e10vq
 

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2006
OR
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-31648
EURONET WORLDWIDE, INC.
(Exact name of the registrant as specified in its charter)
     
Delaware
(State or other jurisdiction
of incorporation or organization)
  74-2806888
(I.R.S. employer
identification no.)
4601 COLLEGE BOULEVARD, SUITE 300
LEAWOOD, KANSAS 66211
(Address of principal executive offices)
(913) 327-4200
(Registrant’s telephone number, including area code)
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 þ   No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of ‘‘accelerated filer and large accelerated filer’’ in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerþ               Accelerated filero               Non-accelerated filero
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o   No þ
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of the issuer’s common stock, $0.02 par value, outstanding as of July 31, 2006 was 37,233,066 shares.
 
 

 


 

Table of Contents
                 
PART I—FINANCIAL INFORMATION     3  
 
  ITEM 1.   FINANCIAL STATEMENTS     3  
 
  ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS     17  
 
  ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK     35  
 
  ITEM 4.   CONTROLS AND PROCEDURES     36  
PART II—OTHER INFORMATION     36  
 
  ITEM 1.   LEGAL PROCEEDINGS     36  
 
  ITEM 1A.   RISK FACTORS     36  
 
  ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS     38  
 
  ITEM 6.   EXHIBITS     39  

2


 

PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EURONET WORLDWIDE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share and per share data)
                 
    June 30,        
    2006     December 31,  
    (unaudited)     2005 (1)  
ASSETS
               
Current assets:
               
Cash and cash equivalents
  $ 232,723     $ 219,932  
Restricted cash
    87,375       73,942  
Inventory — PINs and other
    32,580       25,595  
Trade accounts receivable, net of allowances for doubtful accounts of $2,217 at June 30, 2006 and $1,995 at December 31, 2005
    148,756       166,451  
Deferred income taxes, net
    3,410       1,812  
Prepaid expenses and other current assets
    26,393       21,211  
 
           
Total current assets
    531,237       508,943  
 
Property and equipment, net of accumulated depreciation of $77,536 at June 30, 2006 and $66,644 at December 31, 2005
    50,075       44,852  
Goodwill
    274,208       267,195  
Acquired intangible assets, net of accumulated amortization of $16,205 at June 30, 2006 and $11,918 at December 31, 2005
    50,502       50,724  
Deferred income taxes
    6,553       6,994  
Other assets, net of accumulated amortization of $8,788 at June 30, 2006 and $7,721 at December 31, 2005
    15,189       15,644  
 
           
 
               
Total assets
  $ 927,764     $ 894,352  
 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities:
               
Trade accounts payable
  $ 184,773     $ 202,655  
Accrued expenses and other current liabilities
    80,938       77,101  
Current portion of capital lease obligations
    6,180       5,431  
Short-term debt obligations and current maturities of long-term debt obligations
    12,803       22,893  
Income taxes payable
    10,164       8,207  
Deferred income taxes
    3,261       3,023  
Deferred revenue
    9,800       8,013  
 
           
 
               
Total current liabilities
    307,919       327,323  
Debt obligations, net of current portion
    324,328       315,000  
Capital lease obligations, net of current portion
    13,713       12,229  
Deferred income taxes
    24,508       25,157  
Other long-term liabilities
    1,842       1,161  
Minority interest
    7,446       7,129  
 
           
Total liabilities
    679,756       687,999  
 
           
 
Stockholders’ equity:
               
Preferred Stock, $0.02 par value. Authorized 10,000,000 shares; none issued
           
Common Stock, $0.02 par value. Authorized 90,000,000 shares at June 30, 2006 and 60,000,000 shares at December 31, 2005; issued and outstanding 37,204,682 shares at June 30, 2006 and 35,776,431 at December 31, 2005
    745       717  
Additional paid-in-capital
    331,828       312,025  
Treasury stock
    (196 )     (196 )
Subscriptions receivable
    (313 )     (124 )
Accumulated deficit
    (84,309 )     (104,787 )
Restricted reserve
    796       776  
Accumulated other comprehensive loss
    (543 )     (2,058 )
 
           
Total stockholders’ equity
    248,008       206,353  
 
           
Total liabilities and stockholders’ equity
  $ 927,764     $ 894,352  
 
           
See accompanying notes to the unaudited consolidated financial statements.
 
(1)   Adjusted to include the retroactively applied effects of SFAS No. 123R share-based compensation expense; see Note 1 — General, Note 2, Significant Accounting Policies and Practices and Note 7 — Stock Plans to the unaudited consolidated financial statements.

3


 

EURONET WORLDWIDE, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Comprehensive Income
(Unaudited, in thousands, except share and per share data)
                                 
    Three Months Ended June 30,     Six Months Ended June 30,  
    2006     2005 (1)     2006     2005 (1)  
Revenues:
                               
EFT Processing
  $ 32,418     $ 26,041     $ 62,286     $ 49,930  
Prepaid Processing
    114,185       102,480       225,146       191,861  
Software Solutions
    7,200       3,724       13,341       7,660  
 
                       
 
                               
Total revenues
    153,803       132,245       300,773       249,451  
 
                       
 
                               
Operating expenses:
                               
Direct operating costs
    105,761       92,157       207,114       174,529  
Salaries and benefits
    19,454       14,979       37,488       28,183  
Selling, general and administrative
    9,277       8,197       17,713       14,335  
Depreciation and amortization
    7,063       5,645       13,882       10,670  
 
                       
 
                               
Total operating expenses
    141,555       120,978       276,197       227,717  
 
                       
 
                               
Operating income
    12,248       11,267       24,576       21,734  
 
                       
 
                               
Other income (expense):
                               
Interest income
    3,387       1,105       6,109       2,312  
Interest expense
    (3,656 )     (1,617 )     (7,253 )     (3,205 )
Income from unconsolidated affiliates
    187       407       358       652  
Foreign exchange gain (loss), net
    2,772       (4,715 )     4,330       (7,557 )
 
                       
 
                               
Other income (expense), net
    2,690       (4,820 )     3,544       (7,798 )
 
                       
 
                               
Income before income taxes and minority interest
    14,938       6,447       28,120       13,936  
Income tax expense
    (3,599 )     (3,471 )     (7,169 )     (7,301 )
Minority interest
    (212 )     (313 )     (473 )     (401 )
 
                       
 
                               
Net income
    11,127       2,663       20,478       6,234  
Translation adjustment
    2,118       (3,621 )     1,515       (5,582 )
 
                       
Comprehensive income (loss)
  $ 13,245     $ (958 )   $ 21,993     $ 652  
 
                       
 
                               
Earnings per share — basic:
                               
Earnings per share
  $ 0.30     $ 0.08     $ 0.56     $ 0.18  
 
                       
Basic weighted average shares outstanding
    37,030,289       35,129,878       36,792,719       34,506,665  
 
                       
 
                               
Earnings per share — diluted (see Note 3):
                               
Earnings per share
  $ 0.28     $ 0.07     $ 0.52     $ 0.17  
 
                       
Diluted weighted average shares outstanding
    42,748,030       37,318,188       42,413,623       36,608,589  
 
                       
See accompanying notes to the unaudited consolidated financial statements.
 
(1)   Adjusted to include the retroactively applied effects of SFAS No. 123R share-based compensation expense; see Note 1 — General, Note 2, Significant Accounting Policies and Practices and Note 7 — Stock Plans to the unaudited consolidated financial statements.

4


 

EURONET WORLDWIDE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited, in thousands)
                 
    Six Months Ended June 30,  
    2006     2005 (1)  
Net income
  $ 20,478     $ 6,234  
 
               
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    13,882       10,670  
Share-based compensation
    3,838       2,687  
Unrealized foreign exchange (gain) loss, net
    (3,685 )     6,913  
Gain on disposal of property and equipment
    (189 )     (97 )
Deferred income tax expense (benefit)
    (2,318 )     667  
Income assigned to minority interest
    473       401  
Income from unconsolidated affiliates
    (358 )     (652 )
Amortization of debt issuance expense
    1,131       639  
 
               
Changes in working capital, net of amounts acquired:
               
Income taxes payable
    2,019       (164 )
Restricted cash
    (10,279 )     (15,460 )
Inventory — PINs and other
    (6,826 )     (11,261 )
Trade accounts receivable
    22,381       (10,366 )
Prepaid expenses and other current assets
    (3,759 )     (11,813 )
Trade accounts payable
    (27,042 )     48,013  
Deferred revenue
    2,025       (3,711 )
Accrued expenses and other current liabilities
    4,091       (1,339 )
Other, net
    (251 )     (1,156 )
 
           
 
               
Net cash provided by operating activities
    15,611       20,205  
 
           
 
               
Cash flows from investing activities:
               
Acquisitions, net of cash acquired
    (2,312 )     (99,410 )
Proceeds from sale of property and equipment
    669       318  
Purchases of property and equipment
    (10,818 )     (7,851 )
Purchases of other long-term assets
    (1,526 )     (1,199 )
 
           
 
               
Net cash used in investing activities
    (13,987 )     (108,142 )
 
           
 
               
Cash flows from financing activities:
               
Proceeds from issuance of shares
    11,685       5,419  
Net borrowings on short-term debt obligations and revolving credit agreements
    505       15,208  
Repayment of capital lease obligations
    (3,084 )     (2,761 )
Other, net
    (180 )     (746 )
 
           
 
               
Net cash provided by financing activities
    8,926       17,120  
 
           
 
               
Effect of exchange differences on cash
    2,241       (3,048 )
 
           
 
               
Increase (decrease) in cash and cash equivalents
    12,791       (73,865 )
Cash and cash equivalents at beginning of period
    219,932       124,198  
 
           
 
               
Cash and cash equivalents at end of period
  $ 232,723     $ 50,333  
 
           
 
               
Interest paid during the period
  $ 6,245     $ 2,484  
Income taxes paid during the period
    5,237       7,619  
See accompanying notes to the unaudited consolidated financial statements.
 
(1)   Adjusted to include the retroactively applied effects of SFAS No. 123R share-based compensation expense; see Note 1 — General, Note 2, Significant Accounting Policies and Practices and Note 7 — Stock Plans to the unaudited consolidated financial statements.

5


 

EURONET WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) GENERAL
Basis of presentation
The accompanying unaudited consolidated financial statements of Euronet Worldwide, Inc. and its subsidiaries (“Euronet” or the “Company”) have been prepared from the records of the Company, in conformity with U.S. generally accepted accounting principles and pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, such unaudited consolidated financial statements contain all adjustments (consisting of normal interim closing procedures) necessary to present fairly the financial position of the Company as of June 30, 2006, the results of its operations for the three- and six-month periods ended June 30, 2006 and 2005 and cash flows for the six-month periods ended June 30, 2006 and 2005.
The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements of Euronet for the year ended December 31, 2005, including the notes thereto, set forth in the Company’s Form 10-K. Certain prior year amounts have been reclassified to conform to the current period consolidated financial statement presentation.
The Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment,” (“SFAS No. 123R”) on January 1, 2006. The Company elected to adopt SFAS No. 123R utilizing the modified retrospective application method and, accordingly, financial statement amounts for the prior periods presented in this Form 10-Q have been adjusted to reflect the fair value method of expensing prescribed by SFAS No. 123R. See Note 2 — Significant Accounting Policies and Practices and Note 7 — Stock Plans for further discussion.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The results of operations for the three- and six-month periods ended June 30, 2006 are not necessarily indicative of the results to be expected for the full year ending December 31, 2006.
(2) SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
Share-based compensation
Effective January 1, 2006, the Company adopted the provisions of SFAS No. 123R, which is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation,” and supersedes Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS No. 123R requires the determination of the fair value of the share-based compensation at the grant date and the recognition of the related expense over the period in which the share-based compensation vests (“requisite service period”). The Company elected to adopt the modified retrospective application method as provided by SFAS No. 123R and, accordingly, financial statement amounts for the prior periods presented in this Form 10-Q have been adjusted to reflect the fair value method of expensing prescribed by SFAS No. 123R. The Company believes that this method achieves the highest level of clarity and comparability among the presented periods.
As a result of adopting SFAS No. 123R, the Company’s deferred tax assets related to U.S. Federal and state net operating loss carryforwards, reported for U.S. GAAP purposes, and deferred compensation, increased by an estimated $8.1 million as of December 31, 2005. The Company’s initial estimate remains preliminary while management completes its analysis. However, since the Company records a valuation allowance for its entire U.S. net deferred tax asset position, upon adoption of SFAS No. 123R, the amount of net deferred tax assets did not, and is not expected to, change. The Company has chosen to use the Black-Scholes pricing model for the determination of fair value for future stock option grants. The amount of future compensation expense related to restricted share awards will continue to be based on the share price at the grant date. Share-based compensation expense is generally recognized as an expense of the Corporate division on a “straight-line” basis over the requisite service period. For awards with performance conditions, expense is recognized on a “graded attribution method.” The graded attribution method results in expense recognition on a straight-line basis over the requisite service period for each separately vesting portion of an award, as if the award was, in-substance, multiple awards. See Note 7 — Stock Plans for further disclosure.
For a description of other significant accounting policies of the Company, see Note 3 to the Audited Consolidated Financial Statements as of and for the year ended December 31, 2005, set forth in the Company’s Annual Report on Form 10-K.
Recent accounting pronouncements
In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes.” FIN 48 is an interpretation of SFAS No. 109, “Accounting for Income Taxes,” and seeks to reduce the diversity in practice associated with certain aspects of the measurement and recognition related to accounting for income taxes. This

6


 

interpretation also requires expanded disclosure with respect to uncertain tax positions. The provisions of FIN 48 will be effective for the Company beginning January 1, 2007. The Company is in the process of determining the effect, if any, that the adoption of FIN 48 will have on its financial statements.
(3) EARNINGS PER SHARE
Basic earnings per share has been computed by dividing income available to common stockholders by the weighted average number of common shares outstanding during the respective period. Diluted earnings per share reflect the weighted-average shares outstanding during the respective period, after adjusting for the potential dilution upon the assumed conversion of the Company’s convertible debentures, options to purchase the Company’s common stock, restricted stock and shares issuable in connection with acquisition obligations. The following table provides a reconciliation of the weighted average number of common shares outstanding to the diluted weighted average number of common shares outstanding and a reconciliation of net income to net income available to common stockholders:
                                 
    Three Months Ended June 30,     Six Months Ended June 30,  
(dollar amounts in thousands)   2006     2005 (1)     2006     2005 (1)  
Basic weighted average shares outstanding
    37,030,289       35,129,878       36,792,719       34,506,665  
Additional shares from assumed conversion of 1.625% convertible debentures
    4,162,950             4,162,950        
Weighted average shares issuable in connection with acquisition obligations (See Note 4 - Acquisitions)
    91,285             73,028        
Incremental shares from assumed conversion of stock options and restricted stock (1)
    1,463,506       2,188,310       1,384,926       2,101,924  
 
                       
 
Potentially diluted weighted average shares outstanding
    42,748,030       37,318,188       42,413,623       36,608,589  
 
                       
 
                               
Net income
  $ 11,127     $ 2,663     $ 20,478     $ 6,234  
Add: interest expense of 1.625% convertible debentures
    797             1,594        
 
                       
 
Earnings available to common stockholders
  $ 11,924     $ 2,663     $ 22,072     $ 6,234  
 
                       
 
(1)   As a result of the adoption of SFAS No. 123R, the computation of incremental shares from the assumed conversion of stock options changed. The amount previously reported for the three- and six-month periods ended June 30, 2005 was 2,615,396 and 2,514,894 incremental shares, respectively, from the conversion of stock options.
For the three- and six-month periods ended June 30, 2006 and 2005, the average market price of Euronet common stock exceeded the exercise price of all stock options outstanding.
The Company has $140 million of 1.625% convertible debentures due 2024 and $175 million of 3.50% convertible debentures due 2025 outstanding that, if converted, would have a potentially dilutive effect on the Company’s stock. These debentures are convertible into 4.2 million shares of Common Stock for the $140 million 1.625% issue, and 4.3 million shares of Common Stock for the $175 million 3.50% issue, initially in December 2009 and October 2012, respectively, or earlier upon the occurrence of certain conditions. As required by EITF Issue No. 04-8, “The Effect of Contingently Convertible Debt on Diluted Earnings per Share,” if dilutive, the impact of the contingently issuable shares must be included in the calculation of diluted net income per share under the “if-converted” method, regardless of whether the conditions upon which the debentures would be convertible into shares of the Company’s Common Stock have been met. Under the if-converted method, the assumed conversion of the 1.625% convertible debentures was dilutive for the three- and six-month periods ended June 30, 2006 and anti-dilutive for the three- and six-month periods ended June 30, 2005. Accordingly, the impact has been included in the above computation of potentially diluted weighted average shares outstanding for the three- and six-month periods ended June 30, 2006 and excluded from the above computation for the three- and six-month periods ended June 30, 2005. Under the if-converted method, the assumed conversion of the 3.50% convertible debentures, issued October 2005, was anti-dilutive for the three- and six-month periods ended June 30, 2006 and, accordingly, the impact has been excluded from the above computation of potentially dilutive weighted average shares outstanding. The 3.50% convertible debentures were not outstanding for the three- and six-month periods ended June 30, 2005.
(4) ACQUISITIONS
In accordance with SFAS No. 141, “Business Combinations,” the Company allocates the purchase price of its acquisitions to the tangible assets, liabilities and intangible assets acquired based on estimated fair values. The excess purchase price over those fair values is recorded as goodwill. The fair value assigned to intangible assets acquired is supported by valuations using estimates and assumptions provided by management. For certain large or unique acquisitions management engaged an appraiser to assist in the valuation.

7


 

2006 Acquisitions:
In January 2006, the Company completed the acquisition of the assets of Essentis Limited (“Essentis”) for approximately $3.0 million, which was comprised of $0.9 million in cash and approximately $2.1 million in assumed liabilities. Essentis is a U.K. company that owns a card issuing and merchant acquiring software package that will enhance Euronet’s outsourcing and software offerings to banks. Essentis is reported in the Company’s Software Solutions Segment. The Company’s allocation of the purchase price to the fair values of acquired tangible and intangible assets is preliminary and remains so while management completes its valuation of the fair value of the net assets acquired. The following table summarizes the estimated allocation of the purchase price to the fair values of the acquired tangible and intangible assets at the acquisition date:
                 
    Estimated        
(dollar amounts in thousands)   Life     Essentis  
Property and equipment
  various
  $ 573  
Software
  5 years
    2,467  
 
             
Assets acquired
          $ 3,040  
 
             
There are no potential additional purchase price or escrow arrangements associated with the acquisition of Essentis.
2005 Acquisitions:
During 2005, the Company completed seven acquisitions for an aggregate purchase price of approximately $119.1 million. The Company’s allocation of the purchase price to the fair values of acquired tangible and intangible assets for certain acquisitions are preliminary and remain so while management completes its valuation of the fair value of the net assets acquired. The following table summarizes the allocation of the purchase price, including $2.9 million paid in prior years for acquisitions accounted for as step acquisitions, to the fair values of the acquired tangible and intangible assets at the acquisition dates.
                                 
    Estimated             Other        
(dollar amounts in thousands)   Life     Telerecarga     Acquisitions     Total  
Current assets
          $     $ 3,841     $ 3,841  
Property and equipment
  various
    1,415       1,412       2,827  
Customer relationships
  8 or 9 years
    10,295       14,703       24,998  
Software
  5 years
    655       900       1,555  
Patent
  7 years
          1,699       1,699  
Trade name
  2 years
    254             254  
Non-compete agreements
  5 years
    147             147  
Deferred income tax asset
                  1,055       1,055  
Goodwill
  Indefinite
    42,144       53,513       95,657  
 
                         
Assets acquired
            54,910       77,123       132,033  
 
                               
Current liabilities
                  (687 )     (687 )
Deferred income tax liability
            (3,892 )     (5,442 )     (9,334 )
 
                         
Net assets acquired
          $ 51,018     $ 70,994     $ 122,012  
 
                         
Acquisition of Telerecarga S.L.
In March 2005, to supplement the Company’s prepaid processing business in Spain, Euronet purchased 100% of the assets of Telerecarga S.L. (“Telerecarga”), a Spanish company that distributes prepaid mobile airtime and other prepaid products via Point of Sale (“POS”) terminals throughout Spain. The purchase price of 38.1 million (approximately $51.0 million) was settled through the assumption of 25.4 million (approximately $34.0 million) in liabilities and cash payments of 12.7 million (approximately $17.0 million).
Other acquisitions
During 2005, Euronet completed six other acquisitions described below for a total purchase price of $68.1 million, comprised of $39.6 million in cash, 864,131 shares of Euronet Common Stock, valued at $23.6 million and $4.9 million in liabilities assumed. Additionally, the purchase price for acquisitions accounted for as step acquisitions, in accordance with SFAS No. 141, include $2.9 million paid in prior years.

8


 

    In December 2005, EFT Services Holding B.V. (a wholly-owned subsidiary of Euronet) purchased 6.25% of Euronet Services Private Limited, the Company’s subsidiary in India (“Euronet India”), increasing its share ownership of Euronet India to 100%. Euronet India is included in the Company’s EFT Processing Segment and, since the Company’s ownership share previously exceeded 50%, has been a consolidated subsidiary since inception.
 
    In two separate transactions, one in April 2005 and one in December 2005, EFT Services Holding B.V. (a wholly-owned subsidiary of Euronet) purchased an additional 64% of Europlanet a.d. (“Europlanet”), a Serbian company, increasing its share ownership in Europlanet to 100%. Europlanet is an ATM and card processor that owns, operates and manages a network of ATMs and POS terminals. Upon obtaining a controlling interest in April 2005, Euronet began consolidating Europlanet’s financial position and results of operations. Euronet’s $0.2 million share of dividends declared prior to acquiring a controlling ownership share of Europlanet was recognized as income from unconsolidated affiliates during 2005.
 
    In October 2005, Euronet EFT Services Hellas EPE (a wholly-owned subsidiary of Euronet) acquired all of the share capital of Instreamline S.A. (“Instreamline”), a Greek company that provides card processing services in addition to debit card and transaction gateway switching services in Greece and the Balkan region. Instreamline will complement the Company’s EFT Processing Segment. Subsequent to the acquisition, Instreamline was renamed Euronet Card Services Greece.
 
    In May 2005, Euronet acquired all of the outstanding membership interests in Continental Transfer, LLC and a wholly-owned subsidiary, TelecommUSA, Limited (“TelecommUSA”), a company based in North Carolina. TelecommUSA provides money transfer services, primarily to consumers in the U.S. to destinations in Latin America, and bill payment services within the U.S. This acquisition launched the Company’s money transfer and bill payment business.
 
    In March 2005, to enhance the Company’s U.S. prepaid processing business, PaySpot (a wholly-owned subsidiary of Euronet) purchased substantially all of the assets of Dynamic Telecom, Inc. (“Dynamic Telecom”), a company based in Iowa. Dynamic Telecom’s distribution network in convenience store chains throughout the U.S. provides several types of prepaid products including wireless, long distance and gift cards via POS terminals.
 
    In March 2005, the Company exercised its option to acquire an additional 41% of the shares of ATX Software, Ltd. (“ATX”) and increased its share ownership in ATX to 51%. Euronet originally acquired a 10% share in ATX in May 2004. Euronet’s $0.1 million share of dividends declared prior to acquiring the additional 41% ownership share of ATX was recognized as income from unconsolidated affiliates during 2005. Upon the increase in ownership from 10% to 51%, Euronet consolidated ATX’s financial position and results of operations.
In connection with these six acquisitions, $3.5 million in cash remains in escrow. This cash has been reflected in the purchase price allocation because the Company has determined beyond a reasonable doubt that the performance criteria will be met. During the six-month period ending June 30, 2006, the Company issued 109,542 shares of Euronet Common Stock, valued at $4.1 million, in settlement of contingent payment arrangements associated with the Company’s 2005 acquisitions. This settlement was recorded as an increase in goodwill.
Pro Forma results:
The following unaudited pro forma financial information presents the condensed combined results of operations of Euronet for the three- and six-month periods ended June 30, 2006 and 2005, as if the acquisitions described above had occurred January 1, 2005. An adjustment was made to the combined results of operations, reflecting amortization of purchased intangible assets, net of tax, which would have been recorded if the acquisitions had occurred on January 1, 2005. The unaudited pro forma financial information is not intended to represent, or be indicative of, the consolidated results of operations or financial condition of Euronet that would have been reported had the acquisitions been completed as of the beginning of the periods presented. Moreover, the unaudited pro forma financial information should not be considered as representative of the future consolidated results of operations or financial condition of Euronet.
                                 
    Pro Forma for the Three Months   Pro Forma for the Six Months
    Ended June 30,   Ended June 30,
(amounts in thousands, except per share data)   2006   2005   2006   2005
Revenues
  $ 153,803     $ 137,221     $ 300,773     $ 268,704  
Operating income
  $ 12,248     $ 9,370     $ 24,576     $ 18,680  
Net income
  $ 11,127     $ 1,302     $ 20,478     $ 3,803  
 
                               
Per share data:
                               
Earnings per share-basic
  $ 0.30     $ 0.04     $ 0.56     $ 0.11  
Earnings per share-diluted
  $ 0.28     $ 0.03     $ 0.52     $ 0.10  

9


 

(5) GOODWILL AND INTANGIBLE ASSETS
Intangible assets are carried at amortized cost, and goodwill, which is not amortized, is carried at cost. Intangible assets and goodwill are evaluated for impairment annually or more frequently if there is an indication of impairment. Goodwill represents the excess of the purchase price of the acquired businesses over the fair value of the underlying net tangible and intangible assets acquired. A summary of intangible assets and goodwill activity for the six-month period ended June 30, 2006, is presented below:
                         
    Amortizable             Total  
    Intangible             Intangible  
(in thousands):   Assets     Goodwill     Assets  
 
Balance as of January 1, 2006
  $ 50,724     $ 267,195     $ 317,919  
Increases (decreases):
                       
Acquisition of Essentis
    2,467             2,467  
Earn-out payment related to Dynamic Telecom acquisition
          4,126       4,126  
Adjustments to other 2005 acquisitions
    232       (611 )     (379 )
Amortization
    (4,134 )           (4,134 )
Other (primarily changes in foreign currency exchange rates)
    1,213       3,498       4,711  
 
                 
 
Balance as of June 30, 2006
  $ 50,502     $ 274,208     $ 324,710  
 
                 
Estimated annual amortization expense on intangible assets with finite lives, before income taxes, as of June 30, 2006 is expected to be $8.3 million for 2006, $8.3 million for 2007, $8.1 million for 2008, $8.1 million for 2009, $8.0 million for 2010 and $6.1 million for 2011.
(6) DEBT OBLIGATIONS
A summary of the activity for the six-month period ended June 30, 2006 for all debt obligations is presented below:
                                                 
                            1.625%     3.50%        
    Revolving                     Convertible     Convertible        
    Credit     Other Debt     Capital     Debentures     Debentures        
(in thousands)   Facilities     Obligations     Leases     Due 2024     Due 2025     Total  
Balance at January 1, 2006
  $ 7,343     $ 15,550     $ 17,660     $ 140,000     $ 175,000     $ 355,553  
Increases (decreases):
                                               
Indebtedness incurred
    7,146       1,548       5,204                   13,898  
Repayments
    (7,919 )     (2,040 )     (4,000 )                 (13,959 )
Capital lease interest accrued
                916                   916  
Foreign exchange loss
    123       380       113                   616  
 
                                   
Balance at June 30, 2006
    6,693       15,438       19,893       140,000       175,000       357,024  
 
                                               
Less — current maturities
          (12,803 )     (6,180 )                 (18,983 )
 
                                   
 
Long-term obligations at June 30, 2006
  $ 6,693     $ 2,635     $ 13,713     $ 140,000     $ 175,000     $ 338,041  
 
                                   
During the second quarter 2006 the Company amended its October 2004, $50 million revolving credit agreement to extend the maturity date to May 26, 2009 and established a new credit facility in India maturing on May 26, 2009. The amended facility also increased the number of participating financial institutions from one to three. The credit agreement, as amended, comprises the following:
    A $10 million facility is to be used by the Company and certain U.S. subsidiaries (the “U.S. facility”) and drawn in U.S. dollars. This facility bears interest at either (i) the prime rate plus an applicable margin specified in the respective agreement, or (ii) a fixed rate equal to the U.S. dollar London Interbank Offered Rate (“LIBOR”), plus an applicable margin set forth in the agreement, and varies based on a consolidated funded debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio, adjusted for certain other items as defined in the agreements. Fixed rate borrowings are made with maturities of one month, two months or three months. The U.S. facility is secured by approximately 65% of the share capital of Euronet Services Holding B.V. and the share capital of a majority of the Company’s U.S. subsidiaries.
 
    A $30 million facility for use by the Company and certain European subsidiaries (the “European facility”). The European facility is a multi-currency facility that may be drawn in any combination of U.S. dollar, euro or British pound denominations. U.S. dollar draws are subject to interest charges similar to the $10 million U.S. facility described above. Borrowings in euro or

10


 

      British pounds bear interest at a rate fixed to the Euro Interbank Offered Rate (“EURIBOR”) or LIBOR rate, respectively, plus a margin that varies based on a consolidated debt to EBITDA ratio, plus ancillary costs. Fixed rate borrowings are made with maturities of one month, two months or three months. Borrowings under this facility are secured by the share capital of e-pay Ltd., Euronet Services GmbH, Transact GmbH and Delta Euronet GmbH, and are secured and guaranteed by a majority of the Company’s U.S. subsidiaries.
 
    A $10 million facility, to be drawn in Indian rupees, for use by the Company’s Indian subsidiary (the “Rupee facility”). Borrowings under the Rupee facility either (i) bear interest at a floating rate equal to the Indian prime lending rate or the Mumbai Interbank Offered Rate (“MIBOR”), plus an applicable margin, or (ii) at a fixed MIBOR rate plus an applicable margin. Fixed rate borrowings are made with maturities of one month, two months or three months. Borrowings under this facility are unsecured and guaranteed by Euronet Worldwide, Inc.
The agreement allows the Company to elect to increase the aggregate commitments under the credit facility from $50 million to $65 million. The borrowings under the agreement may be used to refinance debt, for working capital needs, for permitted acquisitions and for other general corporate purposes. The agreement places certain restrictions on use of the facility to finance investments in, or operations of, “money services businesses” such as those engaged in money transfer activities. The agreement contains customary events of cross-default and covenants related to limitations on indebtedness and the maintenance of certain financial ratios. Total debt issuance costs of $0.3 million are being amortized over three years.
As of June 30, 2006, there were borrowings of $6.7 million and stand-by letters of credit of $5.6 million outstanding against these facilities. As a result of the amendment to the revolving credit facility described above, borrowings under the facilities are classified as long-term debt obligations in the unaudited consolidated balance sheet as of June 30, 2006.
(7) STOCK PLANS
The Company has established, and shareholders have approved, a share compensation plan (the “SCP”) that allows the Company to grant restricted shares, or options to purchase shares, of its Common Stock to certain current and prospective key employees, directors and consultants of the Company. These awards generally vest over periods ranging from three to seven years from the date of grant and are generally exercisable during the shorter of a ten-year term or the term of employment or consulting arrangements with the Company. As of June 30, 2006, the Company reserved 13,663,991 shares of Common Stock, including 4,000,000 approved during the three-month period ended June 30, 2006, of which 9,497,340 have been awarded to employees.
(a) Adoption of SFAS No. 123R
As discussed in Note 1 and Note 2, the Company elected to adopt SFAS No. 123R under the modified retrospective application method applied to all periods for which SFAS No 123 was effective. Accordingly, financial statement amounts for the prior periods presented in this Form 10-Q have been adjusted to reflect the fair value method of expensing prescribed by SFAS No. 123R. The following table outlines the impact of adopting SFAS No. 123R on previously reported results:
                         
    As Previously   Impact of    
(in thousands, except per share data)   Reported   Adoption   As Adjusted
 
For Three Months Ended June 30, 2005:
                       
Income before income taxes and minority interest
  $ 7,702     $ (1,255 )   $ 6,447  
Net income
  $ 3,918     $ (1,255 )   $ 2,663  
 
                       
Earnings per share:
                       
Basic
  $ 0.11     $ (0.03 )   $ 0.08  
Diluted
  $ 0.10     $ (0.03 )   $ 0.07  
 
                       
For Six Months Ended June 30, 2005:
                       
Income before income taxes and minority interest
  $ 16,446     $ (2,510 )   $ 13,936  
Net income
  $ 8,744     $ (2,510 )   $ 6,234  
 
                       
Earnings per share:
                       
Basic
  $ 0.25     $ (0.07 )   $ 0.18  
Diluted
  $ 0.24     $ (0.07 )   $ 0.17  
 
                       
As of December 31, 2005:
                       
Additional paid-in capital
  $ 279,307     $ 32,718     $ 312,025  
Accumulated deficit
  $ (72,069 )   $ (32,718 )   $ (104,787 )

11


 

Changes to the Company’s consolidated statement of cash flows for the six-month period ended June 30, 2005 for the adoption of SFAS No. 123R were limited to the impact on net income shown above and the offsetting adjustment for share-based compensation as a non-cash expense.
The Company’s consolidated statements of income and comprehensive income includes share-based compensation expense of $1.9 million and $1.3 million for the three-month periods ended June 30, 2006 and 2005, respectively, and $3.8 million and $2.7 million for the six-month periods ended June 30, 2006 and 2005, respectively. This is recorded as salaries and benefits expense. Of these amounts, approximately $0.1 million and $0.2 million was recorded as expense of the Company’s business segments during the six-month periods ended June 30, 2006 and 2005, respectively. The Company recorded a tax benefit of $0.1 million and $0.2 million during the three- and six-month periods ended June 30, 2006, respectively, for the portion of this expense that relates to foreign tax jurisdictions in which an income tax benefit is expected to be derived. The Company did not record a tax benefit for the three- and six-month periods ended June 30, 2005.
(b) Stock options
Summary stock options activity is presented in the table below:
                                 
                    Weighted        
            Weighted     Average     Aggregate  
            Average     Remaining     Intrinsic  
    Number of     Exercise     Contractual     Value  
    Shares     Price     Term     (thousands)  
 
Outstanding at January 1, 2006
    3,803,261     $ 11.91     6.2 years
  $ 60,439  
Exercised
    (1,273,026 )     8.56             $ 30,262  
Forfeited
    (75,914 )     19.08             $ 2,608  
 
                             
Outstanding at June 30, 2006
    2,454,321     $ 13.51     6.3 years
  $ 61,016  
 
                             
 
                               
Exercisable at January 1, 2006
    2,142,090     $ 8.75     5.2 years
  $ 40,807  
 
                             
 
                               
Exercisable at June 30, 2006
    1,283,158     $ 10.92     5.7 years
  $ 35,227  
 
                             
There were no options granted during the six-month period ended June 30, 2006. The Company received cash of $10.9 million in connection with stock options exercised during the six-month period ended June 30, 2006. As of June 30, 2006, unrecognized compensation expense related to nonvested stock options totaled $5.2 million and will be recognized over the next 30 months, with an overall weighted average period of one year.
(c) Restricted stock
Restricted stock awards vest based on the achievement of time-based service conditions and/or performance-based conditions. For certain awards, vesting is based on the achievement of one or more than one condition of an award with multiple time-based and/or performance-based conditions. The assumed annual forfeiture rate for restricted stock awards is 5%.
During the six-month period ended June 30, 2006, 240,000 restricted shares were granted, 20,100 restricted shares were forfeited and 9,763 restricted shares vested. A summary of restricted stock outstanding as of June 30, 2006 is presented in the table below:
                                 
            Weighted           Unrecognized
            Average           Compensation
            Remaining   Aggregate   Cost on
    Number of   Vesting Period   Intrinsic   Unvested
(dollar amounts in thousands)   Shares   (years)   Value   Shares
 
Restricted stock vesting based on continued employment
    317,270       5.6     $ 12,174     $ 8,276  
 
                               
Restricted stock vesting based on achievement of performance criteria
    435,930       5.0     $ 16,727     $ 11,705  

12


 

(d) Employee stock purchase plans
In 2003, the Company established a qualified Employee Stock Purchase Plan (the “ESPP”), which allows qualified employees (as defined by the plan documents) to participate in the purchase of rights to purchase designated shares of the Company’s Common Stock at a price equal to the lower of 85% of the closing price at the beginning or end of each quarterly offering period. The Company reserved 500,000 shares of Common Stock for purchase under the ESPP. Pursuant to the ESPP, during the six-month period ended June 30, 2006 the Company issued 23,112 rights to purchase shares of Common Stock at an average price per share of $26.59. The following table provides the weighted average fair value of the ESPP stock purchase rights during the six-month period ended June 30, 2006 and the assumptions used to calculate the fair value using the Black-Scholes pricing model:
         
    Six Months
    Ended June 30,
    2006
Volatility
    32.1 %
Risk-free interest rates
    4.0 %
Dividend yield
    0.0 %
Expected lives
  3 months
Weighted-average fair value (per share)
  $ 5.36  
(8) BUSINESS SEGMENT INFORMATION
The Company operates in three principal business segments.
  1)   Through the EFT Processing Segment, the Company processes transactions for a network of ATMs and POS terminals across Europe, Asia and Africa. The Company provides comprehensive electronic payment solutions consisting of ATM network participation, outsourced ATM and POS management solutions and electronic recharge services (for prepaid mobile airtime purchases via ATM or directly from the handset).
 
  2)   Through the Prepaid Processing Segment, the Company provides prepaid processing, or top-up services, for prepaid mobile airtime and other prepaid products. The Company operates a network of POS terminals providing electronic processing of prepaid mobile airtime services in the U.S., Europe, Africa and Asia Pacific. This segment includes the results of Euronet Payments & Remittance, Inc., a licensed money transfer and bill payment company.
 
  3)   Through the Software Solutions Segment, the Company offers a suite of integrated electronic financial transaction (“EFT”) software solutions for electronic payment and transaction delivery systems.
In addition, in its administrative division, “Corporate Services, Eliminations and Other,” the Company accounts for non-operating results, certain intercompany eliminations and the costs of providing corporate and other administrative services to the three business segments. These services are not directly identifiable with the Company’s business segments. During the second quarter and first half of 2006 the Company’s Software Solutions Segment recorded intersegment revenues of $0.6 million in relation to software and services provided to EFT Processing Segment entities. Salaries and benefits expense related to share-based compensation is generally recorded as a corporate expense.

13


 

The following tables present the segment results of the Company’s operations for the three- and six-month periods ended June 30, 2006 and 2005:
                                         
    For the Three Months Ended June 30, 2006  
                            Corporate        
                            Services,        
    EFT     Prepaid     Software     Eliminations        
(in thousands)   Processing     Processing     Solutions     and Other     Consolidated  
Total revenues
  $ 32,418     $ 114,185     $ 7,762     $ (562 )   $ 153,803  
 
                             
 
Operating expenses:
                                       
Direct operating costs
    13,591       91,770       400             105,761  
Salaries and benefits
    4,983       6,205       4,458       3,808       19,454  
Selling, general and administrative
    2,835       4,537       1,090       815       9,277  
Depreciation and amortization
    3,018       3,552       448       45       7,063  
 
                             
 
Total operating expenses
    24,427       106,064       6,396       4,668       141,555  
 
                             
 
Operating income (loss)
    7,991       8,121       1,366       (5,230 )     12,248  
 
                             
 
Other income (expense):
                                       
Interest income
    103       1,051       23       2,210       3,387  
Interest expense
    (700 )     (338 )     (14 )     (2,604 )     (3,656 )
Income (loss) from unconsolidated affiliates
    (631 )     356             462       187  
Foreign exchange gain, net
                      2,772       2,772  
 
                             
 
Total other income (expense)
    (1,228 )     1,069       9       2,840       2,690  
 
                             
 
Income (loss) before income taxes and minority interest
  $ 6,763     $ 9,190     $ 1,375     $ (2,390 )   $ 14,938  
 
                             
                                         
    For the Three Months Ended June 30, 2005  
                            Corporate        
                            Services,        
    EFT     Prepaid     Software     Eliminations        
(in thousands)   Processing     Processing     Solutions     and Other (1)     Consolidated  
Total revenues
  $ 26,041     $ 102,480     $ 3,724     $     $ 132,245  
 
                             
 
Operating expenses:
                                       
Direct operating costs
    10,756       81,053       348             92,157  
Salaries and benefits
    4,169       6,030       2,152       2,628       14,979  
Selling, general and administrative
    2,447       4,105       186       1,459       8,197  
Depreciation and amortization
    2,415       2,956       259       15       5,645  
 
                             
 
Total operating expenses
    19,787       94,144       2,945       4,102       120,978  
 
                             
 
Operating income (loss)
    6,254       8,336       779       (4,102 )     11,267  
 
                             
 
Other income (expense):
                                       
Interest income
    60       889             156       1,105  
Interest expense
    (521 )     (132 )           (964 )     (1,617 )
Income from unconsolidated affiliates
    202       205                   407  
Foreign exchange loss, net
                      (4,715 )     (4,715 )
 
                             
 
Total other income (expense)
    (259 )     962             (5,523 )     (4,820 )
 
                             
 
Income (loss) before income taxes and minority interest
  $ 5,995     $ 9,298     $ 779     $ (9,625 )   $ 6,447  
 
                             

14


 

                                         
    For the Six Months Ended June 30, 2006  
                            Corporate        
                            Services,        
    EFT     Prepaid     Software     Eliminations        
(in thousands)   Processing     Processing     Solutions     and Other     Consolidated  
Total revenues
  $ 62,286     $ 225,146     $ 13,916     $ (575 )   $ 300,773  
 
                             
 
Operating expenses:
                                       
Direct operating costs
    26,017       180,257       840             207,114  
Salaries and benefits
    9,297       12,489       8,382       7,320       37,488  
Selling, general and administrative
    5,589       8,383       2,068       1,673       17,713  
Depreciation and amortization
    5,963       6,936       895       88       13,882  
 
                             
 
Total operating expenses
    46,866       208,065       12,185       9,081       276,197  
 
                             
 
Operating income (loss)
    15,420       17,081       1,731       (9,656 )     24,576  
 
                             
 
Other income (expense):
                                       
Interest income
    165       2,029       24       3,891       6,109  
Interest expense
    (1,343 )     (704 )     (14 )     (5,192 )     (7,253 )
Income (loss) from unconsolidated affiliates
    (810 )     706             462       358  
Foreign exchange gain, net
                      4,330       4,330  
 
                             
 
Total other income (expense)
    (1,988 )     2,031       10       3,491       3,544  
 
                             
 
Income (loss) before income taxes and minority interest
  $ 13,432     $ 19,112     $ 1,741     $ (6,165 )   $ 28,120  
 
                             
 
Total assets as of June 30, 2006
  $ 139,758     $ 588,463     $ 15,863     $ 183,680     $ 927,764  
 
                             
                                         
    For the Six Months Ended June 30, 2005  
                            Corporate        
                            Services,        
    EFT     Prepaid     Software     Eliminations        
(in thousands)   Processing     Processing     Solutions     and Other (1)     Consolidated  
Total revenues
  $ 49,930     $ 191,861     $ 7,660     $     $ 249,451  
 
                             
 
Operating expenses:
                                       
Direct operating costs
    21,590       152,332       607             174,529  
Salaries and benefits
    7,872       10,933       4,279       5,099       28,183  
Selling, general and administrative
    3,755       7,225       576       2,779       14,335  
Depreciation and amortization
    4,880       5,199       541       50       10,670  
 
                             
 
Total operating expenses
    38,097       175,689       6,003       7,928       227,717  
 
                             
 
Operating income (loss)
    11,833       16,172       1,657       (7,928 )     21,734  
 
                             
 
Other income (expense):
                                       
Interest income
    106       1,798             408       2,312  
Interest expense
    (1,090 )     (286 )           (1,829 )     (3,205 )
Income from unconsolidated affiliates
    202       318             132       652  
Foreign exchange loss, net
                      (7,557 )     (7,557 )
 
                             
 
Total other income (expense)
    (782 )     1,830             (8,846 )     (7,798 )
 
                             
 
Income (loss) before income taxes and minority interest
  $ 11,051     $ 18,002     $ 1,657     $ (16,774 )   $ 13,936  
 
                             
 
Total assets as of December 31, 2005
  $ 124,772     $ 477,893     $ 6,308     $ 285,379     $ 894,352  
 
                             
 
(1)   As discussed previously, in connection with the adoption of SFAS No. 123R, the Company adjusted its previously reported results to include the impact of share-based compensation expense.

15


 

(9) CONTINGENCIES
From time to time, the Company is a party to litigation arising in the ordinary course of its business.
During 2005, a former cash supply contractor in Central Europe (the “Contractor”) claimed that the Company owed it approximately $2.0 million for the provision of cash during the fourth quarter 1999 and first quarter 2000 that has not been returned. This claim, based on events that purportedly occurred over five years ago, was made more than a year after the Company had terminated its business with the Contractor and established a cash supply agreement with another supplier. In the first quarter 2006, the Contractor initiated legal action in Budapest, Hungary regarding the claim. Management expects the Company to prevail in defending itself in this matter and, accordingly has not recorded any liability or expense related to this claim. The Company will continue to monitor and assess this claim until ultimate resolution.
Currently, there are no other legal proceedings that management believes, either individually or in the aggregate, would have a material adverse effect upon the consolidated results of operations or financial condition of the Company.
(10) GUARANTEES
As of June 30, 2006, the Company had $26.7 million of bank guarantees issued on its behalf, of which $12.0 million are collateralized by cash deposits held by the respective issuing banks.
Euronet Worldwide, Inc. regularly grants guarantees of the obligations of its wholly-owned subsidiaries. As of June 30, 2006, the Company had granted guarantees in the following amounts:
    Cash in various ATM networks — $18.8 million over the terms of the cash supply agreements.
    Commercial obligations of the Company’s Australian Prepaid Processing subsidiary, including PIN inventory held on consignment with our customers, to a maximum of approximately $45 million.
    Other vendor supply agreements — $17.8 million over the term of the vendor agreements.
From time to time, Euronet enters into agreements with unaffiliated parties that contain indemnification provisions, the terms of which may vary depending on the negotiated terms of each respective agreement. The amount of such obligations is not stated in the agreements. Our liability under such indemnification provision may be subject to time and materiality limitations, monetary caps and other conditions and defenses. Such indemnity obligations include the following:
    In connection with the license of proprietary systems to customers, Euronet provides certain warranties and infringement indemnities to the licensee, which generally warrant that such systems do not infringe on intellectual property owned by third parties and that the systems will perform in accordance with their specifications;
 
    Euronet has entered into purchase and service agreements with our vendors and into consulting agreements with providers of consulting services, pursuant to which the Company has agreed to indemnify certain of such vendors and consultants, respectively, against third-party claims arising from the Company’s use of the vendor’s product or the services of the vendor or consultant;
 
    In connection with acquisitions and dispositions of subsidiaries, operating units and business assets, the Company has entered into agreements containing indemnification provisions, which can be generally described as follows: (i) in connection with acquisitions made by Euronet, the Company has agreed to indemnify the seller against third party claims made against the seller relating to the subject subsidiary, operating unit or asset and arising after the closing of the transaction, and (ii) in connection with dispositions made by Euronet, Euronet has agreed to indemnify the buyer against damages incurred by the buyer due to the buyer’s reliance on representations and warranties relating to the subject subsidiary, operating unit or business assets in the disposition agreement if such representations or warranties were untrue when made;
 
    Euronet has entered into agreements with certain third parties, including banks that provide fiduciary and other services to Euronet or to the Company’s benefit plans. Under such agreements, the Company has agreed to indemnify such service providers for third party claims relating to the carrying out of their respective duties under such agreements; and
 
    In connection with the Company’s entry into the money transfer business, the Company has issued surety bonds in compliance with licensing requirements of those states.
To date, the Company is not aware of any significant claims made by the indemnified parties or third parties to guarantee agreements with the Company and, accordingly, no liabilities were recorded as of June 30, 2006 and December 31, 2005.

16


 

(11) INCOME TAXES
The Company's effective tax rate, after consideration of minority interest, was 24% and 57% for the three-month periods ended June 30, 2006 and 2005, respectively, and was 26% and 54% for the six-month periods ended June 30, 2006 and 2005, respectively. The improvement in the effective tax rate largely relates to the impact of foreign currency exchange gains or losses. Since the Company is in a net operating loss position for its U.S. operations and, accordingly has valuation allowances to reserve for net deferred tax assets, tax benefit or expense associated with foreign currency gains or losses incurred by its U.S. entities is not currently recognized.
(12) EXPIRATION OF PREFERENTIAL COMMISSION RATES IN SPAIN
Under arrangements with a major mobile operator, the Spanish subsidiaries of Euronet received a preferred, exclusive distributor commission on sales of prepaid mobile airtime; the preferential commission under this arrangement expired in May 2006 leaving in place a lower, non-exclusive commission. The Company chose to only pass through a portion of this reduction to its retailers to reduce the risk of losing any retail accounts. Accordingly, as a result of the expiration of the preferred commission, revenues and margins in the second quarter 2006 were reduced by approximately $1.1 million.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
COMPANY OVERVIEW, GEOGRAPHIC LOCATIONS AND PRINCIPAL PRODUCTS AND SERVICES
Euronet Worldwide, Inc. (“Euronet” or the “Company”) is a leading electronic transaction processor, offering ATM and POS outsourcing services, integrated electronic financial transaction (“EFT”) software, network gateways and electronic prepaid top-up services to financial institutions, mobile operators and retailers, as well as electronic consumer money transfer and bill payment services. We operate the largest independent pan-European ATM network, the largest national shared ATM network in India, and we are one of the largest providers of prepaid mobile airtime processing.
We operate in three principal business segments:
    An EFT Processing Segment, in which we process transactions for a network of 7,866 ATMs and more than 38,000 POS terminals across Europe, Asia and Africa. We provide comprehensive electronic payment solutions consisting of ATM network participation, outsourced ATM and POS management solutions, credit card outsourcing and electronic recharge services (for prepaid mobile airtime via an ATM or directly from the handset).
 
    A Prepaid Processing Segment, through which we provide distribution of prepaid mobile airtime and other prepaid products and collections services for various prepaid products, cards and services. We operate a network of more than 259,000 POS terminals providing electronic processing of prepaid mobile airtime top-up services in the U.S., Europe, Africa and Asia Pacific. This segment also includes Euronet Payments & Remittance, Inc. (“Euronet Payments & Remittance”), which resulted from the 2005 acquisition of TelecommUSA, and provides money transfer services to customers from the U.S. to destinations in Latin America, and bill payment services to customers within the U.S.
 
    A Software Solutions Segment, through which we offer a suite of integrated EFT software solutions for electronic payment and transaction delivery systems.
We have seven processing centers in Europe, two in Asia and one in the U.S., and we have 17 principal offices in Europe, four in the Asia-Pacific region, four in the U.S. and one in the Middle East. Our executive offices are located in Leawood, Kansas, USA. With approximately 84% of our revenues denominated in currencies other than the U.S. dollar, any significant changes in currency exchange rates will likely have a significant impact on our growth in revenues, operating income and diluted earnings per share (for more discussion, see Item 7A — Quantitative and Qualitative Disclosure About Market Risk, and Part I, Item 1A — Risk Factors in the Company’s Annual Report of Form 10-K for the year ended December 31, 2005).
SOURCES OF REVENUES AND CASH FLOW
Euronet earns revenues and income based on ATM management fees, transaction fees and commissions, professional services, software licensing fees and software maintenance agreements. Each business segment’s sources of revenue are described below.

17


 

EFT Processing Segment — Revenue in the EFT Processing Segment, which represents approximately 21% of total consolidated revenue for the first half of 2006, is derived from fees charged for transactions effected by cardholders on our proprietary network of ATMs, as well as fixed management fees and transaction fees we charge to banks for operating ATMs and processing credit cards under outsourcing agreements.
On our proprietary network, we generally charge fees for four types of ATM transactions: i) cash withdrawals, ii) balance inquiries, iii) transactions not completed because the relevant card issuer does not give authorization and iv) prepaid telecommunication recharges.
For the first half of 2006, approximately 26% of total segment revenue was derived from ATMs we owned (excluding those leased by us in connection with outsourcing agreements, as discussed below) and the remainder was primarily derived from ATMs that we operate for banks on an outsourced basis. The percentage of revenues we generate from our proprietary network of ATMs has fallen significantly during the past three years. We believe this shift from a largely proprietary, Euronet-owned ATM network, to a greater focus on ATMs operated under outsourcing agreements will continue to provide lower total revenues, but higher marginal returns on investment. This is because we bear all costs of owning and operating ATMs on our proprietary network, including the capital investment represented by the cost of the ATMs themselves, whereas customer-owned ATMs operated under outsource service agreements require a nominal up-front capital investment because we do not purchase the ATMs. Additionally, in many instances operating costs are the responsibility of the owner and, therefore, recurring operating expenses per ATM are lower. In connection with certain long-term outsourcing agreements, we lease many of our ATMs under capital lease arrangements where, generally, we purchase a bank’s ATMs, and simultaneously sell the ATMs (often to an entity related to the bank). We then lease back the ATMs for purposes of fulfilling the ATM outsourcing agreement with the bank. We fully recover the related lease costs from the bank under the outsourcing agreements.
Prepaid Processing Segment — Revenue in the Prepaid Processing Segment, which represents approximately 74% of total consolidated revenue for the first half of 2006, is primarily derived from commissions and processing fees received from mobile and other telecommunication operators, or from distributors of prepaid wireless products for the distribution and/or processing of prepaid mobile airtime and other telecommunication products. Due to certain provisions in our mobile phone operator agreements, the operators have the ability to reduce the overall commission paid on each top-up transaction. However, by virtue of our agreements with retailers (distributors where POS terminals are located) in certain markets, not all of these reductions are absorbed by us because we are able to pass a significant portion of the reductions to retailers. Accordingly, under certain retailer agreements, the effect is to reduce revenues and reduce our direct operating costs resulting in only a small impact on gross margin and operating income. In some markets, reductions in commissions can significantly impact our results as it may not be possible, either contractually or practically in the concerned market, to pass a reduction in commissions to the retailers. In Australia, certain retailers negotiate directly with the mobile phone operators for their own commission rates, which also limits our ability to pass through reductions in commissions.
Agreements with mobile operators are important to the success of our business. These agreements permit us to distribute prepaid mobile airtime to the mobile operators’ customers. The loss of any agreements with mobile operators in any market could materially and adversely affect our results.
Software Solutions Segment — Revenue in the Software Solutions Segment, which represents 5% of total consolidated revenue for the first half of 2006, is derived from licensing, professional services and maintenance fees for software and sales of related hardware. Software license fees are the initial fees we charge to license our proprietary application software to customers. Professional fees consist of charges for customization, installation and consulting services to customers. Software maintenance revenue represents the ongoing fees charged for maintenance and support for customers’ software products. Hardware sales are derived from the sale of computer equipment necessary for the respective software solution.
In January 2006, we acquired the assets of Essentis Limited (“Essentis”), a U.K. company that owns a leading card issuing and merchant acquiring software package. The assets, primarily consisting of the software source code, were purchased out of an administrative proceeding for approximately $3.0 million, including the assumption of certain liabilities. The Essentis software product allows us to add additional outsourcing and software offerings to banks. For further discussion, see Note 4 — Acquisitions to the Unaudited Consolidated Financial Statements. The results of Essentis are reported in the Software Solutions Segment.
OPPORTUNITIES AND CHALLENGES
Our expansion plans and opportunities are focused on five primary areas:
    outsourced ATM and POS terminal management contracts;
 
    transactions processed on our network of owned and operated ATMs;
 
    our prepaid mobile airtime top-up processing services;
 
    our money transfer and bill payment services; and
 
    development of our credit and debit card outsourcing business.

18


 

EFT Processing Segment — The continued expansion and development of our ATM business will depend on various factors including the following:
    the impact of competition by banks and other ATM operators and service providers in our current target markets;
 
    the demand for our ATM outsourcing services in our current target markets;
 
    the ability to develop products or services to drive increases in transactions;
 
    the expansion of our various business lines in markets where we operate and in new markets;
 
    entering into additional card acceptance and ATM management agreements with banks;
 
    the ability to obtain required licenses in markets we intend to enter or expand services;
 
    the availability of financing for expansion; and
 
    the ability to efficiently install ATMs contracted under newly awarded outsourcing agreements.
We carefully monitor the revenue and transactional growth of our ATM networks in each of our markets, and we adjust our plans depending on local market conditions, such as variations in the transaction fees we receive, competition, overall trends in ATM-transaction levels and performance of individual ATMs.
We consistently evaluate and add prospects to our list of potential ATM outsource customers. However, we cannot predict the increase or decrease in the number of ATMs we manage under outsourcing agreements, because this depends largely on the willingness of banks to enter into outsourcing contracts with us. Due to the thorough internal reviews and extensive negotiations conducted by existing and prospective banking customers in choosing outsource vendors, the process of entering into or renewing outsourcing agreements can take approximately nine months to more than one year. The process is further complicated by the legal and regulatory considerations of local countries. These agreements tend to cover large numbers of ATMs, so significant increases and decreases in our pool of managed ATMs could result from acquisition or termination of these management contracts. Therefore, the timing of both current and new contract revenues is uncertain and unpredictable.
In January 2006, through Jiayintong (Beijing) Technology Development Co. Ltd., our 75% owned joint venture with Ray Holdings in China, we entered into an ATM outsourcing pilot agreement with Postal Savings and Remittance Bureau (“PSRB”), a financial institution located and organized in China. This pilot agreement makes us the first, and currently the only, provider of end-to-end ATM outsourcing services in China. Under the pilot contract, we have agreed to deploy and provide all of the day-to-day outsourcing services for a total of 90 ATMs in Beijing, Shanghai and Guangdong, the three largest commercial centers in China. During the first half of 2006, we successfully deployed 58 ATMs and we expect the remaining ATMs to become operational during the next few months. If this pilot agreement meets certain success criteria, we have agreed to take over additional existing ATMs and install new ATMs at PSRB’s request. We have established a technical processing and operations center in Beijing to operate these ATMs. Our future success in China will depend on our ability to be successful in this pilot agreement, the willingness of PSRB to outsource additional ATMs to us or other banks’ willingness to outsource ATMs to us and our ability to take over, install and operate additional ATMs. While we believe that we have the proper resources and skills in place to be successful, there can be no assurance that we will be successful in the pilot agreement or that we will be successful in our ability to take over existing ATMs or install new ATMs as expected by PSRB or others. Start up costs for this joint venture have been expensed as incurred.
Prepaid Processing Segment — We currently offer prepaid mobile phone top-up services in the U.S., Europe, Africa and Asia Pacific; money transfer services to customers from the U.S. to destinations in Latin America; and bill payment services to customers in the U.S., U.K. and Poland. We plan to expand our top-up business in these and other markets by taking advantage of our existing expertise together with relationships with mobile phone operators and retailers. We plan to expand our card-based money transfer and bill payment services by offering the product on many of our existing POS terminals in the U.S. and internationally.
Expansion will depend on various factors, including, but not necessarily limited to, the following:
    the ability to negotiate new agreements for other markets with mobile phone operators, agent banks and retailers;
 
    the continuation of the conversion trend from scratch card solutions to electronic processing solutions for prepaid mobile airtime among mobile phone users and the continued use of third party providers such as ourselves to supply this service;
 
    the development of mobile phone networks in these markets and the increase in the number of mobile phone users;
 
    the continuation of the trend of increased use of electronic money transfer and bill payment among immigrant workers and the unbanked population in our markets;
 
    the overall pace of growth in the prepaid mobile phone market;

19


 

    our market share of the retail distribution capacity;
 
    the level of commission that is paid to the various intermediaries in the prepaid mobile airtime distribution chain;
 
    our ability to obtain money transfer licenses to operate in many of the states within the U.S. and internationally;
 
    the ability to rapidly maximize the number of agents and retailers who sell our card-based money transfer and bill payment product in the U.S. and internationally; and
 
    the availability of financing for further expansion.
In mature markets, such as the U.K., Australia, Spain and Ireland, the conversion from scratch cards to electronic forms of distribution is either complete or nearing completion. Because of this factor, we are likely to cease experiencing the organic increases in the number of transactions per terminal that we have experienced historically. Also in mature markets, competition among prepaid distributors results in the reduction of commissions and margins paid by mobile operators, as well as retailer churn. The combined impact of these factors in developed markets is a flattening of growth in the revenues and profits that we earn. In other markets in which we operate, such as Poland, Germany and the U.S., many of the factors that may contribute to rapid growth (conversion from scratch cards to electronic distribution, growth in the prepaid market, expansion of our network of retailers and access to all mobile operators’ products) remain present.
Growth in our money transfer and bill payment services business, Euronet Payments & Remittance, will be driven by the continuation of global worker migration patterns, our ability to manage rapid growth, our ability to maximize the opportunity to sell our card-based product over our existing POS terminals in the U.S. and internationally, and our ability to obtain licenses to operate in many of the states within the U.S. as well as other countries. While we are currently focused on the U.S. and Latin America market, we plan to expand our money transfer services to other markets. We are focusing on increasing our sending locations in existing licensed states and obtaining licenses to operate in other key states. We have expanded these operations from the original three states into twelve additional states. We also have eight other states where we are preparing to introduce these services and five additional states where licenses are pending approval. Expansion of our money transfer business internationally will require resolution of numerous licensing and regulatory issues in each market we intend to develop and no assurance can be given that these issues will be resolved.
Software Solutions Segment — Software products are an integral part of our product lines, and our investment in research, development, delivery and customer support reflects our ongoing commitment to an expanded customer base. We have been able to enter into agreements under which we use our software in lieu of cash as our initial capital contributions to new transaction processing joint ventures. Such contribution sometimes permits us to enter new markets without significant capital investment. Additionally, this segment supports our EFT Processing Segment and is a valuable element of our overall business strategy. The competitive factors in the Software Solutions business include price, technology development and the ability of software systems to interact with other leading products. Our success is dependent on our ability to design and implement software applications. Technical disruptions or errors in these systems could have a material adverse impact on our revenue and financial results. We also recently expanded the Software Solutions Segment with the January 2006 acquisition of Essentis. This acquisition will allow us to offer additional outsourcing and software products to banks. We expect Essentis to incur operating losses for 2006 totaling approximately $1.5 million to $2.0 million.
Corporate Services, Eliminations and Other — In addition to operating in our principal business segments described above, our division, “Corporate Services, Elimination and Other” includes non-operating results, certain inter-segment eliminations and the cost of providing corporate and other administrative services to the business segments, including share-based compensation expense related to most option and restricted stock grants. These services are not directly identifiable with our business segments.
We evaluate performance of our segments based on income or loss from continuing operations before income taxes, foreign exchange gain (loss), minority interest and other nonrecurring gains and losses. The impact of share-based compensation is recorded as an expense of the Corporate Services division, with certain limited exceptions related to grants of restricted stock to key members of management that vest based on the achievement of performance criteria by our subsidiaries.

20


 

SEGMENT SUMMARY RESULTS OF OPERATIONS
Revenue and operating income by segment revenue for the three- and six-month periods ended June 30, 2006 and 2005 are summarized in the tables below:
                                                                 
    Revenues for the Three                     Revenues for the Six        
    Months Ended June 30,     Year-over-Year Change   Months Ended June 30,     Year-over-Year Change
                    Increase     Increase                   Increase     Increase
                    (Decrease)     (Decrease)                   (Decrease)     (Decrease)
(dollar amounts in thousands)   2006     2005     Amount     Percent   2006     2005     Amount     Percent
 
EFT Processing
  $ 32,418     $ 26,041     $ 6,377       24 %   $ 62,286     $ 49,930     $ 12,356       25 %
Prepaid Processing
    114,185       102,480       11,705       11 %     225,146       191,861       33,285       17 %
Software Solutions
    7,762       3,724       4,038       108 %     13,916       7,660       6,256       82 %
 
                                                   
 
Total
    154,365       132,245       22,120       17 %     301,348       249,451       51,897       21 %
 
                                                               
Eliminations
    (562 )           (562 )     n/m       (575 )           (575 )     n/m  
 
                                                   
Total
  $ 153,803     $ 132,245     $ 21,558       16 %   $ 300,773     $ 249,451     $ 51,322       21 %
 
                                                   
                                                                 
    Operating Income for the                     Operating Income for the        
    Three Months Ended June 30,     Year-over-Year Change   Six Months Ended June 30,     Year-over-Year Change
                    Increase     Increase                   Increase     Increase
                    (Decrease)     (Decrease)                   (Decrease)     (Decrease)
(dollar amounts in thousands)   2006     2005 (1)     Amount     Percent   2006     2005 (1)     Amount     Percent
 
EFT Processing
  $ 7,991     $ 6,254     $ 1,737       28 %   $ 15,420     $ 11,833     $ 3,587       30 %
Prep aid Processing
    8,121       8,336       (215 )     (3 %)     17,081       16,172       909       6 %
Software Solutions
    1,366       779       587       75 %     1,731       1,657       74       4 %
 
                                                 
Total
    17,478       15,369       2,109       14 %     34,232       29,662       4,570       15 %
 
                                                               
Corporate services
    (4,768 )     (4,102 )     (666 )     16 %     (9,194 )     (7,928 )     (1,266 )     16 %
Eliminations and other
    (462 )           (462 )     n/m       (462 )           (462 )     n/m  
 
                                                 
 
                                                               
Total
  $ 12,248     $ 11,267     $ 981       9 %   $ 24,576     $ 21,734     $ 2,842       13 %
 
                                                   
 
n/m — Not meaningful.
 
(1)   As discussed in the Notes to the Unaudited Consolidated Financial Statements, we adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment,” (“SFAS No. 123R”) on January 1, 2006. We elected to adopt the modified retrospective application method as provided by SFAS No. 123R and, accordingly, financial statement amounts for the prior periods presented in this Form 10-Q have been adjusted to reflect the fair value method of expensing prescribed by SFAS No. 123R. See Note 1 — General, Note 2 — Significant Accounting Policies and Practices and Note 7 — Stock Plans to the Unaudited Consolidated Financial Statements for further discussion.

21


 

COMPARISON OF OPERATING RESULTS FOR THE THREE- AND SIX-MONTH PERIODS ENDED JUNE 30, 2006 AND 2005
EFT PROCESSING SEGMENT
The following table presents the results of operations for the three- and six-month periods ended June 30, 2006 and 2005 for our EFT Processing Segment:
                                                                 
    Results for the Three                     Results for the Six        
    Months Ended June 30,     Year-over-Year Change   Months Ended June 30,     Year-over-Year Change
                    Increase     Increase                   Increase     Increase
(dollar amounts in thousands)   2006     2005     Amount     Percent   2006     2005     Amount     Percent
 
Total revenues
  $ 32,418     $ 26,041     $ 6,377       24 %   $ 62,286     $ 49,930     $ 12,356       25 %
 
                                                   
 
Operating expenses:
                                                               
Direct operating costs
    13,591       10,756       2,835       26 %     26,017       21,590       4,427       21 %
Salaries and benefits
    4,983       4,169       814       20 %     9,297       7,872       1,425       18 %
Selling, general and administrative
    2,835       2,447       388       16 %     5,589       3,755       1,834       49 %
Depreciation and amortization
    3,018       2,415       603       25 %     5,963       4,880       1,083       22 %
 
                                                   
 
Total operating expenses
    24,427       19,787       4,640       23 %     46,866       38,097       8,769       23 %
 
                                                   
 
Operating income
  $ 7,991     $ 6,254     $ 1,737       28 %   $ 15,420     $ 11,833     $ 3,587       30 %
 
                                                   
 
                                                               
Transactions processed (millions)
    113.6       86.8       26.8       31 %     216.7       164.1       52.6       32 %
ATMs as of June 30
    7,866       6,565       1,301       20 %     7,866       6,565       1,301       20 %
Average ATMs
    7,766       6,491       1,275       20 %     7,580       6,266       1,314       21 %
Revenues
Our revenue for the first half of 2006 increased when compared to the first half of 2005 primarily due to increases in the number of ATMs operated and, for owned ATMs, the number of transactions processed. Additionally, the first quarter 2006 includes the results of Instreamline and Europlanet. Instreamline was acquired in October 2005 and provides credit card and POS outsourcing services and transaction gateway switching services in Greece and the Balkan region. Our ownership in Europlanet was increased through two transactions; one in April 2005, in which we increased our ownership from 36% to 66%; and one in December 2005, in which we acquired the final 34% ownership. Europlanet provides debit card processing services and manages a network of ATMs and POS terminals in Serbia.
Revenue per average ATM was $4,174 for the second quarter and $8,217 for the first half of 2006, compared to $4,012 for the second quarter and $7,968 for the first half of 2005. Revenue per transaction was $0.29 for both the second quarter and first half of 2006, compared to $0.30 for both the second quarter and first half of 2005. The slight decrease in revenue per transaction is mainly the result of the shift from owning ATMs to managing them under outsourcing agreements. Under outsourcing agreements, we primarily earn revenue based on fixed recurring monthly management fee, with less dependence on transaction-based fees because incremental transactions have little impact on the fixed or variable costs of managing ATMs. Therefore, an overall increase in the number of transactions processed on ATMs that are managed under outsourcing agreements generally does not generate commensurate increases in revenues. We believe this shift from a largely proprietary, Euronet-owned ATM network to operating ATMs under outsourcing arrangements has provided, and will continue to provide, higher marginal returns on investment. While expansion of our network of owned ATMs is not one of our strategic initiatives, if opportunities were available to us, we would consider increasing future capital expenditures to expand this network in new or existing markets.
Of total segment revenue for the first half of 2006, 26% was from ATMs we owned and 74% was from outsourcing services, compared to 30% and 70%, respectively, for the first half of 2005.
Direct operating costs
Direct operating costs consist primarily of site rental fees, cash delivery costs, cash supply costs, maintenance, insurance, telecommunications and the cost of data center operations-related personnel, as well as the processing centers’ facility related costs and other processing center related expenses.
The increase in direct operating cost for the first half of 2006, compared to the first half of 2005, is attributed to the increase in the number of ATMs under operation. Direct operating costs as a percentage of revenues decreased to 42% for the first half of 2006, compared to 43% for the first half of 2005. This reduction resulted from operating a greater percentage of outsourced ATMs, for which direct costs per

22


 

ATM, and on a per transaction basis, are lower than the existing installed base of ATMs, together with leveraging the fixed and semi-fixed data center costs.
Gross margin
Gross margin, which is revenue less direct operating costs, increased to $18.8 million for the second quarter and $36.3 million for the first half of 2006, from $15.3 million for the second quarter and $28.3 million for the first half of 2005. Of total segment gross margin for the first half of 2006, approximately 22% was from ATMs we owned and 78% was from outsourcing services, compared to 28% and 72%, respectively, for the first half of 2005.
Gross margin per average ATM was $4,785 for the first half of 2006, compared to $4,523 for the first half of 2005. The increase in gross margin per average ATM is largely the result of increasing transactions for owned ATMs and related fees from the installed ATM base, together with the leveraged effect of adding additional ATM outsourcing revenues and profits to a direct cost structure that is more fixed than variable with transactional volume. Gross margin per transaction was $0.17 for both the second quarter and first half of 2006, compared to $0.18 for the second quarter and $0.17 for the first half of 2005.
Salaries and benefits
The increase in salaries and benefits for the second quarter and first half of 2006, compared to the second quarter and first half 2005 is primarily due to the acquisition of Instreamline and, Europlanet, staffing costs to expand in emerging markets such as India, China and new European markets, and general merit increases awarded to employees. Certain staffing increases were also necessary due to the larger number of ATMs under operation and transactions processed. These expenses as a percentage of revenue, however, continued to trend downward, decreasing to 15% for both the second quarter and first half of 2006, compared to 16% for both the second quarter and first half of 2005. This decrease as a percentage of revenue reflects increased leverage and scalability in our markets.
Selling, general and administrative
Similar to the increase in salaries and benefits, the increase in selling, general and administrative expenses for the second quarter and first half of 2006, compared to the second quarter and first half of 2005 is also due primarily to the acquisitions of Instreamline and Europlanet and staffing-related costs to expand in emerging markets such as India, China and new European markets. As a percentage of revenue, these costs were 9% of revenue for the second quarter and first half of 2006, compared to 9% of revenue for the second quarter and 8% for the first half of 2005. Offsetting these costs for the first half of 2005 was $0.5 million for an insurance recovery. This insurance recovery related to a loss recorded in the fourth quarter 2003 on certain ATM disbursements resulting from a card association’s change in their data exchange format. Adjusting for this recovery, selling, general and administrative expenses as a percentage of revenue for the first half of 2005 would have been 9%.
Depreciation and amortization
The increase in depreciation and amortization expense for the first half of 2006, compared to the first half of 2005 is due primarily due to depreciation and intangible amortization related to the acquisitions of Instreamline and, to a lesser extent, Europlanet, as well as depreciation on additional ATMs under capital lease arrangements related to outsourcing agreements in India. As a percentage of revenue, these expenses were flat at 9% of revenue for both the second quarter 2006 and 2005, and 10% of revenue for both the first half of 2006 and 2005. Approximately $0.6 million of depreciation and amortization for the first half of 2006 represents amortization of acquired intangible assets related to the acquisitions of Instreamline and Europlanet.
Operating income
The increase in operating income for the segment is generally the result of increased revenue and the related gross margins from new ATM outsourcing and network participation agreements and the impact of the acquisitions of Instreamline and Europlanet, combined with leveraging certain management cost structures. Operating income as a percentage of revenue was 25% for both the second quarter and first half of 2006, compared to 24% for the both the second quarter and first half of 2005.
Operating income per transaction was unchanged at $0.07 for all periods. Operating income per average ATM was $1,029 for the second quarter and $2,034 for the first half of 2006, compared to $963 for the second quarter and $1,888 for the first half of 2005. The continuing increase in operating income per ATM is due to increased leverage and scalability in our markets, as well as the continuing migration toward operating ATMs under outsourcing agreements rather than ownership arrangements. Additionally, the increase in operating income per transaction and per ATM is due to the results of Instreamline and Europlanet, which have substantial non-ATM card-processing operations. Partially offsetting these increases, operating income includes a loss of $0.3 million for the second quarter and $0.9 million for the first half of 2006 related to our 75% owned joint venture in China. We expect to generate total operating losses in China for 2006 of approximately $1.5 million to $2.0 million as we continue to focus on expansion in this market.

23


 

PREPAID PROCESSING SEGMENT
The following table presents the results of operations for the three- and six-month periods ended June 30, 2006 and 2005 for our Prepaid Processing Segment:
                                                                 
    Results for the Three                     Results for the Six        
    Months Ended June 30,     Year-over-Year Change   Months Ended June 30,     Year-over-Year Change
                    Increase     Increase                   Increase     Increase
                    (Decrease)     (Decrease)                   (Decrease)     (Decrease)
(dollar amounts in thousands)   2006     2005     Amount     Percent   2006     2005     Amount     Percent
 
Total revenues
  $ 114,185     $ 102,480     $ 11,705       11 %   $ 225,146     $ 191,861     $ 33,285       17 %
 
                                                   
 
Operating expenses:
                                                               
Direct operating costs
    91,770       81,053       10,717       13 %     180,257       152,332       27,925       18 %
Salaries and benefits
    6,205       6,030       175       3 %     12,489       10,933       1,556       14 %
Selling, general and administrative
    4,537       4,105       432       11 %     8,383       7,225       1,158       16 %
Depreciation and amortization
    3,552       2,956       596       20 %     6,936       5,199       1,737       33 %
 
                                                   
 
Total operating expenses
    106,064       94,144       11,920       13 %     208,065       175,689       32,376       18 %
 
                                                   
 
Operating income
  $ 8,121     $ 8,336     $ (215 )     (3 %)   $ 17,081     $ 16,172     $ 909       6 %
 
                                                   
 
                                                               
Transactions processed (millions)
    107.8       86.2       21.6       25 %     204.2       153.4       50.8       33 %
Revenues
The increase in revenues for the second quarter and first half of 2006, compared to the second quarter and first half of 2005 was generally attributable to the increase in total transactions processed, in part as a result of the full year effects of 2005 acquisitions. Transaction growth also reflects growth from existing operations and from our subsidiaries subsequent to the date of acquisition. In mature markets, such as the U.K. and Australia, our revenue growth has slowed substantially because conversion from scratch cards to electronic top-up is approaching completion and certain mobile operators and retailers are driving competitive reductions in pricing and margins. We expect most of our revenue growth for 2006 and beyond to be derived from developing markets or markets in which there is organic growth in the prepaid sector overall, from continued conversion from scratch cards to electronic top-up, from additional products sold over the base of prepaid processing terminals and, possibly, acquisitions.
Revenue per transaction was $1.06 for the second quarter and $1.10 for the first half of 2006, compared to $1.19 for the second quarter and $1.25 for the first half of 2005. The decrease in revenue per transaction is due primarily to the four following reasons: i) On a year-to-date basis, approximately 25% of the decrease is due to the impact of differences in foreign currency exchange rates on the first quarter 2006 as compared to the first quarter 2005. These foreign currency exchange rate fluctuations affect the amount of revenues recorded without having any impact on the number of transactions processed. Differences in foreign currency exchange rates were smaller during the second quarter 2006 compared to the second quarter 2005 and, therefore, had a minor impact on the comparisons between these two quarters; ii) The largest portion of the decrease in revenue per transaction on a year-to-date basis results from the growth in revenues and transactions recorded by our ATX subsidiary, which was acquired at the end of the first quarter 2005. ATX provides only transaction processing services without direct costs and other operating costs associated with installing and managing terminals; therefore, the revenue we recognize from these transactions is a fraction of that recognized on average transactions, but with virtually no cost. Transaction volumes at ATX have increased by approximately 400% for the first half of 2006, compared to the first half of 2005, and have increased approximately 280% for the second quarter 2006, compared to the second quarter 2005. For the first half of 2006, ATX transaction volumes accounted for approximately 12% of all transaction volume for the Prepaid Processing Segment, compared to 4% for the first half of 2005; iii) A portion of the decrease is also due to our expansion into markets such as Germany and Poland where we earn less revenue per transaction but are able to keep a greater percentage of the commission, thus having little, if any, impact on gross margin; and iv) The decrease between the second quarter 2006 and the second quarter 2005 was also due to the May 2006 expiration of preferential commission arrangements with a Spanish mobile operator. When we acquired our Spanish prepaid subsidiaries, we entered into agreements through May 2006 with a major mobile operator under which the subsidiaries received a preferred, exclusive distributor commission on sales of prepaid mobile airtime. The preferential commission arrangements expired in May 2006 and were not extended. Although we were able to pass through our reduction in commission to the retailers under our contracts with them by paying a lower distribution commission, we chose to only pass through a portion of the reduction to guard against the loss of retailers. Accordingly, our revenues and margins in the second quarter 2006 were reduced by approximately $1.1 million by this reduction in commission. However, during the quarter, we commenced distribution of prepaid time from the two other mobile operators in Spain and expect commissions from the sale of that prepaid time to partially offset this reduction. Moreover, we will continue to evaluate opportunities to pass through

24


 

additional reductions to retailers as determined appropriate in the competitive circumstances. Since the reduction in commission rates in Spain impacted only May and June 2006, the impact on the first half of 2006 compared to the first half of 2005 was not as significant.
Partially offsetting the decreases described above for both the second quarter and first half of 2006, compared to the same periods during 2005, were the growth in both volumes and revenues related to our US Prepaid subsidiary, Payspot. Revenue per transaction for Payspot is generally higher than most of our other Prepaid Processing subsidiaries.
Direct operating costs
Direct operating costs in the Prepaid Processing Segment include the commissions we pay to retail merchants for the distribution and sale of prepaid mobile airtime and other prepaid products, as well as communication and paper expenses required to operate POS terminals. Because of their nature, these expenditures generally fluctuate directly with revenues and processed transactions. The increase in direct operating costs is generally attributable to the increase in total transactions processed over the prior year. Direct costs as a percentage of revenue are slightly higher in our mature markets, such as the U.K. and Australia and have increased in our Spanish market as a result of the expiration of preferential commission arrangements described above. These higher costs have been partially offset during the second quarter and first half of 2006 by lower direct costs as a percentage of revenue in other markets and by ATX. As discussed above, ATX is a transaction processor, with very few direct costs and, accordingly, a high gross margin percentage.
Gross margin
Gross margin, which represents revenue less direct costs, was $22.4 million for the second quarter and $44.9 million for the first half of 2006, compared to $21.4 million for the second quarter and $39.5 million for the first half of 2005. Gross margin per transaction was $0.21 for the second quarter and $0.22 for the first half of 2006, compared to $0.25 per transaction for the second quarter and $0.26 for the first half of 2005. Gross margin as a percentage of revenue was 20% for both the second quarter and first half of 2006, compared to 21% for both the second quarter and first half of 2005. The reduction in gross margin per transaction is primarily due to lower margins in mature markets, primarily the U.K., and the impact of the expiration of preferential commission arrangements in Spain discussed above. Our Spanish subsidiaries, due to competitive circumstances, chose to only pass a portion of the reduction in commission through to retailers and absorbed a majority of this reduction. This resulted in reduced gross margin and operating income of $1.1 million for the second quarter 2006, compared to the second quarter 2005. These reduced margins in Spain and in our mature markets, such as the U.K. and Australia, have been partially offset by increased transactions in markets with higher margins, such as Poland, Germany and the U.S.
Salaries and benefits
The increase in salaries and benefits generally is the result of the full year effects of 2005 acquisitions. Salaries and benefits have decreased slightly as a percentage of revenue to 5.4% for the second quarter and 5.5% for the first half of 2006, compared to 5.9% for the second quarter and 5.7% for the first half of 2005. Salaries and benefits expense for the first half of 2006 includes an increase of approximately $0.8 million, or 0.4% of revenues, incurred in connection with Euronet Payments & Remittance, our money transfer and bill payment subsidiary established during the second quarter 2005. The decrease in salaries and benefits as a percentage of revenue reflects our growing leverage and scalability in our markets.
Selling, general and administrative
The increase in selling, general and administrative expenses generally is the result of the full year effects of 2005 acquisitions. Selling, general and administrative expenses were 4.0% of revenue for both the second quarter 2006 and 2005 and were 3.7% for the first half of 2006, compared to 3.8% for the first half of 2005. Selling, general and administrative expenses for the first half of 2006 includes an increase of approximately $0.6 million incurred in connection with Euronet Payments & Remittance, which was established during the second quarter 2005.
Depreciation and amortization
Depreciation and amortization expense primarily represents amortization of acquired intangibles and the depreciation of POS terminals we install in retail stores. As a percentage of revenues, depreciation and amortization was 3.1% for both the second quarter and first half of 2006, compared to 2.9% for the second quarter and 2.7% for the first half of 2005. A portion of this increase in depreciation and amortization as a percentage of revenue is due to higher depreciation and amortization expense as a percentage of revenue related to our subsidiaries in the U.S., Spain and Poland, some of which were acquired or established during 2005, because each of these entities owns a majority of its POS terminals. Additionally, this increase includes the full year effects of amortization of intangible assets recorded in connection with 2005 acquisitions.
Operating income
The decrease in operating income for the second quarter and first half of 2006, compared to the same periods of 2005, is due to $0.4 million and $1.0 million, respectively, in increased operating losses related to Euronet Payments & Remittance, which was acquired in

25


 

the second quarter 2005. Also, as discussed above, the second quarter and first half of 2006 includes approximately $1.1 million in reduced operating income resulting from the expiration of preferential commission arrangements in Spain. Exclusive of these losses, the improvement in operating income for the second quarter and first half of 2006, over the second quarter and first half of 2005, was due to the growth in revenues and transactions processed, together with contributions from our 2005 acquisitions. Operating income as a percentage of revenues decreased to 7.1% for the second quarter and 7.6% for the first half of 2006, from 8.1% for the second quarter and 8.4% for the first half of 2005. Operating income per transaction decreased to $0.08 for both the second quarter and first half of 2006, from $0.10 in the second quarter and $0.11 for the first half of 2005. As discussed under “gross margin” above, these decreases in operating income as a percentage of revenue and per transaction are the result of lower margins in mature markets, primarily the U.K., the impact of the expiration of preferential commission arrangements in Spain and our continued investments in money transfer and bill payment products.
SOFTWARE SOLUTIONS SEGMENT
The following table presents the results of operations for the three- and six-month periods ended June 30, 2006 and 2005 for the Software Solutions Segment:
                                                                 
    Results for the Three                     Results for the Six        
    Months Ended June 30,     Year-over-Year Change   Months Ended June 30,     Year-over-Year Change
                    Increase     Increase                   Increase     Increase
(dollar amounts in thousands)   2006     2005     Amount     Percent   2006     2005     Amount     Percent
 
                                                               
Total revenues
  $ 7,762     $ 3,724     $ 4,038       108 %   $ 13,916     $ 7,660     $ 6,256       82 %
 
                                                   
 
                                                               
Operating expenses:
                                                               
Direct operating costs
    400       348       52       15 %     840       607       233       38 %
Salaries and benefits
    4,458       2,152       2,306       107 %     8,382       4,279       4,103       96 %
Selling, general and administrative
    1,090       186       904       486 %     2,068       576       1,492       259 %
Depreciation and amortization
    448       259       189       73 %     895       541       354       65 %
 
                                                   
 
                                                               
Total operating expenses
    6,396       2,945       3,451       117 %     12,185       6,003       6,182       103 %
 
                                                   
 
                                                               
Operating income
  $ 1,366     $ 779     $ 587       75 %   $ 1,731     $ 1,657     $ 74       4 %
 
                                                   
Revenues, operating expenses and operating income
The improvement in Software revenues for the second quarter and first half of 2006 is due to the contributions of Euronet Essentis (“Essentis”), which was acquired in January 2006. Approximately $0.4 million of the revenue recognized during the second quarter 2006 was for work performed during the first quarter 2006, but was not recognized as revenue due to the absence of a formal agreement between Essentis and the customer. During the second quarter 2006, Essentis formalized agreements with all customers and, accordingly, recognized all associated deferred revenue. The increase in operating expenses for the second quarter and first half of 2006, compared to the second quarter and first half of 2005 is primarily the result of the acquisition of Essentis. Essentis contributed $3.9 million in revenue and $3.2 million in operating expenses for the second quarter 2006, and $6.6 million in revenue and $6.1 million in operating expenses for the first half of 2006.
The increase in operating income for the second quarter 2006 compared to the second quarter 2005 was primarily the result of Essentis formalizing contracts with customers, as well as increased revenue from license and services in the second quarter 2006.
Software sales backlog
As of June 30, 2006, we had a contract backlog of approximately $9.4 million, compared to approximately $3.8 million as of June 30, 2005. Such backlog represents software sales based on signed contracts under which we continue to have performance milestones before the sale will be complete. We recognize revenue on a percentage of completion method, based on certain milestone conditions, for our software solutions. As a result, we have not recognized all the revenue associated with these sales contracts. We cannot give assurances that the milestones under the contracts will be completed within one year or that we will be able to recognize the related revenue within the one-year period.

26


 

CORPORATE SERVICES
The following table presents the operating expenses for the three- and six-month periods ended June 30, 2006 and 2005 for Corporate Services:
                                                                 
    Results for the Three                     Results for the Six        
    Months Ended June 30,     Year-over-Year Change   Months Ended June 30,     Year-over-Year Change
                    Increase     Increase                   Increase     Increase
                    (Decrease)     (Decrease)                   (Decrease)     (Decrease)
(dollar amounts in thousands)   2006     2005 (1)     Amount     Percent   2006     2005 (1)     Amount     Percent
 
                                                               
Salaries and benefits
  $ 3,808     $ 2,628     $ 1,180       45 %   $ 7,320     $ 5,099     $ 2,221       44 %
Selling, general and administrative
    915       1,459       (544 )     (37 %)     1,786       2,779       (993 )     (36 %)
Depreciation and amortization
    45       15       30       200 %     88       50       38       76 %
 
                                                   
 
                                                               
Total operating expenses
  $ 4,768     $ 4,102     $ 666       16 %   $ 9,194     $ 7,928     $ 1,266       16 %
 
                                                   
 
(1)   As discussed previously, in connection with the adoption of SFAS No. 123R, the Company adjusted its previously reported results to include the impact of share-based compensation expense. As a result of the adjustment, an additional $1.3 million and $2.5 million in expense related to stock options was included in salaries and benefits for the second quarter and first half of 2005, respectively, in the table above.
Corporate operating expenses
The increase in salaries and benefits expense for Corporate Services is primarily attributable to additional expense recorded for share-based compensation in the second quarter and first half of 2006 compared to the second quarter and first half of 2005. Share-based compensation expense increased to $1.9 million for the second quarter and $3.8 million for the first half of 2006, compared to $1.3 million for the second quarter and $2.7 million for the first half of 2005. The first half 2006 share-based compensation expense is comprised of $2.0 million related to the unvested portion of stock options granted prior to 2005 and $1.8 million for restricted stock awards primarily granted during 2005 and 2006. The first half 2005 share-based compensation expense is mainly the result of the adjustment for stock option expense discussed above. The increase of $1.1 million in share-based compensation expense for the first half of 2006 compared to the first half of 2005 is due mainly to: i) $0.7 million in additional expense due to changes in the accounting treatment for performance-based restricted stock awards that require expense to be recognized over a “graded” attribution schedule, rather than a “straight-line” attribution schedule, resulting in more expense in the early years of an award; and ii) $0.4 million in increased expense due to awards to additional employees throughout our existing businesses resulting from acquisitions and overall Company growth. The remaining increase in salaries and benefits expense is due to incremental expense from overall Company growth.
The decrease in selling, general and administrative expenses for the second quarter and first half of 2006, compared to the second quarter and first half of 2005 is due to lower professional fees and other expenses associated with acquisition analysis during the second quarter and first half of 2006 compared to the second quarter and first half of 2005.

27


 

OTHER INCOME (EXPENSE)
                                                                 
    Results for the Three                     Results for the Six        
    Months Ended June 30,     Year-over-Year Change   Months Ended June 30,     Year-over-Year Change
                    Increase     Increase                   Increase     Increase
                    (Decrease)     (Decrease)                   (Decrease)     (Decrease)
(dollar amounts in thousands)   2006     2005     Amount     Percent   2006     2005     Amount     Percent
 
                                                               
Interest income
  $ 3,387     $ 1,105     $ 2,282       207 %   $ 6,109     $ 2,312     $ 3,797       164 %
Interest expense
    (3,656 )     (1,617 )     2,039       126 %     (7,253 )     (3,205 )     4,048       126 %
Income from unconsolidated affiliates
    187       407       (220 )     (54 %)     358       652       (294 )     (45 %)
Foreign currency exchange gain (loss), net
    2,772       (4,715 )     7,487       n/m       4,330       (7,557 )     11,887       n/m  
 
                                                       
 
                                                               
Total other income (expense)
  $ 2,690     $ (4,820 )                   $ 3,544     $ (7,798 )                
 
                                                       
n/m - not meaningful
Interest income
Interest income for 2006 increased over 2005 mainly as a result of interest earned on the unused proceeds from the $175 million October 2005 convertible debt issuance and cash generated from operations.
Interest expense
Interest expense for 2006 increased over 2005 primarily due to the October 2005 issuance of $175 million in convertible debt. However, due to the relatively low rates of interest we pay on our convertible debt, our weighted average interest rate was approximately 4% for both 2006 and 2005.
Net foreign exchange gain (loss)
Assets and liabilities denominated in currencies other than the local currency of our subsidiaries give rise to foreign exchange gains and losses. Exchange gains and losses that result from re-measurement of these assets and liabilities are recorded in determining net income. The foreign exchange gain or loss recorded is a result of the impact of fluctuations in foreign exchange rates on the recorded value of these assets and liabilities. We attempt to match local currency receivables and payables, thereby minimizing exposure to foreign currency fluctuations. Throughout the first half of 2006, the U.S. dollar weakened against most European-based currencies, primarily the euro and British pound, as compared to the first half of 2005, during which time the U.S. dollar strengthened against these currencies.

28


 

INCOME TAX EXPENSE
                                 
    Results for the Three   Results for the Six
    Months Ended June 30,   Months Ended June 30,
(dollar amounts in thousands)   2006   2005   2006   2005
 
                               
Income before income taxes and minority interest
  $ 14,938     $ 6,447     $ 28,120     $ 13,936  
Minority interest
    (212 )     (313 )     (473 )     (401 )
 
                       
 
Income before income taxes
  14,726     6,134     27,647     13,535  
 
                       
 
                               
Income tax expense
    3,599       3,471       7,169       7,301  
 
                       
 
                               
Net income
  $ 11,127     $ 2,663     $ 20,478     $ 6,234  
 
                       
 
                               
Effective income tax rate
    24%       57%       26%       54%  
 
                       
 
                               
Income before income taxes
  $ 14,726     $ 6,134     $ 27,647     $ 13,535  
Adjust: Foreign exchange gain (loss), net
    2,772       (4,715 )     4,330       (7,557 )
 
                       
 
Income before income taxes and foreign exchange gain (loss), net
  $ 11,954     $ 10,849     $ 23,317     $ 21,092  
 
                       
 
Effective income tax rate, excluding foreign exchange gain (loss), net
    30%       32%       31%       35%  
 
                       
Since we are in a net operating loss position for our U.S. operations and, accordingly have valuation allowances to reserve for net deferred tax assets, we do not currently recognize the tax benefit or expense associated with foreign currency gains or losses incurred by our U.S. operations. Therefore, whereas we did not record a tax benefit for foreign exchange losses incurred by our U.S. operations during the six-month period ended June 30, 2005, the effective tax rate for the current year period is comparatively lower because tax expense was not recorded on foreign exchange gains earned by our U.S. operations. This improvement is offset in part by increases in share-based compensation expense incurred for U.S. personnel, for which we are unable to record a tax benefit due to our U.S. net operating loss position.
The decrease in the effective tax rates, excluding foreign currency gains and losses, for the first half of 2006, compared to the first half of 2005 was largely attributable to the increased profitability of individual companies located in lower than average tax rate jurisdictions, particularly Hungary, Poland, Serbia, and Romania.
We determine income tax expense and remit income taxes based upon enacted tax laws and regulations applicable in each of the taxing jurisdictions where we conduct business. Based on our interpretation of such laws and regulations, and considering the evidence of available facts and circumstances and baseline operating forecasts, we have accrued the estimated tax effects of certain transactions, business ventures, contractual and organizational structures, projected business unit performance, and the estimated future reversal of timing differences. Should a taxing jurisdiction change its laws and regulations or dispute our conclusions, or should management become aware of new facts or other evidence that could alter our conclusions, the resulting impact to our estimates could have a material adverse effect to our consolidated financial statements.
Net income
We recorded net income of $11.1 million for the second quarter and $20.5 million for the first half 2006, compared to $2.7 million for the second quarter and $6.2 million for the first half of 2005. As more fully discussed above, the increase of $14.3 million for the first half of 2006 over the first half of 2005 was primarily the result of improvement in the amount of foreign exchange gain/loss recorded of $11.9 million and an increase in operating income of $2.8 million. These improvements in net income were partially offset by a decrease in equity from unconsolidated subsidiaries of $0.3 million and an increase in net interest expense of $0.3 million.

29


 

LIQUIDITY AND CAPITAL RESOURCES
Working capital
As of June 30, 2006, we had working capital, which is the difference between total current assets and total current liabilities, of $223.3 million, compared to working capital of $181.6 million as of December 31, 2005. Our ratio of current assets to current liabilities was 1.73 at June 30, 2006, compared to 1.55 as of December 31, 2005. This improvement is primarily due to the first quarter 2006 operating cash flows, without significant investments in acquisitions or purchases of property and equipment during the quarter. Working capital is also impacted by changes in foreign currency exchange rates as further discussed in Item 3 — Quantitative and Qualitative Disclosures About Market Risk.
Operating cash flows
Cash flows provided by operating activities decreased to 15.6 million for the first half of 2006, compared to $20.2 million for the first half of 2005. The $4.6 million decrease from 2005 is due primarily increases in cash flows from normal operations, offset by fluctuations in working capital associated with the timing of the settlement process with the mobile operators in our Prepaid Processing Segment subsidiaries.
Investing activity cash flow
Cash flows used in investing activities were $14.0 million for the first half of 2006, compared to $108.1 million for the first half of 2005. The decrease in investing activities is primarily related to reduced acquisitions in 2006. Our investing activities for the first half of 2006 consist of $1.8 million in cash paid related to the acquisition of Essentis, $0.9 million of which represents cash paid in settlement of assumed liabilities, and $0.5 million in dividends to the former owners of Europlanet related to their share of 2005 results. Additionally, cash outflows for purchases of property and equipment and other investing activities totaled $11.7 million. Our investing activities for the first half of 2005 were $99.4 million in aggregate for the acquisition of Telerecarga, Movilcarga, ATX, TelecommUSA and Europlanet, as well as the earn-out payment to the former owners of Transact. Our fixed asset purchases and other investing activities for the first half of 2005 totaled $8.7 million.
Financing activity cash flows
Cash flows provided by financing activities were $8.9 million for the first half of 2006, compared to $17.1 million for the first half of 2005. Our financing activities for the first half of 2006 consisted primarily of proceeds from the exercise of stock options and employee share purchases of $11.7 million, partially offset by payments on capital lease obligations totaling $3.1 million. Financing activity for the first half of 2005 include proceeds from borrowings of $15.2 million, proceeds from the exercise of stock options and employee share purchases of $5.4 million, partially offset by repayments of obligations under short-term borrowings and capital leases totaling $2.8 million. The increase in proceeds from the exercise of stock options during the first half of 2006 compared to the first half of 2005 was due to the exercise of a number of stock options during the first quarter 2006 that were nearing the end of their ten year expiration, combined with the impact of our Common Stock trading at or near historical highs.
Expected future financing and investing cash requirements primarily depend on our acquisition activity and the related financing needs.
Other sources of capital
Convertible debt — We have $315 million in convertible debt, consisting of two issuances. The first issuance represents $140 million in principal amount of 1.625% Convertible Senior Debentures Due 2024 having an interest rate of 1.625% and convertible into a total of 4.2 million shares of Euronet Common Stock. The debentures may not be redeemed for five years but are redeemable at any time thereafter at par. Holders of the debentures have the option to require us to purchase their debentures at par on December 15, 2009, 2014 and 2019, and upon a change in control of the Company. The second issuance represents $175 million in principal amount of 3.50% Convertible Debentures Due 2025 having an annual interest rate of 3.50% and convertible into a total of 4.3 million shares of Euronet Common Stock. The debentures may not be redeemed for seven years but are redeemable at par at any time thereafter. Holders of the debentures have the option to require us to purchase their debentures at par on October 15, 2012, 2015 and 2020, or upon a change in control of the Company. When due, these debentures can be settled in cash or Euronet Common Stock, at our option, at predetermined conversion rates.
Revolving credit agreements — As discussed in more detail in Note 7 — Debt Obligations to the unaudited consolidated financial statements, during the second quarter 2006 we amended our October 2004, $50 million revolving credit agreement to extend the maturity date to May 26, 2009, established a new credit facility in India and expand the participating financial institutions from one to three. The amended and new agreements allow the Company to elect to increase the aggregate commitments under the credit facility from $50 million to $65 million. The borrowings under the agreements may be used to refinance debt, for working capital needs, for permitted acquisitions and for other general corporate purposes. The agreements place certain restrictions on the use of the facility to finance investments in, or operations of, “money services businesses” such as those engaged in money transfer activities. As disclosed in Note 7 — Debt Obligations to the unaudited consolidated financial statements, certain of our subsidiaries have pledged all or a portion of their share capital as security for borrowings under the agreements.
As of June 30, 2006, we have borrowings of $6.7 million and stand-by letters of credit totaling $5.6 million outstanding against the revolving credit agreements; the remaining $37.7 million ($52.7 million remaining if we elect to increase the facility to $65 million) was available for borrowing. Borrowings under these agreements are being used to fund short-term working capital requirements in Spain,

30


 

Germany and India. We also have borrowings of $2.6 million at Euronet Card Services Greece (formerly Instreamline) recorded as long-term obligations.
Short-term debt obligations — Short-term debt obligations consist primarily of credit lines, overdraft facilities and short-term loans to support ATM cash needs and supplement short-term working capital requirements. As of June 30, 2006, we had $12.8 million in short-term debt obligations borrowed by our subsidiaries in Greece, India, Spain and the Czech Republic. These borrowings are being used to fund short-term working capital requirements.
Our Prepaid Processing Segment subsidiaries in Spain enter into agreements with financial institutions to receive cash in advance of collections on customers’ accounts. These arrangements can be with or without recourse and the financial institutions charge the Spanish subsidiaries transaction fees and/or interest in connection with these advances. Cash received can be up to 40 days prior to the customer invoice due dates. Accordingly, the Spanish subsidiaries remain obligated to the banks on the cash advances until the underlying account receivable is ultimately collected. Where the risk of collection remains with Euronet, the receipt of cash continues to be carried on the consolidated balance sheet in each of trade accounts receivable and accrued expenses and other current liabilities. As of June 30, 2006, we had $1.7 million recorded under these arrangements.
We believe that the short-term debt obligations can be refinanced at terms acceptable to us. However, if acceptable refinancing options are not available, we believe that amounts due under these obligations can be funded through cash generated from operations, together with cash on hand.
Other uses of capital
Payment obligations related to acquisitions — As provided in our asset purchase agreement with the sellers of the assets of Dynamic Telecom, during the first half of 2006, we issued 109,542 shares of Euronet Common Stock, valued at $4.1 million, in settlement of an earn-out obligation that was based on the achievement of certain performance criteria.
We also have other potential contingent obligations estimated to total between $8.0 million and $12.0 million to the former owners of the net assets of Movilcarga. This obligation has not been recorded in the accompanying consolidated financial statements because the final amounts cannot be estimated beyond a reasonable doubt.
Leases — We lease ATMs and other property and equipment under capital lease arrangements that expire between 2006 and 2011. The leases bear interest between 2.5% and 12.5% per year. As of June 30, 2006, we owed $19.9 million under these capital lease arrangements. The majority of these lease agreements are entered into in connection with long-term outsourcing agreements where, generally, we purchase a bank’s ATMs and simultaneously sell the ATMs to an entity related to the bank and lease back the ATMs for purposes of fulfilling the ATM outsourcing agreement with the bank. We fully recover the related lease costs from the bank under the outsourcing agreements. Generally, the leases may be canceled without penalty upon reasonable notice in the unlikely event the bank or we were to terminate the related outsourcing agreement. We expect that, if terms were acceptable, we would acquire more ATMs from banks under such outsourcing and lease agreements.
Capital expenditures and needs — Total capital expenditures for the first half of 2006 were $12.1 million, of which $1.2 million were funded through capital leases. We expect total capital expenditures to be approximately $30 million to $35 million for the full year 2006, primarily for the purchase of ATMs to meet contractual requirements in Poland and India, the purchase and installation ATMs in key under-penetrated markets, the purchase of POS terminals for the Prepaid Processing Segment and office and data center computer equipment and software. We expect approximately $15.0 million of the capital expenditures will be covered through capital leases in conjunction with ATM outsourcing agreements where we already have signed agreements with banks. The balance of these capital expenditures will be funded through cash generated from operations, together with cash on hand.
In the Prepaid Processing Segment, approximately 81,000 of the more than 259,000 POS devices that we operate are Company owned, with the remaining terminals being operated as integrated cash register devices of our major retail customers or owned by the retailers. As our Prepaid Processing Segment expands, we will continue to add terminals in certain independent retail locations at a price of approximately $300 per terminal. We expect the proportion of owned terminals to total terminals operated to remain relatively constant.
We are required to maintain ATM hardware for Euronet-owned ATMs and software for all ATMs in our network in accordance with certain regulations and mandates established by local country regulatory and administrative bodies as well as EMV. Accordingly, we expect additional capital expenditures over the next few years to maintain compliance with these regulations and/or mandates. While we do not currently have plans to increase capital expenditures to expand our network of owned ATMs, we expect that if strategic opportunities were available to us, we would consider increasing future capital expenditures to expand this network in new or existing markets. Upgrades to our ATM software and hardware were required in 2005 to meet EMV mandates such as Triple DES (Data Encryption Standard) and “micro-chip” card technology for smart cards. We completed a plan for implementation and delivery of the hardware and software modifications; the remaining capital expenditures necessary to complete these upgrade requirements are estimated to be approximately $4.4 million.

31


 

At current and projected cash flow levels, we anticipate that our cash generated from operations, together with cash on hand and amounts available under our recently amended revolving credit agreements and other existing financing will be sufficient to meet our debt, leasing, acquisition earn-out and capital expenditure obligations. If our cash is insufficient to meet these obligations, we will seek to refinance our debt under terms acceptable to us. However, we can offer no assurances that we will be able to obtain favorable terms for the refinancing of any of our debt or obligations.
Contingencies
During 2005, a former cash supply contractor in Central Europe (the “Contractor”) claimed that the Company owed it approximately $2.0 million for the provision of cash during the fourth quarter 1999 and first quarter 2000 that has not been returned. This claim, based on events that purportedly occurred over five years ago, was made more than a year after the Company had terminated its business with the Contractor and established a cash supply agreement with another supplier. In the first quarter 2006, the Contractor initiated legal action in Budapest, Hungary regarding the claim. Management expects the Company to prevail in defending itself in this matter and, accordingly has not recorded any liability or expense related to this claim. The Company will continue to monitor and assess this claim until ultimate resolution.
From time to time, we are a party to litigation arising in the ordinary course of business. Currently, there are no other contingencies that we believe, either individually or in the aggregate, would have a material adverse effect upon our consolidated results of operations or financial condition.
Other trends and uncertainties
Euronet Payments & Remittance — During 2005 we acquired TelecommUSA, now Euronet Payments & Remittance. In connection with the expected future expansion of our card-based money transfer and bill payment product through our existing POS terminals, we expect to incur potentially significant costs for technical development and marketing. Through June 30, 2006, we have incurred approximately $0.1 million in costs for this expansion, and expect to incur approximately $0.4 million over the next 12-18 months, most of which has been or will be capitalized and amortized over the assets’ estimated useful lives. We also expect to incur total operating expenses of approximately $2.0 million to $2.5 million during 2006 related to our money transfer and bill payment business. During the second quarter 2006, the money transfer and bill payment business’ operating expenses exceeded revenues by $0.6 million. These losses may increase as we begin expanding the money transfer and bill payment products domestically and internationally.
EFT Processing Segment expansion in China — In January 2006, through Jiayintong (Beijing) Technology Development Co. Ltd., our 75% owned joint venture with Ray Holdings in China, we entered into an ATM outsourcing pilot agreement with Postal Savings and Remittance Bureau (“PSRB”) a financial institution located and organized in China. Under the pilot agreement we have agreed to deploy and provide all of the day-to-day outsourcing services for a total of 90 ATMs in Beijing, Shanghai and Guangdong, the three largest commercial centers in China. During the first half of 2006, we successfully deployed 58 ATMs and we expect the remaining ATMs to become operational during the third quarter 2006. If this pilot agreement meets certain success criteria, we have agreed to take over additional existing ATMs and install new ATMs, at PSRB’s request. We have established a processing center in Beijing to drive these ATMs. During 2006, before consideration of minority interest, we expect the joint venture to incur total operating losses of approximately $1.5 million to $2.0 million.
Inflation and functional currencies
Generally, the countries in which we operate have experienced low and stable inflation in recent years. Therefore, the local currency in each of these markets is the functional currency. Although Croatia has maintained relatively stable inflation and exchange rates, the functional currency of our Croatian subsidiary is the U.S. dollar due to the significant level of U.S. dollar denominated revenues and expenses. Due to these factors, we do not believe that inflation will have a significant effect on our results of operations or financial position. We continually review inflation and the functional currency in each of the countries where we operate.
OFF BALANCE SHEET ARRANGEMENTS
We regularly grant guarantees of the obligations of our wholly-owned subsidiaries and we sometimes enter into agreements with unaffiliated parties that contain indemnification provisions, the terms of which may vary depending on the negotiated terms of each respective agreement. Our liability under such indemnification provision may be subject to time and materiality limitations, monetary caps and other conditions and defenses. As of June 30, 2006, there were no material changes from the disclosure in our Annual Report on Form 10-K for the year ended December 31, 2005. To date, we are not aware of any significant claims made by the indemnified parties or parties to guarantee agreements with us and, accordingly, no liabilities have been recorded as of June 30, 2006.

32


 

BALANCE SHEET ITEMS
Cash and cash equivalents
Cash and cash equivalents increased to $232.7 million at June 30, 2006 from $219.9 million at December 31, 2005. This increase is due to cash flows from operating activities of $15.6 million, cash flows from financing activities of $8.9 million and the effect of exchange differences on cash of $2.2 million, offset by cash used for investing activities of $14.0 million. Cash flows used in investing activities primarily represent purchases of property and equipment, the acquisition of Essentis and additional payments to the former owners of Europlanet. Cash flows from financing activities primarily represent proceeds from the exercise of stock options and employee share purchases, offset by repayments on capital lease obligations. For more information, see the Unaudited Consolidated Statement of Cash Flows for the six-month period ended June 30, 2006.
Restricted cash
Restricted cash increased to $87.4 million at June 30, 2006 from $73.9 million at December 31, 2005, and primarily represents $74.2 million held in trust and/or cash held on behalf of others in connection with the administration of the customer collection and vendor remittance activities in the Prepaid Processing Segment. Amounts collected from customers that are due to the mobile operators are deposited into a restricted cash account held by our Prepaid Processing Segment subsidiaries on behalf of the mobile operators for which we process transactions. These balances are used in connection with the administration of customer collection and vendor remittance activities and can fluctuate significantly based on the timing of the settlement process for our Prepaid Processing Segment subsidiaries. The remaining balances of restricted cash represent primarily collateral on bank guarantees and ATM network cash.
Inventory — PINs and other
Inventory — PINs and other increased to $32.6 million at June 30, 2006 from $25.6 million at December 31, 2005. Inventory — PINs and other includes prepaid personal identification number (“PIN”) inventory for prepaid mobile airtime purchases related to the Prepaid Processing Segment, primarily in the U.S., Poland, Australia and New Zealand, and to a lesser extent, the U.K. and Germany. This category also includes smaller amounts for POS terminals, mobile phone handsets and ATMs held for sale. The increase from December 31, 2005 is primarily the result of our Prepaid Processing subsidiary in Australia holding $7.9 million in PIN inventory as of June 30, 2006 in connection with a mobile operator’s change from a “consignment” practice to a “billable-with-terms” practice during the second quarter 2006. This increase was partially offset by net decreases of $0.9 million across our other Prepaid Processing subsidiaries. We generally sell our PIN inventory within a very short timeframe, thereby limiting our exposure to overall reductions in the market value of PINs or other obsolescence issues.
Trade accounts receivable, net
Net trade accounts receivable decreased to $148.8 million at June 30, 2006 from $166.5 million at December 31, 2005. The primary component of our trade accounts receivable represents amounts to be collected on behalf of mobile operators for the full value of the prepaid mobile airtime sold in connection with the growing Prepaid Processing Segment. Generally, these balances are collected and remitted to the mobile operators within two weeks. The June 30, 2006 balance includes $3.1 million in accounts receivable related to Essentis, which was acquired during January 2006. The remaining decrease is primarily due to the timing of the settlement process with mobile operators for our Prepaid Processing Segment subsidiaries, as well as the impact of seasonality.
Prepaid expenses and other current assets
Prepaid expenses and other current assets increased to $26.4 million as of June 30, 2006 from $21.2 million as of December 31, 2005. The June 30, 2006 balance includes $1.0 million related to Essentis, which was acquired in January 2006. The remaining increase in this balance is primarily the result of the timing of prepaid expenses across all of our operations. The largest component of this balance is amounts recorded for our net Value Added Tax (“VAT”) receivable related to certain European subsidiaries. The balance of net VAT receivable as of June 30, 2006 was $13.8 million, compared to $14.1 million as of December 31, 2005.
Net property and equipment
Net property and equipment increased to $50.1 million as of June 30, 2006 from $44.9 million as of December 31, 2005. Of this $5.2 million increase, $2.4 million is due to the acquisition of Essentis in January 2006 and the identification of assets under capital lease arrangements at Instreamline. Capital additions were $12.1 million during the first half of 2006, $1.2 million of which were funded through capital leases. The majority of the capital additions were ATMs in Poland, Germany and India; POS terminals in the U.S., Germany and the U.K.; and additions of computer equipment and software for our processing centers in Budapest, Hungary and Munich, Germany. Offsetting these increases, was depreciation and amortization expense of $9.2 million and net disposals of property and equipment of $0.4 million during the first half of 2006. The remaining increase of $0.5 million increase was due to the impact of fluctuations in exchange rates relative to the U.S. dollar during the first half of 2006.

33


 

Goodwill and intangible assets
Net intangible assets and goodwill increased to $324.7 million as of June 30, 2006 from $317.9 million as of December 31, 2005 due primarily to the acquisition of Essentis and the earn-out for the Dynamic Telecom acquisition finalized during the first half of 2006. The following table summarizes the activity for the six-month period ended June 30, 2006:
                         
    Amortizable             Total  
    Intangible             Intangible  
(in thousands):   Assets     Goodwill     Assets  
 
                       
Balance as of January 1, 2006
  $ 50,724     $ 267,195     $ 317,919  
Increases (decreases):
                       
Acquisition of Essentis
    2,467             2,467  
Earn-out payment related to Dynamic Telecom acquisition
          4,126       4,126  
Adjustments to other 2005 acquisitions
    232       (611 )     (379 )
Amortization
    (4,134 )           (4,134 )
Other (primarily changes in foreign currency exchange rates)
    1,213       3,498       4,711  
 
                 
 
                       
Balance as of June 30, 2006
  $ 50,502     $ 274,208     $ 324,710  
 
                 
Trade accounts payable
Accounts payable decreased to $184.8 million at June 30, 2006 from $202.7 million at December 31, 2005. The primary component of our trade accounts payable represents payables to mobile operators in connection with the timing of the settlement process for the growing Prepaid Processing Segment. Of this decrease, $4.1 million was due to the timing of settlements for PIN inventory in Poland at the end of 2005, $7.7 million was due to reduced sales activity with a mobile operator in Spain and the remainder was due mainly to the timing of the settlement process with mobile operators, mainly our e-pay subsidiaries in the U.K. and New Zealand.
Accrued expenses and other current liabilities
Accrued expenses and other current liabilities increased to $80.9 million at June 30, 2006 from $77.1 million at December 31, 2005. The June 30, 2006 balance includes $2.0 million in additional accruals related to the January 2006 acquisition of Essentis. Offsetting this increase is the inclusion in the December 31, 2005 balance of $3.2 million in accruals for the purchase of the remaining 6.25% ownership share of our subsidiary in India and the remaining 34% of our subsidiary in Serbia, Europlanet, that were settled during the first quarter 2006. The remaining increase of $5.4 million is primarily due the timing of the settlement process with mobile operators in our Prepaid Processing Segment subsidiaries in the U.K., Australia, Poland and New Zealand.
Income taxes payable
Income taxes payable increased to $10.2 million at June 30, 2006 from $8.2 million at December 31, 2005. This increase relates to difference between the timing of accruals for income taxes payable and the related tax payments. The amount of income tax payments that we make in certain jurisdictions is based on our profitability for 2005, while our accruals for income taxes are based on estimated profitability for the current year. Since the profitability of our operations is generally expected to increase for 2006 as compared to 2005, accruals for income taxes exceeded amounts paid during the first half of 2006.
Deferred revenue
Deferred revenue increased to $9.8 million as of June 30, 2006 from $8.0 million as of December 31, 2005. The increase is due to the January 2006 acquisition of Essentis, a U.K.-based software solutions company that sells a leading card issuing and merchant acquiring software package. Deferred revenue generally results from unearned software maintenance that is billed in advance and from reaching contractual billing milestones ahead of earnings recognition for certain agreements. Deferred revenue primarily relates to our Software Solutions Segment and to the EFT Segment where contractual pre-payments are collected from customers in advance of providing services.
Total stockholders’ equity
Total stockholders’ equity increased to $248.0 million at June 30, 2006 from $206.4 million at December 31, 2005. This $41.6 million increase is the result of:
  $20.5 million in net income for the first half of 2006;
 
  $4.1 million in Common Stock issued in settlement of the Dynamic Telecom earn-out;

34


 

  $11.7 million from stock issued under employee stock plans;
 
  $3.8 million in share-based compensation; and
 
  $1.5 million decrease in accumulated other comprehensive loss.
As discussed in the Notes to the Unaudited Consolidated Financial Statements, we adopted the provisions of SFAS No. 123R on January 1, 2006. We elected to adopt SFAS No. 123R utilizing the modified retrospective application method as provided by SFAS No. 123R and, accordingly, financial statement amounts for the prior periods presented in this Form 10-Q have been adjusted to reflect the fair value method of expensing prescribed by SFAS No. 123R. See Note 1 — General, Note 2 — Significant Accounting Policies and Practices and Note 7 — Stock Plans to the Unaudited Consolidated Financial Statements for further discussion. These adjustments included an increase of $32.7 million to the January 1, 2006 balance of additional paid-in capital and an offsetting increase of $32.7 million to the January 1, 2006 balance of our accumulated deficit, for the amount of share-based compensation relating to the years 1996 through 2005. Total stockholders’ equity was not impacted by these adjustments.
FORWARD-LOOKING STATEMENTS
This document contains statements that constitute forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts included in this document are forward-looking statements, including statements regarding the following:
  trends affecting our business plans, financing plans and requirements;
 
  trends affecting our business;
 
  the adequacy of capital to meet our capital requirements and expansion plans;
 
  the assumptions underlying our business plans;
 
  business strategy;
 
  government regulatory action;
 
  technological advances; and
 
  projected costs and revenues.
Although we believe that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to be correct. Forward-looking statements are typically identified by the words believe, expect, anticipated, intend, estimate and similar expressions.
Investors are cautioned that any forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may materially differ from those in the forward-looking statements as a result of various factors, including, but not limited to, those referred to above and as set forth and more fully described in Part II, Item 1A — Risk Factors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign currency exchange rate risk
For the first half of 2006, 84% of our revenues were generated in non-U.S. dollar countries compared to 86% for the first half of 2005. This slight decrease as compared to prior year is due to increased revenues of our U.S.-based Prepaid Processing Segment operations. We expect to continue generating a significant portion of our revenues in countries with currencies other than the U.S. dollar.
We are particularly vulnerable to fluctuations in exchange rates of the U.S. dollar to the currencies of countries in which we have significant operations. We estimate that a 10% depreciation in these foreign currency exchange rates would have the combined effect on reported net income and working capital of a $2.8 million decrease. A 10% appreciation in these foreign currency exchange rates would have the combined effect on reported net income and working capital of a $2.8 million increase. This effect was estimated by segregating revenues, expenses and working capital by currency and applying a 10% currency depreciation and appreciation to the non-U.S. dollar amounts. We believe this quantitative measure has inherent limitations and does not take into account any governmental actions or changes in either customer purchasing patterns or our financing or operating strategies.
As a result of continued European economic convergence, including the increased influence of the euro as opposed to the U.S. dollar on the Central European currencies, we expect that the currencies of the markets where we invest will fluctuate less against the euro and the British pound than against the U.S. dollar.

35


 

We are also exposed to foreign currency exchange rate risk in our money transfer subsidiary, Euronet Payments & Remittance, that was established during the second quarter 2005. This portion of our business is currently insignificant; however, we expect that it will grow rapidly. A majority of this business involves receiving and disbursing different currencies, in which we earn a foreign currency spread based on the difference between buying currency at wholesale exchange rates and selling the currency to consumers at retail exchange rates. This spread provides some protection against currency fluctuations that occur while we are holding the foreign currency. Additionally, our exposure to changes in foreign currency exchange rates is limited by the fact that disbursement occurs for the majority of transactions shortly after they are initiated.
Interest rate risk
As of June 30, 2006, we do not have significant exposure to interest rate volatility. Of the total outstanding debt of $357.0 million, approximately 88% relates to contingent convertible debentures having fixed coupon rates. Our $175 million contingent convertible debentures, issued in October 2005, accrue interest at a rate of 3.50% per annum. The $140 million contingent convertible debentures, issued in December 2004, accrue interest at a rate of 1.625% per annum. Interest expense, including amortization of deferred debt issuance costs, for these contingent convertible debentures is expected to total approximately $10.1 million per year, or a weighted average interest rate of 3.2% annually.
The remaining 12% of total debt outstanding relates to debt obligations and capitalized leases with fixed payment and interest terms that expire between 2006 and 2011. We also have $50 million in revolving credit facilities that accrue interest at variable rates, which can be increased to $65 million at our option. Should we borrow this full $65 million under the revolving credit facility, in addition to approximately $15.4 million borrowed under other debt arrangements as of June 30, 2006, and maintain the balance for a full year, a 1% increase in the applicable interest rate would result in additional interest expense to the Company of approximately $0.8 million.
ITEM 4. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Our executive management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2006. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the design and operation of these disclosure controls and procedures were effective as of such date.
CHANGE IN INTERNAL CONTROLS
There has been no change in our internal control over financial reporting during the six-month period ended June 30, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is from time to time a party to litigation arising in the ordinary course of its business.
During 2005, a former cash supply contractor in Central Europe (the “Contractor”) claimed that the Company owed it approximately $2.0 million for the provision of cash during the fourth quarter 1999 and first quarter 2000 that has not been returned. This claim, based on events that purportedly occurred over five years ago, was made more than a year after the Company had terminated its business with the Contractor and established a cash supply agreement with another supplier. In the first quarter 2006, the Contractor initiated legal action in Budapest, Hungary regarding the claim. Management expects the Company to prevail in defending itself in this matter and, accordingly has not recorded any liability or expense related to this claim. The Company will continue to monitor and assess this claim until ultimate resolution.
Currently, there are no other legal proceedings that management believes, either individually or in the aggregate, would have a material adverse effect upon the consolidated results of operations or financial condition of the Company.

36


 

ITEM 1A. RISK FACTORS
You should carefully consider the risks described below before making an investment decision. The risks and uncertainties described below are not the only ones facing our company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.
If any of the following risks actually occurs, our business, financial condition or results of operations could be materially adversely affected. In that case, the trading price of our common stock could decline substantially.
This Quarterly Report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a number of factors, including the risks described below and elsewhere in this Quarterly Report.
Other than as set forth below, there have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, as filed with the SEC.
Risks Related to Our Business
We may be required to recognize impairment charges related to long-lived assets and goodwill recorded in connection with our acquisitions.
Our total assets include approximately $324.7 million, or 35% of total assets, in goodwill and acquired intangible assets recorded as a result of acquisitions. We assess our goodwill, intangible assets and other long-lived assets as and when required by U.S. GAAP to determine whether they are impaired. If operating results in any of our key markets, including the U.K., Germany, Spain, Australia, New Zealand or the U.S. deteriorate or our plans do not progress as expected when we acquired these entities, we may be required to record an impairment write-down of goodwill, intangible assets or other long-lived assets. Impairment charges would reduce reported earnings for the periods in which they are recorded. This could have a material adverse effect on our results of operations and financial condition.
An additional 30 million shares of Common Stock was authorized for issuance by stockholders, which could result in additional shares of our Common Stock being issued, potentially diluting equity ownership of current holders and the share price of our Common Stock.
At the May 18, 2006 Annual Meeting of Stockholders, stockholders approved an amendment to our Certificate of Incorporation to increase the aggregate number of shares of Common Stock that we have the authority to issue from sixty million (60,000,000) shares of Common Stock to ninety million (90,000,000) shares of Common Stock. Further, stockholders approved a new equity compensation plan (“2006 Stock Incentive Program”) under which an additional 4 million shares would be reserved.
Although we have no plans or commitments to issue the additional authorized shares of Common Stock, our Board of Directors believes it was necessary to increase the number of shares of our authorized Common Stock in order to provide us with the flexibility to issue Common Stock for business purposes that may arise as deemed advisable by our Board. These purposes could include, among other things, (i) to declare future stock dividends or stock splits, which may increase the liquidity of our shares; (ii) the sale of stock to obtain additional capital or to acquire other companies or businesses, which could enhance our growth strategy or allow us to reduce debt if needed; (iii) for use in additional stock incentive programs and (iv) for other bona fide purposes. Our Board of Directors may issue the additional authorized shares of Common Stock without notice to, or further action by, our stockholders, unless stockholder approval is required by law or the rules of the NASDAQ Stock Market. The issuance of additional shares of Common Stock may significantly dilute the equity ownership of the current holders of our Common Stock. Further, over the course of time, all of the issued shares have the potential to be publicly traded, perhaps in large blocks. This may result in dilution of the market price of the Common Stock.
An additional 12.3 million shares of Common Stock, representing 33% of the shares outstanding as of June 30, 2006, could be added to our total Common Stock outstanding through the exercise of options or the issuance of additional shares of our Common Stock pursuant to existing agreements. Once issued, these shares of Common Stock could be traded into the market and result in a decrease in the market price of our Common Stock.
As of June 30, 2006, we had an aggregate of 3.2 million options and restricted share awards outstanding held by our directors, officers and employees, which entitles these holders to acquire an equal number of shares of our Common Stock upon exercise. Of this amount, 1.3 million options are currently vested, which means they can be exercised at any time. Approximately 0.3 million additional shares of our Common Stock may be issued in connection with our employee stock purchase plan. Additionally, we may be required to issue approximately 0.3 million shares of our Common Stock (based on current prices and estimated earn-out payments) to the former shareholders or owners of the Movilcarga Assets under contingent “earn-out” payments in connection with these acquisitions. The number of shares issued under the earn-outs will depend upon performance of the acquired business and the trading price of our Common Stock at the time we make the earn-out payments. Another 8.5 million shares of Common Stock could be issued upon conversion of the Company’s Convertible Debentures issued in December 2004 and October 2005.

37


 

Accordingly, approximately 12.3 million shares (based on current prices and estimated earn-out payments) could potentially be added to our total current Common Stock outstanding through the exercise of options or the issuance of additional shares, which could adversely impact the trading price for our stock. The actual number of shares issuable could be higher depending upon the actual amounts of the earn-outs and our stock price at the time of payment (i.e. more shares could be issuable if our share price declines).
Of the 3.2 million total options and restricted share awards outstanding, an aggregate of 1.3 million options and restricted shares are held by persons who may be deemed to be our affiliates and who would be subject to Rule 144. Thus, upon exercise of their options, these affiliates’ shares would be subject to the trading restrictions imposed by Rule 144. The remainder of the common shares issuable under options or as earn-outs described above would be freely tradable in the public market. Over the course of time, all of the issued shares have the potential to be publicly traded, perhaps in large blocks.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on May 18, 2006. A total of 33,944,927, or 92.0%, of the Company’s shares of Common Stock were present or represented by proxy at the meeting. The five proposals presented below were approved as follows:
Proposal 1 Election of Directors.
The three director nominees, information with respect to whom was set forth in the Proxy Statement, were elected. The vote with respect to the election of these directors was as follows:
                 
Director   Voted in Favor   Withheld
Thomas A. McDonnell
    22,558,109       11,386,818  
Paul S. Althasen
    32,433,645       1,511,282  
Daniel R. Henry
    32,632,986       1,311,941  
Other directors whose terms continued after the meeting for the periods indicated in the Proxy materials filed for the annual meeting are Michael J. Brown, M. Jeannine Strandjord, Andrew B. Schmitt, Andrzej Olechowski and Eriberto Scocimara.
Proposal 2 Amendment of Euronet’s Certificate of Incorporation.
The amendment of Euronet’s certificate of incorporation, to increase the authorized Common Stock of Euronet, par value $0.02 per share, from 60 million shares to 90 million shares was approved. The vote with respect to the approval of this proposal was as follows:
                     
For   Against   Abstain   Non-Vote
32,803,510
    1,125,377       16,040    
Proposal 3 Approval of the Euronet 2006 Stock Incentive Plan.
The Euronet 2006 Stock Incentive Plan was approved in accordance with the following vote:
                         
For   Against   Abstain   Non-Vote
19,791,763
    10,144,659       27,884       3,980,621  
Proposal 4 Approval of the Euronet Executive Annual Incentive Plan.
The Euronet Executive Annual Incentive Plan was approved in accordance with the following vote:
                     
For   Against   Abstain   Non-Vote
31,694,030
    2,214,822       36,075    
Proposal 5 Ratification of the appointment of KPMG as Euronet’s auditors for the year ending December 31, 2006.
The appointment of KPMG as Euronet’s auditors for the year ending December 31, 2006 was ratified in accordance with the following vote:
                     
For   Against   Abstain   Non-Vote
33,817,416
    110,205       17,306    

38


 

ITEM 6. EXHIBITS
a) Exhibits
The exhibits that are required to be filed or incorporated herein by reference are listed on the Exhibit Index below.

39


 

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, thereunto duly authorized.
August 4, 2006
         
By:
  /s/ MICHAEL J. BROWN    
 
       
 
  Michael J. Brown    
 
  Chief Executive Officer    
 
       
By:
  /s/ RICK L. WELLER    
 
       
 
  Rick L. Weller    
 
  Chief Financial Officer    

40


 

Exhibit Index
     
Exhibit   Description
 
   
10.1
  Amendment No. 7 dated November 17, 2005 to $10,000,000 U.S. Credit Agreement dated October 25, 2004 among us, Payspot, Inc., Euronet USA, Inc., Call Processing, Inc. and TelecommUSA, Inc. (as Borrowers) and Bank of America, N.A. (as Lender)
 
   
10.2
  Amendment No. 8 dated November 17, 2005 to the $40,000,000 Euro/GBP Credit Agreement dated October 25, 2004 among us, e-pay Holdings Ltd. and Delta Euronet GmbH (as Borrowers) and Bank of America N.A. (as Lender)
 
   
10.3
  Amendment No. 8 dated May 26, 2006 to the $10,000,000 U.S. Credit Agreement dated October 25, 2004 among us, Payspot, Inc., Euronet USA, Inc. and Call Processing, Inc. (as Borrowers) and Bank of America, N.A. (as Lender)
 
   
10.4
  Amendment No. 9 dated May 26, 2006 to the $30,000,000 Euro/GBP Credit Agreement dated October 25, 2004 among us, e-pay Holdings Ltd. and Delta Euronet GmbH (as Borrowers) and Bank of America, N.A. (as Lender)
 
   
10.5
  Euro/GBP Credit Facility Guaranty Agreement dated May 26, 2006 in favor of Bank of America by our U.S. subsidiaries
 
   
10.6
  Rupee Credit Agreement dated May 26, 2006 among us and Euronet India Pvt. Ltd. (as Borrowers) and Bank of America, N.A. acting through its Mumbai, India branch
 
   
10.7
  Rupee Credit Facility Guaranty Agreement dated May 26, 2006 in favor of Bank of America, N.A. by us
 
   
10.8
  Form of Employee Restricted Stock Agreement pursuant to Euronet Worldwide, Inc. 2006 Stock Incentive Plan
 
   
31.1
  Section 302 — Certifications of Chief Executive Officer
 
   
31.2
  Section 302 — Certifications of Chief Financial Officer
 
   
32.1
  Section 906 — Certification of Chief Executive Officer and Chief Financial Officer

41

exv10w1
 

Exhibit 10.1
AMENDMENT NO. 7
TO
$10,000,000 U.S. CREDIT AGREEMENT
     This Amendment No. 7 dated as of November 17, 2005 (this “Amendment”), is entered into by and among Euronet Worldwide, Inc., a Delaware corporation, as Borrower Agent and as a Borrower, PaySpot, Inc., a Delaware corporation, Euronet USA, Inc., an Arkansas corporation, Call Processing, Inc., a Texas corporation and TELECOMMUSA, LTD., a North Carolina corporation (each a "Borrower”, and collectively, the “Borrowers”), and Bank of America, N.A., a national banking association, as agent and as a lender (the “Lender”).
Recitals
     A. The Borrowers and the Lender, as agent and a lender have entered into that certain $10,000,000 U.S. Credit Agreement dated as of October 25, 2004, as amended, supplemented or otherwise modified by that certain Amendment No. 1 and Limited Waiver, dated as of December 14, 2004, that certain Limited Waiver dated as of December 23, 2004, that certain Limited Waiver dated as of February 10, 2005, that certain Amendment No. 2 dated as of March 14, 2005, that certain Limited Waiver dated as of April 14, 2005, that certain Limited Waiver dated as of May 11, 2005, that certain Limited Waiver dated as of May 17, 2005, that certain Amendment No. 3 dated as of May 25, 2005, that certain Amendment No. 4 dated as June 8, 2005, that certain Limited Waiver dated as of June 9, 2005, that certain Supplement No. 1 dated as of June 15, 2005, that certain Amendment No. 5 dated as of July 15, 2005, that certain Amendment No. 6 dated as of September 28, 2005 and that certain Limited Waiver dated as of November 4, 2005 (as so amended, supplemented and modified, the “Credit Agreement”).
     B. The Borrowers have requested that the Lender grant the amendment to the Credit Agreement as more fully described herein.
     C. Subject to the representations and warranties of the Borrowers and upon the terms and conditions set forth in this Amendment, the Lender is willing to grant such amendment as more fully set forth herein.
Agreement
     Now, Therefore, in consideration of the foregoing Recitals, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound, and to induce the Lender to enter into this Amendment, the Borrowers and the Lender hereby agree as follows:
SECTION 1. Defined Terms. Capitalized terms used herein but not otherwise defined herein shall have the meaning assigned to such terms in the Credit Agreement.

1


 

SECTION 2. Amendment & Acknowledgement.
     2.1 Section 10.9 of the Credit Agreement is hereby amended by:
  (a)   deleting the word “and” at the end of Section 10.9(h);
 
  (b)   replacing the period at the end of Section 10.9(i) with “; and”; and
 
  (c)   adding a new Section 10.9(j) to read as follows:
               “(j) Investments in money market funds governed by Rule 2a-7 of the Investment Company Act of 1940, as amended (each a “Money Market Fund”).”
     2.2 The Lender hereby acknowledges that the Holding Company Borrower has designated each of (i) that certain Money Market Fund account with U.S. Bank, National Association and (ii) that certain Money Market Fund account with Fidelity Investments, as a “Proceeds Account” and agrees that each such account shall constitute a “Proceeds Account” under the Credit Agreement.
SECTION 3. Limitations on Amendment.
     3.1 The amendments and acknowledgement set forth in Section 2 above are effective for the purposes set forth herein and will be limited precisely as written and will not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of the Credit Agreement or any other Loan Document, (b) otherwise prejudice any right or remedy which the Agent or the Lenders may now have or may have in the future under or in connection with the Credit Agreement or any other Loan Document or (c) be a consent to any future amendment, waiver or modification of any other term or condition of the Credit Agreement or any other Loan Document.
     3.2 This Amendment is to be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein waived or amended, are hereby ratified and confirmed and will remain in full force and effect.
SECTION 4. Representations and Warranties. In order to induce the Lender to enter into this Amendment, the Borrowers represent and warrant to the Lender as follows:
     4.1 Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents (other than those which expressly speak as of a different date) are true, accurate and complete in all material respects as of the date hereof and (b) no Default or Event of Default has occurred and is continuing;
     4.2 Each Borrower has the corporate power and authority and legal right to execute and deliver this Amendment and to perform its obligations hereunder. Such execution and delivery have been duly authorized by proper proceedings, and this Amendment constitutes the legal, valid and binding obligations of each Borrower, enforceable against each of them in accordance with their respective terms;

2


 

     4.3 The articles of incorporation, bylaws and other organizational documents of each Borrower delivered to the Lender as a condition precedent to the effectiveness of the Credit Agreement are true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect; and
     4.4 The execution, delivery and performance of this Amendment will not violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on any Borrower, any provision of each Borrower’s respective articles or certificate of incorporation, by-laws or other charter documents, or the provisions of any indenture, instrument or other written or oral agreement to which any Borrower is a party or is subject or by which any Borrower or any of its property is bound, or conflict therewith or constitute a default thereunder, or result in the creation or imposition of any Lien in, of or on any of its property pursuant to the terms of any such indenture, instrument or agreement. No order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, any Governmental Authority is required by or in respect of the Borrowers to authorize or is required in connection with the execution, delivery and performance of or the enforceability of this Amendment.
SECTION 5. Expenses. The Borrowers, jointly and severally, agree to pay to Lender upon demand, the amount of any and all out-of-pocket expenses, including the reasonable fees and expenses of its counsel, which Lender may incur in connection with the preparation, documentation, and negotiation of this Amendment and all related documents.
SECTION 6. Reaffirmation. Each Borrower hereby reaffirms its obligations under each Loan Document to which it is a party.
SECTION 7. Effectiveness. This Amendment will become effective as of the date hereof upon the execution and delivery of this Amendment, whether the same or different copies, by each Borrower and Lender.
SECTION 8. Governing Law. This Amendment will be governed by and will be construed and enforced in accordance with the laws of the State of Missouri.
SECTION 9. Claims, Counterclaims, Defenses, Rights of Set-Off. Each Borrower hereby represents and warrants to the Lender that it has no knowledge of any facts what would support a claim, counterclaim, defense or right of set-off.
SECTION 10. Counterparts. This Amendment may be signed in any number of counterparts, and by different parties hereto in separate counterparts, with the same effect as if the signatures to each such counterpart were upon a single instrument. All counterparts will be deemed an original of this Amendment.

3


 

     In Witness Whereof, the parties hereto have caused this Amendment to be executed as of the date first written above.
             
Borrowers:   EURONET WORLDWIDE, INC.,    
    a Delaware corporation    
 
           
 
  By:   /s/ Rick Weller
 
   
    Name: Rick Weller    
    Title: Executive Vice President and Chief Financial Officer    
 
           
    PAYSPOT, INC.,    
    a Delaware corporation    
 
           
 
  By:   /s/ Jeff Newman    
 
           
    Name: Jeff Newman    
    Title: Vice President    
 
           
    EURONET USA, INC.,    
    an Arkansas corporation    
 
           
 
  By:   /s/ Jeff Newman    
 
           
    Name: Jeff Newman    
    Title: Vice President    
 
           
    CALL PROCESSING, INC.,    
    a Texas corporation    
 
           
 
  By:   /s/ Rick Weller    
 
           
    Name: Rick Weller    
    Title: Vice President    
 
           
    TELECOMMUSA, LTD.,    
    a North Carolina corporation    
 
           
 
  By:   /s/ Rick Weller    
 
           
    Name: Rick Weller    
    Title: Vice President    

Signature Page to Amendment No. 7 to U.S. Credit Agreement


 

             
Agent and Lender:   BANK OF AMERICA, N.A.    
 
           
 
  By:   /s/ John Mills
 
   
    Name: John P. Mills    
    Title: Vice President    

Signature Page to Amendment No. 7 to U.S. Credit Agreement

exv10w2
 

Exhibit 10.2
AMENDMENT NO. 8
TO
$40,000,000 EURO/GBP CREDIT AGREEMENT
     This Amendment No. 8 dated as of November 17, 2005 (this “Amendment”), is entered into by and among Euronet Worldwide, Inc., as Borrower Agent (the “Borrower Agent”), e-pay Holdings Limited and Delta Euronet GmbH (each a “Borrower”, and collectively, the "Borrowers”) and Bank of America, N.A. (“Bank of America”), as agent and a Lender (the “Lender”).
Recitals
     A. The Borrower Agent, the Borrowers and the Lender, as agent and a lender have entered into that certain $40,000,000 EURO/GBP Credit Agreement dated as of October 25, 2004, as amended or otherwise modified by that certain Amendment No. 1 and Limited Waiver, dated as of December 14, 2004, that certain Limited Waiver dated as of December 23, 2004, that certain Limited Waiver dated as of February 10, 2005, that certain Amendment No. 2, dated as of March 14, 2005, that certain Limited Waiver dated as of May 11, 2005, that certain Limited Waiver dated as of May 17, 2005, that certain Amendment No. 3 dated as of May 25, 2005, that certain Amendment No. 4 dated as of June 8, 2005, that certain Limited Waiver dated as of June 9, 2005, that certain Amendment No. 5 dated as of June 16, 2005, that certain Amendment No. 6 dated as of July 15, 2005, that certain Amendment No 7 dated as of September 28, 2005 and that certain Limited Waiver dated as of November 4, 2005 (as so amended and modified, the “Credit Agreement”).
     B. The Borrower Agent and the Borrowers have requested that the Lender grant certain amendments to the Credit Agreement as more fully described herein.
     C. Subject to the representations and warranties of the Borrower Agent and the Borrowers and upon the terms and conditions set forth in this Amendment, the Lender is willing to grant such amendments as more fully set forth herein.
Agreement
     Now, Therefore, in consideration of the foregoing Recitals, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound, and to induce the Lender to enter into this Amendment, the Borrower Agent, the Borrowers and the Lender hereby agree as follows:
SECTION 1. Defined Terms. Capitalized terms used herein but not otherwise defined herein shall have the meaning assigned to such terms in the Credit Agreement.
SECTION 2. Amendment & Acknowledgement.
     2.1 Section 10.9 of the Credit Agreement is hereby amended by:
  (a)   deleting the word “and” at the end of Section 10.9(h);

1


 

  (b)   replacing the period at the end of Section 10.9(i) with “; and”; and
 
  (c)   adding a new Section 10.9(j) to read as follows:
               “(j) Investments in money market funds governed by Rule 2a-7 of the Investment Company Act of 1940, as amended (each a “Money Market Fund”).”
     2.2 The Lender hereby acknowledges that the Borrower Agent has designated each of (i) that certain Money Market Fund account with U.S. Bank, National Association and (ii) that certain Money Market Fund account with Fidelity Investments, as a “Proceeds Account” and agrees that each such account shall constitute a “Proceeds Account” under the Credit Agreement.
SECTION 3. Limitations on Amendments.
     3.1 The amendments and acknowledgement set forth in Section 2 above are effective for the purposes set forth herein and will be limited precisely as written and will not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of the Credit Agreement or any other Loan Document, (b) otherwise prejudice any right or remedy which the Agent or the Lenders may now have or may have in the future under or in connection with the Credit Agreement or any other Loan Document or (c) be a consent to any future amendment, waiver or modification of any other term or condition of the Credit Agreement or any other Loan Document.
     3.2 This Amendment is to be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein waived or amended, are hereby ratified and confirmed and will remain in full force and effect.
SECTION 4. Representations and Warranties. In order to induce the Lender to enter into this Amendment, the Borrower Agent and each of the Borrowers represent and warrant to the Lender as follows:
     4.1 Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents (other than those which expressly speak as of a different date) are true, accurate and complete in all material respects as of the date hereof and (b) no Default or Event of Default has occurred and is continuing;
     4.2 The Borrower Agent and each Borrower has the power and authority and legal right to execute and deliver this Amendment and to perform its obligations hereunder. Such execution and delivery have been duly authorized by proper proceedings, and this Amendment constitutes the legal, valid and binding obligations of the Borrower Agent and each Borrower, enforceable against each of them in accordance with their respective terms;
     4.3 The articles of incorporation or organization, bylaws, if any, or other charter documents of the Borrower Agent and each Borrower delivered to the Lender as a condition precedent to the effectiveness of the Credit Agreement are true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

2


 

     4.4 The execution, delivery and performance of this Amendment will not violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Borrower Agent and any Borrower, any provision of the Borrower Agent’s and each Borrower’s respective articles or certificate of incorporation, by-laws, if any, or other charter documents, or the provisions of any indenture, instrument or other written or oral agreement to which any Borrower is a party or is subject or by which the Borrower Agent and any Borrower or any of its property is bound, or conflict therewith or constitute a default thereunder, or result in the creation or imposition of any Lien in, of or on any of its property pursuant to the terms of any such indenture, instrument or agreement. No order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, any Governmental Authority is required by or in respect of the Borrower Agent and the Borrowers to authorize or is required in connection with the execution, delivery and performance of or the enforceability of this Amendment; and
SECTION 5. Expenses. The Borrowers, jointly and severally, agree to pay to Lender upon demand, the amount of any and all out-of-pocket expenses, including the reasonable fees and expenses of its counsel, which Lender may incur in connection with the preparation, documentation, and negotiation of this Amendment and all related documents.
SECTION 6. Reaffirmation. The Borrower Agent and each Borrower hereby reaffirms its obligations under each Loan Document to which it is a party.
SECTION 7. Effectiveness. This Amendment will become effective as of the date hereof upon the execution and delivery of this Amendment, whether the same or different copies, by the Borrower Agent, each Borrower and Lender.
SECTION 8. Governing Law. This Amendment will be governed by and will be construed and enforced in accordance with the laws of the State of Missouri.
SECTION 9. Claims, Counterclaims, Defenses, Rights of Set-Off. The Borrower Agent and each Borrower hereby represents and warrants to the Lender that it has no knowledge of any facts what would support a claim, counterclaim, defense or right of set-off.
SECTION 10. Counterparts. This Amendment may be signed in any number of counterparts, and by different parties hereto in separate counterparts, with the same effect as if the signatures to each such counterpart were upon a single instrument. All counterparts will be deemed an original of this Amendment.

3


 

     In Witness Whereof, the parties hereto have caused this Amendment to be executed as of the date first written above.
             
Borrower Agent:   EURONET WORLDWIDE, INC.,    
    a Delaware corporation    
 
           
 
  By:   /s/ Rick Weller
 
    
    Name: Rick Weller    
    Title: Executive Vice President and Chief Financial Officer    
 
           
Borrowers:   E-PAY HOLDINGS LIMITED,    
    a limited liability company incorporated in England and Wales    
 
           
 
  By:   /s/ Jeff Newman    
 
           
    Name: Jeff Newman    
    Title: Director    
 
           
    DELTA EURONET GMBH.,    
    a German company with limited liability    
 
           
 
  By:   /s/ Rick Weller    
 
           
    Name: Rick Weller    
    Title: Director    

Signature Page to Amendment No. 8 to Euro Credit Agreement


 

             
Agent and Lender:   BANK OF AMERICA, N.A.    
 
           
 
  By:   /s/ John Mills
 
   
    Name: John P. Mills    
    Title: Vice President    

Signature Page to Amendment No. 8 to Euro Credit Agreement

exv10w3
 

Exhibit 10.3
AMENDMENT NO. 8
TO
$10,000,000 U.S. CREDIT AGREEMENT
     This Amendment No. 8 dated as of May 26, 2006 (this “Amendment”), is entered into by and among Euronet Worldwide, Inc., a Delaware corporation, as Borrower Agent and as a Borrower, PaySpot, Inc., a Delaware corporation, Euronet USA, Inc., an Arkansas corporation, and Call Processing, Inc., a Texas corporation (each a “Borrower”, and collectively, the “Borrowers”), and Bank of America, N.A., a national banking association (“Bank of America”), as agent (in such capacity, the “Agent”) and as a lender and Bank of Oklahoma, N.A. (“Bank of Oklahoma”), as a lender (collectively with Bank of America, the “Lenders”).
Recitals
     A. The Borrowers, Euronet Payments & Remittance, Inc. (formerly known as TELECOMMUSA, LTD.) and the Bank of America, as agent and a lender have entered into that certain $10,000,000 U.S. Credit Agreement dated as of October 25, 2004, as amended, supplemented or otherwise modified by that certain Amendment No. 1 and Limited Waiver, dated as of December 14, 2004, that certain Limited Waiver dated as of December 23, 2004, that certain Limited Waiver dated as of February 10, 2005, that certain Amendment No. 2 dated as of March 14, 2005, that certain Limited Waiver dated as of April 14, 2005, that certain Limited Waiver dated as of May 11, 2005, that certain Limited Waiver dated as of May 17, 2005, that certain Amendment No. 3 dated as of May 25, 2005, that certain Amendment No. 4 dated as June 8, 2005, that certain Limited Waiver dated as of June 9, 2005, that certain Supplement No. 1 dated as of June 15, 2005, that certain Amendment No. 5 dated as of July 15, 2005, that certain Amendment No. 6 dated as of September 28, 2005, that certain Limited Waiver dated as of November 4, 2005 and that certain Amendment No. 7 dated as of November 17, 2005 (as so amended, supplemented and modified, the “Credit Agreement”).
     B. Concurrently with entering into this Amendment, Bank of America is entering into an Assignment and Assumption with Bank of Oklahoma pursuant to which Bank of America is assigning a portion of its rights and obligations as a Lender under the Credit Agreement (as further amended, supplement or otherwise modified from time to time) to Bank of Oklahoma.
     C. The Borrowers have requested that the Lenders grant the amendments to the Credit Agreement as more fully described herein.
     D. Subject to the representations and warranties of the Borrowers and upon the terms and conditions set forth in this Amendment, the Lenders are willing to grant such amendment as more fully set forth herein.
Agreement
     Now, Therefore, in consideration of the foregoing Recitals, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound, and to induce the Lenders to enter into this Amendment, the Borrowers and the Lenders hereby agree as follows:

1


 

SECTION 1. Defined Terms. Capitalized terms used herein but not otherwise defined herein shall have the meaning assigned to such terms in the Credit Agreement.
SECTION 2. Amendment & Acknowledgement.
     2.1 Article 2 of the Credit Agreement is hereby amended by adding a new Section 2.3 to such Article to read in its entirety as follows:
     “2.3 Increase of the Commitment.
     (a) Request for Increase. Provided there exists no Default, upon notice to the Agent (which shall promptly notify the Lenders), the Borrower Agent, on behalf of the Borrowers may on a one-time basis, request an increase in the Commitments by an amount not exceeding $15,000,000; provided that:
     (i) any such request for an increase shall be in a minimum amount of $1,000,000; provided that, the aggregate of (x) such increase plus (y) any concurrent increase in the “Commitment” under the Euro Credit Agreement, plus (z) any concurrent increase in the “Commitment” under the Rupee Credit Agreement shall be a minimum of $5,000,000; and
     (ii) after giving effect to any such increase, the aggregate of (x) the Commitment under this Agreement, plus (y) the “Commitment” under the Euro Credit Agreement, plus (z) the “Commitment” under the Rupee Credit Agreement, will not exceed $65,000,000.
At the time of sending such notice, the Borrower Agent (in consultation with the Agent) shall specify the time period within which each Lender is requested to respond (which shall in no event be less than ten Business Days from the date of delivery of such notice to the Lenders).
     (b) Lender Elections to Increase. Each Lender shall notify the Agent within such time period whether or not it agrees to increase its Commitment and, if so, whether by an amount equal to, greater than, or less than its Pro Rata share of such requested increase. Any Lender not responding within such time period shall be deemed to have declined to increase its Commitment.
     (c) Notification by Administrative Agent; Additional Lenders. The Agent shall notify the Borrower Agent and each Lender of the Lenders’ responses to each request made hereunder. To achieve the full amount of a requested increase and subject to the approval of the Agent and the L/C Issuer (which approvals shall not be unreasonably withheld), the Borrower Agent may also invite additional Eligible Assignees to become Lenders pursuant to a joinder agreement in form and substance satisfactory to the Agent and its counsel.
     (d) Effective Date and Allocations. If the Commitment is increased in accordance with this Section, the Agent and the Borrower Agent shall determine the effective date (the “Increase Effective Date”) and the final allocation of such increase. The Agent shall promptly notify the Lenders of the final allocation of such increase and the Increase Effective Date.
     (e) Conditions to Effectiveness of Increase. As a condition precedent to such increase, the Borrowers shall deliver to the Agent a certificate of each Obligor dated as of the

2


 

Increase Effective Date (in sufficient copies for each Lender) signed by a responsible officer of such Obligor (i) certifying and attaching the resolutions adopted by such Obligor approving or consenting to such increase, and (ii) in the case of each Borrower, certifying that, before and after giving effect to such increase, (A) the representations and warranties contained in Article 7 and the other Loan Documents are true and correct on and as of the Increase Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and (B) no Default exists. The Borrowers shall prepay any Revolving Loans outstanding on the Increase Effective Date to the extent necessary to keep the outstanding Revolving Loans ratable with any revised Pro Rata shares arising from any nonratable increase in the Commitment under this Section.
     (f) Conflicting Provisions. This Section shall supersede any provisions in Sections 4.5 or 13.9 to the contrary.”
     2.2 Section 5.1(c) of the Credit Agreement is hereby amended by deleting the last sentence thereof.
     2.3 Article 6 of the Credit Agreement is hereby amended by inserting in the first sentence of the first paragraph of such Article the phrase “, in the case of conditions set forth in Sections 6.4, 6.7, 6.8 and 6.9, as of” immediately before the phrase “each date a Letter of Credit is issued, renewed or extended”.
     2.4 Section 7.9 of the Credit Agreement is hereby amended by replacing the amount “One Million Dollars ($1,000,000)” with the amount “Three Million Dollars ($3,000,000)”.
     2.5 Section 7.21 of the Credit Agreement is hereby amended by inserting the following phrase at the end of such Section:
     “, except as otherwise required for tax or other reporting purposes imposed by any statute, rule, regulation, order or restriction of any foreign government or Governmental Authority applicable to a Foreign Subsidiary of the Holding Company Borrower”
     2.6 Section 8.4(f) of the Credit Agreement is hereby amended by replacing the phrase “One Million Dollars ($1,000,000) in the aggregate” with the phrase “Three Million Dollars ($3,000,000) in the aggregate”.
     2.7 Section 8.7 of the Credit Agreement is hereby amended by adding the following proviso at the end of such Section:
     “; provided, that no proceeds of the Revolving Loans shall be used by any Borrower to directly or indirectly make any Investments (other than Investments permitted pursuant to Section 10.9(f)) in, and no Letters of Credit shall be requested on behalf of or for the benefit of, Euronet Payments & Remittance, Inc. (formerly known as TELECOMMUSA, LTD.) or in any other person that is a “Money services business” (as defined in 31 C.F.R. §103.11(uu) as amended, restated or replaced from time to time).”
     2.8 Section 8.9 of the Credit Agreement is hereby amended by deleting the word “written” from the proviso therein.

3


 

     2.9 Section 10.9(g)(ii) of the Credit Agreement is hereby amended by amending and restating such section in its entirety to read as follows:
                    “(ii) In addition to those Investments set forth on Schedule 10.9, the Borrowers and any other Obligor may collectively make additional Investments of up to Ten Million Dollars ($10,000,000) in the aggregate from the effective date of Amendment No. 8 to this Agreement through the Revolving Credit Termination Date in all Euronet Entities that are not (A) Obligors; provided, that to the extent any such Euronet Entity is required to become an Obligor in accordance with the Section 10.4(e) or Section 10.5, such requirement has been properly waived in accordance with Section 13.9, or (B) “Obligors” as defined in the Euro Credit Agreement; provided, that to the extent any such Euronet Entity is required to become an “Obligor” in accordance with Section 10.4(e) or Section 10.5 of the Euro Credit Agreement, such requirement has been properly waived in accordance with Section 13.9 of the Euro Credit Agreement. To the extent that any such Investments are intercompany loans or advances, such loans and advances shall count against the limitation in the preceding sentence only to the extent such loans or advances have not been repaid;”
     2.10 Article 10 of the Credit Agreement is hereby amended by adding a new Section 10.14 to such Article to read in its entirety as follows:
          “10.14 Money Services Business. Not engage in any business, nor permit any other Obligor to engage in any business, that could reasonably be classified as a “Money services business” (as defined in 31 C.F.R. §103.11(uu) as amended, restated or replaced from time to time).”
     2.11 Section 11.1(k) of the Credit Agreement is hereby amended by amending and restating such Section in its entirety to read as follows:
     “(k) Other Credit Agreements. Any “Event of Default” shall have occurred pursuant to the Euro Credit Agreement or the Rupee Credit Agreement.”
     2.12 Section 13.5 of the Credit Agreement is hereby amended by:
  (i)   inserting at the end of Section 13.5(b)(iv) the word “and”;
 
  (ii)   replacing the “; and” at the end of Section 13.5(b)(v) with a period; and
 
  (iii)   deleting Section 13.5(b)(vi) in its entirety.
     2.13 Exhibit 1 to the Credit Agreement is hereby amended by amending and restating the following defined terms in their entirety to read as follows:
     “EBITDA” shall mean, for any period, (i) operating income, plus (ii) depreciation, plus (iii) amortization, plus (iv) interest income from the operations of the Prepaid Processing Segment, plus, (v) upon the request of the Borrower Agent with the prior consent of the Agent, certain one-time, non-cash charges included in operating income, plus (vi) non-cash expenses recognized pursuant to Financial Accounting Standards Board Statement No. 123(R), (Share-Based Payments); provided that if any non-cash expense referred to in the immediately

4


 

preceding clauses (v) and (vi), including for stock options, becomes a cash charge in a future period then EBITDA shall be adjusted by the amount of such cash charge.
     “EBITDAR” shall mean, for any period, (i) operating income, plus (ii) depreciation, plus (iii) amortization, plus (iv) interest income from the operations of the Prepaid Processing Segment, plus (v) rent, plus (vi) upon the request of the Borrower Agent with the prior consent of the Agent, certain one-time, non-cash charges included in operating income, plus (vii) non-cash expenses recognized pursuant to Financial Accounting Standards Board Statement No. 123(R), (Share-Based Payments); provided that if any non-cash expense referred to in the immediately preceding clauses (vi) and (vii), including for stock options, becomes a cash charge in a future period then EBITDAR shall be adjusted by the amount of such cash charge.
     “Required Lenders” shall mean at any date of determination thereof, Aggregate Lenders having Aggregate Revolving Credit Commitments representing at least 51% of the Aggregate Revolving Credit Commitments at such time; provided, however, that if any Aggregate Lender shall be in breach of any of its obligations hereunder to Borrowers or Agent, under the Euro Credit Agreement to the “Borrowers” or “Agent” party thereto or under the Rupee Credit Agreement to the “Borrowers” or “Agent” party thereto, including any breach resulting from its failure to honor any of its Aggregate Revolving Credit Commitments in accordance with the terms of this Agreement, the Euro Credit Agreement or the Rupee Credit Agreement, as applicable, then, for so long as such breach continues, the term “Required Lenders” shall mean Aggregate Lenders (excluding each Aggregate Lender that is in breach of such obligations) having Aggregate Revolving Credit Commitments representing at least 51% of the Aggregate Revolving Credit Commitments (excluding the Aggregate Revolving Credit Commitments of each Aggregate Lender that is in breach of such obligations) outstanding at such time; provided further, however, that if the Aggregate Revolving Credit Commitments have been terminated, the term “Required Lenders” shall mean the Aggregate Lenders (excluding each Aggregate Lender that is in breach of such obligations) holding Aggregate Revolving Loans representing at least 51% of the aggregate principal amount of all Aggregate Revolving Loans (excluding the Aggregate Revolving Loans of each Aggregate Lender that is in breach of such obligations) outstanding at such time; provided, that in addition to the foregoing, in the event there are less than four Aggregate Lenders then the term Required Lenders must also constitute at least two Aggregate Lenders. For the purposes of the definition of Required Lenders the following terms shall have the following meanings: “Aggregate Lenders” shall mean the Lenders under this Agreement, the “Lenders” under the Euro Credit Agreement and the “Lenders” under the Rupee Credit Agreement; “Aggregate Revolving Credit Commitments” shall mean the Revolving Credit Commitments under this Agreement, plus the “Revolving Credit Commitments” under the Euro Credit Agreement, plus the “Revolving Credit Commitments” under the Rupee Credit Agreement; and “Aggregate Revolving Loans” shall mean the Revolving Loans under this Agreement, plus the “Revolving Loans” under the Euro Credit Agreement, plus the “Revolving Loans” under the Rupee Credit Agreement.
     “Revolving Credit Termination Date” shall mean May 26, 2009 or such other date as may be agreed to by Agent, the Required Lenders, the Borrower Agent and the Borrowers from time to time; provided that no Lender shall be required to extend its Commitment without such Lender’s consent.”

5


 

     2.14 Exhibit 1 to the Credit Agreement is hereby amended by inserting the following defined terms in the appropriate alphabetical order:
     “Increase Effective Date” is defined in Section 2.3(d) of this Agreement.
     “Money Market Fund” is defined in Section 10.9(j) of this Agreement.
     “Prepaid Processing Segment” shall mean the reportable “Prepaid Processing” segment as reported in the Borrowing Agent’s form 10-Q and 10-K filings with the Securities and Exchange Commission.
     “Rupee Borrower” means Euronet Services India Pvt Ltd, a company organized under the laws of India.
     “Rupee Credit Agreement” means the $10,000,000 Rupee Credit Agreement, dated as of May 26, 2006 among Bank of America, N.A., as Lender, the Rupee Borrower, as Borrower and Euronet Worldwide, Inc., as the Borrower Agent.
     2.15 Exhibit 8.4 to the Credit Agreement shall be replaced with Exhibit 8.4 attached hereto effective as of the date of this Amendment and all references in the Credit Agreement to such Exhibit shall be references to the Exhibit attached hereto.
     2.16 Each of the Schedules listed below shall be replaced with the corresponding Schedules attached hereto and effective as of the date of this Amendment and all references in the Credit Agreement to such Schedules shall be references to the Schedules attached hereto:
  (i)   Schedule E-1 – Revolving Credit Commitments;
 
  (ii)   Schedule 7.4 – Environmental Matters;
 
  (ii)   Schedule 7.8 – Organizational Structure;
 
  (iii)   Schedule 10.1 – Existing Indebtedness;
 
  (iv)   Schedule 10.2 – Existing Liens;
 
  (v)   Schedule 10.9 – Existing Investments.
     2.17 Each Lender and each Borrower hereby acknowledge and agree to the following corrections:
          (a) Section 4.7 of the Credit Agreement is hereby corrected as of the date of the Credit Agreement by amending and restating such Section to read as follows:
     “4.7 Minimum Amounts. Each borrowing of, or conversion into, any Prime Rate Loan shall be in an amount of at least One Hundred Thousand Dollars ($100,000) or a multiple of One Hundred Thousand Dollars ($100,000) in excess thereof, and each borrowing of, conversion into, or continuation of, a LIBOR Rate Loan shall be in an amount of at least Five

6


 

Hundred Thousand Dollars ($500,000) or a multiple of One Hundred Thousand Dollars ($100,000) in excess thereof.”
          (b) Article 12 of the Credit Agreement is hereby corrected as of the date of the Credit Agreement by:
               (i) setting forth as Section 12.3 all of Section 12.2 except the first two sentences;
               (ii) setting forth as Section 12.6 all of Section 12.5 except the first three sentences; and
               (iii) setting forth as Section 12.8 all of Section 12.7 except the first two sentences.
          (c) Recital A of Amendment No. 1 and Limited Waiver to the Credit Agreement is hereby corrected as of the date of such Amendment by replacing the date “October 25, 2006” with the date “October 25, 2004”.
          (d) Section 2.12 of Amendment No. 1 and Limited Waiver to the Credit Agreement is hereby corrected as of the date of such Amendment by replacing the date “December [—], 2004” with the date “December 15, 2004” in the definition of “Convertible Senior Debenture Indenture”.
          (e) Recital A of Limited Waiver to the Credit Agreement, dated as of December 23, 2004 is hereby corrected as of the date of such Limited Waiver by replacing the date “October 25, 2006” with the date “October 25, 2004”.
          (f) Recital A of Limited Waiver to the Credit Agreement, dated as of February 10, 2005 is hereby corrected as of the date of such Limited Waiver by replacing the date “October 25, 2006” with the date “October 25, 2004”.
          (g) Section 2.2 of Amendment No. 4 to the Credit Agreement is hereby corrected as of the date of such Amendment by replacing the phrase “times (ii) the Applicable Margin” as its appears in Sections 5.1(b) and Section 5.1(c) of the Credit Agreement as amended by such Section 2.2 with the phrase “times (ii) a rate per annum equal to the Applicable Margin calculated for the applicable quarterly or other period”; and
          (h) Section 3.9 of the Credit Agreement is hereby corrected as of the date of Amendment No. 4 to the Credit Agreement by replacing the phrase “the terms and conditions of the Fee Letter” with the phrase “the terms and conditions of Section 5.1(c).”
     2.18 Each Borrower hereby acknowledges and consents to the Assignment and Assumption between Bank of America and Bank of Oklahoma and that Bank of Oklahoma has become a party to the Credit Agreement and, to the extent of the interest assigned by such Assignment and Assumption, has the rights and obligations of a Lender under the Credit Agreement, and that Bank of America is, to the extent of the interest assigned by such Assignment and Assumption, released from its obligations under this Agreement but shall

7


 

continue to be entitled to the benefits of Sections 3.5, 5.2 and 13.6 of the Credit Agreement with respect to facts and circumstances occurring prior to the effective date of such assignment.
     2.19 The Agent, the L/C Issuer and Lenders hereby release Euronet Payments & Remittance, Inc. (formerly known as TELECOMMUSA, LTD.), a North Carolina corporation (“EP&R”) from its obligations under the Credit Agreement, the Revolving Note, the Fee Letter and each other Loan Document to which it is a party. The Agent hereby releases its lien on the Pledged Shares listed on that certain Pledge Amendment, dated June 15, 2005 by the Holding Company Borrower (the “EP&R Shares”). As of the date hereof EP&R shall no longer be a “Borrower”, “Required Guarantor” or “Obligor” under the Credit Agreement, the Revolving Note, the Fee Letter or any other Loan Document. The Agent and the Lenders hereby waive any requirement in any Loan Document requiring that EP&R be, or become, a Borrower, guarantor, Required Guarantor or Obligor.
SECTION 3. Limitations on Amendment.
     3.1 The amendments set forth in Section 2 above are effective for the purposes set forth herein and will be limited precisely as written and will not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of the Credit Agreement or any other Loan Document, (b) otherwise prejudice any right or remedy which the Agent or the Lenders may now have or may have in the future under or in connection with the Credit Agreement or any other Loan Document or (c) be a consent to any future amendment, waiver or modification of any other term or condition of the Credit Agreement or any other Loan Document.
     3.2 This Amendment is to be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein waived or amended, are hereby ratified and confirmed and will remain in full force and effect.
SECTION 4. Representations and Warranties. In order to induce the Lenders to enter into this Amendment, the Borrowers represent and warrant to the Lenders as follows:
     4.1 Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents (other than those which expressly speak as of a different date) are true, accurate and complete in all material respects as of the date hereof and (b) no Default or Event of Default has occurred and is continuing;
     4.2 Each Borrower has the corporate power and authority and legal right to execute and deliver this Amendment and to perform its obligations hereunder. Such execution and delivery have been duly authorized by proper proceedings, and this Amendment constitutes the legal, valid and binding obligations of each Borrower, enforceable against each of them in accordance with their respective terms;
     4.3 The articles of incorporation, bylaws and other organizational documents of each Borrower delivered to the Lender as a condition precedent to the effectiveness of the Credit

8


 

Agreement are true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect; and
     4.4 The execution, delivery and performance of this Amendment will not violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on any Borrower, any provision of each Borrower’s respective articles or certificate of incorporation, by-laws or other charter documents, or the provisions of any indenture, instrument or other written or oral agreement to which any Borrower is a party or is subject or by which any Borrower or any of its property is bound, or conflict therewith or constitute a default thereunder, or result in the creation or imposition of any Lien in, of or on any of its property pursuant to the terms of any such indenture, instrument or agreement. No order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, any Governmental Authority is required by or in respect of the Borrowers to authorize or is required in connection with the execution, delivery and performance of or the enforceability of this Amendment.
SECTION 5. Expenses. The Borrowers, jointly and severally, agree to pay to the Lenders upon demand, the amount of any and all out-of-pocket expenses, including the reasonable fees and expenses of its counsel, which the Lenders may incur in connection with the preparation, documentation, and negotiation of this Amendment and all related documents.
SECTION 6. Reaffirmation. Each Borrower hereby reaffirms its obligations under each Loan Document to which it is a party, including, without limitation, the validity and enforceability of all of the liens and security interests heretofore granted pursuant to and in connection with the Credit Agreement to the Agent as collateral security for the obligations under the Credit Agreement, including the liens and security interests granted pursuant to (i) that certain Pledge Agreement dated October 25, 2004 by the Holding Company Borrower in favor of Agent, (ii) that Pledge Agreement dated October 25, 2004 by PaySpot, Inc. in favor of Agent, (iii) that certain Deed of Pledges of Shares in EFT Services Holding B.V. dated December 1, 2004 by the Holding Company Borrower in favor of the Agent (iv) that certain Pledge Agreement dated June 15, 2005 by the Holding Company Borrower in favor of Agent. Each Borrower hereby acknowledges that all of such liens and security interests, and all collateral heretofore pledged as security for such obligations, continues to be and remains collateral for such obligations from and after the date hereof.
SECTION 7. This Amendment will become effective as of the date hereof upon:
     7.1 the execution and delivery of this Amendment, whether the same or different copies, by each Borrower and Lender;
     7.2 the execution and delivery of an Amended and Restated Note to Bank of America and a Note to Bank Of Oklahoma by each Borrower;
     7.3 the Agent shall have received a pro forma Compliance Certificate in form and substance satisfactory to the Agent, demonstrating that the Borrowers will be, after giving effect to this Amendment, in compliance with each of the financial covenants set forth in Article 9 of the Credit Agreement;

9


 

     7.4 the Agent shall have received opinions of counsel to each Borrower in form and substance satisfactory to the Agent and its counsel;
     7.5 all conditions set forth in Section 7 of Amendment No. 9 to the Euro Credit Agreement shall have been satisfied; and
     7.6 the Rupee Borrower shall have executed and delivered to Bank of America the Rupee Credit Agreement and have satisfied any other conditions required to be satisfied on the “Closing Date” pursuant to the Rupee Credit Agreement.
     7.7 The Borrowers shall have paid the fees set forth in the Fee Letter dated the date hereof, among the Agent and the Borrowers.
SECTION 8. Governing Law. This Amendment will be governed by and will be construed and enforced in accordance with the laws of the State of Missouri.
SECTION 9. Claims, Counterclaims, Defenses, Rights of Set-Off. Each Borrower hereby represents and warrants to each Lender that it has no knowledge of any facts what would support a claim, counterclaim, defense or right of set-off against such Lender.
SECTION 10. Counterparts. This Amendment may be signed in any number of counterparts, and by different parties hereto in separate counterparts, with the same effect as if the signatures to each such counterpart were upon a single instrument. All counterparts will be deemed an original of this Amendment.

10


 

     In Witness Whereof, the parties hereto have caused this Amendment to be executed as of the date first written above.
             
Borrowers:   EURONET WORLDWIDE, INC.,    
    a Delaware corporation    
 
           
 
  By:   /s/ Rick Weller
 
   
    Name: Rick Weller    
    Title: Executive Vice President and Chief Financial Officer    
 
           
    PAYSPOT, INC.,    
    a Delaware corporation    
 
           
 
  By:   /s/ Jeff Newman    
 
           
    Name: Jeff Newman    
    Title: Vice President    
 
           
    EURONET USA, INC.,    
    an Arkansas corporation    
 
           
 
  By:   /s/ Jeff Newman    
 
           
    Name: Jeff Newman    
    Title: Vice President    
 
           
    CALL PROCESSING, INC.,    
    a Texas corporation    
 
           
 
  By:   /s/ Rick Weller    
 
           
    Name: Rick Weller    
    Title: Vice President    

Signature Page to Amendment No. 8 to U.S. Credit Agreement


 

             
Agent and Lender:   BANK OF AMERICA, N.A.    
 
           
 
  By:   /s/ John Mills
 
   
    Name: John P. Mills    
    Title: Vice President    
 
           
Lender:   BANK OF OKLAHOMA, N.A.    
 
           
 
  By:   /s/ Chris Amburgy    
 
           
    Name: Chris Amburgy    
    Title: Vice President    

Signature Page to Amendment No. 8 to U.S. Credit Agreement


 

ACKNOWLEDGEMENT
     Euronet Payments & Remittance, Inc., a North Carolina corporation (“EP&R”), hereby acknowledges and agrees that as of the effective date of that certain Amendment No. 8 dated as of                      ___, 2006 (the “Amendment”), by and among Euronet Worldwide, Inc., a Delaware corporation, as Borrower Agent and as a Borrower, PaySpot, Inc., a Delaware corporation, Euronet USA, Inc., an Arkansas corporation, and Call Processing, Inc., a Texas corporation and Bank of America, N.A., a national banking association, as agent and as a lender, and Bank of Oklahoma, N.A., as a lender, that EP&R shall no longer be a “Borrower” or “Obligor” under the Credit Agreement (as defined in the Amendment), the Revolving Note, the Fee Letter or any other Loan Document (as such terms are defined in the Credit Agreement) and will no longer be entitled to request Revolving Loans or the issuance of Letters of Credit under the Credit Agreement or otherwise receive proceeds from Revolving Loans or benefit from Letters of Credit requested by the remaining Borrowers under the Credit Agreement.
             
    EURONET PAYMENTS & REMITTANCE, INC.,    
    a North Carolina corporation    
 
           
 
  By:   /s/ Rick Weller
 
   
    Name: Rick Weller    
    Title: Vice President    

EP&R Acknowledgement to Amendment No. 8 to U.S. Credit Agreement


 

Exhibit 8.4
Compliance Certificate

Exhibit 8.4


 

Schedule E-1
Revolving Credit Commitments
                 
Lender           Revolving Credit Commitment
Bank of America, N.A.
          $ 5,000,000  
 
               
Bank of Oklahoma, N.A.
          $ 5,000,000  

Schedule E-1


 

Schedule 7.4
Environmental Matters
None.

Schedule 7.4


 

Schedule 7.8
Organizational Structure

Schedule 10.2


 

Schedule 10.1
Existing Indebtedness

Schedule 10.2


 

Schedule 10.2
Existing Liens

Schedule 10.2


 

Schedule 10.9
Existing Investments

Schedule 10.9

exv10w4
 

Exhibit 10.4
AMENDMENT NO. 9
TO
$30,000,000 EURO/GBP CREDIT AGREEMENT
     This Amendment No. 9 dated as of May 26, 2006 (this “Amendment”), is entered into by and among Euronet Worldwide, Inc., as Borrower Agent (the “Borrower Agent”), e-pay Holdings Limited and Delta Euronet GmbH (each a “Borrower”, and collectively, the “Borrowers”), Bank of America, N.A. (“Bank of America”), as agent and a lender and US Bank, National Association (“US Bank”) as a lender (collectively with Bank of America, the “Lenders”).
Recitals
     A. The Borrower Agent, the Borrowers and Bank of America, as agent and a lender have entered into that certain $30,000,000 EURO/GBP Credit Agreement dated as of October 25, 2004, as amended or otherwise modified by that certain Amendment No. 1 and Limited Waiver, dated as of December 14, 2004, that certain Limited Waiver dated as of December 23, 2004, that certain Limited Waiver dated as of February 10, 2005, that certain Amendment No. 2, dated as of March 14, 2005, that certain Limited Waiver dated as of May 11, 2005, that certain Limited Waiver dated as of May 17, 2005, that certain Amendment No. 3 dated as of May 25, 2005, that certain Amendment No. 4 dated as of June 8, 2005, that certain Limited Waiver dated as of June 9, 2005, that certain Amendment No. 5 dated as of June 16, 2005, that certain Amendment No. 6 dated as of July 15, 2005, that certain Amendment No. 7 dated as of September 28, 2005, that certain Limited Waiver dated as of November 4, 2005 and that certain Amendment No. 8 dated as of November 17, 2005 (as so amended and modified, the “Credit Agreement”).
     B. Concurrently with entering into this Amendment, Bank of America is entering into an Assignment and Assumption with US Bank pursuant to which Bank of America is assigning a portion of its rights and obligations as a Lender under the Credit Agreement (as further amended, supplement or otherwise modified from time to time) to US Bank.
     C. The Borrower Agent and the Borrowers have requested that the Lenders grant the amendments to the Credit Agreement as more fully described herein.
     D. Subject to the representations and warranties of the Borrower Agent and the Borrowers and upon the terms and conditions set forth in this Amendment, the Lenders are willing to grant such amendments as more fully set forth herein.
Agreement
     Now, Therefore, in consideration of the foregoing Recitals, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound, and to induce the Lender to enter into this Amendment, the Borrower Agent, the Borrowers and the Lender hereby agree as follows:

1


 

SECTION 1. Defined Terms. Capitalized terms used herein but not otherwise defined herein shall have the meaning assigned to such terms in the Credit Agreement.
SECTION 2. Amendment.
     2.1 The cover page of the Credit Agreement is hereby amended by replacing the amount “$40,000,000” with the amount “$30,000,000” appearing thereon.
     2.2 The title of the Credit Agreement appearing above the preamble is hereby amended by replacing the amount “$40,000,000” with the amount “$30,000,000”.
     2.3 Section 2.1(a)(i) of the Credit Agreement is hereby amended by:
          (a) inserting immediately before the proviso in such Section the phrase “and, to the extent such Lender is an L/C Issuer, to treat each draw under any Letter of Credit denominated in GBPs (each a “UK Letter of Credit”) as a UK Revolving Loan as provided in Section 2.4 below”; and
          (b) amending and restating the phrase “(i) a Default or Event of Default has occurred and is continuing or (ii) after the making of such UK Revolving Loan, (a) the aggregate unpaid principal balance of all UK Revolving Loans would exceed the UK Revolving Credit Commitments or (b) the aggregate unpaid principal balance of all Revolving Loans would exceed the aggregate Revolving Credit Commitments or (c)” in its entirety to read as follows:
          “(A) a Default or Event of Default has occurred and is continuing or (B) after the making of such UK Revolving Loan, (I) the aggregate unpaid principal balance of all UK Revolving Loans, together with the aggregate undrawn amount under all outstanding UK Letters of Credit, would exceed the UK Revolving Credit Commitments, or (II) the aggregate unpaid principal balance of all Revolving Loans, together with the aggregate undrawn amount under all outstanding Letters of Credit, would exceed the aggregate Revolving Credit Commitments, or (III)”
     2.4 Section 2.1(a)(ii) of the Credit Agreement is hereby amended by:
          (a) inserting immediately before the proviso in such Section the phrase “and, to the extent such Lender is an L/C Issuer, to treat each draw under any Letter of Credit denominated in Euros (each a “German Letter of Credit”) as a German Revolving Loan as provided in Section 2.4 below”; and
          (b) amending and restating the phrase “(i) a Default or Event of Default has occurred and is continuing or (ii) after the making of such German Revolving Loan, (a) the aggregate unpaid principal balance of all German Revolving Loans would exceed the German Revolving Credit Commitments or (b) the aggregate unpaid principal balance of all Revolving Loans would exceed the aggregate Revolving Credit Commitments or (c)” in its entirety to read as follows:
          “(A) a Default or Event of Default has occurred and is continuing or (B) after the making of such German Revolving Loan, (I) the aggregate unpaid principal balance of all German Revolving Loans, together with the aggregate undrawn amount under all outstanding German Letters of Credit, would exceed the German Revolving

2


 

Credit Commitments, or (II) the aggregate unpaid principal balance of all Revolving Loans, together with the aggregate undrawn amount under all outstanding Letters of Credit, would exceed the aggregate Revolving Credit Commitments, or (III)”
     2.5 Section 2.1(b) of the Credit Agreement is hereby amended and restated to read in its entirety as follows:
     “(b) (i) Except as otherwise provided in Section 3.3, if the aggregate principal indebtedness of the UK Borrower under the UK Revolving Notes, plus the aggregate undrawn amount under all outstanding UK Letters of Credit, at any time exceeds the UK Revolving Credit Commitment, the UK Borrower shall immediately, without demand or notice, pay principal under the UK Revolving Notes so that the aggregate principal amount outstanding thereunder, plus the aggregate undrawn amount under all outstanding UK Letters of Credit, does not exceed the UK Revolving Credit Commitment; provided, that in the case of UK Letters of Credit, such amount shall be held as cash collateral for undrawn UK Letters of Credit, and shall promptly be returned to the appropriate Borrower if UK Letters of Credit in an amount sufficient to eliminate such overadvance expire undrawn.
          (ii) Except as otherwise provided in Section 3.3, if the aggregate principal indebtedness of the German Borrower under the German Revolving Notes, plus the aggregate undrawn amount under all outstanding German Letters of Credit, at any time exceeds the German Revolving Credit Commitment, the German Borrower shall immediately, without demand or notice, pay principal under the German Revolving Notes so that the aggregate principal amount outstanding thereunder, plus the aggregate undrawn amount under all outstanding German Letters of Credit, does not exceed the German Revolving Credit Commitment; provided, that in the case of German Letters of Credit, such amount shall be held as cash collateral for undrawn German Letters of Credit, and shall promptly be returned to the appropriate Borrower if German Letters of Credit in an amount sufficient to eliminate such overadvance expire undrawn.
          (iii) Except as otherwise provided in Section 3.3, if the aggregate principal indebtedness of the Borrowers under the Revolving Notes, plus the aggregate undrawn amount under all outstanding Letters of Credit, at any time exceeds the Revolving Credit Commitment, the Borrowers shall immediately, without demand or notice, pay principal under their respective Revolving Notes so that the aggregate principal amount outstanding thereunder, plus the aggregate undrawn amount under all outstanding Letters of Credit, does not exceed the Revolving Credit Commitment; provided, that in the case of Letters of Credit, such amount shall be held as cash collateral for undrawn Letters of Credit, and shall promptly be returned to the appropriate Borrower if Letters of Credit in an amount sufficient to eliminate such overadvance expire undrawn.
     2.6 Article 2 of the Credit Agreement is hereby amended by adding a new Section 2.3 to such Article to read in its entirety as follows:
     “2.3 Increase of the Commitment.
     (a) Request for Increase. Provided there exists no Default, upon notice to the Agent (which shall promptly notify the Lenders), the Borrower Agent, on behalf of the Borrowers may

3


 

on a one-time basis, request an increase in the Commitments by an amount not exceeding $15,000,000; provided that:
     (i) any such request for an increase shall be in a minimum amount of $1,000,000; provided that, the aggregate of (x) such increase plus (y) any concurrent increase in the “Commitment” under the US Credit Agreement, plus (z) any concurrent increase in the “Commitment” under the Rupee Credit Agreement shall be a minimum of $5,000,000; and
     (ii) after giving effect to any such increase, the aggregate of (x) the Commitment under this Agreement, plus (y) the “Commitment” under the US Credit Agreement, plus (z) the “Commitment” under the Rupee Credit Agreement, will not exceed $65,000,000.
At the time of sending such notice, the Borrower Agent (in consultation with the Agent) shall specify the time period within which each Lender is requested to respond (which shall in no event be less than ten Business Days from the date of delivery of such notice to the Lenders).
     (b) Lender Elections to Increase. Each Lender shall notify the Agent within such time period whether or not it agrees to increase its Commitment and, if so, whether by an amount equal to, greater than, or less than its Pro Rata share of such requested increase. Any Lender not responding within such time period shall be deemed to have declined to increase its Commitment.
     (c) Notification by Administrative Agent; Additional Lenders. The Agent shall notify the Borrower Agent and each Lender of the Lenders’ responses to each request made hereunder. To achieve the full amount of a requested increase and subject to the approval of the Agent and the L/C Issuer (which approvals shall not be unreasonably withheld), the Borrower Agent may also invite additional Eligible Assignees to become Lenders pursuant to a joinder agreement in form and substance satisfactory to the Agent and its counsel.
     (d) Effective Date and Allocations. If the Commitment is increased in accordance with this Section, the Agent and the Borrower Agent shall determine the effective date (the “Increase Effective Date”) and the final allocation of such increase. The Agent shall promptly notify the Lenders of the final allocation of such increase and the Increase Effective Date.
     (e) Conditions to Effectiveness of Increase. As a condition precedent to such increase, the Borrowers shall deliver to the Agent a certificate of each Obligor dated as of the Increase Effective Date (in sufficient copies for each Lender) signed by a responsible officer of such Obligor (i) certifying and attaching the resolutions adopted by such Obligor approving or consenting to such increase, and (ii) in the case of each Borrower, certifying that, before and after giving effect to such increase, (A) the representations and warranties contained in Article 7 and the other Loan Documents are true and correct on and as of the Increase Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and (B) no Default exists. The Borrowers shall prepay any Revolving Loans outstanding on the Increase Effective Date to the extent necessary to keep the outstanding Revolving Loans ratable with any revised Pro Rata shares arising from any nonratable increase in the Commitment under this Section.
     (f) Conflicting Provisions. This Section shall supersede any provisions in Sections 4.5 or 13.9 to the contrary.”

4


 

     2.7 Article 2 of the Credit Agreement is hereby amended by adding a new Section 2.4, Section 2.5, Section 2.6, Section 2.7, Section 2.8, Section 2.9, Section 2.10, Section 2.11, Section 2.12, Section 2.13, Section 2.14, Section 2.15 and Section 2.16 to such Article to read in their entirety as follows:
     “2.4 The Letter of Credit Commitment. (a) Subject to the terms and conditions set forth herein, (A) the L/C Issuer agrees, in reliance upon the agreements of the Lenders set forth in this Section 2.4, (1) from time to time on any Business Day during the period from the Closing Date until the Letter of Credit Expiration Date, to issue Letters of Credit for the account of the Borrowers or their Subsidiaries, and to amend or extend Letters of Credit previously issued by it, in accordance with subsection (b) below, and (2) to honor drawings under the Letters of Credit; and (B) the Lenders severally agree to participate in Letters of Credit issued for the account of the Borrower or its Subsidiaries and any drawings thereunder; provided that after giving effect to any L/C Credit Extension with respect to any Letter of Credit:
     (I) the aggregate unpaid principal balance of all UK Revolving Loans, together with the aggregate undrawn amount under all outstanding UK Letters of Credit, shall not exceed the UK Revolving Credit Commitments;
     (II) the aggregate unpaid principal balance of all German Revolving Loans, together with the aggregate undrawn amount under all outstanding German Letters of Credit, shall not exceed the German Revolving Credit Commitments;
     (III) the aggregate unpaid principal balance of all Revolving Loans, together with the aggregate undrawn amount under all outstanding Letters of Credit, shall not exceed the Revolving Credit Commitments; and
     (IV) the aggregate outstanding principal amount of the Revolving Loans of any Lender, plus such Lender’s Pro Rata Share of the aggregate amount of all L/C Obligations shall not exceed such Lender’s Commitment.
Each request by a Borrower for the issuance or amendment of a Letter of Credit shall be deemed to be a representation by such Borrower that the L/C Credit Extension so requested complies with the conditions set forth in the proviso to the preceding sentence. Within the foregoing limits, and subject to the terms and conditions hereof, the Borrower’s ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed.
          (b) The L/C Issuer shall not issue any Letter of Credit, if:
               (i) the expiry date of such requested Letter of Credit would occur more than twelve months after the date of issuance or last extension, unless the Required Lenders have approved such expiry date; or
               (ii) the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless all the Lenders have approved such expiry date.

5


 

          (c) The L/C Issuer shall not be under any obligation to issue any Letter of Credit if:
               (i) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the L/C Issuer from issuing such Letter of Credit, or any applicable law to the L/C Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the L/C Issuer shall prohibit, or request that the L/C Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the L/C Issuer with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the L/C Issuer any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the L/C Issuer in good faith deems material to it;
               (ii) the issuance of such Letter of Credit would violate one or more policies of the L/C Issuer;
               (iii) except as otherwise agreed by the Agent and the L/C Issuer, such Letter of Credit is in an initial stated amount less than $50,000;
               (iv) such Letter of Credit is to be denominated in a currency other than Dollars, GBPs or Euros;
               (v) such Letter of Credit contains any provisions for automatic reinstatement of the stated amount after any drawing thereunder; or
               (vi) a default of any Lender’s obligations to fund exists or any Lender is at such time a Defaulting Lender hereunder, unless the L/C Issuer has entered into satisfactory arrangements with the Borrower or such Lender to eliminate the L/C Issuer’s risk with respect to such Lender.
          (d) The L/C Issuer shall not amend any Letter of Credit if the L/C Issuer would not be permitted at such time to issue such Letter of Credit in its amended form under the terms hereof.
          (e) The L/C Issuer shall be under no obligation to amend any Letter of Credit if (A) the L/C Issuer would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.
          (f) The L/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and the L/C Issuer shall have all of the benefits and immunities (A) provided to the Agent in Article 12 with respect to any acts taken or omissions suffered by the L/C Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and Issuer Documents pertaining to such Letters of Credit as fully as if the term “Agent” as used in Article 12 included the L/C Issuer with respect to such acts or omissions, and (B) as additionally provided herein with respect to the L/C Issuer.

6


 

     2.5 Procedures for Issuance and Amendment of Letters of Credit. (a) Each Letter of Credit shall be issued or amended, as the case may be, upon the request of a Borrower delivered to the L/C Issuer (with a copy to the Agent) in the form of a Letter of Credit Application, appropriately completed and signed by a responsible officer of such Borrower. Such Letter of Credit Application must be received by the L/C Issuer and the Agent not later than 11:00 a.m., London time at least two Business Days (or such later date and time as the Agent and the L/C Issuer may agree in a particular instance in their sole discretion) prior to the proposed issuance date or date of amendment, as the case may be. In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; and (G) such other matters as the L/C Issuer may require. In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as the L/C Issuer may require. Additionally, the requesting Borrower shall furnish to the L/C Issuer and the Agent such other documents and information pertaining to such requested Letter of Credit issuance or amendment, including any Issuer Documents, as the L/C Issuer or the Agent may require.
          (b) Promptly after receipt of any Letter of Credit Application, the L/C Issuer will confirm with the Agent (by telephone or in writing) that the Agent has received a copy of such Letter of Credit Application from the requesting Borrower and, if not, the L/C Issuer will provide the Agent with a copy thereof. Unless the L/C Issuer has received written notice from any Lender, the Agent or any Loan Party, at least one Business Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions contained in Article 6 shall not then be satisfied, then, subject to the terms and conditions hereof, the L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the requesting Borrower (or the applicable Subsidiary) or enter into the applicable amendment, as the case may be, in each case in accordance with the L/C Issuer’s usual and customary business practices. Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the L/C Issuer a risk participation in such Letter of Credit in an amount equal to the product of such Lender’s Pro Rata Share times the amount of such Letter of Credit.
          (c) Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the L/C Issuer will also deliver to the requesting Borrower and the Agent a true and complete copy of such Letter of Credit or amendment.
     2.6 Drawings and Reimbursements; Funding of Participations. (a) Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the L/C Issuer shall notify the Borrowers and the Agent thereof. Not later than 11:00 a.m., London time on the date of any payment by the L/C Issuer under a Letter of Credit (each such date, an “Honor Date”), the Borrowers shall reimburse the L/C Issuer through the Agent in

7


 

an amount equal to the amount of such drawing. If the Borrowers fail to so reimburse the L/C Issuer by such time, the Agent shall promptly notify each Lender of the Honor Date, the amount of the unreimbursed drawing (the “Unreimbursed Amount”), and the amount of such Lender’s Pro Rata Share thereof. In such event, the Borrowers shall be deemed to have requested a LIBOR Rate Loan in the case of UK Letters of Credit or a EURIBOR Rate Loan in the case of German Letters of Credit, each with a deemed Interest Period of one month, to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified herein for the principal amount of Loans, but subject to the amount of the unutilized portion of the aggregate Commitments and the conditions set forth in Article 6 (other than the delivery of a Loan Request). Any notice given by the L/C Issuer or the Agent pursuant to this Section 2.6(a) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.
          (b) Each Lender shall upon any notice pursuant to Section 2.6(a) make funds available to the Agent for the account of the L/C Issuer at the Agent’s principal office in an amount equal to its Pro Rata Share of the Unreimbursed Amount not later than 1:00 p.m., London time on the Business Day specified in such notice by the Agent, whereupon, subject to the provisions of Section 2.6(c), each Lender that so makes funds available shall be deemed to have made a EURIBOR Rate Loan with respect to German Letters of Credit or a LIBOR Rate Loan with respect to UK Letters of Credit to the Borrower in such amount, in each case with a deemed Interest Period of one month. The Agent shall remit the funds so received to the L/C Issuer.
          (c) With respect to any Unreimbursed Amount that is not fully refinanced by a borrowing of EURIBOR Rate Loans or LIBOR Rate Loans as provided in Section 2.6(a) because the conditions set forth in Article 6 cannot be satisfied or for any other reason, the Borrowers shall be deemed to have incurred from the L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate. In such event, each Lender’s payment to the Agent for the account of the L/C Issuer pursuant to Section 2.6(b) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Lender in satisfaction of its participation obligation under this Section 2.6.
          (d) Until each Lender funds its Loan or L/C Advance pursuant to this Section 2.6 to reimburse the L/C Issuer for any amount drawn under any Letter of Credit, interest in respect of such Lender’s Pro Rata Share of such amount shall be solely for the account of the L/C Issuer.
          (e) Each Lender’s obligation to make Loans or L/C Advances to reimburse the L/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.6, shall be absolute and unconditional and shall not be affected by any circumstance, including (i) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the L/C Issuer, the Borrower or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default, or (iii) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Lender’s obligation to make Loans pursuant to this Section 2.6 is subject to the conditions set forth in Article 6 (other than delivery by the Borrower of a Loan Request). No such making of an L/C Advance shall relieve

8


 

or otherwise impair the obligation of the Borrowers to reimburse the L/C Issuer for the amount of any payment made by the L/C Issuer under any Letter of Credit, together with interest as provided herein.
          (f) If any Lender fails to make available to the Agent for the account of the L/C Issuer any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.6 by the time specified in Section 2.6(b), the L/C Issuer shall be entitled to recover from such Lender (acting through the Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the L/C Issuer at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by the L/C Issuer in accordance with banking industry rules on interbank compensation. A certificate of the L/C Issuer submitted to any Lender (through the Agent) with respect to any amounts owing under this Section 2.6(f) shall be conclusive absent manifest error.
     2.7 Repayment of Participations. (a) At any time after the L/C Issuer has made a payment under any Letter of Credit and has received from any Lender such Lender’s L/C Advance in respect of such payment in accordance with Section 2.6, if the Agent receives for the account of the L/C Issuer any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from a Borrower or otherwise, including proceeds of Cash Collateral applied thereto by the Agent), the Agent will distribute to such Lender its Pro Rata Share thereof (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s L/C Advance was outstanding) in the same funds as those received by the Agent.
          (b) If any payment received by the Agent for the account of the L/C Issuer pursuant to Section 2.6(a) is required to be returned under any circumstances (including pursuant to any settlement entered into by the L/C Issuer in its discretion), each Lender shall pay to the Agent for the account of the L/C Issuer its Pro Rata Share thereof on demand of the Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.
     2.8 Obligations Absolute. The obligation of the Borrowers to reimburse the L/C Issuer for each drawing under each Letter of Credit and to repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:
          (a) any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other Loan Document;
          (b) the existence of any claim, counterclaim, setoff, defense or other right that the Borrowers or any Subsidiary may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the L/C Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;

9


 

          (c) any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;
          (d) any payment by the L/C Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the L/C Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law; or
          (e) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or any Subsidiary.
The requesting Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the requesting Borrower’s instructions or other irregularity, the requesting Borrower will immediately notify the L/C Issuer. The Borrowers shall be conclusively deemed to have waived any such claim against the L/C Issuer and its correspondents unless such notice is given as aforesaid.
     2.9 Role of L/C Issuer. Each Lender, the Borrower Agent and each Borrower agree that, in paying any drawing under a Letter of Credit, the L/C Issuer shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. None of the L/C Issuer, the Agent, any of their respective Affiliates, directors, officers, employees, advisers and agents (collectively the “Related Parties”) nor any correspondent, participant or assignee of the L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Issuer Document. Each Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Borrowers pursuing such rights and remedies as they may have against the beneficiary or transferee at law or under any other agreement. None of the L/C Issuer, the Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the L/C Issuer shall be liable or responsible for any of the matters described in Sections 2.8(a) through 2.8(e); provided, however, that anything in such clauses to the contrary notwithstanding, the Borrowers may have a claim against the L/C Issuer, and the L/C Issuer may be liable to the Borrowers, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrowers which the Borrowers prove were caused by the L/C Issuer’s willful misconduct or gross negligence or the L/C Issuer’s willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and

10


 

certificate(s) strictly complying with the terms and conditions of a Letter of Credit. In furtherance and not in limitation of the foregoing, the L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and the L/C Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.
     2.10 Cash Collateral. Upon the request of the Agent, (i) if the L/C Issuer has honored any full or partial drawing request under any Letter of Credit and such drawing has resulted in an L/C Borrowing, or (ii) if, as of the Letter of Credit Expiration Date, any L/C Obligation for any reason remains outstanding, the Borrower shall, in each case, immediately Cash Collateralize the then aggregate outstanding amount of all L/C Obligations. For purposes of this Section 2.10, “Cash Collateralize” shall mean to pledge and deposit with or deliver to the Agent, for the benefit of the L/C Issuer and the Lenders, as collateral for the L/C Obligations, cash or deposit account balances (“Cash Collateral”) pursuant to documentation in form and substance satisfactory to the Agent and the L/C Issuer (which documents are hereby consented to by the Lenders). Derivatives of such term have corresponding meanings. The Borrowers hereby grant to the Agent, for the benefit of the L/C Issuer and the Lenders, a security interest in all such cash, deposit accounts and all balances therein and all proceeds of the foregoing. Cash Collateral shall be maintained in a blocked Cash Collateral Account at Bank of America.
     2.11 Applicability of ISP. Unless otherwise expressly agreed by the L/C Issuer and the requesting Borrower when a Letter of Credit is issued (including any such agreement applicable to an Existing Letter of Credit), the rules of the ISP shall apply to each standby Letter of Credit.
     2.12 Letter of Credit Fees. The Borrower shall pay to the Agent for the account of each Lender fees with respect to the Letters of Credit in accordance with the terms and conditions of Section 5.1(c) (the “Letter of Credit Fee”). Letter of Credit Fees shall be (i) computed on a quarterly basis in arrears and (ii) due and payable on the first Business Day after the end of each fiscal quarter of the Borrower Agent, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand. Notwithstanding anything to the contrary contained herein, upon the request of the Required Lenders, while any Event of Default exists, all Letter of Credit Fees shall accrue at a rate equal to the Default Rate.
     2.13 Conflict with Issuer Documents. In the event of any conflict between the terms hereof and the terms of any Issuer Document, the terms hereof shall control.
     2.14 Letters of Credit Issued for Affiliates. Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, an Affiliate of the Borrowers, the Borrowers shall be obligated to reimburse the L/C Issuer hereunder for any and all drawings under such Letter of Credit. The Borrowers hereby acknowledge that the issuance of Letters of Credit for the account of any such Affiliates inures to the benefit of the Borrowers, and that the Borrowers’ business derives substantial benefits from the businesses of such Affiliates.

11


 

     2.15 Letter of Credit Amounts. Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the stated amount of such Letter of Credit in effect at such time; provided, however, that with respect to any Letter of Credit that, by its terms or the terms of any Issuer Document related thereto, provides for one or more automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.
     2.16 Indemnity. Each Borrower shall immediately on demand indemnify the L/C Issuer against any cost, loss or liability incurred by the L/C Issuer (other than by reason of the L/C Issuer’s gross negligence or wilful misconduct) in acting as L/C Issuer under any Letter of Credit requested by any Borrower.”
     2.8 Section 3.1 of the Credit Agreement is hereby amended by amending and restating such Section in its entirety to read as follows:
     “3.1 Currency and Amount. The amounts of all Commitments, Loans, L/C Obligations and other monetary obligations hereunder shall be measured in the Base Currency. The Borrowers may request Loans be funded in an Optional Currency and such Loans, together with any interest or fees related thereto may be repaid in such Optional Currency. The Borrowers may request Letters of Credit be issued in an Optional Currency and all L/C Obligations with respect thereto may be paid in such Optional Currency.”
     2.9 Section 3.2 of the Credit Agreement is hereby amended by adding to the end of such Section a new sentence to read as follows:
     “A Borrower (or the Borrower Agent on behalf of a Borrower) shall select the currency of a Letter of Credit in each request for the issuance or amendment of a Letter of Credit and such currency shall be deemed the “denominated” currency for the purposes of repayment in accordance with Section 3.6(b).”
     2.10 Section 3.3 of the Credit Agreement is hereby amended by amending and restating Sections 3.3(b), 3.3(c) and 3.3(d) in their entirety to read as follows:
          “(b) Not later than 5:00 p.m., Kansas City time, on each Reset Date and on each date on which Revolving Loans are made or continued or Letters of Credit are issued or amended, the Agent shall determine (i) the aggregate unpaid principal balance of all UK Revolving Loans outstanding plus the aggregate undrawn amount under all outstanding UK Letters of Credit in the equivalent of the Base Currency and (ii) the aggregate unpaid principal balance of all German Revolving Loans outstanding plus the aggregate undrawn amount under all outstanding German Letters of Credit in the equivalent of the Base Currency.
          (c) In the event (i) the aggregate unpaid principal balance of all UK Revolving Loans plus the aggregate undrawn amount under all outstanding UK Letters of Credit (calculated in accordance with this Section 3.3) exceeds the aggregate UK Revolving Credit Commitments or (ii) the aggregate unpaid principal balance of all German Revolving Loans plus the aggregate undrawn amount under all outstanding German Letters of Credit (calculated in accordance with this Section 3.3) exceeds the aggregate German Revolving Credit Commitments, the Agent will promptly notify the Borrower Agent. The Borrowers (and the

12


 

Borrower Agent on behalf of the Borrowers) shall not be entitled to make any further Loan Requests (other than with respect to continuations of outstanding Loans) for the type of Loans that have exceeded the Commitments with respect to such Loans and the Lenders will have no obligation to make any such Loans (other than the continuations of outstanding Loans), in each case for so long as such condition is continuing with respect to such Loans.
          (d) Without limiting Section 3.3(c), in the event the sum of (i) the amount by which the aggregate unpaid principal balance of all UK Revolving Loans plus the aggregate undrawn amount under all outstanding UK Letters of Credit (calculated in accordance with this Section 3.3) exceeds the UK Revolving Commitments, if any, and (ii) the amount by which the aggregate unpaid principal balance of all German Revolving Loans plus the aggregate undrawn amount under all outstanding German Letters of Credit (calculated in accordance with this Section 3.3) exceeds the German Revolving Commitments, if any, is greater than Three Million Dollars ($3,000,000), the Borrowers shall, not later than the next Business Day following receipt of the notice provided in accordance with Section 3.3(b), and without any further demand or notice, pay principal under their respective Revolving Notes in the amount by which such amount exceeds Three Million Dollars ($3,000,000).”
     2.11 Section 5.1 of the Credit Agreement is hereby amended by inserting a new Section 5.1(c) at the end of such Section to read as follows:
          “(c) Letter of Credit Fees. The Borrowers agree to pay to the Agent a fee in an amount equal to (i) the undrawn amount of all outstanding Letters of Credit, times (ii) the per annum rate equal to the Applicable Margin calculated for the applicable quarterly or other period.”
     2.12 Article 6 of the Credit Agreement is hereby amended by inserting at the end of the first sentence of the first paragraph of such Article the phrase “and in the case of conditions set forth in Sections 6.4, 6.7, 6.8 and 6.9, as of each date a Letter of Credit is issued, renewed or extended”.
     2.13 Section 6.4 of the Credit Agreement is hereby amended by:
          (a) inserting after the phrase “Disbursement Date” each time it appears in the second sentence of such Section, the phrase “or such date of issuance, renewal or extension of a Letter of Credit”; and
          (b) inserting after the phrase “request for borrowing” appearing in the last sentence of such Section, the phrase “or for issuing, renewing or extending a Letter of Credit”.
     2.14 Section 7.9 of the Credit Agreement is hereby amended by replacing the amount “One Million Dollars ($1,000,000)” with the amount “Three Million Dollars ($3,000,000)”.
     2.15 Section 7.21 of the Credit Agreement is hereby amended by inserting the following phrase at the end of such Section:
     ”, except as otherwise required for tax or other reporting purposes imposed by any statute, rule, regulation, order or restriction of any foreign government or Governmental Authority applicable to a Foreign Subsidiary of the Borrower Agent”

13


 

     2.16 Section 8.4(f) of the Credit Agreement is hereby amended by replacing the phrase “in excess of One Million Dollars ($1,000,000) in the aggregate” with the phrase “in excess of Three Million Dollars ($3,000,000) in the aggregate”.
     2.17 Section 8.7 of the Credit Agreement is hereby amended by adding the following proviso at the end of such Section:
     “; provided, that no proceeds of the Revolving Loans shall be used by any Borrower to directly or indirectly make any Investments (other than Investments permitted pursuant to Section 10.9(f)) in, and no Letters of Credit shall be requested on behalf of, or for the benefit of, Euronet Payments & Remittance, Inc. (formerly known as TELECOMMUSA, LTD.) or in any other person that is a “Money services business” (as defined in 31 C.F.R. §103.11(uu) as amended, restated or replaced from time to time).
     2.18 Section 8.9 of the Credit Agreement is hereby amended by deleting the word “written” from the proviso therein.
     2.19 Section 10.9(g)(ii) of the Credit Agreement is hereby amended by amending and restating such section in its entirety to read as follows:
               “(ii) In addition to those Investments set forth on Schedule 10.9, the Borrowers and any other Obligor may collectively make additional Investments of up to Ten Million Dollars ($10,000,000) in the aggregate from the effective date of Amendment No. 9 to this Agreement through the Revolving Credit Termination Date in all Euronet Entities that are not (A) Obligors; provided, that to the extent any such Euronet Entity is required to become an Obligor in accordance with the Section 10.4(e) or Section 10.5, such requirement has been properly waived in accordance with Section 13.9, or (B) “Obligors” as defined in the US Credit Agreement; provided, that to the extent any such Euronet Entity is required to become an “Obligor” in accordance with Section 10.4(e) or Section 10.5 of the US Credit Agreement, such requirement has been properly waived in accordance with Section 13.9 of the US Credit Agreement. To the extent that any such Investments are intercompany loans or advances, such loans and advances shall count against the limitation in the preceding sentence only to the extent such loans or advances have not been repaid;”
     2.20 Article 10 of the Credit Agreement is hereby amended by adding a new Section 10.12 to such Article to read in its entirety as follows:
          “10.12 Money Services Business. Not engage in any business, nor permit any other Obligor to engage in any business, that could reasonably be classified as a “Money services business” (as defined in 31 C.F.R. §103.11(uu) as amended, restated or replaced from time to time).”
     2.21 Section 11.1(b) of the Credit Agreement is hereby amended by inserting after the phrase “any interest upon the Note” appearing in such Section, the phrase “, any reimbursement obligation respecting any Letter of Credit”.
     2.22 Section 11.1(k) of the Credit Agreement is hereby amended by amending and restating such Section in its entirety to read as follows:

14


 

     “(k) Other Credit Agreements. Any “Event of Default” shall have occurred pursuant to the US Credit Agreement or the Rupee Credit Agreement.”
     2.23 Section 12.4 of the Credit Agreement is hereby amended by amending and restating the penultimate sentence of such Section in its entirety to read as follows:
“In determining compliance with any condition hereunder to the making of a Loan, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the L/C Issuer, the Agent may presume that such condition is satisfactory to such Lender or the L/C Issuer unless the Agent shall have received notice to the contrary from such Lender or the L/C Issuer prior to the making of such Loan or the issuance of such Letter of Credit.”
     2.24 Section 12.6 of the Credit Agreement (as corrected pursuant to Section 2.40(c)(ii) of this Amendment) is hereby amended and restated in its entirety to read as follows:
     “12.6 Resignation of Agent. (a) The Agent may at any time give notice of its resignation to the Lenders, the L/C Issuer and the Borrower Agent. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrower Agent, to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may on behalf of the Lenders and the L/C Issuer, appoint a successor Agent meeting the qualifications set forth above; provided that if the Agent shall notify the Borrower Agent and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Agent on behalf of the Lenders or the L/C Issuer under any of the Loan Documents, the retiring Agent shall continue to hold such collateral security until such time as a successor Agent is appointed) and (2) all payments, communications and determinations provided to be made by, to or through the Agent shall instead be made by or to each Lender and the L/C Issuer directly, until such time as the Required Lenders appoint a successor Agent as provided for above in this Section. Upon the acceptance of a successor’s appointment as Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Agent, and the retiring Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrowers or Borrower Agent to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrowers and such successor. After the retiring Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article and Section 13.6 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Agent was acting as Agent.
          (b) Any resignation by Bank of America as Agent pursuant to this Section shall also constitute its resignation as L/C Issuer. In the event of any such resignation as L/C Issuer, the Borrowers shall be entitled to appoint from among the Lenders a successor L/C Issuer hereunder; provided, however, that no failure by the Borrowers to appoint any such successor

15


 

shall affect the resignation of Bank of America as L/C Issuer, as the case may be. Upon the acceptance of a successor’s appointment as Agent hereunder, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer, (b) the retiring L/C Issuer shall be discharged from all of their respective duties and obligations hereunder or under the other Loan Documents, and (c) the successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangement satisfactory to the retiring L/C Issuer to effectively assume the obligations of the retiring L/C Issuer with respect to such Letters of Credit.”
     2.25 Section 12.7 of the Credit Agreement (as corrected pursuant to Section 2.40(c)(iii) of this Amendment) is hereby amended by inserting after the phrase “Each Lender” appearing at the beginning of the first and second sentences of such Section the phrase “and the L/C Issuer”.
     2.26 Section 12.8 of the Credit Agreement (as corrected pursuant to Section 2.40(c)(iii) of this Amendment) is hereby amended by amending and restating such Section in its entirety to read as follows:
     “12.8 Agent May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Borrower or other Obligor, the Agent (irrespective of whether the principal of any Loan or L/C Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Agent shall have made any demand on the Borrowers) shall be entitled and empowered, by intervention in such proceeding or otherwise:
          (a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, L/C Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the L/C Issuer and the Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the L/C Issuer and the Agent and their respective agents and counsel and all other amounts due the Lenders, the L/C Issuer and the Agent under the Fee Letter and Section 13.6) allowed in such judicial proceeding; and
          (b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and the L/C Issuer to make such payments to the Agent and, in the event that the Agent shall consent to the making of such payments directly to the Lenders and the L/C Issuer, to pay to the Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Agent and its agents and counsel, and any other amounts due the Agent under the Fee Letter and Section 13.6.
     Nothing contained herein shall be deemed to authorize the Agent to authorize or consent to or accept or adopt on behalf of any Lender or the L/C Issuer any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Agent to vote in respect of the claim of any Lender in any such proceeding.”

16


 

     2.27 Section 12.9 is hereby amended by inserting after the phrase “The Lenders” appearing at the beginning of the first sentence of such Section the phrase “and the L/C Issuer”.
     2.28 Section 13.5(a) of the Credit Agreement is hereby amended by amending and restating the parenthetical appearing in the last sentence of such Section to read as follows:
“(other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in Section 13.5(d) and, to the extent expressly contemplated hereby, the Related Parties of each of the Agent, the L/C Issuer and the Lenders)”
     2.29 Section 13.5(b) of the Credit Agreement is hereby amended by amending and restating the parenthetical appearing immediately before the proviso of such Section to read as follows:
“(including all or a portion of its Commitment and the Loans (including for purposes of this Section 13.5(b), participations in L/C Obligations) at the time owing to it)”
     2.30 Section 13.5(b)(iii) of the Credit Agreement is hereby amended by inserting after the phrase “approved by the Agent” appearing in such Section the phrase “and the L/C Issuer”.
     2.31 Section 13.5(b) of the Credit Agreement is hereby amended by:
          (a) inserting at the end of Section 13.5(b)(iv) the word “and”;
          (b) replacing the “; and” at the end of Section 13.5(b)(v) with a period; and
          (c) deleting Section 13.5(b)(vi) in its entirety.
     2.32 Section 13.5(c) of the Credit Agreement is hereby amended by:
          (a) inserting after the phrase “principal amounts of the Loans” appearing in the first sentence of such Section the phrase “and L/C Obligations”; and
          (b) inserting after the phrase “each of the Borrowers” appearing in the penultimate sentence of such Section the phrase “and the L/C Issuer”.
     2.33 The first paragraph of Section 13.5(d) of the Credit Agreement is hereby amended by amending and restating such paragraph in its entirety to read as follows:
          “(d) Participations. Any Lender may at any time, without the consent of, or notice to, the Borrowers or the Agent, sell participations to any Person (other than a natural person or a Borrower or any of the Borrowers’ Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans (including such Lender’s participations in L/C Obligations) owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrowers, the Agent, the Lenders and the L/C Issuer shall

17


 

continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.”
     2.34 Section 13.5 to the Credit Agreement is hereby amended by inserting a new Section 13.5(h) at the end of such Section to read as follows:
          “(h) Resignation as L/C Issuer after Assignment. Notwithstanding anything to the contrary contained herein, if at any time Bank of America assigns all of its Commitments and Loans pursuant to Section 13.5(b) above, Bank of America may, upon 30 days’ notice to the Borrower Agent and the Lenders, resign as L/C Issuer. In the event of any such resignation as L/C Issuer, the Borrowers shall be entitled to appoint from among the Lenders a successor L/C Issuer hereunder; provided, however, that no failure by the Borrowers to appoint any such successor shall affect the resignation of Bank of America as L/C Issuer, as the case may be. If Bank of America resigns as L/C Issuer, it shall retain all the rights and obligations of the L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as L/C Issuer and all L/C Obligations with respect thereto (including the right to require the Lenders to make Prime Rate Loans or fund risk participations in Unreimbursed Amounts).”
     2.35 Section 13.9(a) of the Credit Agreement is hereby amended by inserting a new clause (iv) in such Section immediately following clause (iii) to read as follows:
               “(iv) without the prior written consent of the L/C Issuer, no amendment or waiver with respect to the provisions of Sections 2.4, 2.5, 2.6, 2.7, 2.8, 2.9, 2.10, 2.11, 2.12, 2.13, 2.14, and 2.15 shall be effective;”
     2.36 Exhibit 1 to the Credit Agreement is hereby amended by amending and restating the following defined terms in their entirety to read as follows:
     “Applicable Margin” shall mean the percentage set forth below opposite the applicable Consolidated Senior Funded Debt/EBITDA Ratio calculated and adjusted on the first day of the month following the receipt by the Agent of each quarterly Compliance Certificate; any change in the “Applicable Margin” shall be effective with respect to any LIBOR Rate Loan, any EURIBOR Rate Loan, any unused commitment fee and any Letter of Credit Fee on or after each such date.
                                 
                    Unused    
If the Euronet Entities’ Consolidated   Libor Rate   Euribor Rate   Commitment   Letter of Credit
Senior Funded Debt / EBITDA Ratio is   Loans   Loans   Fee   Fee
greater than 2.50:1.00
    2.50 %     2.50 %     .25 %     1.75 %
 
                               
less than or equal to 2.50:1.00, but greater than 2.00:1.00
    2.25 %     2.25 %     .25 %     1.75 %
 
                               
less than or equal to 2.00:1.00, but greater than 1.50:1.00
    1.75 %     1.75 %     .20 %     1.75 %
 
                               
less than or equal to 1.50:1.00, but greater than 1.00:1.00
    1.25 %     1.25 %     .20 %     1.75 %
 
                               
less than or equal to 1.00: 1.00
    1.00 %     1.00 %     .15 %     1.75 %

18


 

     Notwithstanding anything in this definition to the contrary, the Borrowers must maintain a Consolidated Senior Funded Debt Ratio in accordance with Section 9.1 or pay interest at the Default Rate in accordance with Section 4.3(b).
     “EBITDA” shall mean, for any period, (i) operating income, plus (ii) depreciation, plus (iii) amortization, plus (iv) interest income from the operations of the Prepaid Processing Segment, plus (v) upon the request of the Borrower Agent with the prior consent of the Agent, certain one-time, non-cash charges included in operating income, plus (vi) non-cash expenses recognized pursuant to Financial Accounting Standards Board Statement No. 123(R), (Share-Based Payments); provided that if any non-cash expense referred to in the immediately preceding clauses (v) and (vi), including for stock options, becomes a cash charge in a future period then EBITDA shall be adjusted by the amount of such cash charge.
     “EBITDAR” shall mean, for any period, (i) operating income, plus (ii) depreciation, plus (iii) amortization, plus (iv) interest income from the operations of the Prepaid Processing Segment, plus (v) rent, plus (vi) upon the request of the Borrower Agent with the prior consent of the Agent, certain one-time, non-cash charges included in operating income, plus (vii) non-cash expenses recognized pursuant to Financial Accounting Standards Board Statement No. 123(R), (Share-Based Payments); provided that if any non-cash expense referred to in the immediately preceding clauses (vi) and (vii), including for stock options, becomes a cash charge in a future period then EBITDAR shall be adjusted by the amount of such cash charge.
     “Obligations” shall mean all unpaid principal of and accrued and unpaid interest on the Revolving Notes, all accrued and unpaid Fees, and all other obligations and liabilities of any Borrower to the Agent or any Lender now existing or hereafter arising under the Loan Documents and any Hedging Agreements, including, without limitation, all renewals, replacements, extensions and modifications thereof and thereto and any and all draws under any and all Letters of Credit and any other letters of credit issued by the L/C Issuer or Bank of America for the account of any Borrower.
     “Required Lenders” shall mean at any date of determination thereof, Aggregate Lenders having Aggregate Revolving Credit Commitments representing at least 51% of the Aggregate Revolving Credit Commitments at such time; provided, however, that if any Aggregate Lender shall be in breach of any of its obligations hereunder to Borrowers or Agent, under the US Credit Agreement to the “Borrowers” or “Agent” party thereto or under the Rupee Credit Agreement to the “Borrowers” or “Agent” party thereto, including any breach resulting from its failure to honor any of its Aggregate Revolving Credit Commitments in accordance with the terms of this Agreement, the US Credit Agreement or the Rupee Credit Agreement, as applicable, then, for so long as such breach continues, the term “Required Lenders” shall mean Aggregate Lenders (excluding each Aggregate Lender that is in breach of such obligations) having Aggregate Revolving Credit Commitments representing at least 51% of the Aggregate Revolving Credit Commitments (excluding the Aggregate Revolving Credit Commitments of each Aggregate Lender that is in breach of such obligations) outstanding at such time; provided further, however, that if the Aggregate Revolving Credit Commitments have been terminated, the term “Required Lenders” shall mean the Aggregate Lenders (excluding each Aggregate Lender that is in breach of such obligations) holding Aggregate Revolving Loans representing at least 51% of the aggregate principal amount of all Aggregate Revolving Loans (excluding the Aggregate Revolving Loans of each Aggregate Lender that is in breach of such obligations) outstanding at such time; provided, that in addition to the foregoing, in the event there are less than four

19


 

Aggregate Lenders then the term Required Lenders must also constitute at least two Aggregate Lenders. For the purposes of the definition of Required Lenders, the following terms shall have the following meanings: “Aggregate Lenders” shall mean the Lenders under this Agreement, the “Lenders” under the US Credit Agreement and the “Lenders” under the Rupee Credit Agreement; “Aggregate Revolving Credit Commitments” shall mean the Revolving Credit Commitments under this Agreement, plus the “Revolving Credit Commitments” under the US Credit Agreement, plus the “Revolving Credit Commitments” under the Rupee Credit Agreement; and “Aggregate Revolving Loans” shall mean the Revolving Loans under this Agreement, plus the “Revolving Loans” under the US Credit Agreement, plus the “Revolving Loans” under the Rupee Credit Agreement.
     “Revolving Credit Termination Date” shall mean May 26, 2009 or such other date as may be agreed to by Agent, the Required Lenders, the Borrower Agent and the Borrowers from time to time; provided that no Lender shall be required to extend its Commitment without such Lender’s consent.
     2.37 Exhibit 1 to the Credit Agreement is hereby amended by inserting the following defined terms in the appropriate alphabetical order:
     “Cash Collateral” is defined in Section 2.10 of this Agreement.
     “Cash Collateral Account” shall mean a demand deposit, money market or other account established by Agent at such financial institution as Agent may select in its discretion, which account shall be in Agent’s name and subject to Agent’s Liens for the Pro Rata benefit of the Lenders.
     “Cash Collateralize” is defined in Section 2.10 of this Agreement.
     “Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.
     “Defaulting Lender” means any Lender that (a) has failed to fund any portion of the Loans, participations in L/C Obligations required to be funded by it hereunder within one Business Day of the date required to be funded by it hereunder, (b) has otherwise failed to pay over to the Agent or any other Lender any other amount required to be paid by it hereunder within one Business Day of the date when due, unless the subject of a good faith dispute, or (c) has been deemed insolvent or become the subject of a bankruptcy or insolvency proceeding.
     “Federal Funds Rate” shall mean for any period, a fluctuating interest rate per annum equal for each date during such period to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) in New York, New York by the Federal Reserve Bank of New York, or if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Agent from 3 federal funds brokers of recognized standing selected by Agent.

20


 

     “German Letter of Credit” is defined in Section 2.1(a)(ii) of this Agreement.
     “Honor Date” is defined in Section 2.6(a) of this Agreement.
     “Increase Effective Date” is defined in Section 2.3(d) of this Agreement.
     “ISP” means, with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance).
     “Issuer Documents” means with respect to any Letter of Credit, the Letter Credit Application, and any other document, agreement and instrument entered into by the L/C Issuer and the Borrowers (or any Subsidiary) or in favor the L/C Issuer and relating to any such Letter of Credit.
     “L/C Advance” means, with respect to each Lender, such Lender’s funding of its participation in any L/C Borrowing in accordance with its Pro Rata Share.
     “L/C Borrowing” means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made or refinanced as a Loan.
     “L/C Credit Extension” means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the increase of the amount thereof.
     “L/C Issuer” means Bank of America in its capacity as issuer of Letters of Credit hereunder, or any successor issuer of Letters of Credit hereunder.
     “L/C Obligations” means, as at any date of determination, the aggregate amount available to be drawn under all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings. For purposes of computing the amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 2.15. For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.
     “Letter of Credit” means (i) any standby letter of credit issued hereunder and (ii) any guarantee, indemnity or other instrument in a form requested by a Borrower or the Borrower Agent and agreed by the Agent and the L/C Issuer.
     “Letter of Credit Application” means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by the L/C Issuer.
     “Letter of Credit Expiration Date” means the day that is seven days prior to the Revolving Credit Termination Date then in effect (or, if such day is not a Business Day, the next preceding Business Day).
     “Letter of Credit Fee” is defined in Section 2.12 of this Agreement.
     “Money Market Fund” is defined in Section 10.9(j) of this Agreement.

21


 

     “Participant” is defined in Section 13.5(d) of this Agreement.
     “Prepaid Processing Segment” shall mean the reportable “Prepaid Processing” segment as reported in the Borrowing Agent’s form 10-Q and 10-K filings with the Securities and Exchange Commission.
     “Related Parties” is defined in Section 2.9 of this Agreement.
     “Rupee Borrower” means Euronet Services India Pvt Ltd, a company organized under the laws of India.
     “Rupee Credit Agreement” means the $10,000,000 Rupee Credit Agreement, dated as of May 26, 2006 among Bank of America, N.A., as Lender, the Rupee Borrower, as Borrower and Euronet Worldwide, Inc., as the Borrower Agent.
     “UK Letter of Credit” is defined in Section 2.1(a)(i) of this Agreement.
     “Unreimbursed Amount” is defined in Section 2.6(a) of this Agreement.
     2.38 Exhibit 8.4 to the Credit Agreement shall be replaced with Exhibit 8.4 attached hereto effective as of the date of this Amendment and all references in the Credit Agreement to such Exhibit shall be references to the Exhibit attached hereto.
     2.39 Each of the Schedules listed below shall be replaced with the corresponding Schedules attached hereto and effective as of the date of this Amendment all references in the Credit Agreement to such Schedules shall be references to the Schedules attached hereto:
     (i) Schedule E-1 – Revolving Credit Commitments;
     (ii) Schedule 7.4 – Environmental Matters;
     (ii) Schedule 7.8 – Organizational Structure;
     (iii) Schedule 10.1 – Existing Indebtedness;
     (iv) Schedule 10.2 – Existing Liens;
     (v) Schedule 10.9 – Existing Investments.
     2.40 Each Lender, the Borrower Agent and each Borrower hereby acknowledge and agree to the following corrections:
          (a) Section 4.3(a) of the Credit Agreement is hereby corrected as of the date of the Credit Agreement by replacing the phrase “a rate equal to” found in clauses (i) and (ii) of such Section with the phrase “a rate per annum equal to”;
          (b) Section 4.7 of the Credit Agreement is hereby corrected as of the date of the Credit Agreement by inserting the following proviso at the end of such section:

22


 

“; provided that fluctuations in the unpaid principal balance of any Loan resulting from the translation calculations set forth in Section 3.3 shall not affect any Borrower’s ability to request any continuation of a Loan as a result of it not meeting the minimum amount or multiple amount requirements of this Section 4.7.”
          (c) Article 12 of the Credit Agreement is hereby corrected as of the date of the Credit Agreement by:
               (i) setting forth as Section 12.3 all of Section 12.2 except the first two sentences;
               (ii) setting forth as Section 12.6 all of Section 12.5 except the first three sentences; and
               (iii) setting forth as Section 12.8 all of Section 12.7 except the first two sentences;
          (d) Recital A of Amendment No. 1 and Limited Waiver to the Credit Agreement is hereby corrected as of the date of such Amendment by replacing the date “October 25, 2006” with the date “October 25, 2004”.
          (e) Section 2.8 of Amendment No. 1 and Limited Waiver to the Credit Agreement is hereby corrected as of the date of such Amendment by replacing the date “December [—], 2004” with the date “December 15, 2004” in the definition of “Convertible Senior Debenture Indenture”;
          (f) Recital A of Limited Waiver to the Credit Agreement, dated as of December 23, 2004 is hereby corrected as of the date of such Limited Waiver by replacing the date “October 25, 2006” with the date “October 25, 2004”.
          (g) Recital A of Limited Waiver to the Credit Agreement, dated as of February 10, 2005 is hereby corrected as of the date of such Limited Waiver by replacing the date “October 25, 2006” with the date “October 25, 2004”.
          (h) Section 2 of Amendment No. 2 to the Credit Agreement is hereby corrected as of the date of such Amendment by replacing the references to “9.1” in such Section with references to “9.1(a)”;
          (i) Section 2.1 of Amendment No. 4 to the Credit Agreement is hereby corrected as of the date of such Amendment by replacing the phrase “ times (ii) the Applicable Margin” as it appears in Section 5.1(b) of the Credit Agreement as amended by such Section 2.1 with the phrase “times (ii) a rate per annum equal to the Applicable Margin calculated for the applicable quarterly or other period”; and
          (j) Amendment No. 4 to the Credit Agreement is hereby corrected as of the date of such Amendment by adding an amendment to delete Section 4.3(a)(iii) of the Credit Agreement in its entirety.

23


 

     2.41 The Borrower Agent and each Borrower hereby acknowledges and consents to the Assignment and Assumption between Bank of America and US Bank and that US Bank has become a party to the Credit Agreement and, to the extent of the interest assigned by such Assignment and Assumption, has the rights and obligations of a Lender under the Credit Agreement, and that Bank of America is, to the extent of the interest assigned by such Assignment and Assumption, released from its obligations under this Agreement but shall continue to be entitled to the benefits of Sections 3.5, 5.2 and 13.6 of the Credit Agreement with respect to facts and circumstances occurring prior to the effective date of such assignment.
     2.42 The Agent and Lenders hereby release Euronet Payments & Remittance, Inc. (formerly known as TELECOMMUSA, LTD.), a North Carolina corporation (“EP&R”) from its obligations under the Guaranty Agreement dated June 15, 2005 (the “EP&R Guaranty Agreement”) by and between EP&R and the Agent, and each other Loan Document to which it is a party. The Agent hereby releases its lien on the Pledged Shares listed on that certain Pledge Amendment, dated June 15, 2005 by the Borrower Agent (the “EP&R Shares”). As of the date hereof EP&R shall no longer be a “Required Guarantor”, “Guarantor” or “Obligor” under the Credit Agreement, the EP&R Guaranty Agreement or any other Loan Document. The Agent and the Lenders hereby waive any requirement in any Loan Document requiring that EP&R be, or become, a Borrower, Required Guarantor, Guarantor or Obligor.
SECTION 3. Limitations on Amendments.
     3.1 The amendments and acknowledgement set forth in Section 2 above are effective for the purposes set forth herein and will be limited precisely as written and will not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of the Credit Agreement or any other Loan Document, (b) otherwise prejudice any right or remedy which the Agent or the Lenders may now have or may have in the future under or in connection with the Credit Agreement or any other Loan Document or (c) be a consent to any future amendment, waiver or modification of any other term or condition of the Credit Agreement or any other Loan Document.
     3.2 This Amendment is to be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein waived or amended, are hereby ratified and confirmed and will remain in full force and effect.
SECTION 4. Representations and Warranties. In order to induce the Lenders to enter into this Amendment, the Borrower Agent and each of the Borrowers represent and warrant to the Lenders as follows:
     4.1 Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents (other than those which expressly speak as of a different date) are true, accurate and complete in all material respects as of the date hereof and (b) no Default or Event of Default has occurred and is continuing;
     4.2 The Borrower Agent and each Borrower has the power and authority and legal right to execute and deliver this Amendment and to perform its obligations hereunder. Such execution and delivery have been duly authorized by proper proceedings, and this Amendment

24


 

constitutes the legal, valid and binding obligations of the Borrower Agent and each Borrower, enforceable against each of them in accordance with their respective terms;
     4.3 The articles of incorporation or organization, bylaws, if any, or other charter documents of the Borrower Agent and each Borrower delivered to the Lender as a condition precedent to the effectiveness of the Credit Agreement are true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;
     4.4 The execution, delivery and performance of this Amendment will not violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Borrower Agent and any Borrower, any provision of the Borrower Agent’s and each Borrower’s respective articles or certificate of incorporation, by-laws, if any, or other charter documents, or the provisions of any indenture, instrument or other written or oral agreement to which any Borrower is a party or is subject or by which the Borrower Agent and any Borrower or any of its property is bound, or conflict therewith or constitute a default thereunder, or result in the creation or imposition of any Lien in, of or on any of its property pursuant to the terms of any such indenture, instrument or agreement. No order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, any Governmental Authority is required by or in respect of the Borrower Agent and the Borrowers to authorize or is required in connection with the execution, delivery and performance of or the enforceability of this Amendment; and
SECTION 5. Expenses. The Borrowers, jointly and severally, agree to pay to Lender upon demand, the amount of any and all out-of-pocket expenses, including the reasonable fees and expenses of its counsel, which Lender may incur in connection with the preparation, documentation, and negotiation of this Amendment and all related documents.
SECTION 6. Reaffirmation. The Borrower Agent and each Borrower hereby reaffirms its obligations under each Loan Document to which it is a party, including, without limitation, the validity and enforceability of all of the liens and security interests heretofore granted pursuant to and in connection with the Credit Agreement to the Agent as collateral security for the obligations under the Credit Agreement, including the liens and security interests granted pursuant to (i) that certain Pledge Agreement dated October 25, 2004 by the Borrower Agent in favor of Agent, (ii) that certain Agreement on the Creation of Pledge Over Shares dated October 28, 2004 by the German Borrower in favor of Agent, (iii) Mortgage of Shares dated November 4, 2004 by the Borrower Agent and the UK Borrower in favor of Agent, and (iv) that certain Agreement on the Creation of Pledge Over Shares dated June 22, 2005 by the German Borrower in favor of Agent. Each Borrower hereby acknowledges that all of such liens and security interests, and all collateral heretofore pledged as security for such obligations, continues to be and remains collateral for such obligations from and after the date hereof.
SECTION 7. This Amendment will become effective as of the date hereof upon:
     7.1 the execution and delivery of this Amendment, whether the same or different copies, by each Borrower and each Lender;
     7.2 the execution and deliver of a Second Amended and Restated Note to Bank of America and a Note to US Bank by each Borrower;

25


 

     7.3 the execution and delivery of each Required Guarantor of an acknowledgement of this Amendment and a reaffirmation of such Required Guarantor’s Guaranty;
     7.4 the Agent shall have received a Guaranty Agreement from EWI Foreign Holdings Ltd (“EWI Cyprus”) in form and substance satisfactory to the Agent and the conditions of Section 8.10 of the Credit Agreement shall have been otherwise satisfied with respect to EWI Cyprus.
     7.5 each Borrower, the Borrower Agent, and each Required Guarantor (including EWI Cyprus) shall have taken all corporate or company proceedings necessary to authorize this Amendment, any Guaranty Agreement and any Acknowledgment to which it is a party and the transactions contemplated hereby and thereby. Each Borrower, the Borrower Agent and EWI Cyprus shall have delivered to the Agent certificates, dated the Closing Date and signed by their respective Secretaries, Managing Directors, Directors or other responsible officers, satisfactory to the Agent, respecting such proceedings and the incumbency of the officers executing this Agreement, any Guaranty Agreement and any Acknowledgment to which it is a party, including in the case of the German Borrower, resolutions of the shareholder of the German Borrower authorizing this Agreement and the transactions contemplated hereby and certified excerpts from the commercial register reflecting the incumbency of the officer executing this Agreement on behalf of the German Borrower dated not earlier than three Business Days prior to the Closing Date. Each Borrower, the Borrower Agent and EWI Cyprus shall have delivered to the Agent copies of its articles of organization or association or other charter documents, including all amendments thereto, certified by the appropriate officer, and copies of its bylaws or other constitutional documents, including all amendments thereto, certified by the appropriate officer. The Agent shall have received satisfactory results to all company and other final searches in relation to the UK Borrower and e-pay Limited as the Agent may reasonably request.
     7.6 the Agent shall have received opinions from counsel to each Borrower, the Borrower Agent and each Required Guarantor that is a US Subsidiary and from counsel to EWI Cyprus in form and substance satisfactory to the Agent and its counsel.
     7.7 the Agent shall have received a pro forma Compliance Certificate in form and substance satisfactory to the Agent, demonstrating that the Borrowers will be, after giving effect to this Amendment, in compliance with each of the financial covenants set forth in Article 9 of the Credit Agreement;
     7.8 all conditions set forth in Section 7 of Amendment No. 8 to the US Credit Agreement shall have been satisfied; and
     7.9 the Rupee Borrower shall have executed and delivered to Bank of America the Rupee Credit Agreement and have satisfied any other conditions required to be satisfied on the “Closing Date” pursuant to the Rupee Credit Agreement.
     7.10 The Borrowers shall have paid the fees set forth in the Fee Letter dated the date hereof, among the Agent and the Borrowers.
SECTION 8. Governing Law. This Amendment will be governed by and will be construed and enforced in accordance with the laws of the State of Missouri.

26


 

SECTION 9. Claims, Counterclaims, Defenses, Rights of Set-Off. The Borrower Agent and each Borrower hereby represents and warrants to each Lender that it has no knowledge of any facts what would support a claim, counterclaim, defense or right of set-off against such Lender.
SECTION 10. Counterparts. This Amendment may be signed in any number of counterparts, and by different parties hereto in separate counterparts, with the same effect as if the signatures to each such counterpart were upon a single instrument. All counterparts will be deemed an original of this Amendment.

27


 

     In Witness Whereof, the parties hereto have caused this Amendment to be executed as of the date first written above.
             
Borrower Agent:   EURONET WORLDWIDE, INC.,
    a Delaware corporation
 
           
 
  By:   /s/ Rick Weller    
 
  Name:  
 
Rick Weller
   
    Title:   Executive Vice President and Chief Financial Officer
 
           
Borrowers:   E-PAY HOLDINGS LIMITED,
    a limited liability company incorporated in England and Wales
 
           
 
  By:   /s/ Jeff Newman    
 
  Name:  
 
Jeff Newman
   
 
  Title:   Director    
 
           
    DELTA EURONET GMBH,
    a German company with limited liability
 
           
 
  By:   /s/ Rick Weller    
 
  Name:  
 
Rick Weller
   
 
  Title:   Director    
 
           
Signature Page to Amendment No. 9 to Euro Credit Agreement

 


 

             
Agent and Lender:   BANK OF AMERICA, N.A.
 
           
 
  By:   /s/ John Mills    
 
  Name:  
 
John P. Mills
   
 
  Title:   Vice President    
 
           
Lender:   US BANK, NATIONAL ASSOCIATION
 
           
 
  By:   /s/ Kelvin Liebelt    
 
  Name:  
 
Kelvin S. Liebelt
   
 
  Title:   Vice President    
Signature Page to Amendment No. 9 to Euro Credit Agreement

 


 

ACKNOWLEDGEMENT
     Euronet Payments & Remittance, Inc., a North Carolina corporation (“EP&R”), hereby acknowledges and agrees that as of the effective date of that certain Amendment No. 9 dated as of                      ___, 2006 (the “Amendment”), by and among Euronet Worldwide, Inc., as Borrower Agent, e-pay Holdings Limited and Delta Euronet GmbH, Bank of America, N.A., as agent and a lender, and US Bank, National Association, as a lender, that EP&R shall no longer be a “Guarantor” or “Obligor” under the Credit Agreement or EP&R Guaranty Agreement (as such terms are defined in the Amendment) or any other Loan Document (as defined in the Credit Agreement) and will no longer be entitled to receive proceeds from Revolving Loans or benefit from Letters of Credit requested by the Borrowers under the Credit Agreement.
             
    EURONET PAYMENTS & REMITTANCE, INC.,
    a North Carolina corporation
 
           
 
  By:   /s/ Rick Weller    
 
  Name:  
 
Rick Weller
   
 
  Title:   Vice President    
EP&R Acknowledgement to Amendment No. 9 to Euro Credit Agreement

 


 

Exhibit 8.4
Compliance Certificate
Exhibit 8.4

 


 

Schedule E-1
Revolving Credit Commitments
I. UK Revolving Credit Commitments
         
Lender   Revolving Credit Commitment
Bank of America, N.A.
  $ 13,333,333.34  
US Bank, National Association
  $ 6,666,666.66  
Total
  $ 20,000,000.00  
II. German Revolving Credit Commitments
         
Lender   Revolving Credit Commitment
Bank of America, N.A.
  $ 6,666,666.66  
US Bank, National Association
  $ 3,333,333.34  
Total
  $ 10,000,000.00  
Schedule E-1

 


 

Schedule 7.4
Environmental Matters
None.
Schedule 7.4

 


 

Schedule 7.8
Organizational Structure
Schedule 10.2

 


 

Schedule 10.1
Existing Indebtedness
Schedule 10.2

 


 

Schedule 10.2
Existing Liens
Schedule 10.2

 


 

Schedule 10.9
Existing Investments
Schedule 10.2

 

exv10w5
 

Exhibit 10.5
EURO/GBP CREDIT FACILITY
GUARANTY AGREEMENT
          THIS GUARANTY is made as of the 26th day of May, 2006, by and between EWI Foreign Holdings Ltd, a company organized under the laws of Cyprus (the “Guarantor”), and Bank of America, N.A. (Bank of America), a national banking association, as agent (in such capacity, the “Agent”), pursuant to that certain Credit Agreement dated as of October 25, 2004, by and among Euronet Worldwide, Inc., a Delaware corporation (the “Borrower Agent”), e-pay Holdings, Limited, a limited liability company incorporated in England and Wales, Delta Euronet GmbH, a German company with limited liability (collectively the “Borrowers”), the Agent and the financial institutions party thereto from time to time as Lenders, as amended or otherwise modified by that certain Amendment No. 1 and Limited Waiver, dated as of December 14, 2004, that certain Limited Waiver dated as of December 23, 2004, that certain Limited Waiver dated as of February 10, 2005, that certain Amendment No. 2, dated as of March 14, 2005, that certain Limited Waiver dated as of May 11, 2005, that certain Limited Waiver dated as of May 17, 2005, that certain Amendment No. 3 dated as of May 25, 2005, that certain Amendment No. 4 dated as of June 8, 2005, that certain Limited Waiver dated as of June 9, 2005, that certain Amendment No. 5 dated as of June 16, 2005, that certain Amendment No. 6 dated as of July 15, 2005, that certain Amendment No. 7 dated as of September 28, 2005, that certain Limited Waiver dated as of November 4, 2005, that certain Amendment No. 8 dated as of November 17, 2005, and that certain Amendment No. 9 dated as of the date hereof (as so amended or otherwise modified and as from time to time further amended, restated, supplemented or otherwise modified, the “Credit Agreement”).
          WHEREAS, Guarantor is a Subsidiary of the Borrower Agent and an Affiliate of the Borrowers and as such will derive direct and indirect economic benefits from the making of the Loans and other financial accommodations provided to Borrower pursuant to the Credit Agreement and the other Loan Documents; and
          WHEREAS, in order to induce the Agent and the Lenders to make Loans pursuant to the Credit Agreement, certain direct and indirect Subsidiaries of the Borrower Agent (other than the Borrowers), including the Guarantor, have agreed to provide guarantees of the Borrowers’ Obligations under the Credit Agreement and the other Loan Documents;
          NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, and to induce Lenders to provide the Loans and other financial accommodations under the Credit Agreement and the other Loan Documents, it is agreed as follows:

 


 

ARTICLE 1
DEFINITIONS
          Capitalized terms used herein shall have the meanings assigned to them in the Credit Agreement, unless otherwise defined herein.
          References to this “Guaranty” or this “Agreement” shall mean this Guaranty, including all amendments, modifications and supplements and any annexes, exhibits and schedules to any of the foregoing, and shall refer to this Guaranty as the same may be in effect at the time such reference becomes operative.
ARTICLE 2
     2.1 Guaranty of Guaranteed Obligations of Borrower. The Guarantor unconditionally guarantees to Agent and Lenders, and their respective successors, endorsees, transferees and assigns, the prompt payment (whether at stated maturity, by acceleration or otherwise) and performance of the Obligations of Borrowers (hereinafter the “Guaranteed Obligations”). Guarantor agrees that this Guaranty is a guaranty of payment and performance and not of collection, and that its obligations under this Guaranty shall be primary, absolute and unconditional, irrespective of, and unaffected by:
     (a) the genuineness, validity, regularity, enforceability or any future amendment of, or change in this Guaranty, the Credit Agreement or any other Loan Document or any other agreement, document or instrument to which any obligor for the Guaranteed Obligations is or may become a party;
     (b) the absence of any action to enforce this Guaranty, the Credit Agreement or any other Loan Document or the waiver or consent by Agent and/or Lenders with respect to any of the provisions thereof;
     (c) the existence, value or condition of, or failure to perfect its Liens against, any Collateral for the Guaranteed Obligations or any action, or the absence of any action, by Agent in respect thereof (including, without limitation, the release of any such security); or
     (d) the insolvency of the Borrowers or any other obligor for the Guaranteed Obligations; or
     (e) any other action or circumstances which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor,
it being agreed by the Guarantor that its obligations under this Guaranty shall not be discharged until all Commitments under the Credit Agreement to lend have been terminated and all Obligations have been indefeasibly paid in full in cash. Upon the occurrence and during the continuance of an Event of Default, the Guarantor shall be regarded, and shall be in the same position, as principal debtor with respect to the Guaranteed Obligations. The Guarantor agrees that any notice or directive given at any time to Agent which is inconsistent with the waiver in the immediately preceding sentence shall be null and void and may be ignored by the Agent and the Lenders, and, in addition, may not be pleaded or introduced as evidence in any litigation

2


 

relating to this Guaranty for the reason that such pleading or introduction would be at variance with the written terms of this Guaranty, unless the Agent and the Lenders have specifically agreed otherwise in writing. It is agreed among the Guarantor, the Agent and the Lenders that the foregoing waivers are of the essence of the transaction contemplated by the Credit Agreement and the other Loan Documents and that, but for this Guaranty and such waivers, Agent and Lenders would decline to enter into the Credit Agreement and the other Loan Documents.
     2.2 Demand by Agent or Lenders. In addition to the terms of the Guaranty set forth in Section 2.1 hereof, and in no manner imposing any limitation on such terms, it is expressly understood and agreed that, if, at any time, the outstanding principal amount of the Guaranteed Obligations under the Credit Agreement or any other Loan Document (including all accrued interest thereon) is declared to be immediately due and payable, then the Guarantor shall, without demand, pay to the holders of the Guaranteed Obligations the entire outstanding Guaranteed Obligations due and owing to such holders. Payment by the Guarantor shall be made to Agent in immediately available Dollars or an Optional Currency, calculated at the Exchange Rate to an account designated by Agent or at the address set forth herein for the giving of notice to Agent or at any other address that may be specified in writing from time to time by Agent, and shall be credited and applied to the Guaranteed Obligations.
     2.3 Enforcement of Guaranty. In no event shall Agent have any obligation (although it is entitled, at its option) to proceed against the Borrowers or any obligor for the Guaranteed Obligations or any Collateral pledged to secure the Guaranteed Obligations before seeking satisfaction from the Guarantor, and Agent may proceed, prior or subsequent to, or simultaneously with, the enforcement of Agent’s rights hereunder, to exercise any right or remedy which it may have against any Collateral, as a result of any Lien it may have as security for all or any portion of the Guaranteed Obligations.
     2.4 Waiver. In addition to the waivers contained in Section 2.1 hereof, Guarantor waives, and agrees that it shall not at any time insist upon, plead or in any manner whatever claim or take the benefit or advantage of, any appraisal, valuation, stay, extension, marshaling of assets or redemption laws, or exemption, whether now or at any time hereafter in force, which may delay, prevent or otherwise affect the performance by the Guarantor of its Guaranteed Obligations under, or the enforcement by Agent or Lenders of, this Guaranty. The Guarantor hereby waives diligence, presentment and demand (whether for non-payment or protest or of acceptance, maturity, extension of time, change in nature or form of the Guaranteed Obligations, acceptance of further security, release of further security, composition or agreement arrived at as to the amount of, or the terms of, the Guaranteed Obligations, notice of adverse change in the Borrower’s financial condition or any other fact which might increase the risk to the Guarantor) with respect to any of the Guaranteed Obligations or all other demands whatsoever and waive the benefit of all provisions of law which are or might be in conflict with the terms of this Guaranty. The Guarantor represents, warrants and agrees that, as of the date of this Guaranty, its obligations under this Guaranty are not subject to any offsets or defenses against the Agent or the Lenders or any obligor for the Guaranteed Obligations. The Guarantor further agrees that its obligations under this Guaranty shall not be subject to any counterclaims, offsets or defenses against Agent or any Lender or any other obligor for the Guaranteed Obligations which may arise in the future.

3


 

     2.5 Benefit of Guaranty. The provisions of this Guaranty are for the benefit of the Agent and the Lenders and their respective successors, transferees, endorsees and assigns, and nothing herein contained shall impair, as between any obligor for the Guaranteed Obligations and the Agent or the Lenders, the obligations of any obligor for the Guaranteed Obligations under the Loan Documents. In the event all or any part of the Guaranteed Obligations are transferred, endorsed or assigned by Agent or any Lender to any Person or Persons, any reference to “Agent” or “Lender” herein shall be deemed to refer equally to such Person or Persons.
     2.6 Modification of Guaranteed Obligations, Etc. Guarantor hereby acknowledges and agrees that the Agent and the Lenders may at any time or from time to time, with or without the consent of, or notice to, the Guarantor or any other obligor for the Guaranteed Obligations:
     (a) change or extend the manner, place or terms of payment of, or renew or alter all or any portion of, the Guaranteed Obligations;
     (b) take any action under or in respect of the Credit Agreement or any other Loan Document in the exercise of any remedy, power or privilege contained therein or available to it at law, equity or otherwise, or waive or refrain from exercising any such remedies, powers or privileges;
     (c) amend or modify, in any manner whatsoever, the Credit Agreement or any other Loan Document;
     (d) extend or waive the time for any obligor for the Guaranteed Obligations performance of, or compliance with, any term, covenant or agreement on its part to be performed or observed under the Credit Agreement or any other Loan Document, or waive such performance or compliance or consent to a failure of, or departure from, such performance or compliance;
     (e) take and hold Collateral for the payment of the Guaranteed Obligations guaranteed hereby or sell, exchange, release, dispose of, or otherwise deal with, any property pledged, mortgaged or conveyed, or in which the Agent or the Lenders have been granted a Lien, to secure any Obligations;
     (f) release anyone who may be liable in any manner for the payment of any amounts owed by the Guarantor or any other obligor for the Guaranteed Obligations to the Agent or any Lender;
     (g) modify or terminate the terms of any intercreditor or subordination agreement pursuant to which claims of other creditors of the Guarantor or any other obligor for the Guaranteed Obligations are subordinated to the claims of the Agent and the Lenders; and/or
     (h) apply any sums by whomever paid or however realized to any amounts owing by the Guarantor or other obligor for the Guaranteed Obligations to the Agent or any Lender in such manner as the Agent or any Lender shall determine in its discretion;

4


 

and the Agent and the Lenders shall not incur any liability to Guarantor as a result thereof, and no such action shall impair or release the Guaranteed Obligations of Guarantor under this Guaranty.
     2.7 Reinstatement. This Guaranty shall remain in full force and effect and continue to be effective should any petition be filed by or against the Guarantor or any other obligor for the Guaranteed Obligations for liquidation or reorganization, should the Guarantor or any other obligor for the Guaranteed Obligations become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of the assets of such Guarantor or any obligor for the Guaranteed Obligations, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Guaranteed Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by Agent or any Lender, whether as a “voidable preference”, “fraudulent conveyance”, or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Guaranteed Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.
     2.8 Deferral of Subrogation, Etc. Notwithstanding anything to the contrary in this Guaranty, or in any other Loan Document, Guarantor hereby:
     (a) expressly and irrevocably waives, on behalf of itself and its successors and assigns (including any surety) until all commitments under the Credit Agreement to lend have terminated and all Obligations of Borrower have been indefeasibly paid in full in cash, any and all rights at law or in equity to subrogation, to reimbursement, to exoneration, to contribution, to indemnification, to set off or to any other rights that could accrue to a surety against a principal, to a guarantor against a principal, to a guarantor against a maker or obligor, to an accommodation party against the party accommodated, to a holder or transferee against a maker, or to the holder of any claim against any Person, and which Guarantor may have or hereafter acquire against any obligor for the Guaranteed Obligations in connection with or as a result of Guarantor’s execution, delivery and/or performance of this Guaranty, or any other documents to which Guarantor is a party or otherwise; and
     (b) acknowledges and agrees (i) that this waiver is intended to benefit the Agent and the Lenders and shall not limit or otherwise effect the Guarantor’s liability hereunder or the enforceability of this Guaranty, and (ii) that the Agent, the Lenders and their respective successors and assigns are intended third party beneficiaries of the waivers and agreements set forth in this Section 2.8 and their rights under this Section 2.8 shall survive payment in full of the Guaranteed Obligations.
     2.9 Election of Remedies. If the Agent may, under applicable law, proceed to realize benefits under any of the Loan Documents giving the Agent and the Lenders a Lien upon any Collateral owned by any obligor for the Guaranteed Obligations, either by judicial foreclosure or by non-judicial sale or enforcement, the Agent may, at its sole option, determine which of such remedies or rights it may pursue without affecting any of such rights and remedies under this Guaranty. If, in the exercise of any of its rights and remedies, the Agent shall forfeit

5


 

any of its rights or remedies, including its right to enter a deficiency judgment against any obligor for the Guaranteed Obligations, whether because of any applicable laws pertaining to “election of remedies” or the like, the Guarantor hereby consents to such action by the Agent and waives any claim based upon such action, even if such action by the Agent shall result in a full or partial loss of any rights of subrogation which the Guarantor might otherwise have had but for such action by the Agent. Any election of remedies which results in the denial or impairment of the right of the Agent to seek a deficiency judgment against any obligor for the Guaranteed Obligations shall not impair the Guarantor’s obligation to pay the full amount of the Guaranteed Obligations. In the event the Agent shall bid at any foreclosure or trustee’s sale or at any private sale permitted by law or the Loan Documents, the Agent may bid all or less than the amount of the Guaranteed Obligations and the amount of such bid need not be paid by the Agent but shall be credited against the Guaranteed Obligations. To the fullest extent permitted by law, the amount of the successful bid at any such sale shall be conclusively deemed to be the fair market value of the collateral and the difference between such bid amount and the remaining balance of the Guaranteed Obligations shall be conclusively deemed to be the amount of the Guaranteed Obligations guaranteed under this Guaranty.
     2.10 Funds Transfers. If the Guarantor shall engage in any transaction as a result of which the Borrower is required to make a mandatory prepayment with respect to the Guaranteed Obligations under the terms of the Credit Agreement (including any issuance or sale of Guarantor’s capital stock or any sale of its assets), to the extent the Borrowers are unable to make such mandatory prepayment, the Guarantor shall distribute to, or make a contribution to the capital of, the Borrowers an amount equal to the mandatory prepayment required under the terms of the Credit Agreement.
ARTICLE 3
DELIVERIES
          In a form satisfactory to Agent, Guarantor shall deliver to Agent (with sufficient copies for each Lender), concurrently with the execution of this Guaranty and the Credit Agreement, the Loan Documents and other instruments, certificates and documents as are required to be delivered by Guarantor to Agent under the Credit Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
          To induce Lenders to make the Loans under the Credit Agreement, Guarantor makes the following representations and warranties to the Agent and each Lender, each and all of which shall survive the execution and delivery of this Guaranty:
     4.1 Corporate Existence and Standing. Guarantor is a corporation or company duly incorporated or organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization and has all requisite authority to own its property and to carry on its business in each jurisdiction where the failure to so qualify would have a material adverse effect on its business, properties, assets, operations or financial condition taken as a whole.

6


 

     4.2 Authorization and Validity. Guarantor has the power and authority and legal right to execute and deliver this Agreement and each other Loan Document to which it is a party and to perform its obligations thereunder. Such execution and delivery have been duly authorized by proper proceedings, and this Agreement and such other Loan Documents constitute the legal, valid and binding obligations of Guarantor, enforceable against it in accordance with their respective terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, receivership, liquidation, moratorium, and other similar laws affecting the rights and remedies of creditors generally and (ii) by general principles of equity (regardless of whether such enforcement is considered in equity or at law).
     4.3 No Conflict; Governmental Consent. The execution, delivery and performance of this Agreement and the other Loan Documents to which Guarantor is a party will not violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on any Guarantor, any provision of Guarantor’s respective articles or certificate of incorporation or organization, by-laws or other charter documents, or the provisions of any indenture, instrument or other written or oral agreement to which Guarantor is a party or is subject or by which the Guarantor or any of its property is bound, or conflict therewith or constitute a default thereunder, or result in the creation or imposition of any Lien in, of or on any of its property pursuant to the terms of any such indenture, instrument or agreement (other than any Lien permitted by Section 10.2 of the Credit Agreement). No order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, any Governmental Authority is required by or in respect of the Guarantor to authorize or is required in connection with the execution, delivery and performance of or the enforceability of this Agreement or any of the other Loan Documents to which Guarantor is a party, except as otherwise required by the terms of such Loan Document.
     4.4 Compliance with Laws; Environmental and Safety Matters. (a) Guarantor represents and warrants to the Agent and the Lenders that Guarantor has complied with all applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government or Governmental Authority having jurisdiction over the conduct of its businesses or the ownership of its respective properties except to the extent that such non-compliance will not have a material adverse effect on the financial condition or business operations of Borrowers, on a consolidated basis or on the Euronet Entities on a consolidated basis.
     (b) Guarantor has complied with all federal, national, state, local and other statutes, ordinances, orders, judgments, rulings and regulations relating to environmental pollution, environmental regulation or control, or employee health or safety, except to the extent that such non-compliance will not have a material adverse effect on the financial condition or business operations of the Borrowers on a consolidated basis; Guarantor has not received any written notice of any failure so to comply; and none of Guarantor’s facilities treat, store or dispose of any hazardous wastes, hazardous substances, hazardous materials, toxic substances, toxic pollutants or substances (collectively, “Hazardous Materials”) similarly denominated, as those terms or similar terms are used in RCRA, CERCLA, the Hazardous Materials Transportation Act, the Toxic Substances Control Act, the Clean Air Act, the Clean Water Act, the Occupational Safety and Health Act or any other state, local or federal applicable law, ordinance, rule or regulation relating to environmental pollution, environmental regulation or control or employee health and safety (collectively, “Environmental Laws”) in a quantity or manner that requires a permit,

7


 

registration, or another notification or authorization from a Governmental Authority except for the treatment, storage, or disposal of Hazardous Materials in a quantity or manner which, if in non-compliance with Environmental Laws, would not have a material adverse effect on the Borrowers’ financial condition or business operations, taken as a whole. The conduct of the business and the condition of the property of Guarantor does not violate any Environmental Laws or any judicial interpretation thereof relating primarily to the environment or Hazardous Materials. Guarantor is not aware of any events, conditions or circumstances involving environmental pollution or contamination or employee health or safety that could reasonably be expected to result in material liability on the part of the Borrowers taken as a whole.
     4.5 Ownership of Properties; Collateral Liens. Guarantor has good title, free and clear of all Liens (other than those permitted by Section 10.2 of the Credit Agreement), to all of the properties and assets reflected in its financial statements as owned by it, and its interest in all other properties and assets in or to which it has an interest as a lessee, licensee or otherwise is free and clear of all Liens (other than those permitted under Section 10.2 of the Credit Agreement).
     4.6 Taxes. Guarantor has filed all federal tax returns and all other tax returns which are required to be filed and paid all taxes due pursuant to said returns or pursuant to any assessment received by it, including without limitation all federal and state withholding taxes and all taxes required to be paid pursuant to applicable law, except such taxes, if any, as are being contested in good faith, by appropriate proceedings and as to which adequate charges, accruals and reserves have been set aside. No tax Liens have been filed, and no claims are being asserted with respect to any such taxes, except such tax Liens and claims that will not have a material adverse effect in the aggregate, on the assets, business, operations or financial condition of the Euronet entities on a consolidated basis. The charges, accruals and reserves on the books of the Euronet Entities, on a consolidated basis, in respect of any taxes or other governmental charges are adequate.
     4.7 Solvency. Guarantor reasonably anticipates that it will be able to meet its debts as they mature. Guarantor has adequate capital to conduct the business in which it is engaged.
     4.8 Executive Offices. Guarantor’s executive office and principal place of business are as set forth on Schedule 4.8.
ARTICLE 5
COVENANTS
     Guarantor agrees that it will:
     5.1 Conduct of Business and Maintenance of Properties. Carry on and conduct its business in substantially the same manner and in substantially the same fields of enterprise as it is presently conducted and do all things necessary to remain duly incorporated, validly existing and in good standing in its jurisdiction of organization and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted; maintain, preserve, protect and keep its properties in good repair, working order and condition; and comply in all material respects with all agreements and instruments to which it is a party.

8


 

     5.2 Insurance. Maintain with financially sound and reputable insurance companies, insurance on all its property, covering such liabilities and such risks (including business interruption risks) and in such amounts as is consistent with sound business practice and reasonably satisfactory to the Agent and furnish to the Agent upon request full information as to the insurance carried.
     5.3 Compliance with Laws and Taxes. Comply with, any and all laws, statutes, rules, regulations, orders, judgments, decrees and awards, a violation of which, in any respect, taken as a whole, may materially and adversely affect the Guarantor’s business, assets, operations or condition, financial condition taken as a whole, including, without limitation, those regarding the collection, payment and deposit of employees’ income, unemployment, and Social Security taxes (or similarly established social insurance and healthcare taxes) and those regarding environmental matters; pay when due all taxes, assessments and governmental charges and levies upon it or its income, profits or property, except those which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside; make a timely payment or deposit of all FICA payments and withholding taxes (or similarly established social insurance and healthcare taxes) required of it under applicable law; and, upon request, furnish to the Agent evidence satisfactory to the Agent that such payments have been made.
     5.4 Financial Statements, Reports, etc. Maintain a system of accounting established and administered in accordance with GAAP (as adopted in the United States).
     5.5 Further Assurances. The Guarantor agrees, upon the written request of Agent or any Lender, to execute and deliver to Agent or such Lender, from time to time, any additional instruments or documents reasonably considered necessary by Agent or such Lender to cause this Guaranty to be, become or remain valid and effective in accordance with its terms.
ARTICLE 6
PAYMENTS FREE AND CLEAR OF TAXES
          All payments required to be made by Guarantor hereunder shall be made to Agent and Lenders free and clear of, and without deduction for, any and all present and future taxes. If Guarantor shall be required by law to deduct any withholding taxes from or in respect of any sum payable hereunder, (a) the sum payable shall be increased as much as shall be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 6) Agent or Lenders, as applicable, receive an amount equal to the sum they would have received had no such deductions been made, (b) Guarantor shall make such deductions, and (c) Guarantor shall pay the full amount deducted to the relevant taxing or other authority in accordance with applicable law. Guarantor shall not be required, however, to gross up payments to Agent or Lenders for an amount higher than the withholding tax rate established in the treaty existing at such time of payment between Guarantor’s country of legal domicile and the United States. Within thirty (30) days after the date of any payment of taxes, or within five (5) Business Days following receipt by Guarantor of evidence of payment from Guarantor’s taxing authority, whichever is later,Guarantor shall furnish to Agent the original or a certified copy of a receipt evidencing payment thereof. Guarantor shall indemnify and, within ten (10) days of demand therefor, pay Agent and each Lender for the full amount of withholding taxes

9


 

(including any withholding taxes imposed by any jurisdiction on amounts payable under this Section 6) paid by Agent or such Lender, as appropriate, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such taxes were correctly or legally asserted, so long as paid by such Agent or such Lender in good faith.
ARTICLE 7
OTHER TERMS
     7.1 Entire Agreement. This Agreement and the other Loan Documents constitute the entire contract between the parties relative to the subject matter hereof. Any previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement and the other Loan Documents. Nothing in this Agreement or in the other Loan Documents, expressed or implied, is intended to confer upon any party other than the parties hereto and thereto any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Loan Documents.
     7.2 Headings. Section headings used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.
     7.3 Severability. In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
     7.4 Notices. Notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed or sent by telecopy or other telegraphic communications equipment of the sending party, as follows:
if to Guarantor, to it c/o Euronet Worldwide, Inc. at 4601 College Boulevard, Suite 300, Leawood, Kansas 66211 (Facsimile: 913-327-1921).
if to the Agent, to it at PO Box 219038, MO8-060-12-02, 64121-9038, Attention: Middle Market Banking (Facsimile: 816-979-7174) (if by hand delivery or overnight courier service then to 1200 Main, Suite 1400, Kansas City, Missouri 64105, Attention: Middle Market Banking) with a required copy to Scott Long, Lathrop & Gage L.C., 2345 Grand Boulevard, Kansas City, Missouri 64108 (Facsimile: 816/292-2001);
or to such other address or telecopy number as any party may direct by notice given as provided in this Section 7.4. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telecopy or other telegraphic communications equipment of the sender, if received on or before 5:00 p.m., local time of the recipient, on a Business Day, or on the next Business Day if received after 5:00 p.m.

10


 

on a Business Day or on a day that is not a Business Day, or on the date five (5) Business Days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 7.4 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 7.4.
     7.5 Successors and Assigns; Participations. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and permitted assigns of such party. The Agent and any Lender may assign or delegate to one or more of its Affiliates all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of the Loans and the Note). Each Lender may sell participations to one or more of its Affiliates in all or a portion of its rights and obligations under this Agreement (including all or a portion of the Loans and the Notes). Each Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 7.5, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrower Agent, the Borrowers and the Euronet Entities furnished to the Agent or the Lenders by or on behalf of the Borrower Agent or any Borrower.
     7.6 No Waiver; Cumulative Remedies; Amendments. Neither the Agent nor any Lender shall by any act, delay, omission or otherwise be deemed to have waived any of its rights or remedies hereunder, and no waiver shall be valid unless in writing, signed by Agent and then only to the extent therein set forth. A waiver by the Agent, for itself and the ratable benefit of the Lenders, of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Agent would otherwise have had on any future occasion. No failure to exercise nor any delay in exercising on the part of the Agent or any Lender, any right, power or privilege hereunder, shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or future exercise thereof or the exercise of any other right, power or privilege. The rights and remedies hereunder provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights and remedies provided by law. None of the terms or provisions of this Guaranty may be waived, altered, modified, supplemented or amended except by an instrument in writing, duly executed by the Agent and the Guarantor.
     7.7 Termination. This Guaranty is a continuing guaranty and shall remain in full force and effect until all commitments under the Credit Agreement (including any amendment, restatement or refinancing thereof with Bank of America) to lend have been terminated and all Obligations of Borrowers have been indefeasibly paid in full. Upon payment and performance in full of the Guaranteed Obligations, Agent shall deliver to the Guarantor such documents as the Guarantor may reasonably request to evidence such termination.
     7.8 Counterparts. This Agreement may be executed in two or more counterparts, all of which when taken together shall constitute but one contract.
     7.9 Applicable Law. This Agreement and the other Loan Documents shall be governed by and construed and enforced under and in accordance with the laws of the State of Missouri applicable to contracts made and to be performed wholly within said state, without giving effect to choice of law or conflict of law principles.

11


 

     7.10 ARBITRATION. (a) EXCEPT AS SET OUT BELOW, ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO, INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY LOAN DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT (COLLECTIVELY, “CLAIM”), SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT ADOPTED BY THE UNITED STATES (OR IF NOT APPLICABLE, THE APPLICABLE LAW IN THE STATE OF MISSOURI), THE RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR ANY SUCCESSOR THEREOF (“J.A.M.S.”), AND THE “SPECIAL RULES” SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CLAIM IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION. THE INSTITUTION AND MAINTENANCE OF AN ACTION FOR ANY JUDICIAL RELIEF SHALL NOT CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE PLAINTIFF, TO SUBMIT THE CLAIM TO ARBITRATION IF ANY OTHER PARTY CONTESTS SUCH ACTION FOR JUDICIAL RELIEF.
     (b) SPECIAL RULES. ANY ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF BORROWER AGENT’S DOMICILE AT THE TIME OF THE EXECUTION OF THIS AGREEMENT, OR IF THERE IS REAL OR PERSONAL PROPERTY COLLATERAL, IN THE COUNTY WHERE SUCH REAL OR PERSONAL PROPERTY IS LOCATED, AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATION SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS. ANY DISPUTE CONCERNING THIS ARBITRATION PROVISION OR WHETHER A CLAIM IS ARBITRABLE SHALL BE DETERMINED BY THE ARBITRATOR. THE ARBITRATOR SHALL HAVE THE POWER TO AWARD LEGAL FEES PURSUANT TO THE TERMS OF THIS AGREEMENT.
     (c) RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT; OR (II)) BE A WAIVER BY AGENT OR ANY LENDER OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF ANY PARTY HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST OR SELL ANY REAL OR PERSONAL PROPERTY OR COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A

12


 

RECEIVER, ANY PARTY MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE OR SELL COLLATERAL OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS AGREEMENT. NONE OF THESE ACTIONS SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE CLAIM OCCASIONING RESORT TO SUCH REMEDIES OR PROCEDURES.
     (d) WAIVER OF CERTAIN DAMAGES. THE PARTIES HERETO WAIVE ANY RIGHT OR REMEDY EITHER MAY HAVE AGAINST THE OTHER TO RECOVER PUNITIVE OR EXEMPLARY DAMAGES ARISING OUT OF ANY CLAIM WHETHER THE CLAIM IS RESOLVED BY ARBITRATION OR BY JUDICIAL ACTION.
ARTICLE 8
NEGATIVE PLEDGE
     Guarantor covenants and agrees that it shall not permit to exist any Lien on any of its property, except Liens of the nature or type the Euronet Entities are permitted to have pursuant to Section 10.2 of the Credit Agreement. On the request of the Agent, the Guarantor will execute acknowledgments or other forms of notice of such negative pledge, and the Agent may record or file the same in the appropriate filing offices.

13


 

          IN WITNESS WHEREOF, the parties hereto have executed and delivered this Guaranty Agreement as of the date first above written.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.
             
    EWI FOREIGN HOLDINGS LTD    
 
           
 
  By:   /s/ Eric Mettemeyer    
 
           
 
  Name:   Eric Mettemeyer    
 
  Title:   Director    
 
           
    BANK OF AMERICA, N.A., as Agent    
 
           
 
  By:   /s/ John Mills
 
   
 
  Name:   John P. Mills    
 
  Title:   Vice President    
Signature Page to Guaranty of
Euronet Foreign Holdings Ltd

 


 

SCHEDULE 4.8
Julia House
3 Themistocles Dervis Street
CY-1066 Nicosia, Cyprus

 

exv10w6
 

Exhibit 10.6
CREDIT AGREEMENT
Dated as of May 26, 2006
Borrower Parties
EURONET WORLDWIDE, INC.,
as Borrower Agent
AND
EURONET SERVICES INDIA PVT LTD,
as Borrower
AND
BANK OF AMERICA, N.A.,
as Lender and Agent
Rupee Revolving Line of Credit
Termination Date: May 26, 2009

 


 

TABLE OF CONTENTS
         
    Page
 
ARTICLE 1 DEFINITIONS
    1  
ARTICLE 2 REVOLVING LINE OF CREDIT
    1  
2.1 Agreement to Lend
    1  
2.2 Revolving Note
    2  
2.3 Increase of the Commitment
    2  
2.4 The Letter of Credit Commitment
    3  
2.5 Procedures of Issuance and Amendment of Letters of Credit
    5  
2.6 Drawings and Reimbursements; Funding of Participations
    6  
2.7 Repayment of Participations
    8  
2.8 Obligations Absolute
    8  
2.9 Role of L/C Issuer
    9  
2.10 Cash Collateral
    10  
2.11 Applicability of ISP
    10  
2.12 Letter of Credit Fees
    10  
2.13 Conflict with Issuer Documents
    10  
2.14 Letters of Credit Issued for Affiliates
    11  
2.15 Letter of Credit Amounts
    11  
ARTICLE 3 CURRENCY
    11  
3.1 Currency and Amount
    11  
3.2 [Intentionally Omitted.]
    11  
3.3 Translation Calculations
    11  
3.4 Agent’s Calculations
    12  
3.5 Currency Indemnity
    12  
3.6 Currency of Account
    13  
3.7 Change of Currency
    13  
ARTICLE 4 DISBURSEMENTS; INTEREST; PAYMENTS
    14  
4.1 Types of Loans
    14  
4.2 Loan Disbursement Procedures
    14  
4.3 Interest
    14  
4.4 Optional and Mandatory Payments
    14  
4.5 Payments
    16  
4.6 Status of Lenders
    17  
4.7 Minimum Amounts
    17  
4.8 Certain Requests and Notices
    18  
4.9 Borrower Agent
    19  
ARTICLE 5 FEES; COLLATERAL
    20  
5.1 Fees
    20  
5.2 Additional MIBOR Rate Loan Costs
    20  
5.3 Reserve Costs
    21  
5.4 Notice of Increased Costs
    22  
ARTICLE 6 CONDITIONS TO MAKING LOANS
    22  
6.1 Delivery of Loan Documents
    22  
6.2 Proper Proceedings; Charter Documents
    23  

 


 

         
    Page
 
6.3 Legal Opinion
    23  
6.4 No Adverse Changes; Representations; No Default
    23  
6.5 Notice of Borrowing
    23  
6.6 [Intentionally Omitted.]
    23  
6.7 No Material Impairment
    23  
6.8 Required Consents and Approvals
    23  
6.9 Legality
    24  
6.10 General
    24  
ARTICLE 7 REPRESENTATIONS AND WARRANTIES
    24  
7.1 Corporate Existence and Standing
    24  
7.2 Authorization and Validity
    24  
7.3 No Conflict; Governmental Consent
    24  
7.4 Compliance with Laws; Environmental and Safety Matters
    25  
7.5 US GAAP Financial Statements
    26  
7.6 Ownership of Properties; Collateral Liens
    26  
7.7 Indebtedness
    25  
7.8 Subsidiaries
    27  
7.9 Litigation
    27  
7.10 Material Agreements; Labor Matters
    27  
7.11 Investment Company Act; Public Utility Holding Company Act
    27  
7.12 Taxes
    27  
7.13 Accuracy of Information
    28  
7.14 Employee Benefit Plans
    28  
7.15 No Undisclosed Dividend Restrictions
    28  
7.16 Absence of Default or Event of Default
    28  
7.17 Disclosure
    28  
7.18 Solvency
    28  
7.19 Margin Regulations
    28  
7.20 Copyrights, Patents and Other Rights
    29  
7.21 Fiscal Year
    29  
ARTICLE 8 AFFIRMATIVE COVENANTS
    29  
8.1 Conduct of Business and Maintenance of Properties
    29  
8.2 Insurance
    29  
8.3 Compliance with Laws and Taxes
    29  
8.4 Financial Statements, Reports, etc.
    30  
8.5 Other Notices
    32  
8.6 Access to Properties and Inspections
    32  
8.7 Use of Proceeds
    32  
8.8 Payment of Claims
    33  
8.9 Maintain Lender Accounts
    33  
ARTICLE 9 FINANCIAL COVENANTS
    33  
9.1 Euronet Consolidated Financial Covenants
    33  
9.2 Minimum Borrower EBITDA
    33  
ARTICLE 10 NEGATIVE COVENANTS
    35  
10.1 Indebtedness
    35  
10.2 Liens
    36  
10.3 Sale and Lease-Back Transactions
    38  

 


 

         
    Page
 
10.4 Mergers, Transfers of Assets, Acquisitions
    39  
10.5 Creation of Subsidiaries
    40  
10.6 Subsidiary Dividend Restrictions
    40  
10.7 [Intentionally Omitted.]
    40  
10.8 Use of Proceeds
    40  
10.9 Loans, Advances and Investments
    40  
10.10 Negative Pledge
    41  
10.11 Liquidation or Change in Business
    41  
10.12 Money Services Business
    41  
ARTICLE 11 EVENTS OF DEFAULT
    42  
11.1 Events of Default
    42  
11.2 Rights and Remedies
    43  
ARTICLE 12 AGENT
    44  
12.1 Appointment and Authority
    44  
12.2 Rights as a Lender
    43  
12.3 Exculpatory Provisions
    43  
12.4 Reliance by Agent
    45  
12.5 Delegation of Duties
    46  
12.6 Resignation of Agent
    46  
12.7 Non-Reliance on Agent and Other Lenders
    45  
12.8 Agent May File Proofs of Claim
    45  
12.9 Collateral and Guaranty Matters
    48  
ARTICLE 13 MISCELLANEOUS
    48  
13.1 Notices
    48  
13.2 [Intentionally Omitted.]
    49  
13.3 Survival of Agreement
    49  
13.4 Binding Effect
    49  
13.5 Successors and Assigns; Participations
    49  
13.6 Expenses; Indemnity
    52  
13.7 Right of Setoff
    53  
13.8 Applicable Law
    53  
13.9 Waivers; Amendment
    54  
13.10 Suretyship Waivers
    55  
13.11 Interest Rate Limitation
    57  
13.12 Entire Agreement
    57  
13.13 Severability
    57  
13.14 Counterparts
    57  
13.15 Headings
    57  
13.16 Jurisdiction; Consent to Service of Process
    57  
13.17 Terms Generally
    58  
13.18 English Language
    58  
13.19 USA PATRIOT Act Notice
    58  
13.20 ARBITRATION
    59  

 


 

         
List of Exhibits:
       
Exhibit 1 — Definitions
       
Exhibit 2.2 — Revolving Note
       
Exhibit 4.8-A — Notice of Borrowing
       
Exhibit 4.8-B — Notice of Termination or Reduction
       
Exhibit 8.4 — Compliance Certificate
       
 
       
List of Schedules:
       
Schedule E-1 — Revolving Credit Commitments
       
Schedule 7.4 — Environmental Matters
       
Schedule 7.5 — Financial Statements
       
Schedule 7.8 — Corporate Structure
       
Schedule 10.1 — Existing Indebtedness
       
Schedule 10.2 — Existing Liens
       
Schedule 10.9 — Loans, Advances and Investments
       

 


 

RUPEE CREDIT AGREEMENT
     THIS CREDIT AGREEMENT (“Agreement”) is made as of the 26th day of May, 2006, by and among Euronet Worldwide, Inc., a Delaware corporation, as Borrower Agent, Euronet Services India Pvt Ltd, a company organized under the laws of India (the “Borrower”), and Bank of America, N.A., a national banking association acting through its branch in Mumbai, India (“Bank of America”), as agent (in such capacity, the “Agent”) and as a lender (and together with the other financial institutions from time to time party hereto, as lenders, each a “Lender” and collectively the “Lenders”).
     WHEREAS, the Borrower has requested that the Agent arrange a three-year revolving line of credit with the Lenders in the amount of Ten Million US Dollars ($10,000,000); and
     WHEREAS, in order to induce the Agent and the Lenders to make such loans, the Borrower Agent has agreed to provide a guarantee of the Borrower’s obligations hereunder; and
     WHEREAS, the Lenders have agreed to make such loans available to the Borrower upon the terms and conditions set forth herein;
     NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, the parties agree as follows:
ARTICLE 1
DEFINITIONS
     Certain terms used in this Agreement are defined herein. Certain other terms are defined in Exhibit 1 attached hereto and incorporated herein by this reference.
ARTICLE 2
REVOLVING LINE OF CREDIT
     2.1 Agreement to Lend.
          (a) Revolving Loans. Each Lender severally, but not jointly, agrees, on the terms and subject to the conditions set forth in this Agreement, to make loans (each a “Revolving Loan”) to the Borrower from time to time on any Business Day during the period beginning on the Closing Date through the first Business Day before the Revolving Credit Termination Date, in such amounts as the Borrower shall request as provided in Section 4.8 hereof not to exceed in aggregate principal amount outstanding at any time, such Lender’s Pro Rata Share of the Revolving Credit Commitment and, to the extent such Lender is an L/C Issuer, to treat each draw under any Letter of Credit as a Revolving Loan as provided in Section 2.4 below; provided, however, that no Lender shall have any obligation to make a requested Revolving Loan if, (A) a Default or Event of Default has occurred and is continuing or (B) after the making of such Revolving Loan, (I) the aggregate unpaid principal balance of all Revolving Loans, together with the aggregate undrawn amount under all outstanding Letters of Credit, would exceed the

 


 

Revolving Credit Commitments, or (II) a Default or Event of Default will have occurred and be continuing. The Borrower may terminate or reduce the unused portion of the Revolving Credit Commitment at any time by giving notice to the Lender as provided in Section 4.8 below, provided that any partial reduction shall be in an amount of at least One Million Dollars ($1,000,000) or the equivalent amount in the Funding Currency. Revolving Loans shall be used to pay existing intercompany indebtedness, for working capital and for other corporate or business purposes.
          (b) Except as otherwise provided in Section 3.3, if the aggregate principal indebtedness of the Borrower under the Revolving Notes, plus the aggregate undrawn amount under all outstanding Letters of Credit, at any time exceeds the Revolving Credit Commitment, the Borrower shall immediately, without demand or notice, pay principal under the Revolving Notes so that the aggregate principal amount outstanding thereunder, plus the aggregate undrawn amount under all outstanding Letters of Credit, does not exceed the Revolving Credit Commitment; provided, that in the case of Letters of Credit, such amount shall be held as cash collateral for undrawn Letters of Credit, and shall promptly be returned to the Borrower if Letters of Credit in an amount sufficient to eliminate such overadvance expire undrawn.
     2.2 Revolving Note. The Revolving Loans shall be evidenced by and repaid in accordance with Revolving Notes executed by the Borrower in favor of each Lender, in the form of Exhibit 2.2 hereto, dated as of the Closing Date or, with respect to Revolving Notes issued to a financial institution that becomes a Lender subsequent to the Closing Date, the date such financial institution becomes a Lender, and each Revolving Note shall be payable to the order of the applicable Lender. Such Notes and any and all amendments, extensions, modifications, renewals, reaffirmations, restatements, replacements and substitutions thereof and therefor executed with respect to the Revolving Loans are herein referred to as the “Revolving Notes”. Interest shall accrue on the unpaid principal balance of the Revolving Notes outstanding from time to time at a rate or rates determined as provided in Section 4.3 below. The Revolving Notes shall be paid in full on the Revolving Credit Termination Date.
     2.3 Increase of the Commitment.
          (a) Request for Increase. Provided there exists no Default, upon notice to the Agent (which shall promptly notify the Lenders), the Borrower Agent, on behalf of the Borrower may on a one-time basis, request an increase in the Commitments by an amount not exceeding $15,000,000; provided that:
     (i) any such request for an increase shall be in a minimum amount of $1,000,000; provided that, the aggregate of (x) such increase plus (y) any concurrent increase in the “Commitment” under the US Credit Agreement, plus (z) any concurrent increase in the “Commitment” under the Euro Credit Agreement shall be a minimum of $5,000,000; and
     (ii) after giving effect to any such increase, the aggregate of (x) the Commitment under this Agreement, plus (y) the “Commitment” under the US

- 2 -


 

Credit Agreement, plus (z) the “Commitment” under the Euro Credit Agreement, will not exceed $65,000,000.
At the time of sending such notice, the Borrower Agent (in consultation with the Agent) shall specify the time period within which each Lender is requested to respond (which shall in no event be less than ten Business Days from the date of delivery of such notice to the Lenders).
          (b) Lender Elections to Increase. Each Lender shall notify the Agent within such time period whether or not it agrees to increase its Commitment and, if so, whether by an amount equal to, greater than, or less than its Pro Rata share of such requested increase. Any Lender not responding within such time period shall be deemed to have declined to increase its Commitment.
          (c) Notification by Administrative Agent; Additional Lenders. The Agent shall notify the Borrower Agent and each Lender of the Lenders’ responses to each request made hereunder. To achieve the full amount of a requested increase and subject to the approval of the Agent and the L/C Issuer (which approvals shall not be unreasonably withheld), the Borrower Agent may also invite additional Eligible Assignees to become Lenders pursuant to a joinder agreement in form and substance satisfactory to the Agent and its counsel.
          (d) Effective Date and Allocations. If the Commitment is increased in accordance with this Section, the Agent and the Borrower Agent shall determine the effective date (the “Increase Effective Date”) and the final allocation of such increase. The Agent shall promptly notify the Lenders of the final allocation of such increase and the Increase Effective Date.
          (e) Conditions to Effectiveness of Increase. As a condition precedent to such increase, the Borrower shall deliver to the Agent a certificate of each Obligor dated as of the Increase Effective Date (in sufficient copies for each Lender) signed by a responsible officer of such Obligor (i) certifying and attaching the resolutions adopted by such Obligor approving or consenting to such increase, and (ii) in the case of the Borrower, certifying that, before and after giving effect to such increase, (A) the representations and warranties contained in Article 7 and the other Loan Documents are true and correct on and as of the Increase Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and (B) no Default exists. The Borrower shall prepay any Revolving Loans outstanding on the Increase Effective Date to the extent necessary to keep the outstanding Revolving Loans ratable with any revised Pro Rata shares arising from any nonratable increase in the Commitment under this Section.
          (f) Conflicting Provisions. This Section shall supersede any provisions in Sections 4.5 or 13.9 to the contrary.
     2.4 The Letter of Credit Commitment.

- 3 -


 

          (a) Subject to the terms and conditions set forth herein, (A) the L/C Issuer agrees, in reliance upon the agreements of the Lenders set forth in this Section 2.4, (1) from time to time on any Business Day during the period from the Closing Date until the Letter of Credit Expiration Date, to issue Letters of Credit for the account of the Borrower, and to amend or extend Letters of Credit previously issued by it, in accordance with subsection (b) below, and (2) to honor drawings under the Letters of Credit; and (B) the Lenders severally agree to participate in Letters of Credit issued for the account of the Borrower and any drawings thereunder; provided that after giving effect to any L/C Credit Extension with respect to any Letter of Credit:
     (I) the aggregate unpaid principal balance of all Revolving Loans, together with the aggregate undrawn amount under all outstanding Letters of Credit, shall not exceed the Revolving Credit Commitments; and
     (II) the aggregate outstanding principal amount of the Revolving Loans of any Lender, plus such Lender’s Pro Rata Share of the aggregate amount of all L/C Obligations shall not exceed such Lender’s Commitment.
Each request by the Borrower for the issuance or amendment of a Letter of Credit shall be deemed to be a representation by the Borrower that the L/C Credit Extension so requested complies with the conditions set forth in the proviso to the preceding sentence. Within the foregoing limits, and subject to the terms and conditions hereof, the Borrower’s ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed.
          (b) The L/C Issuer shall not issue any Letter of Credit, if:
               (i) the expiry date of such requested Letter of Credit would occur more than twelve months after the date of issuance or last extension, unless the Required Lenders have approved such expiry date; or
               (ii) the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless all the Lenders have approved such expiry date.
          (c) The L/C Issuer shall not be under any obligation to issue any Letter of Credit if:
               (i) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the L/C Issuer from issuing such Letter of Credit, or any applicable law to the L/C Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the L/C Issuer shall prohibit, or request that the L/C Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the L/C Issuer with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the L/C Issuer is not otherwise compensated hereunder)

- 4 -


 

not in effect on the Closing Date, or shall impose upon the L/C Issuer any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the L/C Issuer in good faith deems material to it;
               (ii) the issuance of such Letter of Credit would violate one or more policies of the L/C Issuer;
               (iii) except as otherwise agreed by the Agent and the L/C Issuer, such Letter of Credit is in an initial stated amount less than $50,000;
               (iv) such Letter of Credit is to be denominated in a currency other than the Funding Currency;
               (v) such Letter of Credit contains any provisions for automatic reinstatement of the stated amount after any drawing thereunder; or
               (vi) a default of any Lender’s obligations to fund exists or any Lender is at such time a Defaulting Lender hereunder, unless the L/C Issuer has entered into satisfactory arrangements with the Borrower or such Lender to eliminate the L/C Issuer’s risk with respect to such Lender.
          (d) The L/C Issuer shall not amend any Letter of Credit if the L/C Issuer would not be permitted at such time to issue such Letter of Credit in its amended form under the terms hereof.
          (e) The L/C Issuer shall be under no obligation to amend any Letter of Credit if (A) the L/C Issuer would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.
          (f) The L/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and the L/C Issuer shall have all of the benefits and immunities (A) provided to the Agent in Article 12 with respect to any acts taken or omissions suffered by the L/C Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and Issuer Documents pertaining to such Letters of Credit as fully as if the term “Agent” as used in Article 12 included the L/C Issuer with respect to such acts or omissions, and (B) as additionally provided herein with respect to the L/C Issuer.
     2.5 Procedures for Issuance and Amendment of Letters of Credit.
          (a) Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Borrower delivered to the L/C Issuer (with a copy to the Agent) in the form of a Letter of Credit Application, appropriately completed and signed by a responsible officer of the Borrower. Such Letter of Credit Application must be received by the L/C Issuer and the Agent not later than 11:00 a.m., Mumbai, India time at least two Business Days (or such later date and time as the Agent and the L/C Issuer may agree in a particular instance in their sole discretion) prior to the proposed issuance date

- 5 -


 

or date of amendment, as the case may be. In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; and (G) such other matters as the L/C Issuer may require. In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as the L/C Issuer may require. Additionally, the Borrower shall furnish to the L/C Issuer and the Agent such other documents and information pertaining to such requested Letter of Credit issuance or amendment, including any Issuer Documents, as the L/C Issuer or the Agent may require.
          (b) Promptly after receipt of any Letter of Credit Application, the L/C Issuer will confirm with the Agent (by telephone or in writing) that the Agent has received a copy of such Letter of Credit Application from the Borrower and, if not, the L/C Issuer will provide the Agent with a copy thereof. Unless the L/C Issuer has received written notice from any Lender, the Agent or any Loan Party, at least one Business Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions contained in Article 6 shall not then be satisfied, then, subject to the terms and conditions hereof, the L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the Borrower or enter into the applicable amendment, as the case may be, in each case in accordance with the L/C Issuer’s usual and customary business practices. Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the L/C Issuer a risk participation in such Letter of Credit in an amount equal to the product of such Lender’s Pro Rata Share times the amount of such Letter of Credit.
          (c) Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the L/C Issuer will also deliver to the Borrower and the Agent a true and complete copy of such Letter of Credit or amendment.
     2.6 Drawings and Reimbursements; Funding of Participations.
          (a) Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the L/C Issuer shall notify the Borrower and the Agent thereof. Not later than 4:00 p.m., Mumbai time on the date of any payment by the L/C Issuer under a Letter of Credit (each such date, an “Honor Date”), the Borrower shall reimburse the L/C Issuer through the Agent in an amount equal to the amount of such drawing. If the Borrower fails to so reimburse the L/C Issuer by such time, the Agent shall promptly notify each Lender of the Honor Date, the amount of the

- 6 -


 

unreimbursed drawing (the “Unreimbursed Amount”), and the amount of such Lender’s Pro Rata Share thereof. In such event, the Borrower shall be deemed to have requested a Prime Lending Rate Loan to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified herein for the principal amount of Loans, but subject to the amount of the unutilized portion of the aggregate Commitments and the conditions set forth in Article 6 (other than the delivery of a Loan Request). Any notice given by the L/C Issuer or the Agent pursuant to this Section 2.6(a) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.
          (b) Each Lender shall upon any notice pursuant to Section 2.6(a) make funds available to the Agent for the account of the L/C Issuer at the Agent’s principal office in an amount equal to its Pro Rata Share of the Unreimbursed Amount not later than 1:00 p.m., Mumbai time on the Business Day specified in such notice by the Agent, whereupon, subject to the provisions of Section 2.6(c), each Lender that so makes funds available shall be deemed to have made a Prime Lending Rate Loan to the Borrower in such amount. The Agent shall remit the funds so received to the L/C Issuer.
          (c) With respect to any Unreimbursed Amount that is not fully refinanced by a borrowing of Prime Lending Rate Loans as provided in Section 2.6(a) because the conditions set forth in Article 6 cannot be satisfied or for any other reason, the Borrower shall be deemed to have incurred from the L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate. In such event, each Lender’s payment to the Agent for the account of the L/C Issuer pursuant to Section 2.6(b) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Lender in satisfaction of its participation obligation under this Section 2.6.
          (d) Until each Lender funds its Loan or L/C Advance pursuant to this Section 2.6 to reimburse the L/C Issuer for any amount drawn under any Letter of Credit, interest in respect of such Lender’s Pro Rata Share of such amount shall be solely for the account of the L/C Issuer.
          (e) Each Lender’s obligation to make Loans or L/C Advances to reimburse the L/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.6, shall be absolute and unconditional and shall not be affected by any circumstance, including (i) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the L/C Issuer, the Borrower or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default, or (iii) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Lender’s obligation to make Loans pursuant to this Section 2.6 is subject to the conditions set forth in Article 6 (other than delivery by the Borrower of a Loan Request). No such making of an L/C Advance shall relieve or otherwise impair the obligation of the Borrower to reimburse the L/C Issuer for the amount of any payment

- 7 -


 

made by the L/C Issuer under any Letter of Credit, together with interest as provided herein.
          (f) If any Lender fails to make available to the Agent for the account of the L/C Issuer any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.6 by the time specified in Section 2.6(b), the L/C Issuer shall be entitled to recover from such Lender (acting through the Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the L/C Issuer at a rate per annum equal to the greater of the Prime Lending Rate and a rate determined by the L/C Issuer in accordance with banking industry rules on interbank compensation. A certificate of the L/C Issuer submitted to any Lender (through the Agent) with respect to any amounts owing under this Section 2.6(f) shall be conclusive absent manifest error.
     2.7 Repayment of Participations.
          (a) At any time after the L/C Issuer has made a payment under any Letter of Credit and has received from any Lender such Lender’s L/C Advance in respect of such payment in accordance with Section 2.6, if the Agent receives for the account of the L/C Issuer any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Borrower or otherwise, including proceeds of Cash Collateral applied thereto by the Agent), the Agent will distribute to such Lender its Pro Rata Share thereof (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s L/C Advance was outstanding) in the same funds as those received by the Agent.
          (b) If any payment received by the Agent for the account of the L/C Issuer pursuant to Section 2.6(a) is required to be returned under any circumstances (including pursuant to any settlement entered into by the L/C Issuer in its discretion), each Lender shall pay to the Agent for the account of the L/C Issuer its Pro Rata Share thereof on demand of the Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the Prime Lending Rate from time to time in effect. The obligations of the Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.
     2.8 Obligations Absolute. The obligation of the Borrower to reimburse the L/C Issuer for each drawing under each Letter of Credit and to repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:
          (a) any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other Loan Document;
          (b) the existence of any claim, counterclaim, setoff, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such

- 8 -


 

transferee may be acting), the L/C Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;
          (c) any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;
          (d) any payment by the L/C Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the L/C Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law; or
          (e) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower.
The Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the Borrower’s instructions or other irregularity, the Borrower will immediately notify the L/C Issuer. The Borrower shall be conclusively deemed to have waived any such claim against the L/C Issuer and its correspondents unless such notice is given as aforesaid.
     2.9 Role of L/C Issuer. Each Lender, the Borrower Agent and the Borrower agree that, in paying any drawing under a Letter of Credit, the L/C Issuer shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. None of the L/C Issuer, the Agent, any of their respective Affiliates, directors, officers, employees, advisers and agents (collectively the “Related Parties”) nor any correspondent, participant or assignee of the L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Issuer Document. The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Borrower pursuing such rights and remedies as they may have against the beneficiary or transferee at law or under any other agreement. None of the L/C Issuer, the Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the

- 9 -


 

L/C Issuer shall be liable or responsible for any of the matters described in Sections 2.8(a) through 2.8(e); provided, however, that anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against the L/C Issuer, and the L/C Issuer may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower which the Borrower proves were caused by the L/C Issuer’s willful misconduct or gross negligence or the L/C Issuer’s willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit. In furtherance and not in limitation of the foregoing, the L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and the L/C Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.
     2.10 Cash Collateral. Upon the request of the Agent, (i) if the L/C Issuer has honored any full or partial drawing request under any Letter of Credit and such drawing has resulted in an L/C Borrowing, or (ii) if, as of the Letter of Credit Expiration Date, any L/C Obligation for any reason remains outstanding, the Borrower shall, in each case, immediately Cash Collateralize the then aggregate outstanding amount of all L/C Obligations. For purposes of this Section 2.10, “Cash Collateralize” shall mean to pledge and deposit with or deliver to the Agent, for the benefit of the L/C Issuer and the Lenders, as collateral for the L/C Obligations, cash or deposit account balances (“Cash Collateral”) pursuant to documentation in form and substance satisfactory to the Agent and the L/C Issuer (which documents are hereby consented to by the Lenders). Derivatives of such term have corresponding meanings. The Borrower hereby grants to the Agent, for the benefit of the L/C Issuer and the Lenders, a security interest in all such cash, deposit accounts and all balances therein and all proceeds of the foregoing. Cash Collateral shall be maintained in a blocked Cash Collateral Account at Bank of America.
     2.11 Applicability of ISP. Unless otherwise expressly agreed by the L/C Issuer and the Borrower when a Letter of Credit is issued (including any such agreement applicable to an Existing Letter of Credit), the rules of the ISP shall apply to each standby Letter of Credit.
     2.12 Letter of Credit Fees. The Borrower shall pay to the Agent for the account of each Lender fees with respect to the Letters of Credit in accordance with the terms and conditions of Section 5.1(c) (the “Letter of Credit Fee”). Letter of Credit Fees shall be (i) computed on a quarterly basis in arrears and (ii) due and payable on the first Business Day after the end of each fiscal quarter of the Borrower Agent, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand. Notwithstanding anything to the contrary contained herein, upon the request of the Required Lenders, while any Event of Default exists, all Letter of Credit Fees shall accrue at the Default Rate.

- 10 -


 

     2.13 Conflict with Issuer Documents. In the event of any conflict between the terms hereof and the terms of any Issuer Document, the terms hereof shall control.
     2.14 Letters of Credit Issued for Affiliates. Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, an Affiliate of the Borrower, the Borrower shall be obligated to reimburse the L/C Issuer hereunder for any and all drawings under such Letter of Credit. The Borrower hereby acknowledges that the issuance of Letters of Credit for the account of any such Affiliates inures to the benefit of the Borrower, and that the Borrower’s business derives substantial benefits from the businesses of such Affiliates.
     2.15 Letter of Credit Amounts. Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the stated amount of such Letter of Credit in effect at such time; provided, however, that with respect to any Letter of Credit that, by its terms or the terms of any Issuer Document related thereto, provides for one or more automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.
     2.16 Indemnity. The Borrower shall immediately on demand indemnify the L/C Issuer against any cost, loss or liability incurred by the L/C Issuer (other than by reason of the L/C Issuer’s gross negligence or willful misconduct) in acting as L/C Issuer under any Letter of Credit requested by the Borrower.
ARTICLE 3
CURRENCY
     3.1 Currency and Amount. The amounts of all Commitments, Loans, L/C Obligations and other monetary obligations hereunder shall be measured in the Base Currency. The Loans shall be funded in the Funding Currency and such Loans, together with any interest or fees related thereto shall be repaid in the Funding Currency. Letters of Credit shall be issued in the Funding Currency and all L/C Obligations with respect thereto shall be paid in the Funding Currency.
     3.2 [Intentionally Omitted.]
     3.3 Translation Calculations. (a) No later than 11:00 a.m., Mumbai time, on the last day of each month that is a Business Day (each a “Calculation Date”), the Agent will determine the Exchange Rate as of such Calculation Date with respect to the Funding Currency and the Agent shall give written notice thereof to the Lenders and the Borrower Agent. The Exchange Rate so determined shall become effective as of the first Business Day immediately following the relevant Calculation Date (a “Reset Date”), and shall remain effective until the next succeeding Reset Date, and shall for all purposes of this Agreement be the Exchange Rates employed in converting any amounts between the Base Currency and the Funding Currency.

- 11 -


 

          (b) Not later than 4:00 p.m., Mumbai time, on each Reset Date and on each date on which Revolving Loans are made or continued or Letters of Credit are issued or amended, the Agent shall determine the aggregate unpaid principal balance of all Revolving Loans outstanding plus the aggregate undrawn amount under all outstanding Letters of Credit in the equivalent of the Base Currency.
          (c) In the event the aggregate unpaid principal balance of all Revolving Loans plus the aggregate undrawn amount under all outstanding Letters of Credit (calculated in accordance with this Section 3.3) exceeds the aggregate Revolving Credit Commitments, the Agent will promptly notify the Borrower Agent. The Borrower (and the Borrower Agent on behalf of the Borrower) shall not be entitled to make any further Loan Requests (other than with respect to continuations of outstanding Loans) and the Lenders will have no obligation to make any Loans (other than the continuations of outstanding Loans), for so long as such condition is continuing.
          (d) Without limiting Section 3.3(c), in the event the amount by which the aggregate unpaid principal balance of all Revolving Loans plus the aggregate undrawn amount under all outstanding Letters of Credit (calculated in accordance with this Section 3.3) exceeds the Revolving Commitments, is greater than One Million Dollars ($1,000,000), the Borrower shall, not later than the next Business Day following receipt of the notice provided in accordance with Section 3.3(b), and without any further demand or notice, pay principal under its Revolving Notes in the amount by which such amount exceeds One Million Dollars ($1,000,000).
     3.4 Agent’s Calculations. All calculations made by the Agent pursuant to this Article 3 will take into account any repayment, prepayment, consolidation or division of Loans to be made on the date of such calculations, and will be presumptively correct absent manifest error.
     3.5 Currency Indemnity.
          (a) If any sum due from an Obligor under the Loan Documents (a “Sum”), or any order, judgment or award given or made in relation to a Sum, has to be converted from the currency (the “First Currency”) in which that Sum is payable into another currency (the “Second Currency”) for the purpose of:
               (i) making or filing a claim or proof against that Obligor; or
               (ii) obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,
that Obligor shall as an independent obligation, within three Business Days of demand, indemnify each of the Agent or any Lender to whom that Sum is due against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between (A) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (B) the rate or rates of exchange available to that person at the time of its receipt of that Sum; provided, however that the above indemnity with respect

- 12 -


 

to the Agent or any Lender, shall not apply to the extent that any cost, loss or liability arises from the gross negligence or willful misconduct of the Agent or such Lender in making such currency conversion.
          (b) Each Obligor waives any right it may have in any jurisdiction to pay any amount under the Loan Documents in a currency or currency unit other than that in which it is expressed to be payable.
     3.6 Currency of Account.
          (a) Subject to paragraphs (b) through (e) below, the Base Currency is the currency of account and payment for any sum due from an Obligor under any Loan Document.
          (b) A repayment of a Loan or Sum or a part of a Loan or Sum shall be made in the currency in which that Loan or Sum is denominated on its due date.
          (c) Each payment of interest shall be made in the currency in which the sum in respect of which the interest is payable was denominated when that interest accrued.
          (d) Each payment in respect of costs, expenses or any taxes shall be made in the currency in which the costs, expenses or such taxes are incurred.
          (e) Any amount expressed to be payable in a currency other than the Base Currency shall be paid in that other currency.
     3.7 Change of Currency.
          (a) Unless otherwise prohibited by law, if more than one currency or currency unit are at the same time recognized by the central bank of any country as the lawful currency of that country, then:
               (i) any reference in the Loan Documents to, and any obligations arising under the Loan Documents in, the currency of that country shall be translated into, or paid in, the currency or currency unit of that country designated by the Agent; and
               (ii) any translation from one currency or currency unit to another shall be at the official rate of exchange recognized by the central bank of such country for the conversion of that currency or currency unit into the other, rounded up or down by the Agent.
          (b) If a change in any currency of a country occurs, this Agreement will, to the extent the Agent specifies to be necessary, be amended to comply with any generally accepted conventions and market practice in the Relevant Interbank Market and otherwise to reflect the change in currency.

- 13 -


 

ARTICLE 4
DISBURSEMENTS; INTEREST; PAYMENTS
     4.1 Types of Loans. The Loans made on each Disbursement Date may, subject to the terms and conditions of this Agreement, be Prime Lending Rate Loans or MIBOR Rate Loans (each being referred to as a “type” of Loan) as specified in the applicable Loan Request given by the Borrower or the Borrower Agent in accordance with Section 4.8 hereof.
     4.2 Loan Disbursement Procedures.
          (a) Loans shall be disbursed by the Agent upon request by the Borrower or the Borrower Agent on behalf of the Borrower from time to time on or after the Closing Date, in such amounts as provided in Section 4.7 below, subject to the limitations on the Lenders’ obligations to make Loans as set forth in Section 2.1 above. Subject to the terms of this Agreement, the Borrower may borrow, repay and re-borrow Loans at any time prior to the Revolving Credit Termination Date.
          (b) Each Loan Request shall be delivered to the Agent in writing or by telex or facsimile transmission in the manner provided in Section 13.1 hereof, or as otherwise agreed by the Agent, in the manner and within the time periods set forth in Section 4.8. The Agent may rely and act upon any such Loan Request which is received from the Borrower Agent or any other person believed by the Agent in good faith to be authorized to make such request on behalf of the Borrower. The Agent shall record in its records all Loans made by the Lenders to the Borrower pursuant to this Agreement and all payments made on the Loans.
     4.3 Interest.
          (a) The Borrower shall pay to the Agent for the Pro Rata benefit of the Lenders interest on the unpaid principal amount of each Revolving Loan at the following rates per annum:
               (i) Floating Rate Option. During any period while such Loan is a Prime Lending Rate Loan, a rate per annum equal to the Prime Lending Rate (as in effect from time to time) plus the Applicable Margin, in effect from time to time. The rate of interest applicable to Prime Lending Rate Loans shall change as and when the Prime Lending Rate changes.
               (ii) Fixed Rate Option. The Borrower may elect, in accordance with Section 4.8 hereof, to have a specified portion of the Revolving Loan bear interest from time to time at a fixed rate per annum equal to the MIBOR Rate for the applicable Interest Period plus the Applicable Margin in effect on the Disbursement Date, the date of conversion or the date of continuation, as applicable, as adjusted as provided in this Agreement. The interest rate (other than adjustments to the Applicable

- 14 -


 

Margin as provided herein) with respect to any MIBOR Rate Loan shall not change during any Interest Period.
          (b) Notwithstanding the provisions of Section 4.3(a) above, the Borrower shall pay interest at the Default Rate on any principal of any Loan and on any interest or other amount payable by the Borrower hereunder or under the Revolving Notes (i) that is not paid in full when due (whether at maturity, by acceleration or otherwise), for the period commencing on and including the due date thereof until the same is paid in full and (ii) upon and during the continuance of any failure to comply with or violation of any of the financial covenants set forth in Article 9 of this Agreement as shown on and as of the last day of a fiscal quarter as reflected on any Compliance Certificate.
Accrued interest on each Loan shall be payable on the last day of each calendar month; provided that interest payable at the Default Rate shall be payable, to the extent applicable, from time to time on demand of the Agent.
          (c) The Agent shall, as part of its interest statements, notify the Borrower Agent of any change in the Prime Lending Rate or the MIBOR Rates in effect and shall, on the request of the Borrower Agent at any time, notify the Borrower Agent of the MIBOR Rates then in effect.
          (d) In the event that the Borrower or the Borrower Agent on behalf of the Borrower fails to select the type of Loan or the duration of any Interest Period for any MIBOR Rate Loan within the time period and otherwise as provided in Section 4.8, such Loan (if outstanding as a MIBOR Rate Loan) will be automatically converted into a Prime Lending Rate Loan on the last day of the then current Interest Period for such Loan or (if outstanding as a Prime Lending Rate Loan) will remain as, or will be made as, a Prime Lending Rate Loan.
          (e) The amount of all interest and fees hereunder shall be computed for the actual number of days elapsed on the basis of a year consisting of three hundred sixty five (365) days. Interest on any Loan shall be computed for the period commencing on and including the date of such Loan to but excluding the date such Loan is paid in full; provided, however, that if a Loan is repaid on the same day on which it is made, such day shall be included in computing interest on such Loan.
     4.4 Optional and Mandatory Payments. The Borrower shall have the right to prepay the Loans in whole or in part at any time without premium or penalty, subject to giving the Agent prior notice in accordance with the provisions of Section 4.8 hereof, provided that (i) each such partial prepayment shall be in the aggregate principal amount of not less than Five Hundred Thousand Dollars ($500,000) or the equivalent amount in the Funding Currency calculated in accordance with the Exchange Rate, and (ii) if any prepayment is made on any day other than the last day of the Interest Period therefor, it may be prepaid only upon three (3) Business Days prior notice to Agent and the Borrower shall pay to the Agent any applicable fees and amounts described in Section 5.2(a) below. Amounts prepaid in respect of Loans under this Section 4.4 may be re-

- 15 -


 

borrowed subject to the terms and conditions hereof. The Borrower shall make mandatory principal payments on the Loans as provided in Section 2.1(b), Section 2.2 and Section 3.3(d) above.
     4.5 Payments. (a) Except as otherwise provided herein and subject to Section 4.8 below, all payments of principal, interest, Fees, taxes, charges, expenses and other items payable by the Borrower hereunder and under the Revolving Notes shall be made in the Funding Currency but shall be calculated by the Agent in Dollars and shall be credited on the date of receipt by the Agent for the Pro Rata benefit of the Lenders if received by the Agent at its principal office in Mumbai, in immediately available funds, prior to 4:00 p.m., Mumbai time, on a Business Day. Payments made in funds which are not immediately available shall be credited only when the funds are collected by the Agent, and payments received (whether from the Borrower in immediately available funds or through the collection of funds which were not immediately available at the time payment was tendered by the Borrower) after 4:00 p.m. (Mumbai time) will be credited on the next Business Day. The Agent reserves the right to apply all payments received by it from the Borrower and designated or authorized to be applied to the Revolving Notes first to any Fees and other charges then due to the Agent or the Lenders, then to accrued interest on such Revolving Notes for the benefit of the Lenders on a Pro Rata basis and then to reduction of the principal balance of such Revolving Notes for the benefit of the Lenders on a Pro Rata basis, or such other order as the Agent may determine in its sole discretion. The Agent shall also record in its records, in accordance with customary accounting practice, all interest, Fees, taxes, charges, expenses and other items properly chargeable to the Borrower with respect to the Loans, all payments received by the Agent for application to the Obligations, and all other appropriate debits and credits. The Agent’s records shall constitute prima facie evidence of the amount of Obligations outstanding from time to time. All payments received by the Agent shall be distributed by Agent in accordance with this Section 4.5, subject to the rights of offset that Agent may have as to amounts otherwise to be remitted to a particular Lender by reason of amounts due to the Agent from such Lender under any of the Loan Documents.
(b) (i) Each Obligor shall make all payments by it required hereunder or under any other Loan Document without any Tax Deduction, unless a Tax Deduction is required by law.
(ii) The Borrower Agent shall promptly, upon any Obligor becoming aware that an Obligor has had or will have to make a Tax Deduction (or that there has been or will be a change in the rate at which or the basis on which any Tax Deduction has to be made), notify the Agent accordingly. Similarly, a Lender shall notify the Agent upon becoming so aware in respect of a payment payable to that Lender. If the Agent receives such notification from a Lender it shall notify the Borrower Agent and the applicable Obligor.
(iii) If a Tax Deduction is required by law to be made by an Obligor, the amount of the payment in respect of which the Tax Deduction is required to be made shall be increased to the amount which (after making any Tax Deduction)

- 16 -


 

will leave an amount equal to the payment which would have been due if no Tax Deduction had been required.
     4.6 Status of Lenders. Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is a resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall deliver to the Borrower Agent (with a copy to the Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower Agent or the Agent, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if requested by the Borrower Agent or the Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower Agent or the Agent as will enable the Borrower or the Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements.
Without limiting the generality of the foregoing, in the event that the Borrower is resident for tax purposes in the United States, any Foreign Lender shall deliver to the Borrower and the Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:
     (i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party,
     (ii) duly completed copies of Internal Revenue Service Form W-8ECI,
     (iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code and (y) duly completed copies of Internal Revenue Service Form W-8BEN, or
     (iv) any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower Agent to determine the withholding or deduction required to be made.
     4.7 Minimum Amounts. Each borrowing of, or conversion into, any Prime Lending Rate Loan shall be in an amount in the Funding Currency equal to at least One

- 17 -


 

Hundred Thousand Dollars ($100,000) or a multiple of One Hundred Thousand Dollars ($100,000) in excess thereof, and each borrowing of, conversion into, or continuation of, a MIBOR Rate Loan shall be in an amount in the Funding Currency equal to at least Five Hundred Thousand Dollars ($500,000) or a multiple of One Hundred Thousand Dollars ($100,000) in excess thereof, in each case calculated in accordance with the Exchange Rate; provided that fluctuations in the unpaid principal balance of any MIBOR Rate Loan resulting from the translation calculations set forth in Section 3.3 shall not affect the Borrower’s ability to request a continuation of a MIBOR Rate Loan as a result of it not meeting the minimum amount or multiple amount requirements of this Section 4.7.
     4.8 Certain Requests and Notices. (a) The Borrower or the Borrower Agent on behalf of the Borrower will request borrowings and give notice to the Agent of all terminations or reductions of the Commitment or conversions, continuations and prepayments of Loans and duration of Interest Periods substantially in the form of Exhibits 4.8-A and 4.8-B hereto, as applicable (each a “Loan Request”). Each such notice shall be irrevocable and shall be effective only if received by the Agent not later than 11:00 a.m. Mumbai time (i) on the Business Day prior to the effective date of the requested termination or reduction of the Commitment, (ii) on the same day if it is a notice of a borrowing or prepayment of a Prime Lending Rate Loan (except that if such date is not a Business Day, then on the next Business Day), or (ii) three (3) Business Days prior to the requested effective date for a borrowing or prepayment of, conversion into or continuation of a MIBOR Rate Loan or any selection of an Interest Period for a MIBOR Rate Loan. Any such Loan Request for a borrowing of, conversion into or continuation of a MIBOR Rate Loan shall specify, (i) the amount of principal which shall comprise the MIBOR Rate Loan, (ii) the date on which the rate is to become effective, and (iii) the Interest Period for such MIBOR Rate Loan. For purposes of calculating the number of Business Days, the date the notice is received shall be included if received not later than 11:00 a.m. Mumbai time and excluded if received after 11:00 a.m. Mumbai time.
          (b) Fundings by Lenders. Subject to its receipt of notice from Agent of a Loan Request for a borrowing as provided in Section 4.8(a) (except in the case of a deemed request by the Borrower for a Revolving Loan as provided herein, in which event no Notice of Borrowing need be submitted), each Lender shall timely honor its Revolving Credit Commitment by funding its Pro Rata share of each Revolving Loan that is properly requested by the Borrower or the Borrower Agent on behalf of the Borrower and that the Borrower is entitled to receive under this Agreement. Agent shall endeavor to notify Lenders of each Loan Request (or deemed request for a Borrowing), by 1:00 p.m. Mumbai time on the proposed funding date (in the case of Prime Lending Rate Loans) or by 3:00 p.m. Mumbai time at least 2 Business Days before the proposed funding date (in the case of MIBOR Rate Loans). Each Lender shall deposit with Agent an amount equal to its Pro Rata share of the Revolving Loan requested or deemed requested by the Borrower at Agent’s designated bank in immediately available funds not later than 2:00 p.m. Mumbai time on the date of funding of such Revolving Loan, unless Agent’s notice to the Lenders is received after 1:00 p.m. Mumbai time on the proposed funding date of a Prime Lending Rate Loan, in which event the Lenders shall deposit with Agent their respective Pro Rata shares of the requested Revolving Loan on or before

- 18 -


 

11:00 a.m. Mumbai time on the next Business Day. Subject to its receipt of such amounts from the Lenders, Agent shall make the proceeds of the Revolving Loans received by it available to the Borrower by disbursing such proceeds in accordance with the Borrower’s or Borrower Agent’s disbursement instructions set forth in the applicable Loan Request. Neither Agent nor any Lender shall have any liability on account of any delay by any bank or other depository institution in treating the proceeds of any Revolving Loan as collected funds or any delay in receipt, or any loss, of funds that constitute a Revolving Loan, the wire transfer of which was initiated by Agent in accordance with wiring instructions provided to Agent. Unless Agent shall have been notified in writing by a Lender prior to the proposed time of funding that such Lender does not intend to deposit with Agent an amount equal such Lender’s Pro Rata share of the requested Revolving Loan (or deemed request), Agent may assume that such Lender has deposited or promptly will deposit its share with Agent and Agent may in its discretion disburse a corresponding amount to the Borrower on the applicable funding date. If a Lender’s Pro Rata share of such Revolving Loan is not in fact deposited with Agent, then, if Agent has disbursed to the Borrower an amount corresponding to such share, then such Lender agrees to pay, and in addition the Borrower agrees to repay, to Agent forthwith on demand such corresponding amount, together with interest thereon, for each day from the date such amount is disbursed by Agent to or for the benefit of the Borrower until the date such amount is paid or repaid to Agent, (a) in the case of the Borrower, at the interest rate applicable to such Revolving Loan and (b) in the case of such Lender, at the Prime Lending Rate. If such Lender repays to Agent such corresponding amount, such amount so repaid shall constitute a Revolving Loan, and if both such Lender and the Borrower shall have repaid such corresponding amount, Agent shall promptly return to the Borrower such corresponding amount in same day funds. A notice from Agent submitted to any Lender with respect to amounts owing under this Section 4.8(b) shall be conclusive, absent manifest error.
     4.9 Borrower Agent. The Borrower hereby irrevocably appoints Euronet Worldwide, Inc. and Euronet Worldwide, Inc. agrees to act under this Agreement, as the agent and representative of the Borrower for all purposes under this Agreement (in such capacity, “Borrower Agent”), including requesting Revolving Loans, selecting whether any Loan is to be a Prime Lending Rate Loan or a MIBOR Rate Loan, and receiving account statements and other notices and communications to the Borrower from Agent. Agent may rely, and shall be fully protected in relying, on any Loan Request, disbursement instructions, reports, information, or any other notice or communication made or given by Borrower Agent, either in its own name or on behalf of the Borrower, and Agent shall have no obligation to make any inquiry or request any confirmation from or on behalf of the Borrower as to the binding effect on the Borrower of any such Loan Request, instruction, report, information, or other notice or communication; provided that the provisions of this Section 4.9 shall not be construed so as to preclude the Borrower from directly requesting Borrowings or taking other actions permitted to be taken by “the Borrower” hereunder.

- 19 -


 

ARTICLE 5
FEES; COLLATERAL
     5.1 Fees.
          (a) [Intentionally Omitted.]
          (b) Unused Commitment Fees. The Borrower shall pay to the Agent an unused commitment fee equal to (i) the average daily unused portion of the aggregate Revolving Credit Commitments under the Credit Agreement, computed on the last day of each fiscal quarter of the Borrower Agent, based upon the daily utilization for such fiscal quarter as calculated by the Agent, times (ii) a rate per annum equal to the Applicable Margin calculated for the applicable quarterly or other period. Such unused commitment fee shall accrue from the Original Closing Date to the Revolving Credit Termination Date, and shall be due and payable quarterly in arrears on the last Business Day of each fiscal quarter of the Borrower, commencing on April 30, 2006, with the final payment to be made on the Revolving Credit Termination Date. The unused commitment fees provided for in this subsection shall accrue at all times after the Closing Date, including any time during which one or more of the conditions in Article 6 are not met.
          (c) Letter of Credit Fees. The Borrower agrees to pay to the Agent a fee in an amount equal to (i) the undrawn amount of all outstanding Letters of Credit, times (ii) a rate per annum equal to the Applicable Margin calculated for the applicable quarterly or other period.
     5.2 Additional MIBOR Rate Loan Costs.
          (a) The Borrower shall pay to the Agent for the benefit of the Lenders from time to time, upon request of the Agent, an administrative fee of Three Hundred Dollars ($300) plus such amounts as the Agent may determine to be necessary to compensate the Lenders for any loss, cost or expense which the Lenders incur (including, without limitation, any loss, cost or expense incurred by reason of the liquidation or re-employment of deposits, but excluding loss of anticipated profits) that is attributable to (A) any payment, prepayment or conversion of a MIBOR Rate Loan made by the Borrower for any reason on a date other than the last day of an Interest Period for such Loan or (B) any failure by the Borrower for any reason (including, without limitation, the failure of any condition specified in Article 6 hereof to be satisfied) to borrow, continue or convert a MIBOR Rate Loan on the date therefor specified in the request for borrowing or notice given pursuant to Section 4.8 hereof. Such compensation may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of the applicable Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by the

- 20 -


 

Agent) which would have accrued to the Lenders on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Rupee market. The covenants of the Borrower set forth in this Section 5.2 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. The Agent will notify the Borrower Agent of any event which will entitle the Agent or the Lenders to compensation pursuant to this Section 5.2 as promptly as practicable after the Agent determines to require such compensation and will furnish the Borrower Agent with a certificate setting forth in reasonable detail the basis and amount of such compensation.
          (b) Determinations by the Agent of the effect of any Regulatory Change (i) on its rate of return, (ii) on its cost of maintaining the MIBOR Rate Loans, (iii) on its obligation to make MIBOR Rate Loans or (iv) on amounts receivable by it in respect of the MIBOR Rate Loans and determinations of the amounts required to compensate the Agent or the Lenders under this Section 5.2 shall be conclusive, provided that such determinations are made on a reasonable basis and are set forth in reasonable detail in the certificates referred to in Section 5.2(a) above.
          (c) Anything herein to the contrary notwithstanding, if it becomes unlawful for the Agent or any Lender to honor its obligation to make or maintain MIBOR Rate Loans hereunder or if, on or prior to the determination of any MIBOR Rate for any Interest Period, the Agent determines (which determination shall be conclusive) that quotations of interest rates for the relevant deposits referred to in the definition of “MIBOR Rate” in Exhibit 1 hereto are not being provided in the relevant amounts or for the relevant maturities for purposes of determining rates of interest for MIBOR Rate Loans, then the Agent shall give the Borrower Agent prompt notice thereof, and, so long as such condition remains in effect, the Agent and the Lenders shall be under no obligation to make additional MIBOR Rate Loans, to continue MIBOR Rate Loans or to convert Prime Lending Rate Loans into MIBOR Rate Loans, and the Borrower shall, on the last day(s) of the then current Interest Period(s) for the outstanding MIBOR Rate Loans, either prepay such Loans or convert such Loans into Prime Lending Rate Loans.
     5.3 Reserve Costs. If, by reason of (i) any change in the law or in its interpretation or administration and/or (ii) compliance with any request from or requirement of the Reserve Bank of India (for increasing the capital adequacy costs) or other fiscal, monetary or other authority (including, without limitation, a request or requirement which affects the manner in which a Lender or any affiliate allocates capital resources to any Lender’s obligations hereunder) and/or (iii) unavailability of funding and/or (iv) capital adequacy charge and/or funding losses:
          (a) the Agent or any Lender or any affiliate incurs a cost as a result of such person having entered into and/or performing its obligation under this Agreement and/or assuming or maintaining the Commitment under this Agreement and/or in making any Loan or extending any Commitment hereunder;

- 21 -


 

          (b) the Agent or any Lender or any affiliate is unable to obtain the rate of return on its overall capital which it would have been able to obtain but for such person having entered into this Agreement and/or performing its obligations hereunder and/or assuming or maintaining the Commitment;
          (c) there is any increase in the cost to the Agent, any Lender or its affiliate of funding or maintaining all or any of its participation in any Commitment hereunder; or
          (d) the Agent or any Lender or any of its affiliate becomes liable to make any payment on account of tax or otherwise on or calculated by reference to the amount of the Commitment or any Loan extended by the such person hereunder,
then the Borrower shall, from time to time on demand by the Agent, promptly pay to the Agent for the benefit of any person making a claim under this Section 5.3, such amounts as are sufficient to indemnify the Agent, any Lender or any of its affiliate against, as the case may be, (i) such additional cost (ii) such reduction in rate of return, (iii) such increased cost, or (iv) such liability. Neither the Agent nor any Lender nor any of their affiliates shall be under any obligation to disclose information, which it reasonably considers to be confidential in connection with its demand under this clause.
     5.4 Notice of Increased Costs. If a Lender intends to make any claim or demand pursuant to Section 5.3 above, it shall notify the Borrower or the Borrower Agent of the reason thereof in writing.
ARTICLE 6
CONDITIONS TO MAKING LOANS
     The Lenders’ obligation hereunder to make the Loans, extend credit and enter into transactions referred to in Article 3 shall be subject to the satisfaction of the following conditions and, in the case of the conditions set forth in Sections 6.4, 6.5, 6.7, 6.8 and 6.9, as of each Disbursement Date and, in the case of the conditions set forth in Sections 6.4, 6.7, 6.8 and 6.9, as of each date a Letter of Credit is issued, renewed or extended.
     6.1 Delivery of Loan Documents. The Borrower and the Borrower Agent shall have executed and delivered to the Agent, as applicable, this Agreement, the Note and the Guaranty Agreement to which the Borrower Agent is a party, all of which shall be in form and substance satisfactory to the Agent and its counsel. The US Borrowers shall have executed and delivered to Bank of America Amendment No. 8 to the US Credit Agreement and shall have satisfied any other conditions required for the effectiveness of such Amendment. The Euro Borrowers shall have executed and delivered to Bank of America Amendment No. 9 to the Euro Credit Agreement and shall have satisfied any other conditions required for the effectiveness of such Amendment.

- 22 -


 

     6.2 Proper Proceedings; Charter Documents. The Borrower shall have taken all corporate or company proceedings necessary to authorize the Loan Documents and the transactions contemplated hereby. The Borrower shall have delivered to the Agent certificates, dated the Closing Date and signed by its Secretary, Managing Director, Director or other responsible officer, satisfactory to the Agent, respecting such proceedings and the incumbency of the officers executing the Loan Documents. The Borrower shall have delivered to the Agent copies of its memorandum and articles of organization or association or other charter documents, including all amendments thereto, certified by the appropriate officer, and copies of its bylaws or other constitutional documents, including all amendments thereto, certified by the appropriate officer. The Agent shall have received satisfactory results to all company and other final searches in relation to the Borrower as the Agent may reasonably request.
     6.3 Legal Opinion. The Agent shall have received opinions from counsel to the Borrower, dated as of the Closing Date, in form and substance satisfactory to the Agent and its counsel.
     6.4 No Adverse Changes; Representations; No Default. Since the date hereof, there shall have been no material adverse change in the business, operations, financial condition or prospects of the Borrower or the Euronet Entities taken as a whole. The representations and warranties contained in Article 7 hereof shall be true and correct as though made on and as of the Closing Date or such Disbursement Date or such date of issuance, renewal or extension of a Letter of Credit, as the case may be, except that the representations and warranties set forth in the first sentence of Section 7.4(b), Section 7.7 and Section 7.8 (which relate to disclosure Schedules 7.4, 10.1 and 7.8) are not required by this Section 6.4 to be made as of any Disbursement Date or such date of issuance, renewal or extension of a Letter of Credit. No Default or Event of Default shall have occurred and be continuing. The Agent shall have received certifications of the Borrower Agent in form satisfactory to the Agent and dated the Closing Date or the date of the request for borrowing or for issuing, renewing or extending a Letter of Credit, as applicable, certifying as to each matter set forth in this Section 6.4, which certifications may be included in the Loan Request described in Section 4.8 hereof.
     6.5 Notice of Borrowing. Agent shall have received the Loan Request described in Section 4.8 hereof.
     6.6 [Intentionally Omitted.]
     6.7 No Material Impairment. The Agent shall have determined that the prospect of payment of the Loans has not been materially impaired.
     6.8 Required Consents and Approvals. All consents, approvals and authorizations of any Governmental Authority or any other Person necessary in connection with the execution and performance of the Loan Documents, the consummation of the transactions contemplated hereby or the making of the Loans hereunder shall have been obtained and shall be in full force and effect.

- 23 -


 

     6.9 Legality. The making of any Loan shall not subject the Agent or any Lender to any penalty or special tax, shall not be prohibited by any law or governmental order or regulations applicable to the Agent, any Lender or to the Borrower and shall not violate any voluntary credit restraint program of the executive branch of the government of the United States or any other Governmental Authority, and all necessary consents, approvals and authorizations of any Governmental Authority to or of such Loan shall have been obtained.
     6.10 General. All instruments and legal and corporate proceedings in connection with the transactions contemplated by this Agreement shall be satisfactory in form and substance to the Agent and its counsel, and the Agent shall have received copies of all other documents, including records of corporate proceedings and opinions of counsel, which the Agent may have requested in connection therewith, such documents where appropriate to be certified by proper corporate or governmental authorities, and such other conditions shall have been fulfilled as may have been requested by the Agent.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
     Each Borrower Party (except as specifically set forth herein) represents and warrants to the Agent and the Lenders that:
     7.1 Corporate Existence and Standing. Each Borrower Party is a corporation or company duly incorporated or organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization and has all requisite authority to own its property and to carry on its business in each jurisdiction where the failure to so qualify would have a material adverse effect on its business, properties, assets, operations or condition (financial or otherwise). Borrower Agent represents and warrants to the Agent and the Lenders that each Euronet Entity is an entity duly created, validly existing and in good standing under the laws of its jurisdiction of organization and has all requisite authority to own its property and to carry on its business in each jurisdiction where the failure to so qualify would have a material adverse effect on its business, properties, assets, operations or condition (financial or otherwise).
     7.2 Authorization and Validity. Each Borrower Party has the power and authority and legal right to execute and deliver the Loan Documents to which it is a party and to perform its obligations thereunder. Such execution and delivery have been duly authorized by proper proceedings, and the Loan Documents constitute the legal, valid and binding obligations of each Borrower Party, enforceable against each of them in accordance with their respective terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, receivership, liquidation, moratorium, and other similar laws affecting the rights and remedies of creditors generally and (ii) by general principles of equity (regardless of whether such enforcement is considered in equity or at law).
     7.3 No Conflict; Governmental Consent. The execution, delivery and performance of the Loan Documents will not violate any law, rule, regulation, order, writ,

- 24 -


 

judgment, injunction, decree or award binding on any Borrower Party, any provision of each Borrower Party’s respective articles or certificate of incorporation or organization, by-laws or other charter documents, or the provisions of any indenture, instrument or other written or oral agreement to which any Borrower Party is a party or is subject or by which any Borrower Party or any of its property is bound, or conflict therewith or constitute a default thereunder, or result in the creation or imposition of any Lien in, of or on any of its property pursuant to the terms of any such indenture, instrument or agreement. No order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, any Governmental Authority is required by or in respect of the Borrower to authorize or is required in connection with the execution, delivery and performance of or the enforceability of any of the Loan Documents.
     7.4 Compliance with Laws; Environmental and Safety Matters.
          (a) Each Borrower Party represents and warrants to the Agent and the Lenders that each Euronet Entity, has complied with all applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government or Governmental Authority having jurisdiction over the conduct of its businesses or the ownership of its respective properties except to the extent that such non-compliance will not have a material adverse effect on the financial condition or business operations of Borrower, on a consolidated basis or on the Euronet Entities on a consolidated basis.
          (b) Each Borrower Party has, except as disclosed in Schedule 7.4 hereto and to each Borrower Party’s actual knowledge, complied with all federal, national, state, local and other statutes, ordinances, orders, judgments, rulings and regulations relating to environmental pollution, environmental regulation or control, or employee health or safety, except to the extent that such non-compliance will not have a material adverse effect on the financial condition or business operations of the Borrower; no Borrower Party has received any written notice of any failure so to comply except as disclosed in Schedule 7.4 hereto; and no Borrower Party’s facilities treat, store or dispose of any hazardous wastes, hazardous substances, hazardous materials, toxic substances, toxic pollutants or substances (“Hazardous Materials”) similarly denominated, as those terms or similar terms are used in RCRA, CERCLA, the Hazardous Materials Transportation Act, the Toxic Substances Control Act, the Clean Air Act, the Clean Water Act, the Occupational Safety and Health Act or any other state, local or federal applicable law, ordinance, rule or regulation relating to environmental pollution, environmental regulation or control or employee health and safety applicable in the US or any other applicable jurisdiction, including without limitation, India (“Environmental Laws”) in a quantity or manner that requires a permit, registration, or another notification or authorization from a Governmental Authority except for the treatment, storage, or disposal of Hazardous Materials in a quantity or manner which, if in non-compliance with Environmental Laws, would not have a material adverse effect on the Borrower’s financial condition or business operations, taken as a whole, except as disclosed in Schedule 7.4 hereto. The conduct of the business and the condition of the property of the Borrower do not violate any Environmental Laws or any judicial interpretation thereof relating primarily to the environment or Hazardous Materials. The Borrower is not aware

- 25 -