to 6.60 to 1.00 as defined in the 2013 Credit Agreement (total first lien senior secured debt to Adjusted EBITDA). In addition, the 2013 Credit Agreement, among other things: (a) limits EVERTEC Group’s ability and the ability of its subsidiaries to incur additional indebtedness, incur liens, pay dividends or make certain other restricted payments and enter into certain transactions with affiliates; (b) restricts EVERTEC Group’s ability to enter into agreements that would limit the ability of its subsidiaries to pay dividends or make certain payments to its parent company; and (c) places restrictions on EVERTEC Group’s ability and the ability of its subsidiaries to merge or consolidate with any other person or sell, assign, transfer, convey or otherwise dispose of all or substantially all of their assets. However, all of the covenants in these agreements are subject to significant exceptions. As of September 30, 2015, the senior secured leverage ratio was 3.41 to 1.00 and we were in compliance with the applicable restrictive covenants under the 2013 Credit Agreement.

In this Quarterly Report on Form 10-Q, we refer to the term “Adjusted EBITDA” to mean EBITDA as so defined and calculated for purposes of determining compliance with the senior secured leverage ratio based on the financial information for the last twelve months at the end of each quarter.

Net Income Reconciliation to EBITDA, Adjusted EBITDA and Adjusted Net Income

We define “EBITDA” as earnings before interest, taxes, depreciation and amortization. We define “Adjusted EBITDA” as EBITDA further adjusted to exclude certain unusual items and other adjustments described below. We define “Adjusted Net Income” as net income adjusted to exclude certain unusual items and other adjustments described below.

We present EBITDA and Adjusted EBITDA because we consider them important supplemental measures of our performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. In addition, our presentation of Adjusted EBITDA is consistent with the equivalent measurements that are contained in the senior secured credit facilities in testing EVERTEC Group’s compliance with covenants therein, such as the senior secured leverage ratio. We use Adjusted Net Income to measure our overall profitability because it reflects our cash flow generation by capturing the actual cash taxes paid rather than our tax expense as calculated under GAAP and excludes the impact of the non-cash amortization and depreciation that was created as a result of the Merger. In evaluating EBITDA, Adjusted EBITDA and Adjusted Net Income, you should be aware that in the future we may incur expenses such as those excluded in calculating them. Further, our presentation of these measures should not be construed as an inference that our future operating results will not be affected by unusual or nonrecurring items.

Some of the limitations of EBITDA, Adjusted EBITDA and Adjusted Net Income are as follows:

•

they do not reflect cash outlays for capital expenditures or future contractual commitments;

•

they do not reflect changes in, or cash requirements for, working capital;

•

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect cash requirements for such replacements;

•

in the case of EBITDA and Adjusted EBITDA, they do not reflect interest expense, or the cash requirements necessary to service interest, or principal payments, on indebtedness;

•

in the case of EBITDA and Adjusted EBITDA, they do not reflect income tax expense or the cash necessary to pay income taxes; and

•

other companies, including other companies in our industry, may not use EBITDA, Adjusted EBITDA and Adjusted Net Income or may calculate EBITDA, Adjusted EBITDA and Adjusted Net Income differently than as presented in this Report, limiting their usefulness as a comparative measure.

EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per common share are not measurements of liquidity or financial performance under GAAP. You should not consider EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per common share as alternatives to cash flows from operating activities or any other performance measures determined in accordance with GAAP, as an indicator of cash flows, as a measure of liquidity or as an alternative to operating or net income determined in accordance with GAAP.

A reconciliation of net income to EBITDA, Adjusted EBITDA and Adjusted Net Income is provided below:


(Dollar amounts in thousands)	Three months ended September 30, 2015			Nine months ended September 30, 2015			Twelve months ended September 30, 2015			Three months ended September 30, 2014			Nine months ended September 30, 2014

Net income	$	13,423		$	52,755		$	65,217		$	19,091		$	55,070
Income tax expense		1,687			6,053			8,426			1,082			5,205
Interest expense, net		5,863			18,043			24,261			6,279			19,535
Depreciation and amortization		16,934			49,767			66,298			16,453			49,457

EBITDA		37,907			126,618			164,202			42,905			129,267

Software maintenance reimbursement and other costs ⁽¹⁾		479			1,408			1,886			661			1,770
Equity income ⁽²⁾		3			(196	)		(431	)		(239	)		(580	)
Compensation and benefits ⁽³⁾		7,271			9,935			14,514			648			1,573
Transaction, refinancing and other fees ⁽⁴⁾		260			992			6,137			269			2,785
Purchase accounting ⁽⁵⁾		94			82			69			284			459

Adjusted EBITDA		46,014			138,839			186,377			44,528			135,274

Operating depreciation and amortization ⁽⁶⁾		(7,568	)		(21,667	)		(29,083	)		(7,338	)		(22,102	)
Cash interest expense, net ⁽⁷⁾		(5,081	)		(15,723	)		(21,163	)		(5,500	)		(16,911	)
Cash income taxes ⁽⁸⁾		(999	)		(4,600	)		(4,873	)		(300	)		(703	)

Adjusted net income	$	32,366		$	96,849		$	131,258		$	31,390		$	95,558

Adjusted net income per common share:
Basic	$	0.42		$	1.25					$	0.40		$	1.22
Diluted	$	0.42		$	1.25					$	0.40		$	1.21
Shares used in computing adjusted net income per common share:
Basic		77,160,514			77,472,673						78,666,241			78,485,109
Diluted		77,292,813			77,577,394						79,216,924			79,193,452

⁽¹⁾	Primarily represents reimbursements received for certain software maintenance expenses as part of the Merger.

⁽²⁾	Represents the elimination of non-cash equity earnings from our 19.99% equity investment in CONTADO, net of cash dividends received.

⁽³⁾

Represents non-cash equity based compensation expense of $1.6 million and $3.7 million for the quarter and nine month period ended September 30, 2015 and severance payments of $5.7 million and $6.2 million for the quarter and nine month period ended September 30, 2015. For 2014 primarily represents non-cash equity based compensation.

⁽⁴⁾	Represents fees and expenses associated with fees and corporate transactions, as defined in the Credit Agreement, including the withdrawn senior secured notes offering in the second quarter of 2014.

⁽⁵⁾	Represents the elimination of the effects of purchase accounting in connection with certain software related arrangements where EVERTEC receives reimbursements from Popular.

⁽⁶⁾	Represents operating depreciation and amortization expense which excludes amortization generated as a result of the Merger.

⁽⁷⁾	Represents interest expense, less interest income, as they appear on our consolidated statement of income and comprehensive income, adjusted to exclude non-cash amortization of the debt issuance costs, premium and accretion of discount and other adjustment related to interest expense.

⁽⁸⁾	Represents cash taxes paid for each period presented.

Off Balance Sheet Arrangements

In the ordinary course of business the Company may enter into commercial commitments. As of September 30, 2015, we had an outstanding letter of credit of $1.1 million with a maturity of less than three months. Also, as of September 30, 2015 we had an off balance sheet item of $10.8 million related to the unused amount of the windfall that is available to offset future taxable income.

See Note 8 of the Unaudited Consolidated Financial Statements within Item I of this Quarterly Report on Form 10-Q for additional information related to this off balance sheet item.

Seasonality

Our payment businesses generally experiences increased activity during the traditional holiday shopping periods and around other nationally recognized holidays.

Effect of Inflation

While inflationary increases in certain input costs, such as occupancy, labor and benefits, and general administrative costs, have an impact on our operating results, inflation has had minimal net effect on our operating results during the last three years as overall inflation has been offset by increased selling process and cost reduction actions. We cannot assure you, however, that we will not be affected by general inflation in the future.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks arising from our normal business activities. These market risks principally involve the possibility of changes in interest rates that will adversely affect the value of our financial assets and liabilities or future cash flows and earnings. Market risk is the potential loss arising from adverse changes in market rates and prices.

Interest rate risks

We issued floating-rate debt which is subject to fluctuations in interest rates. Our senior secured credit facilities accrue interest at variable rates and only the Term B Loan is subject to floors or minimum rates. A 100 basis point increase in interest rates over our floor(s) on our debt balances outstanding as of September 30, 2015 under the senior secured credit facilities would increase our annual interest expense by approximately $6.7 million, excluding the revolving credit facility. The impact on future interest expense as a result of future changes in interest rates will depend largely on the gross amount of our borrowings at that time.

Foreign exchange risk

We conduct business in certain countries in Latin America. Some of this business is conducted in the countries’ local currencies. The resulting foreign currency translation adjustments, from operations for which the functional currency is other than the U.S. dollar, are reported in accumulated other comprehensive loss in the unaudited consolidated condensed balance sheet, except for highly inflationary environments in which the effects would be included in other operating income in the consolidated statements of income and comprehensive income. At September 30, 2015, the Company had $6.0 million in an unfavorable foreign currency translation adjustment as part of accumulated other comprehensive loss compared with an unfavorable foreign currency translation adjustment of $6.5 million at December 31, 2014.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company, under the direction of the Chief Executive Officer and the Chief Financial Officer, has established disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act. Based upon their evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of September 30, 2015, the Company’s disclosure controls and procedures are effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rule 13a -15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended September 30, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are defendants in various lawsuits or arbitration proceedings arising in the ordinary course of business. Management believes, based on the opinion of legal counsel and other factors, that the aggregated liabilities, if any, arising from such actions will not have a material adverse effect on the financial condition, results of operations and the cash flows of the Company.

Item 1A. Risk Factors

In addition to the risk factors previously disclosed under Item 1A. of the Company’s 2014 Form 10-K, investors should consider the following updated risk:

Rating downgrades on the Government of Puerto Rico’s debt obligations could slow the Puerto Rico economy, delay Government payments and affect consumer spending

In February 2014, the principal nationally recognized statistical rating organizations downgraded the general obligation bonds of the Commonwealth of Puerto Rico and other debt obligations of Puerto Rico instrumentalities to non-investment grade categories. The downgrades are based mostly on concerns about financial flexibility and a reduced capacity to borrow in the financial markets. If the Commonwealth of Puerto Rico and its instrumentalities (collectively the “Government”) is unable to access the capital markets to place new debt or roll its upcoming maturities, the Government may reduce spending, impose new taxes, and take other actions which could slow the economy. A prolonged recession or future fiscal measures may also impact our business. The continuing challenging economic environment could affect our customer base, depress general consumer spending, and lengthen the Government’s payments, thus increasing our Government accounts receivables; these outcomes, if realized, could have a material adverse effect on our business, financial condition and results of operations.

Further ratings downgrades for the Government have occurred since then and there continues to be significant doubt regarding the Government’s liquidity and its ability to pay outstanding debt obligations. Certain measures have been taken to address the fiscal crisis, including an increase in the sales tax rate, imposing a 4% business to business tax, and several spending cuts. Furthermore, the Government has shown indications that it might not be able to make certain scheduled payments on its debt obligations. On August 3, 2015, the Government defaulted for the first time on the Public Finance Corporation bonds and only made a partial interest payment on that obligation. In addition, the Government halted deposits into the fund that pays its general obligation bonds, although has expressed its intentions to deposit the funds on time to comply with scheduled payments. The Government has expressed its intention to continue taking actions to improve the liquidity of the General Fund and is attempting to renegotiate some terms of certain outstanding Government debt.

At September 30, 2015, the Company has no direct exposure to the Government’s debt obligations, including those of its instrumentalities or municipalities. The Company has accounts receivable with the Puerto Rico government and its agencies amounting to $16.2 million as of September 30, 2015 down from $21.4 million as of December 31, 2014.

The risks described in our 2014 Form 10-K and in this report are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table summarizes repurchases of the Company’s common stock in the nine month period ended September 30, 2015:


Period	Total number of shares purchased		Average price paid per share		Total shares purchased as part of a publicly announced program		Aproximate dollar value of shares that may yet be purchased under the program ⁽¹⁾

3/1/2015 - 3/31/2015		452,175		22.114		452,175
8/1/2015 - 8/31/2015		50,920		17.884		50,920
9/1/2015 - 9/30/2015		1,331,133		18.084		1,331,133

		1,834,228	$	19.072		1,834,228	$	40,000,000

⁽¹⁾

On September 24, 2014, the Company announced a stock repurchase program authorizing the purchase of up to $75 million of the Company’s common stock over the next twelve months. On August 5, 2015, 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 $100 million of the Company’s common stock and extended the expiration to September 30, 2016.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits


10.61*+		Employment Agreement, dated as of September 1, 2015, by and between EVERTEC Group, LLC and Peter J. S. Smith.

10.62*+		Restricted Stock Unit Award Agreement under the EVERTEC, Inc. 2013 Equity Incentive Plan, dated as of September 1, 2015, by and between EVERTEC, Inc. and Peter J. S. Smith.

10.63*+		Separation Agreement and General Release, dated as of September 1, 2015, by and between EVERTEC Group, LLC and Eduardo Franco de Camargo

31.1*		CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**		CEO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**		CFO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS XBRL***		Instance document

101.SCH XBRL***		Taxonomy Extension Schema

101.CAL XBRL***		Taxonomy Extension Calculation Linkbase

101.DEF XBRL***		Taxonomy Extension Definition Linkbase

101.LAB XBRL***		Taxonomy Extension Label Linkbase

101.PRE XBRL***		Taxonomy Extension Presentation Linkbase

*	Filed herewith.

**	Furnished herewith.

***

Pursuant to applicable securities laws and regulations, the Company is deemed to have complied with the reporting obligation relating to the submission of interactive data files in such exhibits and is not subject to liability under any anti-fraud provisions of the federal securities laws as long as the Company has made a good faith attempt to comply with the submission requirements and promptly amends the interactive data files after becoming aware that the interactive data files fail to comply with the submission requirements. Users of this data are advised that, pursuant to Rule 406T, these interactive data files are deemed not filed and otherwise are not subject to liability.

+	This exhibit is a management contract or a compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	EVERTEC, Inc. (Registrant)

Date: November 6, 2015	By:	/s/ Morgan M. Schuessler, Jr.

	Morgan M. Schuessler, Jr. Chief Executive Officer

Date: November 6, 2015	By:	/s/ Peter J.S. Smith

	Peter J.S. Smith Chief Financial Officer

Exhibit 10.61

EXECUTION COPY

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT is made by and between EVERTEC GROUP, LLC, a Puerto Rico limited liability company (together with its subsidiaries and affiliates, the “ Company ”), and Peter J. S. Smith (“ Executive ,” and collectively with the Company, the “ Parties ”) as of this 19 ^th day of August, 2015 (the “ Execution Date ”) with an effective date of September 1, 2015 (the “ Effective Date ”).

WHEREAS, the Parties desire to enter into this employment agreement (this “ Agreement ”) pursuant to the terms, provisions and conditions set forth herein.

NOW, THEREFORE , in consideration of the premises and of the mutual covenants, understandings, representations, warranties, undertakings and promises hereinafter set forth, intending to be legally bound thereby, the Parties agree as follows:

1.	Employment Period .

Subject to earlier termination in accordance with Section 3 of this Agreement, Executive shall continue to be employed by the Company until December 31, 2018 (the “ Employment Period ”) unless the parties mutually agree to extend the term at least 90 calendar days prior to the end of the Employment Period. Upon Executive’s termination of employment with the Company for any reason, Executive shall immediately resign all positions with the Company or any of its subsidiaries or affiliates.

2.	Terms of Employment .

(a) Position . During the Employment Period, Executive shall serve as Executive Vice President, Treasurer and Chief Financial Officer and will perform such duties and exercise such supervision with regard to the business of the Company as are associated with such position, including such duties as may be prescribed from time to time by the President and Chief Executive Officer of the Company (the “ CEO ”) and/or the Board of Directors of the Company (the “ Board ”). Executive shall report directly to the CEO and if requested by the CEO, Executive hereby agrees to serve (without additional compensation) as an officer and director of the Company or any affiliate or subsidiary thereof.

(b) Duties . During the Employment Period, Executive shall have such responsibilities, duties, and authority that are customary for his position, subject at all times to the control of the CEO, and shall perform such services as customarily are provided by an executive of a corporation with his position and such other services consistent with his position, as shall be assigned to him from time to time by the CEO. During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled in accordance with Company policies, the Executive agrees to devote all of his business time to the business and affairs of the Company and to use Executive’s commercially reasonable efforts to perform faithfully, effectively and efficiently his responsibilities and obligations hereunder.

(c) Principal Work Location . Executive’s principal work and residence, subject to travel on Company business, shall be San Juan or Dorado, Puerto Rico.

EXECUTION COPY

(d) Compensation .

(i) Base Salary . During the Employment Period, Executive shall receive an annual base salary in an amount not less than Three Hundred Fifty Thousand Dollars ($350,000), less all applicable withholdings, which shall be paid in accordance with the customary payroll practices of the Company (as in effect from time to time, the “ Annual Base Salary ”). The Annual Base Salary shall be prorated for partial calendar years of employment and shall be subject to annual review as determined by the Board (or a committee designated by the Board), in its sole discretion.

(ii) Annual Bonus . During the Employment Period, with respect to each completed fiscal year of the Company, Executive shall be eligible to receive a bonus (the “ Bonus ”) pursuant to the terms and conditions set forth in the EVERTEC Annual Performance Incentive Guidelines in effect on the date eligibility for a bonus is determined, which Bonus shall be prorated for partial calendar years and which shall be payable on or about March 15 of each year.

(iii) Long-Term Incentive Compensation .

(a) Within ten (10) business days of the Effective Date, the Company will grant Executive restricted stock units (the “ RSUs ”) of EVERTEC, Inc. (“ EVERTEC ”) common stock under the EVERTEC, Inc. 2013 Equity Incentive Plan with a value equal to Five Hundred Thousand Dollars ($500,000) on the date of grant, the number of which RSUs as determined by dividing Five Hundred Thousand Dollars ($500,000) by the fair market value of EVERTEC’s common stock, using the market price of EVERTEC’s common stock at the close of business on the grant date. The RSUs shall become vested on the third anniversary of the grant date, subject to Executive’s continuous employment with the Company throughout the three-year vesting period ( i.e. , a three-year cliff vesting period).

(b) It is anticipated that Executive will participate in the EVERTEC 2016 Long Term Incentive Plan and will receive an RSU grant equal to 175% of Executive’s Annual Base Salary on or about February 15, 2016 (the “ 2016 LTIP Grant ”). The 2016 LTIP Grant is contingent upon the adoption by the Compensation Committee of the Board (the “ Compensation Committee ”) of a 2016 Long Term Incentive Plan. To the extent that the 2016 LTIP Grant is made to Executive, the RSUs which are the subject of the grant will likely vest based on the achievement of quantitative performance goals for EVERTEC established by the Compensation Committee, as well as annual time-based vesting.

(iv) Benefits . During the Employment Period, Executive shall be eligible to participate in all employee benefit plans, practices, policies and programs, including any health and dental insurance, vacation pay, and life insurance for a face amount of no less than $1,000,000 and short-term ($1,000 per week) and long-term (60% of base salary, subject to a cap of $10,000 a month) disability insurance benefits provided by the Company to other executives of the Company (except severance plans, policies, practices, or programs) subject to the eligibility criteria set forth therein, as such may be amended or terminated from time to time. During the Employment Period, Executive shall also be provided with an automobile plus related insurance in accordance with Company policy. Finally, Executive shall be eligible to four (4) weeks paid vacation each calendar year in addition to the Company’s standard holidays.

EXECUTION COPY

(v) Expenses . During the Employment Period, Executive shall be entitled to receive reimbursement for all reasonable business expenses incurred by Executive in performance of his duties hereunder provided that Executive provides all necessary documentation in accordance with the Company’s policies.

(vi) Relocation/Reimbursement of Commission . The Company will reimburse Executive for reasonable costs and expenses incurred in connection with his relocation to Puerto Rico, including (A) reasonable travel in connection with finding a residence in Puerto Rico, (B) reasonable incidental costs and expenses, and (C) any real estate commission related to the sale of Executive’s home located in Jacksonville, Florida, upon substantiation and documentation of such costs and expenses subject to a maximum amount of Fifty Thousand Dollars ($50,000). The reimbursement of the relocation and commission costs and expenses referred to in this clause (vi) shall be paid to Executive within sixty (60) calendar days after the Effective Date.

(vii) Temporary Housing . The Company will reimburse Executive for three (3) months of temporary housing and related utilities in connection with Executive’s relocation to Puerto Rico, in an amount not to exceed Twenty-Five Thousand Dollars ($25,000) in the aggregate and the provision by Executive to the Company of substantiation and documentation of such costs and expenses. The reimbursement of the temporary housing costs and related utilities referred to in this clause (vii) shall be paid to Executive within sixty (60) calendar days after the Effective Date.

3.	Termination of Employment .

(a) Death or Disability . Executive’s employment shall terminate automatically upon Executive’s death. If Executive becomes subject to a “ Disability ” (as defined below) during the Employment Period, the Company may give Executive written notice in accordance with Sections 3(g) and 9(g) of its intention to terminate Executive’s employment. For purposes of this Agreement, “Disability” means Executive’s inability to perform his essential duties hereunder by reason of any medically determinable physical or mental impairment for a period of six (6) months or more in any twelve (12) month period.

(b) Cause . Executive’s employment may be terminated at any time by the Company for Cause. For purposes of this Agreement “ Cause ” shall mean Executive’s (i) commission of a felony or a crime of moral turpitude; (ii) engaging in conduct that constitutes fraud, bribery or embezzlement; (iii) engaging in conduct that constitutes gross negligence or willful misconduct that results or could reasonably be expected to result in harm to the Company’s business or reputation; (iv) breach of any material terms of Executive’s employment, including this Agreement, which results or could reasonably be expected to result in harm to the Company’s business or reputation; (v) continued willful failure to substantially perform duties as Chief Financial Officer and Treasurer of the Company; or (vi) failure to maintain his primary residence in Puerto Rico.

EXECUTION COPY

(d) Good Reason . Executive’s employment may be terminated at any time by Executive for Good Reason upon thirty (30) calendar days’ prior written notice following the occurrence of the event giving rise to the termination for Good Reason. For purposes of this Agreement, “ Good Reason ” means voluntary resignation after any of the following actions taken by the Company without Executive’s written consent: (i) any material failure of the Company to fulfill its obligations under this Agreement; (ii) a material and adverse change to, or a material reduction of, Executive’s duties and responsibilities to the Company; (iii) a material reduction in Executive’s then current Annual Base Salary and Bonus (not including any diminution related to a broader compensation reduction that is not limited to Executive specifically and that is not more than 10% in the aggregate); or (iv) the failure of any successor (whether by sale, reorganization, consolidation, merger or other corporate transaction) to assume this Agreement, whether in writing or by operation of law; provided , that any such event shall not constitute Good Reason unless and until Executive shall have provided the Company with notice thereof no later than 30 calendar days following Executive’s knowledge of the occurrence of such event and the Company shall have failed to remedy such event within thirty (30) calendar days of receipt of such notice.

(e) Voluntary Termination . Executive’s employment may be terminated at any time by Executive without Good Reason upon 30 calendar days’ prior written notice.

(f) Termination as a Result of Expiration of the Employment Period . Unless otherwise agreed between the Parties, Executive’s employment shall automatically terminate upon expiration of the Employment Period.

(g) Notice of Termination . Any termination by the Company for Cause or without Cause, or by Executive for Good Reason or without Good Reason, shall be communicated by notice of termination to the other party hereto given in accordance with Section 9(g) herein specifying the Date of Termination (as defined below) (a “ Notice of Termination ”). The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company hereunder or preclude Executive or the Company from asserting such fact or circumstance in enforcing Executive’s or the Company’s rights hereunder.

(h) “ Date of Termination ” means (i) if Executive’s employment is terminated by the Company for Cause, without Cause or by reason of Disability, or by Executive for Good Reason or without Good Reason, the date of receipt of the Notice of Termination (in the case of a termination with or without Good Reason, provided such Date of Termination is in accordance with Section 3(d) or Section 3(e)) or any later date specified therein pursuant to Section 3(g), as the case may be; (ii) if Executive’s employment is terminated by reason of death, the date of death; and (iii) the expiration of the Employment Period, and the termination of Executive’s employment upon the date of such expiration.

EXECUTION COPY

4.	Obligations of the Company upon Termination .

(a) With Good Reason; Without Cause . If during the Employment Period the Company terminates Executive’s employment without Cause or Executive terminates his employment for Good Reason, then the Company will provide Executive with the following payments and/or benefits:

(i) The Company shall pay to Executive as soon as reasonably practicable but no later than the 15 ^th day of the third month following the end of the calendar year that contains the Date of Termination in a lump sum to the extent not previously paid, (A) the Annual Base Salary through the Date of Termination; (B) the Bonus earned for any fiscal year ended prior to the year in which the Date of Termination occurs, provided that Executive was employed on the last day of such fiscal year; (C) the amount of any unpaid expense reimbursements to which Executive may be entitled pursuant to Section 2(d)(v) hereof; and (D) any other vested payments or benefits to which Executive or Executive’s estate may be entitled to receive under any of the Company’s benefit plans or applicable law, in accordance with the terms of such plans or law (clauses (A)-(D), the “ Accrued Obligations ”); and

(ii) Subject to Section 4(e) below, after the Date of Termination, the Company will pay Executive severance in an amount equal to the greater of (a) two (2) times Executive’s Annual Base Salary (provided that such Date of Termination is on or before September 1, 2018; if such Date of Termination is after September 1, 2018, Executive shall be entitled to one (1) times his Annual Base Salary) and (b) amounts due under applicable laws (the “ Severance Payment ”). The Severance Payment shall be made in a lump sum on the date that is sixty (60) calendar days following the Date of Termination, subject to the terms and conditions in Section 4(e) below.

(b) Death or Disability . If Executive’s employment shall be terminated by reason of the Executive’s death or Disability, then the Company will provide Executive with the Accrued Obligations. Thereafter, the Company shall have no further obligation to Executive, his estate, his beneficiaries or his legal representatives.

(c) Cause; Other than for Good Reason . If Executive’s employment shall be terminated by the Company for Cause or by Executive without Good Reason, then the Company shall have no further obligations to Executive other than for payment of the Accrued Obligations.

(d) Expiration of the Employment Period . Subject to Section 4(e) below, if Executive’s employment shall be terminated by reason of the expiration of the Employment Period (and not for Cause), then the Company will provide Executive with the Accrued Obligations and will pay Executive an amount equal to the Severance Payment (the “ Expiration Payment ”). The Expiration Payment shall be made in a lump sum on the date that is sixty (60) calendar days following the expiration of the Employment Period.

(e) After the payments specified in Sections 4(a)(ii) and 4(d), the Company shall have no further obligation to Executive or his legal representatives.

(f) Separation Agreement and General Release . The Company’s obligation to make the Severance Payment is conditioned on Executive’s or his legal representative’s executing a

EXECUTION COPY

separation agreement and general release of claims (a “ Release ”) related to or arising from Executive’s employment with the Company or the termination of employment, against the Company, including, for the avoidance of doubt, any subsidiary or affiliate thereof (and their respective officers and directors), in a form reasonably determined by the Company, which shall be provided by the Company to Executive within five (5) calendar days following the Date of Termination; provided , however , that if Executive should fail to execute (or revokes) such Release within forty-five (45) calendar days following the Date of Termination, the Company shall not have any obligation to provide the Severance Payment. If Executive executes the Release within such 45-calendar day period and does not revoke the Release within seven (7) calendar days following the execution of the Release, the Severance Payment will be made in accordance with Section 4(a)(ii).

5.	Restrictive Covenants .

(a) In consideration of Executive’s employment and receipt of payments hereunder, including, without limitation, the grant of any form of long-term compensation described in Section 2(d) herein, during the period commencing on the Effective Date and ending twelve (12) months after the Date of Termination, Executive shall not directly, or indirectly through another person, (i) directly or indirectly induce or attempt to induce any employee, representative, agent or consultant of the Company or any of its affiliates or subsidiaries to leave the employ or services of the Company or any of its affiliates or subsidiaries, or in any way interfere with the relationship between the Company or any of its affiliates or subsidiaries and any employee, representative, agent or consultant thereof; or (ii) hire any person who was an employee, representative, agent or consultant of the Company or any of its affiliates or subsidiaries at any time during the twelve-month period immediately prior to the date on which such hiring would take place.

(b) Non-Competition . Executive hereby acknowledges that he is familiar with the Confidential Information (as defined below) of the Company and its affiliates and subsidiaries. Executive acknowledges and agrees that the Company would be irreparably damaged if Executive were to provide services to any person directly or indirectly competing with the Company or any of its affiliates or subsidiaries or engaged in a “Similar Business” (as defined below) and that such competition by Executive would result in a significant loss of goodwill by the Company. Therefore, Executive agrees that the following are reasonable restrictions:

(i) Similar Business: During the Employment Period, and for a term of twelve (12) months immediately after the termination of such relationship (voluntarily or involuntarily), Executive shall not, directly or indirectly, engage in Similar Business services or activities within Puerto Rico or any other market the Company is engaged in business; provided, that nothing herein shall prohibit Executive from being a passive owner of not more than 5% of the outstanding stock of any class of a corporation which is publicly traded so long as none of such persons has any active participation in the business of such corporation.

(ii) Clients: For a period of twelve (12) months after the termination the Executive’s employment relationship with the Company (voluntarily or involuntarily), Executive shall not, directly or indirectly, solicit or provide, without the written consent of the Company, any service for any Client, such as those Similar Business services or activities provided by Executive during his employment relationship.

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For purposes of this Section 5(b), the following terms shall have the following meanings:

“ Similar Business ” shall mean the same or substantially the same business activity or activities performed or engaged by Executive for, or on behalf, of the Company or any of its subsidiaries or affiliates.

“ Clients ” shall mean any person or entity that was a client or customer of the Company at the time of termination of Executive’s employment relationship with the Company or for whom Executive provided any services on behalf of the Company or any of its affiliates or subsidiaries at any time during the twelve (12) months prior to such termination and which still maintains a business relationship with the Company as of the Date of Termination.

Executive warrants and represents that the nature and extent of this non-competition clause has been fully explained to Executive by the Company, and that Executive’s decision to accept the same is made voluntarily, knowingly, intelligently and free from any undue pressure or coercion and after consultation with an attorney. Executive further warrants and represents that he has agreed to this non-competition clause in exchange for compensation, benefits and protections Executive is receiving under this Agreement.

(c) Non-Disclosure; Non-Use of Confidential Information . Executive shall not disclose or use at any time, either during his employment with the Company or at any time thereafter, any Confidential Information of which Executive is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and required by Executive’s performance in good faith of duties assigned to Executive by the Company. Executive will take all appropriate steps to safeguard all Confidential Information in his possession and to protect it against disclosure, misuse, espionage, loss and theft. Executive shall deliver to the Company at the termination of his employment with the Company, or at any time the Company may request, all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof, whether in written or electronic form) relating to the Confidential Information or the “Work Product” (as defined in Section 5(e)(ii)) of the business of the Company that Executive may then possess or have under his control.

(d) Proprietary Rights . Executive recognizes that the Company possesses a proprietary interest in all Confidential Information and Work Product and has the exclusive right and privilege to use, protect by copyright, patent or trademark, or otherwise exploit the processes, ideas and concepts described therein to the exclusion of Executive, except as otherwise agreed between the Company and Executive in writing. Executive expressly agrees that any Work Product made or developed by Executive or his agents during the course of Executive’s employment, including any Work Product which is based on or arises out of Work Product, shall be the property of and inure to the exclusive benefit of the Company. Executive further agrees that all Work Product developed by Executive (whether or not able to be protected by copyright, patent or trademark) during the course of his employment with the Company, or involving the use of the time, materials or other resources of the Company, shall be promptly

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disclosed to the Company and shall become the exclusive property of the Company, and Executive shall execute and deliver any and all documents necessary or appropriate to implement the foregoing.

(e) Certain Definitions .

(i) As used herein, the term “ Confidential Information ” means information that is not generally known to the public (but for purposes of clarity, Confidential Information shall never exclude any such information that becomes known to the public because of Executive’s unauthorized disclosure) and that is used, developed or obtained by the Company in connection with its business, including, but not limited to, information, observations and data obtained by Executive while employed by the Company concerning (A) the business or affairs of the Company; (B) products or services; (C) fees, costs and pricing structures; (D) designs; (E) analyses; (F) drawings, photographs and reports; (G) computer software, including operating systems, applications and program listings; (H) flow charts, manuals and documentation; (I) databases; (J) accounting and business methods; (K) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice; (L) customers and clients and customer or client lists; (M) other copyrightable works; (N) all production methods, processes, technology and trade secrets; and (O) all similar and related information in whatever form. Confidential Information will not include any information that has been published in a form generally available to the public (except as a result of Executive’s unauthorized disclosure or any third party’s unauthorized disclosure resulting from any direct or indirect influence by Executive) prior to the date Executive proposes to disclose or use such information. Confidential Information will not be deemed to have been published or otherwise disclosed merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination.

(ii) As used herein, the term “ Work Product ” means all inventions, innovations, improvements, technical information, systems, software developments, methods, designs, analyses, drawings, reports, service marks, trademarks, trade names, logos and all similar or related information (whether patentable or unpatentable) that relates to the Company’s actual or anticipated business, research and development or existing or future products or services and that are conceived, developed or made by Executive (whether or not during usual business hours and whether or not alone or in conjunction with any other person) while employed by the Company together with all patent applications, letters patent, trademark, trade name and service mark applications or registrations, copyrights and reissues thereof that may be granted for or upon any of the foregoing.

6.	Non-Disparagement .

During the Employment Period and at all times thereafter, neither Executive nor his agents or representatives, on the one hand, nor the Company itself, or its executives or boards of directors or managers, on the other hand, shall directly or indirectly issue or communicate any public statement, or statement likely to become public, that maligns, denigrates or disparages the other (including, in the case of communications by Executive or his agents or representatives, the Company or any of the Company’s officers, directors or employees. The foregoing shall not be

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violated by truthful responses to (a) legal processes or governmental inquiries or (b) by private statements to the Company or any of Company’s officers, directors or employees; provided , however , that in the case of Executive, with respect to clause (b), such statements are made in the course of carrying out his duties pursuant to this Agreement.

7.	Confidentiality of Agreement .

The Parties agree that the consideration furnished under or otherwise referenced in this Agreement, the discussions and correspondence that led to this Agreement, and the terms and conditions of this Agreement and any other collateral agreement referred to herein are private and confidential. Except as may be required by applicable law, regulation, or stock exchange requirement, neither Party may disclose the above information to any other person or entity without the prior written approval of the other.

8.	Executive’s Representations, Warranties and Covenants .

(a) Executive hereby represents and warrants to the Company that:

(i) Executive has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and this Agreement has been duly executed by Executive voluntarily, knowingly, intelligently and free from any undue pressure or coercion;

(ii) the execution, delivery and performance of this Agreement by Executive does not and will not, with or without notice or the passage of time, conflict with, breach, violate or cause a default under any agreement, contract or instrument to which Executive is a party or any judgment, order or decree to which Executive is subject;

(iii) Executive is not a party to or bound by any employment agreement, consulting agreement, non-compete agreement, non-solicitation agreement, fee-for-services agreement, confidentiality agreement or similar agreement with any other person;

(iv) upon the execution and delivery of this Agreement by the Company and Executive, this Agreement will be a legal, valid and binding obligation of Executive, enforceable against him in accordance with its terms;

(v) Executive understands that the Company will rely upon the accuracy and truth of the representations and warranties of Executive set forth herein and Executive consents to such reliance;

(vi) Executive has had ample opportunity to consult with an attorney prior to entering into this Agreement; and

(vi) as of the date of execution of this Agreement, Executive is not in breach of any of its terms, including having committed any acts that would form the basis for a Cause termination if such act had occurred after the Effective Date.

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(b) The Company hereby represents and warrants to Executive that:

(i) the Company has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and this Agreement has been duly executed by the Company;

(ii) the execution, delivery and performance of this Agreement by the Company does not and will not, with or without notice or the passage of time, conflict with, breach, violate or cause a default under any agreement, contract or instrument to which the Company is a party or any judgment, order or decree to which the Company is subject;

(iii) upon the execution and delivery of this Agreement by the Company and Executive, this Agreement will be a legal, valid and binding obligation of the Company, enforceable in accordance with its terms; and

(iv) the Company understands that Executive will rely upon the accuracy and truth of the representations and warranties of the Company set forth herein and the Company consents to such reliance.

9.	General Provisions .

(a) Severability . It is the desire and intent of the Parties that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Upon a determination that any term or provision is invalid, illegal, or incapable of being enforced, the Parties agree that a reviewing court (or arbitration panel) shall have the authority to “blue pencil” or modify this Agreement so as to render it enforceable and effect the original intent of the Parties to the fullest extent permitted by applicable law.

(b) Entire Agreement and Effectiveness . Effective as of the Effective Date, this Agreement embodies the complete agreement and understanding among the Parties with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the Parties, written or oral, which may have related to the subject matter hereof in any way (excluding any type of long-term compensation described in Section 2(d) herein the terms and conditions of which are or will be embodied in other agreements).

(i) This Agreement is personal to Executive and without the prior written consent of the Company shall not be assignable by Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive’s legal representatives.

(ii) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. The Company will require any successor (whether direct or indirect, by sale, reorganization, consolidation, merger, or other corporate transaction) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “ Company ” shall mean the Company as hereinbefore defined (which, for the

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avoidance of doubt, shall include any subsidiary or affiliate thereof) and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law, contract or otherwise.

(d) Governing Law . THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PUERTO RICO, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE COMMONWEALTH OF PUERTO RICO OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE COMMONWEALTH OF PUERTO RICO TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE COMMONWEALTH OF PUERTO RICO WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTION’S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.

(e) Enforcement .

(i) Arbitration . Except for disputes arising under Section 5 of this Agreement (including, without limitation, any claim for injunctive relief), any controversy, dispute or claim arising out of or relating to this Agreement, or its interpretation, application, implementation, breach or enforcement which the Parties are unable to resolve by mutual agreement, shall be settled by submission by either Executive or the Company of the controversy, claim or dispute to binding arbitration in San Juan, Puerto Rico (unless the Parties agree in writing to a different location), before a single arbitrator in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association then in effect. In any such arbitration proceeding the Parties agree to provide all discovery deemed necessary by the arbitrator. The decision and award made by the arbitrator shall be accompanied by a reasoned opinion, and shall be final, binding and conclusive on all Parties hereto for all purposes, and judgment may be entered thereon in any court having jurisdiction thereof. The Company will bear the totality of the arbitrator’s and administrative fees and costs. Each Party shall bear its or his litigation costs and expenses (including, without limitation, legal counsel fees and expenses); provided , however , that the arbitrator shall have the discretion to award the prevailing party reimbursement of its or his reasonable attorneys’ fees and costs. Upon the request of either of the Parties, at any time prior to the beginning of the arbitration hearing the Parties may attempt in good faith to settle the dispute by mediation administered by the American Arbitration Association. The Company will bear the totality of the mediator’s and administrative fees and costs. In any arbitration, neither of the Parties will be entitled to present, maintain or participate in a class, collective or representative complaint, and the arbitrator will have no authority over any of said claims or actions. This covenant to arbitrate shall not govern claims regarding workers’ compensation under the State Insurance Fund, state insurance for temporary disability or unemployment insurance benefits.

(ii) Remedies . The arbitrator shall have authority to grant remedies under this Agreement and/or remedies provided for by law, and may, to the extent permitted by law, be exercised concurrently or separately.

(iii) Waiver of Jury Trial . EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

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(f) Amendment and Waiver . The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and Executive and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall be construed as a waiver of such provisions or affect the validity, binding effect or enforceability of this Agreement or any provision hereof.

(g) Notices . Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) in an envelope marked “confidential” to the recipient at the address below indicated or at such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Notices will be deemed to have been given hereunder and received when delivered personally, five (5) calendar days after deposit in the U.S. mail and one (1) calendar day after deposit for overnight delivery with a reputable overnight courier service.

If to the Company, to:

EVERTEC GROUP, LLC

GENERAL COUNSEL AND HUMAN RESOURCES SENIOR VICE PRESIDENT

Carr #176, Km 1.3

Cupey Bajo, Rio Piedras Puerto Rico 00926

P.O. Box 364527

San Juan, Puerto Rico 00936-4527

Telephone: (787) 759-9999

with a copy (which shall not constitute notice) to:

Lic. Reynaldo Quintana

Baerga & Quintana

416 Ponce de Leon Ave.

Union Plaza Suite 810

San Juan, Puerto Rico 00918

Tel. 787.753.7455

Fax. 787.756.5796

If to Executive, to:

Executive’s home address most recently on file with the Company.

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(h) Withholdings Taxes . The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.

(i) Survival of Representations, Warranties and Agreements . All representations, warranties and agreements contained herein shall survive the consummation of the transactions contemplated hereby indefinitely.

(j) Descriptive Headings . The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. All references to a “Section” in this Agreement are to a section of this Agreement unless otherwise noted.

(k) Construction . Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party.

(l) Counterparts . This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

(m) Section 409A . Notwithstanding anything herein to the contrary, this Agreement is intended to be interpreted and applied so that the payment of the benefits set forth herein either shall either be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”), or shall comply with the requirements of such provision. Notwithstanding anything in this Agreement or elsewhere to the contrary, distributions upon termination of Executive’s employment may only be made upon a “separation from service” as determined under Section 409A of the Code. Each payment under this Agreement or otherwise shall be treated as a separate payment for purposes of Section 409A of the Code. In no event may Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement or otherwise which constitutes a “deferral of compensation” within the meaning of Section 409A of the Code. All reimbursements and in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A of the Code. To the extent that any reimbursements pursuant to this Agreement or otherwise are taxable to Executive, any reimbursement payment due to Executive shall be paid to Executive on or before the last calendar day of Executive’s taxable year following the taxable year in which the related expense was incurred; provided , that , Executive has provided the Company written documentation of such expenses in a timely fashion and such expenses otherwise satisfy the Company’s expense reimbursement policies. Reimbursements pursuant to this Agreement or otherwise are not subject to liquidation or exchange for another benefit and the amount of such reimbursements that Executive receives in one taxable year shall not affect the amount of such reimbursements that Executive receives in any other taxable year. Notwithstanding any provision in this Agreement to the contrary, if on the date of his termination from employment with the Company Executive is deemed to be a “specified employee” within the meaning of Code Section 409A and the Final Treasury Regulations using the identification methodology selected by the Company from time to time, or if none, the default methodology under Code Section 409A, any

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payments or benefits due upon a termination of Executive’s employment under any arrangement that constitutes a “deferral of compensation” within the meaning of Code Section 409A shall be delayed and paid or provided (or commence, in the case of installments) on the first payroll date on or following the earlier of (i) the date which is six (6) months and one calendar day after Executive’s termination of employment for any reason other than death; and (ii) the date of Executive’s death, and any remaining payments and benefits shall be paid or provided in accordance with the normal payment dates specified for such payment or benefit. Notwithstanding any of the foregoing to the contrary, the Company and its respective officers, directors, employees, or agents make no guarantee that the terms of this Agreement as written comply with, or are exempt from, the provisions of Code Section 409A, and none of the foregoing shall have any liability for the failure of the terms of this Agreement as written to comply with, or be exempt from, the provisions of Code Section 409A.

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the Execution Date first written above.


EVERTEC GROUP, LLC


Name:		Morgan M. Schuessler, Jr.
Title:		President & Chief Executive Officer

EXECUTIVE


Name:		Peter J. S. Smith
Title:		Executive Vice President, Treasurer and Chief Financial Officer

Exhibit 10.62

EVERTEC, INC.

2013 EQUITY INCENTIVE PLAN

RESTRICTED STOCK UNIT AWARD AGREEMENT

THIS RESTRICTED STOCK UNIT AWARD AGREEMENT (this “ Agreement ”) is made as of this September 1, 2015 (the “ Date of Grant ”), by and between EVERTEC, Inc. (the “ Company ”) and the person whose signature, name and title appear in the signature block hereof (the “ Participant ”). Defined terms used but not otherwise defined herein will have the meanings attributed to them in the Plan (defined below) and the Participant’s employment agreement dated as of the 1 ^st day of September, 2015 (the “ Employment Agreement ”). Defined terms used but not otherwise defined herein will have the meanings attributed to them in the Plan (defined below) and the Participant’s Employment Agreement.

W I T N E S S E T H

WHEREAS, the Company maintains the EVERTEC, Inc. 2013 Equity Incentive Plan (the “ Plan ”); and

WHEREAS, in connection with the Participant’s service as an employee of the Company or any of its Affiliates and Subsidiaries (the “ Employment ”), the Company desires to grant Restricted Stock Units (“ RSUs ”) to the Participant (the “ Award ”), subject to the terms and conditions of the Plan and this Agreement.

NOW, THEREFORE, in consideration of the covenants and agreements contained herein and for other good and valuable consideration, the parties agree as follows:

Grant of RSUs . In consideration of the Employment, the Company grants to the Participant 27,996 RSUs. Each RSU represents the unfunded and unsecured promise of the Company to deliver to the Participant one share of common stock, par value $.01 per share, of the Company (the “ Common Stock ”) on the Settlement Date (as defined in Section 6 hereof).

2.	Purchase Price . The purchase price of the RSUs shall be deemed to be zero U.S. Dollars ($0) per share.

3.	Vesting . The RSUs shall vest and become non-forfeitable on the third anniversary of the Date of Grant (the “ *Vesting Date* ”), provided that the Participant is actively carrying out his duties in connection with the Employment at all times from the Date of Grant through the Vesting Date.

4.	Termination . For purposes of this Section 4 , “ *Termination Date* ” is the date the Participant’s Employment is terminated under the circumstances set forth in (a) or (b) below.

(a)

In the event of the Participant’s Disability or in the event that the Employment is terminated (i) by the Company without Cause; (ii) by the Participant for Good Reason; (iii) due to the Participant’s death; or (iv) due to the Company’s non-renewal of the Participant’s Employment Agreement, then all of the RSUs that have not become vested as of the date of Disability or the Termination Date, as applicable, shall automatically vest.

(b)

In the event the Employment is terminated (i) by the Company for Cause or (ii) by the Participant without Good Reason, all of the RSUs that have not become vested as of the Termination Date shall automatically be forfeited.

Dividend Equivalents . If the Company pays an ordinary cash dividend on its outstanding Common Stock at any time between the Date of Grant and the Settlement Date (as defined in Section 6 below) — provided that the date on which stockholders of record are determined for purposes of paying a cash dividend on issued and outstanding shares of the Common Stock falls after the Date of Grant — the Participant shall receive on the Settlement Date: (a) a number of Shares having a Fair Market Value on the Vesting Date equal to the aggregate amount of the cash dividends paid by the Company on a single share of the Common Stock, multiplied by the number of RSUs that are settled on the Settlement Date; or (b) a lump sum cash payment equal to the aggregate amount of the cash dividends paid by the Company on a single share of the Common Stock, multiplied by the number of RSUs that are settled on the Settlement Date ((a) or (b) as applicable, the “ Dividend Payment ”); provided, however, that in the case of (a), any partial Share resulting from the calculation will be paid in cash.

Settlement . Within sixty (60) days following the Vesting Date or the day any RSUs are automatically vested in accordance with the terms and conditions of this Agreement (the “ Settlement Date ”), the Company shall (a) issue and deliver to the Participant one share of Common Stock for each vested RSU (the “ Shares ” ) and enter the Participant’s name as a shareholder of record or beneficial owner with respect to the Shares on the books of the Company; and (b) calculate the Dividend Payment. The Participant agrees that the Company may deduct from the Dividend Payment any amounts owed by the Participant to the Company with respect to any whole Share issued by the Company to the Participant to cover any partial Share resulting from the settlement process.

Taxes . Unless otherwise required by applicable law, on the Settlement Date, (a) the Shares and the Dividend Payment will be considered ordinary income for tax purposes and subject to all applicable payroll taxes; (b) the Company shall report such income to the appropriate taxing authorities as it determines to be necessary and appropriate; (c) the Participant shall be responsible for payment of any taxes due in respect of the Shares and the Dividend Payment; and (d) the Company shall withhold taxes in respect of the Shares and the Dividend Payment (a “ Tax Payment ”); provided, however, that the Participant may elect, subject to the Company’s approval in its sole discretion, to satisfy his or her obligation to pay the Tax Payment by authorizing the Company to withhold from any Shares otherwise to be delivered to the Participant, a number of whole shares of Common Stock having a Fair Market Value equal to the Tax Payment (i.e., a “cashless exercise”). If the Participant fails to pay any required Tax Payment, the Company may, in its discretion, deduct any Tax Payments from any amount then or thereafter payable by the Company to the Participant and take such other action as deemed necessary to satisfy all obligations for the Tax Payment (including reducing the number of Shares delivered on the Settlement Date). The Participant agrees to pay the Company in the form of a check or cashier’s check any overage of the Tax Payment paid by the Company as a result of making whole any partial Share issued through a cashless exercise. Furthermore, the Participant acknowledges and agrees that the Participant will be solely responsible for making any Tax Payment directly to the appropriate taxing authorities should the Participant opt not to satisfy his or her Tax Payment through a cashless exercise.

Rights as Stockholder . Upon and following the Settlement Date (but not before), the Participant shall be the record or beneficial owner of the Shares unless and until such shares are sold or otherwise disposed of, and, if a record owner, shall be entitled to all rights of a stockholder of the Company (including voting rights).

9.	Governing Law . This Agreement shall be construed and interpreted in accordance with the laws of the Commonwealth of Puerto Rico applicable to contracts to be performed therein.

10.

Notice . Every notice or other communication relating to this Agreement shall be made in writing and the notice, request or other communication shall be deemed to be received upon receipt by the party entitled thereto. Any notice, request or other communication by the Participant should be delivered to the Company’s General Counsel.

11.

Miscellaneous . This Agreement, the Plan and the Employment Agreement (solely with respect to the defined terms and the non-compete and non-solicitation covenants contained therein (the “ Incorporated Provisions ”)) contain the entire agreement between the parties hereto with respect to the subject matter contained herein and supersede all prior communications, representations and negotiations in respect thereto. If the Participant’s Employment Agreement expires or is not renewed by the Company and the Participant’s Employment continues, the Incorporated Provisions will remain valid insofar as this Agreement remains in effect. No change, modification or waiver of any provision of this Agreement shall be valid unless in writing and signed by the parties hereto. This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company and any person or persons who shall, upon the death of the Participant, acquire any rights hereunder in accordance with this Agreement or the Plan. The terms and provisions of the Plan are incorporated herein by reference, and the Participant hereby acknowledges receiving a copy of the Plan. In the event of a conflict or inconsistency between the terms and provisions of the Plan and the provisions of this Agreement, the Plan shall govern and control. This Agreement may be signed in counterparts, each of which shall be deemed an original and both of which together shall constitute one and the same instrument.

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IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the Date of Grant set forth above.


EVERTEC, INC.		THE PARTICIPANT


Name:	Morgan M. Schuessler, Jr.	Name:	Peter J. S. Smith
Title:	Chief Executive Officer	Title:	Executive Vice President, Treasurer and Chief Financial Officer

Exhibit 10.63

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SEPARATION AGREEMENT AND GENERAL RELEASE

THIS SEPARATION AGREEMENT AND GENERAL RELEASE (the “ Release ”) is made and entered into as of this 1 ^st day of September 2015 by and between EVERTEC GROUP, LLC, a Puerto Rico limited liability company (the “ Company ”), and Eduardo Franco de Camargo (the “ Executive ”).

FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1. Termination of Employment . Effective the close of business on August 31, 2015 (the “ Separation Date ”), the Executive and the Company agree that the Executive’s employment with the Company terminated. Effective on the Separation Date, the Executive has resigned from all positions he holds as an officer and/or member of the board of directors or board of managers of EVERTEC, Inc. (“ Parent ”) and any of its subsidiaries, including the Company (Parent and its direct and indirect subsidiaries, including the Company, are hereinafter referred to as the “ Company Group ”) and from all committees of any such board of directors or board of managers. The Executive agrees that he will not hereafter seek reinstatement, recall or re-employment with the Company Group. The Executive further agrees that, in the event he is employed by any company or other entity that is acquired by or merged with any member of the Company Group, he shall resign from said employment immediately upon the acquisition, and that should the Executive fail or refuse to do so, the Company Group may terminate his employment and the Executive shall have no recourse against the Company Group. The Executive acknowledges that this Release constitutes the required notice of termination of the Executive’s employment pursuant to Section 3(g) of the Amended and Restated Employment Agreement, by and between the Company and the Executive, dated July 1, 2014 (the “ Employment Agreement ”).

2. Settlement Payment As a settlement payment, and provided this Release is executed and not revoked by Executive, the Company shall provide the Executive with the following payments and benefits:

(i) A lump sum payment of $260,000 (the “ Severance Payment ”) on or before 60 calendar days after the Separation Date in accordance with Section 4(a)(ii) of the Employment Agreement.

(ii) Accelerated vesting as of the Separation Date of 10,230 time-based restricted stock units (the “ Time-Based RSUs ”), in accordance with paragraph 4(a) of Parent’s Equity Incentive Plan Restricted Stock Unit Award Agreement dated as of March 13, 2015 and executed by Parent and Executive (the “ 2015 LTIP Agreement ”). The Time-Based RSUs will be settled by the Company within 75 calendar days of the Separation Date. In addition, 1,958 performance-based restricted stock units shall remain outstanding and capable of vesting in the normal course subject to actual performance of Parent, in accordance with paragraph 4(a) of Executive’s 2015 LTIP Agreement.

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(iii) Accrued but unused vacation, if any, as of the Separation Date, to be paid in a lump sum on or before 60 calendar days after the Separation Date.

(iv) The amount of any unpaid expense reimbursements to which Executive may be entitled pursuant to his Employment Agreement.

(v) Executive shall be paid a pro-rated amount of his Bonus (as defined in the Employment Agreement), subject to (a) quantitative metrics achieved by the Company for the year ended December 31, 2015, and (b) qualitative metrics achieved by Executive through the Separation Date (the “ Pro-Rated Bonus ”). The Pro-Rated Bonus will be determined by the Compensation Committee and will be payable on or about March 15, 2016 when bonuses to other executives are paid.

The Company may withhold from all amounts payable under this Release such federal, state, local and payroll taxes as may be required to be withheld pursuant to any applicable law or regulation.

(b) Continuing Rights . The Executive agrees that, except for the payments and benefits set forth above, he (i) has been paid all other compensation due to him, including but not limited to all salary, hourly pay, overtime pay, bonuses, deferred compensation, incentives and all other compensation of any nature whatsoever, and (ii) does not have any equity or equity-based ownership interest in Parent or any other member of the Company Group other than (1) 50,000 vested options at an exercise price of $23.36 per share; and (2) two unvested options each to purchase 50,000 shares of Parent’s common stock at an exercise price of $23.36 per share each of which vests on November 6, 2015 and November 6, 2017, respectively, the terms of which option shall continue to be governed by Parent’s 2013 Equity Incentive Plan. No other sums (contingent or otherwise) shall be paid to the Executive in respect of his employment by the Company, and any such sums (whether or not owed) are hereby expressly waived by the Executive.

(c) Continuing Entitlement . The Executive acknowledges that his continuing entitlement to payments and benefits under this Paragraph 2 shall be conditioned upon his continuing compliance with Paragraphs 1, 4, 5, 6 and 9(c) of this Release and any violation of Paragraphs 1, 4, 6 or 9(a) by the Executive shall terminate the Company’s obligation to continue to make payments or provide benefits in accordance with this Paragraph 2.

3. General Release . As a material inducement to the Company to enter into this Release and in consideration of the payments to be made by the Company to the Executive in accordance with Paragraph 2 above, the Executive, on behalf of himself, his representatives, agents, estate, heirs, successors and assigns, and with full understanding of the contents and legal effect of this Release and having the right and opportunity to consult with his counsel, releases and discharges each member of the Company Group, each of their respective shareholders, officers, directors, supervisors, members, managers, employees, agents, representatives, attorneys, insurers, divisions, affiliates, and all employee benefit plans sponsored by or contributed to by any member of the Company Group (including any fiduciaries thereof), and all related entities of any kind or nature, and its and their predecessors, successors, heirs, executors, administrators, and assigns (collectively, the “ Released Parties ”) from any and all claims, actions, causes of action,

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grievances, suits, charges, or complaints of any kind or nature whatsoever, that he ever had or now has, whether fixed or contingent, liquidated or unliquidated, known or unknown, suspected or unsuspected, and whether arising in tort, contract, statute, or equity, before any federal, state, local, or private court, agency, arbitrator, mediator, or other entity, regardless of the relief or remedy; provided, however, and subject to Paragraph 4 below, the Release is not intended to and does not limit the Executive’s right to file a charge or participate in an investigative proceeding of a governmental agency. Without limiting the generality of the foregoing, it being the intention of the parties to make this Release as broad and as general as the law permits, this Release specifically includes, but is not limited to, and is intended to explicitly release, any and all subject matter and claims arising from or in connection with any alleged violation by any of the Released Parties under the Employment Agreement or Title VII of the Civil Rights Act of 1964, the Civil Rights Acts of 1866 and 1991 and Executive Order 11246, which prohibit employment discrimination based on race, color, religion, sex, or national origin; the Age Discrimination in Employment Act of 1967 and the Older Workers Benefit Protection Act of 1990, which prohibit employment discrimination because of age against individuals who are 40 years of age or older; the Equal Pay Act, which prohibits sex-based wage discrimination against men and women who perform substantially equal work in the same establishment; the Americans with Disabilities Act of 1990 (ADA), which prohibits employment discrimination against qualified individuals with disabilities in the private sector, and in state and local governments; and Sections 501 and 505 of the Rehabilitation Act of 1973, which prohibit federal contractors to discriminate in employment against qualified individuals with disabilities; the Genetic Information Nondiscrimination Act (GINA) of May 21, 2008, which prohibits discrimination against employees based on genetic information; the Family and Medical Leave Act, which protects employees’ rights to medical and family leave; the Uniformed Services Employment and Reemployment Rights Act (USERRA); the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA); the Constitution of Puerto Rico, which prohibits discriminatory treatment; Law 69 of July 6, 1985, which prohibits employment discrimination on the basis of sex; Law 17 of April 22, 1988, which prohibits sexual harassment in employment; Law 100 of June 30, 1959, as amended, which prohibits employment discrimination based on age, race, color, sex, marital status, social or national origin, social condition, political affiliation, political or religious beliefs, or against an employee for being a victim or being perceived as a victim of domestic violence, sexual aggression or stalking, or based on sexual orientation or gender identity; Law 116 of December 20, 1991; Law 44 of July 2, 1985, which prohibits employment discrimination against qualified individuals with disabilities or under any other local, state or federal law which prohibits discrimination, harassment or retaliation; Act 139 of June 26, 1968 (SINOT); Act 45 of April 18, 1935 (State Insurance Fund); the Employee Retirement Income Security Act of 1974 (ERISA); the Workers Adjustment Retraining and Notification Act (WARN); the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA); the Federal Bankruptcy Act; the Insurance and the Civil Codes of Puerto Rico; Law 80 of May 30, 1976; Law 379 (Days and Hours of Work); Law 96 of June 26, 1956 (Minimum Wage); Law 180 of July 27, 1998 (vacation and sick leave) and any other federal, state or local (including Puerto Rico) laws (including, with respect to each law or regulation referenced above, any amendments thereto), whether based on statute, regulation or common law, providing workers’ compensation benefits; restricting an employer’s right to terminate employees or otherwise regulating employment; or enforcing express or implied employment contracts or requiring an employer to deal with employees fairly or in good faith; providing recourse for alleged wrongful

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discharge, harassment or discrimination, physical or personal injury, emotional distress, fraud, negligent misrepresentation, libel, slander, defamation and similar or related claims and any other statutory claim, tort claim, employment or other contract or implied contract claim, or common law claim for wrongful discharge, breach of an implied covenant of good faith and fair dealing, defamation, invasion of privacy, or any other claim, arising out of or in connection with or involving his employment with the Company, the termination of his employment with the Company, or involving any other matter, including but not limited to the continuing effects of his employment with the Company or termination of employment with the Company. The Executive further acknowledges that he is aware that statutes exist that render null and void releases and discharges of any claims, rights, demands, liabilities, action and causes of action that are unknown to the releasing or discharging party at the time of execution of the release and discharge. The Executive hereby expressly waives, surrenders and agrees to forego any protection to which he would otherwise be entitled by virtue of the existence of any such statute in any jurisdiction including, but not limited to, the Commonwealth of Puerto Rico. The waivers and releases previously mentioned include any damages arising after the signature of this document as a result of the continuous effect of any act or omission that occurred before the signature of this document. Notwithstanding the foregoing, this Release will not waive rights or claims that may arise after the Release becomes effective, nor will it apply to any rights of indemnification, contribution, or to be held harmless, or to the coverage afforded by any directors and officers insurance maintained by the Company Group, as in effect as of the Separation Date. This Release will not waive any rights to which the Executive is otherwise entitled with respect to his vested retirement benefits. This Release will not waive any right to enforce the terms of this Release.

4. Covenant Not to Sue . The Executive, for himself, his heirs, executors, administrators, successors and assigns agrees not to bring, file, claim, sue or cause, assist, or permit to be brought, filed, or claimed any action, cause of action or proceeding regarding or in any way related to any of the claims described in Paragraph 3 hereof, and further agrees that this Release is, will constitute and may be pleaded as, a bar to any such claim, action, cause of action or proceeding. If the Executive files a charge or participates in an investigative proceeding of a governmental agency, or is otherwise made a party to any proceedings described in Paragraph 3 hereof, the Executive will not seek and will not accept any personal equitable or monetary relief in connection with such charge or investigative or other proceeding.

5. Indemnification . The Executive will fully indemnify the Released Parties against and will hold the Released Parties harmless from any and all claims, costs, damages, demands, expenses (including without limitation attorneys’ fees), judgments, losses or other liabilities of any kind or nature whatsoever arising from or directly or indirectly related to any or all of this Release and the conduct of the Executive hereunder, including without limitation any material breach or failure to comply with any or all of the provisions of this Release.

6. Restrictive Covenants . The Executive acknowledges and agrees that he shall continue to be bound by the covenants set forth in Sections 5 and 6 of the Employment Agreement, which are hereby incorporated by reference.

7. Severability . If any provision of this Release shall be found by a court of competent jurisdiction to be invalid or unenforceable, in whole or in part, then such provision shall be

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construed and/or modified or restricted to the extent and in the manner necessary to render the same valid and enforceable, or shall be deemed excised from this Release, as the case may require, and this Release shall be construed and enforced to the maximum extent permitted by law, as if such provision had been originally incorporated herein as so modified or restricted, or as if such provision had not been originally incorporated herein, as the case may be. The parties further agree to seek a lawful substitute for any provision found to be unlawful; provided, that, if the parties are unable to agree upon a lawful substitute, the parties desire and request that a court or other authority called upon to decide the enforceability of this Release modify the Release so that, once modified, the Release will be enforceable to the maximum extent permitted by the law in existence at the time of the requested enforcement.

8. Waiver . A waiver by the Company of a breach of any provision of this Release by the Executive shall not operate or be construed as a waiver or estoppel of any subsequent breach by the Executive. No waiver shall be valid unless in writing and signed by an authorized officer of the Company.

9. Miscellaneous Provisions .

a. Representation . The Executive represents and certifies that he has carefully read and fully understands all of the provisions and effects of this Release, has knowingly and voluntarily entered into this Release freely and without coercion, and acknowledges that on August 31, 2015, the Company advised him to consult with an attorney prior to executing this Release and further advised him that he had 45 calendar days within which to review and consider this Release. Executive understands that he can waive the 45-day period to evaluate and consider this Agreement and that, if he signs this Release in less time, he has done so voluntarily in order to obtain sooner the benefits under this Release. The Executive is voluntarily entering into this Release and no member of the Company Group nor any other Released Parties made any representations concerning the terms or effects of this Release other than those contained in the Release itself and the Executive is not relying on any statement or representation by the Company or any other Released Parties in executing this Release. The Executive is relying on his own judgment and that of his attorney to the extent so retained. The Executive also specifically affirms that this Release clearly expresses his intent to waive fraudulent inducement claims, and that he disclaims any reliance on representations about any of the specific matters in dispute.

b. Revocation . The Executive acknowledges that he has 7 calendar days from the date this Release is executed in which to revoke his acceptance of this Release, and this Release will not be effective or enforceable until such 7-day period has expired. To be effective, any such revocation must be in writing and delivered to the Company’s principal place of business, Attn.: Arturo Díaz-Abramo, on or before the 7 ^th calendar day after signing and must expressly state the Executive’s intention to revoke this Release.

c. Return of Property . By signing this Release, the Executive affirms having returned to the Company all of the Company’s property that is in the Executive’s possession, custody or control, including, without limitation, (a) all keys, access cards, credit cards, computer hardware (including but not limited to all hard drives, diskettes, compact disks, DVDs, electronic storage devices, and personal data assistants, and the contents of all such hardware, as well as any

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passwords or codes or instructions needed to operate any such hardware), computer software and programs, data, materials, papers, books, files, documents, records, policies, client and customer information and lists, marketing information, design information, specifications and plans, data base information and lists, mailing lists, notes, and any other property or information that the Executive has or had relating to the Company Group (whether those materials are in paper, electronic or computer-stored form or in any other form or medium), and (b) all documents and other property containing, summarizing, or describing any Confidential Information (as defined in the Employment Agreement), including all originals and copies. The Executive affirms that he has not retained any such property or information in any form, and will not give copies of such property or information or disclose their contents to any other person.

10. Complete Agreement . This Release sets forth the entire agreement between the parties, and fully supersedes any and all prior agreements or understandings, whether oral or written, between the parties pertaining to actual or potential claims arising from the Executive’s employment with the Company or the termination of the Executive’s employment with the Company; provided , however , that all obligations and rights arising under Sections 5 through 9 of the Employment Agreement, which are incorporated by reference herein, shall not be superseded, shall be unaffected hereby, and shall remain in full force and effect. The Executive expressly warrants and represents that no promise or agreement which is not herein expressed has been made to him in executing this Release.

11. No Pending or Future Lawsuits . The Executive represents that he has no lawsuits, claims or actions pending in his name, or on behalf of any other person or entity, against the Company or any of the Released Parties. The Executive also represents that he does not intend to bring any claims on his own behalf or on behalf of any other person or entity against the Company or any of the Released Parties.

12. No Admission of Liability . The Executive understands and acknowledges that this Release constitutes a compromise and settlement of any and all actual or potential disputed claims by the Executive. No action taken by the Company Group hereto, either previously or in connection with this Release, shall be deemed or construed to be (a) an admission of the truth or falsity of any actual or potential claims or (b) an acknowledgment or admission by the Company Group of any fault or liability whatsoever to the Executive or any third party.

13. Reimbursement . If the Executive or his heirs, executors, administrators, successors or assigns (a) is in breach of or breaches Paragraphs 1, 5, 6 or 9(c) of this Release, or (b) attempts to challenge the enforceability of this Release, or (c) files a charge of discrimination, a lawsuit of any kind or nature against one or more of the Released Parties, or a claim of any kind or nature against one or more of the Released Parties, the Executive or his heirs, executors, administrators, successors or assigns shall be obligated to tender back to the Company, as a contractual remedy hereunder, all payments made to him or them under this Release, or any amount of actual damages proven by the Company, if greater. Further, the Executive shall indemnify and hold harmless the Released Parties from and against all liability, costs and expenses, including attorneys’ fees, arising out of said breach, challenge or action by the Executive, his heirs, executors, administrators, successors or assigns. The Company and the Executive acknowledge that the remedy set forth hereunder is not to be considered a form of liquidated damages and the tender back shall not be the exclusive remedy hereunder.

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14. Future Cooperation . In connection with any and all claims, disputes, negotiations, investigations, lawsuits or administrative proceedings involving the Company Group, the Executive agrees to make himself available, upon reasonable notice from the Company Group and without the necessity of subpoena, to provide information or documents, provide declarations or statements to the Company Group, meet with attorneys or other representatives of the Company Group, prepare for and give depositions or testimony, and/or otherwise cooperate in the investigation, defense or prosecution of any or all such matters.

15. Joint Participation . The parties hereto participated jointly in the negotiation and preparation of this Release, and each party has had the opportunity to obtain the advice of legal counsel and to review and comment upon the Release. Accordingly, it is agreed that no rule of construction shall apply against any party or in favor of any party. This Release shall be construed as if the parties jointly prepared this Release, and any uncertainty or ambiguity shall not be interpreted against one party and in favor of the other.

16. Governing Law . THIS RELEASE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PUERTO RICO, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE COMMONWEALTH OF PUERTO RICO OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE COMMONWEALTH OF PUERTO RICO TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE COMMONWEALTH OF PUERTO RICO WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS RELEASE, EVEN IF UNDER SUCH JURISDICTION’S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.

17. Enforcement

a. Arbitration . Any controversy, dispute or claim arising out of or relating to this Release, or its interpretation, application, implementation, breach or enforcement which the parties are unable to resolve by mutual agreement, shall be settled by submission by either party of the controversy, claim or dispute to binding arbitration in San Juan, Puerto Rico (unless the parties agree in writing to a different location), before a single arbitrator in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association then in effect. In any such arbitration proceeding the parties agree to provide all discovery deemed necessary by the arbitrator. The decision and award made by the arbitrator shall be accompanied by a reasoned opinion, and shall be final, binding and conclusive on the parties for all purposes, and judgment may be entered thereon in any court having jurisdiction thereof. The Company will bear the totality of the arbitrator’s and administrative fees and costs. Each party shall bear its or his litigation costs and expenses. Upon the request of any of the parties, at any time prior to the beginning of the arbitration hearing the parties may attempt in good faith to settle the dispute by mediation administered by the American Arbitration Association. The Company will bear the totality of the mediator’s and administrative fees and costs.

b. Waiver of Jury Trial . THE COMPANY AND THE EXECUTIVE EACH HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS RELEASE.

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18. Execution of Release . This Release may be executed in counterparts, each of which shall be considered an original, but which when taken together, shall constitute one Release. The Release, to the extent signed and delivered by means of a facsimile machine or by PDF File (portable document format file), shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the originally signed version delivered in person. At the request of either party hereto, the other party shall re-execute original forms hereof and deliver them to all other parties.

PLEASE READ THIS RELEASE AND CAREFULLY CONSIDER ALL OF ITS PROVISIONS BEFORE SIGNING IT. THIS RELEASE CONTAINS A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.

[Signature Page Follows]

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IN WITNESS WHEREOF, the Executive and the Company have voluntarily signed this Separation Agreement and General Release consisting of nine (9) pages effective as of the date first written above.


EVERTEC GROUP, LLC

By:
	Name:	Morgan M. Schuessler
	Title:	Chief Executive Officer


Signature:
		Eduardo Franco de Camargo

EXHIBIT 31.1

Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a)

I, Morgan M. Schuessler, Jr., certify that:

I have reviewed this report on Form 10-Q of EVERTEC, Inc.;

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;

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;

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:

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;

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;

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

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

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):

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

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.

EXHIBIT 31.2

Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a)

I, Peter J.S. Smith, certify that:

I have reviewed this report on Form 10-Q of EVERTEC, Inc.;

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.

EXHIBIT 32.1

Certification Pursuant to 18 U.S.C. Section 1350

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of EVERTEC, Inc (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 (the “Form 10-Q”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

EXHIBIT 32.2

Certification Pursuant to 18 U.S.C. 1350

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of EVERTEC, Inc (the “Company”), does hereby certify, to such officer’s knowledge, that:

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