<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
EURONET SERVICES INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
EURONET SERVICES INC.
HORVAT U. 14-24
1027 BUDAPEST
HUNGARY
011-361-224-1000
CONSENT SOLICITATION STATEMENT
CONSENT OF STOCKHOLDERS IN LIEU OF ANNUAL MEETING
----------------
This Consent Solicitation Statement is being furnished to stockholders of
Euronet Services Inc., a Delaware corporation (the "Company"), in connection
with the solicitation of written consents by the Board of Directors of the
Company (the "Board") with respect to the matters set forth below. This
Consent Solicitation Statement is first being mailed to stockholders of the
Company on or about June 26, 1998.
In connection with this Consent Solicitation Statement, stockholders are
being asked:
1. To elect two persons to the Board, each to serve for a term of three
years;
2. To consider and vote upon a proposal to approve the Company's Stock
Option Plan, as adopted by the Company's Board on May 18, 1998; and
3. To consider and vote upon a proposal to ratify the Company's Long Term
Incentive Stock Option Plan originally adopted in December 1996.
The principal executive office of the Company is located at Horvat u. 14-24,
1027 Budapest, Hungary. The telephone number of the principal executive office
of the Company is 011-361-224-1000.
THE MATTERS DESCRIBED HEREIN ARE OF GREAT IMPORTANCE TO THE COMPANY.
ACCORDINGLY, STOCKHOLDERS ARE URGED TO READ AND TO CONSIDER CAREFULLY THE
INFORMATION CONTAINED IN THIS CONSENT SOLICITATION STATEMENT.
By Order of the Board of Directors
Jeffrey B. Newman
Secretary and General Counsel
The date of this Consent Solicitation Statement is June 26, 1998
<PAGE>
EURONET SERVICES INC.
HORVAT U. 14-24
1027 BUDAPEST
HUNGARY
011-361-224-1000
----------------
CONSENT SOLICITATION STATEMENT
----------------
GENERAL INFORMATION
This consent solicitation statement and the accompanying form of consent are
furnished in connection with the solicitation of stockholder consents by the
Board of Directors (the "Board") of Euronet Services Inc. (the "Company"), in
lieu of an annual meeting of stockholders, in connection with the matters set
forth herein. Only stockholders of record on the books of the Company at the
close of business on May 29, 1998 (the "Record Date") will be entitled to
submit a consent. It is anticipated that these consent solicitation materials
will be mailed to stockholders on or about June 26, 1998.
The Company is incorporated in the State of Delaware and is therefore
subject to the Delaware General Corporation Law (the "DGCL"). Section 228 of
the DGCL permits the stockholders of the Company to take action without a
meeting if consents in writing, setting forth the action so taken, are signed
by the holders of outstanding stock having not less than the minimum number of
votes that would be entitled to vote thereon were present and voted. The DGCL
also provides that the minimum necessary votes must be received by the Company
within 60 days of the Record Date. Accordingly, if, on or before July 28,
1998, the Company receives executed consents approving the matters set forth
herein from the holders of a majority of the issued and outstanding shares of
common stock, par value $0.02 (the "Common Stock"), and those consents have
not been revoked, the stockholders of the Company will be deemed to have
approved the matters set forth herein. On all matters, each share of Common
Stock is entitled to one vote.
All consents received by the Company, regardless of when dated, will expire
unless valid, written, unrevoked consents constituting the necessary vote for
approval of the matters set forth herein are received by the Company on or
before July 28, 1998.
The cost of soliciting consents will be borne by the Company. In addition to
solicitation by mail, officers, directors and other employees of the Company
may solicit consents by telephone, telegraph or personal contact without
additional compensation.
Consents in the accompanying form which are properly executed, duly returned
and not revoked, shall be voted in accordance with the instructions thereon.
If a consent is executed but no indication is made with respect to any one or
more particular matters contained in such consent as to what action is to be
taken, such consent shall be deemed to constitute a consent to each particular
matter contained thereon with respect to which no indication is made. A
consent executed by a stockholder may be revoked at any time provided that a
written, dated revocation is executed and delivered to the Company on or prior
to the time at which the Company receives written consents sufficient to
approve the matters set forth herein. A revocation may be in any written form
validly signed by the stockholder as long as it clearly states that the
consent previously given is no longer effective. The revocation should be sent
to the place fixed for receipt of consents. The unrevoked signed consents of
the holders of the Common Stock outstanding and entitled to consent as of the
Record Date, representing at least a majority of the number of votes which the
holders of the Common Stock would be entitled to vote in the aggregate at a
meeting at which all shares entitled to vote thereon were present and voted,
are necessary to effect the approval of the matters set forth herein.
As required by the DGCL, if the matters set forth herein are approved by the
holders of a majority of the Company's outstanding Common Stock, the Company
will promptly notify the stockholders from whom consent has not been received.
<PAGE>
ALL DIRECTORS AND OFFICERS, WHO OWN, IN THE AGGREGATE, APPROXIMATELY 27.5%
OF THE COMPANY'S OUTSTANDING COMMON STOCK, HAVE ADVISED THE COMPANY THAT THEY
PRESENTLY INTEND TO CONSENT TO THE MATTERS SET FORTH HEREIN. IF SUCH PERSONS
CONSENT AS INDICATED, THE MATTERS SET FORTH HEREIN WILL BE APPROVED IF HOLDERS
OF APPROXIMATELY 22.5% OF THE REMAINING SHARES OF THE COMPANY'S COMMON STOCK
CONSENT TO THE MATTERS SET FORTH HEREIN. CERTAIN OFFICERS AND DIRECTORS OF THE
COMPANY ARE ASSOCIATED WITH CERTAIN OF THE COMPANY'S 5% STOCKHOLDERS. SUCH 5%
STOCKHOLDERS OWN APPROXIMATELY 39% OF THE OUTSTANDING SHARES OF COMMON STOCK.
This consent solicitation statement, the accompanying consent form and the
Company's 1997 Annual Report to Stockholders will be first sent or given to
stockholders on or about June 26, 1998. ADDITIONAL COPIES OF THE COMPANY'S
1997 ANNUAL REPORT TO STOCKHOLDERS OR COPIES OF THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 WILL BE FURNISHED
WITHOUT CHARGE TO ANY STOCKHOLDER UPON WRITTEN REQUEST TO: JEFFREY B. NEWMAN
AT THE COMPANY'S ADDRESS SET FORTH ABOVE. EXHIBITS WILL BE PROVIDED UPON
WRITTEN REQUEST AND PAYMENT OF AN APPROPRIATE PROCESSING FEE.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Any proposal of a stockholder intended to be presented at the Company's
annual meeting of stockholders in 1999 must be received by the Company's
secretary at the Company's principal executive offices not later than January
31, 1999 for inclusion in the proxy statement for that meeting.
YOUR CONSENT IS IMPORTANT. YOU ARE URGED TO DATE, SIGN AND RETURN YOUR
CONSENT PROMPTLY SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR
WISHES AND IN ORDER THAT THE APPROVAL OF THE PROPOSED CORPORATE ACTIONS BY THE
CONSENT OF THE MAJORITY OF THE ISSUED AND OUTSTANDING SHARES MAY BE ASSURED.
THE PROMPT RETURN OF YOUR CONSENT WILL ALSO AID THE COMPANY IN REDUCING THE
EXPENSE OF THE CONSENT SOLICITATION. THE GIVING OF SUCH CONSENT DOES NOT
AFFECT YOUR RIGHT TO CHANGE YOUR VOTE BY REVOKING YOUR CONSENTS IN A
SUBSEQUENT WRITING RECEIVED BY THE COMPANY AT THE PLACE FIXED FOR RECEIPT OF
CONSENTS PRIOR TO THE TIME AT WHICH THE COMPANY RECEIVES WRITTEN CONSENTS
SUFFICIENT TO APPROVE THE MATTERS SET FORTH HEREIN.
2
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
Stockholders of record as of the close of business on May 29, 1998 will be
entitled to submit a consent on the accompanying form. The Company had
15,138,453 shares of Common Stock issued and outstanding at such date. Each
share of Common Stock is entitled to one vote in the Consent Solicitation.
Consents evidencing a majority of the outstanding shares of Common Stock
entitled to submit a consent are required to approve the matters being
submitted to the stockholders of the Company for approval in the Consent
Solicitation. To be counted toward the majority required for approval of the
matters set forth herein, a consent must be delivered to the Company within 60
days of the Record Date.
The following table sets forth, to the Company's knowledge, based on filings
with the Securities and Exchange Commission, the beneficial ownership of
Common Stock as of May 29, 1998 by (i) each person or entity beneficially
owning more than 5% of the shares of the Company's Common Stock, (ii) each
director, each nominee, and certain named executive officers, individually,
and (iii) all directors and executive officers as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
------------------------
NUMBER OF PERCENTAGE OF
STOCKHOLDER SHARES(1) OUTSTANDING(1)
----------- --------- --------------
<S> <C> <C>
Directors and Named Executive Officers
Michael J. Brown(2)................................ 3,063,202 20.2%
Daniel R. Henry(3)................................. 762,319 5.0%
Jeffrey B. Newman(4)............................... 14,000 *
Bruce S. Colwill................................... 16,058 *
Dennis H. Depenbusch............................... 289,905 1.9%
Steven J. Buckley(5)............................... 1,000 *
Nicholas B. Callinan(6)............................ 5,898 *
Thomas A. McDonnell(7)............................. -- *
Andrzej Olechowski(8).............................. 1,400 *
Eriberto R. Scocimara(9)........................... -- *
All directors and executive officers as a group (8
persons)............................................ 4,153,782 27.5%
Five Percent Holders
DST Systems, Inc.(7)............................... 1,683,597 11.1%
333 West 11th Street
Kansas City, Missouri 64105-1594
Hungarian-American Enterprise Fund(9).............. 798,702 5.3%
1 East Putman Avenue
Greenwich, Connecticut 06830
Poland Investment Fund L.P.(6)(10)................. 737,268 4.9%
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
Advent Partners L.P.(6)(10)........................ 29,491 *
101 Federal Street
Boston, Massachusetts 02110
Advent Private Equity Fund(6)(10).................. 707,777 4.7%
101 Federal Street
Boston, Massachusetts 02110
Hungarian Private Equity Fund(6)(10)............... 294,910 1.9%
101 Federal Street
Boston, Massachusetts 02110
Poland Partners L.P.(5) ........................... 1,769,446 11.7%
c/o Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
</TABLE>
3
<PAGE>
- --------
* The percentage of shares of Common Stock beneficially owned does not
exceed one percent of the outstanding Shares.
(1) Calculations of percentage of beneficial ownership assumes the exercise
by only the respective named stockholder of all options for the purchase
of shares of Common Stock held by such stockholder which are exercisable
within 60 days of May 29, 1998.
(2) Includes an aggregate of 926,323 shares of Common Stock issuable pursuant
to options exercisable within 60 days of May 29, 1998.
(3) Includes an aggregate of 689,619 shares of Common Stock issuable pursuant
to options exercisable within 60 days of May 29, 1998.
(4) Includes an aggregate of 14,000 shares of Common Stock issuable pursuant
to options exercisable within 60 days of May 29, 1998.
(5) Steven Buckley is also the President of Poland Partners L.P. Management
Company, the advisor to Poland Partners L.P.
(6) Mr. Callinan's shares are held indirectly through his interest in Advent
Partners L.P. Mr. Callinan is also Senior Vice President and Managing
Director for Emerging Markets of Advent International Corporation.
(7) Thomas A. McDonnell is also the President of DST Systems, Inc.
(8) Includes an aggregate of 1,400 shares of Common Stock issuable pursuant
to options exercisable within 60 days of May 29, 1998.
(9) Eriberto R. Scocimara is also the President and Chief Executive Officer
of the Hungarian-American Enterprise Fund.
(10) These entities are affiliated through Advent International Corporation of
which Mr. Callinan is Senior Vice President and Managing Director for
Central and Eastern Europe. Such entities own in the aggregate 1,769,446
shares, which constitute approximately 11.7% of the outstanding shares.
4
<PAGE>
ELECTION OF DIRECTORS
DIRECTORS OF THE COMPANY
The Directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
DIRECTORS
Michael J. Brown(1)..... 41 Chairman, President and Chief Executive Officer
Daniel R. Henry......... 32 Director, Chief Operating Officer
Thomas A.
McDonnell(1)(2)(3)..... 52 Director
Nicholas B.
Callinan(1)(2)......... 51 Director
Steven J.
Buckley(1)(2)(3)....... 42 Director
Eriberto R. Scocimara... 61 Director
Andrzej Olechowski...... 50 Director
</TABLE>
- --------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
(3) Member of the Stock Option Committee
CLASSIFIED BOARD
The Company has a classified Board of Directors consisting of two directors
with terms expiring in 1998, two directors with terms expiring in 1999 and two
directors with terms expiring in 2000, who will serve until 1998, 1999 and
2000, respectively, and until their respective successors are elected and
qualified. Mr. Brown and Mr. Henry are employee directors. The remaining five
directors are independent directors. Each year, two (three in one year)
directors are elected for a full term of three years to succeed those
directors whose terms expire in such year.
Stockholders submitting a consent form will consent, unless the consent form
is marked otherwise, to elect the following persons as directors: Mr. Michael
J. Brown and Mr. Andrzej Olechowski. The terms of the directors elected
pursuant to this Consent Solicitation Statement will expire in 2001.
The following information relates to the nominees listed above and to the
other directors of the Company whose terms of office will extend beyond 1998.
All directors have held their present positions for at least five years,
except as otherwise indicated. THE BOARD UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR THE NOMINEES LISTED BELOW.
NOMINEES
MICHAEL J. BROWN founded the predecessor of the Company with Daniel R. Henry
in 1994 and has served as the Chief Executive Officer of the Company or its
predecessor since 1994. In 1979 Mr. Brown founded Innovative Software, a
computer software company that was merged with Informix, a leading provider of
advanced database software technology, in 1988. During this period, Innovative
Software conducted three public offerings of its shares. Mr. Brown served as
President and Chief Operating Officer of Informix from February 1988 to
January 1989. He served as President of the Workstation Products Division of
Informix from January 1989 until April 1990. Annual revenues of Informix had
grown to $170 million by the time Mr. Brown left Informix in 1990. In 1993 Mr.
Brown was a founding investor of Visual Tools, Inc., a company that writes and
markets component software for the growing Visual Basic and Visual C++
developer market. Visual Tools, Inc. was acquired by Sybase Software in
February 1996. Mr. Brown received a B.S. in Electrical Engineering from the
University of Missouri--Columbia in 1979 and a M.S. in Molecular and Cellular
Biology at the University
5
<PAGE>
of Missouri--Kansas City in 1996. Mr. Brown has been a Director of the Company
since its incorporation in December 1996 and he previously served on the
boards of Euronet's predecessor companies. If elected, Mr. Brown's term will
expire in May 2001. Mr. Brown is married to the sister of Mr. Henry's wife.
ANDRZEJ OLECHOWSKI has served as a Director of the Company since its
incorporation in December 1996. He has held several senior positions with the
Polish government: from 1993 to 1995, he was Minister of Foreign Affairs and
in 1992 he was Minister of Finance. From 1992 to 1993, and again in 1995, he
served as economic advisor to President Walesa. From 1991 to 1992, he was
Secretary of State in the Ministry of Foreign Economic Relations and from 1989
to 1991 was Deputy Governor of the National Bank of Poland. At present
Dr. Olechowski is Chairman of Central Europe Trust, Poland, a consulting firm.
Since 1994, he has served as Chairman of the City Council in Wilanow, a
district of Warsaw. His memberships include a number of public policy
initiatives as well as International Advisory Boards of Goldman Sachs
International, Creditanstalt, Banca Nazionale del Lavoro, International
Finance Corporation, Textron and boards of various charitable and educational
foundations. He received a Ph.D. in Economics in 1979 from the Central School
of Planning and Statistics in Warsaw. If elected, Mr. Olechowski's term will
expire in May 2001.
OTHER DIRECTORS
NICHOLAS B. CALLINAN has been a Director of the Company since its
incorporation in December 1996 and he previously served on the board of
Euronet Holding N.V. From 1993 he served as Senior Vice President and Managing
Director for Central and Eastern Europe of Advent International Corporation, a
venture capital investment and management company and the ultimate general
partner of private equity funds which are a shareholder of the Company. In
1997, he was appointed Managing Director of Emerging Markets for Advent
International Corporation. From 1983 to 1993, he was founder and Chief
Executive Officer of Western Pacific Management & Investment Company, which
later became the Advent Group of Companies. Mr. Callinan has a B.E. in Civil
Engineering and an M.B.A. from the University of Melbourne. Mr. Callinan's
term as Director of the Company will expire in May 1999.
ERIBERTO R. SCOCIMARA has been a Director of the Company since its
incorporation in December 1996 and he previously served on the boards of
Euronet's predecessor companies. Since April 1994 Mr. Scocimara has served as
President and Chief Executive Officer of the Hungarian-American Enterprise
Fund, a private company that is funded by the U.S. government and invests in
Hungary and is also a shareholder of the Company. Since 1984 he has been the
President of Scocimara & Company, Inc., an investment management company.
Mr. Scocimara was a partner of G.L. Ohrstrom & Co. from 1969 to 1984. Mr.
Scocimara is currently a director of the Hungarian-American Enterprise Fund,
Carlisle Companies, Harrow Industries, Inc., Roper Industries, Quaker Fabrics
and several privately-owned companies. He has a Licence de Science
Econonomique from the University of St. Gallen, Switzerland, and an M.B.A.
from Harvard University. His term as a Director of the Company will expire in
May 1999.
DANIEL R. HENRY founded the predecessor of the Company with Michael J. Brown
in 1994 and is currently serving as Chief Operating Officer of the Company.
Mr. Henry is based in Budapest, Hungary where he oversees the daily operations
of the Company's European subsidiaries. Mr. Henry also is responsible for the
expansion of the Company into other countries and the development of new
markets. Prior to joining the Company, Mr. Henry was a commercial real estate
broker for five years in the Kansas City metropolitan area where he
specialized in the development and leasing of premiere office properties. Mr.
Henry received a B.S. in Business Administration from the University of
Missouri--Columbia in 1988. Mr. Henry has been a Director of the Company since
its incorporation in December 1996 and he previously served on the boards of
Euronet's predecessor companies. His term as Director of the Company will
expire in May 2000. Mr. Henry is married to the sister of Mr. Brown's wife.
THOMAS A. MCDONNELL has been a Director of the Company since its
incorporation in December 1996 and he previously served on the boards of
Euronet's predecessor companies. From 1973 to September 1995, he served as
Treasurer of DST Systems, Inc., an information processing and computer
software company. Since
6
<PAGE>
October 1984 he has served as Chief Executive Officer and since January 1973
(except for a 30 month period from October 1984 to April 1987) he has served
as President of such company. From February 1987 to October 1995, he served as
Executive Vice President and from 1983 to November 1995 he served as a
director of Kansas City Southern Industries. From December 1989 to October
1995, he served as a director of The Kansas City Southern Railway Company.
From October 1994 to April 1995 he served as President and from 1992 to
September 1995 as director of Berger Associates, Inc., a money management
firm. From 1994 to January 1997, Mr. McDonnell was a director of First of
Michigan Capital Corporation. He is currently a director of Informix, BHA
Group, Inc., DST Systems, Inc., Cerner Corporation, Computer Science
Corporation and Janus Capital Corporation. Mr. McDonnell has a B.S. in
Accounting from Rockhurst College and an M.B.A. from the Wharton School of
Finance. Mr. McDonnell's term as Director of the Company will expire in May
2000.
STEVEN J. BUCKLEY has been a Director of the Company since its incorporation
in December 1996 and he previously served on the boards of Euronet's
predecessor companies. In April 1994 he was a co-founder of Poland Partners
L.P., a venture capital fund for investment in Poland and since that time
April 1994 he has served as President and Chief Executive Officer of Poland
Partners Management Company, the advisor of such fund. From June 1990 to April
1994, he was a founder and director of Company Assistance Ltd., a business
advisory firm in Poland. He has a B.A. in Political Science from Stanford
University and an M.B.A. from Harvard University. Mr. Buckley's term as
Director of the Company will expire in May 2000.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board held three meetings (including telephonic meetings) during 1997.
All directors attended all three meetings except Mr. Callinan, Mr. Buckley and
Mr. McDonnell who each attended two of the three meetings. No Board committees
held a meeting in 1997. The Board has a standing audit committee, a standing
compensation committee and a standing stock option committee. The Board does
not have a standing nominating committee.
Audit Committee. The Audit Committee, which is comprised solely of
independent directors, did not hold a meeting in 1997. The reason the Audit
Committee did not meet in 1997 is because the Company was inactive from its
formation in December, 1996 until its initial public offering in March, 1997
(the "IPO"). The Audit Committee makes recommendations concerning the
engagement of independent accountants, reviews with the independent
accountants the plans and results of the audit engagement, approves
professional services provided by the independent accountants, reviews the
independence of the independent accountants, considers the range of the audit
and non-audit fees and reviews the adequacy of the Company's internal
accounting controls. In addition, the Audit Committee is responsible for
reviewing and overseeing transactions between the Company and related parties
or affiliated companies. Thomas A. McDonnell, Steven J. Buckley and Nicholas
B. Callinan are the current members of the Audit Committee.
Compensation Committee. The Compensation Committee, which is comprised of a
majority of independent directors, did not hold a meeting in 1997. The reason
the Compensation Committee did not meet in 1997 is because in connection with
the IPO, the Company entered into long term employment agreements with its
executive officers. The Compensation Committee makes determinations with
respect to salaries and bonuses payable to the Company's Executive Officers.
Michael J. Brown, Thomas A. McDonnell, Steven J. Buckley and Nicholas B.
Callinan are the current members of the Compensation Committee. Mr. Brown does
not participate in decisions regarding his own compensation.
Stock Option Committee. Effective October 16, 1997, the Board established a
Stock Option Committee, which is comprised solely of independent directors.
The Stock Option Committee will make determinations with respect to grants of
options to officers and other key employees of the Company. Thomas A.
McDonnell and Steven J. Buckley are currently members of the Stock Option
Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Of the members of the Company's Compensation Committee, Michael J. Brown is
the Chief Executive Officer and President of the Company. Mr. Brown does not
participate in decisions relating to his own
7
<PAGE>
compensation. For information regarding certain transactions between the
Company and members of the Compensation Committee, see "Certain Relationships
and Related Transactions."
SECTION 16 COMPLIANCE
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during 1997, the Company's directors, officers, and
greater than 10% beneficial owners complied with all applicable Section 16(a)
filing requirements.
COMPENSATION OF DIRECTORS
The Company historically has not paid fees to its directors for attendance
at meetings. Effective January 1, 1998, the Company pays each director a fee
of $2,000 for each board meeting attended, a fee of $1,000 for each committee
meeting attended and a fee of $250 for participation in a telephonic meeting.
In addition, each Director will receive annually options to purchase 1,000
shares of Common Stock in accordance with the Company's Stock Option Plan if
the Stock Option Plan is consented to by the holders of a majority of the
Company's outstanding Common Stock. The Company also reimburses directors for
out-of-pocket expenses incurred in connection with the directors' attendance
at meetings. Andrzej Olechowski is paid $4,000 for serving as a member of the
Company's Advisory Board.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the
compensation awarded or paid by the Company to its Chief Executive Officer and
to the one other executive officer of the Company whose total annual salary
and bonus equaled or exceeded $100,000 during the year ended December 31, 1997
(the "Named Executive Officers") for the periods indicated:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION LONG-TERM COMPENSATION
------------------ ---------------------------------
SECURITIES
UNDERLYING RESTRICTED
NAME AND PRINCIPAL OTHER ANNUAL OPTIONS/ STOCK LTP ALL OTHER
POSITION PERIOD SALARY($) BONUS($) COMPENSATION($) SAR'S(#) AWARD(S)($) PAYOUTS($) COMPENSATION($)
------------------ ------ --------- -------- --------------- ---------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael J. Brown....... 1997 100,000 $0 $0 -- -- -- --
Chief Executive
Officer, 1996 100,000 $0 $0 1,149,890 -- -- --
President and Chairman
of the Board
Jeffrey B. Newman ..... 1997 133,333 $0 $0 17,500 -- -- --
Vice President and 1996 -- $0 $0 52,500 -- -- --
General Counsel
</TABLE>
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides certain information concerning Options granted
to the Named Executive Officers of the Company during the year ended December
31, 1997.
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
% OF TOTAL PRICE
NUMBER OF OPTIONS APPRECIATION
SECURITIES GRANTED TO EXERCISE FOR OPTION
UNDERLYING EMPLOYEES PRICE TERM(1)
OPTIONS IN FISCAL PER EXPIRATION ---------------
NAME GRANTED YEAR SHARE DATE 5%($) 10%($)
- ---- ---------- ---------- -------- ------------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Brown.. -- -- -- -- -- --
Jeffrey B. Newman. 17,500 5.8% $13.94 Apr. 22, 2007 153,419 388,793
</TABLE>
- --------
(1) Potential realizable value is based on the assumption that the shares
appreciate at the annual rates shown (compounded annually) from the date
of grant until the expiration of the option term. Those numbers are
calculated based upon the requirements promulgated by the Commission and
do not reflect any estimate by the Company of future price increases.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information concerning Options
exercised by the Named Executive Officers during the year ended December 31,
1997 and Options held by such individuals at December 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED DECEMBER 31, 1997 DECEMBER 31, 1997($)
ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED$(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Brown........ 224,492 2,010,979 926,323 -- 5,196,672 --
Jeffrey B. Newman....... -- -- 10,500 42,000 58,905 235,620
</TABLE>
- --------
(1) Based on the difference between the exercise price of the Options and the
fair market value of the Common Stock on March 7, 1997 and December 1,
1997, which are the dates the Options were exercised.
EMPLOYMENT AGREEMENTS
Mr. Brown serves as the Chief Executive Officer, President and Chairman of
the Board of the Company pursuant to an employment agreement dated December
17, 1996. Under the terms of his agreement, Mr. Brown is entitled to an annual
salary of $100,000, subject to annual review and adjustments by the Board of
Directors, and is reimbursed for all reasonable and proper business expenses
incurred by him in the performance of his duties under the agreement. The
terms of the agreement also provide that Mr. Brown will be entitled to fringe
benefits and perquisites comparable to those provided to any or all of the
Company's senior officers. The term of the agreement expires in December 1999.
The term of the agreement, however, will be automatically extended on the same
terms and conditions for successive periods of one year each unless declined
by either party for any reason. In the event that Mr. Brown's employment with
the Company is terminated by the Company for Cause (as defined in the
agreement), or if Mr. Brown voluntarily terminates employment with the
Company, he will be entitled to receive all compensation, benefits and
reimbursable expenses accrued as of the date of such termination. In the event
that Mr. Brown's employment with the Company is terminated by reason of death
or Disability (as defined in the agreement), he (or his designated
beneficiary) will be paid his annual salary at the rate then in effect for an
additional one-year period. The agreement also contains certain non-
competition, non-solicitation and non-disclosure covenants.
The Company has also entered into employment agreements with Messrs. Henry,
Depenbusch, Newman and Colwill, all of which expire in December 1999. The
terms of these employment agreements are substantially similar to those
contained in Mr. Brown's employment agreement.
9
<PAGE>
BENEFIT PLANS
The Company provides insurance benefits to its officers and other employees,
including health, dental, and life insurance, subject to certain deductibles
and copayments by employees.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee. The Committee is responsible for establishing and
administering the policies which govern both annual compensation and equity
ownership programs. The grant of options is governed by the Stock Option
Committee. Mr. Brown does not participate in any decisions regarding his own
compensation.
Overview and Philosophy
The Company's executive compensation program has the following objectives:
. To provide competitive compensation that will help attract, retain and
reward highly qualified executives who contribute to the long-term
success of the Company.
.To align management's interests with stockholders by including long-term
equity incentives.
Currently, the Company's compensation package for executives consists of a
base salary and stock options which vest over a period of years, generally
five years. The Company's executive compensation package is being revised in
1998 to include a performance based cash bonus program with the objective of
further reinforcing the incentive impact of the compensation package.
Compensation Levels in 1997
The Company was incorporated in December, 1996. Many of the executives in
the Company (which the Committee considers to include the Company's directors
and officers as well as managers of the countries in which the Company has
established subsidiaries) were hired during 1997. The Company is still small
in relation to those in its industry peer group and is growing rapidly. In
addition, the Company is in an unusual situation in that all of its business
is conducted outside of the United States, with the head office established in
Budapest. These factors render comparison of executive compensation levels
within the Company with those of other companies in its peer group somewhat
difficult. Moreover, the Company believes that a successful compensation
program requires the application of judgment and subjective determinations of
individual performance, and to that extent the Committee applies judgment in
reconciling the program's objectives with the realities of retaining valued
employees in the markets in which it operates.
To date, the compensation packages granted to senior executives have been
based on the levels in effect with the predecessor to the Company, Euronet
Holding N.V., as of the time of the incorporation of the Company and the
individual qualifications of each employee. Although base salary levels are
currently fairly low as compared with similar public companies in the United
States and the Company's peer group, the Company believes it has been able to
attract and retain excellent executive talent through its stock option
programs, which is perceived to provide significant long term compensation
value due to the high growth potential of the Company.
Base Salary
Mr. Brown's base salary is determined by an Executive Employment Contract
dated December, 1996. Mr. Brown's base salary is currently well below industry
standard. However, when the value of "Milestone" options held by Mr. Brown
which vested in 1997 are taken into account, Mr. Brown's total compensation
for 1997 is considered extremely competitive. The Committee will consider
revision of Mr. Brown's base salary for 1998 during its next meeting. Mr.
Brown will not participate in this decision.
Base salaries for all other executives were set by Mr. Brown at the time of
hire and will be reviewed annually. Mr. Brown attempts to set base salary
compensation within the range of salaries of executive officers
10
<PAGE>
with comparable qualifications, experience and responsibilities at other
companies in the same or similar businesses and of comparable size and
success. In addition, salary determinations depend both upon the executive's
salary at his previous place of employment and upon the individual's potential
value to the Company as measured by certain subjective non-financial
objectives. These non-financial objectives include the individual's potential
and actual contribution to the company as a whole, including his or her
ability to motivate others, develop the skills necessary to grow as the
Company matures, recognize and pursue new business opportunities and initiate
programs to enhance the Company's growth and success.
Annual Incentive Compensation and Stock Options Programs
The Company does not yet have in place an annual incentive bonus program,
but expects to design and implement such a program during 1998. The objective
of such program will be to provide key employees with cash incentives and
stock options to achieve the Company's financial goals. Although the specific
details of this program remain to be defined, it is anticipated that it will
include the following features:
The bonus program for Mr. Brown will be set each year by the Committee and
reviewed by the full Board of Directors. The payment of bonus compensation to
Mr. Brown will depend on the attainment by the Company of projected revenues
and Company goals and will be calculated as a percentage of the financial
goals actually attained.
For all other employees, there will be two components to the Company's bonus
program, the first based on Company performance and the second based on the
executive's individual performance. At the beginning of each year, Mr. Brown
will establish recommended target annual bonus levels expressed as a
percentage of salary according to level of management, which amount the
executive will receive if the Company achieves its target net income for the
year. The second component of the Company's bonus program will be awarded to
the executive based upon a review of the executive's performance in relation
to individual objectives which may depend upon the specific executive's
functions.
Cash bonuses will then be paid annually to each executive based upon the
performance targets as well as the review of individual objectives established
and measured by the CEO.
Stock Option Programs
The Company's stock option plans are designed to promote the identity of
long-term interests between the Company's employees and its stockholders and
to assist in the retention of executives. All option grants are proposed by
Mr. Brown and approved by the Stock Option Committee of the Board of
Directors, which consists of two non-management members of the Compensation
Committee. The size of option grants is generally intended by Mr. Brown to
reflect the executive's position with the Company and his or her contributions
to the Company. Stock options are granted at an option price equal to the fair
market value of the Common Stock on the date of grant and generally vest over
a five year period in order to encourage key employees to remain with the
Company.
Benefits
The Company's executive officers are entitled to receive medical insurance
benefits. A 401(K) Plan is being established and will be available to
executives on the same basis as other full-time employees of the Company.
The amount of perquisites, as determined in accordance with the rules of the
Securities and Exchange Commission relating to executive compensation, did not
exceed 10% of salary and bonus for 1997 for any of the Named Executive
Officers.
Conclusion
Through these programs, a significant portion of the Company's executive
compensation is linked directly to individual and Company performance in
furtherance of strategic goals, as well as stock price appreciation. The
Committee intends to continue the policy of linking executive compensation to
Company performance and stockholder return.
11
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the total cumulative return on the
Common Stock from March 7, 1997 (the date of the IPO) through December 31,
1997 with the Center for Research in Security Prices ("CRSP") Total Returns
Index for U.S. companies traded on the Nasdaq Stock Market (the "Market
Group") and an index group of peer companies, the CRSP Total Returns Index for
U.S. Nasdaq Financial Stocks (the "Peer Group"). The companies in each of the
Market Group and the Peer Group were weighted by market capitalization.
Returns are based on monthly changes in price and assume reinvested dividends.
These calculations assume the value of an investment in the Common stock, the
Market Group and the Peer Group was $100 on March 7, 1997. The Company's
Common Stock is traded on the Nasdaq National Market under the symbol EEFT.
[ LINE GRAPH APPEARS HERE ]
<TABLE>
<CAPTION>
TOTAL RETURNS INDEX 03/07/97 04/30/97 09/30/97 12/31/97
<S> <C> <C> <C> <C>
Euronet Services Inc. 100.000 73.3 76.6 51.66
The Market Group 100.000 107.323 129.31 121.27
The Peer Group 100.000 103.710 130.13 140.88
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
FINANCINGS
Between June 22, 1994 and the present, the Company and its existing
shareholders engaged in several transactions to provide the Company (including
its predecessors and operating subsidiaries) with necessary financing. These
transactions are summarized below. For the convenience of the reader all
amounts of capital contributions made in Hungarian forints have been
translated into U.S. dollars at the official middle rate established by the
National Bank of Hungary on the date such capital contributions were made and
all amounts of capital contributions made in Polish zlotys have been
translated into U.S. dollars at the exchange rate quoted by the National Bank
of Poland at noon on the date such capital contributions were made.
Formation of the Company. Bank Access 24 Kft. ("Bank 24"), the predecessor
of the Hungarian operating subsidiary of the Company, was established on June
22, 1994 by Michael Brown and Daniel Henry,
12
<PAGE>
both of whom are Directors of the Company. Mr. Brown received a 90% equity
interest in Bank 24 in consideration for a contribution of $9,000 and Mr.
Henry received a 10% interest in consideration of a contribution of $1,000.
Original Joint Venture Agreement. On July 19, 1994 a Joint Venture Agreement
(the "Original JVA") was entered into by Mr. Brown and DST Systems, Inc.,
Euroventures (Hungary) B.V. ("Euroventures"), Mark Callegari, Larry Maddox and
Lawrence Schwartz. The Original JVA provided that the parties to the Original
JVA would contribute capital to Bank 24 in exchange for ownership interests in
Bank 24 in the following amounts:
<TABLE>
<CAPTION>
CAPITAL PERCENTAGE
SHAREHOLDER CONTRIBUTION OWNERSHIP
----------- ------------ ----------
<S> <C> <C>
Michael Brown...................................... $ 990,000 42.74%
DST Systems, Inc. ................................. $1,000,000 34.72%
Euroventures....................................... $ 300,000 10.42%
Mark Callegari..................................... $ 200,000 6.93%
Lawrence Schwartz.................................. $ 50,000 1.74%
Larry Maddox....................................... $ 100,000 3.74%
</TABLE>
Pursuant to the Original JVA, Mr. Henry transferred his 10% interest in Bank
24 to Mr. Brown for a purchase price equal to $1,000. At the time of the
Original JVA, Mr. Brown was granted an additional 8% equity interest in Bank
24 at no cost.
Capital Increase and Amendment of Original JVA. On February 20, 1995, the
Original JVA was amended by an Amended and Restated Joint Venture Agreement
(the "Amended JVA") under which a new shareholder, the Hungarian-American
Enterprise Fund ("HAEF"), and Euroventures agreed to purchase from a third
party 100% of the equity interests in SatComNet Kft., which is now a
subsidiary of the Company ("SatComNet"). HAEF acquired an 89% interest in
SatComNet for a purchase price of $439,000 and Euroventures purchased an 11%
interest in SatComNet for $52,000. Under the Amended JVA, HAEF also agreed to
contribute $611,000 to Bank 24, Euroventures agreed to contribute $148,000 and
a new shareholder, Hi-Care Trade and Development Company ("Hi-Care") agreed to
contribute $197,000.
The shareholders of SatComNet and Bank 24 exchanged their interests held in
such companies to create identical ownership of the two companies, as follows:
<TABLE>
<CAPTION>
PERCENTAGE
SHAREHOLDER OWNERSHIP
----------- ----------
<S> <C>
Michael Brown................................................... 30.29%
DST Systems, Inc. .............................................. 22.49%
HAEF............................................................ 23.61%
Euroventures.................................................... 11.24%
Hi-Care......................................................... 4.50%
Mark Callegari.................................................. 4.50%
Larry Maddox.................................................... 2.25%
Lawrence Schwartz............................................... 1.12%
------
Total......................................................... 100.00%
======
</TABLE>
Bank 24 was then transformed into an "Rt.", a different form of Hungarian
corporate entity.
Under the Amended JVA, Mr. Henry was granted an option to purchase up to 6%
of the shares of each of Bank 24 and SatComNet for a total purchase price of
$246,000.
Hi-Care entered into a lease with Bank 24 effective as of September 10, 1994
for the Company's current offices in Budapest. The entire amount contributed
to the capital of Bank 24 by Hi-Care under the Amended JVA was immediately
paid out to Hi-Care as a payment under such lease.
13
<PAGE>
Loans from Mr. Michael J. Brown. Mr. Brown established the Company's Polish
operating subsidiary, Bankomat 24/Euronet Sp. z o.o. ("Bankomat"), on August
8, 1995. Upon its formation, Mr. Brown contributed $2,000 to Bankomat and was
the sole interest holder of Bankomat. A capital increase in the amount of
$61,000 was made on December 7, 1995. On August 31, 1995, Mr. Brown agreed to
make revolving loans in the amount $125,000 to Bankomat at a rate of interest
of 10% per year. The amount of such loans was increased to $195,000 as of May
21, 1996. As of December 31, 1996, $262,000 was outstanding under such loans
and other loans made by Mr. Brown to the Company consisting of $67,000 in
loans at an interest rate of 10% relating to the establishment of Bankomat.
Such loans were repaid in 1997 by application of the proceeds of the Company's
1997 equity offering.
Formation of Euronet Holding N.V. On February 15, 1996 the shareholders in
Bank 24 and SatComNet and Hi-Care (the "Original Investors") terminated the
Amended JVA and entered into a shareholders' agreement dated February 15,
1996, as amended October 14, 1996 (the "Shareholders' Agreement") reorganizing
the ownership of Bank 24, SatComNet and Bankomat. Under the Shareholders'
Agreement, the Original Investors contributed all of their shares and
interests in Bank 24, SatComNet and Bankomat to Euronet Holding N.V., which
was established on March 27, 1996 as a holding company. In addition, four new
shareholders made cash contributions to the capital of Euronet Holding N.V. in
exchange for preferred stock of Euronet Holding N.V., as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF PREFERRED STOCK
CONTRIBUTION OF EURONET HOLDING
NEW SHAREHOLDERS COMMITMENT N.V.
---------------- ------------ ------------------
<S> <C> <C>
Advent Private Equity Fund CELP.............. $1,250,000 875,000
Hungarian Private Equity Fund................ $ 500,000 350,000
Poland Investment Fund....................... $1,250,000 875,000
Poland Partners L.P. ........................ $3,000,000 2,100,000
</TABLE>
Concurrently with these transactions, Euroventures purchased the shares and
interests of Hi-Care in Bank 24 and SatComNet.
The Shareholders' Agreement provided that the Original Investors and
management of Euronet Holding N.V. would be granted certain awards of
preferred shares, and in the case of Mr. Brown, Common Shares, of Euronet
Holding N.V. in consideration of the payment of the par value ($0.02) of such
shares if certain goals ("Milestones") were attained by the Company (the
"Milestone Awards"). Specifically, the following Original Investors were to
receive the following amounts of preferred shares or Common Shares of Euronet
Holding N.V.:
<TABLE>
<CAPTION>
NUMBER OF
ORIGINAL INVESTOR OR SHARES TO BE
MANAGEMENT MEMBER AWARDED
--------------------- ---------------
<S> <C>
Michael Brown................................................ Up to 1,117,620
DST Systems, Inc. ........................................... Up to 258,300
HAEF......................................................... Up to 271,110
Euroventures................................................. Up to 180,810
Mark Callegari............................................... Up to 51,597
Larry Maddox................................................. Up to 25,802
Lawrence Schwartz............................................ Up to 12,901
Daniel Henry................................................. Up to 593,670
</TABLE>
Pursuant to the Shareholders' Agreement, Euronet Holding N.V. was entitled
to call a "standby round" of investment from DST Systems, Inc., Poland
Partners L.P., Hungarian Private Equity Fund and the Advent Private Equity
Fund CELP of up to $3,000,000 in the aggregate from such shareholders at a per
share price of $2.14 for one tranche and $10.00 per share for a second tranche
subject to certain conditions. The first tranche of this standby round was
called on November 26, 1996 and 466,669 Series B convertible preferred shares
of Euronet Holding N.V. were issued in exchange for $1 million. The Company's
right to call the remainder of the standby
14
<PAGE>
round commitment terminated on the termination of the Shareholders' Agreement
which occurred on March 7, 1997 in connection with the equity offering.
In addition, the Shareholders' Agreement provided that Mr. Brown would be
reimbursed by the shareholders for up to $100,000 for expenses incurred from
December 1994 to May 1995, and by the Company for expenses incurred from June
1, 1995 to March 27, 1996 relating to the establishment of Bankomat. On
October 11, 1996, Euronet Holding N.V. adopted a revision to its Articles of
Association effecting a ten for one stock split.
On October 14, 1996, the Shareholders' Agreement was amended (the "First
Amendment") and the Milestone Award arrangements were modified to provide for
two different types of grants:
(i) Milestone Awards of preferred shares of Euronet Holding N.V. in
exchange for payment of par value ($0.02), to all Original Investors except
Mr. Brown;
(ii) Options to purchase Common Shares and preferred stock of Euronet
Holding N.V. to Mr. Brown, and options to purchase preferred shares of
Euronet Holding N.V. to Mr. Henry, Mr. Depenbusch and certain other
employees of the group at a purchase price of $2.14 per share ("Milestone
Options"). The number of shares of Euronet Holding N.V. subject to these
option arrangements was increased as compared with the amounts that were to
be awarded under the Shareholder's Agreement to take into account the fact
that consideration was now to be paid for such shares. The following
numbers of Milestone Options were granted to directors and officers of the
Company: Michael Brown (1,149,890 of Common Shares and preferred stock of
Euronet Holding N.V.); Daniel Henry (599,340 preferred shares of Euronet
Holding N.V.); and Dennis Depenbusch (226,450 preferred shares of Euronet
Holding N.V.).
All Milestone Awards of Common Shares of Euronet Holding N.V. became
effective as of the closing of the 1997 equity offering and all Milestone
Options became vested upon the closing of the offering, with the exception of
49,819 Options to certain key employees which will vest equally in March of
1998 and 1999. Such options have an exercise price of $2.14 per share.
The Reorganization. In December 1996, the Company, shareholders and
optionholders of Euronet Holding N.V. entered into an Exchange Agreement
pursuant to which (i) 10,296,076 shares of Common Stock were to be issued to
the shareholders of Euronet Holding N.V. in exchange for all of the Common
Shares of Euronet Holding N.V., (ii) options to acquire 3,113,355 shares of
Common Stock were to be granted to the holders of options to acquire 3,113,355
Common Shares of Euronet Holding N.V. in exchange for all of such options and
(iii) awards with respect to 800,520 shares of Common Stock were to be issued
to the holders of awards with respect to 800,520 preferred shares of Euronet
Holding N.V. in exchange for all such awards. The exchange became effective as
of March 6, 1997, the date of the execution of the underwriting agreement in
connection with the Company's 1997 equity offering.
GE Capital Investment. On January 31, 1997, the Company signed a
subscription agreement (the "Subscription Agreement") with General Electric
Capital Corporation ("GE Capital") pursuant to which GE Capital agreed to
subscribe for preferred stock of Euronet Holding N.V. for an aggregate
purchase price of $3 million which entitled GE Capital to receive 710,507
shares of Common Stock of the Company in connection with the Reorganization,
resulting in a per share purchase price of $4.22. Under a "claw back" option,
the Company retained the right to repurchase up to 292,607 of such shares for
nominal consideration in the event of a public or private offering of the
Company's Common Stock, if the Company was attributed a valuation that is
higher than that used for purposes of the Subscription Agreement, including
the 1997 equity offering. The conditions for the exercise of this option were
met and the Company exercised this option on June 16, 1997. The Company
repurchased all 292,607 shares from GE Capital for a price of approximately
$4,000. These shares are currently held in treasury.
The Subscription Agreement also included certain reciprocal rights of the
parties to act as preferred providers of services to each other in Poland,
Hungary, the Czech Republic, Germany and Austria. In particular, the Company
is a preferred provider of outsourced ATM services to certain banks affiliated
with GE Capital and GE Capital is a preferred provider of equipment financing
and satellite telecommunications to the Company.
15
<PAGE>
Initial Public Offering. On March 7, 1997, the Company completed an initial
public offering of its Common Shares. The following transactions occurred in
connection with the offering:
(i) the Reorganization became effective;
(ii) the Shareholders' Agreement was terminated;
(iii) Michael Brown exercised Milestone Options to purchase 149,492
shares and sold them in the offering together with 205,023 shares which he
held directly prior to the offering, resulting in total net proceeds to him
of approximately $4,226,000.
(iv) Daniel Henry exercised Milestone and certain incentive options to
purchase 103,985 shares of the Company's stock and sold them in the
offering, resulting in net proceeds to him of approximately $1,174,000.
(v) Dennis Depenbusch exercised Milestone and certain incentive options
to purchase 51,345 shares of the Company's stock and sold them in the
offering, resulting in net proceeds to him of approximately $569,000.
(vi) all of the shareholders of the Company as of March 6, 1997 except
DST Systems, Inc. sold 25% of the shares held as of that time, including
the following shareholders who held over 10% of the shares prior to the
offering: Michael J. Brown; HAEF, which sold 350,753 shares for total net
proceeds of approximately $4,493,000; and Poland Partners which sold
525,000 shares for total net proceeds of approximately $6,733,000.
(vii) the Company issued and sold in the offering a total of 3,833,650
shares, including 795,000 shares which were purchased by the underwriters
pursuant to their over-allotment option. Total net proceeds to the Company
in the offering were approximately $47,857,000.
ATM Purchase Option. On March 10, 1995, Bank 24 entered into a Master Rental
Agreement with HFT Corporation ("HFT") pursuant to which HFT agreed to lease
ATM machines to Bank 24 pursuant to operating leases which are treated, for
U.S. GAAP purposes only, as capital leases. On the same date, HFT granted an
option to purchase the ATM machines which were the subject of this Master
Rental Agreement to Windham Technologies, a company controlled by Michael
Brown and Mark Callegari. On March 25, 1995, Windham Technologies executed a
unilateral undertaking (the "Undertaking") to sell such machines to Bank 24
for a purchase price which was equal to the price paid by Windham, plus
incidental expenses. All ATMs operated by the Company are subject to this
arrangement. The Company intends to restructure these arrangements as capital
leases under Hungarian law and has recorded an accrual in its financial
statements in this respect.
Windham Technologies Inc. Windham Technologies Inc. ("Windham") holds the
option to purchase certain ATMs at the end of the lease term. Windham is
jointly owned by two shareholders of Euronet Holding N.V. Windham has signed
an undertaking to contribute these assets to Euronet Holding N.V. at the end
of the lease at a bargain purchase price of $1 plus incidental expenses.
In addition, payments of $94,000, $425,000, $320,000 and $66,000 have been
made for the years ended December 31, 1997, 1996 and 1995, for the period from
June 22, 1994 (inception) through December 31, 1994, respectively, to Windham.
These payments cover the services and related expenses of consultants seconded
by Windham to Euronet Holding N.V. These services include AS400 computer
expertise, bank marketing and management support.
Certain directors or officers and their affiliates have rights to require
the Company to file a registration statement covering the public sale by such
persons of the shares of Common Stock owned by them, and to pay all of the
costs and expenses associated therewith, other than underwriting discounts and
fees.
16
<PAGE>
PROPOSAL TO APPROVE THE ADOPTION OF THE
EURONET SERVICES INC. STOCK OPTION PLAN
The Board believes that it is desirable that the Company's officers, other
key employees and certain non-employee directors and independent consultants
have a financial interest in the Company's performance. As a result, on May
18, 1998, the Board adopted the Euronet Services Inc. Stock Option Plan (the
"Stock Option Plan"), subject to the consent of holders of a majority of the
Company's outstanding Common Stock.
The following summary of the Stock Option Plan is qualified in its entirety
by reference to the complete text of the Stock Option Plan, which is attached
to this Consent Solicitation Statement as Appendix A and is incorporated
herein by reference.
Administration. The Compensation Committee shall administer the Stock Option
Plan, but decisions with respect to grants of options to officers and other
key employees of the Company shall be made solely by the Stock Option
Committee.
Effective Date. The Stock Option Plan became effective as of May 18, 1998,
subject to the consent by stockholders holding a majority of the Company's
outstanding Common Stock and will continue in effect for a period of ten years
unless terminated sooner as provided in the Stock Option Plan.
Eligibility. All of the Company's officers, other key employees, non-
employee directors and independent consultants are eligible to participate in
the Stock Option Plan (the "participants").
Shares Subject to the Stock Option Plan. The aggregate number of shares
subject to the Stock Option Plan will not exceed 2,000,000 shares, subject to
anti-dilution adjustments. If any change is made to the Common Stock subject
to the Stock Option Plan (whether by reason of a stock dividend,
recapitalization resulting in stock splits or combinations or exchanges of
shares, or other capital change affecting the Common Stock), the appropriate
adjustments to the maximum number of shares subject to the Stock Option Plan
will be made. Although the Company is not obligated to file a registration
statement to register the shares issued under the Stock Option Plan, it plans
to file a Form S-8 registration statement to cover the shares that may be
issued on exercise of options granted under such plan at such time as options
granted under the plan first become exercisable.
Provisions of the Stock Option Plan. Options granted under the Stock Option
Plan will either be incentive stock options as such term is defined under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
stock options not intended to qualify as such ("non-qualified stock options").
The exercise price of each share of Common Stock underlying an incentive stock
option may not be less than 100% of the fair market value of the Common Stock
on the date of grant of such option; provided, however, that the exercise
price of incentive stock options granted to holders of at least 10% of the
Company's capital stock ("Ten Percent Holders") may not be less than 110% of
such fair market value. The exercise price of each share of Common Stock
underlying a non-qualified stock option may not be less than the fair market
value of a share of Common Stock on the date of grant of the option.
Options are exercisable in whole or in part at any time over the exercise
period specified by the Compensation Committee, but in no event may the
exercise period exceed ten years from the date of grant of each incentive
stock option or non-qualified stock option; provided, however, that the
exercise period for incentive stock options granted to Ten Percent Holders may
not exceed five years from the date of grant of such options. Options granted
to independent consultants vest immediately, and options granted to employees
or directors vest over a five-year period with no such options vesting prior
to one year from the date of grant. The option exercise price must be paid in
full, at the time of exercise, in cash or, with Compensation Committee
approval, in shares of Common Stock having a fair market value in the
aggregate equal to the option exercise price or in a combination of cash and
such shares, provided that any shares of common stock used to pay the option
exercise price must have been held by the participant for no less than six
months.
17
<PAGE>
In the event that a participant (other than an independent consultant)
ceases to maintain continuous service to the Company or any parent or
subsidiary of the Company, for any reason other than death, an exercisable
stock option will continue to be exercisable for 60 days; provided, however,
that if the association of the participant with the Company or any parent or
subsidiary of the Company shall terminate for "cause" (as determined by the
Compensation Committee), all options theretofore granted to such participant
shall, to the extent not theretofore exercised, terminate forthwith. If a
participant who was an independent consultant when his option was granted
shall die, exercisable stock options shall continue to be exercisable during
the remaining period of their terms. If a participant who was a director,
officer or employee of the Company or any of its parents or subsidiaries dies,
exercisable stock options will continue to be exercisable for 90 days, to the
extent exercisable by the participant immediately prior to his death. In no
event may an option be exercised after its expiration date.
Options are nontransferable except in the event of death, in which case the
options may be exercised by the successor or representative of the deceased or
disabled participant during the exercise period described above. The shares
issued on exercise of the options may contain such restrictions including, but
not limited to, limitations on transferability, as the Compensation Committee
may determine.
Certain Tax Matters. The following is a summary, and does not purport to be
a complete description, of certain federal income tax aspects of the Stock
Option Plan and transactions thereunder. Furthermore, no information is given
with respect to any state, local, or foreign taxes which may be applicable.
Under the Stock Option Plan, a participant will not recognize taxable
income, and the Company will not be entitled to a deduction, upon the grant of
either an incentive stock option or a non-qualified stock option.
Upon exercise of a non-qualified stock option, the participant will
recognize ordinary income in an amount equal to the amount by which the fair
market value of each share of Common Stock on the date of exercise exceeds the
option price. The amount so recognized as income will be deductible by the
Company. Upon any subsequent sale of shares acquired through a non-qualified
stock option by a participant, the participant's basis in the shares purchased
for determining gain or loss will be their fair market value on the date of
exercise of the non-qualified stock option, if such shares were acquired for
cash. If the exercise of the option is made by delivery of shares of Common
Stock in payment of the option price, the shares delivered are deemed to be
exchanged in a tax-free transaction for the equivalent number of new shares of
Common Stock. Such equivalent number of new shares has the same basis and
holding period as the shares exchanged. The number of shares received in
excess of the number of shares delivered is included in the participant's
income at the fair market value thereof at the time of exercise. Any gain or
loss recognized upon the sale or other disposition of such shares will be
capital gain or loss, either long-term or short-term depending upon the
holding period of such shares (which begins on the date the participant
recognizes income with respect to such shares).
Upon exercise of an incentive stock option, the participant will generally
not recognize ordinary income and the Company will generally not be entitled
to a deduction at the time of exercise. Upon subsequent sales by a participant
of shares acquired through the exercise of an incentive stock option, the
participant's basis in the shares purchased for determining gain or loss will
be the option price paid for the stock. Any gain will be capital gain unless
the shares are sold within one year from the date of the exercise of the
option to which the shares relate or within two years from the date of the
issuance of the option to which they relate, in which case a portion of the
gain may be treated as ordinary income. The ordinary income portion of the
gain would equal the lesser of (i) the amount of gain recognized upon the sale
or (ii) the amount by which the fair market value of the shares exceeded the
option price on the date of exercise. The amount so treated as ordinary income
will be deductible by the Company.
The foregoing is not to be considered as tax advice to any persons who may
be Stock Option Plan participants and any such persons are advised to consult
their own tax counsel.
Amendments and Termination. The Board may from time to time suspend,
terminate, modify, or amend the Stock Option Plan, provided that in most cases
any amendment that would materially increase the aggregate
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number of shares of Common Stock as to which Options may be granted under the
Stock Option Plan, materially increase the benefits accruing to participants
under the Stock Option Plan, or materially modify the requirements as to
eligibility for participation in the Stock Option Plan shall be subject to the
approval of the holders of a majority of the Common Stock voting at a meeting
at which a quorum is present. In most cases, no suspension, termination,
modification or amendment of the Stock Option Plan may adversely affect any
rights under the Stock Option Plan unless the written consent of those
affected is obtained. Unless terminated earlier by the Board, the Stock Option
Plan will terminate on May 18, 2008.
Options Granted Under the Stock Option Plan. On May 18, 1998, when the Stock
Option Plan was approved by the Board of Directors, the Board granted options
to purchase an aggregate of 637,400 shares of Common Stock under the Stock
Option Plan assuming stockholders consented to the adoption of the Stock
Option Plan. All such options are exercisable at $5.75 per share, which
represents 100% of the closing price of the shares of Common Stock on May 18,
1998 as reported by Nasdaq. Of such options, an aggregate of 77,700 were
granted to executive officers and directors as set forth under the caption "--
Benefit Amounts."
Benefit Amounts. The table below sets forth the benefits that (i) to the
extent such benefits are determinable, will be received under the Stock Option
Plan during 1998, if the Stock Option Plan is approved [and (ii) to the extent
that such benefits for 1998 are not determinable, the benefits that would have
been received had the Stock Option Plan been in effect in 1997.]
NEW PLAN BENEFITS
EURONET SERVICES INC. STOCK OPTION PLAN
<TABLE>
<CAPTION>
DOLLAR NUMBER
NAME AND POSITION VALUE($)(1) OF UNITS
----------------- ----------- --------
<S> <C> <C>
Michael J. Brown, Chief Executive Officer............... -0- -0-
Jeffrey B. Newman, Vice President and General Counsel... $ 73,250 25,000
Executive Group......................................... $221,801 75,700
Non-Executive Director Group(2)......................... $ 17,580 6,000
Non-Executive Officer Employee Group.................... -0- -0-
</TABLE>
- --------
(1)The dollar value of grants is based on an assumed value of $2.93 per share,
representing a present value calculated at May 18, 1998 using the Black-
Scholes valuation model. The weighted average assumptions used in the
calculations include an expected volatility of 55%, a risk-free rate of
return of 7.13%, no dividend yield and an expected life of four years.
(2) Assumes that the Stock Option Plan was in effect during fiscal 1998, and
that one grant of 1,000 options was made to each director other than
Olechowski who received 2,000 options.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE
STOCK OPTION PLAN.
PROPOSAL TO RATIFY THE COMPANY'S 1996 STOCK OPTION PLAN
In December 1996, in contemplation of the Company's IPO, the Board of
Directors adopted the Long Term Incentive Stock Option Plan (the "1996 Stock
Option Plan") which provides for the grant of options to purchase an aggregate
of 2,413,586 shares of the Company's Common Stock. The terms and conditions
pursuant to which options could be granted and exercised, including exercise
price and eligibility requirements, and the other provisions of the plan are
substantially the same as the terms, conditions and provisions discussed above
regarding the adoption of the Stock Option Plan. At December 31, 1997, options
to purchase an aggregate of 1,364,176 shares are outstanding under the 1996
Stock Option Plan and options to purchase an aggregate of 1,095,374 shares are
available for future grant. The 1996 Stock Option Plan was adopted by
stockholders in connection with the restructuring of the Company in
contemplation of the IPO. Although the Company believes that stockholders
approved the adoption of the 1996 Stock Option Plan when approving the
restructuring of the Company for the IPO, certain questions have arisen as to
whether the 1996 Stock Option Plan was properly adopted by stockholders. For
this reason, stockholders are being asked to ratify the 1996 Stock Option
Plan. Stockholder ratification would provide that the incentive stock options
("ISO") intended to be issued under such plan are in fact ISO options and that
the holders of such options
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<PAGE>
would benefit from favorable Federal income tax treatment. See "Proposal to
Approve the Adoption of the Euronet Services Inc. Stock Option Plan--Certain
Tax Matters" for a discussion of the favorable tax benefits afforded to
holders of ISO options. Regardless of whether stockholder ratification is
obtained, the 1996 Stock Option Plan would remain in effect and the Company
would continue to have authority to grant options under such plan.
Participants could, however, suffer an adverse tax consequence should it be
determined by the Internal Revenue Service that stockholder approval was not
obtained. See "Executive Compensation" for information regarding outstanding
options under the 1996 Stock Option Plan.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR RATIFICATION OF
THE 1996 STOCK OPTION PLAN.
INDEPENDENT ACCOUNTANTS
The firm of KPMG Polska Audyt Sp. zo.o. currently serves as the Company's
independent accountants. The Board has not yet made a decision as to whether
KPMG Polska Sp. zo.o. will be retained as the Company's independent auditors
in 1998.
METHOD OF CONSENT SOLICITATION
The entire cost of this consent solicitation will be borne by the Company.
The Company's directors, officers, and regular employees, without additional
remuneration, may solicit consents by telephone, telegraph and personal
interviews. The Company will, if requested, reimburse banks, brokerage houses,
and other custodians, nominees and certain fiduciaries for their reasonable
out-of-pocket expenses incurred in connection with the distribution of consent
materials to their principals.
By Order of the Board of Directors,
Jeffrey B. Newman
Secretary and General Counsel
June 26, 1998
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<PAGE>
APPENDIX A
EURONET SERVICES INC.
STOCK OPTION PLAN
1. PURPOSE
This Stock Option Plan (the "Plan") for Euronet Services Inc. (the
"Company") is intended to provide incentive (i) to officers and other key
employees of the Company and (ii) to certain non-employee Directors and
independent contractors providing services to the Company by providing those
persons with opportunities to purchase shares of the Company's Common Stock
under (a) incentive stock options ("Incentive Stock Options") as such term is
defined under Section 422 of the Internal Revenue Code of 1986, as amended and
(b) other stock options ("Non-Qualified Options").
2. DEFINITIONS
As used in this Plan, the following words and phrases shall have the
meanings indicated:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the Option Committee of the Board.
(d) "Common Stock" shall mean the Common Stock, $0.01 par value, of the
Company.
(e) "Company" shall mean Euronet Services, Inc., a Delaware corporation.
(f) "Fair Market Value" per share as of a particular date shall mean (i)
the closing sales price per share of Common Stock on the principal national
securities exchange, if any, on which the shares of Common Stock shall then
be listed for the last preceding date on which there was a sale of such
Common Stock on such exchange, or (ii) if the shares of Common Stock are
not then listed on a national securities exchange, the last sales price per
share of Common Stock entered on a national inter-dealer quotation system
for the last preceding date on which there was a sale of such Common Stock
on such national inter-dealer quotation system, or (iii) if no closing or
last sales price per share of Common Stock is entered on a national inter-
dealer quotation system, the average of the closing bid and asked prices
for the shares of Common Stock in the over-the-counter market for the last
preceding date on which there was a quotation for such Common Stock in such
market, or (iv) if no price can be determined under the preceding
alternatives, then the price per share as most recently determined by the
Board, which shall make such determinations of value at least once
annually.
(g) "Incentive Stock Option" means one or more Options to purchase Common
Stock which, at the time such Options are granted under this Plan or any
other such plan of the Company, qualify as incentive stock options under
Section 422 of the Code.
(h) "Non-Qualified Option" shall mean any Option that is not an Incentive
Stock Option.
(i) "Option Price" shall mean the purchase price of shares of Common
Stock covered by an Option.
(j) "Parent" shall mean any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, at the time of
granting an Option, each of the corporations other than the Company owns
stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
(k) "Plan" shall mean this Stock Option Plan.
(l) "Option" shall mean any option issued pursuant to this Plan.
(m) "Optionee" shall mean any person to whom an Option is granted under
this Plan.
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(n) "Subsidiary" shall mean any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the
time of granting an Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain.
(o) "Ten Percent Shareholder" shall mean an Optionee who, at the time an
Option is granted, owns directly or indirectly (within the meaning of
section 425(d) of the Code) stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company, its
Parent or a Subsidiary.
3. GENERAL ADMINISTRATION.
(a) The Plan shall be administered by the Committee.
(b) The Committee shall have the authority in its discretion, subject to and
not inconsistent with the express provisions of the Plan, to administer the
Plan and to exercise all the powers and authorities either specifically
granted to it under the Plan or necessary or advisable in the administration
of the Plan, including, without limitation, the authority to grant Options; to
determine the Option Price; to determine the persons to whom, and the time or
times at which, Options shall be granted; to determine the number of shares to
be covered by each Option; to interpret the Plan; to prescribe, amend and
rescind rules and regulations relating to the Plan; to determine the terms and
provisions of the Option Agreements (which need not be identical) entered into
in connection with Options granted under the Plan; and to make all other
determinations deemed necessary or advisable for the administration of the
Plan.
(c) No member of the Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Option
granted hereunder.
4. GRANTING OF OPTIONS
Options may be granted under the Plan at any time prior to February 1, 2008.
5. ELIGIBILITY
(a) Options may be granted to any director, officer, key employee or outside
consultant of the Company. In determining from time to time the officers and
employees to whom Options shall be granted and the number of shares to be
covered by each Option, the Committee shall take into account the duties of
the respective officers and employees, their present and potential
contributions to the success of the Company and such other factors as the
Committee shall deem relevant in connection with accomplishing the purposes of
the Plan.
(b) At the time of the grant of each Option under the Plan, the Committee
shall determine whether or not such Option is to be designated an Incentive
Stock Option. Incentive Stock Options shall not be granted to a director or a
consultant who is not an employee of the Company. The length of the exercise
period of Incentive Stock Options shall be governed by Section 7(e)(2) of the
Plan; the exercise period of all other Options will be governed by Section
7(e)(3).
(c) An Option designated as an Incentive Stock Option can, prior to its
exercise, be changed to a Non-Qualified Option if the Optionee consents to
amend his Option Agreement to provide that the exercise period of such Option
will be governed by Section 7(e)(2) of the Plan.
6. STOCK
The stock subject to the Options shall be shares of the Common Stock. Such
shares may, in whole or in part, be authorized but unissued shares contributed
directly by the Company or shares which shall have been or which may be
acquired by the Company. The aggregate number of shares of Common Stock as to
which Options
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may be granted from time to time under the Plan shall be 2,000,000 shares. The
limitation established by the preceding sentence shall be subject to
adjustment as provided in Section 7(j) hereof. If any outstanding Option under
the Plan for any reason expires or is terminated without having been exercised
in full, the shares of Common Stock allocable to the unexercised portion of
such Option shall (unless the Plan shall have been terminated) become
available for subsequent grants of Options under the Plan in the following
year.
7. TERMS AND CONDITIONS OF OPTIONS
Each Option granted pursuant to the Plan shall be evidenced by Option
Agreements in such forms as the Committee may from time to time approve.
Options shall comply with and be subject to the following terms and
conditions:
(a) OPTION PRICE. Each Option shall state the Option Price, which in the
case of Incentive Stock Options shall be not less than one hundred percent
(100%) of the Fair Market Value of the shares of Common Stock on the date
of grant of the Option; provided, however, that in the case of an Incentive
Stock Option granted to a Ten Percent Shareholder, the Option Price shall
not be less than one hundred ten percent (110%) of such fair market value.
The Option Price per share for Non-Qualified Options shall also not be less
than the Fair Market Value value of a share of Common Stock on the
effective date of grant of the Option. The Option Price shall be subject to
adjustment as provided in Section 7(j) hereof. The date on which the
Committee adopts a resolution expressly granting an Option shall generally
be considered the day on which such Option is granted. However, the
Committee may, in its sole discretion, grant a series of sequential Options
to an Optionee pursuant to a single resolution adopted by the Committee.
Such a series of sequential Options will be treated as granted as of the
specific future dates designated by the Committee and such Options will
have an Option Price determined in each case by reference to the Fair
Market Value of Common Stock as of the respective future dates as of which
the Options are deemed granted. For example, as of May 15, 1998, the
Committee could, in its sole discretion, grant a series of Options to an
Optionee equal to 1,000 shares of Common Stock which could be deemed by the
Committee to be granted at the rate of 250 shares as of June 1, 1998 and at
the rate of 250 shares as of the first day of each of the next three
calendar months thereafter for an Option Price in each case equivalent to
the Fair Market Value of 250 shares of Common Stock as of each of the
deemed grant days.
(b) RESTRICTIONS. Any Common Stock issued under the Plan may contain
restrictions including, but not limited to, limitations on transferability,
as the Committee may determine.
(c) VALUE OF SHARES. Options may be granted to any eligible person for
shares of Common Stock of any value, provided that the aggregate Fair
Market Value (determined at the time the Option is granted) of the stock
with respect to which Incentive Stock Options are exercisable for the first
time by the Optionee during any calendar year (under all the plans of the
Company, its Parent and its Subsidiaries) shall not exceed $100,000.
(d) MEDIUM AND TIME OF PAYMENT. The Option Price shall be paid in full,
at the time of exercise, in cash or, with the approval of the Committee, in
shares of Common Stock having a Fair Market Value in the aggregate equal to
such Option Price or in a combination of cash and such shares, provided
that any shares of Common Stock used to pay the Option Price must have been
held by the Optionee for no less than six (6) months.
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(e) TERM AND EXERCISE OF OPTIONS.
(1) Unless the applicable Option Agreement otherwise provides, each
Option granted to an independent contractor performing services for the
Company shall be vested immediately and each Option granted to an employee
or Director shall become vested and first exercisable in the following
installments:
<TABLE>
<CAPTION>
ANNIVERSARY PERCENTAGE
DATE OF GRANT EXERCISABLE
------------- -----------
<S> <C>
Less than One.............................................. 0%
One........................................................ 20%
Two........................................................ 40%
Three...................................................... 60%
Four....................................................... 80%
Five....................................................... 100%
</TABLE>
(2) Incentive Stock Options shall be exercisable over the exercise period
specified by the Committee in the Option Agreement, but in no event shall
such period exceed ten (10) years from the date of the grant of each such
Incentive Stock Option; provided, however, that in the case of an Incentive
Stock Option granted to a Ten Percent Shareholder, the exercise period
shall not exceed five (5) years from the date of grant of such Option. Non-
Qualified Options shall be exercisable over a period not to exceed ten (10)
years. The exercise period of any Option shall be subject to earlier
termination as provided in Section 7(g) and 7(h) hereof. An Option may be
exercised, as to any or all full shares of Common Stock as to which the
Option has become exercisable, by giving written notice of such exercise to
the Committee; provided that an Option may not be exercised at any one time
as to less than 100 shares (or such number of shares as to which the Option
is then exercisable if such number of shares is less than 100).
(f) DIVIDEND EQUIVALENCY
Any Option may, in the discretion of the Committee, provide for dividend
equivalency rights under which the Optionee shall be entitled to additional
payments, in the nature of compensation, equal to the amount of dividends
which would have been paid, during the period such Option is held, on the
number of shares of Common Stock equal to the number of shares subject to
such Option.
(g) TERMINATION OF EMPLOYMENT. Except as provided in this Section 7(g)
and Section 7(h) hereof and except with respect to Options granted to an
independent contractor performing services for the Company, an Option may
only be exercised by persons who are employees or of the Company or any
Parent or Subsidiary of the Company (or a corporation or a Parent or
Subsidiary of such corporation issuing or assuming the Option in a
transaction to which Section 425(a) of the Code applies), who have remained
continuously, a director or so employed since the date of grant of the
Option. In the event all association of an Optionee with the Company (as an
employee or director) shall terminate (other than by reason of death), all
Options or unexercised portions thereof granted to such Optionee which are
then exercisable may, unless earlier terminated in accordance with their
terms, be exercised within sixty (60) days after such termination;
provided, however, that if the association of the Optionee with the Company
shall terminate for "cause" (as determined by the Committee), all Options
theretofore granted to such Optionee shall, to the extent not theretofore
exercised, terminate forthwith. A bona fide leave of absence shall not be
considered a termination or break in continuity of employment for any
purpose of the Plan so long as the period of such leave does not exceed
ninety (90) days or such longer period during which the Optionee's right to
reemployment is guaranteed by statute or by contract. Where the period of
such leave exceeds ninety (90) days and the Optionee's right to
reemployment is not guaranteed, the Optionee's employment will be deemed to
have terminated on the ninety-first (1st) day of such leave. Nothing in the
Plan or in any Option granted pursuant hereto shall confer upon an employee
any right to continue in the employ of the Company or any of its divisions
or Parent or Subsidiaries or interfere in any way with the right of the
Company or any such divisions or Parent or Subsidiary to terminate or
change the terms of such employment at any time.
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(h) DEATH OF OPTIONEE. If an Optionee who was an outside consultant when
his Option was granted shall die, all Options heretofore granted to such
Optionee may be exercised at any time during the remaining period of their
terms by the personal representative of the Optionee's estate or by a
person who acquired the right to exercise such Options by bequest or
inheritance or otherwise by reason of death of the Optionee. If an Optionee
shall die while a director of or employed by the Company or any Parent or
Subsidiary of the Company, all Options theretofore granted to such Optionee
may, unless earlier terminated in accordance with their terms and to the
extent already vested and exercisable, be exercised by the Optionee or by
the personal representative of the Optionee's estate or by a person who
acquired the right to exercise such Option by bequest or inheritance or
otherwise by reason of death of the Optionee, at any time within
ninety (90) days after the date of death of the Optionee.
(i) NONTRANSFERABILITY OF OPTIONS. Options granted under the Plan shall
not be transferable other than by will or by the laws of descent and
distribution, and Options may be exercised, during the lifetime of the
Optionee, only by the Optionee. Notwithstanding the preceding sentence, the
Committee, in its sole discretion, may permit the assignment or transfer of
a Non-Qualified Option and the exercise thereof by a person other than an
Optionee, on such terms and conditions as the Committee may determine. Any
such terms shall be determined at the time the Non-Qualified Option is
granted, and shall be set forth in the Option Agreement.
(j) EFFECT OF CERTAIN CHANGES.
(1) If there is any change in the number of shares of Common Stock
through the declaration of stock dividends, recapitalization resulting in
stock splits, or combinations or exchanges of such shares, then the number
of shares of Common Stock available for Options, the number of such shares
covered by outstanding Options, and the price per share of such Options
shall be proportionately adjusted to reflect any increase or decrease in
the number of issued shares of Common Stock; provided, however, that any
fractional shares resulting from such adjustment shall be eliminated.
(2) In the event of a proposed dissolution or liquidation of the Company,
or in the event of any corporate separation or division, including but not
limited to, a split-up, a split-off or spin-off, the Committee may provide
that the holder of each Option then exercisable shall have the right to
exercise such Option (at its then Option Price) solely for the kind and
amount of shares of stock and other securities, property, cash or any
combination thereof receivable upon such dissolutions or liquidation, or
corporate separation or division; or the Committee may provide, in the
alternative, that each Option granted under the Plan shall terminate as of
a date to be fixed by the Committee, provided, however, that no less than
thirty (30) days' written notice of the date so fixed shall be given to
each Optionee, who shall have the right, during the period of thirty (30)
days preceding such termination, to exercise the Options as to all or any
part of the shares of Common Stock covered thereby, including shares as to
which such Options would not otherwise be exercisable.
(3) If while unexercised Options remain outstanding under the Plan (i)
the Company executes a definitive agreement to merge or consolidate with or
into another corporation or to sell or otherwise dispose of substantially
all its assets, or (ii) more than 50% of the Company's then outstanding
voting stock is acquired by any person or (any such event being an
"Accelerating Event") then from and after the date of any such agreement or
the date on which public announcement of the acquisition of such percentage
(any such date being referred to herein as the "Acceleration Date"), the
Committee shall have the right, but not the obligation, to declare that all
such Options shall be exercisable in full, whether or not otherwise
exercisable. Following the Acceleration Date, (a) the Committee shall, in
the case of a merger, consolidation or sale or disposition of assets,
promptly make an appropriate adjustment to the number and class of shares
of Common Stock available for Options, and to the amount and kind of shares
or other securities or property receivable upon exercise of any outstanding
Options after the effective date of such transaction, and the price
thereof, and (b) the Committee may, in its discretion, permit the
cancellation of outstanding Options in exchange for a cash payment in an
amount per share subject to any such option determined by the Committee in
its sole discretion, but not less than the difference between the Option
Price per share and the Fair Market Value per share of Common stock on the
Acceleration Date.
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(4) Paragraphs (2) and (3) of this Section 7(i) shall not apply to a
merger or consolidation in which the Company is the surviving corporation
and shares of Common Stock are not converted into or exchanged for stock,
securities or any other corporation, cash or any other thing of value.
Notwithstanding the preceding sentence, in case of any consolidation or
merger of another corporation into the Company in which the Company is the
continuing corporation and in which there is a reclassification or change
(including a change to the right to receive cash or other property) of the
shares of Common Stock (other than a change in par value, or from par value
to no par value, or as a result of a subdivision or combination, but
including any change in such shares into two or more classes or series of
shares), the Committee may provide that the holder of each Option then
exercisable shall have the right to exercise such Option solely for the
kind and amount of shares of stock and other securities (including those of
any new direct or indirect parent of the Company), property, cash or any
combination thereof receivable by the holder of the number of shares of
Common Stock for which such Option might have been exercised upon such
reclassification, change, consolidation or merger.
(5) In the event of a change in the Common Stock as presently
constituted, which is limited to a change of all of its authorized shares
with par value into the same number of shares with a different par value or
without par value, the shares resulting from any such change shall be
deemed to be the Common Stock within the meaning of the Plan.
(6) To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Committee,
whose determination in that respect shall be final, binding and conclusive,
provided that each Option granted pursuant to this Plan and designated an
Incentive Stock Option shall not be adjusted in a manner that causes the
Option to fail to continue to qualify as an Incentive Stock Option within
the meaning of Section 422 of the Code.
(7) Except as hereinbefore expressly provided in this Section 7(i), the
Optionee shall have no rights by reason of any subdivision or consolidation
of shares of stock of any class or the payment of any stock dividend or any
other increase or decrease in the number of shares of stock of any class or
by reason of any dissolution, liquidation, merger, or consolidation, and
any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
Option Price of shares of Common Stock subject to an Option. The grant of
an Option pursuant to the Plan shall not affect in any way the right or
power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge
or to consolidate or to dissolve, liquidate or sell, or transfer all or any
part of its business or assets.
(j) RIGHTS AS A SHAREHOLDER. An Optionee or a transferee of an Option
shall have no rights as a shareholder with respect to any shares covered by
his Option until the date of the issuance of a stock certificate to him for
such shares. No adjustments shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the
date such stock certificate is issued, except as provided in Section 7(i)
or Section 7(f) hereof.
(k) OTHER PROVISIONS. The Option Agreements authorized under the Plan
shall contain such other provisions, including, without limitation, (i) the
imposition of restrictions upon the exercise of an Option and (ii) the
inclusion of any condition not inconsistent with an Option designated by
the Committee as an Incentive Stock Option qualifying as an Incentive Stock
Option, as the Committee shall deem advisable, including provisions with
respect to compliance with federal and applicable state securities laws. In
furtherance of the foregoing, at the time of any exercise of an Option, the
Committee may, if it shall determine it necessary or desirable for any
reason, require the Optionee as a condition to the exercise thereof, to
deliver to the Committee a written representation of the Optionee's present
intention to purchase the Common Stock for investment and not for
distribution. If such representation is required to be delivered, an
appropriate legend may be placed upon each certificate delivered to the
Optionee upon his exercise of part or all of an Option and a stop transfer
order may be placed with the transfer agent. Each such option shall also be
subject to the requirement that, if at any time the Committee determines,
in its discretion, that
A-6
<PAGE>
either (i) the listing, registration or qualification of Common Stock
subject to an Option upon any securities exchange or under any state,
federal or foreign law, or (ii) the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in
connection with, the issue or purchase of Common Stock thereunder, the
Option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected
or obtained free of any conditions not acceptable to the Committee. An
Optionee shall not have the power to require or oblige the Company to
register any Common Stock subject to an Option.
8. AGREEMENT BY OPTIONEE REGARDING WITHHOLDING TAXES
(a) No later than the date of exercise of any Option granted hereunder, the
Optionee will pay to the Company or make arrangements satisfactory to the
Board regarding payment of any federal, state or local taxes of any kind
required by law to be withheld upon the exercise of such Option, and
(b) The Company shall, to the extent permitted or required by law, have the
right to deduct from any payment of any kind otherwise due to the Optionee any
federal, state or local taxes of any kind required by law to be withheld upon
the exercise of such Option.
9. TERM OF PLAN
Options may be granted pursuant to the Plan from time to time within a
period of ten (10) years from the date on which the Plan is adopted by the
Board, provided that no Options granted under the Plan shall become
exercisable unless and until the Plan shall have been approved by the
Company's shareholders.
10. SAVINGS CLAUSE
Notwithstanding any other provision hereof, this Plan is intended to qualify
as a plan pursuant to which Incentive Stock Options may be issued under
Section 422 of the Code. If this Plan or any provision of this Plan shall be
held to be invalid or to fail to meet the requirements of Section 422 of the
Code or the regulations promulgated thereunder, such invalidity or failure
shall not affect the remaining parts of this Plan, but rather it shall be
construed and enforced as if the Plan or the affected provision thereof, as
the case may be, complied in all respects with the requirements of Section 422
of the Code.
11. AMENDMENT AND TERMINATION OF THE PLAN
The Board may at any time and from time to time suspend, terminate, modify
or amend the Plan, provided that any amendment that would materially increase
the aggregate number of shares of Common Stock as to which Options may be
granted under the Plan, materially increase the benefits accruing to
participants under the Plan, or materially modify the requirements as to
eligibility for participation in the Plan shall be subject to the approval of
the holders of a majority of the Common Stock voting at a meeting at which a
quorum is present, except that any such increase or modification that may
result from adjustments authorized by Section 7(i) hereof shall not require
such approval. Except as provided in Section 7 hereof, no suspension,
termination, modification or amendment of the Plan may adversely affect any
Option previously granted unless the written consent of the Optionee is
obtained.
12. NONEXCLUSIVELY OF THE PLAN
Neither the adoption of the Plan by the Board nor the submission of the Plan
to stockholders of the Company for approval shall be construed as creating any
limitations on the power or authority of the Board to adopt such other or
additional incentive or other compensation arrangements of whatever nature as
the Board may deem necessary or desirable or preclude or limit the
continuation of any other plan, practice or arrangement for the payment of
compensation or fringe benefits to employees generally, or to any class or
group of employees, which the Company or any Subsidiary now has lawfully put
into effect, including, without limitation, any retirement, pension, savings
and stock purchase plan, insurance, death and disability benefits and
executive short-term incentive plans.
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<PAGE>
13. NATURE OF PAYMENTS
(a) All Options granted shall be in consideration of services performed for
the Company by the Optionee.
(b) All Options granted shall constitute a special incentive benefit to the
Optionee and shall not be taken into account in computing the amount of salary
or compensation of the Optionee for the purpose of determining any benefits
under any pension, retirement, profit-sharing, bonus, life insurance or other
benefit plan of the Company or under any agreement between the Company and the
Optionee, unless such plan or agreement specifically otherwise provides.
14. NONUNIFORM DETERMINATIONS
The Committee's determinations under this Plan need not be uniform and may
be made by it selectively among persons who receive, or are eligible to
receive, Options (whether or not such persons are similarly situated). Without
limiting the generality of the foregoing, the Committee shall be entitled,
among other things, to make nonuniform and selective determinations which may,
inter alia, reflect the specific terms of individual employment agreements,
and to enter into nonuniform and selective Option Agreements, as to the
persons to receive Options and the terms and conditions of Options.
15. SECTION HEADINGS
The section headings contained herein are for the purpose of convenience
only and are not intended to define or limit the contents of said sections.
Adopted by the Board of Directors on May 18, 1998.
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<PAGE>
EURONET SERVICES INC.
Written Consent of Shareholders
in lieu of Annual Meeting
Consent Solicited on Behalf of the Board of Directors
The undersigned consents to the actions specified on the reverse side.
THIS CONSENT, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS GIVEN, THIS WILL BE DEEMED TO
HAVE CONSENTED TO THE ELECTION OF EACH OF THE NOMINEES IN PROPOSAL 1 AND IN
FAVOR OF PROPOSALS 2 AND 3.
- --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY USING THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please sign exactly as your name(s) appear(s) on the books of the Company, Joint
owners should each sign personally. Trustee, custodians, and other fiduciaries
should indicate the capacity in which they sign, and where more than one name
appears, a majority must sign. If the shareholder is a corporation, this
signature should be that of an authorized officer who should indicate his or her
title.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ------------------------------------- --------------------------------------
- ------------------------------------- --------------------------------------
- ------------------------------------- --------------------------------------
<PAGE>
<TABLE>
<CAPTION>
[X] PLEASE MARK CONSENT
AS IN THIS EXAMPLE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------- 1. Election of Directors. With- For All
EURONET SERVICES, INC. For hold Except
- ----------------------------------------------------------------------------
Michael J. Brown [_] [_] [_]
Andrzej Olechowski
<CAPTION>
<S> <C>
Mark box at right if an address change or comment has been noted on [_] NOTE: If you do not wish to consent "FOR" a
the reverse side of this card. particular nominee, mark the "For All Except"
box and strike a line through that nominee's
name. You shall consent to the election of the
RECORD DATE SHARES: remaining nominee.
<CAPTION>
<S> <C> <C> <C> <C>
For Against Abstain
2. Approval of the adoption
of the Stock Option Plan. [_] [_] [_]
For Against Abstain
3. Ratify the adoption of
the 1996 Stock Option
Plan. [_] [_] [_]
-----------------
Please be sure to sign and date this Consent. Date
- ----------------------------------------------------------------------------
- --------Shareholder sign here-----------Co-owner sign here------------------
DETACH CARD DETACH CARD
</TABLE>
EURONET SERVICES INC.
Dear Shareholder,
Please take note of the important information enclosed with this Consent Form.
There are a number of issues related to the management and operation of your
Corporation that require your immediate attention and approval. These are
discussed in detail in the enclosed solicitation materials.
Your vote counts, and your are strongly encouraged to exercise your right to
consent.
Please mark the boxes on this Consent Form to indicate how your shares will be
voted. Then sign the card, detach it and return your Consent Form in the
enclosed postage paid envelope.
Your vote must be received prior to July 28, 1998.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Euronet Services Inc.
