Business Context and Reporting Period
This Form 8-K Current Report, filed on November 21, 2014, by EVERTEC, Inc. (a Puerto Rico-based payment processing company), discloses significant changes in executive leadership. The report details the appointment of a new President and Chief Executive Officer (CEO) and the resignation of the incumbent CEO and Board member.
Key Financial Metrics and Compensation
This filing does not contain operational financial metrics such as revenue, profit, cash flow, or debt levels. The financial data provided relates exclusively to executive compensation and separation packages:
- New CEO (Morgan M. Schuessler, Jr.):
- Annual Base Salary: $650,000.
- Annual Cash Incentive: Up to 100% of base salary.
- Christmas Bonus: 3% of base salary.
- Hiring Bonus: $100,000.
- Initial Restricted Stock Units (RSUs): Valued at $3,000,000 (vesting over 3 years).
- Additional RSUs: Valued at $1,950,000 (25% time-based, 75% performance-based).
- Relocation and Legal Reimbursement: Up to $25,000 for legal fees; relocation expenses covered.
- Outgoing CEO (Peter Harrington):
- Christmas Bonus: $26,650.
- Dividend Adjustment Payment: $63,933.79.
- Attorneys' Fees Reimbursement: Up to $6,000.
- Apartment Lease Assumption: $3,300/month through March 31, 2015.
- Stock Put Rights: Option to sell 324,322 shares of common stock and 93,332 stock options at a price based on the 30-day average closing price (Oct 21 - Nov 19, 2014).
Material Changes Versus Prior Period
The primary material change is the transition of executive leadership effective January 1, 2015:
- Appointment: Morgan M. Schuessler, Jr. was appointed President and CEO, effective January 1, 2015. He brings over 20 years of payment industry experience, previously serving as President of International for Global Payments Inc.
- Resignation: Peter Harrington resigned as President, CEO, and Board member, effective December 31, 2014.
- Board Composition: Mr. Schuessler will join the Board of Directors on January 1, 2015.
Outlook, Risks, and Contingencies
Legal Contingency: The filing notes a potential legal risk regarding Mr. Schuessler's prior employment. His previous agreement with Global Payments Inc. contains a two-year non-compete restriction within the United States. EVERTEC intends to file a declaratory judgment action in the San Juan Superior Court to confirm that this restriction does not prohibit Mr. Schuessler from joining the Company in Puerto Rico. The Company has agreed to continue paying Mr. Schuessler's base salary until December 31, 2015, if he is enjoined from working due to this restriction.
Separation Conditions: Mr. Harrington's supplemental termination benefits are contingent upon his execution of a general release of claims and his failure to revoke that release within the seven-day revocation period.
Key Facts for Investor Verification
- Verify the outcome of the declaratory judgment action regarding Mr. Schuessler's non-compete restrictions and potential impact on his start date.
- Review the specific performance metrics for the 75% performance-based RSU grant to Mr. Schuessler, as these are to be established by the Compensation Committee.
- Monitor the exercise of Mr. Harrington's put rights on his stock and options, which must be exercised by December 20, 2014.
- Assess the total cash and equity cost of the leadership transition, including the $3M initial RSU grant and the $1.95M additional RSU grant to the new CEO.