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
(Registrants 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 issuers common stock, $0.02 par value, outstanding as of July 31, 2006
was 37,233,066 shares.
PART IFINANCIAL 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 Companys 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 Companys 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 Companys 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 Companys 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 Companys convertible
debentures, options to purchase the Companys 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 Companys 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 Companys 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 Euronets outsourcing and
software offerings to banks. Essentis is reported in the Companys Software Solutions Segment. The
Companys 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 Companys 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 Companys 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 Companys subsidiary in
India (Euronet India), increasing its share ownership of Euronet India to 100%. Euronet
India is included in the Companys EFT Processing Segment and, since the Companys
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 Europlanets financial position and results of operations.
Euronets $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 Companys 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 Companys money transfer and
bill payment business. |
|
|
|
|
In March 2005, to enhance the Companys 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 Telecoms
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. Euronets $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 ATXs 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 Companys 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 Companys 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 Companys U.S.
subsidiaries. |
|
|
|
|
A $10 million facility, to be drawn in Indian rupees, for use by the Companys 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 Companys 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 Companys 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 Companys
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 Companys 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 Companys business segments. During the second
quarter and first half of 2006 the Companys 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 Companys 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 Companys 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 Companys use of the vendors 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 buyers 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 Companys 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 Companys 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. MANAGEMENTS 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 Companys
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
segments 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 banks 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 PSRBs 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 associations 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 banks 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 PSRBs 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 operators 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 IIOTHER 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 Companys 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
Companys 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 Companys 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 Euronets Certificate of Incorporation.
The amendment of Euronets 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 Euronets auditors for the year ending December 31, 2006.
The appointment of KPMG as Euronets 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 Borrowers 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 Agents and each Borrowers 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 Lenders 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 Agents 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 Borrowers 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 Lenders Pro Rata Share of the aggregate amount of all L/C Obligations shall not
exceed such Lenders 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 Borrowers 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 Lenders 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 Issuers 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 Issuers 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 Lenders 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 Lenders 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 Agents 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 Lenders 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
Lenders Pro Rata Share of such amount shall be solely for the account of the L/C Issuer.
(e) Each Lenders 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 Lenders 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 Lenders 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
Lenders 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
Borrowers 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
Issuers willful misconduct or gross negligence or the L/C Issuers 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 Issuers
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 successors 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 Agents 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 successors 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 Lenders rights and/or obligations under this Agreement
(including all or a portion of its Commitment and/or the Loans (including such Lenders
participations in L/C Obligations) owing to it); provided that (i) such Lenders 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 Lenders
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 Lenders 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 Agents name and subject to Agents 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 Lenders 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 Agents 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
Borrowers 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 Agents and each Borrowers 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 Guarantors 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 Agents 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 Borrowers 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 Guarantors 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 Guarantors 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 Guarantors obligation to pay the full amount of the Guaranteed Obligations.
In the event the Agent shall bid at any foreclosure or trustees 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 Guarantors 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 Guarantors 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 Guarantors 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. Guarantors 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 Guarantors 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 Guarantors 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
Guarantors 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 AGENTS
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 Agents 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 Borrowers 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 Lenders 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 Lenders Pro Rata Share of the aggregate amount of all L/C Obligations shall not
exceed such Lenders 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 Borrowers 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 Lenders 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 Issuers 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 Issuers 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
Lenders 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 Lenders 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 Agents 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 Lenders 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
Lenders Pro Rata Share of such amount shall be solely for the account of the L/C Issuer.
(e) Each Lenders 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 Lenders 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 Lenders 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 Lenders 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 Borrowers 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
Issuers willful misconduct or gross negligence or the L/C Issuers 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 Borrowers 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 Issuers 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 Agents 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 Agents 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
Borrowers 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 Exhib