e10vk

Location

Former Use

Year Closed

Atlanta, GA

Operations support

Atlanta, GA

Atlanta, GA

Information Technology

0000950123-11-021958.txt : 20110304 0000950123-11-021958.hdr.sgml : 20110304 20110304065919 ACCESSION NUMBER: 0000950123-11-021958 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20101231 FILED AS OF DATE: 20110304 DATE AS OF CHANGE: 20110304 FILER: COMPANY DATA: COMPANY CONFORMED NAME: M & F WORLDWIDE CORP CENTRAL INDEX KEY: 0000945235 STANDARD INDUSTRIAL CLASSIFICATION: AIRCRAFT PART & AUXILIARY EQUIPMENT, NEC [3728] IRS NUMBER: 020423416 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13780 FILM NUMBER: 11662379 BUSINESS ADDRESS: STREET 1: 35 E 62ND ST CITY: NEW YORK STATE: NY ZIP: 10021 BUSINESS PHONE: 2125728600 MAIL ADDRESS: STREET 1: 35 EAST 62ND STREET CITY: NEW YORK STATE: NY ZIP: 10021 10-K 1 y04589e10vk.htm FORM 10-K e10vk

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K


(Mark One)

x		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2010
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number 1-13780

M & F WORLDWIDE CORP.

(Exact name of registrant as specified in its charter)


Delaware
(State or other jurisdiction of incorporation or organization)		02-0423416 (I.R.S. Employer Identification No.)

35 East 62^nd Street, New York, N.Y. (Address of principal executive offices)		10065 (Zip Code)

212-572-8600
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Name of each exchange on which registered

Common Stock, par value $0.01 per share		New York Stock Exchange, Inc.

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

o Yes x No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

o Yes x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

o Yes o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o	Accelerated filer x	Non-accelerated filer o	Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

o Yes x No

The aggregate market value of the common stock held by non-affiliates of the registrant (using the New York Stock Exchange closing price as of June 30, 2010, the last business day of the registrant’s most recently completed second fiscal quarter) was $296,472,130. The number of shares of common stock outstanding as of March 4, 2011 was 19,333,931; of which 7,248,000 shares were held by MFW Holdings One LLC and 1,012,666 shares were held by MFW Holdings Two LLC, each of which are wholly owned subsidiaries of MacAndrews & Forbes Holdings Inc.

Portions of the registrant’s 2011 definitive Proxy Statement issued in connection with the annual meeting of stockholders are incorporated by reference into Part III of this Form 10-K.

This Form 10-K is being distributed to stockholders in lieu of a separate annual report.

M & F WORLDWIDE CORP.

INDEX TO ANNUAL REPORT ON FORM 10-K

For the Year Ended December 31, 2010


			PAGE

PART I
	Item 1.	Business		1
		Harland Clarke Holdings Corp.		2
		Harland Clarke		2
		Harland Financial Solutions		4
		Scantron		5
		Mafco Worldwide		8
		Non-Operating Contingent Claims, Indemnification and Insurance Matters		12
	Item 1A.	Risk Factors		16
	Item 1B.	Unresolved Staff Comments		36
	Item 2.	Properties		36
	Item 3.	Legal Proceedings		38
	Item 4.	Removed and Reserved		38

PART II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		39
	Item 6.	Selected Financial Data		40
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		42
	Item 7A.	Quantitative and Qualitative Disclosures about Market Risks		75
	Item 8.	Financial Statements and Supplementary Data		75
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		75
	Item 9A.	Controls and Procedures		75
	Item 9B.	Other Information		78

PART III
	Item 10.	Directors, Executive Officers and Corporate Governance		*
	Item 11.	Executive Compensation		*
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		*
	Item 13.	Certain Relationships and Related Transactions, and Director Independence		*
	Item 14.	Principal Accounting Fees and Services		*

PART IV
	Item 15.	Exhibits and Financial Statement Schedules		80
EX-4.21
EX-21.1
EX-23.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2


*		Incorporated by reference from M & F Worldwide Corp. 2011 Proxy Statement

PART I


Item 1.	Business

M & F Worldwide Corp. (“M & F Worldwide” and, together with its subsidiaries, the “Company”) was incorporated in Delaware on June 1, 1988. M & F Worldwide is a holding company that conducts its operations through its indirect wholly owned subsidiaries, Harland Clarke Holdings Corp. (“Harland Clarke Holdings”), formerly known as Clarke American Corp. (“Clarke American”), and Mafco Worldwide Corporation (“Mafco Worldwide”). At December 31, 2010, MacAndrews & Forbes Holdings Inc. (“Holdings”), through its wholly owned subsidiaries MFW Holdings One LLC and MFW Holdings Two LLC, beneficially owned approximately 43.4% of the outstanding M & F Worldwide common stock.

The Company has organized its business and corporate structure along the following four business segments: Harland Clarke, Harland Financial Solutions, Scantron and Licorice Products.

The Harland Clarke segment offers checks and related products, forms and treasury supplies, and related delivery and fraud prevention products to financial services, retail and software providers. It also provides direct marketing services to their clients including direct marketing campaigns, direct mail, database marketing, telemarketing and e-mail marketing. In addition to these products and services, the Harland Clarke segment offers stationery, business cards and other business and home office products to consumers and small businesses.

The Harland Financial Solutions segment provides technology products and services to financial services clients worldwide, including lending and mortgage compliance and origination applications, risk management solutions, business intelligence solutions, Internet and mobile banking applications, branch automation solutions, self-service solutions, electronic payment solutions and core processing systems.

The Scantron segment provides data management solutions and related services to educational, commercial, healthcare and governmental entities worldwide including testing and assessment solutions, patient information collection and tracking, and survey services. Scantron’s solutions combine a variety of data collection, analysis, and management tools, including web-based solutions, software, scanning equipment, forms, and related field maintenance services.

On July 21, 2010, Scantron Corporation (“Scantron”), a wholly owned subsidiary of Harland Clarke Holdings, acquired 100% of the equity of Spectrum K12 School Solutions, Inc. (“Spectrum K12”). Spectrum K12 develops, markets and sells student achievement management, response to intervention and special education software solutions. Spectrum K12’s software solutions complement Scantron’s software solutions for education assessments, content and data management (see Note 3 to the Company’s consolidated financial statements included elsewhere in this Annual Report on Form 10-K).

The Licorice Products segment, which is operated by Mafco Worldwide, produces a variety of licorice products from licorice root, intermediary licorice extracts produced by others and certain other ingredients. Approximately 63% of Mafco Worldwide’s licorice product sales are to the worldwide tobacco industry for use as tobacco flavor enhancing and moistening agents in the manufacture of American blend cigarettes, moist snuff, chewing tobacco and pipe tobacco. Mafco Worldwide also manufactures and sells natural products for use in the tobacco industry. Mafco Worldwide also sells licorice products to food processors, confectioners, cosmetic companies and pharmaceutical manufacturers for use as flavoring or masking agents, including its Magnasweet brand flavor enhancer, which is used in various brands of chewing gum, energy bars, non-carbonated beverages, lip balm, chewable vitamins, aspirin and other products. In addition, Mafco Worldwide sells licorice root residue as garden mulch under the name Right Dress.

Company Overview

Harland Clarke Holdings

Harland Clarke

Harland Clarke provides checks and related products, direct marketing services and customized business and home office products to financial services, retail and software providers as well as consumers and small business. In 2010, Harland Clarke generated revenues of $1,191.2 million (67% of the Company’s 2010 consolidated net revenues).

Products and Services

Checks and Related Products

In addition to offering basic consumer and small business checks, Harland Clarke also offers checks customized with licensed designs and characters, such as cartoon characters, collegiate designs and photographs. Harland Clarke also offers a variety of financial documents in conjunction with consumer and small business financial software packages. Accessory products include leather checkbook covers, endorsement stamps, address labels, recording registers and other bill paying accessories. In addition, Harland Clarke also offers its clients a variety of fraud prevention solutions.

Harland Clarke offers various delivery options, including expedited and trackable delivery. Check users often prefer expedited delivery to both receive their order sooner and for the security and tracking features that these expedited methods provide. These delivery services represent an important component of the range of value-added service offerings.

Harland Clarke also offers a wide variety of standard financial forms and flexible formats to suit clients’ needs, and the products are also compatible with image processing systems. Harland Clarke also provides treasury management supplies, such as integrated cash deposit products, customized deposit tickets and security bags.

Marketing Services

Harland Clarke also offers integrated, multi-channel marketing services that help clients measure, understand, manage and optimize their business-to-consumer and business-to-business relationships as well as their returns on marketing investments. These services include:


	•	marketing strategies such as acquisition, lead generation and nurturing, retention, activation, cross-selling and up-selling;

	•	data management and analytics;

	•	database design, development and hosting;

	•	print production and lettershop;

	•	teleservices; and

	•	online and e-mail marketing with advanced filtering to deliver targeted messages, social media and web analytics integration, and tools to manage complex enterprise and channel programs.

Customized Business and Home Office Products

In addition to a wide variety of checks and related products, Harland Clarke offers consumers and small businesses customized products including stationery, business cards, notepads, invitations, announcements, labels, rubber stamps and envelopes.

Sales and Marketing

Harland Clarke manages relationships with large and complex financial and commercial institutions through dedicated account management teams composed of relationship management, marketing, operations and service oriented skill sets. In addition, Harland Clarke has a national sales force targeting distinct financial institution segments ranging from major nationwide and large regional banks and securities firms to community banks and credit unions. Hosted websites, contact center services and mail order forms enable clients to offer convenient ordering options to their customers.

Harland Clarke also markets its products directly to consumers and small businesses through advertising inserts in newspapers, advertisements sent directly to residences, and online and e-mail advertising. Online shopping, contact center access and mail order forms enable consumers to order at their convenience.

Clients

The clients of Harland Clarke range from major national and large regional banks and securities firms to community banks, credit unions, brokerage houses, retailers and software companies. In addition, Harland Clarke clients include consumers and small businesses.

Harland Clarke contracts with its clients are generally sole-source contracts for the sale of its checks and related products to the clients’ customers. The initial terms of the agreements generally range from three to five years and generally are terminable for cause, although some of its financial institution clients can terminate their contracts for convenience.

Competition

Harland Clarke’s primary competition comes from alternative payment methods such as debit cards, credit cards, ACH, and other electronic and online payment options. Harland Clarke also competes with large providers that offer a wide variety of products and services including Deluxe Corporation, Harte-Hanks, Inc., and R.R. Donnelley & Sons Company. There are also many other competitors that specialize in providing one or more of the products and services Harland Clarke offers to its clients. Harland Clarke competes on the basis of service, convenience, quality, product range and price.

Environmental Matters

Harland Clarke’s current check printing operations use hazardous materials in the printing process and generate solid wastes, wastewater and air emissions. Consequently, its facilities are subject to many existing and proposed federal, state and local laws and regulations designed to protect human health and the environment. While enforcement of these laws may require the expenditure of material amounts for environmental compliance or cleanup, Harland Clarke believes that its facilities are currently in material compliance with such laws and regulations.

Historic check printing operations at Harland Clarke’s current and former facilities used hazardous materials and generated regulated wastes in greater quantities than Harland Clarke’s current operations. In some instances Harland Clarke has sold these facilities and agreed to indemnify the buyer of the facility for potential environmental liabilities. Harland Clarke may also be subject to liability under environmental laws for environmental conditions at these current or former facilities or in connection with the disposal of waste generated at these facilities. Harland Clarke is not aware of any fact or circumstance that would require the expenditure of material amounts for environmental cleanup or indemnification in connection with its historic operations. However, if environmental contamination is discovered at any of these former facilities or at locations where wastes were disposed, Harland Clarke could be required to spend material amounts for environmental cleanup.

It is generally not possible to predict the ultimate total costs relating to any remediation that may be demanded at any environmental site due to, among other factors, uncertainty regarding the extent of prior pollution, the complexity of applicable environmental laws and regulations and their interpretations, uncertainty regarding future changes to such laws and regulations or their enforcement, the varying costs and effectiveness of alternative cleanup technologies and methods, and the questionable and varying degrees of responsibility and/or involvement by Harland Clarke.

Harland Financial Solutions

Harland Financial Solutions provides technology products and services to financial services clients worldwide including lending and mortgage applications, risk management solutions, business intelligence solutions, Internet and mobile banking applications, branch automation solutions, self-service solutions, electronic payment solutions and core processing systems. In 2010, Harland Financial Solutions generated revenues of $282.7 million (16% of the Company’s 2010 consolidated net revenues).

Products and Services

Harland Financial Solutions provides host processing systems on both an in-house and outsourced basis to financial institutions, including banks, credit unions and thrifts. Its products centralize customer information and facilitate high speed and reliable processing of transactions from every delivery channel. Harland Financial Solutions has integrated its compliance, branch automation, Internet banking, mobile banking and business intelligence products into its core processing solutions. Management believes that this integration capability differentiates Harland Financial Solutions from other providers. Harland Financial Solutions helps financial institutions increase the profitability of customer relationships through business intelligence and branch automation software. Harland Financial Solutions offers Internet banking, mobile banking and branch automation systems designed to enhance the customer experience through integrated teller, platform, call center and self-service tools from new account opening and funding to account-to-account money transfers, person-to-person payments, account and adviser-client relationship management, and bill presentment and payment.

Harland Financial Solutions also sells loan and deposit origination and compliance software to financial institutions. Harland Financial Solutions offers a complete product suite, Pro Suite, including solutions for lending, account opening, sales management and loan underwriting. Harland Financial Solutions also offers a commercial lending risk management, underwriting and portfolio management product suite marketed as CreditQuest. Harland Financial Solutions provides mortgage loan origination, production and servicing solutions through its various products.

As a result of the Parsam acquisition in December 2010, Harland Financial Solutions has a software development and support operation consisting of approximately 40 information technology professionals located in Thiruvananthapuram, India.

Backlog

Harland Financial Solutions’ backlog was estimated to be $366.1 million at December 31, 2010. Backlog consists of contracted products, maintenance, outsourced services and professional services prior to delivery. The Company expects to deliver approximately 36% of this backlog during 2011. Due to the long-term nature of certain service contracts, primarily in the service bureau business, the remainder of the backlog will be delivered in 2012 and beyond. During 2010, Harland Financial Solutions updated its definition of backlog to include contracted maintenance and contractual adjustments to prices during the term of the agreement and refined its calculation to eliminate a seasonal bias at year end. Under this definition and calculation, the value of Harland Financial Solutions backlog was estimated to be $347.8 million at December 31, 2009.

Sales and Marketing

Harland Financial Solutions predominately sells its products and services directly to financial institutions through its own national sales organization supported by dedicated product management, marketing, and client support organizations.

Clients

Harland Financial Solutions is a leading supplier of financial software and services to financial institutions, including banks, credit unions and thrifts. Harland Financial Solutions contracts generally provide for a license with ongoing maintenance or a term-based service arrangement.

Competition

Providing technological solutions to financial institutions is highly competitive and fragmented. Harland Financial Solutions competes with several large and diversified financial technology providers, including, among others, Fidelity National Information Services, Inc., Fiserv, Inc., Jack Henry & Associates, Inc., Open Solutions Inc., Computer Services Inc. and many regional providers. Many multi-national and international providers of technological solutions to financial institutions also compete with products or services offered by Harland Financial Solutions both domestically and internationally, including Temenos Group AG, Misys plc, Infosys Technologies Limited, Tata Consultancy and Oracle Financial Services. There are also many other competitors that offer one or more specialized products or services that compete with products and services offered by Harland Financial Solutions. Management believes that competitive factors influencing buying decisions include product features and functionality, client support, price and vendor financial stability.

Scantron

Scantron provides data management solutions and related services to educational, commercial, healthcare and governmental entities worldwide. Scantron’s solutions combine a variety of data collection, analysis and management tools, including web-based software tools, scanning equipment, forms, and related field maintenance services. For the year ended December 31, 2010, Scantron generated revenue of $203.7 million (11% of the Company’s 2010 consolidated net revenues).

Products and Services

Education-Related Products

Scantron’s sales to K-12 educational institutions have historically represented the largest portion of Scantron’s revenues, although it also generates revenues from sales to higher education, healthcare, government and commercial institutions. In 2010, Scantron derived approximately 30% of its revenues from sales to K-12 educational institutions.

Scantron’s Achievement Series is a set of web-based testing solutions that provide schools and other enterprises with a content-neutral platform for measuring achievement, with real-time reporting. Scantron also offers solutions for managing and centralizing the data generated by the testing process to measure progress against state and national standards. Scantron’s Performance Series is an Internet-delivered, standards-based, computer adaptive assessment that provides valid and reliable diagnostic and placement assessment data. Each assessment is adapted for each student, is aligned to individual state standards, and links to instructional applications that can help educators design formative assessment-based instruction.

Scantron has integrated Achievement Series and Performance Series to provide an overall diagnostic, achievement testing, monitoring and data reporting solution. These solutions also allow the easy integration of disparate technologies and content. Scantron’s Achievement Series and Performance Series solutions generate subscription revenues and the opportunity for the sale of associated products, including forms and scanner solutions, testing content, testing-based instruction applications and data management tools.

EXCEED^® is a web-based solution acquired in 2010 in the Spectrum K12 acquisition that manages, administers and prescribes the personalized learning process and data required for all K-12 students. Information about each student is gathered from any assessments to conduct universal screening and ongoing progress monitoring. This instructional outcome data is integrated with other student data like attendance, discipline, and grades to give teachers, principals and school district administrators a centralized, 360 degree view of each student and the data to inform and individualize instruction for every student.

As a result of the GlobalScholar acquisition in January 2011, Scantron provides a comprehensive software platform through GlobalScholar’s Pinnacle System, that supports standards-based student, classroom, and program grading and evaluation, enabling schools to identify deficiencies in student performance and comply with government-mandated standards. The Pinnacle System provides databases of attendance, grades, and student proficiencies that is available over the Internet and through other devices to students, parents, teachers and administrators. Additionally, users worldwide, through a series of websites, can obtain tutoring services and access directories of educational institutions; access lectures and full courses on many topics; obtain educational administrative support and assistance in developing interactive educational websites; and store curriculum, testing, and evaluation information. With the GlobalScholar acquisition, Scantron acquired operations located in Chennai, India consisting of approximately 200 employees. Approximately 100 of these employees are information technology professionals who provide software development and support services.

Scantron provides educational institutions with a patented forms and scanner solution for standardized and classroom-based testing needs. The Scantron forms and scanner solution has achieved widespread acceptance among educational institutions. Scantron generates forms and scanner solutions revenues by charging for the purchase or lease of scanners and the purchase of forms by the client. In addition, Scantron has a loan marketing program, under which a scanner is loaned to a client in exchange for a minimum annual forms purchase.

Scantron also offers custom form and scanner solutions, course evaluations and classroom testing software packages, and student response devices.

Commercial, Healthcare, and Government-Related Products

Scantron provides data management outsourcing services for clients using web-based, telephone and paper-based methods for data collection, processing, analysis and reporting. These services include customer and employee surveys, patient information tracking, and a wide variety of other data collection, analysis and management applications.

Scantron provides custom form and scanner solutions for a wide variety of data collection applications such as patient information collection, safety assessments and employee testing or information collection. Scantron offers scanners with both optical mark and full image capabilities. The scanners range in size and speed for various customer applications. Scantron also provides software that converts optical marks and images into digital data for delivery to third-party applications.

In addition, Scantron offers software packages for client-managed survey and general data collection.

Field Maintenance Services

Scantron provides field maintenance services including installation, maintenance and repairs for computers and other third-party equipment as well as Scantron scanners.

Backlog

Scantron’s backlog, which consists primarily of contracted products and services prior to delivery, was estimated to be $60.4 million and $65.3 million at December 31, 2010 and 2009, respectively. The Company expects to deliver approximately 81% of the 2010 backlog during 2011.

Sales, Marketing and Product Support

Scantron sells its products and services directly through sales organizations segmented by industry vertical or product category. Scantron provides comprehensive product support to its clients directly with telephone and online support and provides on-site and depot support for scanner products.

Clients

Clients for Scantron’s educational products range from K-12 institutions and districts to higher education institutions. Clients for Scantron’s other data management products include commercial, healthcare and government organizations.

Competition

Scantron competes with many education software providers at the K-12 and higher education levels. Scantron also faces significant competition from a number of local and regional education competitors. Scantron faces competition with respect to its forms and scanners from large international and regional printers and manufacturers. The business landscape for commercial, healthcare and governmental data management is highly fragmented, and Scantron faces competition for its products and services from many large and small companies.

Harland Clarke Holdings’ Suppliers

The main supplies used in check and form printing are paper, print ink, binders, boxes, packaging and delivery services. For all critical supplies, Harland Clarke has at least two qualified suppliers or multiple qualified production sites in order to ensure that supplies are available as needed. Using alternative suppliers may, however, result in increased costs. Harland Clarke has not historically experienced any material shortages and management believes Harland Clarke has redundancy in its supplier network for each of its key inputs.

Scantron purchases a majority of the paper for its business from a single supplier. It purchases scanner components from various equipment manufacturers and supply firms. Scantron historically has not experienced shortages of materials and believes it will continue to be able to obtain such materials or suitable substitutes in acceptable quantities and at acceptable prices.

Harland Clarke Holdings’ Foreign Sales

Harland Clarke Holdings conducts business outside the United States in Canada, India, Ireland and Israel. Its foreign sales totaled $20.6 million in 2010, $18.1 million in 2009 and $19.1 million in 2008.

Harland Clarke Holdings’ Employees

As of December 31, 2010, Harland Clarke Holdings had approximately 7,900 employees. No employees of Harland Clarke Holdings are represented by a labor union. Harland Clarke Holdings considers its employee relations to be good.

Harland Clarke Holdings’ Intellectual Property

Harland Clarke Holdings relies on a combination of trademark, copyright and patent laws, trade secret protection and confidentiality and license agreements to protect its trademarks, copyrights, software, inventions, trade secrets, know-how and other intellectual property. The sale of products bearing trademarks or designs licensed from third parties accounts for a significant portion of Harland Clarke Holdings’ revenue. Typically, such license agreements are effective for a two- to three-year period, provide for the retention of ownership of the tradename, know-how or other intellectual property by the licensor and require the payment of a royalty to the licensor. There can be no guarantee that such licenses will be renewed or will continue to be available on terms that would allow Harland Clarke Holdings to sell the licensed products profitably.

Governmental Regulation Related to Harland Clarke Holdings

Harland Clarke Holdings is subject to the federal financial modernization law known as the Gramm-Leach-Bliley Act and the regulations implementing its privacy and information security requirements, as well as other privacy and data security federal and state laws and regulations. Harland Clarke Holdings is also subject to additional privacy and information security requirements in many of its contracts with financial institution clients, which are often more restrictive than the laws or regulations. These laws, regulations and agreements require Harland Clarke Holdings to develop and implement policies to protect the security and confidentiality of consumers’ nonpublic personal information and to disclose these policies to consumers before a customer relationship is established and periodically thereafter.

These laws and regulations require some of Harland Clarke Holdings’ businesses to provide a notice to consumers to allow them the opportunity to have their nonpublic personal information removed from Harland Clarke Holdings’ files before Harland Clarke Holdings shares their information with certain third parties. These laws and regulations may limit Harland Clarke Holdings’ ability to use its direct-to-consumer data in its businesses. Current laws and regulations allow Harland Clarke Holdings to transfer consumer information to process a consumer-initiated transaction, but also require Harland Clarke Holdings to protect the confidentiality of a consumer’s records or to protect against actual or potential fraud, unauthorized transactions, claims or other liabilities. Harland Clarke Holdings is also allowed to transfer consumer information for required institutional risk control and for resolving customer disputes or inquiries. Harland Clarke Holdings may also contribute consumer information to a consumer-reporting agency under the Fair Credit Reporting Act. Some of Harland Clarke Holdings’ financial institution clients request various contractual provisions in their agreements that are intended to comply with their obligations under the Gramm-Leach-Bliley Act and other laws and regulations.

Congress and many states have passed and are considering additional laws or regulations that, among other things, restrict the use, purchase, sale or sharing of nonpublic personal information about consumers and business customers. New laws and regulations may be adopted in the future with respect to the Internet, e-commerce or marketing practices generally relating to consumer privacy. Such laws or regulations may impede the growth of the Internet and/or use of other sales or marketing vehicles. For example, new privacy laws could decrease traffic to Harland Clarke Holdings’ websites, decrease telemarketing opportunities and decrease the demand for its products and services. Additionally, the applicability to the Internet of existing laws governing property ownership, taxation and personal privacy is uncertain and may remain uncertain for a considerable length of time.

Mafco Worldwide

Overview

Mafco Worldwide produces a variety of licorice products from licorice root, intermediary licorice extracts produced by others and certain other ingredients at its facilities in Camden, New Jersey; Richmond, Virginia; Gardanne, France; and Zhangjiagang, Jiangsu, People’s Republic of China (“ZFTZ”). Approximately 63% of Mafco Worldwide’s licorice product sales are to the worldwide tobacco industry for use as tobacco flavor enhancing and moistening agents in the manufacture of American blend cigarettes, moist snuff, chewing tobacco and pipe tobacco. While licorice represents a small percentage of the total cost of manufacturing

American blend cigarettes and other tobacco products, the particular formulation and quantity used by each brand is an important element in the brand’s quality. In addition, Mafco Worldwide manufactures and sells cocoa and carob products for use in the tobacco industry.

Mafco Worldwide also sells licorice products worldwide to food processors, confectioners, cosmetic companies and pharmaceutical manufacturers for use as flavoring and masking agents, including its Magnasweet brand flavor enhancer, which is used in various brands of chewing gum, lip balm, energy bars, non-carbonated beverages, chewable vitamins, aspirin and other products.

Mafco Worldwide also sells licorice root residue as garden mulch under the name Right Dress.

Mafco Worldwide has achieved its position as the world’s leading manufacturer of licorice products through its experience in obtaining licorice root, its technical expertise at maintaining the consistency and quality of its product and its ability to develop and manufacture proprietary formulations for individual customers and applications. In 2010, Mafco Worldwide generated revenues of $111.4 million (6% of the Company’s 2010 consolidated net revenues).

Products and Manufacturing

Licorice Products

Mafco Worldwide selects licorice root from various sources to optimize flavor enhancing and chemical characteristics and then shreds the root to matchstick size. Licorice solids are then extracted from the shredded root with hot water. After filtration and evaporation, the concentrated extract is converted into powder, semi fluid or blocks, depending on the customer’s requirements, and then packaged and shipped. For certain customers, extracts from root may be blended with intermediary licorice extracts from other producers and non-licorice ingredients to produce licorice products that meet the individual customer’s requirements. Licorice extracts are further purified through various chemical and physical separation processes at Mafco Worldwide’s facilities in China to produce licorice derivatives. Mafco Worldwide maintains finished goods inventories of licorice extracts and licorice derivatives of sufficient quantity to normally provide immediate shipment to its tobacco and non-tobacco customers. In addition, Mafco Worldwide sells licorice root residue as garden mulch under the name Right Dress.

Non-licorice Products

Mafco Worldwide also sells flavoring agents and plant products to the tobacco and health food industries. Mafco Worldwide cuts, grinds and extracts natural plant products into finished products.

Raw Materials

Licorice is derived from the roots of the licorice plant, a shrub-like leguminous plant that is indigenous to the Middle East and Central Asia. The plant’s roots, which can be up to several inches thick and up to 25 feet long, are harvested when the plant is about four years old. They are then cleaned, dried and bagged or pressed into bales. Through its foreign suppliers, Mafco Worldwide acquires the root in local markets for shipment to Mafco Worldwide’s licorice extract processing facilities. Most of the licorice root processed by Mafco Worldwide originates in Afghanistan, the People’s Republic of China, Pakistan, Iraq, Azerbaijan, Turkmenistan, Uzbekistan and Turkey. Through many years of experience, Mafco Worldwide has developed extensive knowledge and relationships with its suppliers in these areas. Although the amount of licorice root Mafco Worldwide purchases from any individual source or country varies from year to year depending on cost and quality, Mafco Worldwide endeavors to purchase some licorice root from all available sources. This sourcing strategy enables Mafco Worldwide to maintain multiple sources of supply and relationships with many suppliers so that, if the licorice root from any one source becomes temporarily unavailable or uneconomical, Mafco Worldwide will be able to replace that source with licorice root from another area or supplier. Mafco Worldwide has therefore been able to obtain licorice root raw materials without interruption since World War II, even though there has been periodic instability in the areas of the world where licorice root raw materials are obtained. During 2010, Mafco Worldwide had numerous suppliers of root, and one

vendor who supplied approximately 42% of Mafco Worldwide’s total root purchases. Mafco Worldwide tries to maintain a sufficient licorice root raw material inventory and open purchase contracts to meet normal production needs for two to three years. At December 31, 2010, Mafco Worldwide had on hand a supply of licorice root raw material of approximately three years. Licorice root has an indefinite retention period as long as it is kept dry, and therefore Mafco Worldwide has experienced little, if any, raw material spoilage.

In addition to licorice root, Mafco Worldwide also uses intermediary licorice extracts and licorice derivatives produced by Mafco Worldwide’s facilities in ZFTZ and purchases licorice extracts and derivatives from other manufacturers for use as a raw material. These products are available from producers primarily in the People’s Republic of China and Central Asia in quantities sufficient to meet Mafco Worldwide’s current requirements and anticipated requirements for the foreseeable future. During 2010, Mafco Worldwide had several suppliers of derivatives and one vendor supplied approximately 54% of Mafco Worldwide’s total derivative purchases.

Other raw materials for Mafco Worldwide’s non-licorice products and plant products are commercially available through many domestic and foreign sources.

Operating Strategies

Mafco Worldwide intends to maintain its position as the world leader in licorice products by continuing to manufacture high quality licorice extracts and derivatives to meet its customer’s strict quality requirements and by providing a high level of security of supply and superior service to its customers. In order to accomplish these goals, Mafco Worldwide will continue to make significant investments in licorice raw materials and will continue to operate factories and invest in raw material collection and manufacturing ventures in strategic areas of the world.

Sales and Marketing

All sales in the United States (including sales of licorice products to United States cigarette manufacturers for use in American blend cigarettes to be exported) are made through Mafco Worldwide’s offices located in Camden, New Jersey or Richmond, Virginia, with technical support from Mafco Worldwide’s research and development department. Outside the United States, Mafco Worldwide sells its products from its Camden, New Jersey offices, through its French and Chinese subsidiaries and its sales office in Dubai, United Arab Emirates and through exclusive agents as well as independent distributors.

Mafco Worldwide has established strong relationships with its customers in the tobacco, confectionery and other industries because of its expertise in producing and supplying consistent quality licorice products and other flavor enhancing agents with a high level of service and security of supply. Mafco Worldwide ships products worldwide and provides technical assistance for product development for both tobacco and non-tobacco applications.

Mafco Worldwide sells licorice root residue, a by-product of the licorice extract manufacturing process, as garden mulch under the name Right Dress. Distribution of Right Dress is generally limited to the area within a 200-mile radius of Camden, New Jersey due to shipping costs and supply limitations.

Competition

Mafco Worldwide’s position as the largest manufacturer of licorice products in the world arises from its long-standing ability to provide its customers with a steady supply of high quality and consistent products, together with superior technical support. Producing licorice products of consistently high quality requires an experienced work force, careful manufacturing and rigorous quality control. Mafco Worldwide’s long-term relationships and knowledge of the licorice root market are of great value in enabling it to consistently acquire quality raw materials. Although Mafco Worldwide could face increased competition in the future, Mafco Worldwide currently encounters limited competition in sales of licorice products to tobacco companies in many of its markets as a result of the factors described above and the large investments in inventories of raw materials and production facilities that are required to adequately fulfill its customers’ needs. Other markets in

which Mafco Worldwide operates, particularly the confectionery licorice market in Europe, are more competitive. Significant competing producers of licorice products are government-owned and private corporations in the People’s Republic of China and Iran and a private corporation based in Israel.

The Tobacco Industry

Sales of licorice extract to the worldwide tobacco industry are a material part of the overall sales of Mafco Worldwide, so developments and trends within the tobacco industry may have a material effect on its operations.

Changing public attitudes toward tobacco products, an increased emphasis on the public health aspects of tobacco product consumption, increases in excise and other taxes on tobacco products and a constant expansion of tobacco regulations in a number of countries have contributed significantly to this worldwide decline in consumption. Moreover, the trend is toward increasing regulation of the tobacco industry and taxation of tobacco products. Restrictive tobacco legislation has also included restrictions on where and how tobacco may be sold and used, imposition of warning labels and other graphic packaging images and, recently, restrictions on tobacco product ingredients.

Producers of tobacco products are subject to regulation in the United States at the federal, state and local levels, as well as in foreign countries. In 2009, the United States government enacted the Family Smoking Prevention and Tobacco Control Act, which provides greater regulatory oversight for the manufacture of tobacco products, including the ability to regulate tobacco product additives. As a result, the United States Food & Drug Administration has the power to limit the type or quantity of additives that may be used in the manufacture of tobacco products in the United States.

Similarly, countries outside the United States have rules restricting the use of various ingredients in tobacco products. During 2005, the World Health Organization promulgated its Framework Convention for Tobacco Control (the “FCTC”). The FCTC is the first international public health treaty and establishes a global agenda for tobacco regulation in order to limit the use of tobacco products. More than 160 countries, as well as the European Union, have become parties to the FCTC. In November 2010, the governing body of the FCTC issued guidelines that provide non-binding recommendations to restrict or ban flavorings and additives that increase the attractiveness of tobacco products and require tobacco product manufacturers to disclose ingredient information to public health authorities who would then determine whether such ingredients increase attractiveness. The European Commission and individual governments are also considering regulations to further restrict or ban various cigarette ingredients. Future tobacco product regulations may be influenced by these FCTC recommendations.

In October 2009, the Canadian federal government adopted a law that banned virtually all flavor ingredients in cigarettes and little cigars. Certain tobacco-related businesses have contended that the Canadian law effectively bans the sale in Canada of traditional American blend cigarettes containing licorice extract.

Over the years, there has been substantial litigation between tobacco product manufacturers and individuals, various governmental units and private health care providers regarding increased medical expenditures and losses allegedly caused by use of tobacco products. Some of this litigation has been settled through the payment of substantial amounts to various state governments, and United States cigarette companies significantly increased the wholesale price of cigarettes in order to recoup a portion of the settlement cost. Cigarette companies have also sought to offset the cost of these payments by changing product formulations and introducing new products with decreased ingredient costs. There may be an increase in health-related litigation against the tobacco industry, and it is possible that Mafco Worldwide, as a supplier to the tobacco industry, may become a party to such litigation. This litigation, if successful, could have a material adverse effect on Mafco Worldwide.

Insurance Program (SCHIP). The health programs in this legislation are being funded by an increase in the federal tax on cigarettes to $1.0066 per pack from the previous $0.39 per pack and by significant increases in federal taxes on cigars and other tobacco products. Other proposals to increase taxes on tobacco products are also regularly introduced in the United States and foreign countries. Additional taxes may lead to an accelerated decline in tobacco product sales.

Publicly available information suggests that the annual cigarette consumption decline is well over 4% on a worldwide basis and has accelerated in recent years. This accelerated rate of decline was due to all the factors mentioned in the discussion above. Tobacco products other than cigarettes, mainly chewing tobacco and moist snuff, also contain licorice extract and consumption of these products is concentrated primarily in the United States. Domestic consumption of chewing tobacco products has declined by approximately 7% per year over the past five years. Moist snuff consumption has increased approximately 5% per year over the past five years due at least in part to the shift away from cigarettes and other types of smoking and smokeless tobacco.

Mafco Worldwide is unable to predict whether there will be additional price or tax increases for tobacco products or the size of any such increases, or the effect of other developments in tobacco regulation or litigation or consumer attitudes on further declines in the consumption of either tobacco products containing licorice extract or on sales of licorice extract to the tobacco industry. Further material declines in sales to the tobacco industry are likely to have a significant negative effect on the financial performance of Mafco Worldwide.

Environmental Matters

Mafco Worldwide is subject to applicable state, federal and foreign environmental laws. Management believes that Mafco Worldwide’s operations are in substantial compliance with all applicable environmental laws. Although no other material capital or operating expenditures relating to environmental controls or other environmental matters are currently anticipated, there can be no assurance that Mafco Worldwide will not incur costs in the future relating to environmental matters that would have a material adverse effect on Mafco Worldwide’s business or financial condition.

Seasonality in Business

The licorice product business is generally non-seasonal. However, sales of Right Dress garden mulch occur primarily in the first six and last two months of the year.

Employees

At December 31, 2010, Mafco Worldwide had 337 employees, of which 145 were covered under collective bargaining agreements. The Mafco Worldwide collective bargaining agreement covering employees at the Camden, New Jersey facility expires at the end of May 2011. Management of Mafco Worldwide believes that employee relations are good.

Non-Operating Contingent Claims, Indemnification and Insurance Matters

The Company’s non-operating contingent claims are generally associated with its indirect, wholly owned, non-operating subsidiary, Pneumo Abex LLC (together with its predecessors in interest, “Pneumo Abex”). Substantially all of these contingent claims are the financial responsibility of third parties and include various environmental and asbestos-related claims. As a result, the Company has not since 1995 paid and does not expect to pay on its own behalf material amounts related to these matters.

agreements, the Original Indemnitor has ultimate responsibility for all the remaining asbestos-related claims asserted against Pneumo Abex through August 1998 and for certain asbestos-related claims asserted thereafter. In connection with the sale by Pneumo Abex in December 1994 of its Friction Products Division, a subsidiary (the “Friction Buyer”) of Cooper Industries, Inc. (now Cooper Industries, LLC, the “Friction Guarantor”) assumed all liability for substantially all asbestos-related claims asserted against Pneumo Abex after August 1998 and not indemnified by the Original Indemnitor. Following the Friction Products sale, Pneumo Abex treated the Division as a discontinued operation and stopped including the Division’s assets and liabilities in its financial statements.

In 1995, MCG Intermediate Holdings Inc. (“MCGI”), M & F Worldwide and two subsidiaries of M & F Worldwide entered into a transfer agreement (the “Transfer Agreement”). Under the Transfer Agreement, Pneumo Abex transferred to MCGI substantially all of its assets and liabilities other than the assets and liabilities relating to its former Abex NWL Aerospace Division (“Aerospace”) and certain contingent liabilities and the related assets, including its historical insurance and indemnification arrangements. The Transfer Agreement provides for appropriate transfer, indemnification and tax sharing arrangements, in a manner consistent with applicable law and previously existing contractual arrangements, as further explained below.

The Transfer Agreement also requires MCGI, which currently is an indirect subsidiary of Holdings, to undertake certain administrative and funding obligations with respect to certain categories of asbestos-related claims and other liabilities, including environmental claims, that Pneumo Abex did not transfer. Pneumo Abex will be obligated to reimburse the amounts so funded only when it receives amounts under related indemnification and insurance agreements. Such administrative and funding obligations would be terminated as to these categories of asbestos-related claims in the case of a bankruptcy of Pneumo Abex or M & F Worldwide or of certain other events affecting the availability of coverage for such claims from third-party indemnitors and insurers. In the event of certain kinds of disputes with Pneumo Abex’s indemnitors regarding their indemnities, the Transfer Agreement permits Pneumo Abex to require MCGI to fund 50% of the costs of resolving the disputes.

Pneumo Abex’s former subsidiary maintained product liability insurance covering substantially all of the period during which it manufactured or distributed asbestos-containing products. The subsidiary and its successors have pursued litigation against the insurers providing this coverage in order to confirm its availability and obtain its benefits. As a result of settlements in that litigation, other coverage agreements with other carriers, payments by the Original Indemnitor and funding payments pursuant to the Transfer Agreement, all of Pneumo Abex’s monthly expenditures for asbestos-related claims other than as described below are managed and paid by others. As of December 31, 2010, the Company has not incurred and does not expect to incur material amounts related to asbestos-related claims not subject to the arrangements described above (the “Remaining Claims”). Management does not expect the Remaining Claims to have a material adverse effect on the Company’s financial position or results of operations, but the Company is unable to forecast either the number of future asbestos-related claimants or the amount of future defense and settlement costs associated with present or future asbestos-related claims.

The Transfer Agreement further provides that MCGI will assume from Pneumo Abex all liability for environmental matters associated with Pneumo Abex’s and its predecessor’s operations to the extent not paid by third-party indemnitors or insurers, other than matters relating to Pneumo Abex’s former Aerospace business. Accordingly, environmental liabilities arising after the 1988 transaction with the Original Indemnitor that relate to the former Aerospace business are the Company’s responsibility. The Original Indemnitor is obligated to indemnify Pneumo Abex for costs, expenses and liabilities relating to environmental and natural resource matters to the extent attributable to the pre-1988 operation of the businesses acquired from the Original Indemnitor, subject to certain conditions and limitations principally relating to compliance with notice, cooperation and other procedural requirements. The Original Indemnitor is generally discharging its environmental indemnification liabilities in the ordinary course, and MCGI manages and advances all costs associated with such matters pending reimbursement by the Original Indemnitor.

and regulations and their interpretations, uncertainty regarding future changes to such laws and regulations or their enforcement, the varying costs and effectiveness of alternative cleanup technologies and methods, and the questionable and varying degrees of responsibility and/or involvement by Pneumo Abex. However, the Company does not itself expect to pay any of these costs due to the Transfer Agreement and the Original Indemnitor’s indemnity.

The Company considers Pneumo Abex’s unassumed contingent claims, except for certain immaterial matters where no third-party indemnification or assumption arrangement exists, to be the financial responsibility of those third parties and monitors their financial positions to determine the level of uncertainty associated with their abilities to satisfy their obligations.

While the Friction Guarantor has been fulfilling its obligation under a 1994 Mutual Guaranty Agreement (the “Mutual Guaranty”) to guarantee the Friction Buyer’s performance since October 2001, when the successor in interest to the Friction Buyer filed for Chapter 11 bankruptcy and stopped performing itself, in May 2010, Pneumo Abex commenced a lawsuit in the New York Supreme Court (the “Transfer Lawsuit”) against the Friction Guarantor and certain of its affiliates alleging, among other things, that various corporate transactions in which the Friction Guarantor and its affiliates had engaged since 2002 had improperly reduced the resources available to satisfy the Mutual Guaranty. Pneumo Abex seeks in the Transfer Lawsuit injunctive relief remedying the financial consequences of these corporate transactions to Pneumo Abex, a constructive trust over the transferred assets, and damages. The Friction Guarantor has continued to perform under the Mutual Guaranty during the pendency of the Transfer Lawsuit and the Company still considers Pneumo Abex’s contingent claims assumed by the Friction Buyer in the Friction Products sale to be the financial responsibility of the Friction Guarantor under the Mutual Guaranty. Based upon the Original Indemnitor’s repeated acknowledgements of its obligations, management’s view of the aggregate resources of the Friction Guarantor and the noted affiliates, the active management by both the Original Indemnitor and the Friction Guarantor of pending contingent claims, the discharging of the related liabilities when required, and their respective financial positions based upon publicly filed financial statements, as well as the history of insurance recovery set forth above, the Company believes that the likelihood that Pneumo Abex will be required to pay material amounts of unreimbursed expense for its contingent claims is remote.

On February 1, 2011, the Company, an affiliate of Holdings, the Friction Guarantor and certain affiliates of the Friction Guarantor entered into an agreement (the “Settlement Agreement”) to settle the Transfer Lawsuit and certain counterclaims that the Friction Guarantor could bring in the Transfer Lawsuit against the Company.

Pursuant to the Settlement Agreement, the direct owner of Pneumo Abex will transfer all of the membership interests in Pneumo Abex to a Delaware statutory trust (the “Settlement Trust”), and the Settlement Trust will become the sole owner and new managing member of Pneumo Abex. The Company will also contribute a total of $15.0 million to Pneumo Abex, half of which is being paid to liquidate an existing indemnification obligation of Mafco Worldwide to Pneumo Abex relating to a reorganization of Pneumo Abex and Mafco Worldwide in 2004. In addition, the Company will pay $5.0 million into the Settlement Trust. Under the Settlement Agreement, the Settlement Trust will also receive a capital contribution from the Friction Guarantor, consisting of a cash contribution of $250.0 million payable at closing and a note in the amount of $57.5 million payable over four years that is guaranteed by certain parent entities of the Friction Guarantor, subject to certain adjustments.

Following the closing under the Settlement Agreement:


	•	Pneumo Abex, owned by the Settlement Trust, will continue to resolve asbestos-related claims asserted against it in the tort system,

	•	The Settlement Trust will indemnify Pneumo Abex with respect to the defense and resolution of the asbestos-related claims formerly subject to the Mutual Guaranty,

	•	The Friction Guarantor’s obligation to indemnify Pneumo Abex pursuant to the Mutual Guaranty will terminate,

	•	The Company will be indemnified by the Settlement Trust against any liability for the matters formerly subject to the Mutual Guaranty, and


	•	All other insurance and indemnification rights of Pneumo Abex owing from third parties will remain assets of Pneumo Abex.

The Settlement Agreement is subject to the satisfaction or waiver of various closing conditions, including, among other things, the receipt of a confirmation from the Internal Revenue Service concerning the tax treatment of the transactions contemplated by the Settlement Agreement and an approval by the Supreme Court of the State of New York, County of New York of a stipulation of dismissal of the claims pending or that could have been pending in the Transfer Lawsuit. The parties to the Settlement Agreement received the requisite court approval on February 17, 2011.

Pneumo Abex’s former Aerospace business sold certain of its aerospace products to the United States Government or to private contractors for the United States Government. Pneumo Abex retained in the Aerospace sale certain claims for allegedly defective pricing that the Government made with respect to certain of these products. In the first quarter of 2009, Pneumo Abex resolved the final remaining pricing matter that it managed for a payment of $0.1 million, resulting in a gain of $0.9 million due to the release of a reserve previously accrued for this claim.

Honeywell Indemnification

Certain of the intermediate holding companies of the predecessor of Harland Clarke Holdings had issued guarantees on behalf of operating companies formerly owned by these intermediate holding companies, which operating companies are not part of Harland Clarke Holdings’ businesses. In the stock purchase agreement executed in connection with the 2005 acquisition of Clarke American Corp. by the Company, Honeywell International Inc. agreed to use its commercially reasonable efforts to assume, replace or terminate such guarantees and indemnify the Company and its affiliates, including Harland Clarke Holdings and its subsidiaries, with respect to all liabilities arising under such guarantees.

Other

A series of commercial borrowers in eight states that allegedly obtained loans from banks employing HFS’s LaserPro software have commenced individual or class actions against their banks alleging that the loans were deceptive or usurious in that they failed to disclose properly the effect of the “365/360” method of calculating interest. In some cases, the banks have made warranty claims against HFS related to these actions. Some of these actions have already been dismissed, and many of the remainder, and the related warranty claims, are at early stages, so that the likely progress of the matters still pending is not yet clear. HFS settled one warranty claim in 2009 for an immaterial amount without any admission of liability. The Company has not accepted any of the remaining warranty claims and does not believe that any of these claims will result in material liability for the Company, but there can be no assurance.

Various other legal proceedings, claims and investigations are pending against the Company, including those relating to commercial transactions, product liability, environmental, safety and health matters, employment matters and other matters. The Company is also involved in various stages of legal proceedings, claims, investigations and cleanup relating to environmental or natural resource matters, some of which relate to waste disposal sites. Most of these matters are covered by insurance, subject to deductibles and maximum limits, and by third-party indemnities. In the opinion of management, based upon the information available at this time, the outcome of the matters referred to above will not have a material adverse effect on the Company’s financial position or results of operations.

Availability of Reports

Copies of the Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports filed or furnished pursuant to the Securities Exchange Act of 1934 are available on the Company’s website, www.mandfworldwide.com, without charge and as soon as reasonably practicable after the Company files such materials with or furnishes such materials to the Securities and Exchange Commission.


Item 1A.	Risk Factors

M & F Worldwide’s holding company structure could limit its ability to pay its expenses and dividends on its common stock.

M & F Worldwide is a holding company whose only material assets are the stock of its subsidiaries and $87.5 million in cash and cash equivalents as of December 31, 2010. M & F Worldwide conducts all of its operations through its operating subsidiaries. M & F Worldwide’s ability to pay its expenses and dividends on its common stock depends on its cash and cash equivalents and on the payment of dividends and tax sharing payments to it by Harland Clarke Holdings and Mafco Worldwide. Payments to M & F Worldwide by those subsidiaries, in turn, depend upon their consolidated results of operations and cash flows and whether they meet the criteria to make dividend payments under the instruments governing their indebtedness.

Risks Related to Our Substantial Indebtedness

Our subsidiaries have substantial indebtedness, which may adversely affect our ability to operate our businesses and prevent our subsidiaries from fulfilling their obligations under their respective debt agreements.

As of December 31, 2010, Harland Clarke Holdings had total indebtedness of $2,219.7 million (including $4.6 million of capital lease obligations and other indebtedness), and $91.8 million of additional availability under the Harland Clarke Holdings revolving credit facility (after giving effect to the issuance of $8.2 million of letters of credit). As of December 31, 2010, Mafco Worldwide had total indebtedness of $31.0 million and $14.0 million of additional availability under the Mafco Worldwide revolving credit facility. There were no letters of credit issued by Mafco Worldwide as of December 31, 2010. In addition, under certain circumstances, Harland Clarke Holdings is permitted to incur additional term loan and/or revolving credit facility indebtedness in an aggregate principal amount of up to $250.0 million, and the terms of Harland Clarke Holdings’ senior secured credit facilities and notes allow it to borrow substantial additional debt, including additional secured debt. Our substantial level of indebtedness could have important consequences. For example, it could:


	•	make it more difficult for our subsidiaries to satisfy their obligations with respect to their indebtedness;

	•	increase our vulnerability to general adverse economic and industry conditions;

	•	require us to dedicate a substantial portion of cash flow from operations to payments on indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures, research and development efforts and other general corporate purposes;

	•	limit our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate; and

	•	limit our ability to borrow additional funds.

Holdings has advised the Company that it has pledged shares of M & F Worldwide common stock to secure obligations and that additional shares of M & F Worldwide common stock may from time to time be pledged to secure obligations of Holdings. A default under any of these obligations that are secured by the pledged shares could cause a foreclosure with respect to such shares of common stock. A foreclosure upon any such shares of common stock or dispositions of shares of common stock could, in a sufficient amount, constitute a “change of control” as defined under the Company’s financing agreements, which would permit the Company’s lenders to accelerate amounts outstanding under such indebtedness.

Harland Clarke Holdings’ and Mafco Worldwide’s ability to make payments on their indebtedness depends on their ability to generate sufficient cash in the future.

Harland Clarke Holdings’ and Mafco Worldwide’s ability to make payments on their respective indebtedness and to fund planned capital expenditures will depend on their ability to generate cash in the future. This

is subject to general economic, financial, competitive, legislative, regulatory and other factors beyond our control.

Harland Clarke Holdings is required to make scheduled payments of principal on its senior secured term loan in the amount of $18.0 million per year in equal quarterly installments. In addition, Harland Clarke Holdings’ term loan facility requires that a portion of its excess cash flow be applied to prepay amounts borrowed under that facility. An excess cash flow payment of approximately $3.5 million will be paid in 2011 with respect to 2010 and will be applied against other mandatory payments due in 2011 under the terms of the facility. No such excess cash flow payment was paid in 2010 with respect to 2009 and no such excess cash flow payment was paid in 2009 with respect to 2008. Harland Clarke Holdings is required to repay its senior secured term loan in full in 2014 and is required to repay its senior notes in 2015. Harland Clarke Holdings’ revolving credit facility will mature in 2013.

Borrowings under Mafco Worldwide’s senior secured revolving credit facility are repayable in full on December 15, 2015.

Harland Clarke Holdings and Mafco Worldwide may not be able to generate sufficient cash flow from operations and future borrowings may not be available to them under their respective credit facilities in an amount sufficient to enable Harland Clarke Holdings or Mafco Worldwide to repay their debt or to fund their other liquidity needs. If Harland Clarke Holdings’ or Mafco Worldwide’s future cash flow from operations and other capital resources is insufficient to pay their obligations as they mature or to fund their liquidity needs, Harland Clarke Holdings or Mafco Worldwide, as the case may be, may be forced to reduce or delay its business activities and capital expenditures, sell assets, obtain additional debt or equity capital or restructure or refinance all or a portion of its debt on or before maturity. Harland Clarke Holdings or Mafco Worldwide, as the case may be, may not be able to accomplish any of these alternatives on a timely basis or on satisfactory terms, if at all. In addition, the terms of Harland Clarke Holdings’ and Mafco Worldwide’s existing and future indebtedness may limit their respective ability to pursue any of these alternatives.

Despite our subsidiaries’ current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt. Additional indebtedness could exacerbate the risks associated with our substantial leverage.

We and our subsidiaries may be able to incur substantial additional indebtedness in the future. The terms of Harland Clarke Holdings’ senior secured credit facilities, the indenture governing Harland Clarke Holdings’ senior notes and the terms of Mafco Worldwide’s credit facilities do not fully prohibit Harland Clarke Holdings or Mafco Worldwide from doing so. In addition, as of December 31, 2010, there was $91.8 million of additional availability under Harland Clarke Holdings’ $100.0 million revolving credit facility (after giving effect to the issuance of $8.2 million of letters of credit) and $14.0 million of additional availability under Mafco Worldwide’s $45.0 million revolving credit facility. There were no letters of credit issued by Mafco Worldwide as of December 31, 2010. Under certain circumstances, Harland Clarke Holdings is permitted to incur additional term loan and/or revolving credit facility indebtedness under its senior secured credit facilities in an aggregate principal amount of up to $250.0 million. In addition, the terms of Harland Clarke Holdings’ senior secured credit facilities and senior notes allow Harland Clarke Holdings to borrow substantial additional debt, including additional secured debt. If new indebtedness is added to our current debt levels, the related risks that we now face could intensify.

Covenant restrictions under our subsidiaries’ indebtedness may limit each subsidiary’s ability to operate its respective business.

The indenture governing Harland Clarke Holdings’ senior notes and the agreements governing Harland Clarke Holdings’ and Mafco Worldwide’s respective senior secured credit facilities contain, among other things, covenants that restrict Harland Clarke Holdings’, Mafco Worldwide’s and their respective subsidiaries’ ability to finance future operations or capital needs or to engage in other business activities. The indenture

governing the Harland Clarke Holdings senior notes restricts, among other things, Harland Clarke Holdings’ and its subsidiaries’ ability to:


	•	incur or guarantee additional indebtedness;

	•	make certain investments;

	•	make restricted payments;

	•	pay certain dividends or make other distributions;

	•	incur liens;

	•	enter into transactions with affiliates; and

	•	merge or consolidate or transfer and sell assets.

Harland Clarke Holdings’ and Mafco Worldwide’s senior secured credit facilities contain customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, mergers and consolidations, sales of assets, loans, investments, acquisitions, restricted payments, transactions with affiliates, dividends and other payment restrictions affecting subsidiaries and sale-leaseback transactions.

In addition, Harland Clarke Holdings’ and Mafco Worldwide’s respective credit facilities contain covenants requiring them to maintain financial ratios, including, with respect to Harland Clarke Holdings, a maximum consolidated leverage ratio for the benefit of the lenders under its revolving credit facility only and with respect to Mafco Worldwide, a maximum total debt ratio and a minimum consolidated interest expense ratio. These restrictions may limit Harland Clarke Holdings’ and Mafco Worldwide’s ability to operate their respective businesses and may prohibit or limit their ability to enhance their operations or take advantage of potential business opportunities as they arise.

Risks Related to Our Business

Weak economic conditions and further acceleration of check unit declines may continue to have an adverse effect on the Company’s revenues and profitability and could result in additional impairment charges.

The Company has substantial intangible assets, including substantial goodwill arising from previous acquisitions. Goodwill and other intangible assets determined to have an indefinite life are not amortized, but are tested for impairment annually in the fourth quarter, or when events or changes in circumstances indicate that the assets might be impaired. The Company also has a significant amount of property, plant and equipment and amortizable intangible assets, such as customer relationships, which are tested for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The impairment test processes are more fully described in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates” included elsewhere in this Annual Report on Form 10-K.

The annual impairment evaluations for goodwill and indefinite-lived intangible assets involve significant estimates and assumptions made by management regarding specific business and operating factors as well as discount rates. Changes in estimates and assumptions, as well as the occurrence of various events or changes in circumstances, could have a material impact on the fair value of goodwill or indefinite-lived intangible assets in future periods, which in turn may result in material asset impairments. Similar considerations apply to any impairment evaluation of our property, plant and equipment and amortizable intangible assets as well as our determinations as to whether interim impairment tests are necessary.

The Company periodically updates its long-range business plans and forecasts, which include financial projections that are incorporated in the annual impairment tests. Estimated revenue growth rates for all reporting units may be lower than past projections due to the various factors discussed in this report, including, but not limited to, the following:


	•	the continued adverse economic environment, which may negatively affect future revenue and margins as a result of lower demand and pricing pressure;


	•	check unit declines that have continued at a higher rate than in the past and are expected to continue to decline at higher rates than in recent years, which may negatively affect future revenue for our Harland Clarke segment; and

	•	continued worldwide consumption declines in tobacco products using licorice, which may negatively affect future revenue for our Licorice Products segment.

Depending on the nature of these factors and the expected relative magnitude and permanency of their effects, the Company’s businesses may not be able to achieve previous levels of performance even when overall economic conditions improve. During the 2009 annual impairment test for goodwill and indefinite-lived tradenames, the Company determined the fair value of the Harland Clarke tradename was less than its carrying value due to declines in revenues from check unit volumes that are projected to decline at rates that are higher than recent years and also due to the continuing economic downturn. As a result of this impairment, the useful life of the Harland Clarke tradename was reassessed and determined to no longer be indefinite. Based on an analysis of future cash flows attributable to the Harland Clarke tradename, the Company determined the economic life for the Harland Clarke tradename is 25 years. A non-cash impairment charge of $44.2 million was recorded in the fourth quarter of 2009 based on the current fair value of the Harland Clarke tradename being less than its carrying value and the useful life was reclassified from an indefinite life to a life of 25 years. The annual impairment test for goodwill and indefinite-lived tradenames performed in the fourth quarter of 2010 did not result in further impairments of goodwill and indefinite-lived tradenames.

Future impairment tests may result in a determination that there have been additional material asset impairments. Any asset impairment would be reported as a non-cash operating loss, would have a negative effect on the Company’s earnings and total assets, and could have a negative impact on the market prices of the Company’s outstanding securities. Impairment charges in the future would not impact the Company’s consolidated cash flows, current liquidity, capital resources and covenants under its existing credit facilities.

Difficult conditions in the financial markets and a general economic downturn may adversely affect the business and results of operations of the Company and we cannot determine if these conditions will improve or worsen in the near future.

The economic conditions since late 2008 and the volatility in the financial markets during this period have contributed and may continue to contribute to high unemployment levels, decreased consumer spending, reduced credit availability and/or declining business and consumer confidence. During this period, a number of financial institutions have taken significant write-downs of asset values. These write-downs have caused many financial institutions to seek additional capital, to merge with other institutions and, in some cases, to fail. We cannot determine whether the difficult conditions in the economy in general and/or the financial markets will improve or worsen in the near future. Our businesses have been and may continue to be adversely affected by these difficult conditions. Harland Clarke may experience reduced revenues due to losses of customers in the event the financial institutions upon which it depends either merge with or are sold to other institutions, or fail, or in the event that consumer spending continues to decline, or checking account openings continue to decrease, resulting in further acceleration in the decline of check usage and the use of Harland Clarke’s other products. Similarly, Harland Financial Solutions, which also depends on its financial institution customers, may be adversely affected due to losses of financial institution customers from mergers, consolidations or failures. Reductions in financial institution information technology budgets in response to market difficulties could continue to result in further delays or cancellations of Harland Financial Solutions client purchases, as well as potential pricing pressure on Harland Financial Solutions products. Economic slowdown and liquidity constraints may also cause state and local public and private education budgets to be further reduced, which could continue to result in reduced revenues at Scantron, as well as pricing pressure on Scantron products. In addition, further disruptions in the credit and other financial markets could, among other things, impair the financial condition of suppliers of the Company, thereby increasing the risk of supplier performance.

Account data breaches involving stored client data or misuse of such data could adversely affect our reputation, revenues, profits and growth.

We, our clients, and other third parties store customer account information relating to our Harland Clarke segment’s checks. In addition, a number of clients use our Harland Financial Solutions products and Scantron products to store and manage sensitive customer and student information. Scantron also provides services which involve the storage of non-public customer information. Any breach of the systems on which sensitive customer data and account information are stored or archived and any misuse by our own employees, by employees of data archiving services or by other unauthorized users of such data could lead to fraudulent activity involving our clients and our financial institution clients’ customers’ information and/or funds, damage the reputation of our brands and result in claims against us. If we are unsuccessful in defending any lawsuit involving such data security breaches or misuse, we may be forced to pay damages, which could materially and adversely affect our profitability and could have a material adverse impact on our transaction volumes, revenue and future growth prospects. In addition, such breaches could adversely affect our financial institution clients’ perception as to our reliability, and could lead to the termination of client contracts.

Legislation and contracts relating to protection of personal data could limit or harm our future business.

We are subject to state and federal laws and regulations regarding the protection of consumer information commonly referred to as “non-public personal information.” Examples include the federal financial modernization law known as the Gramm-Leach-Bliley Act and the regulations implementing its privacy and information security requirements, as well as other privacy and data security federal and state laws and regulations. We are also subject to additional requirements in many of our contracts with financial institution clients, which are often more restrictive than the regulations. These laws, regulations and agreements require us to develop and implement policies to protect non-public personal information and to disclose these policies to consumers before a customer relationship is established and periodically thereafter. The laws, regulations, and agreements limit our ability to use or disclose non-public personal information for other than the purposes originally intended.

Where not preempted by the provisions of the Gramm-Leach-Bliley Act, states may enact legislation or regulations that are more restrictive on our use of data. In addition, more restrictive legislation or regulations have been introduced in the past and could be introduced in the future in Congress and the states and could have a negative impact on our business, results of operations or prospects. Additionally, future contracts may impose even more stringent requirements on us which could increase our operating costs, as well as interfere with the cost savings we are trying to achieve.

We market certain products and services through various distribution media, including direct mail, telemarketing, online marketing, and other methods. These media are subject to increasing regulation, both at the federal and state levels, particularly in the area of consumer privacy. Our ability to solicit or sign up new customers may be affected.

The financial services sector is also subject to various federal and state regulations and oversight. As a supplier of services to financial institutions, certain operations of our Harland Clarke and Harland Financial Solutions segments are examined by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, among other agencies, to confirm our ability to maintain data security. These agencies regulate and audit services we provide and the manner in which we operate, and we are required to comply with a broad range of applicable laws and regulations. Adverse audit findings could impact our ability to continue to render services or require investment in corrective measures. Moreover, current laws and regulations may be amended in the future or interpreted by regulators in a manner which could negatively affect the operations of our Harland Clarke or Harland Financial Solutions segments or limit their future growth.

The use of our Scantron products and services to store and manage student and other educational data may be subject to The Family Education Rights and Privacy Act of 1974, commonly known as FERPA, which is a federal law that protects the privacy of student education records in connection with Scantron’s web-based assessment services. Many states have enacted similar laws to protect the privacy of student data. The

operation of websites by Scantron that are accessed by children under the age of 13 may be subject to the Children’s Online Privacy Protection Act of 1998, commonly known as COPPA. The collection of patient data through Scantron’s survey services is subject to the Health Insurance Portability and Accountability Act of 1996, commonly known as HIPAA, which protects the privacy of patient data. Scantron is also subject to the Gramm-Leach-Bliley Act.

New laws and regulations may be adopted in the future with respect to the Internet, e-commerce or marketing practices generally relating to consumer privacy. Such laws or regulations may impede the growth of the Internet and/or use of other sales or marketing vehicles. As an example, new privacy laws could decrease traffic to our websites, decrease telemarketing opportunities and decrease the demand for our products and services. Additionally, the applicability to the Internet of existing laws governing property ownership, taxation, libel and personal privacy is uncertain and may remain uncertain for a considerable length of time.

We may experience processing errors or software defects that could harm our business and reputation.

We use sophisticated software and computing systems in our Harland Clarke, Harland Financial Solutions and Scantron segments. We may experience difficulties in installing or integrating our technologies on platforms used by our clients. Furthermore, certain financial institution clients of our Harland Clarke segment have integrated certain components of their systems with ours, permitting our operators to effect certain operations directly into our financial institution clients’ customers’ accounts. Errors or delays in the processing of check orders, software defects or other difficulties could result in:


	•	loss of clients;

	•	additional development costs;

	•	diversion of technical and other resources;

	•	negative publicity; or

	•	exposure to liability claims.

We may not successfully implement any or all components of our business strategies or realize all of our continued cost savings, which could reduce our revenues and profitability.

Important components of our business strategies for the businesses operated by Harland Clarke Holdings are to cross-sell between business segments, capitalize on complementary offerings across the client base of our Harland Clarke segment, cross-sell software products into our combined client base, continue focusing on software-enabled testing and assessment products while expanding the offering of survey services to financial institutions, and continue to reduce costs and generate strong cash flow.

We may not be able to fully implement any or all components of our business strategies or realize, in whole or in part or within the timeframes anticipated, the efficiency improvements or cost savings from these strategies. These strategies are subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. Financial industry turmoil and the general economic slowdown may continue to adversely affect our ability to implement our business strategies. Additionally, our business strategies may change from time to time. As a result, we may not be able to achieve our expected results of operations.

We may be unable to protect our rights in intellectual property, and third-party infringement or misappropriation may materially adversely affect our profitability.

We rely on a combination of measures to protect our intellectual property, among them, contract provisions, registering trademarks and copyrights, patenting inventions, implementing procedures that afford trade secret status and protection to our proprietary information, such as entering into third-party non-disclosure and intellectual property assignment agreements, and maintaining our intellectual property by entering into licenses that grant only limited rights to third parties. We may be required to spend significant resources to protect, monitor and police our trade secrets, proprietary know-how trademarks and other

intellectual property rights. Despite our efforts to protect our intellectual property, third parties or licensees may infringe or misappropriate our intellectual property. The confidentiality agreements that are designed to protect our trade secrets and proprietary know-how could be breached, or our trade secrets and proprietary know-how might otherwise become known by others. We may not have adequate remedies for infringement or misappropriation of our intellectual property rights or for breach of our confidentiality agreements. The loss of intellectual property protection or the inability to enforce our intellectual property rights could harm our business and ability to compete.

We may be unable to maintain our licenses to use third-party intellectual property on favorable terms.

A significant portion of our revenues are derived from the sale of products by our Harland Clarke segment bearing third-party trademarks or designs pursuant to royalty-bearing licenses. Typically, these licenses are for a term of between two and three years, and some licenses may be terminated at the licensor’s option upon a change of control. There can be no guarantee that such licenses will be renewed or will continue to be available to us on terms that would allow us to continue to sell the licensed products profitably.

Third parties may claim we infringe on their intellectual property rights.

Third parties may assert intellectual property infringement claims against us in the future. In particular, there has been a substantial increase in the issuance of patents for Internet-related systems and business methods, which may have broad implications for participants in technology and service sectors. Claims for infringement of these patents are increasingly becoming a subject of litigation. Because patent application information may not always be readily available, there is also a risk that we could adopt a technology without knowledge of a pending patent application, which technology would infringe a third-party patent once that patent is issued. Responding to these infringement claims may require us to enter into royalty-bearing license agreements, to stop selling or to redesign affected products, services and technologies, to pay damages, and/or to satisfy indemnification commitments under agreements with our licensees. In the event that our trademarks are successfully challenged by third parties, we could be forced to rebrand our products, which could result in the loss of brand recognition. Future litigation relating to infringement claims could also result in substantial costs to us and a diversion of management resources. Adverse determinations in any litigation or proceeding could also subject us to significant liabilities and could prevent us from using some of our products, services or technologies.

We are dependent upon third-party providers for significant information technology needs, and an interruption of services from these providers could materially and adversely affect our operations.

We have entered into agreements with third-party providers for the licensing of certain software and the provision of information technology services, including software development and support services, and personal computer, telecommunications, network server and help desk services. In the event that one or more of these providers is not able to provide adequate information technology services or terminates a license or service, we would be adversely affected. Although we believe that information technology services and substantially equivalent software and services are available from numerous sources, a failure to perform or a termination by one or more of our service providers could cause a disruption in our business while we obtain an alternative source of supply and we may not be able to find such an alternative source on commercially reasonable terms, or at all.

We depend upon the talents and contributions of a limited number of individuals, many of whom would be difficult to replace, and the loss or interruption of their services could materially and adversely affect our business, financial condition and results of operations.

Our business is largely driven by the personal relationships of our senior management teams. Despite executing employment agreements with certain members of our senior management teams, these individuals may discontinue service with us and we may not be able to find individuals to replace them at the same cost, or at all. We have not obtained “key person” insurance for any member of our senior management teams. The

loss or interruption of the services of these executives could have a material adverse effect on our business, financial condition and results of operations.

We face uncertainty with respect to future acquisitions, and unsuitable or unsuccessful acquisitions could materially and adversely affect our business, prospects, results of operations and financial condition.

We have acquired complementary businesses in the past, and we may pursue acquisitions of complementary businesses in the future. We cannot predict whether suitable acquisition candidates can be acquired on acceptable terms or whether future acquisitions, even if completed, will be successful. Future acquisitions by us could result in the incurrence of contingent liabilities, debt or amortization expenses relating to intangible assets which could materially adversely affect our business, results of operations and financial condition. Moreover, the success of any past or future acquisition will depend upon our ability to integrate effectively the acquired businesses.

We also cannot predict whether any acquired products, technology or business will contribute to our revenues or earnings to any material extent or whether cost savings and synergies we expect at the time of an acquisition can be realized once the acquisition has been completed. Furthermore, if we incur additional indebtedness to finance an acquisition, we cannot predict whether the acquired business will be able to generate sufficient cash flow to service that additional indebtedness.

Unsuitable or unsuccessful acquisitions could therefore have a material and adverse effect on our business, prospects, financial condition and results of operations.

Our business is exposed to changes in interest rates.

We are exposed to changes in interest rates on our variable-rate debt. A hypothetical increase of 1 percentage point in the variable component of interest rates applicable to floating rate debt outstanding as of December 31, 2010 would have resulted in an increase to interest expense of approximately $9.1 million per year including the effect of interest rate swaps outstanding at December 31, 2010. Adverse interest rate changes could have a material adverse effect on our business, results of operations and financial condition.

We are dependent on the success of our research and development and the failure to develop new and improved products could adversely affect our business.

We have in the past made, and intend to continue in the future to make, investments in research and development in order to enable us to identify and develop new products. The development process for new products can be lengthy. Despite investments in this area, our research and development may not result in the discovery or successful development of new products. The success of our new product offerings will depend on several factors, including our ability to:


	•	accurately anticipate and properly identify our customers’ needs and industry trends;

	•	price our products competitively;

	•	innovate, develop and commercialize new products and applications in a timely manner;

	•	obtain necessary regulatory approvals;

	•	differentiate our products from competitors’ products; and

	•	use our research and development budget efficiently.

The continuous introduction of new products is important to our growth. Our financial condition could deteriorate if we cannot timely and cost effectively develop and commercialize new products.

We may be subject to sales and other taxes, which could have adverse effects on our business.

In accordance with current federal, state and local tax laws, and the constitutional limitations thereon, we currently collect sales, use or other similar taxes in state and local jurisdictions where we have a physical

presence. One or more state or local jurisdictions may seek to impose sales tax collection obligations on us and other out-of-state companies which engage in remote or online commerce. Several states in the United States have taken various initiatives to prompt retailers to collect local and state sales taxes on purchases made over the Internet. Furthermore, tax law and the interpretation of constitutional limitations thereon is subject to change. In addition, any new operations of these businesses in states where they do not currently have a physical presence could subject shipments of goods by these businesses into such states to sales tax under current or future laws. If one or more state or local jurisdictions successfully asserts that we must collect sales or other taxes beyond our current practices, it could have a material, adverse affect on our business.

We may be subject to environmental risks, and liabilities for environmental compliance or cleanup could have a material, adverse effect on our profitability.

Our operations are subject to many existing and proposed federal, state, local and foreign laws and regulations pertaining to pollution and protection of human health and the environment, the violation of which can result in substantial costs and liabilities, including material civil and criminal fines and penalties. Such requirements include those pertaining to air emissions; wastewater discharges; occupational safety and health; the generation, handling, treatment, remediation, use, storage, transport, release, and exposure to hazardous substances and wastes. Under certain of these laws and regulations, such as the federal Superfund statute, the obligation to investigate and remediate contamination at a facility may be imposed on current and former owners or operators or on persons who may have sent waste to that facility for disposal. In addition, environmental laws and regulations, and interpretation or enforcement thereof, are constantly evolving and any such changes could affect the business, financial condition or results of operations. Enforcement of these laws and regulations may require the expenditure of material amounts for environmental compliance or cleanup.

The operations of our Harland Clarke segment use hazardous materials in the printing process and generate wastewater and air emissions. Some of our historic check and form printing operations at current and former facilities used hazardous materials in greater quantities. In some instances, we have sold these facilities and agreed to indemnify the buyer of the facility for certain environmental liabilities. We may also be subject to liability under environmental laws and regulations for environmental conditions at our current or former facilities or in connection with the disposal of waste generated at these facilities. Although we are not aware of any fact or circumstance that would require the expenditure of material amounts for environmental compliance or cleanup, if environmental liabilities are discovered at our current or former facilities or at locations where our wastes were disposed, we could be required to spend material amounts for environmental compliance or cleanup.

Our principal stockholder has significant influence over us.

Holdings is a corporation wholly owned by Mr. Ronald O. Perelman. Mr. Perelman, directly and through Holdings, beneficially owned, as of December 31, 2010, approximately 43.4% of our outstanding common stock. In addition, three of our directors, as well as the senior executives of M & F Worldwide, are affiliated with Holdings. As a result, Holdings and its sole stockholder possess significant influence over our business decisions.

Risks Related to our Harland Clarke Segment

The paper check industry overall is a mature industry and check usage is declining. Our business will be harmed if check usage declines faster than expected.

Check and related products and services, including delivery services, account for most of our revenues. The check industry overall is a mature industry. The number of checks written in the United States has declined in recent years, and we believe that it will continue to decline due to the increasing use of alternative payment methods, including credit cards, debit cards, smart cards, automated teller machines, direct deposit, wire transfers, electronic, home banking applications, Internet based payment services and other bill paying services. The actual rate and extent to which alternative payment methods will achieve consumer acceptance and replace checks, whether as a result of legislative developments, personal preference or otherwise, cannot be predicted with certainty and could decline at a more rapid rate. Changes in technology or the widespread adoption of current technologies may also make alternative payment methods more popular. An increase in the use of any of these alternative payment methods could have a material adverse effect on the demand for checks and a material adverse effect on our business, results of operations and prospects. In recent years, Harland Clarke has experienced check unit declines at a higher rate than in the past, as evidenced by recent period-over-period declines in Harland Clarke revenue. Harland Clarke is unable to determine at this time whether these higher rates of decline are attributable to economic and financial market difficulties, the depth and length of the economic recession, higher unemployment, decreased openings of checking accounts, changing business strategies of our financial institution clients, decreased consumer spending and/or a further acceleration in the use of alternative non-cash payments. Harland Clarke expects that check unit volume will continue to decline at rates that are higher than it had previously experienced in recent years, resulting in a corresponding decrease in check revenues and depending on the nature and relative magnitude of the causes for the decreases, such decreases may not be mitigated when overall economic conditions improve. Harland Clarke is focused on growing its non-check related products and services, including marketing services, and optimizing its existing catalog of offerings to better serve its clients, as well as managing its costs, overhead and facilities to reflect the decline in check unit volumes. Harland Clarke does not believe that revenues from non-check related products and services will fully offset revenue declines from declining check unit volumes. In the future, Harland Clarke may not be able to mitigate the revenue declines from declining check unit volumes through cost management, which could negatively affect Harland Clarke’s margins.

Consolidation among financial institutions may adversely affect our relationships with our clients and our ability to sell our products and may therefore result in lower revenues and profitability.

Mergers, acquisitions and personnel changes at financial institutions, as well as failures or liquidations of such financial institutions, may adversely affect our business, financial condition and results of operations. For the year ended December 31, 2010, financial institutions accounted for approximately 83% of revenues for our Harland Clarke segment. In recent years, the number of financial institutions has declined due to consolidation. Consolidation among financial institutions could cause us to lose current and potential clients as such clients are, for example, acquired by financial institutions with pre-existing relationships with other providers. The increase in general negotiating strength possessed by such consolidated entities also presents a risk that new and/or renewed contracts with these institutions may not be secured on terms as favorable as those historically negotiated with these clients. Consolidation among or failure of financial institutions could therefore decrease our revenues and profitability.

We are dependent on a few large clients, and adverse changes in our relationships with these highly concentrated clients may adversely affect our revenues and profitability.

The majority of sales from our Harland Clarke segment has been, and very likely will continue to be, concentrated among a small group of clients. For the year ended December 31, 2010, the top 20 clients of our Harland Clarke segment represented approximately 43% of its revenues, with sales to Bank of America and Wells Fargo representing a significant portion of revenues. A number of contracts with Harland Clarke segment clients may be terminated by the client for convenience upon written notice or “for cause.” A significant decrease or interruption in business from any of our Harland Clarke segment significant clients, or

the termination of our contracts with any of our most significant clients could have a material adverse effect on our revenues and profitability.

Our financial results can also be adversely affected by the business practices and actions of our large clients in a number of ways, including timing, size and mix of product orders and supply chain management. Several contracts with our significant clients expire over the next several years. We may not be able to renew them on terms favorable to us, or at all. The loss of one or more of these clients or a shift in the demand by, distribution methods of, pricing to, or terms of sale to, one or more of these clients could materially adversely affect us. The write-off of any significant receivable due from delays in payment or return of products by any of our significant clients could also adversely impact our revenues and profitability.

We face intense competition and pricing pressures in certain areas of our business, which could result in lower revenues, higher costs and lower profitability.

The check printing industry is intensely competitive. In addition to competition from alternative payment methods, we also face considerable competition from other check printers and other similar providers of printed products. The principal factors on which we compete are service, convenience, quality, product range and price. We may not be able to compete effectively against current and future competitors, which could result in lower revenues, higher costs and lower profitability.

Interruptions or adverse changes in our vendor or supplier relationships or delivery services could have a material adverse effect on our business.

We have strong relationships with many of the country’s largest paper mills and ink suppliers. These relationships afford us certain purchasing advantages, including stable supply and favorable pricing arrangements. Our supplier arrangements are by purchase order and terminable at will at the option of either party. While we have been able to obtain sufficient paper supplies during recent paper shortages and otherwise, in part through purchases from foreign suppliers, we are subject to the risk that we will be unable to purchase sufficient quantities of paper to meet our production requirements during times of tight supply. An interruption in our relationship with service providers for our digital printers could compromise our ability to fulfill pending orders for checks and related products. In addition, disruptions in the credit and other financial markets could, among other things, impair the financial condition of suppliers of the Company, thereby increasing the risk of supplier performance. Any interruption in supplies or service from these or other vendors or suppliers or delivery services could result in a disruption to our business if we are unable to readily find alternative service providers at comparable rates.

Increased production and delivery costs, such as fluctuations in paper costs, could materially adversely affect our profitability.

Increases in production costs such as paper and labor could adversely affect our profitability, our business, our financial condition and results of operations. For example, the principal raw material used by our Harland Clarke segment is paper. Rising inflation may cause our material and delivery costs to rise. Any significant increase in paper prices as a result of a short supply or otherwise would adversely affect our costs. In addition, disruptions in parcel deliveries or increases in delivery rates, which are often tied to fuel prices, could also increase our costs. Our contracts with clients in our Harland Clarke segment may contain certain restrictions on our ability to pass on to clients increased production costs or price increases. In addition, competitive pressures in the check industry may have the effect of inhibiting our ability to reflect these increased costs in the prices of our products and services.

Softness in direct mail response rates could have an adverse impact on our operating results.

The direct-to-consumer business of our Harland Clarke segment has experienced declines in response and retention rates related to direct mail promotional materials. We believe that these declines are attributable to a number of factors, including the decline in check usage, the overall increase in direct mail solicitations received by our target customers, and the multi-box promotional strategies employed by us and our

competitors. To offset these factors, we may have to modify and/or increase our marketing efforts, which could result in increased expense.

The profitability of the direct-to-consumer business of our Harland Clarke segment depends in large part on our ability to secure adequate advertising media placements at acceptable rates, as well as the consumer response rates generated by such advertising. Suitable advertising media may not be available at a reasonable cost, or available at all. Furthermore, the advertising we utilize may not be effective. Competitive pricing pressure may inhibit our ability to reflect any of these increased costs in the prices of our products. We may not be able to sustain our current levels of profitability as a result.

Risks Related to our Harland Financial Solutions and Scantron Segments

If we fail to continually improve our Harland Financial Solutions and Scantron products, effectively manage our product offerings and introduce new products and service offerings, our business may suffer.

Harland Financial Solutions’ and Scantron’s businesses are affected by technological change, evolving industry standards, changes in client requirements and frequent new product introductions and enhancements. The businesses of providing technological solutions to financial institutions, educational organizations and other enterprises have been and continue to be intensely competitive, requiring us to continually improve our existing products and create new products while at the same time controlling our costs. We face intense competition from a number of multi-national, international, national, regional and local providers of software and services, some of whom may have greater financial and other resources than we have, greater familiarity with our prospective clients than we do, or the ability to offer more attractive products and services than we do. Our future success will depend in part upon our ability to:


	•	continue to enhance and expand existing Harland Financial Solutions and Scantron products and services;

	•	make Harland Financial Solutions and Scantron products compatible with future and existing operating systems and applications that achieve popularity within the business application marketplace, including current and future versions of Windows, Unix and IBM iSeries;

	•	engage in new business initiatives; and

	•	develop and introduce new products and new services that satisfy increasingly sophisticated client requirements, keep pace with technological and regulatory developments, provide client value and are attractive to customers.

We may not successfully anticipate and develop product enhancements or new products and services to adequately address changing technologies and client requirements. Any such products, solutions or services may not be successful or may not generate expected revenues or cash flow, and the business and results of operations of our Harland Financial Solutions and Scantron businesses may be materially and adversely affected as a result.

The revenues, cash flows and results of operations of our Harland Financial Solutions segment may be reduced if we need to lower prices or offer other favorable terms on our products and services to meet competitive pressures in the software industry.

Providing technological solutions to financial institutions has been and continues to be intensely competitive. Some of our competitors have advantages over Harland Financial Solutions due to their significant worldwide presence, longer operating and product development history, larger installed client base, and substantially greater financial, technical and marketing resources. In response to competition, Harland Financial Solutions has been required in the past, and may be required in the future, to furnish additional discounts to clients, otherwise modify pricing practices or offer more favorable payment terms or more favorable contractual implementation terms. These developments have and may increasingly negatively affect the revenues, cash flows and results of operations of the Harland Financial Solutions business.

Consolidation among financial institutions may adversely affect our relationships with Harland Financial Solutions clients and our ability to sell our products and may therefore result in lower revenues and profitability.

Mergers, acquisitions and personnel changes at financial institutions, as well as failures or liquidations of such financial institutions, may adversely affect our Harland Financial Solutions business, financial condition and results of operations. For the year ended December 31, 2010, financial institutions accounted for substantially all of our Harland Financial Solutions segment revenues. In recent years, the number of financial institutions has declined due to consolidation. Consolidation among financial institutions could cause us to lose current and potential clients as such clients are, for example, acquired by financial institutions with pre-existing relationships with other providers. The increase in general negotiating strength possessed by such consolidated entities also presents a risk that new and/or renewed contracts with these institutions may not be secured on terms as favorable as those historically negotiated with these clients. Consolidation among or failure of financial institutions could therefore decrease our revenues and profitability.

Downturns in general economic and industry conditions, enhanced regulatory burdens and reductions in information technology budgets could cause decreases in demand for our software and related services which could negatively affect our revenues, cash flows and results of operations.

Our revenues, cash flows and results of operations depend on the overall demand for our products, software and related services. Economic downturns in one or more of the countries in which we do business and enhanced regulatory burdens, including through increased fees and assessments charged to financial institutions by the Federal Deposit Insurance Corporation (“FDIC”) and National Credit Union Administration (“NCUA”) or due to recently enacted federal legislation for additional taxes on certain financial institutions, could result in reductions in the information technology budgets for some portion of our clients and potentially longer lead-times for acquiring Harland Financial Solutions products and services. Such reductions and longer lead times could result in delays or cancellations of client purchases and could have a material adverse effect on our business, financial position, results of operations and cash flows. Recent financial industry turmoil and the general economic slowdown may adversely affect our financial institution clients’ ability or willingness to commit financial resources to our products, and spending decisions by these clients may continue to be delayed. Prolonged economic slowdowns may result in clients requiring us to renegotiate existing contracts on less advantageous terms than those currently in place or default on payments due on existing contracts.

As our software offerings increase in number, scope and complexity, our need to prevent any undetected errors and to correct any identified errors may increase our costs, slow the introduction of new products and we may become subject to warranty or product liability claims which could be costly to resolve and result in negative publicity.

Although our Harland Financial Solutions and Scantron businesses test each of their new products and product enhancement releases and evaluate and test the products obtained through acquisition before introducing them to customers, significant errors may be found in existing or future releases of our software products, and vulnerability to cyber attacks may arise, with the possible result that significant resources and expenditures may be required in order to correct such errors or otherwise satisfy client demands. In addition, defects in our products or difficulty integrating our products with our clients’ systems could result in delayed or lost revenues, warranty or other claims against us by clients or third parties, adverse client reaction and negative publicity about us or our products and services or reduced acceptance of our products and services in the marketplace, any of which could have a material adverse effect on our business, financial position, results of operations and cash flows.

Errors, defects or other performance problems of our products could result in harm or damage to our clients and expose us to liability, which may adversely affect our business and operating results.

Because our clients may use our products for mission critical applications, errors, defects or other performance problems may cause financial or other damages to our clients and result in claims for substantial damages against us, regardless of our responsibility for such errors, defects or other performance problems.

For example, Harland Financial Solutions has been named in at least one lawsuit challenging certain provisions in Harland Financial Solutions’ lending products.

The terms of our contracts with our clients are generally designed to limit our liability for errors, defects or other performance problems and damages relating to such errors, defects or other performance problems, but these provisions may not be enforced by a court or otherwise effectively protect us from legal claims. Our liability insurance may not be adequate to cover all of the costs resulting from these legal claims. Our current liability insurance coverage may not continue to be available on acceptable terms and insurers may deny coverage as to any future claim. The successful assertion against us of one or more large claims that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or coinsurance requirements, could have a material adverse effect on our business, financial position, results of operations and cash flows. Furthermore, even if we succeed in the litigation, we are likely to incur additional costs and our management’s attention might be diverted from our normal operations.

Failure to hire and retain a sufficient number of qualified information technology professionals could have a material adverse effect on our business, results of operations and financial condition.

Our business of delivering professional information technology services is labor intensive, and, accordingly, our success depends upon our ability to attract, develop, motivate, retain and effectively utilize highly skilled information technology professionals. We believe that there is a growing shortage of, and significant competition for, information technology professionals in the United States who possess the technical skills and experience necessary to deliver our services, and that such information technology professionals are likely to remain a limited resource for the foreseeable future. We also plan to manage and grow software development operations internationally related to Harland Financial Solutions and Scantron. We believe that, as a result of these factors, we operate within an industry that experiences a significant rate of annual turnover of information technology personnel. Our business plans are based on hiring and training a significant number of additional information technology professionals each year to meet anticipated turnover and increased staffing needs. Our ability to maintain and renew existing engagements and to obtain new business depends, in large part, on our ability to hire and retain qualified information technology professionals. We may not be able to recruit and train a sufficient number of qualified information technology professionals, and we may not be successful in retaining current or future employees. Increased hiring by technology companies and increasing worldwide competition for skilled technology professionals may lead to a shortage in the availability of qualified personnel in the markets in which we operate and hire. Failure to hire and train or retain qualified information technology professionals in sufficient numbers could have a material adverse effect on our business, results of operations and financial condition.

We may not receive significant revenues from our current research and development efforts.

Developing and localizing software is expensive, and the investment in product development may involve a long payback cycle. Our future plans include significant investments in software research and development and related product opportunities. We believe that we must continue to dedicate a significant amount of resources to our research and development efforts to maintain our competitive position, but future revenues from these investments are not fully predictable. Therefore, we may not realize any benefits from our research and development efforts in a timely fashion or at all.

Our Harland Financial Solutions segment provides services to clients that are subject to government regulations that could constrain its operations.

The financial services sector is subject to various federal and state regulations and oversight. As a supplier of services to financial institutions, certain Harland Financial Solutions operations are examined by the Office of the Comptroller of the Currency, the FDIC and the NCUA, among other agencies. These agencies regulate services we provide and the manner in which we operate, and we are required to comply with a broad range of applicable laws and regulations. Current laws and regulations may be amended in the future or

interpreted by regulators in a manner which could negatively affect our current Harland Financial Solutions’ operations or limit its future growth.

We may not be able to successfully develop new products and services for our Scantron segment, and those products and services may not receive widespread acceptance. As a result, the business, prospects, results of operations and financial condition of Scantron could be materially and adversely affected.

The data collection and educational testing industry has also changed significantly during recent years due to technological advances and regulatory changes, and we must successfully develop new products and solutions in our Scantron segment to respond to those changes. Scantron must continue to keep pace with changes in testing and data collection technology and the needs of its clients. The development of new testing methods and technologies depends on the timing and costs of the development effort, product performance, functionality, customer acceptance, adoption rates and competition, all of which could have a negative effect on our business. If we are not able to adopt new electronic data collection solutions at a rate that keeps pace with other technological advances, the business, business prospects, results of operations and financial condition of Scantron could be materially and adversely affected.

Budget deficits may reduce funding available for Scantron products and services and have a negative effect on our revenue.

Our Scantron segment derives a significant portion of its revenues from public schools and colleges, which are heavily dependent on local, state and federal governments for financial support. Government budget deficits, including deficits arising from the current economic slowdown, may have a negative effect on the availability of funding for Scantron products. Budget deficits experienced by schools or colleges may also cause those institutions to react negatively to future price increases for Scantron products. If budget deficits significantly reduce funding available for Scantron products and services, our revenue could be adversely affected.

If we are not able to obtain paper and other supplies at acceptable quantities and prices, our revenue could be adversely affected.

Our Scantron segment purchases a majority of its paper from one supplier. Scantron purchases scanner components from equipment manufacturers, supply firms and others. Scantron may not be able to purchase those supplies in adequate quantities or at acceptable prices. Rising inflation will also cause Scantron’s material and delivery costs to rise. If Scantron is forced to obtain paper and other supplies at higher prices or lower quantities, our profitability could be adversely affected.

Risks Related to Mafco Worldwide’s Business and Industry

Mafco Worldwide’s business is heavily dependent on sales to the worldwide tobacco industry, and negative developments and trends within the tobacco industry could have a material adverse effect on Mafco Worldwide’s business, financial condition and results of operations.

In 2010, approximately 63% of Mafco Worldwide’s licorice sales and 4% of the Company’s consolidated net revenues were to the worldwide tobacco industry for use as tobacco flavor enhancing and moistening agents in the manufacture of American blend cigarettes, moist snuff, chewing tobacco and pipe tobacco. Negative developments and trends within the tobacco industry, such as those described below, could have a material adverse effect on Mafco Worldwide’s business, financial condition and results of operations.

The tobacco industry has been subject to increased governmental taxation and regulation and in recent years has been subject to substantial litigation. These trends are likely to continue and it is likely that these trends will negatively affect tobacco product consumption and tobacco product manufacturers.

tobacco products, including the ability to regulate tobacco product additives. As a result, the United States Food & Drug Administration has the power to limit the type or quantity of additives that may be used in the manufacture of tobacco products in the United States.

The tobacco business, including the sale of cigarettes and smokeless tobacco, has been subject to federal, state, local and foreign excise taxes for many years. In recent years, federal, state, local and foreign governments have increased such taxes as a means of both raising revenue and discouraging the consumption of tobacco products. In February 2009, the United States government enacted the State Children’s Health Insurance Program. The health programs in this legislation are being funded by an increase in the federal tax on cigarettes to $1.0066 per pack from the previous $0.39 per pack and by significant increases in federal taxes on cigars and other tobacco products. Other proposals to increase taxes on tobacco products are also regularly introduced in the United States and foreign countries. Additional taxes may lead to an accelerated decline in tobacco product sales.

Consumption of tobacco products worldwide has declined steadily for years.

tobacco may be sold and used, imposition of warning labels and other graphic packaging images and, recently, restrictions on tobacco product ingredients.

Changes in consumer preferences could decrease Mafco Worldwide’s revenues and cash flow.

Mafco Worldwide is subject to the risks of evolving consumer preferences and nutritional and health-related concerns. A portion of Mafco Worldwide’s revenues are derived from the sale of licorice to worldwide confectioners. To the extent that consumer preferences shift away from licorice-flavored candy, operating results relating to the sale of licorice to worldwide confectioners could be impaired, which could have a material adverse effect on Mafco Worldwide’s business, financial condition and results of operations. In addition, a portion of Mafco Worldwide’s revenues are derived from the sale of licorice derivatives to food processors for use as flavoring or masking agents, including Mafco Worldwide’s Magnasweet brand flavor enhancer, which is used in various brands of chewing gum, lip balm, energy bars, non-carbonated beverages, chewable vitamins, aspirin, and other products and is identified in the United States as a natural flavor. To the extent that consumer preferences evolve away from products that use licorice derivatives, operating results relating to the sale of licorice derivatives could be impaired, which could have a material adverse effect on Mafco Worldwide’s business, financial condition and results of operations.

Changes in regulations regarding licorice confection may reduce Mafco Worldwide’s sales and profits.

Licorice confections are primarily purchased by consumers in the European Union. During 2009, the European Union issued regulations that imposed limitations on certain chemical substances commonly found in licorice root and licorice extracts. These regulations were effective beginning July 2010 and could result in decreased demand for Mafco Worldwide’s products from its confectionery customers in the European Union in the future. Sales of licorice extracts to confectionery customers in the European Union totaled $13.6 million for the year ended December 31, 2010.

Competition and consolidation in the specialty sweetener industry may reduce Mafco Worldwide’s sales and profit margins.

The non-nutritive sweetener industry is a highly competitive industry. Mafco Worldwide competes with companies that have greater capital resources, facilities and diversity of product lines. Increased competition as to Mafco Worldwide’s products could result in decreased demand for its products, reduced volumes and/or prices, each of which would reduce Mafco Worldwide’s sales and margins and have a material adverse effect on Mafco Worldwide’s business, financial condition and results of operations.

Mafco Worldwide’s margins are also under pressure from consolidation in the retail food industry in many regions of the world. In the United States, Mafco Worldwide’s customers may experience a shift in the channels where consumers purchase their products from the higher margin retail to the lower margin club and mass merchandisers. Such consolidation may significantly increase Mafco Worldwide’s customers’ costs of doing business and may further result in lower sales of its products and/or lower margins on sales.

Any failure to comply with the many laws applicable to Mafco Worldwide’s business may result in significant fines and penalties.

Mafco Worldwide’s facilities and products are subject to laws and regulations administered by the Federal Food and Drug Administration, and other federal, state, local, and foreign governmental agencies relating to

the processing, packaging, storage, distribution, advertising, labeling, quality, and safety of food products. Mafco Worldwide’s failure to comply with applicable laws and regulations could subject it to administrative penalties and injunctive relief, civil remedies, including fines, injunctions and recalls of Mafco Worldwide’s products. Mafco Worldwide’s operations are also subject to regulations administered by the Environmental Protection Agency and other state, local and foreign governmental agencies. Failure to comply with these regulations can have serious consequences, including civil and administrative penalties and negative publicity. In addition to these possible fines and penalties, changes in laws and regulations in domestic and foreign jurisdictions, including changes in food and drug laws, accounting standards, taxation requirements (including tax rate changes, new tax laws and revised tax law interpretations) and environmental laws could have a significant adverse effect on Mafco Worldwide’s results of operations.

Mafco Worldwide is heavily dependent on certain of its customers for a significant percentage of its net revenues.

In 2010, Mafco Worldwide’s ten largest customers, six of which are manufacturers of tobacco products, accounted for approximately 63% of its net revenues or 4% of the Company’s consolidated net revenues. If any of Mafco Worldwide’s significant customers were to stop purchasing licorice products from Mafco Worldwide, it would have a material adverse effect on Mafco Worldwide’s business, financial condition and results of operations.

Many of Mafco Worldwide’s employees belong to labor unions, and strikes, work stoppages and other labor disturbances could adversely affect Mafco Worldwide’s operations and could cause its costs to increase.

Mafco Worldwide is a party to a collective bargaining agreement with respect to its employees at the Camden, New Jersey facility. This agreement expires in May 2011. Disputes with regard to the terms of this agreement or Mafco Worldwide’s potential inability to negotiate an acceptable contract upon expiration of the existing contract could result in, among other things, strikes, work stoppages or other slowdowns by the affected workers. If the unionized workers were to engage in a strike, work stoppage or other slowdown, or other employees were to become unionized or the terms and conditions in future labor agreements were renegotiated, Mafco Worldwide could experience a significant disruption of its operations and higher ongoing labor costs. In addition, Mafco Worldwide’s collective bargaining agreements and labor laws may impair its ability to reduce labor costs by streamlining existing manufacturing facilities and in restructuring its business because of limitations on personnel and salary changes and similar restrictions.

Changes in Mafco Worldwide’s relationships with its suppliers could have a material adverse effect on Mafco Worldwide’s business, financial condition and results of operations.

Mafco Worldwide is dependent on its relationships with suppliers of licorice root. Licorice is derived from the roots of the licorice plant, a shrub-like leguminous plant that is indigenous to the Middle East and Central Asia. Most of the licorice root Mafco Worldwide purchases originates in Afghanistan, the Peoples’ Republic of China, Pakistan, Iraq, Azerbaijan, Uzbekistan, Turkmenistan and Turkey. During 2010, one of Mafco Worldwide’s suppliers of licorice root supplied approximately 42% of its total root purchases. Mafco Worldwide also purchases licorice extracts and licorice derivatives. If any material licorice root supplier or any other material supplier modifies its relationship with Mafco Worldwide, such a loss, reduction or modification could have a material adverse effect on Mafco Worldwide’s business, results of operations and financial condition.

Fluctuations in costs of licorice root and intermediary licorice extract could have a material adverse effect on Mafco Worldwide’s business, financial condition and results of operations.

The price of licorice root and intermediary licorice extracts increased significantly during 2010 and 2009. Prior to this, the price of licorice root and intermediary licorice extract had been relatively stable for several years. The price of licorice root and intermediary licorice extract are affected by many factors, including monetary fluctuations and economic, political and weather conditions in countries where Mafco Worldwide’s suppliers are located. Although Mafco Worldwide often enters into purchase contracts for these products,

significant or prolonged increases in the prices of licorice root and intermediary licorice extract could have a material adverse effect on Mafco Worldwide’s business, results of operations and financial condition.

Mafco Worldwide is subject to risks associated with economic, climatic or political instability in countries in which Mafco Worldwide sources licorice root and intermediary licorice extract.

Most of the licorice root Mafco Worldwide processes originates in Afghanistan, the People’s Republic of China, Pakistan, Iraq, Azerbaijan, Uzbekistan, Turkmenistan and Turkey. Producers of intermediary licorice extract are located primarily in the People’s Republic of China, Iraq and Central Asia. Mafco Worldwide’s wholly owned derivative manufacturing facility, the primary source of Mafco Worldwide’s licorice derivatives, is located in the People’s Republic of China. These countries and regions have, from time to time, been subject to political instability, corruption and violence. Economic, climatic or political instability in these countries and regions could result in reduced supply, material shipping delays, fluctuations in foreign currency exchange rates, customs duties, tariffs and import or export quotas, embargos, sanctions, significant raw material price increases or exposure to liability under the Foreign Corrupt Practices Act and could have a material adverse effect on Mafco Worldwide’s business, results of operations and financial condition. Furthermore, military action in Iraq and Afghanistan, increasing military tension involving Pakistan, as well as continuing threats of terrorist attacks and unrest, have caused instability in the world’s financial and commercial markets and have significantly increased political and economic instability in some of the countries and regions from which Mafco Worldwide’s raw materials originate. Acts of terrorism and threats of armed conflicts in or around these countries and regions could adversely affect Mafco Worldwide’s business, results of operations and financial condition in ways the Company cannot predict at this time.

Mafco Worldwide’s business is exposed to domestic and foreign currency fluctuations and changes in interest rates.

Mafco Worldwide’s international sales are denominated in foreign currencies, and this revenue could be materially affected by currency fluctuations. Approximately 27% of Mafco Worldwide’s sales were from international operations in 2010. Mafco Worldwide’s primary exposures are to fluctuations in exchange rates for the United States dollar versus the Euro and the United States dollar versus the Chinese Yuan. Changes in currency exchange rates could also affect the relative prices at which Mafco Worldwide and its foreign competitors sell products in the same market. Adverse foreign currency fluctuations could have a material adverse effect on Mafco Worldwide’s business, results of operations and financial condition.

Mafco Worldwide is also exposed to changes in interest rates on its variable rate debt. A hypothetical increase of 1 percentage point in the variable component of interest rates applicable to floating rate debt outstanding as of December 31, 2010 would have resulted in an increase in its annual interest expense of approximately $0.3 million. Adverse interest rate changes could have a material adverse effect on Mafco Worldwide’s business, results of operations and financial condition.

Any failure to maintain the quality of Mafco Worldwide’s manufacturing processes or raw materials could harm its operating results.

The manufacture of Mafco Worldwide’s products is a multi-stage process that requires the use of high-quality materials and manufacturing technologies. In spite of stringent quality controls, weaknesses in process control or minute impurities in materials may cause a substantial percentage of a product in a lot to be defective. If Mafco Worldwide were not able to maintain its manufacturing processes or to maintain stringent quality controls, or if contamination problems arise, Mafco Worldwide’s operating results would be harmed.

Mafco Worldwide’s business is subject to risks related to weather, disease and pests that could adversely affect its business.

Licorice production is subject to a variety of agricultural risks. Extreme weather conditions, disease and pests can materially and adversely affect the quality and quantity of licorice produced.

Mafco Worldwide generally maintains a substantial inventory of licorice root to mitigate against the risks of any temporary supply interruption, including an interruption due to agricultural factors, but a sustained interruption could have a material adverse effect on its business, results of operations and financial condition.

Mafco Worldwide is subject to transportation risks.

An extended interruption in Mafco Worldwide’s ability to ship or distribute products could have a material adverse effect on its business, financial condition and results of operations. While the Company believes Mafco Worldwide is adequately insured, the Company cannot be sure that Mafco Worldwide would be able to transport its products by alternative means if it were to experience an interruption due to strike, natural disasters or otherwise, in a timely and cost-effective manner.

Mafco Worldwide’s failure to accurately forecast and manage inventory could result in an unexpected shortfall of its products which could harm its business.

Mafco Worldwide monitors its inventory levels based on its own projections of future demand. Because of the length of time necessary to harvest licorice root and produce licorice products, Mafco Worldwide must make production decisions well in advance of sales. An inaccurate forecast of demand can result in the unavailability of licorice products in high demand. This unavailability may depress sales volumes and adversely affect customer relationships.

Risks Relating to the Company’s Contingent Claims

The failure of Pneumo Abex’s claims managers, guarantor, indemnitors and insurers to pay their obligations timely and substantially in full could have a material adverse effect on the Company.

Pneumo Abex has no operating business or regular source of revenue and is therefore dependent on its claims managers, guarantor, indemnitors and insurers for payment of obligations arising out of the defense and resolution of third-party claims asserted against it. Based upon these third parties’ active management of indemnifiable matters, discharging of the related liabilities when required, and financial positions based upon publicly filed financial statements, as well as the history of insurance recovery, the Company believes that the likelihood of the covering parties failing to satisfy the obligations associated with these matters is remote, although there can be no assurance. Pneumo Abex commenced the Transfer Lawsuit against the Friction Guarantor and certain of its affiliates alleging that certain transfers by the Friction Guarantor have diminished the assets available to it to perform under the Mutual Guaranty. That claim, and any issue arising from any future failure involving Pneumo Abex, will be resolved if and when there is a closing of the transactions contemplated by the Settlement Agreement because the Company will no longer have an ownership interest in Pneumo Abex and will be indemnified by the Settlement Trust. Even if there should be a material failure to satisfy obligations to Pneumo Abex, there should be no material effect on the Company as a whole because Pneumo Abex is an immaterial part of the overall Company. In that circumstance, however, third-party claimants may attempt to seek redress from the other units of the Company. While such attempts should fail, the Company can give no assurance in that regard.


Item 1B.	Unresolved Staff Comments

None.


Item 2.	Properties

Harland Clarke is headquartered in San Antonio, Texas, Harland Financial Solutions is headquartered in Lake Mary, Florida and Scantron is headquartered in Eagan, Minnesota. Mafco Worldwide is headquartered in Camden, New Jersey. The principal properties for each segment are as follows:

Harland Clarke


		Approximate
		Floor Space		Leased/
Location	Use	(Square Feet)		Owned Status

Atlanta, GA	Administration, Information Technology, Sales and Marketing		96,400		Owned
Atlanta, GA(a)	Closed		36,000		Owned
Atlanta, GA(a)	Closed		54,000		Owned
Atlanta, GA(a)	Closed		132,300		Owned
Atlanta, GA	Tech Center		14,294		Leased
Atlanta, GA	Operations Support		9,665		Leased
Boulder City, NV	Administration and Production		4,000		Leased
Braintree, MA	Marketing Services and Support		3,476		Leased
Charlotte, NC	Administration		4,906		Leased
Colorado Springs, CO	Services		22,665		Leased
Glen Burnie, MD	Marketing Services and Production		120,000		Leased
Grapevine, TX	Printing		83,282		Leased
Gurabo, Puerto Rico	Printing		22,446		Leased
High Point, NC	Printing		135,000		Leased
Jeffersonville, IN	Printing		141,332		Leased
Kansas City, MO	Marketing Services		5,401		Leased
Lisle, IL	Marketing Services		7,050		Leased
Louisville, KY	Printing		50,000		Leased
Milton, WA	Printing		87,640		Leased
Nashville, TN	Administration		21,309		Leased
New Braunfels, TX	Administration, Printing and Contact Center		98,030		Owned
Phoenix, AZ	Printing		64,000		Leased
Redwood City, CA	Administration		10,000		Leased
Salt Lake City, UT	Printing, Distribution and Contact Center		129,100		Owned
San Antonio, TX	Printing		166,000		Leased
San Antonio, TX	Contact Center		68,000		Leased
San Antonio, TX	Contact Center		42,262		Leased
San Antonio, TX	Corporate Headquarters		90,000		Leased
San Antonio, TX	Administration		1,936		Leased
San Antonio, TX	Warehouse		16,166		Leased
San Antonio, TX	Warehouse		18,675		Leased


(a)		Held for sale.

Harland Financial Solutions


		Approximate
		Floor Space		Leased/
Location	Use	(Square Feet)		Owned Status

Atlanta, GA	Development and Support		7,098		Leased
Birmingham, AL	Development and Support		4,400		Leased
Bothell, WA	Development and Support		20,784		Leased
Carmel, IN	Development and Support		5,931		Leased
Cincinnati, OH	Service Bureau		63,901		Leased
Clive, IA	Service Bureau		36,466		Leased
Cotuit, MA	Development and Support		3,200		Leased
Englewood, CO	Development and Support		28,838		Leased
Fargo, ND	Development and Support		18,371		Leased
Grand Rapids, MI	Development and Support		5,703		Leased
Lake Mary, FL	Corporate Headquarters, Development and Support		80,390		Leased
Memphis, TN	Development and Support		7,981		Leased
Miamisburg, OH	Development and Support		15,286		Leased
Orlando, FL	Processing		14,856		Leased
Pleasanton, CA	Development and Support		49,115		Leased
Portland, OR	Administration, Development and Support		58,685		Leased
Tel Aviv, Israel	Development and Support		7,991		Leased
Thiruvananthapuram, India	Development and Support		4,000		Leased

Scantron


		Approximate
		Floor Space		Leased/
Location	Use	(Square Feet)		Owned Status

Atlanta, GA	Administration, Development and Support		2,921		Leased
Bellevue, WA	Administration		16,000		Leased
Chennai, India	Development and Support		38,060		Leased
Columbia, PA	Printing		121,370		Owned
Eagan, MN	Corporate Headquarters, Development and Support		109,500		Owned
Greeley, CO	Development and Support		10,800		Leased
Lakewood, CO	Development and Support		3,077		Leased
Lawrence, KS	Administration		21,000		Leased
McLean, VA	Administration, Development and Support		4,336		Leased
Olivet, MI	Development and Support		1,856		Leased
Omaha, NE	Field Services, Administration and Support		50,000		Owned
Santa Ana, CA	Development and Support		26,057		Leased
San Diego, CA	Development and Support		21,333		Leased
Towson, MD	Administration, Development and Support		9,193		Leased

Mafco Worldwide


		Approximate
		Floor Space		Leased/
Location	Use	(Square Feet)		Owned Status

Camden, NJ	Licorice Manufacturing, Warehousing and Administration		390,000		Owned
Camden, NJ	Warehousing		78,000		Leased
Camden, NJ	Warehousing		48,000		Leased
Gardanne, France	Licorice Manufacturing and Administration		48,900		Owned
Richmond, VA	Manufacturing and Administration for Non-licorice products		65,000		Owned
Zhangjiagang, China	Licorice Extract Blending and Licorice Derivative Manufacturing, Warehousing and Administration		55,563		Owned
Zhangjiagang, China	Warehousing		55,972		Leased
Shanghai, China	Administration		1,352		Leased
Xianyang, China	Administration		743		Leased
Dubai, UAE	Sales		3,724		Leased


Item 3.	Legal Proceedings

Pneumo Abex’s former Aerospace business sold certain of its aerospace products to the United States Government or to private contractors for the United States Government. Pneumo Abex retained in the Aerospace sale certain claims for allegedly defective pricing that the United States Government made with respect to certain of these products. In the first quarter of 2009, Pneumo Abex resolved the final remaining pricing matter that it managed for a payment of $0.1 million, resulting in a gain of $0.9 million due to the release of a reserve previously accrued for this claim.

Various legal proceedings, claims and investigations are pending against the Company, including those relating to commercial transactions, product liability, safety and health matters, employment matters and other matters. The Company is also involved in various stages of legal proceedings, claims, investigations and cleanup relating to environmental or natural resource matters, some of which relate to waste disposal sites. Most of these matters are covered by insurance, subject to deductibles and maximum limits, and by third-party indemnities.

The Company believes that the outcome of all pending legal proceedings in the aggregate will not have a material adverse effect on its consolidated financial position or results of operations.

See Item 1. Business: Mafco Worldwide -The Tobacco Industry; and Non-Operating Contingent Claims, Indemnification and Insurance Matters.


Item 4.	Removed and Reserved

PART II


Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The M & F Worldwide common stock is listed on the New York Stock Exchange, Inc. (“NYSE”) under the symbol MFW. The following table sets forth, for the calendar quarters indicated, the high and low closing prices per share of the M & F Worldwide common stock on the NYSE based on published financial sources.


	High		Low

Calendar 2009
First Quarter	$	16.80	$	7.73
Second Quarter		25.74		11.51
Third Quarter		20.87		18.46
Fourth Quarter		42.20		19.65
Calendar 2010
First Quarter	$	42.25	$	30.60
Second Quarter		33.31		26.41
Third Quarter		29.49		22.92
Fourth Quarter		27.98		22.30

The number of holders of record of the M & F Worldwide common stock as of February 25, 2011 was 4,980.

M & F Worldwide has not paid any cash dividend on its common stock to date and does not intend to pay regular cash dividends on its common stock. M & F Worldwide’s Board of Directors expect to review M & F Worldwide’s dividend policy from time to time in light of M & F Worldwide’s results of operations and financial position and such other business considerations as the Board of Directors considers relevant. Mafco Worldwide’s credit agreement and Harland Clarke Holdings’ credit agreement and indenture limit Mafco Worldwide’s and Harland Clarke Holdings’ respective ability to pay dividends to M & F Worldwide, which in turn may limit the ability of M & F Worldwide to pay dividends. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and the notes to the Company’s consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

During the fourth quarter of 2010, M & F Worldwide did not repurchase any of its equity securities.

The Chief Executive Officer of M & F Worldwide certified to the NYSE in June 2010 that he was not aware of any violation by the Company of the NYSE’s corporate governance listing standards.

Common Stock Performance

The graph and table set forth below present a comparison of cumulative stockholder return through December 31, 2010, assuming reinvestment of dividends, by an investor who invested $100.00 on December 31, 2005 in each of (i) the M & F Worldwide common stock, (ii) the S&P 500 Composite Index (the “S&P 500 Index”), (iii) Deluxe Corporation common stock, and (iv) R.R. Donnelley & Sons Co. common stock.

Comparison of Cumulative Total Return Among the Company’s Common Stock, the S&P 500 Index,
Deluxe Corporation Common Stock and R.R. Donnelley & Sons Co. Common Stock


Value of Initial Investment	12/31/05		12/31/06		12/31/07		12/31/08		12/31/09		12/31/10

M & F Worldwide Corp.	$	100.00	$	154.78	$	329.95	$	94.65	$	242.02	$	141.53
S&P 500 Index	$	100.00	$	115.80	$	122.16	$	76.96	$	97.33	$	111.99
Deluxe Corporation	$	100.00	$	88.63	$	118.99	$	57.55	$	61.84	$	101.40
R.R. Donnelley & Sons Co.	$	100.00	$	107.18	$	116.98	$	44.05	$	77.88	$	64.78


Item 6.	Selected Financial Data

The table below reflects historical financial data which are derived from the audited consolidated financial statements of M & F Worldwide for each of the years in the five-year period ended December 31, 2010.

The selected financial data are not necessarily indicative of results of future operations, and should be read in conjunction with Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Company’s consolidated financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K.


	Year Ended December 31,
	2010(a)			2009(b)			2008(c)			2007(d)			2006
	(in millions, except per share amounts)

Statement of Operations Data:
Net revenues	$	1,782.6		$	1,814.1		$	1,906.2		$	1,472.8		$	722.0
Cost of revenues		1,028.5			1,055.4			1,128.3			889.3			439.2

Gross profit		754.1			758.7			777.9			583.5			282.8
Selling, general and administrative expenses		414.5			415.6			467.9			357.5			162.0
Asset impairment charges		3.7			44.4			2.4			3.1			—
Restructuring costs		22.3			32.5			14.6			5.6			3.3

Operating income		313.6			266.2			293.0			217.3			117.5
Interest expense, net		(116.8	)		(137.4	)		(186.7	)		(163.3	)		(65.3	)
Gain (loss) on early extinguishment of debt		—			65.0			—			(54.6	)		—
Other (expense) income, net		(0.7	)		(1.1	)		2.7			0.1			—

Income (loss) before income taxes		196.1			192.7			109.0			(0.5	)		52.2
Provision for income taxes		75.2			73.0			42.0			3.7			16.0

Net income (loss) before extraordinary gain		120.9			119.7			67.0			(4.2	)		36.2
Extraordinary gain		—			—			0.7			—			—

Net income (loss)	$	120.9		$	119.7		$	67.7		$	(4.2	)	$	36.2

Earnings (loss) per common share before extraordinary gain:
Basic	$	6.26		$	6.20		$	3.30		$	(0.20	)	$	1.82

Diluted	$	6.22		$	6.17		$	3.30		$	(0.20	)	$	1.78

Extraordinary gain per common share:
Basic	$	—		$	—		$	0.04		$	—		$	—

Diluted	$	—		$	—		$	0.04		$	—		$	—

Earnings (loss) per common share:
Basic	$	6.26		$	6.20		$	3.34		$	(0.20	)	$	1.82

Diluted	$	6.22		$	6.17		$	3.34		$	(0.20	)	$	1.78


	December 31,
	2010(a)		2009(b)		2008(c)		2007(d)		2006
	(in millions)

Balance Sheet Data:
Total assets	$	3,769.1	$	3,686.0	$	3,783.1	$	3,811.7	$	1,455.4
Long-term debt including current portion and short-term borrowings^(e)		2,250.7		2,316.2		2,482.6		2,475.6		692.7
Stockholders’ equity		642.5		514.0		380.3		405.5		410.5


(a)		Includes the financial position and results of operations of Spectrum K12 from the date of its acquisition on July 21, 2010 and the financial position and results of operations of Parsam from the date of its acquisition on December 6, 2010. See Note 3 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
(b)		Includes the financial position and results of operations of Protocol IMS from the date of its acquisition on December 4, 2009 and financial position of SubscriberMail from the date of its acquisition on December 31, 2009. See Note 3 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
(c)		Includes the financial position and results of operations of Data Management I LLC from the date of its acquisition on February 22, 2008 and financial position of Transaction Holdings from the date of its acquisition on December 31, 2008. See Note 3 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
(d)		Includes the financial position and results of operations of John H. Harland Company from the date of its acquisition on May 1, 2007 and financial position and the results of operations of Wei Feng Enterprises Limited from the date of its acquisition on July 2, 2007.

(e)		Includes capital leases of $4.6 million, $5.7 million, $2.6 million, $3.4 million and $4.6 million at December 31, 2010, 2009, 2008, 2007 and 2006, respectively.


Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with Item 6. “Selected Financial Data” and the M & F Worldwide consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K.

Overview of Business

M & F Worldwide Corp. (“M & F Worldwide” and, together with its subsidiaries, the “Company”) is a holding company that conducts its operations through its indirect, wholly owned subsidiaries, Harland Clarke Holdings and Mafco Worldwide. The Company has organized its business and corporate structure along the following four business segments: Harland Clarke, Harland Financial Solutions, Scantron and Licorice Products.

The Harland Financial Solutions segment provides technology products and services to financial services clients worldwide including lending and mortgage compliance and origination applications, risk management solutions, business intelligence solutions, Internet and mobile banking applications, branch automation solutions, self-service solutions, electronic payment solutions and core processing systems.

The Scantron segment provides data management solutions and related services to educational, commercial, healthcare and governmental entities worldwide including testing and assessment solutions, patient information collection and tracking, and survey services. Scantron’s solutions combine a variety of data collection, analysis, and management tools including web-based solutions, software, scanning equipment, forms, and related field maintenance services.

The Licorice Products segment, which is operated by Mafco Worldwide, produces a variety of licorice products from licorice root, intermediary licorice extracts produced by others and certain other ingredients. Approximately 63% of Mafco Worldwide’s licorice product sales are to the worldwide tobacco industry for use as tobacco flavor enhancing and moistening agents in the manufacture of American blend cigarettes, moist snuff, chewing tobacco and pipe tobacco. Mafco Worldwide also manufactures and sells natural products for use in the tobacco industry. Mafco Worldwide also sells licorice products to food processors, cosmetic companies, confectioners and pharmaceutical manufacturers for use as flavoring or masking agents, including its Magnasweet brand flavor enhancer, which is used in various brands of chewing gum, energy bars, non-carbonated beverages, lip balm, chewable vitamins, aspirin and other products. In addition, Mafco Worldwide sells licorice root residue as garden mulch under the name Right Dress.

Recent Development

On December 15, 2010, Scantron Corporation (“Scantron), a wholly owned subsidiary of Harland Clarke Holdings, entered into a securities purchase agreement with KUE Digital International LLC pursuant to which Scantron would purchase all of the outstanding capital stock or membership interests of KUE Digital Inc., KUED Sub I LLC and KUED Sub II LLC (collectively referred to as “GlobalScholar”) for $140.0 million in cash, subject to post-closing adjustments, and a contingent payment of up to $20.0 million in cash, which would be dependent upon the achievement of certain revenue targets during calendar year 2011. GlobalScholar’s instructional management platform supports all aspects of managing education at K-12 schools, including student information systems; performance-based scheduler; gradebook; learning management system; longitudinal data collection, analysis and reporting; teacher development and performance tracking; and online communication and tutoring portals. GlobalScholar’s instructional management platform complements Scantron’s testing and assessment, response to intervention, student achievement management and special education

software solutions thereby expanding Scantron’s web-based education solutions. Scantron completed the acquisition of GlobalScholar on January 3, 2011 for $135.4 million in cash, net of cash acquired, and subject to post-closing adjustments. The Company financed the acquisition and related fees and expenses with Harland Clarke Holdings’ cash on hand. Due to the timing of the acquisition, preliminary accounting for the business combination is not complete. Financial results for GlobalScholar will be included in the Company’s results of operations beginning in the first quarter of 2011.

The Parsam Acquisition

On December 6, 2010, Harland Financial Solutions, Inc. (“HFS”), a wholly owned subsidiary of Harland Clarke Holdings, acquired all of the outstanding membership interests of Parsam Technologies, LLC and the equity of SRC Software Private Limited (collectively referred to as “Parsam”). Parsam’s solutions allow financial institutions to provide services online, in branches and at call centers, from new account opening and funding to account-to-account money transfers, person-to-person payments, account and adviser-client relationship management and bill presentment and payment. HFS is integrating Parsam’s solutions into its existing solution offerings. The acquisition-date purchase price was $32.6 million in cash, net of cash acquired, and subject to post-closing adjustments. In addition, the Company recorded the fair value of contingent consideration of $2.7 million, which resulted in total consideration of $35.3 million. Contingent consideration would be payable upon achievement of certain revenue targets of Parsam during calendar years 2011 and 2012 with a maximum aggregate contingent consideration of $25.0 million if the revenue targets are met (see Note 3 to the Company’s consolidated financial statements included elsewhere in this Annual Report on Form 10-K). The Company financed the acquisition and related fees and expenses with Harland Clarke Holdings’ cash on hand.

The Spectrum K12 Acquisition

On July 21, 2010, Scantron acquired Spectrum K12 School Solutions, Inc. (“Spectrum K12”). Spectrum K12 develops, markets and sells student achievement management, response to intervention and special education software solutions. Spectrum K12’s software solutions complement Scantron’s software solutions for education assessments, content and data management. The acquisition-date purchase price was $28.6 million in cash, net of cash acquired and after giving effect to working capital adjustments. In addition, the Company recorded the fair value of contingent consideration of $4.0 million, which resulted in total consideration of $32.7 million. Contingent consideration would be payable upon achievement of certain revenue targets of Spectrum K12 during the twelve-month periods ending June 30, 2011 and 2012 with a maximum aggregate contingent consideration of $20.0 million if the revenue targets are met (see Note 3 to the Company’s consolidated financial statements included elsewhere in this Annual Report on Form 10-K). The Company financed the acquisition and related fees and expenses with Harland Clarke Holdings’ cash on hand.

The SubscriberMail and Protocol IMS Acquisitions

During December 2009, Harland Clarke Corp., a wholly owned subsidiary of Harland Clarke Holdings, acquired in separate transactions SubscriberMail and Protocol Integrated Marketing Services (“Protocol IMS”), a division of Protocol Global Solutions. SubscriberMail is a leading email marketing service provider that offers patented tools to develop and deliver professional email communications. Protocol IMS focuses on direct marketing services with solutions that include business to business strategic services, business to consumer strategic services, database marketing and analytics, outbound business to business teleservices, production and fulfillment. The acquisition-date aggregate consideration of $13.1 million for these transactions includes contingent consideration of $1.8 million for SubscriberMail upon the achievement of certain revenue targets in 2010 and 2011, with a maximum aggregate contingent consideration of $2.0 million if the revenue targets are met (see Note 3 to the Company’s consolidated financial statements included elsewhere in this Annual Report on Form 10-K). The Protocol IMS and SubscriberMail acquisitions are collectively referred to as the “2009 Acquisitions.”

The Transaction Holdings Acquisition

In December 2008, Harland Clarke Corp. acquired Transaction Holdings Inc. (“Transaction Holdings”) for total cash consideration of $8.2 million (the “Transaction Holdings Acquisition”). Transaction Holdings produces personal and business checks, payment coupon books and promotional checks and provides direct marketing services to financial institutions as well as individual consumers and small businesses.

The Data Management Acquisition

In February 2008, Scantron purchased all of the limited liability membership interests of Data Management I LLC (“Data Management”) from NCS Pearson, for $218.7 million in cash after giving effect to working capital adjustments of $1.6 million (the “Data Management Acquisition”). Data Management designed, manufactured and serviced scannable data collection products, including printed forms, scanning equipment and related software, and provided survey consulting and tracking services, including medical device tracking, as well as field maintenance services to corporate and governmental clients. The Company financed the Data Management Acquisition and related fees and expenses with Harland Clarke Holdings’ cash on hand.

Economic and Other Factors Affecting the Businesses of the Company

Harland Clarke

While total non-cash payments — including checks, credit cards, debit cards and other electronic forms of payment — are growing, the number of checks written has declined and is expected to continue to decline. Harland Clarke believes the number of checks printed is driven by the number of checks written, the number of new checking accounts opened and reorders reflecting changes in consumers’ personal situations, such as name or address changes. In recent years, Harland Clarke has experienced check unit declines at a higher rate than in the past, as evidenced by recent period-over-period declines in Harland Clarke revenue which are discussed in more detail elsewhere in this report. Harland Clarke is unable to determine at this time whether these higher rates of decline are attributable to recent economic and financial market difficulties, the depth and length of the economic downturn, higher unemployment, decreased openings of checking accounts, changing business strategies of our financial institution clients, decreased consumer spending and/or a further acceleration in the use of alternative non-cash payments. Harland Clarke expects that check unit volume will continue to decline at rates that are higher than it had previously experienced in recent years, resulting in a corresponding decrease in check revenues and depending on the nature and relative magnitude of the causes for the decreases, such decreases may not be mitigated when overall economic conditions improve. Harland Clarke is focused on growing its non-check related products and services, including marketing services, and optimizing its existing catalog of offerings to better serve its clients, as well as managing its costs, overhead and facilities to reflect the decline in check unit volumes. Harland Clarke does not believe that revenues from non-check related products and services will fully offset revenue declines from declining check unit volumes. In the future, Harland Clarke may not be able to mitigate the revenue declines from declining check unit volumes through cost management, which could negatively affect Harland Clarke’s margins.

The Harland Clarke segment’s operating results are also affected by consumer confidence and employment. Consumer confidence directly correlates with consumer spending, while employment also affects revenues through the number of new checking accounts being opened. The Harland Clarke segment’s operating results may be negatively affected by slow or negative growth of, or downturns in, the United States economy. Business confidence affects a portion of the Harland Clarke segment. In addition, if Harland Clarke’s financial institution customers fail or merge with other financial institutions, Harland Clarke may lose any or all revenue

from such financial institutions and/or experience further pricing pressure, which would negatively affect Harland Clarke’s operating results.

Harland Financial Solutions

Harland Financial Solutions’ operating results are affected by the overall demand for our products, software and related services which is based upon the technology budgets of our clients and prospects. Economic downturns in one or more of the countries in which we do business and enhanced regulatory burdens, including through increased fees and assessments charged to financial institutions by the Federal Deposit Insurance Corporation and National Credit Union Association or due to recently enacted federal legislation for additional taxes on certain financial institutions, could result in reductions in the information technology budgets for some portion of our clients and potentially longer lead-times for acquiring Harland Financial Solutions products and services. In addition, if Harland Financial Solutions’ financial institution customers fail or merge with other financial institutions, Harland Financial Solutions may lose any or all revenue from such financial institutions and/or experience further pricing pressure, which would negatively affect Harland Financial Solutions’ operating results.

Harland Financial Solutions’ business is affected by technological change, evolving industry standards, regulatory changes in client requirements and frequent new product introductions and enhancements. The business of providing technological solutions to financial institutions and other enterprises requires that we continually improve our existing products and create new products while at the same time controlling our costs to remain price competitive.

Providing technological solutions to financial institutions is highly competitive and fragmented. Harland Financial Solutions competes with several large and diversified financial technology providers, including, among others, Fidelity National Information Services, Inc., Fiserv, Inc., Jack Henry & Associates, Inc., Open Solutions Inc., Computer Services Inc. and many regional providers. Many multi-national and international providers of technological solutions to financial institutions also compete with Harland Financial Solutions both domestically and internationally, including Temenos Group AG, Misys plc, Infosys Technologies Limited, Tata Consultancy and Oracle Financial Services. There are also many other competitors that offer one or more specialized products or services that compete with products and services offered by Harland Financial Solutions. Management believes that competitive factors influencing buying decisions include product features and functionality, client support, price and vendor financial stability.

Scantron

While the number of tests given annually in K-12 and higher education continues to grow, the demand for optical mark reader paper-based testing has declined and is expected to continue to decline. Changes in educational funding can affect the rate at which schools adopt new technology thus slowing the decline for paper-based testing but also slowing the demand for Scantron’s on-line testing products. Educational funding changes may also reduce the rate of consumption of Scantron’s forms and purchase of additional hardware to process these forms. Scantron’s education-based customers may turn to lower cost solutions for paper-based forms and hardware in furtherance of addressing their budget needs. A weak economy in the United States may negatively affect education budgets and spending, which would have an adverse effect on Scantron’s operating results. Data collection is also experiencing a conversion to non-paper based methods of collection. Scantron believes this trend will also continue as the availability of these alternative technologies becomes more widespread. While Scantron’s non-paper data collection business could benefit from this trend, Scantron’s paper-based data collection business could be negatively affected by this trend. Changes in the overall economy can affect the demand for data collection to the extent that Scantron’s customers adjust their research or testing expenditures.

Mafco Worldwide

Tobacco products other than cigarettes, including chewing tobacco and moist snuff, also contain licorice extract. Producers of tobacco products are subject to regulation in the United States at the federal, state and local levels, as well as in foreign countries. In 2009, the United States government enacted the Family Smoking Prevention and Tobacco Control Act, which provides greater regulatory oversight for the manufacture of tobacco products, including the ability to regulate tobacco product additives. As a result, the United States Food & Drug Administration has the power to limit the type or quantity of additives that may be used in the manufacture of tobacco products in the United States.

Similarly, countries outside the United States have rules restricting the use of various ingredients in tobacco products. During 2005, the World Health Organization promulgated its Framework Convention for Tobacco Control (the “FCTC”). The FCTC is the first international public health treaty and establishes a global agenda for tobacco regulation in order to limit the use of tobacco products. More than 160 countries, as well as the European Union, have become parties to the FCTC. In November 2010, the governing body of the FCTC issued guidelines that provide non-binding recommendations to restrict or ban flavoring and additives that increase the attractiveness of tobacco products and require tobacco product manufacturers to disclose ingredient information to public health authorities who would then determine whether such ingredients increase attractiveness. The European Commission and individual governments are also considering regulations to further restrict or ban various cigarette ingredients. Future tobacco product regulations may be influenced by these FCTC recommendations.

The tobacco business, including the sale of cigarettes and smokeless tobacco, has been subject to federal, state, local and foreign excise taxes for many years. In recent years, federal, state, local and foreign governments have increased such taxes as a means of both raising revenue and discouraging the consumption of tobacco products. In February 2009, the United States government enacted the State Children’s Health Insurance Program (SCHIP). The health programs in this legislation are being funded by an increase in the federal tax on cigarettes to $1.0066 per pack from the previous $0.39 per pack and by significant increases in federal taxes on cigars and other tobacco products. Other proposals to increase taxes on tobacco products are

also regularly introduced in the United States and foreign countries. Additional taxes may lead to an accelerated decline in tobacco product sales.

Critical Accounting Policies and Estimates

The Company reviews its accounting policies on a regular basis. The Company makes estimates and judgments as part of its financial reporting that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to accounts receivable, investments, intangible assets, pensions and other postretirement benefits, income taxes, contingencies and litigation, as well as other assets and liabilities. The Company bases its estimates on historical experience and on various other assumptions that it believes reasonable under the circumstances. These estimates form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Results may differ from these estimates due to actual outcomes being different from the assumed outcomes. The Company believes the following critical accounting policies affect its more significant judgments and estimates.

Revenue Recognition — The Company considers its revenue recognition policy as critical to its reported results of operations primarily in its Harland Financial Solutions and Scantron segments. Revenue recognition requires judgment, including, amongst other things, whether a software arrangement includes multiple elements, whether any elements are essential to the functionality of any other elements, and whether vendor-specific objective evidence (“VSOE”) of fair value exists for those elements. Customers receive certain elements of the Company’s products and services over time.

Changes to the elements in a software arrangement or in the Company’s ability to identify VSOE for those elements could materially affect the amount of earned and unearned revenue reflected in the financial statements.

For software license agreements that do not require significant modification or customization of the software, the Company recognizes software license revenue when persuasive evidence of an arrangement exists, delivery of the product has occurred, the license fee is fixed and determinable and collection is probable. The Company’s software license agreements include multiple products and services or “elements.” None of these elements are deemed to be essential to the functionality of the other elements. The accounting guidance generally requires revenue earned on software arrangements involving multiple elements to be allocated proportionally to each element based on VSOE of fair value. Fair value is determined for license fees based upon the price charged when sold separately. In the event that the Company determines that VSOE does not exist for one or more of the delivered elements of a software arrangement, but does exist for all of the undelivered elements, revenue is recognized using the residual method. Under the residual method, a residual amount of the total arrangement fee is recognized as revenue for the delivered elements after the established fair value of all undelivered elements has been deducted. In the event the Company determines that VSOE is not achieved for any of the elements of a software arrangement, the entire arrangement is

bundled as a single unit and revenue is recognized ratably over the initial term of the arrangement commencing upon the delivery of the software.

Implementation services are generally for installation, training, implementation and configuration. These services are not considered essential to the functionality of the related software. VSOE of fair value is established by pricing used when these services are sold separately. Generally revenue is recognized when services are completed. On implementations for outsourced data processing services, revenue is deferred and recognized over the life of the outsourcing arrangement. On certain larger implementations, revenue is recognized based on milestones during the implementation. Milestones are triggered by tasks completed or based on labor hours. Estimates of efforts to complete a project are used in the percentage-of-completion calculation. Due to uncertainties inherent in these estimates, actual results could differ from these estimates. Revenue from arrangements that are subject to substantive customer acceptance provisions is deferred until the acceptance conditions have been met.

Maintenance fees are deferred and recognized ratably over the maintenance period, which is usually twelve months. VSOE of fair value is determined based on contract renewal rates.

Outsourced data processing services and other transaction processing services are recognized in the month the transactions are processed or the services are rendered.

The Company recognizes product and service revenue when persuasive evidence of a non-cancelable arrangement exists, products have been shipped and/or services have been rendered, the price is fixed or determinable, collectability is reasonably assured, legal title and economic risk is transferred to the customer and an economic exchange has taken place. Revenues are recorded net of any applicable discounts, contract acquisition payments amortization, accrued incentives and allowances for sales returns. Deferred revenues represent amounts billed to the customer in excess of amounts earned.

Title for product sales may pass to customers upon leaving the Company’s facilities, upon receipt at a specific destination (such as a shipping port) or upon arrival at the customer’s facilities, depending on the terms of the contractual agreements for each customer. Title for product sales to domestic customers typically passes when the product leaves the Company’s facilities. Title for product sales to international customers typically passes either when the product is delivered to a shipping port or when the product is delivered to the customer’s facilities.

Revenues for direct response marketing services are recognized from the Company’s fixed price direct mail and marketing contracts based on the proportional performance method for specific projects.

Inventories — The majority of the Company’s inventories consists of licorice raw materials. Licorice raw materials have an indefinite life as long as they are kept dry; therefore the Company has not been required to establish an obsolescence reserve for licorice. A reserve for the value of the products has not been necessary based on the Company’s lower of cost or market analysis. The Company determines cost by average costing or the first-in, first-out method. The Company also ensures that storage facilities where the raw materials are inventoried are properly safeguarded and maintained to preserve its characteristics.

Income Taxes — The Company estimates its actual current tax liability together with temporary differences resulting from differing treatment of items, such as net operating losses and depreciation, for tax and accounting purposes. These temporary differences result in deferred tax assets and liabilities. The Company must assess the likelihood that it will recover deferred tax assets from future taxable income and, to the extent it believes that recovery is not likely, establish a valuation allowance. To the extent the Company establishes a valuation allowance or increases this allowance in a period, it must include and expense the allowance within the tax provision in the consolidated statement of income. Significant management judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against net deferred tax assets.

As part of the process of preparing its consolidated financial statements, the Company is required to calculate the amount of income tax in each of the jurisdictions in which it operates. On a regular basis, the

amount of taxable income is reviewed by various federal, state and foreign taxing authorities. As such, the Company routinely provides reserves for unrecognized tax benefits for items that it believes could be challenged by these taxing authorities.

Long-Lived Assets — The Company assesses the impairment of property, plant and equipment and amortizable intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Some factors the Company considers important that could trigger an impairment review include the following:


	•	Significant underperformance relative to expected historical or projected future operating results;

	•	Significant changes in the manner of use of these assets or the strategy for the Company’s overall business; and

	•	Significant negative industry or economic trends.

When the Company determines that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more indicators of impairment, it measures the impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with current market expectations. Significant assumptions requiring judgment are required to determine future cash flows, including but not limited to the estimated remaining useful life of the asset, future revenue streams and future expenditures to maintain the existing service potential of the asset. The Company re-evaluates the useful life of these assets at least annually to determine if events and circumstances continue to support their recorded useful lives. Assets held for sale are carried at the lower of carrying amount or fair value, less estimated costs to sell such assets.

Goodwill and Acquired Intangible Assets — Goodwill represents the excess of consideration transferred over the fair value of identifiable net assets acquired. Acquired intangibles are recorded at fair value as of the date acquired. Goodwill and other intangibles determined to have an indefinite life are not amortized, but are tested for impairment annually in the fourth quarter, or when events or changes in circumstances indicate that the assets might be impaired, such as a significant adverse change in the business climate.

The goodwill impairment test is a two-step process, which requires management to make judgments in determining what assumptions to use in the calculation. The first step of the process consists of estimating the fair value of the Company’s reporting units. In 2009, the Company reduced the number of reporting units from six to five as a result of an organizational realignment and the integration of two former reporting units into a single reporting unit. In 2010, the Company further reduced the number of reporting units from five to four as a result of the integration of two former reporting units into a single reporting unit. The Company’s reporting units are now the same as its reportable segments.

The Company utilizes both the income and market approaches to estimate the fair value of the reporting units. The income approach involves discounting future estimated cash flows. The discount rate used is the value-weighted average of the reporting unit’s estimated cost of equity and debt (“cost of capital”) derived using, both known and estimated, customary market metrics. The Company performs sensitivity tests with respect to growth rates and discount rates used in the income approach. In applying the market approach, valuation multiples are derived from historical and projected operating data of selected guideline companies; evaluated and adjusted, if necessary, based on the strengths and weaknesses of the reporting unit relative to the selected guideline companies; and applied to the appropriate historical and/or projected operating data of the reporting unit to arrive at an indication of fair value. The Company weights the results of the income and market approaches equally, except where guideline companies are not similar enough to provide a reasonable value using the market approach. When that occurs, the market approach is weighted less than the income approach. The Company assesses the results of the reporting unit valuations in relation to the value indicated by the Company’s market capitalization to ensure that the results are reasonable relative to market pricing.

reporting unit to the assets and liabilities of the reporting unit. Any unallocated fair value represents the “implied fair value” of goodwill, which is compared to the corresponding carrying value.

The Company measures impairment of its indefinite-lived tradename based on the relief-from-royalty-method. Under the relief-from-royalty method of the income approach, the value of an intangible asset is determined by quantifying the cost savings a company obtains by owning, as opposed to licensing, the intangible asset. Assumptions about royalty rates are based on the rates at which similar tradenames are licensed in the marketplace. The Company also re-evaluates the useful life of this asset to determine whether events and circumstances continue to support an indefinite useful life.

The Company measures impairment of Mafco Worldwide’s indefinite-lived product formulations based on the excess earnings method of the income approach. Under this methodology, the estimated fair value of the product formulations is determined by the sum of the present values of the projected annual earnings attributable to the product formulations. The Company also re-evaluates the useful life of these assets to determine whether events and circumstances continue to support an indefinite useful life.

The annual impairment evaluations for goodwill and indefinite-lived intangible assets involve significant estimates made by management. The discounted cash flow analyses require various judgmental assumptions about sales, operating margins, growth rates and discount rates. Assumptions about sales, operating margins and growth rates are based on the Company’s budgets, business plans, economic projections, anticipated future cash flows and marketplace data. Changes in estimates could have a material impact in the carrying amount of goodwill and indefinite-lived intangible assets in future periods.

Intangible assets that are deemed to have a finite life are amortized over their estimated useful life generally using accelerated methods that are based on expected cash flows. They are also evaluated for impairment as discussed above in “Long-Lived Assets.”

Contingent Consideration Arrangements — The Company has entered into contingent consideration arrangements in conjunction with recent acquisitions. These arrangements are in the form of earn-out agreements with payments based on the achievement of certain revenue targets over specified time periods after the date of the acquisition. The fair value of these contingent consideration arrangements is recorded as a liability on the date of the acquisition, except for arrangements that are considered to be employee compensation for services rendered. In those cases, the fair value is recorded as a liability and compensation expense ratably over the requisite service period. The fair value of these arrangements is subject to remeasurement as of each balance sheet date.

The fair value of each arrangement is estimated utilizing a discounted cash flow analysis. The analysis considers, among other things, estimates of future revenues which involve significant estimates by management. Changes in estimates of revenues could have a material effect on the fair value of liabilities for contingent consideration arrangements with any changes in fair value being recognized in net income.

Contingencies and Indemnification Agreements — The Company records the estimated impacts of various conditions, situations or circumstances involving uncertain outcomes. These events are “contingencies,” and the accounting for such events follows accounting guidance for contingencies.

The accrual of a contingency involves considerable judgment by management. The Company uses internal expertise and consults with outside experts, as necessary, to help estimate the probability that the Company has incurred a loss and the amount (or range) of the loss. When evaluating the need for an accrual or a change in an existing accrual, the Company considers whether it is reasonably probable to estimate an outcome for the contingency based on its experience, any experience of others facing similar contingencies of which the Company is aware and the particulars of the circumstances creating the contingency. See Item 3. Legal Proceedings; and Note 19 — Commitments and Contingencies to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Pensions and Other Postretirement Benefits — The Company sponsors defined benefit pension plans, which cover certain current and former Company employees who meet eligibility requirements. The Company also sponsors unfunded defined benefit postretirement plans that cover certain former salaried and non-salaried

employees. One postretirement benefit plan provides healthcare benefits and the other provides life insurance benefits. The Company consults with outside actuaries who use several statistical and other factors that attempt to estimate future events to calculate the expense and liability related to the plans. These factors include assumptions about the discount rate, expected return on pension plan assets and rate of future compensation increases as determined by the Company, within certain guidelines. In addition, the Company’s actuarial consultants also use subjective factors such as withdrawal and mortality rates and the expected healthcare cost trend rate to estimate these factors.

The actuarial assumptions used by the Company may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates, higher or lower healthcare inflation rates or longer or shorter life spans of participants, among other things. Differences from these assumptions may result in a significant difference with the amount of pension and postretirement benefit income/expense and asset/liability that the Company recorded.

Derivative Financial Instruments — The Company uses derivative financial instruments to manage interest rate risk related to a portion of its long-term debt. The Company recognizes all derivatives at fair value as either assets or liabilities on the consolidated balance sheets and changes in the fair values of such instruments are recognized in earnings unless specific hedge accounting criteria are met. If specific cash flow hedge accounting criteria are met, the Company recognizes the changes in fair value of these instruments in other comprehensive income (loss) until the underlying debt instrument being hedged is settled or the Company determines that the specific hedge accounting criteria are no longer met.

On the date the interest rate derivative contract is entered into, the Company designates the derivative as either a fair value hedge or a cash flow hedge. The Company formally documents the relationship between hedging instruments and the hedged items, as well as its risk-management objectives and strategy for undertaking various hedge transactions. The Company links all hedges that are designated as fair value hedges to specific assets or liabilities on the balance sheet or to specific firm commitments. The Company links all hedges that are designated as cash flow hedges to forecasted transactions or to liabilities on the balance sheet. The Company also assesses, both at the inception of the hedge and on an on-going basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. If an existing derivative were to become not highly effective as a hedge, the Company would discontinue hedge accounting prospectively. The Company assesses the effectiveness of the hedge based on total changes in the hedge’s cash flows at each payment date as compared to the change in the expected future cash flows on the long-term debt.

Accounting Guidance

See Note 2 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K regarding the impact of recently issued accounting guidance on the Company’s financial condition and results of operations.

Off-Balance Sheet Arrangements

It has not been the Company’s practice to enter into off-balance sheet arrangements. In the normal course of business the Company periodically enters into agreements that incorporate general indemnification language. These indemnifications encompass such items as intellectual property rights, governmental regulations and/or employment-related matters. Performance under these indemnities would generally be triggered by a breach of terms of the contract or by a third-party claim. There has historically been no material losses related to such indemnifications, and the Company does not expect any material adverse claims in the future.

The Company is not engaged in any transactions, arrangements or other relationships with any unconsolidated entity or other third party that is reasonably likely to have a material effect on its consolidated results of operations, financial position or liquidity. In addition, the Company has not established any special purpose entity.

Asset Impairments

Changes in estimates and assumptions used in the Company’s financial projections resulting from the factors discussed above for any of the Company’s business segments could have a material impact on the fair value of goodwill, indefinite-lived intangible assets or other long-lived assets in future periods, which may result in material asset impairments, as more fully described in Item 1A, “Risk Factors — Weak economic conditions and further acceleration of check unit declines may continue to have an adverse effect on the Company’s revenues and profitability and could result in additional impairment charges.”

Restructuring

The Company has taken restructuring actions in the past in an effort to achieve manufacturing and contact center efficiencies and other cost savings. Past restructuring actions have related to both acquisitions and ongoing cost reduction initiatives and have included manufacturing plant closures, contact center closures and workforce rationalization. The Company anticipates future restructuring actions, where appropriate, to realize process efficiencies, to continue to align our cost structure with business needs and remain competitive in the marketplace. The Company expects to incur severance and severance-related costs, facilities closures costs and other costs such as inventory write-offs, training, hiring and travel in connection with future restructuring actions.

Consolidated Operating Results

The Company has organized its business along four reportable segments together with a corporate group for certain support services. The Company’s operations are aligned on the basis of products, services and industry. Management measures and evaluates the reportable segments based on operating income.

In the tables below, dollars are in millions.

Year Ended December 31, 2010 Compared to Year Ended December 31, 2009

The operating results for the years ended December 31, 2010 and 2009, as reflected in the accompanying consolidated statements of income and described below, include the acquired Parsam, Spectrum K12, SubscriberMail and Protocol IMS businesses from the respective dates of acquisition (see Note 3 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K).

Net Revenues:


	Year Ended December 31,
	2010			2009

Consolidated Net Revenues:
Harland Clarke segment	$	1,191.2		$	1,226.0
Harland Financial Solutions segment		282.7			278.9
Scantron segment		203.7			208.0
Licorice Products segment		111.4			101.8
Eliminations		(6.4	)		(0.6	)

Total	$	1,782.6		$	1,814.1

Net revenues decreased by $31.5 million, or 1.7%, to $1,782.6 million in 2010 from $1,814.1 million in 2009.

Net revenues for the Harland Clarke segment decreased by $34.8 million, or 2.8%, to $1,191.2 million in 2010 from $1,226.0 million in 2009. The decrease was primarily due to volume declines in check and related products, the loss of a client and a decrease in revenues per unit, partially offset by a $27.0 million increase in revenues from the businesses acquired in the 2009 Acquisitions, the addition of new clients, and a one-time payment received as a result of the loss of a client. Revenues from new client additions more than offset lost

revenues from client losses. Net revenues in the 2010 period included charges of $0.6 million for non-cash fair value acquisition accounting adjustments to deferred revenue related to the SubscriberMail acquisition.

Net revenues for the Harland Financial Solutions segment increased by $3.8 million, or 1.4%, to $282.7 million in 2010 from $278.9 million in 2009. Increases in term license, maintenance, outsourced host processing revenues and early termination fees as well as revenues from the Parsam acquisition were partially offset by decreases in other license revenues and hardware sales.

Net revenues for the Scantron segment decreased by $4.3 million, or 2.1%, to $203.7 million in 2010 from $208.0 million in 2009. The decrease was primarily due to declines in forms, hardware and service maintenance revenues, partially offset by increases in revenues from web-based products and services for the education market, sales of a solution that assists financial institutions with the implementation of changes to federal regulations during 2010 regarding overdraft services provided to financial institution customers and revenues from the Spectrum K12 acquisition. Net revenues in the 2010 period included charges of $2.1 million for non-cash fair value acquisition accounting adjustments to deferred revenue primarily related to the Spectrum K12 acquisition.

Net revenues for the Licorice Products segment increased by $9.6 million, or 9.4%, to $111.4 million in 2010 from $101.8 million in 2009. Magnasweet and pure licorice derivative sales increased by $4.8 million primarily due to an increase in shipment volumes to international customers. Sales of licorice extract to the worldwide tobacco industry increased by $3.2 million in 2010 compared to 2009. Certain customers reduced their licorice extract purchases during 2009 and resumed more normal purchase patterns in 2010. Sales of licorice extract to non-tobacco customers increased by $1.6 million primarily due to an increase in shipment volumes to confectionery customers partially offset by the unfavorable impact of the U.S. dollar translation of Mafco Worldwide’s Euro denominated sales due to the stronger dollar in 2010 versus 2009.

Elimination of net revenues increased to $6.4 million in the 2010 period from $0.6 million in the 2009 period primarily due to intersegment sales from the Scantron segment to the Harland Clarke segment. These intersegment sales are related to solutions that assist financial institutions with the implementation of changes to federal regulations during 2010.

Cost of Revenues:


	Year Ended December 31,
	2010			2009

Consolidated Cost of Revenues:
Harland Clarke segment	$	730.9		$	764.3
Harland Financial Solutions segment		121.7			119.6
Scantron segment		112.4			114.4
Licorice Products segment		69.9			57.7
Eliminations		(6.4	)		(0.6	)

Total	$	1,028.5		$	1,055.4

Cost of revenues decreased by $26.9 million, or 2.5%, to $1,028.5 million in 2010 from $1,055.4 million in 2009.

Cost of revenues for the Harland Clarke segment decreased by $33.4 million, or 4.4%, to $730.9 million in 2010 from $764.3 million in 2009. The decrease in cost of revenues was primarily due to labor cost reductions and decreases in depreciation and occupancy expenses, primarily resulting from restructuring activities. Additionally, lower volumes resulted in lower delivery, materials, and other variable overhead expenses. Decreases in cost of revenues were partially offset by increases resulting from the businesses acquired in the 2009 Acquisitions and by a $4.6 million increase in amortization expense resulting from the reclassification of the Harland Clarke tradename from an indefinite-lived to a definite-lived intangible asset in the fourth quarter of 2009. Cost of revenues as a percentage of revenues for the Harland Clarke segment was 61.4% in 2010 as compared to 62.3% in 2009.

Cost of revenues for the Harland Financial Solutions segment increased by $2.1 million, or 1.8%, to $121.7 million in 2010 from $119.6 million in 2009. The increase in cost of revenues was primarily due to a $1.7 million increase in amortization expense resulting from the reclassification of the Harland Clarke tradename from an indefinite-lived to a definite-lived intangible asset in the fourth quarter of 2009. Additional increases due to labor and related expenses and costs associated with the business acquired in the Parsam acquisition were offset by lower hardware and third-party license costs. Cost of revenues as a percentage of revenues for the Harland Financial Solutions segment was 43.0% in 2010 as compared to 42.9% in 2009.

Cost of revenues for the Scantron segment decreased by $2.0 million, or 1.7%, to $112.4 million in 2010 from $114.4 million in 2009. The decrease was primarily due to volume declines and labor cost reductions resulting from restructuring activities, partially offset by costs associated with the business acquired in the Spectrum K12 acquisition and an increase in delivery costs related to the Company’s solution that assists financial institutions with the implementation of changes to federal regulations during 2010. Cost of revenues as a percentage of revenues for the Scantron segment was 55.2% in 2010 as compared to 55.0% in 2009.

Cost of revenues for the Licorice Products segment increased by $12.2 million, or 21.1%, to $69.9 million in 2010 from $57.7 million in 2009. The increase in cost of revenues was primarily due to the increase in sales, a change in the mix of products sold and increased raw material costs. Cost of revenues as a percentage of revenues for the Licorice Products segment was 62.7% in 2010 as compared to 56.7% in 2009 due to the factors mentioned above and lower average revenues per unit.

Elimination of cost of revenues increased to $6.4 million in the 2010 period from $0.6 million in the 2009 period primarily due to intersegment costs from the Scantron segment to the Harland Clarke segment. These intersegment costs are related to solutions that assist financial institutions with the implementation of changes to federal regulations during 2010.

Selling, General and Administrative Expenses:


	Year Ended December 31,
	2010		2009

Consolidated Selling, General and Administrative Expenses:
Harland Clarke segment	$	206.3	$	206.6
Harland Financial Solutions segment		109.6		112.1
Scantron segment		58.8		55.9
Licorice Products segment		13.1		12.0
Corporate		26.7		29.0

Total	$	414.5	$	415.6

Selling, general and administrative expenses decreased by $1.1 million, or 0.3%, to $414.5 million in 2010 from $415.6 million in 2009.

Selling, general and administrative expenses for the Harland Clarke segment decreased by $0.3 million, or 0.1%, to $206.3 million in 2010 from $206.6 million in 2009. The decrease was primarily due to labor cost reductions resulting from restructuring activities and reductions in advertising and selling expenses, substantially offset by costs of the businesses acquired in the 2009 Acquisitions, investments in growth initiatives and an increase in travel expenses. Selling, general and administrative expenses as a percentage of revenues for the Harland Clarke segment was 17.3% in 2010 as compared to 16.9% in 2009.

Selling, general and administrative expenses for the Harland Financial Solutions segment decreased by $2.5 million, or 2.2%, to $109.6 million in 2010 from $112.1 million in 2009. The decrease was primarily due to labor cost reductions resulting from restructuring activities, a reduction in compensation expense related to an incentive agreement, and decreases in general overhead expenses and depreciation, partially offset by an increase in selling expenses, an increase in occupancy costs and costs associated with the business acquired in the Parsam acquisition. Selling, general and administrative expenses in the 2010 and 2009 periods included charges of $1.1 million and $3.5 million, respectively, for compensation expense related to an incentive

agreement for an acquisition in 2007. Selling, general and administrative expenses as a percentage of revenues for the Harland Financial Solutions segment was 38.8% in 2010 as compared to 40.2% in 2009.

Selling, general and administrative expenses for the Scantron segment increased $2.9 million, or 5.2%, to $58.8 million in 2010 from $55.9 million in 2009. The increase was primarily due to costs associated with the business acquired in the Spectrum K12 acquisition and increases in management, sales and product development personnel in connection with investments in growth initiatives, partially offset by cost reductions resulting from restructuring activities and a decrease in integration expenses. Selling, general and administrative expenses as a percentage of revenues for the Scantron segment was 28.9% in 2010 as compared to 26.9% in 2009.

Selling, general and administrative expenses for the Licorice Products segment increased $1.1 million, or 9.2%, to $13.1 million in 2010 from $12.0 million in 2009. The increase was primarily due to lower income earned on Mafco Worldwide’s overfunded pension plan and severance expenses in 2010. Selling, general and administrative expenses as a percentage of revenues for the Licorice Products segment was 11.8% in 2010 and 2009.

Corporate selling, general and administrative expenses decreased $2.3 million, or 7.9%, to $26.7 million in 2010 from $29.0 million in 2009, primarily due to decreased deferred directors’ compensation and amortization expense for restricted stock due to a decrease in the price of the Company’s common stock during 2010, partially offset by $2.2 million in transaction expenses related to Harland Clarke Holdings merger and acquisition activities and increases in general overhead expenses.

Asset Impairment Charges

During the 2010 period, the Company recorded non-cash impairment charges of $3.7 million for the Harland Clarke segment primarily related to the abandonment of a development project, an adjustment to the carrying value of certain held for sale facilities to reflect an updated estimate for the fair values less costs to sell and restructuring related impairments of property, plant and equipment.

During 2009, the Company recorded non-cash asset impairment charges of $33.6 million for the Harland Clarke segment, $10.6 million for the Harland Financial Solutions segment and $0.2 million for the Scantron segment, of which $44.2 million related to an impairment of the Harland Clarke tradename. This impairment resulted from the 2009 annual impairment test for indefinite-lived tradenames and the Company’s decision to reclassify the Harland Clarke tradename to a definite life.

See Notes 6, 7 and 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information regarding these asset impairment charges.

Restructuring Costs

The Company adopted plans during 2008, 2009 and 2010 to strengthen operating margins and leverage incremental synergies within the printing plants, contact centers and selling, general and administrative areas by relying on the Company’s shared services capabilities and reorganizing certain operations and sales and support functions.

During 2010, the Company recorded restructuring costs of $12.3 million for the Harland Clarke segment and Corporate, $2.8 million for the Harland Financial Solutions segment and $7.2 million for the Scantron segment related to these plans. During 2009, the Company recorded restructuring costs of $25.7 million for the Harland Clarke segment and Corporate, $3.8 million for the Harland Financial Solutions segment and $3.0 million for the Scantron segment related to these plans. (see Note 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K).

Interest Income

Interest income was $1.0 million in 2010 as compared to $1.7 million in 2009. The decrease in interest income was primarily due to decreased interest on notes receivable from a related party (see Note 20 to the Company’s consolidated financial statements included elsewhere in this Annual Report on Form 10-K).

Interest Expense

Interest expense was $117.8 million in 2010 as compared to $139.1 million in 2009. The decrease in interest expense was primarily due to lower effective interest rates as well as a decrease in total debt outstanding.

Gain on Early Extinguishment of Debt

During 2009, the Company extinguished debt with a total principal amount of $136.9 million by purchasing Harland Clarke Holdings 2015 Senior Notes in individually negotiated transactions for an aggregate purchase price of $67.6 million, resulting in a gain of $65.0 million after the write-off of $4.3 million of unamortized deferred financing fees related to the extinguished debt. The Company did not purchase any Harland Clarke Holdings 2015 Senior Notes during the 2010 period (see Note 14 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K).

Other (Expense) Income, Net

Other (expense) income, net was an expense of $0.7 million in 2010 as compared to an expense of $1.1 million in 2009. The expense in 2010 was primarily due to a loss on the sale of the remaining investment in auction-rate securities (“ARS”). The expense in 2009 was primarily due to a loss on the sale of certain ARS issues and the reclassification of all unrealized losses on ARS from accumulated other comprehensive income (loss) to earnings, partially offset by the favorable settlement of a claim against the Company related to a previously owned business and a gain on the sale of the Company’s remaining interest in a joint venture.

Provision for Income Taxes

The Company’s effective tax rate was 38.3% in 2010 and 37.9% in 2009. The increase was primarily due to a charge in 2010 for the change in federal law relating to the deductibility of retiree prescription drug subsidies, the release of a reserve for uncertain tax positions in 2010 that was less than a similar release in 2009 and an increase in the valuation allowance for capital losses, partially offset by an increased benefit from the domestic production activities deduction.

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

The operating results for the years ended December 31, 2009 and 2008, as reflected in the accompanying consolidated statements of income and described below, include the acquired Protocol IMS, Transaction Holdings and Data Management businesses from the respective dates of acquisition (see Note 3 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K).

Net Revenues:


	Year Ended December 31,
	2009			2008

Consolidated Net Revenues:
Harland Clarke segment	$	1,226.0		$	1,290.4
Harland Financial Solutions segment		278.9			293.7
Scantron segment		208.0			211.3
Licorice Products segment		101.8			111.6
Eliminations		(0.6	)		(0.8	)

Total	$	1,814.1		$	1,906.2

Net revenues decreased by $92.1 million, or 4.8%, to $1,814.1 million in 2009 from $1,906.2 million in 2008.

Net revenues for the Harland Clarke segment decreased by $64.4 million, or 5.0%, to $1,226.0 million in 2009 from $1,290.4 million in 2008. The decrease was primarily due to volume declines from check and related products, which the Company believes was partially affected by the economic downturn. Declines in volumes were partially offset by increased revenues per unit.

Net revenues for the Harland Financial Solutions segment decreased by $14.8 million, or 5.0%, to $278.9 million in 2009 from $293.7 million in 2008. The decrease was primarily due to declines in license, hardware and professional services revenues as well as in mortgage products, partially offset by increases in lending products. The Company believes the declines were partially affected by the economic downturn, which has negatively affected financial institution purchases.

Net revenues for the Scantron segment decreased by $3.3 million, or 1.6%, to $208.0 million in 2009 from $211.3 million in 2008. The Data Management Acquisition accounted for an increase of $14.6 million. The remaining $17.9 million decrease was a result of volume declines in hardware and forms products, partially offset by organic growth in software products. The Company believes transactions related to hardware and forms product lines were partially affected by the economic downturn.

Net revenues for the Licorice Products segment decreased by $9.8 million, or 8.8%, to $101.8 million in 2009 from $111.6 million in 2008. Sales of licorice extract to the worldwide tobacco industry decreased by $8.1 million as the result of a decline in shipment volumes primarily due to continued worldwide consumption declines in tobacco products using licorice, a shift in the strategy of worldwide cigarette manufacturers which placed a greater emphasis on product changes and costs reductions and the continued rationalization of inventories by Altria, Inc. (“Altria”) and Philip Morris International, Inc. (“PMI”) subsequent to Altria’s spin-off of PMI in 2008. Magnasweet and pure licorice derivative sales decreased by $0.3 million as the result of shipment volume declines in pure licorice derivatives, which were partially offset by an increase in sales to international Magnasweet customers. Sales of licorice extract to non-tobacco customers decreased by $1.4 million as a result of lower shipment volumes and the unfavorable impact of the U.S. dollar translation of Mafco Worldwide’s Euro denominated sales due to the stronger dollar in 2009 versus 2008, which were not fully offset by price increases.

Cost of Revenues:


	Year Ended December 31,
	2009			2008

Consolidated Cost of Revenues:
Harland Clarke segment	$	764.3		$	822.5
Harland Financial Solutions segment		119.6			124.1
Scantron segment		114.4			121.1
Licorice Products segment		57.7			61.4
Eliminations		(0.6	)		(0.8	)

Total	$	1,055.4		$	1,128.3

Cost of revenues decreased by $72.9 million, or 6.5%, to $1,055.4 million in 2009 from $1,128.3 million in 2008.

Cost of revenues for the Harland Clarke segment decreased by $58.2 million, or 7.1%, to $764.3 million in 2009 from $822.5 million in 2008. The decrease was primarily due to lower volumes, which resulted in decreases in delivery, materials, and other variable overhead expenses. Labor costs decreased due to cost reduction and restructuring activities. Decreases in travel expenses and depreciation also contributed to the decrease in cost of revenues. These decreases were partially offset by inflation in delivery and materials expenses, as well as an increase in the amortization of intangible assets of $5.1 million. Cost of revenues as a percentage of revenues for the Harland Clarke segment was 62.3% in 2009 as compared to 63.7% in 2008.

Cost of revenues for the Harland Financial Solutions segment decreased by $4.5 million, or 3.6%, to $119.6 million in 2009 from $124.1 million in 2008. The decrease was primarily due to lower hardware and third-party license costs related to volume declines, as well as reductions in labor and related expenses due to cost reduction activities. Decreases in depreciation and amortization also contributed to the decrease in cost of revenues. Cost of revenues as a percentage of revenues for the Harland Financial Solutions segment was 42.9% in 2009 as compared to 42.3% in 2008.

Cost of revenues for the Scantron segment decreased by $6.7 million, or 5.5%, to $114.4 million in 2009 from $121.1 million in 2008. The Data Management Acquisition accounted for an increase of $9.4 million. The remaining $16.1 million decrease was primarily due to volume declines and cost reductions related to the Data Management Acquisition, in addition to other restructuring activities. Cost of revenues as a percentage of revenues for the Scantron segment was 55.0% in 2009 as compared to 57.3% in 2008.

Cost of revenues for the Licorice Products segment was $57.7 million in 2009 and $61.4 million in 2008, a decrease of $3.7 million, or 6.0%. The decrease was due to the decrease in sales and a change in the mix of products sold, partially offset by increased raw material costs. Cost of revenues as a percentage of revenues for the Licorice Products segment was 56.7% in 2009 as compared to 55.0% in 2008.

Selling, General and Administrative Expenses:


	Year Ended December 31,
	2009		2008

Consolidated Selling, General and Administrative Expenses:
Harland Clarke segment	$	206.6	$	240.1
Harland Financial Solutions segment		112.1		131.6
Scantron segment		55.9		59.4
Licorice Products segment		12.0		10.8
Corporate		29.0		26.0

Total	$	415.6	$	467.9

Selling, general and administrative expenses decreased by $52.3 million, or 11.2%, to $415.6 million in 2009 from $467.9 million in 2008.

Selling, general and administrative expenses for the Harland Clarke segment decreased by $33.5 million, or 14.0%, to $206.6 million in 2009 from $240.1 million in 2008. The decrease was primarily due to labor cost reductions and lower integration-related and travel expenses. Selling, general and administrative expenses as a percentage of revenues for the Harland Clarke segment was 16.9% in 2009 as compared to 18.6% in 2008.

Selling, general and administrative expenses for the Harland Financial Solutions segment decreased by $19.5 million, or 14.8%, to $112.1 million in 2009 from $131.6 million in 2008. The decrease was primarily due to labor cost reductions, a reduction in compensation expense related to an incentive agreement for an acquisition and reductions in occupancy, travel and depreciation expenses. Selling, general and administrative expenses in 2009 and 2008 included charges of $3.5 million and $8.1 million, respectively, for compensation expense related to an incentive agreement for an acquisition. Selling, general and administrative expenses as a percentage of revenues for the Harland Financial Solutions segment was 40.2% in 2009 as compared to 44.8% in 2008.

Selling, general and administrative expenses for the Scantron segment decreased $3.5 million, or 5.9%, to $55.9 million in 2009 from $59.4 million in 2008. The Data Management Acquisition accounted for an increase of $3.3 million, which was more than offset by a $6.8 million decrease, primarily due to cost reductions related to the Data Management Acquisition, in addition to other restructuring activities, and a decrease in integration-related expenses. In 2009, the Scantron segment incurred approximately $1.3 million in one-time expenses related to a contractual obligation owing to a former employee upon termination of employment. Selling, general and administrative expenses as a percentage of revenues for the Scantron segment was 26.9% in 2009 as compared to 28.1% in 2008.

Selling, general and administrative expenses for the Licorice Products segment increased $1.2 million, or 11.1%, to $12.0 million in 2009 from $10.8 million in 2008. The increase was primarily due to lower income earned on the Company’s overfunded pension plan and an increase in foreign currency transaction losses. Selling, general and administrative expenses as a percentage of revenues for the Licorice Products segment was 11.8% in 2009 as compared to 9.7% in 2008.

Corporate selling, general and administrative expenses increased $3.0 million, or 11.5%, to $29.0 million in 2009 from $26.0 million in 2008, primarily due to increased deferred directors’ compensation and increased amortization expense for restricted stock due to an increase in the price of the Company’s common stock during 2009, partially offset by lower professional fees.

Asset Impairment Charges

During 2008, the Company recorded non-cash asset impairment charges of $2.4 million for the Harland Clarke segment. The charges consisted of $1.9 million primarily related to the Company’s decision to consolidate facilities as a result of the Harland acquisition. In addition, the Company experienced declines in customer revenues from Alcott Routon operations in 2008 and assessed the customer relationship intangible asset for impairment resulting in an impairment charge of $0.5 million.

See Notes 6, 7 and 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information regarding these asset impairment charges.

Restructuring Costs

During 2007 and 2008, as a result of acquisition activity, the Company adopted plans to restructure its businesses. These plans focused on improving operating margins through consolidating facilities and reducing duplicative expenses, such as selling, general and administrative, executive and shared services expenses. As a result of the economic downturn and the sales decline experienced in recent periods, the Company adopted further restructuring plans during 2008 and 2009 to strengthen operating margins and leverage incremental synergies within the printing plants, contact centers and selling, general and administrative areas by relying on the Company’s shared services capabilities and reorganizing certain operations and sales and support functions.

During 2009, the Company recorded restructuring costs of $25.7 million for the Harland Clarke segment and Corporate, $3.8 million for the Harland Financial Solutions segment and $3.0 million for the Scantron segment related to these plans. During 2008, the Company recorded restructuring costs of $8.3 million for the Harland Clarke segment and Corporate, $3.9 million for the Harland Financial Solutions segment and $2.4 million for the Scantron segment related to these plans (see Notes 3 and 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K).

Interest Income

Interest income was $1.7 million in 2009 as compared to $4.2 million in 2008. The decrease in interest income was primarily due to lower average cash equivalents balances in 2009 as compared to 2008 and lower interest rates on investments in cash equivalents in 2009 as compared to 2008, partially offset by higher interest income on notes receivable from a related party in 2009.

Interest Expense

Interest expense was $139.1 million in 2009 as compared to $190.9 million in 2008. The decrease in interest expense was due to lower effective interest rates and also a decrease in total debt outstanding.

Gain on Early Extinguishment of Debt

During 2009, the Company extinguished debt with a total principal amount of $136.9 million by purchasing Harland Clarke Holdings 2015 Senior Notes in individually negotiated transactions for an aggregate purchase price of $67.6 million, resulting in a gain of $65.0 million after the write-off of $4.3 million of unamortized deferred financing fees related to the extinguished debt (see Note 14 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K).

Other (Expense) Income, Net

Other (expense) income, net was an expense of $1.1 million in 2009 as compared to income of $2.7 million in 2008. The expense in 2009 was primarily due to the sale of certain ARS issues and the reclassification of all unrealized losses on ARS from accumulated other comprehensive income (loss) to earnings, partially offset by the favorable settlement of a claim against the Company related to a previously owned business and a gain on the sale of the Company’s remaining interest in a joint venture. The income in 2008 was primarily attributable to an insurance settlement and the receipt of payments pursuant to indemnification agreements, partially offset by a $0.8 million write-down of an equity investment due to an other-than-temporary decline in its market value.

Provision for Income Taxes

The Company’s effective tax rate was 37.9% in 2009 and 38.5% in 2008. The change was primarily due to the effects of a net reduction in reserves for uncertain tax positions in 2009, partially offset by foreign losses with no tax benefit.

Extraordinary Gain

An extraordinary gain of $0.7 million in 2008 resulted from an amendment in May 2008 to a purchase agreement for an acquisition, which reduced the total consideration paid below the value of the assets acquired after reducing long-lived assets to zero.

Related Party Transactions

The Transfer Agreement

In connection with the 1995 transfer to an indirect subsidiary of Holdings of certain of Pneumo Abex’s consolidated assets and liabilities, with the remainder being retained, M & F Worldwide, the transferee subsidiary and two subsidiaries of M & F Worldwide entered into the Transfer Agreement. Under the Transfer Agreement, Pneumo Abex retained the assets and liabilities relating to Aerospace, as well as certain contingent liabilities and the related assets, including its historical insurance and indemnification arrangements. Pneumo Abex transferred substantially all of its other assets and liabilities to the transferee subsidiary. The Transfer Agreement provides for appropriate transfer, indemnification and tax sharing arrangements, in a manner consistent with applicable law and existing contractual arrangements.

The Transfer Agreement requires the transferee subsidiary to undertake certain administrative and funding obligations with respect to certain categories of asbestos-related claims and other liabilities, including environmental claims, retained by Pneumo Abex. Pneumo Abex will be obligated to make reimbursement for the amounts so funded only when it receives amounts under related indemnification and insurance agreements. Such administrative and funding obligations would be terminated as to these categories of asbestos-related claims in the case of a bankruptcy of Pneumo Abex or M & F Worldwide or of certain other events affecting the availability of coverage for such claims from third-party indemnitors and insurers. In the event of certain kinds of disputes with Pneumo Abex’s indemnitors regarding their indemnities, the Transfer Agreement permits Pneumo Abex to require the transferee subsidiary to fund 50% of the costs of resolving the disputes.

For recent developments with regard to the Transfer Agreement, see Non-Operating Contingent Claims, Indemnification and Insurance Matters in the Liquidity Assessment section of this Item 7.

Registration Rights Agreement

A subsidiary of Holdings (“MCG”) and the Company are parties to a registration rights agreement (as amended, the “Company/MCG Registration Rights Agreement”) providing MCG with the right to require the Company to use its best efforts to register under the Securities Act, and the securities or blue sky laws of any jurisdiction designated by MCG, all or a portion of the issued and outstanding shares of M & F Worldwide common stock owned by MCG or its affiliates (the “Registrable Shares”). Such demand rights are subject to the conditions that the Company is not required to (1) effect a demand registration more than once in any 12-month period, (2) effect more than one demand registration with respect to the Registrable Shares, or (3) file a registration statement during periods (not to exceed three months) (a) when the Company is contemplating a public offering, (b) when the Company is in possession of certain material non-public information, or (c) when audited financial statements are not available and their inclusion in a registration statement is required. In addition, and subject to certain conditions described in the Company/MCG Registration Rights Agreement, if at any time the Company proposes to register under the Securities Act an offering of common stock or any other class of equity securities, then MCG will have the right to require the Company to use its best efforts to effect the registration under the Securities Act and the securities or blue sky laws of any jurisdiction designated by MCG of all or a portion of the Registrable Shares as designated by MCG. The Company is responsible for all expenses relating to the performance of, or compliance with, the Company/MCG Registration Rights Agreement except that MCG is responsible for underwriters’ discounts and selling commissions with respect to any Registrable Shares sold.

Affiliate Transactions

MacAndrews & Forbes LLC (formerly MacAndrews & Forbes Inc.), a wholly owned subsidiary of Holdings, provides the services of the Company’s Chief Executive Officer and Chief Financial Officer, as well as other management, advisory, transactional, corporate finance, legal, risk management, tax and accounting services pursuant to the terms of a management services agreement (the “Management Services Agreement”). Under the terms of the Management Services Agreement, the Company pays MacAndrews & Forbes LLC an annual fee of $10.0 million for these services. The Management Services Agreement also contains customary indemnities covering MacAndrews & Forbes LLC and its affiliates and personnel.

The Management Services Agreement provides for termination of the agreement on December 31, 2011, subject to automatic one-year renewal periods unless either party gives the other party written notice at least 90 days prior to the end of the initial term or a subsequent renewal period. The Management Services Agreement will also terminate in the event that MacAndrews & Forbes LLC or its affiliates no longer in the aggregate retain beneficial ownership of 10% or more of the outstanding common stock of the Company. Neither party provided notice in 2010; therefore MacAndrews & Forbes LLC will continue to provide these services in 2011 under the terms of the existing agreement.

On May 30, 2007, the Company issued 200,000 shares of restricted common stock to Mr. Ronald O. Perelman under the Company’s 2003 Stock Incentive Plan (the “Restricted Stock”). Mr. Perelman is the Chairman of the Company’s board of directors and is the sole shareholder of Holdings. The Restricted Stock vested in equal installments on each of the three anniversaries of the issuance date. The Company recognized non-cash compensation expense related to the Restricted Stock using the straight-line method over the vesting period. The unvested Restricted Stock was revalued at the end of each reporting period based on the quoted market price of the Company’s common stock. The Company expensed $0.6 million, $2.1 million and $0.9 million related to the Restricted Stock in 2010, 2009 and 2008, respectively.

As discussed in Note 3 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, the Company paid $2.0 million to Holdings in February 2008 for services related to sourcing, analyzing, negotiating and executing the Data Management Acquisition.

The Company participates in Holdings’ directors and officers insurance program, which covers the Company as well as Holdings and Holdings’ other affiliates. The limits of coverage are available on aggregate losses to any or all of the participating companies and their respective directors and officers. The Company reimburses Holdings for its allocable portion of the premiums for such coverage, which the Company believes is more favorable than premiums the Company could secure were it to secure its own coverage. In December 2008, the Company elected to participate in third-party financing arrangements, together with Holdings and certain of Holdings affiliates, to finance a portion of premium payments. The financing arrangements require the Company to make future fixed payments totaling $0.2 million through June 2011 at an interest rate of 7.5%.

At December 31, 2010, the Company recorded prepaid expenses of $1.1 million and other current liabilities of $0.2 million relating to the directors and officers insurance programs and financing arrangements. At December 31, 2009, the Company recorded prepaid expenses and other assets of $1.2 million and $0.8 million and other current liabilities and other liabilities of $0.7 million and $0.2 million, respectively, relating to the directors and officers insurance programs and financing arrangements. The Company paid $1.1 million, $0.8 million and $0.6 million to Holdings in 2010, 2009 and 2008, respectively, under the insurance programs, including amounts due under the financing arrangements.

Stockholders Agreement

On January 20, 2009, the Company and Holdings entered into a Stockholders Agreement (the “Stockholders Agreement”). Pursuant to the Stockholders Agreement, Holdings agreed to provide advance notice and make certain representations and warranties to the Company in the event of certain future acquisitions of the Company’s common stock. In addition, Holdings agreed that, so long as the Company has public equity securities outstanding, Holdings would use its best efforts to assure that the Company will continue to

maintain a Board of Directors comprised of a majority of independent directors (under applicable stock exchange rules) and nominating and compensation committees comprised solely of independent directors.

Notes Receivable

In 2008, Harland Clarke Holdings acquired the senior secured credit facility and outstanding note of Delphax Technologies, Inc. (“Delphax”), the supplier of Imaggia printing machines and related supplies and service for the Harland Clarke segment. The senior secured credit facility is comprised of a revolving credit facility of up to $14.0 million, subject to borrowing limitations set forth therein, that mature in September 2011. The senior secured credit facility is collateralized by a perfected security interest in substantially all of Delphax’s assets. The revolving facility has a borrowing base calculated based on Delphax’s eligible accounts receivable and inventory. The senior secured credit facility has an interest rate equal to the sum of Wells Fargo N. A. prime rate plus 2.5%, with accrued interest payable quarterly. The note had an original principal amount of $7.0 million, matures in September 2012 and originally bore interest at an annual rate of 12%, payable quarterly either in cash or in a combination of cash and up to 25% Delphax stock. Contemporaneous with its acquisition of the facility and note, Harland Clarke Holdings also acquired 250,000 shares of Delphax common stock from the previous holder of the Delphax note. In January 2010, the note was restated to reduce the interest rate to 9%, payable solely in cash, effective October 1, 2009, and to require the repayment of $3.0 million of principal in 2010.

During 2010, the Company received $3.0 million in payments and released no draws on the revolver, bringing the principal balance of the note and the senior secured credit facility to $4.0 million and $0.0 million, respectively, at December 31, 2010. During 2009, Harland Clarke Holdings received $15.0 million in payments and released $9.8 million in draws on the revolver, bringing the principal balance of the note and the senior secured credit facility to $7.0 million and $0.0 million, respectively, at December 31, 2009. The outstanding balance on the note is included in other assets in the consolidated balance sheets included elsewhere in this Annual Report on Form 10-K. Interest income of $0.4 million, $0.8 million and $0.4 million was recorded in 2010, 2009 and 2008, respectively.

Liquidity and Capital Resources

Cash Flow Analysis

The Company’s net cash provided by operating activities for the year ended December 31, 2010 was $293.5 million as compared to $206.4 million during the year ended December 31, 2009. The increase in net cash provided by operating activities of $87.1 million was due to changes in working capital and an increase in cash flow from operations. The changes in working capital were primarily due to the timing of payments related to other accrued expenses and prepaid expenses and lower inventory requirements during 2010 compared to 2009.

The Company’s net cash used in investing activities was $46.8 million for year ended December 31, 2010 as compared to $72.1 million for year ended December 31, 2009. The decrease in cash used in investing activities during 2010 compared to 2009 was primarily due to proceeds of $53.1 million from the sale and redemption of marketable securities and lower capital expenditures in 2010, partially offset by an increase of $49.8 million expended for the acquisition of businesses, net of cash acquired in these acquisitions in 2010. Another factor contributing to the decrease was the Company’s investment in marketable securities of $24.6 million in 2009.

The Company’s net cash used in financing activities was $67.5 million for the year ended December 31, 2010 as compared to $102.8 million for the year ended December 31, 2009. The decrease in net cash used in financing activities was primarily due to the extinguishment of $136.9 million principal amount of Harland Clarke Holdings 2015 Senior Notes for an aggregate purchase price of $67.6 million during 2009, partially offset by $22.2 million of repayments of short-term debt during 2010 and $24.2 million of net payments on credit facilities by Mafco Worldwide during 2010. Mafco Worldwide made $55.2 million of repayments on its previous credit facility during 2010 and received $31.0 million from draws on its new credit facility during 2010.

M & F Worldwide is a holding company whose only material assets are its ownership interests in its subsidiaries and $87.5 million in cash and cash equivalents. M & F Worldwide’s principal business operations are conducted by its subsidiaries, and M & F Worldwide has no operations of its own. Accordingly, M & F Worldwide’s only source of cash to pay its obligations, other than cash and cash equivalents, is expected to be distributions and tax sharing payments with respect to its ownership interests in its subsidiaries. M & F Worldwide’s subsidiaries may not generate sufficient cash flow to pay dividends, tax sharing payments or distribute funds to M & F Worldwide and applicable state law and contractual restrictions, including negative covenants contained in the debt instruments of such subsidiaries, may not permit such dividends or distributions. During the year ended December 31, 2010, M & F Worldwide received cash dividend payments in the amount of $31.2 million and $1.5 million from Harland Clarke Holdings and Mafco Worldwide, respectively. During the year ended December 31, 2009, M & F Worldwide received cash dividend payments in the amount of $41.3 million and $1.5 million from Harland Clarke Holdings and Mafco Worldwide, respectively. Funds from the 2009 dividends covered certain public company and other overhead expenses incurred by M & F Worldwide since the Harland Acquisition.

The Company’s Consolidated Contractual Obligations

The Company has certain cash obligations and other commercial commitments which will affect its short-term liquidity. At December 31, 2010, such obligations and commitments, which do not include options for renewal, were as follows:


	Payments Due by Period
			Less than		1-3		4-5		After
	Total		1 year		years		years		5 years
	(in millions)

Revolving credit facilities⁽¹⁾⁽⁷⁾	$	31.0	$	—	$	—	$	31.0	$	—
Senior secured term loans⁽²⁾⁽⁷⁾		1,737.0		18.0		36.0		1,683.0		—
Senior notes⁽³⁾⁽⁷⁾		478.1		—		—		478.1		—
Interest on long-term debt⁽⁴⁾⁽⁷⁾		364.1		102.4		184.8		76.9		—
Capital lease obligations and other indebtedness		5.2		1.7		2.5		1.0		—
Operating lease obligations		113.3		27.4		42.5		23.8		19.6
Raw material purchase obligations		22.3		22.0		0.3		—		—
Other long-term liabilities		14.5		0.7		1.9		1.6		10.3
Client incentive payments⁽⁵⁾		94.8		56.2		34.0		4.1		0.5
Other purchase obligations⁽⁶⁾		22.7		12.7		8.7		1.3		—
Postretirement benefit payments		6.4		0.6		1.3		1.3		3.2
Contingent consideration arrangements⁽⁸⁾		8.2		4.6		3.6		—		—
Pension benefit payments		7.6		0.3		1.3		1.2		4.8
Directors & Officers insurance financing		0.2		0.2		—		—		—

Total	$	2,905.4	$	246.8	$	316.9	$	2,303.3	$	38.4


(1)		Revolving credit facilities consist of Harland Clarke Holdings’ and Mafco Worldwide’s revolving credit facilities. Harland Clarke Holdings’ $100.0 million revolving credit facility will mature on June 28, 2013. Mafco Worldwide’s $45.0 million revolving credit facility will mature on December 15, 2015. See Note 14 to the accompanying consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

(2)		Harland Clarke Holdings’ $1,800.0 million senior secured term loan will mature on June 30, 2014, and Harland Clarke Holdings is required to make payments of principal in the amount of $18.0 million per year in equal quarterly installments. See Note 14 to the accompanying consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

(3)		The senior notes will mature in 2015 and include $271.3 million of Harland Clarke Holdings’ fixed rate notes and $206.8 million of Harland Clarke Holdings’ floating rate notes. See Note 14 to the accompanying consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

(4)		Interest on long-term debt assumes that all floating rates of interest remain the same as those in effect at December 31, 2010 and includes the effect of the Company’s interest rate derivative arrangements on future cash payments for the remaining period of those derivatives. The payments noted above also assume that the level of borrowing under the Harland Clarke Holdings revolving credit facility remains at zero, as it was on December 31, 2010 and Mafco Worldwide revolving credit facility remains at $31.0 million, as it was on December 31, 2010, and all mandatory payments are made.


(5)		Represents unpaid amounts under existing client contracts.

(6)		Purchase obligations include amounts due under contracts with third-party service providers. Such contracts are primarily for information technology services including license rights for mainframe software usage, voice and network data services and telecommunication services. We routinely issue purchase orders to numerous vendors for the purchase of inventory and other supplies. These purchase orders are generally cancelable with reasonable notice to the vendor. As such, these purchase orders are not included in the purchase obligations presented in the table above.

(7)		The credit facilities and senior notes include early repayment provisions if certain events occur, including excess cash flow payments with respect to the senior secured credit facilities. See Note 14 to the accompanying consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Payments in the table above assume that only mandatory principal payments will be made and that there will be no prepayments.

(8)		Represents the recorded liabilities for contingent consideration arrangements as of December 31, 2010. See Notes 3 and 16 to the accompanying consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

At December 31, 2010, the Company had a net deferred tax liability of $421.7 million. Deferred tax liabilities are temporary differences between tax and financial statement basis of assets and do not directly relate to income taxes to be paid in the future. At December 31, 2010, the Company had unrecognized tax benefits of $12.1 million for which the Company is unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authority. Thus, these liabilities have not been included in the contractual obligations table.

Mafco Worldwide expects to contribute approximately $0.8 million to its defined benefit pension plans in 2011.

Mafco Worldwide Credit Agreement

On December 15, 2010, Mafco Worldwide entered into a credit agreement governing a $45.0 million, five-year revolving credit facility (the “Mafco Revolving Credit Agreement”). Approximately $30.0 million was drawn on December 15, 2010 to prepay term borrowings under Mafco Worldwide’s former credit agreement and to pay fees and expenses in connection with the refinancing. The indebtedness under the Mafco Revolving Credit Agreement is guaranteed by Mafco Worldwide’s domestic subsidiaries and its parent corporation, Flavors Holdings Inc. (collectively, the “Mafco Worldwide Guarantors”). Mafco Worldwide’s obligations under the Mafco Revolving Credit Agreement and the guarantees of the Mafco Worldwide Guarantors are secured by a first-priority security interest in substantially all of Mafco Worldwide’s and the Mafco Worldwide Guarantors’ assets. Borrowings under the Mafco Revolving Credit Agreement bear interest, at Mafco Worldwide’s option, at either an adjusted Eurodollar rate plus an applicable margin ranging from 1.5% to 2.0% or an alternative base rate plus an applicable margin ranging from 0.5% to 1.0% depending on Mafco Worldwide’s consolidated leverage ratio at the end of each fiscal quarter.

The Mafco Revolving Credit Agreement contains affirmative and negative covenants customary for such financing. The Mafco Revolving Credit Agreement also requires Mafco Worldwide to maintain a maximum total debt ratio and a minimum consolidated interest expense ratio as of the last day of each fiscal quarter. The Mafco Revolving Credit Agreement contains events of default customary for such financing, including but not limited to nonpayment of principal, interest, fees or other amounts when due; violation of covenants; failure of any representation or warranty to be true in all material respects when made or deemed made; cross default and cross acceleration to certain indebtedness; certain ERISA events; change of control; dissolution, insolvency and bankruptcy events; material judgments; actual or asserted invalidity of the guarantees or security documents; and violation of limitations on the activities of Flavors Holdings Inc. and of EVD Holdings Inc. and Mafco Shanghai Corporation, subsidiaries of Mafco Worldwide. Some of these events of default allow for grace periods and materiality concepts.

The borrowings under the Mafco Revolving Credit Agreement are repayable in full on December 15, 2015. At December 31, 2010, there was $31.0 million principal amount of borrowings outstanding under the Mafco Revolving Credit Agreement and there was $14.0 million available for borrowing. There were no letters of credit issued by Mafco Worldwide as of December 31, 2010.

Mafco Worldwide’s French subsidiary has credit agreements renewable annually with two banks whereby it may borrow up to 1.5 million Euros (approximately $2.0 million at December 31, 2010) for working capital purposes. The French subsidiary had no borrowings at December 31, 2010.

Harland Clarke Holdings Credit Agreement

On April 4, 2007, Harland Clarke Holdings, as borrower, entered into senior secured credit facilities, which provided for a revolving credit facility of $100.0 million maturing on June 28, 2013 and a $1,800.0 million term loan maturing on June 30, 2014. Portions of the Harland Clarke Holdings revolving credit facility are available for the issuance of letters of credit and swing line loans.

All obligations under the credit facilities are guaranteed by Harland Clarke Holdings’ direct parent (a subsidiary of the Company) and by each of Harland Clarke Holdings’ direct and indirect present domestic subsidiaries and future wholly owned domestic subsidiaries. The credit facilities are secured by a perfected first priority security interest in substantially all of Harland Clarke Holdings’ and the guarantors’ assets, other than voting stock in excess of 65.0% of the outstanding voting stock of each direct foreign subsidiary and certain other excluded property.

The term loan facility has an aggregate principal amount of $1,800.0 million which was drawn in full on May 1, 2007. The term loan facility is required to be repaid in quarterly installments of $4.5 million until maturity. The term loan facility requires that a portion of Harland Clarke Holdings’ excess cash flow (as defined in the senior secured credit facilities) be applied to prepay amounts borrowed thereunder, beginning in 2009 with respect to 2008. An excess cash flow payment of approximately $3.5 million will be paid in 2011 with respect to 2010 and will be applied against other mandatory payments due in 2011 under the terms of the facility. No such excess cash flow payment was paid in 2010 with respect to 2009 and no such excess cash flow payment was paid in 2009 with respect to 2008. The balance of the term loan facility is due in full in 2014.

Loans under the credit facilities bear, at Harland Clarke Holdings’ option, interest at:


	•	a rate per annum equal to the higher of (a) the prime rate of Credit Suisse and (b) the Federal Funds rate plus 0.50%, in each case plus an applicable margin of 1.50% per annum for revolving loans and for term loans; or

	•	a rate per annum equal to a reserve-adjusted LIBOR rate, plus an applicable margin of 2.50% per annum for revolving loans and for term loans.

The credit facilities have a commitment fee of 0.50% for the unused portion of the revolver and a weighted average commitment fee of 2.52% for issued letters of credit. Interest rate margins and commitment fees under the revolver are subject to reduction in increments based upon Harland Clarke Holdings achieving certain consolidated leverage ratios.

The credit facilities contain representations and warranties customary for a senior secured credit facility. They also contain affirmative and negative covenants customary for a senior secured credit facility, including, among other things, restrictions on indebtedness, liens, mergers and consolidations, sales of assets, loans, acquisitions, restricted payments, transactions with affiliates, dividends and other payment restrictions affecting subsidiaries and sale leaseback transactions. The credit facilities also require Harland Clarke Holdings to maintain a certain maximum consolidated leverage ratio for the benefit of the lenders under the revolver only.

As of December 31, 2010, $1,737.0 million principal amount was outstanding under the term loan facility. As of December 31, 2010, no amounts were drawn under Harland Clarke Holdings’ $100.0 million revolving credit facility, and Harland Clarke Holdings had $91.8 million available for borrowing (giving effect to the issuance of $8.2 million of letters of credit).

During 2009 and 2010, Harland Clarke Holdings entered into interest derivative transactions in the form of three-year interest rate swaps with notional amounts totaling $855.0 million currently outstanding, which swap the underlying variable rate for fixed rates ranging from 1.264% to 2.353%. Those derivatives are being accounted for as cash flow hedges. The purpose of the transactions is to limit the Company’s risk on a portion of Harland Clarke Holdings’ variable rate term loan.

Harland Clarke Holdings Senior Notes

On May 1, 2007, Harland Clarke Holdings issued $305.0 million aggregate principal amount of Senior Floating Rate Notes due 2015 (the “Floating Rate Notes”) and $310.0 million aggregate principal amount of 9.50% Senior Fixed Rate Notes due 2015 (the “Fixed Rate Notes” and, together with the Floating Rate Notes, the “2015 Senior Notes”). The 2015 Senior Notes mature on May 15, 2015. The Fixed Rate Notes bear interest at a rate per annum of 9.50%. The Floating Rate Notes bear interest at a rate per annum equal to the Applicable LIBOR Rate (as defined in the indenture governing the 2015 Senior Notes (the “Indenture”)), subject to a floor of 1.25%, plus 4.75%. The Senior Notes are unsecured and are therefore effectively subordinated to all of Harland Clarke Holdings’ senior secured indebtedness, including outstanding borrowings under the senior secured credit facilities. The Indenture contains customary restrictive covenants, including, among other things, restrictions on Harland Clarke Holdings’ ability to incur additional debt, pay dividends and make distributions, make certain investments, repurchase stock, incur liens, enter into transactions with affiliates, enter into sale and lease back transactions, merge or consolidate and transfer or sell assets. Harland Clarke Holdings must offer to repurchase all of the 2015 Senior Notes upon the occurrence of a “change of control,” as defined in the Indenture, at a purchase price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest. Harland Clarke Holdings must also offer to repurchase the 2015 Senior Notes with the proceeds from certain sales of assets, if it does not apply those proceeds within a specified time period after the sale, at a purchase price equal to 100% of their aggregate principal amount, plus accrued and unpaid interest.

The Senior Notes are guaranteed fully and unconditionally, jointly and severally by each of Harland Clarke Holdings’ existing subsidiaries other than unrestricted and certain immaterial subsidiaries, all of which are wholly owned by Harland Clarke Holdings.

During 2009, Harland Clarke Holdings extinguished $136.9 million principal amount of debt by purchasing 2015 Senior Notes in individually negotiated transactions for an aggregate purchase price of $67.6 million. Harland Clarke Holdings did not purchase any 2015 Senior Notes during 2010.

Impact of Inflation

The Company presents its results of operations and financial condition based upon historical cost. While it is difficult to measure accurately the impact of inflation due to the imprecise nature of the estimates required, the Company believes that, for the three most recent fiscal years, the effects of inflation, if any, on its results of operations and financial condition have been minor.

Liquidity Assessment

The Company believes that its cash and cash equivalents, borrowings available under the Harland Clarke Holdings and Mafco Worldwide credit agreements (as further discussed in Note 14 to the Company’s consolidated financial statements included elsewhere in this Annual Report on Form 10-K) and anticipated cash flow from operating activities will be sufficient to meet the Company’s expected operating needs, investment and capital spending requirements and debt service requirements for the foreseeable future.

Harland Clarke Holdings

In addition to normal operating cash, working capital requirements and service of indebtedness, Harland Clarke Holdings also requires cash to fund capital expenditures, make contract acquisition payments to financial institution clients and enable cost reductions through restructuring projects as follows:


	•	Capital Expenditures. Harland Clarke Holdings’ capital expenditures are primarily related to infrastructure investments, internally developed software, cost reduction programs, marketing initiatives and other projects that support future revenue growth. During the years ended December 31, 2010, 2009 and 2008, Harland Clarke Holdings incurred $38.6 million, $42.2 million and $48.2 million of capital expenditures and $0.1 million, $0.3 million and $0.7 million of capitalized interest,


		respectively. Capital expenditures for the years ended December 31, 2009 and 2008 include $11.8 million and $21.7 million, respectively, related to integration projects.


	•	Contract Acquisition Payments. During the years ended December 31, 2010, 2009 and 2008, Harland Clarke Holdings made $39.6 million, $39.5 million and $43.8 million of contract acquisition payments to its clients, respectively.

	•	Restructuring/Cost Reductions. Restructuring accruals and purchase accounting reserves have been established for anticipated severance payments, costs related to facilities closures and other expenses related to the planned restructuring or consolidation of some of the Harland Clarke Holdings historical operations, as well as related to the acquisition of John H. Harland Company, the Data Management Acquisition, the Transaction Holdings Acquisition and the acquisition of Protocol IMS. During the years ended December 31, 2010, 2009 and 2008, Harland Clarke Holdings made $14.4 million, $33.6 million and $19.2 million of payments for restructuring, respectively.

The Company may also, from time to time, seek to use its cash to make acquisitions or investments, and also to retire or purchase its outstanding debt in open market purchases, in privately negotiated transactions, or otherwise. Such retirement or purchase of debt may be funded from the operating cash flows of the business or other sources and will depend upon prevailing market conditions, liquidity requirements, contractual restrictions and other factors, and the amounts involved may be material. During 2009, Harland Clarke Holdings extinguished $136.9 million principal amount of debt by purchasing 2015 Senior Notes in individually negotiated transactions for an aggregate purchase price of $67.6 million. Harland Clarke Holdings did not purchase any 2015 Senior Notes during 2010. Harland Clarke Holdings also used cash on hand to fund the aggregate $61.2 million, net of cash acquired, expended for both the Spectrum K12 and Parsam acquisitions in 2010 and the $135.4 million, net of cash acquired, expended for the GlobalScholar acquisition on January 3, 2011.

Mafco Worldwide

In addition to normal operating cash, working capital requirements and service of indebtedness, Mafco Worldwide also requires cash to fund capital expenditures, periodically build raw materials inventories and fund administrative and other expenses regarding indemnified liabilities.


	•	Capital Expenditures. During the years ended December 31, 2010, 2009 and 2008, Mafco Worldwide incurred $1.3 million, $1.6 million and $1.2 million of capital expenditures, respectively. While expenditures for future years are expected to be within this general range, future changes in governmental regulations could require the Company to substantially increase capital expenditures in order to comply with these regulations.

	•	Inventories. Mafco Worldwide’s licorice raw materials are subject to a variety of agricultural risks. Additionally, most of the licorice root Mafco Worldwide purchases originates in countries and regions that have, from time to time, been subject to political instability. Accordingly, Mafco Worldwide must periodically build its raw materials supply in order to avoid material shortages or significant raw material price increases. Shortages of licorice raw materials could have a material adverse effect on Mafco Worldwide’s business, results of operations and financial condition.

Cash Flow Risks

Each of Harland Clarke Holdings’ and Mafco Worldwide’s ability to meet their respective debt service obligations and reduce their total debt will depend upon their respective ability to generate cash in the future which, in turn, will be subject to general economic, financial, business, competitive, legislative, regulatory and other conditions, many of which are beyond their respective control. Each of Harland Clarke Holdings and Mafco Worldwide may not be able to generate sufficient cash flow from operations or borrow under their credit facilities in an amount sufficient to repay their debt or to fund other liquidity needs. As of December 31, 2010, Harland Clarke Holdings had $91.8 million of availability under its revolving credit facility (after giving effect to the issuance of $8.2 million of letters of credit) and Mafco Worldwide had $14.0 million of

availability under its revolving credit facility. There were no letters of credit issued by Mafco Worldwide as of December 31, 2010. The Company may also use the revolving credit facilities to fund potential future acquisitions or investments. If future cash flow from operations and other capital resources is insufficient to pay each’s respective obligations as they mature or to fund their liquidity needs, Harland Clarke Holdings or Mafco Worldwide, as the case may be, may be forced to reduce or delay business activities and capital expenditures, sell assets, obtain additional debt or equity capital or restructure or refinance all or a portion of their debt on or before maturity. Harland Clarke Holdings or Mafco Worldwide, as the case may be, may not be able to accomplish any of these alternatives on a timely basis or on satisfactory terms, if at all. In addition, the terms of their existing and future indebtedness may limit their ability to pursue any of these alternatives.

Mafco Worldwide may encounter liquidity risks arising from its supply of licorice root raw material. Mafco Worldwide tries to maintain a sufficient licorice root raw material inventory and open purchase contracts to meet normal production needs for approximately three years. At December 31, 2010, Mafco Worldwide had on hand a supply of licorice root raw material of approximately three years. Licorice root has an indefinite retention period as long as it is kept dry, and therefore has experienced little, if any, material spoilage. Although Mafco Worldwide has been able to obtain licorice root raw materials without interruption since World War II, since there has been periodic instability in the areas of the world where licorice root raw materials are obtained, Mafco Worldwide may in the future experience a short supply of licorice root raw materials due to these or other instabilities. If Mafco Worldwide is unable to obtain licorice root raw materials, or is unable to obtain them in a cost-effective manner, Mafco Worldwide’s business will be severely hampered and Mafco Worldwide will experience severe liquidity difficulties.

In 2010, Mafco Worldwide’s ten largest customers, six of which are manufacturers of tobacco products, accounted for approximately 4% of the Company’s consolidated net revenues (and approximately 63% of Mafco Worldwide’s net revenues). If any of Mafco Worldwide’s significant customers were to stop purchasing licorice from Mafco Worldwide, it would have a significant negative effect on the financial results of Mafco Worldwide, which would also create severe liquidity difficulties for Mafco Worldwide.

Non-Operating Contingent Claims, Indemnification and Insurance Matters

In 1988, a predecessor of Pepsi-Cola Metropolitan Bottling Company, Inc. (the “Original Indemnitor”) sold to Pneumo Abex various operating businesses, all of which Pneumo Abex re-sold by 1996. Prior to the 1988 sale, those businesses had manufactured certain asbestos-containing friction products. Pneumo Abex has been named, typically along with 10 to as many as 100 or more other companies, as a defendant in various personal injury lawsuits claiming damages relating to exposure to asbestos. Pursuant to indemnification agreements, the Original Indemnitor has ultimate responsibility for all the remaining asbestos-related claims asserted against Pneumo Abex through August 1998 and for certain asbestos-related claims asserted thereafter. In connection with the sale by Pneumo Abex in December 1994 of its Friction Products Division, a subsidiary (the “Friction Buyer”) of Cooper Industries, Inc. (now Cooper Industries, LLC, the “Friction Guarantor”) assumed all liability for substantially all asbestos-related claims asserted against Pneumo Abex after August 1998 and not indemnified by the Original Indemnitor. Following the Friction Products sale, Pneumo Abex treated the Division as a discontinued operation and stopped including the Division’s assets and liabilities in its financial statements.

Agreement provides for appropriate transfer, indemnification and tax sharing arrangements, in a manner consistent with applicable law and previously existing contractual arrangements, as further explained below.

It is generally not possible to predict the ultimate total costs relating to any remediation that may be demanded at any of the sites subject to the indemnity from the Original Indemnitor due to, among other factors, uncertainty regarding the extent of prior pollution, the complexity of applicable environmental laws and regulations and their interpretations, uncertainty regarding future changes to such laws and regulations or their enforcement, the varying costs and effectiveness of alternative cleanup technologies and methods, and the questionable and varying degrees of responsibility and/or involvement by Pneumo Abex. However, the Company does not itself expect to pay any of these costs due to the Transfer Agreement and the Original Indemnitor’s indemnity.

While the Friction Guarantor has been fulfilling its obligation under the Mutual Guaranty to guarantee the Friction Buyer’s performance since October 2001, when the successor in interest to the Friction Buyer filed for Chapter 11 bankruptcy and stopped performing itself, in May 2010, Pneumo Abex commenced the

Transfer Lawsuit in the New York Supreme Court against the Friction Guarantor and certain of its affiliates alleging, among other things, that various corporate transactions in which the Friction Guarantor and its affiliates had engaged since 2002 had improperly reduced the resources available to satisfy the Mutual Guaranty. Pneumo Abex seeks in the Transfer Lawsuit injunctive relief remedying the financial consequences of these corporate transactions to Pneumo Abex, a constructive trust over the transferred assets, and damages. The Friction Guarantor has continued to perform under the Mutual Guaranty during the pendency of the Transfer Lawsuit and the Company still considers Pneumo Abex’s contingent claims assumed by the Friction Buyer in the Friction Products sale to be the financial responsibility of the Friction Guarantor under the Mutual Guaranty. Based upon the Original Indemnitor’s repeated acknowledgements of its obligations, management’s view of the aggregate resources of the Friction Guarantor and the noted affiliates, the active management by both the Original Indemnitor and the Friction Guarantor of pending contingent claims, the discharging of the related liabilities when required, and their respective financial positions based upon publicly filed financial statements, as well as the history of insurance recovery set forth above, the Company believes that the likelihood that Pneumo Abex will be required to pay material amounts of unreimbursed expense for its contingent claims is remote.

On February 1, 2011, the Company, an affiliate of Holdings, the Friction Guarantor and certain affiliates of the Friction Guarantor entered into the Settlement Agreement to settle the Transfer Lawsuit and certain counterclaims that the Friction Guarantor could bring in the Transfer Lawsuit against the Company.

Pursuant to the Settlement Agreement, the direct owner of Pneumo Abex will transfer all of the membership interests in Pneumo Abex to the Settlement Trust, and the Settlement Trust will become the sole owner and new managing member of Pneumo Abex. The Company will also contribute a total of $15.0 million to Pneumo Abex, half of which is being paid to liquidate an existing indemnification obligation of Mafco Worldwide to Pneumo Abex relating to a reorganization of Pneumo Abex and Mafco Worldwide in 2004. In addition, the Company will pay $5.0 million into the Settlement Trust. Under the Settlement Agreement, the Settlement Trust will also receive a capital contribution from the Friction Guarantor, consisting of a cash contribution of $250.0 million payable at closing and a note in the amount of $57.5 million payable over four years that is guaranteed by certain parent entities of the Friction Guarantor, subject to certain adjustments.

Following the closing under the Settlement Agreement:


	•	Pneumo Abex, owned by the Settlement Trust, will continue to resolve asbestos-related claims asserted against it in the tort system,

	•	The Settlement Trust will indemnify Pneumo Abex with respect to the defense and resolution of the asbestos-related claims formerly subject to the Mutual Guaranty,

	•	The Friction Guarantor’s obligation to indemnify Pneumo Abex pursuant to the Mutual Guaranty will terminate,

	•	The Company will be indemnified by the Settlement Trust against any liability for the matters formerly subject to the Mutual Guaranty, and

	•	All other insurance and indemnification rights of Pneumo Abex owing from third parties will remain assets of Pneumo Abex.

Pneumo Abex’s former Aerospace business of the Company formerly sold certain of its aerospace products to the United States Government or to private contractors for the United States Government. Pneumo Abex retained in the Aerospace sale certain claims for allegedly defective pricing that the Government made with respect to certain of these products. In the first quarter of 2009, Pneumo Abex resolved the final

remaining pricing matter that it managed for a payment of $0.1 million, resulting in a gain of $0.9 million due to the release of a reserve previously accrued for this claim.

Honeywell Indemnification

Certain of the intermediate holding companies of the predecessor of Harland Clarke Holdings had issued guarantees on behalf of operating companies formerly owned by these intermediate holding companies, which operating companies are not part of Harland Clarke Holdings’ businesses. In the stock purchase agreement executed in connection with the 2005 acquisition of the predecessor of Harland Clarke Holdings by the Company, Honeywell International Inc. agreed to use its commercially reasonable efforts to assume, replace or terminate such guarantees and indemnify M & F Worldwide and its affiliates, including Harland Clarke Holdings and its subsidiaries, with respect to all liabilities arising under such guarantees.

Other

Forward-Looking Statements

This Annual Report on Form 10-K for the year ended December 31, 2010, as well as certain of the Company’s other public documents and statements and oral statements, contains forward-looking statements that reflect management’s current assumptions and estimates of future performance and economic conditions. When used in this Annual Report on Form 10-K, the words “believes,” “anticipates,” “plans,” “expects,” “intends,” “estimates” or similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. All forward-looking statements speak only as of the date of this Annual Report on Form 10-K. Although the Company believes that its plans, intentions and expectations reflected in or suggested by the forward-looking statements are reasonable, such plans, intentions or expectations may not be achieved. Such forward-looking statements are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company cautions investors that any forward-looking statements are subject to risks and uncertainties that may cause actual results and future trends to differ materially from those projected, stated or implied by the forward-looking statements. In addition, the Company encourages investors to read the summary of the Company’s critical accounting policies and estimates included in this Annual Report on Form 10-K under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates.”

In addition to factors described in the Company’s SEC filings and others, the following factors could cause the Company’s actual results to differ materially from those expressed in any forward-looking statements made by the Company:


	•	the substantial indebtedness of Harland Clarke Holdings and its subsidiaries and Mafco Worldwide and its subsidiaries;

	•	further adverse changes in or worsening of general economic and industry conditions, including the depth and length of the economic downturn and higher unemployment, which could result in more rapid declines in product sales of and/or pricing pressure on the Harland Clarke and Scantron segments, and reductions in information technology budgets, which could result in adverse impacts on the Harland Financial Solutions segment;

	•	weak economic conditions and declines in the financial performance of our business that may result in material impairment charges, which could have a negative effect on the Company’s earnings, total assets and market prices of the Company’s outstanding securities;

	•	our ability to generate sufficient cash in the future that affects our ability to make payments on our indebtedness;

	•	our ability to incur substantially more debt that could exacerbate the risks associated with our substantial leverage;

	•	covenant restrictions under Harland Clarke Holdings’ and Mafco Worldwide’s indebtedness that may limit our ability to operate our businesses and react to market changes;

	•	lack of access to cash flow or other assets of the Company’s subsidiaries, including Harland Clarke Holdings and Mafco Worldwide;

	•	increases in interest rates;

	•	the maturity of the paper check industry, including a faster than anticipated decline in check usage due to increasing use of alternative payment methods, decreased consumer spending and other factors and our ability to grow non-check related product lines;

	•	consolidation among financial institutions;

	•	adverse changes or failures or consolidation of the large financial institution clients on which we depend, resulting in decreased revenues and/or pricing pressure;

	•	intense competition in all areas of our businesses;

	•	our ability to successfully manage acquisitions;

	•	our ability to implement any or all components of our business strategy;

	•	interruptions or adverse changes in our vendor or supplier relationships;

	•	increased production and delivery costs;

	•	fluctuations in the costs of raw materials and other supplies;

	•	our ability to attract, hire and retain qualified personnel;

	•	technological improvements that may reduce any advantage over other providers in our respective industries;

	•	our ability to protect customer or consumer data against data security breaches;

	•	changes in legislation relating to consumer privacy protection that could increase our costs or limit our future business opportunities;

	•	contracts with our clients relating to consumer privacy protection that could restrict our business;


	•	our ability to protect our intellectual property rights;

	•	our reliance on third-party providers for certain significant information technology needs;

	•	software defects or cyber attacks that could harm our businesses and reputation;

	•	sales and other taxes that could have adverse effects on our businesses;

	•	environmental risks;

	•	the ability of our Harland Financial Solutions segment to achieve organic growth;

	•	regulations governing the Harland Financial Solutions segment;

	•	our ability to develop new products for our Scantron segment and to grow Scantron’s web-based education business;

	•	our ability to achieve VSOE for software businesses we have acquired or will acquire, which could affect the timing of recognition of revenue;

	•	changes in contingent consideration estimates related to acquisition earn-out arrangements;

	•	future warranty or product liability claims which could be costly to resolve and result in negative publicity;

	•	government and school clients’ budget deficits, which could have an adverse impact on our Scantron segment;

	•	softness in direct mail response rates;

	•	economic, climatic or political conditions in countries in which Mafco Worldwide sources licorice root or in countries where Mafco Worldwide manufactures licorice extracts and licorice derivatives;

	•	economic, climatic or political conditions that have an impact on the worldwide tobacco industry or on the consumption of tobacco products in which licorice products are used;

	•	additional government regulation of tobacco products, tobacco industry litigation or enactment of new or increased taxes on cigarettes or other tobacco products, to the extent any of the foregoing curtail growth in or actually reduce consumption of tobacco products in which licorice products are used or place limitations on the use of licorice extracts as additives used in manufacturing tobacco products;

	•	additional government regulation relating to non-tobacco uses of Mafco Worldwide’s products;

	•	the failure of third parties to make full and timely payment in our favor for environmental, asbestos, tax, acquisition-related and other matters for which we are entitled to indemnification;

	•	any material failure of the indemnification, assumption, guaranty or management arrangements that protect Pneumo Abex against contingent claims;

	•	lower than expected cash flow from operations;

	•	unfavorable foreign currency fluctuations;

	•	the loss of one of our significant customers;

	•	work stoppages and other labor disturbances; and

	•	unanticipated internal control deficiencies or weaknesses.

The Company encourages investors to read carefully the risk factors in the section entitled “Risk Factors” for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements.


Item 7A.	Quantitative and Qualitative Disclosures About Market Risks

The Company has exposure to market risk from changes in interest rates and foreign currency exchange rates, which could affect its business, results of operations and financial condition. The Company manages its exposure to these market risks through its regular operating and financing activities.

At December 31, 2010, Harland Clarke Holdings had $1,737.0 million of term loans outstanding under its credit agreement, $8.2 million of letters of credit outstanding under its revolving credit facility, $206.8 million of floating rate senior notes and $271.3 million of 9.50% fixed rate senior notes. At December 31, 2010, Mafco Worldwide had $31.0 million of borrowings and no letter of credit outstanding under its revolving credit agreement. All of these outstanding loans bear interest at variable rates, with the exception of the $271.3 million of fixed rate senior notes. Accordingly, the Company is subject to risk due to changes in interest rates. The Company believes that a hypothetical increase of 1 percentage point in the variable component of interest rates applicable to its floating rate debt outstanding as of December 31, 2010 would have resulted in an increase in its annual interest expense of approximately $9.1 million, including the effect of the interest rate derivative transactions discussed below.

In order to manage its exposure to fluctuations in interest rates on a portion of the outstanding variable rate debt, the Company entered into interest rate derivative transactions in 2009 and 2010 in the form of swaps for Harland Clarke Holdings with notional amounts totaling $855.0 million currently outstanding, as further described in the notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The Harland Clarke Holdings’ derivatives currently swap the underlying variable rates for fixed rates ranging from 1.264% to 2.353%.

As of December 31, 2010, the Company’s net foreign currency market exposures were $51.7 million. This is the value of the equity of the investments in the foreign subsidiaries in France, Ireland, Canada, India, Israel and China. Most of the Company’s export sales and purchases of licorice raw materials are made in United States dollars. Mafco Worldwide’s French subsidiary sells in several foreign currencies as well as the United States dollar and purchases raw materials principally in United States dollars. Mafco Worldwide’s Chinese subsidiaries primarily sell finished products and purchase raw materials in United States dollars. Since the exposures are not material on these transactions, the Company does not generally hedge against foreign currency fluctuations.

A 10% appreciation in foreign currency exchange rates from the prevailing market rates would result in a $4.0 million increase in the related assets or liabilities. Conversely, a 10% depreciation in these currencies from the prevailing market rates would result in a $6.1 million decrease in the related assets or liabilities.


Item 8.	Financial Statements and Supplementary Data

See the financial statements and supplementary data listed in the accompanying Index to Consolidated Financial Statements and Financial Statement Schedules on page F-1 herein. Information required by other schedules called for under Regulation S-X is either not applicable or is included in the consolidated financial statements or notes thereto included elsewhere in this Annual Report on Form 10-K.


Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.


Item 9A.	Controls and Procedures

The Company’s management, with the participation of M & F Worldwide’s Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13(a)-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of December 31, 2010. Based on that evaluation, M & F Worldwide’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2010.

There were no material changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2010 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

The Company’s internal control over financial reporting includes those policies and procedures that:


	•	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

	•	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

	•	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework.

Based on its assessment, management believes that, as of December 31, 2010, the Company’s internal control over financial reporting was effective.

The Company’s independent registered public accounting firm has issued an audit report on the Company’s internal control over financial reporting, which appears below.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of M & F Worldwide Corp.

We have audited M & F Worldwide Corp.’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). M & F Worldwide Corp.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, M & F Worldwide Corp. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010 based on the COSO criteria.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 2010 consolidated financial statements of M & F Worldwide Corp. and our report dated March 4, 2011 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

New York, New York

March 4, 2011


Item 9B.	Other Information

None.

PART III

The Company will provide the information otherwise set forth in Part III, Items 10 through 14, of Form 10-K in its definitive proxy statement for its 2011 annual meeting of stockholders, which is to be filed pursuant to Regulation 14A not later than April 30, 2011.

PART IV


Item 15.	Exhibits and Financial Statement Schedules

(a) (1 and 2) Financial statements and financial statement schedules.

See Index to Consolidated Financial Statements and Financial Statement Schedules, which appears on page F-1 herein. All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.

(3) Exhibits


Exhibit No.		Description

2.1		Stock Purchase Agreement, dated April 28, 1988, between Pneumo Abex and IC Industries, Inc. (predecessor of Pepsi-Cola Metropolitan Bottling Company, Inc. (incorporated by reference to Exhibit 2.1 to Pneumo Abex’s Registration Statement on Form S-1, Commission File No. 33-22725) as amended by an Amendment, dated as of August 29, 1988, and a Second Amendment and related Settlement Agreement, dated September 23, 1991 (incorporated by reference to Exhibit 10.4 to Abex Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 1992).
2.2		Asset Purchase Agreement, dated as of November 21, 1994, by and between Pneumo Abex and Wagner Electric Corporation (incorporated by reference to Exhibit 1 to Abex Inc.’s Current Report on Form 8-K dated November 21, 1994).
2.3		Stock Purchase Agreement by and between M & F Worldwide Corp. and Honeywell International Inc., dated October 31, 2005 (incorporated by reference to Exhibit 2.1 of M & F Worldwide Corp.’s Current Report on Form 8-K, dated October 31, 2005).
2.4		Agreement and Plan of Merger by and among John H. Harland Company, M & F Worldwide Corp. and H Acquisition Corp., dated as of December 19, 2006 (incorporated by reference to Exhibit 2.1 of M & F Worldwide Corp.’s Current Report on Form 8-K, dated December 20, 2006).
2.5		Membership Interest Purchase Agreement by and among M & F Worldwide Corp., NCS Pearson Inc. and Pearson Inc., dated as of February 13, 2008 (incorporated by reference to Exhibit 2.1 of M & F Worldwide Corp.’s Current Report on Form 8-K, dated February 14, 2008).
2.6		Securities Purchase Agreement, dated as of December 15, 2010, by and between Scantron Corporation and KUE Digital International LLC (incorporated by reference to Exhibit 2.1 of M & F Worldwide Corp.’s Current Report on Form 8-K, dated December 16, 2010).
3.1		Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to M & F Worldwide Corp.’s Current Report on Form 8-K dated April 30, 1996).
3.2		Certificate of Designations, Powers, Preferences and Rights of Series B Non-Cumulative Perpetual Participating Preferred Stock of M & F Worldwide Corp. (incorporated by reference to Exhibit 4.2 to M & F Worldwide Corp.’s Form 8-K dated April 20, 2001).
3.3		By-laws of M & F Worldwide Corp. as currently in effect (incorporated by reference to Exhibit 3.1 to M & F Worldwide Corp.’s Current Report on Form 8-K dated December 27, 2007).
4.1		Registration Rights Agreement between Holdings and the Company (incorporated by reference to Exhibit 2 to the Schedule 13D dated June 26, 1995 filed by Holdings Inc., MCG Holdings Inc. and Holdings in connection with the Company’s capital stock).
4.2		Indenture dated as of May 1, 2007 among Harland Clarke Holdings Corp., the co-issuers and guarantors party thereto and Wells Fargo Bank, N.A., as trustee (incorporated by reference to Exhibit 4.1 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).


Exhibit No.		Description

4.3		Registration Rights Agreement (relating to the initial notes) dated as of May 1, 2007 by and among Harland Clarke Holdings Corp., the Guarantors (listed therein), Credit Suisse Securities (USA) LLC, Bear, Stearns & Co., Inc., Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. (incorporated by reference to Exhibit 4.4 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
4.4		Credit Agreement dated as of December 8, 2005 among Flavors Holdings Inc., Mafco Worldwide Corporation, the several lenders from time to time party thereto, JPMorgan Chase Bank, N.A., as administrative agent, Bear Stearns Corporate Lending Inc., as syndication agent, and Natexis Banques Populaires and National City Bank, as co-documentation agents (incorporated by reference to Exhibit 4.4 to M & F Worldwide Corp.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005).
4.5		Guarantee and Collateral Agreement made by Flavors Holdings Inc., Mafco Worldwide Corporation, and certain of its subsidiaries in favor of JPMorgan Chase Bank, N.A., as administrative agent, dated as of December 8, 2005 (incorporated by reference to Exhibit 4.5 to M & F Worldwide Corp.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005).
4.6		Mortgage, Security Agreement, Assignment of Leases and Rents, and Fixture Filing, made by Mafco Worldwide Corporation, Mortgagor, to JPMorgan Chase Bank, N.A., as Administrative Agent, Mortgagee, dated as of December 8, 2005 (incorporated by reference to Exhibit 4.6 to M & F Worldwide Corp.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005).
4.7		Credit Line Deed of Trust, Security Agreement, Assignment of Leases and Rents, and Fixture Filing, made by Mafco Worldwide Corporation, Grantor, in favor of Kanawha Land Title Services, LLC, as Trustee, for the use and benefit of, JP Morgan Chase Bank, N.A., as Administrative Agent, Beneficiary, dated as of December 8, 2005 (incorporated by reference to Exhibit 4.7 to M & F Worldwide Corp.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005).
4.8		Notice of Grant of Security Interest in Trademarks, dated as of January 30, 2006, made by Mafco Worldwide Corporation in favor of JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 4.8 to M & F Worldwide Corp.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005).
4.9		Credit Agreement, dated as of April 4, 2007 among Harland Clarke Holdings Corp., the Subsidiary Borrowers (listed therein), the Lenders (listed therein) and Credit Suisse, Cayman Islands Branch, as administrative agent (incorporated by reference to Exhibit 4.5 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
4.10		First Amendment to Credit Agreement, dated as of May 4, 2007, by and among Harland Clarke Holdings Corp., the lender parties (listed therein) and Credit Suisse, Cayman Islands Branch, as administrative and collateral agent (incorporated by reference to Exhibit 4.6 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
4.11		Guarantee and Collateral Agreement, dated as of May 1, 2007, by and among Harland Clarke Holdings Corp. and certain subsidiaries in favor of Credit Suisse, Cayman Islands Branch (incorporated by reference to Exhibit 4.7 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
4.12		Assumption Agreement, dated as of May 1, 2007 by and among Harland Clarke Corp., Harland Checks and Services, Inc., Scantron Corporation, Harland Financial Solutions, Inc., HFS Core Systems, Inc., Centralia Holding Corp. and John H. Harland Company of Puerto Rico in favor of Credit Suisse, Cayman Islands Branch, as administrative and collateral agent (incorporated by reference to Exhibit 4.8 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).


Exhibit No.		Description

4.13		Intellectual Property Security Agreement, dated as of May 1, 2007, by and among B(2)Direct, Inc., Checks in the Mail, Inc. and Clarke American Checks, Inc., the Grantors, in favor of Credit Suisse, Cayman Islands Branch, as administrative and collateral agent (incorporated by reference to Exhibit 4.9 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
4.14		Intellectual Property Security Agreement, dated as of May 1, 2007, by and among Harland Clarke Corp., Harland Checks and Services, Inc., Scantron Corporation, Harland Financial Solutions, Inc. and HFS Core Systems, Inc., the Grantors, in favor of Credit Suisse, Cayman Islands Branch, as administrative and collateral agent (incorporated by reference to Exhibit 4.10 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
4.15		Joinder Agreement, dated as of May 1, 2007, by and among B(2)Direct, Inc., Checks in the Mail, Inc., Clarke American Checks, Inc., New CS, Inc., New SCSFH, Inc., H Acquisition Corp., New SCH, Inc., New SFH, Inc. and Credit Suisse, Cayman Islands Branch (incorporated by reference to Exhibit 4.11 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
4.16		Joinder Agreement, dated as of May 1, 2007, by and among Harland Clarke Corp., Harland Checks and Services, Inc., Scantron Corporation, Harland Financial Solutions, Inc., HFS Core Systems, Inc. and Credit Suisse, Cayman Islands Branch (incorporated by reference to Exhibit 4.12 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
4.17		Deed to Secure Debt by Harland Clarke Corp. to Credit Suisse, Cayman Islands Branch (5096 Panola Industrial Blvd, Decatur, Georgia and 2933-2939 Miller Road, Decatur, Georgia) (incorporated by reference to Exhibit 4.14 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
4.18		Deed of Trust, Security Agreement, Assignment of Rents and Leases and Fixture Filing by Scantron Corporation in favor of First American Title Insurance Company, as trustee for the benefit of Credit Suisse, Cayman Islands Branch (2020 South 156 Circle, Omaha, Nebraska) (incorporated by reference to Exhibit 4.15 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
4.19		Deed of Trust, Security Agreement, Assignment of Rents and Leases and Fixture Filing by Checks In The Mail Inc. in favor of Peter Graf, Esq., as trustee for the benefit of Credit Suisse, Cayman Islands Branch (2435 Goodwin Lane, New Braunfels, Texas) (incorporated by reference to Exhibit 4.18 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
4.20		Deed of Trust, Security Agreement, Assignment of Rents and Leases and Fixture Filing by Harland Clarke Corp. in favor of First American Title Insurance Agency, LLC, as trustee for the benefit of Credit Suisse, Cayman Islands Branch (4867-4883 West Harold Gatty Road, Salt Lake City, Utah) (incorporated by reference to Exhibit 4.20 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
4.21*		Credit Agreement, dated as of December 15, 2010, by and among Mafco Worldwide Corporation, the lenders from time to time party thereto, PNC Bank, National Association, as Administrative Agent and PNC Capital Markets LLC, as Lead Arranger.
10.1		Mutual Guaranty Agreement, dated as of December 30, 1994, between Abex Inc. and Cooper Industries Inc. (incorporated by reference to Exhibit 10.29 to Abex Inc.’s Registration Statement on Form S-4, Commission File No. 33-92188).
10.2		Transfer Agreement among the Company, MCG Intermediate Holdings Inc., Pneumo Abex and PCT International Holdings Inc. (incorporated by reference to Exhibit 10.1 to PCT’s Current Report on Form 8-K dated June 28, 1995).
10.3		Letter Agreement, dated as of June 26, 1995, between the Company and Mafco Consolidated Group LLC (incorporated by reference to Exhibit 10.2 to M & F Worldwide Corp.’s Current Report on Form 8-K dated June 28, 1995).


Exhibit No.		Description

10.4		Letter Agreement, dated as of February 5, 1996, between the Company and Mafco Consolidated Group LLC (incorporated by reference to Exhibit 6 to Amendment No. 2 to Schedule 13D dated February 8, 1996 filed by Holdings, Mafco Consolidated Group LLC and Mafco Consolidated Holdings Inc. in connection with the Company’s capital stock).
10.5		Contract between Mafco Worldwide Corporation and Licorice & Paper Employees Association of Camden, New Jersey effective June 1, 2008.
10.6+		Stephen G. Taub Executive Employment Agreement (incorporated by reference to Exhibit 10.29 to M & F Worldwide Corp.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001).
10.7+		First Amendment to the Employment Agreement by and between Mafco Worldwide Corporation and Stephen G. Taub, dated as of October 31, 2006 (incorporated by reference to M & F Worldwide Corp.’s Current Report on Form 8-K dated October 31, 2006).
10.8+		Second Amendment, dated as of December 31, 2008, to the Employment Agreement, dated as of August 1, 2001, as amended as of October 31, 2006, between Mafco Worldwide Corporation and Stephen G. Taub (incorporated by reference to Exhibit 10.3 to M & F Worldwide Corp.’s Current Report on Form 8-K filed on January 7, 2009).
10.9		Second Amended and Restated Management Services Agreement, dated as of June 30, 2007, by and between MacAndrews & Forbes Inc., and M & F Worldwide Corp. (incorporated by reference to Exhibit 10.1 to M & F Worldwide Corp.’s Current Report on Form 8-K dated June 25, 2007).
10.10+		M & F Worldwide Corp. Amended and Restated Outside Directors Deferred Compensation Plan (incorporated by reference to Exhibit 99.1 to M & F Worldwide Corp.’s Registration Statement on Form S-8 dated November 21, 2008).
10.11+		M & F Worldwide Corp. 2003 Stock Option Plan (incorporated by reference to M & F Worldwide Corp.’s Definitive Proxy Statement on Schedule 14A dated April 2, 2004).
10.12		Tax Sharing Agreement, dated as of December 15, 2005, by and among M & F Worldwide Corp., Harland Clarke Holdings Corp., and PCT International Holdings Inc. (incorporated by reference to Exhibit 10.15 to M & F Worldwide Corp.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005).
10.13+		Employment Agreement, dated as of February 13, 2008, between Harland Clarke Holdings Corp. and Charles T. Dawson (incorporated by reference to Exhibit 10.1 to Harland Clarke Holdings Corp.’s Current Report on Form 8-K filed on February 15, 2008).
10.14+		Amendment, dated as of December 31, 2008, to the Employment Agreement, dated as of February 13, 2008, between Harland Clarke Holdings Corp. and Charles T. Dawson (incorporated by reference to Exhibit 10.2 to M & F Worldwide Corp.’s Current Report on Form 8-K filed on January 7, 2009).
10.15+		M & F Worldwide Corp. 2008 Long Term Incentive Plan (incorporated by reference to Exhibit 10.15 to M & F Worldwide Corp.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007).
10.16+		Amendment No. 1 to the M & F Worldwide Corp. 2008 Long Term Incentive Plan, dated as of December 31, 2008 (incorporated by reference to Exhibit 10.2 to M & F Worldwide Corp.’s Current Report on Form 8-K filed on January 7, 2009).
10.17+		M & F Worldwide Corp. 2008 Long Term Incentive Plan — Award Agreement for Participating Executives (incorporated by reference to Exhibit 10.16 to M & F Worldwide Corp.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007).
10.18		M & F Worldwide Corp. Stockholders Agreement (incorporated by reference to Exhibit 99.1 to M & F Worldwide Corp.’s Form 8-K filed on January 22, 2009).
10.19		Mafco Worldwide Amended & Restated Benefit Restoration Plan, effective January 1, 2009 (incorporated by reference to Exhibit 10.4 to M & F Worldwide Corp.’s Current Report on Form 8-K filed on January 7, 2009).


Exhibit No.		Description

10.20+		Amendment, dated as of February 2, 2010, to the Employment Agreement, dated as of February 13, 2008, between Harland Clarke Holdings Corp. and Charles T. Dawson (incorporated by reference to Exhibit 10.22 to Harland Clarke Holdings Corp.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009).
10.21+		Employment Agreement, dated as of January 1, 2011, by and among M & F Worldwide Corp., Harland Clarke Holdings Corp. and Charles T. Dawson (incorporated by reference to Exhibit 10.1 to M & F Worldwide Corp.’s Current Report on Form 8-K filed on January 6, 2011).
10.22		Settlement Agreement, dated as of February 1, 2011, by and among M & F Worldwide Corp., Pneumo Abex LLC, Mafco Worldwide Corporation, Mafco Consolidated Group LLC, PCT International Holdings Inc., Cooper Industries plc, Cooper Industries Ltd., Cooper Holdings, Ltd., Cooper US Inc. and Cooper Industries, LLC (incorporated by reference to Exhibit 99.1 to M & F Worldwide Corp.’s Current Report on Form 8-K filed on February 7, 2011).
21.1*		List of subsidiaries.
23.1*		Consent of Independent Registered Public Accounting Firm.
31.1*		Certification of Barry F. Schwartz, Chief Executive Officer, dated March 4, 2011.
31.2*		Certification of Paul G. Savas, Chief Financial Officer, dated March 4, 2011.
32.1		Certification of Barry F. Schwartz, Chief Executive Officer, dated March 4, 2011 pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.2		Certification of Paul G. Savas, Chief Financial Officer, dated March 4, 2011, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).


*		Filed herewith

+		Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit hereto.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

M & F WORLDWIDE CORP.


Dated: March 4, 2011		By: /s/ Barry F. Schwartz Barry F. Schwartz President, Chief Executive Officer and Director (Principal Executive Officer)

Dated: March 4, 2011		By: /s/ Paul G. Savas Paul G. Savas Executive Vice President and Chief Financial Officer (Principal Financial Officer)

Dated: March 4, 2011		By: /s/ Alison M. Horowitz Alison M. Horowitz Vice President, Treasurer and Controller (Principal Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, the following persons have signed this report on behalf of the Registrant and in the capacities and on the dates indicated.


Signature	Title	Date


/s/ Ronald O. Perelman Ronald O. Perelman	Director	March 4, 2011

/s/ Philip E. Beekman Philip E. Beekman	Director	March 4, 2011

/s/ William C. Bevins William C. Bevins	Director	March 4, 2011

/s/ Martha L. Byorum Martha L. Byorum	Director	March 4, 2011

/s/ Charles T. Dawson Charles T. Dawson	Director	March 4, 2011

/s/ Viet D. Dinh Viet D. Dinh	Director	March 4, 2011

/s/ Theo W. Folz Theo W. Folz	Director	March 4, 2011

/s/ John M. Keane John M. Keane	Director	March 4, 2011

/s/ Paul M. Meister Paul M. Meister	Director	March 4, 2011

/s/ Barry F. Schwartz Barry F. Schwartz	Director	March 4, 2011

/s/ Bruce Slovin Bruce Slovin	Director	March 4, 2011

/s/ Stephen G. Taub Stephen G. Taub	Director	March 4, 2011

/s/ Carl B. Webb Carl B. Webb	Director	March 4, 2011

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 2010

The following consolidated financial statements of M & F Worldwide Corp. and Subsidiaries are included in Item 8:

As of December 31, 2010 and 2009 and for the years ended December 31, 2010, 2009 and 2008.


	Pages

Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets		F-3
Consolidated Statements of Income		F-4
Consolidated Statements of Stockholders’ Equity		F-5
Consolidated Statements of Cash Flows		F-6
Notes to Consolidated Financial Statements		F-7
The following financial statement schedules of M & F Worldwide Corp. and Subsidiaries are included in Item 15(a):
Schedule I – Condensed Financial Information of Registrant		F-55
Schedule II – Valuation and Qualifying Accounts and Reserves		F-58

All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted.

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

M & F Worldwide Corp.

We have audited the accompanying consolidated balance sheets of M & F Worldwide Corp. and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2010. Our audits also included the financial statement schedules listed in the Index at Item 15(a). These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of M & F Worldwide Corp. and subsidiaries at December 31, 2010 and 2009, and the consolidated results of their operations and cash flows for each of the three years in the period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), M & F Worldwide Corp. and subsidiaries’ internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 4, 2011 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

New York, New York

March 4, 2011

F-2

M & F Worldwide Corp. and Subsidiaries
Consolidated Balance Sheets
(in millions, except share and per share data)


	December 31,
	2010			2009

ASSETS
Current assets:
Cash and cash equivalents	$	312.8		$	133.7
Accounts receivable (net of allowances of $3.1 and $3.3)		137.8			133.1
Marketable securities		—			24.6
Inventories		130.0			139.4
Income taxes receivable		12.1			12.2
Deferred tax assets		18.4			22.4
Prepaid expenses and other current assets		71.9			78.1

Total current assets		683.0			543.5
Property, plant and equipment, net		157.1			175.6
Goodwill		1,569.8			1,517.3
Other intangible assets, net		1,207.3			1,297.9
Pension asset		10.3			10.5
Contract acquisition payments, net		27.2			28.6
Auction-rate securities		—			29.4
Other assets		114.4			83.2

Total assets	$	3,769.1		$	3,686.0


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	43.0		$	41.0
Deferred revenues		128.9			116.1
Short-term borrowings		—			22.2
Current maturities of long-term debt		19.4			24.5
Accrued liabilities:
Salaries, wages and employee benefits		77.6			56.7
Income and other taxes payable		13.4			15.5
Customer incentives		29.0			23.5
Other current liabilities		30.9			34.6

Total current liabilities		342.2			334.1
Long-term debt		2,231.3			2,269.5
Deferred tax liabilities		440.1			462.6
Other liabilities		113.0			105.8
Commitments and contingencies
Stockholders’ equity:
Common stock, par value $0.01; 250,000,000 shares authorized; 23,875,831 shares issued at December 31, 2010 and 2009		0.2			0.2
Additional paid-in capital		76.0			75.4
Treasury stock at cost; 4,541,900 shares at December 31, 2010 and 2009		(106.6	)		(106.6	)
Retained earnings		677.6			556.7
Accumulated other comprehensive (loss) income, net of taxes:
Foreign currency translation adjustments		3.6			6.5
Unrecognized amounts included in pension and postretirement obligations		(5.2	)		(10.5	)
Derivative fair-value adjustment		(10.9	)		(8.6	)
Unrealized gains (losses) on investments, net		7.8			0.9

Total accumulated other comprehensive loss, net of taxes		(4.7	)		(11.7	)

Total stockholders’ equity		642.5			514.0

Total liabilities and stockholders’ equity	$	3,769.1		$	3,686.0

See Notes to Consolidated Financial Statements

F-3

M & F Worldwide Corp. and Subsidiaries
Consolidated Statements of Income

(in millions, except per share data)


	Year Ended December 31,
	2010			2009			2008

Product revenues, net	$	1,456.2		$	1,514.8		$	1,598.5
Service revenues, net		326.4			299.3			307.7

Total net revenues		1,782.6			1,814.1			1,906.2
Cost of products sold		857.2			903.3			969.8
Cost of services provided		171.3			152.1			158.5

Total cost of revenues		1,028.5			1,055.4			1,128.3

Gross profit		754.1			758.7			777.9
Selling, general and administrative expenses		414.5			415.6			467.9
Asset impairment charges		3.7			44.4			2.4
Restructuring costs		22.3			32.5			14.6

Operating income		313.6			266.2			293.0
Interest income		1.0			1.7			4.2
Interest expense		(117.8	)		(139.1	)		(190.9	)
Gain on early extinguishment of debt		—			65.0			—
Other (expense) income, net		(0.7	)		(1.1	)		2.7

Income before income taxes and extraordinary gain		196.1			192.7			109.0
Provision for income taxes		75.2			73.0			42.0

Net income before extraordinary gain		120.9			119.7			67.0
Extraordinary gain		—			—			0.7

Net income	$	120.9		$	119.7		$	67.7

Earnings per common share before extraordinary gain:
Basic	$	6.26		$	6.20		$	3.30

Diluted	$	6.22		$	6.17		$	3.30

Extraordinary gain per common share:
Basic	$	—		$	—		$	0.04

Diluted	$	—		$	—		$	0.04

Earnings per common share:
Basic	$	6.26		$	6.20		$	3.34

Diluted	$	6.22		$	6.17		$	3.34

See Notes to Consolidated Financial Statements

F-4

M & F Worldwide Corp. and Subsidiaries
Consolidated Statements of Stockholders’ Equity

(in millions)


															Accumulated
					Additional										Other
	Common Stock				Paid-in		Treasury Stock					Retained			Comprehensive
	Shares		Amount		Capital		Shares		Amount			Earnings			Income (Loss)			Total

Balance, December 31, 2007		23.8	$	0.2	$	57.8		2.5	$	(14.8	)	$	369.5		$	(7.2	)	$	405.5
Net income													67.7						67.7
Currency translation adjustments, net of taxes of $0.0																(3.8	)		(3.8	)
Change in unrecognized amounts included in pension and postretirement obligations, net of taxes of $4.6																(7.4	)		(7.4	)
Unrealized losses on investments, net of taxes of $1.7																(3.2	)		(3.2	)
Reclassification for investment write-downs included in net income, net of taxes of $0.3																0.5			0.5
Derivative fair-value adjustment, net of taxes of $2.0																(2.7	)		(2.7	)

Total comprehensive income																			51.1

Repurchase of common stock								2.0		(91.8	)								(91.8	)
Tax benefits related to prior year stock option exercises						14.6													14.6
Amortization of unearned compensation and vesting of restricted stock, net of taxes of $0.0		0.1				0.9													0.9

Balance, December 31, 2008		23.9	$	0.2	$	73.3		4.5	$	(106.6	)	$	437.2		$	(23.8	)	$	380.3
Cumulative effect of adoption of amended guidance for determining whether an impairment is other-than-temporary for debt securities, net of taxes of $0.1													(0.2	)		0.2			—
Net income													119.7						119.7
Currency translation adjustments, net of taxes of $0.0																2.0			2.0
Change in unrecognized amounts included in pension and postretirement obligations, net of taxes of $1.1																(1.5	)		(1.5	)
Unrealized gains on investments, net of taxes of $0.9																1.6			1.6
Reclassification for investment write-down and realized loss included in net income, net of taxes of $0.9																1.8			1.8
Derivative fair-value adjustment, net of taxes of $5.2																8.0			8.0

Total comprehensive income																			131.6

Amortization of unearned compensation and vesting of restricted stock, net of taxes of $0.0						2.1													2.1

Balance, December 31, 2009		23.9	$	0.2	$	75.4		4.5	$	(106.6	)	$	556.7		$	(11.7	)	$	514.0
Net income													120.9						120.9
Currency translation adjustments, net of taxes of $0.3																(2.9	)		(2.9	)
Change in unrecognized amounts included in pension and postretirement obligations, net of taxes of $3.3																5.3			5.3
Unrealized gains on investments, net of taxes of $4.4																6.9			6.9
Derivative fair-value adjustment, net of taxes of $1.3																(2.3	)		(2.3	)

Total comprehensive income																			127.9

Amortization of unearned compensation and vesting of restricted stock, net of taxes of $0.0						0.6													0.6

Balance, December 31, 2010		23.9	$	0.2	$	76.0		4.5	$	(106.6	)	$	677.6		$	(4.7	)	$	642.5

See Notes to Consolidated Financial Statements

F-5

M & F Worldwide Corp. and Subsidiaries
Consolidated Statements of Cash Flows

(in millions)


	Year Ended December 31,
	2010			2009			2008

Operating activities
Net income	$	120.9		$	119.7		$	67.7
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		50.6			59.6			68.4
Amortization of intangible assets		109.0			104.3			98.1
Amortization of deferred financing fees		7.7			7.3			8.2
Gain on early extinguishment of debt		—			(65.0	)		—
Restricted stock amortization		0.6			2.1			0.9
Deferred income taxes		(23.2	)		(20.5	)		(27.8	)
Tax benefits from stock options exercised		—			—			(14.6	)
Asset impairments		3.7			44.4			2.4
Realized and unrealized loss on marketable securities		1.0			2.7			0.8
Changes in operating assets and liabilities, net of effect of businesses acquired:
Accounts receivable		(1.1	)		13.7			(15.1	)
Inventories		8.5			(11.5	)		(18.7	)
Prepaid expenses and other assets		(20.6	)		(21.9	)		(0.6	)
Pension asset		0.6			(0.1	)		(1.3	)
Contract acquisition payments, net		1.4			11.2			11.8
Accounts payable and accrued liabilities		19.5			(54.8	)		(13.3	)
Deferred revenues		13.0			11.1			11.2
Income and other taxes		(4.4	)		(1.1	)		20.5
Other, net		6.3			5.2			0.5

Net cash provided by operating activities		293.5			206.4			199.1
Investing activities
Purchase of businesses, net of cash acquired		(61.2	)		(11.4	)		(235.3	)
Proceeds from sale of joint venture		—			1.0			—
Purchase of marketable securities		—			(24.6	)		—
Proceeds from sale and redemption of marketable securities		53.1			5.3			2.4
Investment in related party notes receivable		—			—			(14.4	)
Net repayments of related party notes receivable		3.0			5.2			1.8
Proceeds from sale of property, plant and equipment		2.5			0.7			5.7
Capital expenditures		(39.9	)		(43.8	)		(49.4	)
Capitalized interest		(0.1	)		(0.3	)		(0.7	)
Other, net		(4.2	)		(4.2	)		(0.6	)

Net cash used in investing activities		(46.8	)		(72.1	)		(290.5	)
Financing activities
Tax benefits from stock options exercised		—			—			14.6
Repurchase of common stock		—			—			(91.8	)
Redemption of notes		—			(67.6	)		—
Borrowings on credit agreements		31.0			—			62.0
Repayments of credit agreements and other borrowings		(74.8	)		(30.8	)		(82.0	)
Proceeds from short-term borrowings		—			—			27.2
Repayments of short-term borrowings		(22.2	)		(4.1	)		(0.9	)
Payments of contingent consideration arrangements		(0.7	)		—			—
Insurance premium financing payments		(0.4	)		(0.3	)		(0.1	)
Debt issuance cost		(0.4	)		—			—

Net cash used in financing activities		(67.5	)		(102.8	)		(71.0	)
Effect of exchange rate changes on cash and cash equivalents		(0.1	)		—			(0.5	)

Net increase (decrease) in cash and cash equivalents		179.1			31.5			(162.9	)
Cash and cash equivalents at beginning of period		133.7			102.2			265.1

Cash and cash equivalents at end of period	$	312.8		$	133.7		$	102.2

Supplemental disclosure of cash paid for:
Interest, net of amounts capitalized	$	109.6		$	139.7		$	175.2
Income taxes, net of refunds		100.5			97.0			52.9

See Notes to Consolidated Financial Statements

F-6

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements

(dollars in millions, except per share data)


1.	Description of the Business and Basis of Presentation

M & F Worldwide Corp. (“M & F Worldwide” and, together with its subsidiaries, the “Company”) was incorporated in Delaware on June 1, 1988. M & F Worldwide is a holding company that conducts its operations through its indirect wholly owned subsidiaries, Harland Clarke Holdings Corp. (“Harland Clarke Holdings”) and Mafco Worldwide Corporation (“Mafco Worldwide”). At December 31, 2010, MacAndrews & Forbes Holdings Inc. (“Holdings”), through its wholly owned subsidiaries MFW Holdings One LLC and MFW Holdings Two LLC, beneficially owned approximately 43.4% of the outstanding M & F Worldwide common stock.

The Company has organized its business and corporate structure along the following four business segments: Harland Clarke, Harland Financial Solutions, Scantron and Licorice Products.

The Scantron segment provides data management solutions and related services to educational, commercial, healthcare and governmental entities worldwide including testing and assessment solutions, patient information collection and tracking, and survey services. Scantron’s solutions combine a variety of data collection, analysis, and management tools including web-based solutions, software, scanning equipment, forms and related field maintenance services.

The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries after the elimination of all material intercompany accounts and transactions. The Company has consolidated the results of operations and accounts of businesses acquired from the date of acquisition. Investments in which the Company has at least a 20%, but not more than a 50%, interest are generally accounted for under the equity method.

Harland Clarke Holdings and each of its existing subsidiaries other than unrestricted subsidiaries and certain immaterial subsidiaries are guarantors and may also be co-issuers under the 2015 Senior Notes (as hereinafter defined) (see Note 14). Harland Clarke Holdings is a holding company, and has no independent assets at December 31, 2010, and no operations. The guarantees and the obligations of the subsidiaries of

F-7

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

Harland Clarke Holdings are full and unconditional and joint and several, and any subsidiaries of Harland Clarke Holdings other than the subsidiary guarantors and obligors are not significant.

See Notes 3 and 25 for information regarding recent acquisitions.


2.	Summary of Significant Accounting Policies

Use of Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Revenue Recognition

The Company recognizes product and service revenue when persuasive evidence of a non-cancelable arrangement exists, products have been shipped and/or services have been rendered, the price is fixed or determinable, collectibility is reasonably assured, legal title and economic risk is transferred to the customer and an economic exchange has taken place. Revenues are recorded net of any applicable discounts, contract acquisition payments amortization, accrued incentives and allowances for sales returns. Deferred revenues represent amounts billed to the customer in excess of amounts earned.

Revenues for direct response marketing services are recognized from the Company’s fixed price direct mail and marketing contracts based on the proportional performance method for specific projects.

For multiple-element software arrangements, total revenue is allocated to each element based on the relative fair value method or the residual method when applicable. Under the relative fair value method, the total revenue is allocated among the elements based upon the relative fair value of each element as determined through vendor-specific objective evidence (“VSOE”) (the price of a bundled element when sold separately). Under the residual method, the fair value of the undelivered maintenance, training and other service elements, as determined based on VSOE is deferred and the remaining (residual) arrangement is recognized as revenue at the time of delivery. Maintenance fees are deferred and recognized ratably over the maintenance period, which is usually twelve months. Training revenue is recognized as the services are performed. In the event the Company determines that VSOE is not achieved for any of the elements of a software arrangement, the entire arrangement is bundled as a single unit and revenue is recognized ratably over the initial term of the arrangement commencing upon delivery of the software.

Revenue from licensing of software under usage-based contracts is recognized ratably over the term of the agreement or on an actual usage basis. Revenue from licensing of software under limited term license agreements is recognized ratably over the term of the agreement.

For software that is installed and integrated by the Company or customer, license revenue is recognized upon shipment if functionality has already been proven and there are no significant customization services. For software that is installed, integrated and customized by the Company, revenue is recognized on a percentage-of-completion basis as the services are performed using an input method based on labor hours. Estimates of efforts to complete a project are used in the percentage-of-completion calculation. Due to the

F-8

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

uncertainties inherent in these estimates, actual results could differ from those estimates. Revenue from arrangements that are subject to substantive customer acceptance provisions is deferred until the acceptance conditions have been met.

Revenue from outsourced data processing services and other transaction processing services is recognized in the month the transactions are processed or the services are rendered.

The contractual terms of software sales do not provide for product returns or allowances. However, on occasion the Company may allow for returns or allowances primarily in the case of a new product release. Provisions for estimated returns and sales allowances are established by the Company concurrently with the recognition of revenue and are based on a variety of factors including actual return and sales allowance history and projected economic conditions.

Service revenues are comprised of revenues derived from software maintenance agreements, card services, field maintenance services, core processing service bureau deliverables, analytical services, consulting services, training services, survey services, direct marketing services and certain contact center services.

Customer Incentives

The Company’s Harland Clarke segment has contracts with certain clients that provide both fixed and volume-based rebates. These rebates are recorded as a reduction of revenues to which they apply and as accrued liabilities.

Shipping and Handling

Revenue received from shipping and handling fees is reflected in product revenues, net in the accompanying consolidated statements of income. Costs related to shipping and handling are included in cost of products sold.

Cash and Cash Equivalents

The Company considers all cash on hand, money market funds and other highly liquid debt instruments with a maturity, when purchased, of three months or less to be cash and cash equivalents.

Investments

The Company has investments classified as available-for-sale securities, consisting of corporate equity securities, which are stated at fair value with unrealized gains and losses on such investments reflected net of tax, as other comprehensive income (loss). The Company also previously owned auction rate debt securities (“ARS”) and United States treasury securities, which were sold prior to December 31, 2010. Realized gains and losses on investments are included in other (expense) income, net in the accompanying consolidated statements of income. The cost of securities sold is based on the specific identification method. The United States treasury securities are classified as current and included in marketable securities in the accompanying 2009 consolidated balance sheet. The corporate equity securities are classified as noncurrent and are included in other assets in the accompanying consolidated balance sheets. Interest earned on ARS is included in interest income in the accompanying consolidated statements of income ($0.3, $0.6 and $1.3 during 2010, 2009 and 2008, respectively). See Note 17.

If the market value of an investment declines below its cost, the Company evaluates whether the decline is temporary, or other than temporary. The Company considers several factors in determining whether a decline is temporary including the length of time market value has been below cost, the magnitude of the decline, financial prospects of the issuer or business and the Company’s intention to hold the security. If a

F-9

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

decline in market value of an investment is determined to be other than temporary, a charge to earnings is recorded for the loss and a new cost basis in the investment is established.

Accounts Receivable and Allowance for Doubtful Accounts

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable losses in its existing accounts receivable based on historical losses and current economic conditions. Account balances are charged against the allowance when the Company believes it is probable the receivable will not be recovered. The Company does not have any off-balance sheet credit exposure related to its customers.

Inventories

The Company states inventories at the lower of cost or market value. The Company determines cost by average costing or the first-in, first-out method.

Contract Acquisition Payments

Certain contracts with customers of the Company’s Harland Clarke segment involve upfront payments to the customer. These payments are capitalized and amortized on a straight-line basis as a reduction of revenue over the life of the related contract and are generally refundable from the customer on a prorated basis if the contract is canceled prior to the contract termination date. When such a termination occurs, the amounts repaid are offset against any unamortized contract acquisition payment balance related to the terminating customer, with any resulting excess reported as an increase in revenue. The Company recorded revenue related to these contract terminations of $5.8, $0.8 and $2.2 in 2010, 2009 and 2008, respectively.

Advertising

Advertising costs, which are recorded predominately in selling, general and administrative expenses, consist mainly of marketing new and existing products, re-branding existing products and launching new initiatives throughout the Company.

Direct-response advertising is capitalized and amortized over its expected period of future benefit, while all other advertising costs are expensed as incurred. Direct-response advertising consists primarily of inserts that include order coupons for products offered by a division of the Company’s Harland Clarke segment, which are amortized for a period up to 18 months. These costs are amortized following their distribution, and are charged to match the advertising expense with the related revenue streams.

At December 31, 2010 and 2009, the Company had prepaid advertising costs of $4.5 and $3.4, respectively, which are included in prepaid expenses and other current assets in the accompanying consolidated balance sheets. The Company’s advertising expense was $19.8, $22.2 and $23.9 for 2010, 2009 and 2008, respectively.

Property, Plant and Equipment

The Company states property, plant and equipment at cost. Maintenance and repairs are charged to expense as incurred. Additions, improvements and replacements that extend the asset life are capitalized. Depreciation is provided on a straight-line basis over the estimated useful lives of such assets. The Company amortizes leasehold improvements over the shorter of the useful life of the related asset or the lease term. Certain leases also contain tenant improvement allowances, which are recorded as a leasehold improvement and deferred rent and amortized over the lease term. The Company eliminates cost and accumulated depreciation applicable to assets retired or otherwise disposed of from the accounts and reflects any gain or

F-10

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

loss on such disposition in operating results. As further discussed below, the Company capitalizes the qualifying costs incurred during the development stage on software to be sold, leased or otherwise marketed, internally developed software and software obtained for internal use and amortizes the costs over the estimated useful life of the software. The Company capitalizes interest on qualified long-term projects and depreciates it over the life of the related asset.

The useful lives for computing depreciation are as follows:


	Years

Machinery and equipment		3 – 15
Computer software and hardware		3 – 5
Leasehold improvements		1 – 20
Buildings and improvements		20 – 30
Furniture, fixtures and transportation equipment		5 – 8

Software and Other Development Costs

The Company expenses research and development expenditures as incurred, including expenditures related to the development of software products that do not qualify for capitalization. The amounts expensed totaled $21.9, $15.4 and $17.7 during 2010, 2009 and 2008, respectively, and were primarily costs incurred related to the development of software.

Software development costs incurred prior to the establishment of technological feasibility are expensed as incurred. Software development costs incurred after establishing the technological feasibility of the subject software product and before its availability for sale are capitalized and are included in other intangible assets, net on the accompanying consolidated balance sheets. Capitalized software development costs are amortized on a product-by-product basis using the estimated economic life of the product on a straight-line basis over three years with related amortization expense in cost of goods sold on the accompanying consolidated statements of income. Unamortized software development costs in excess of estimated net realizable value from a particular product are written down to their estimated net realizable value.

The Company capitalizes costs to develop or obtain computer software for internal use once the preliminary project stage has been completed, management commits to funding the project and it is probable that the project will be completed and the software will be used to perform the function intended. Capitalized costs include only (1) external direct costs of materials and services consumed in developing or obtaining internal-use software, (2) payroll and payroll-related costs for employees who are directly associated with and who devote time to the internal-use software project and (3) interest costs incurred, when significant, while developing internal-use software. Capitalization of costs ceases when the project is substantially complete and ready for its intended use and are included in property, plant and equipment, net on the accompanying consolidated balance sheets.

Goodwill and Acquired Intangible Assets

Goodwill represents the excess of consideration transferred over the fair value of identifiable net assets acquired. Acquired intangibles are recorded at fair value as of the date acquired. Goodwill and other intangibles determined to have an indefinite life are not amortized, but are tested for impairment annually in the fourth quarter, or when events or changes in circumstances indicate that the assets might be impaired, such as a significant adverse change in the business climate.

F-11

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

six to five as a result of an organizational realignment and the integration of two former reporting units into a single reporting unit. In 2010, the Company further reduced the number of reporting units from five to four as a result of the integration of two former reporting units into a single reporting unit. The Company’s reporting units are now the same as its reportable segments.

The Company utilizes both the income and market approaches to estimate the fair value of the reporting units. The income approach involves discounting future estimated cash flows. The discount rate used is the value-weighted average of the reporting unit’s estimated cost of equity and debt (“cost of capital”) derived using, both known and estimated, customary market metrics. The Company performs sensitivity tests with respect to growth rates and discount rates used in the income approach. In applying the market approach, valuation multiples are derived from historical and projected operating data of selected guideline companies; evaluated and adjusted, if necessary, based on the strengths and weaknesses of the reporting unit relative to the selected guideline companies; and applied to the appropriate historical and/or projected operating data of the reporting unit to arrive at an indication of fair value. The Company weights the results of the income and market approaches equally, except where guideline companies are not similar enough to provide a reasonable value using the market approach. When that occurs, the market approach is weighted less than the income approach. The results of the Company’s annual tests for 2010 and 2009 indicated no goodwill impairment as the estimated fair values were greater than the carrying values. The Company assesses the results of the reporting unit valuations in relation to the value indicated by the Company’s market capitalization to ensure that the results are reasonable relative to market pricing.

If the estimated fair value of a reporting unit is less than the carrying value, a second step is performed to compute the amount of the impairment by determining an “implied fair value” of goodwill. The determination of the Company’s “implied fair value” requires the Company to allocate the estimated fair value of the reporting unit to the assets and liabilities of the reporting unit. Any unallocated fair value represents the “implied fair value” of goodwill, which is compared to the corresponding carrying value.

F-12

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

Costs to renew or extend the term of a recognized intangible asset are expensed as incurred and are not significant.

Long-Lived Assets

When events or changes in circumstances indicate that the carrying amount of a long-lived asset other than goodwill and indefinite-lived intangible assets may not be recoverable, the Company assesses the recoverability of such asset based on estimates of future undiscounted cash flows compared to net book value. If the future undiscounted cash flow estimates are less than net book value, net book value would then be reduced to estimated fair value, which generally approximates discounted cash flows. The Company also evaluates the amortization periods of assets to determine whether events or circumstances warrant revised estimates of useful lives. Assets held for sale are carried at the lower of carrying amount or fair value, less estimated costs to sell such assets.

Income and Other Taxes

The Company computes income taxes under the liability method. Under the liability method, the Company generally determines deferred income taxes based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The Company records net deferred tax assets when it is more likely than not that it will realize the tax benefits.

The Company records any tax assessed by a governmental authority that is both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, which may include, but is not limited to, sales, use, value added, and some excise taxes on a net basis in the accompanying consolidated statements of income.

Pensions and Other Postretirement Benefits

The Company has defined benefit pension and other postretirement benefit plans and defined contribution 401(k) plans, which cover certain current and former employees of the Company who meet eligibility requirements.

Benefits for defined benefit pension plans are based on years of service and, in some cases, the employee’s compensation. The Company’s policy is to contribute annually the amount required pursuant to the Employee Retirement Income Security Act. Certain subsidiaries of the Company outside the United States have retirement plans that provide certain payments upon retirement.

The Company recognizes in its balance sheet the funded status of its defined benefit pension and postretirement benefit plans, measured as the difference between the fair value of the plan assets and the benefit obligation and recognizes changes in the funded status of a defined benefit pension and postretirement benefit plan within accumulated other comprehensive income (loss), net of tax, to the extent such changes are not recognized in earnings as components of periodic net benefit cost (see Note 11).

Translation of Foreign Currencies

The functional currency for each of the Company’s foreign subsidiaries is its local currency. The Company translates all assets and liabilities denominated in foreign functional currencies into United States dollars at rates of exchange in effect at the balance sheet date and statement of income items at the average rates of exchange prevailing during the period. The Company records translation gains and losses as a component of accumulated other comprehensive income (loss) in the stockholders’ equity section of the Company’s balance sheets. Gains and losses resulting from transactions in other than functional currencies are

F-13

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

reflected in operating results, except for transactions of a long-term nature. The Company considers undistributed earnings of certain foreign subsidiaries to be permanently invested. As a result, no income taxes have been provided on the undistributed earnings of those foreign subsidiaries.

Self-Insurance

The Company is self-insured for certain workers’ compensation and group medical costs. Provisions for losses expected under these programs are recorded based on the Company’s estimates of the aggregate liabilities for the claims incurred. Payments for estimated claims beyond one year have been discounted. As of December 31, 2010 and 2009, the combined liabilities for self-insured workers’ compensation and group medical were $9.7 and $10.8, respectively.

Share-Based Payments

The Company accounts for share-based payments to employees, including grants of employee stock options in its financial statements based on their fair values. The Company did not grant any options in 2010, 2009 and 2008. See Note 10 regarding the issuance of restricted stock to a director in 2007.

Derivative Financial Instruments

The Company uses derivative financial instruments to manage interest rate risk related to a portion of its long-term debt. The Company recognizes all derivatives at fair value as either assets or liabilities in the consolidated balance sheets and changes in the fair values of such instruments are recognized in earnings unless specific hedge accounting criteria are met. If specific cash flow hedge accounting criteria are met, the Company recognizes the changes in fair value of these instruments in other comprehensive income (loss) until the underlying debt instrument being hedged is settled or the Company determines that the specific hedge accounting criteria are no longer met.

Deferred Financing Fees

Deferred financing fees are being amortized to interest expense using the effective interest method over the term of the respective financing agreements. Unamortized balances are reflected in other assets in the accompanying consolidated balance sheets and were $25.5 and $32.5 as of December 31, 2010 and 2009, respectively.

Restructuring Charges

The Company has restructuring costs related primarily to facility consolidations and workforce rationalization. A portion of these costs relate to plans to exit activities acquired from Data Management I LLC and Transaction Holdings Inc. (see Note 3) and have been included in purchase accounting in accordance with accounting guidance for business combinations that was in effect until January 1, 2009. The remaining costs

F-14

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

relate to other exit activities and primarily consist of employee termination benefits which are accrued when it is probable that a liability has been incurred and the amount of the liability is reasonably estimable. In addition to employee termination benefits, other restructuring costs include, but are not limited to, equipment moves, training and travel, which are expensed as incurred. Additional restructuring charges related to the Company’s existing operations will be incurred as the Company completes its restructuring plans.

Fair Value Measurements

The Company measures fair value using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions (see Note 16).

Reclassifications

Certain amounts in previously issued financial statements have been reclassified to conform to the 2010 presentation. These reclassifications had no effect on previously reported net income.

Specifically, certain revenues for the Harland Clarke segment previously reported as product revenues, net along with related cost of products sold were reclassified to service revenues, net and cost of services provided to enable comparability with the presentation of the consolidated statements of income for 2010. Reclassifications for product revenues, net and service revenues, net were also made in Note 22 for the Harland Clarke segment.

Recently Issued Accounting Guidance

In October 2009, the Financial Accounting Standards Board (the “FASB”) issued new guidance for certain arrangements that include software elements. The new guidance removes non-software components of tangible products and software components of tangible products that have software components essential to the functionality of the tangible product from the scope of software revenue recognition.

In October 2009, the FASB issued new guidance for multiple-deliverable revenue arrangements. The new guidance requires entities to allocate revenue in a multiple-deliverable arrangement within the scope of the guidance using estimated selling prices based on a selling price hierarchy. It also eliminates the residual method of revenue allocation and requires revenue to be allocated using the relative selling price method. In addition, the new guidance significantly expands qualitative and quantitative disclosure requirements for multiple-deliverable arrangements.

The new guidance for certain arrangements that include software elements and multiple-deliverable revenue arrangements is effective for fiscal years beginning on or after June 15, 2010. The guidance may be applied retrospectively for all periods presented, or prospectively to all arrangements entered into or materially modified after the adoption date. The Company will adopt the new guidance prospectively for all arrangements entered into or materially modified on or after January 1, 2011. The Company does not expect the new guidance will have a material effect on the Company’s consolidated financial condition, results of operations or cash flows.


3.	Acquisitions

Acquisition of Parsam

F-15

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

equity of SRC Software Private Limited (collectively referred to as “Parsam”). Parsam’s solutions allow financial institutions to provide services online, in branches and at call centers, from new account opening and funding to account-to-account money transfers, person-to-person payments, account and adviser-client relationship management, and bill presentment and payment. HFS is integrating Parsam’s solutions into its existing solution offerings. The acquisition-date purchase price was $32.6 in cash, net of cash acquired, and subject to post-closing adjustments. In addition, the Company recorded the fair value of contingent consideration of $2.7, which resulted in total consideration of $35.3. Contingent consideration would be payable upon achievement of certain revenue targets of Parsam during calendar years 2011 and 2012. The transaction was accounted for as a business combination and Parsam’s results of operations have been included in the Company’s operations since the date of its acquisition.

The preliminary allocation of purchase price resulted in identified intangible assets of $7.8 and goodwill of $27.5. The goodwill arises because the total consideration for Parsam, which reflects its future earnings and cash flow potential, exceeds the fair value of the net assets acquired. The goodwill resulting from the acquisition was assigned to the Harland Financial Solutions segment. Of the goodwill recognized, $24.4 is expected to be deductible for income tax purposes. The Company financed the Parsam acquisition and related fees and expenses with Harland Clarke Holdings’ cash on hand. Acquisition-related fees and expenses were not material.

The contingent consideration arrangement provides for cash payments of up to an aggregate maximum of $25.0, which may be payable upon the achievement of certain future revenue targets of Parsam measured during the calendar years 2011 and 2012. The acquisition-date fair value of the contingent consideration arrangement of $2.7 was estimated utilizing a discounted cash flow analysis with significant inputs that are not observable in the market (Level 3 inputs). Key assumptions include a projection of Parsam revenues for the measurement periods. The application of fair value accounting for the contingent consideration arrangement requires recurring remeasurement for changes in key assumptions (see Note 16). As of December 31, 2010, the amount recognized for the contingent consideration liability and the assumptions used to develop the estimates had not changed.

The application of acquisition accounting decreased acquired deferred revenues by $1.6 to $0.4 due to a fair value adjustment. This non-cash fair value adjustment results in lower revenue being recognized over the related earnings period (of which a negligible amount was reflected as a reduction of revenues for the period December 7, 2010 to December 31, 2010).

The fair value of financial assets acquired was not significant and all receivables are expected to be collected. The pro forma effects for the Parsam acquisition on the consolidated results of operations were not material.

Acquisition of Spectrum K12

On July 21, 2010, Scantron Corporation (“Scantron”), a wholly owned subsidiary of Harland Clarke Holdings, acquired 100% of the equity of Spectrum K12. Spectrum K12 develops, markets and sells student achievement management, response to intervention and special education software solutions. Spectrum K12’s software solutions complement Scantron’s software solutions for educational assessments, content and data management. The acquisition-date purchase price was $28.6 in cash, net of cash acquired and after giving effect to working capital adjustments. In addition, the Company recorded the fair value of contingent consideration, as described below, of $4.0, which resulted in total consideration of $32.7. The transaction was accounted for as a business combination and Spectrum K12’s results of operations have been included in the Company’s operations since the date of its acquisition.

The preliminary allocation of purchase price resulted in identified intangible assets of $6.6 and goodwill of $26.6. The goodwill arises because the total consideration for Spectrum K12, which reflects its future

F-16

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

earnings and cash flow potential, exceeds the fair value of the net assets acquired. The goodwill resulting from the acquisition was assigned to the Scantron segment. Of the goodwill recognized, $1.5 is expected to be deductible for income tax purposes. The Company financed the Spectrum K12 acquisition and related fees and expenses with Harland Clarke Holdings’ cash on hand. Acquisition-related fees and expenses were not material.

The contingent consideration arrangement provides for cash payments of up to an aggregate maximum of $20.0, which may be payable upon the achievement of certain future revenue targets of Spectrum K12 measured during the twelve-month periods ending June 30, 2011 and 2012. Certain of the contingent consideration payments may be payable under the terms of the acquisition to eligible employees who remain employed by Spectrum K12 during the twelve-month periods ending June 30, 2011 and 2012. These contingent consideration payments of up to an aggregate of $5.0 to eligible employees will be considered incentive compensation and will be recorded as compensation expense as earned. The acquisition-date fair value of the contingent consideration arrangement of $4.9, of which $0.9 is considered to be incentive compensation, was estimated utilizing a discounted cash flow analysis with significant inputs that are not observable in the market (Level 3 inputs). Key assumptions include a projection of Spectrum K12 revenues for the measurement periods. The application of fair value accounting for the contingent consideration arrangement requires recurring remeasurement for changes in key assumptions (see Note 16). As of December 31, 2010, the fair value of the contingent consideration arrangement was $4.7, of which $0.9 is considered to be incentive compensation. The reduction in fair value from the acquisition date was primarily the result of a decline in projected revenues during the measurement periods. As of December 31, 2010, the contingent consideration liability recognized was $4.3 (of which $0.5 was recorded as compensation expense for the period July 22, 2010 to December 31, 2010).

The application of acquisition accounting decreased acquired deferred revenues by $10.5 to $5.0 due to a fair value adjustment. This non-cash fair value adjustment results in lower revenue being recognized over the related earnings period (of which $1.8 was reflected as a reduction of revenues for the period July 22, 2010 to December 31, 2010).

The fair value of financial assets acquired was not significant and all receivables are expected to be collected. The pro forma effects for the Spectrum K12 acquisition on the consolidated results of operations were not material.

Acquisition of Protocol IMS and SubscriberMail

During December 2009, Harland Clarke Corp., a wholly owned subsidiary of Harland Clarke Holdings, acquired in separate transactions 100% of the equity of SubscriberMail and certain assets and liabilities of Protocol IMS. The acquisition-date aggregate consideration of $13.1 for these transactions includes contingent consideration of $1.8 for SubscriberMail upon the achievement of certain revenue targets in 2010 and 2011, with a maximum aggregate contingent consideration of $2.0 if the targets are met. In 2010, $1.0 of contingent consideration was earned under this contingent consideration arrangement, of which $0.7 was paid in 2010 and the remainder was paid in 2011. As of December 31, 2010, $1.2 was recognized for the contingent consideration liability, which includes the earned, but unpaid amount of $0.3 from 2010. SubscriberMail is a leading email marketing service provider that offers patented tools to develop and deliver professional email communications. SubscriberMail results of operations have been included in the Company’s operations since December 31, 2009, the date of its acquisition. Protocol IMS focuses on direct marketing services with solutions that include business to business strategic services, business to consumer strategic services, database marketing and analytics, outbound business to business teleservices, production and fulfillment. Protocol IMS results of operations have been included in the Company’s operations since December 4, 2009, the date of its acquisition. The allocations of purchase price are complete and resulted in identified intangible assets of $4.2 and goodwill of $7.2, which are deductible for tax purposes.

F-17

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

The pro forma effects for the Protocol IMS and SubscriberMail acquisitions on the results of operations were not material.

Acquisition of Transaction Holdings

In December 2008, Harland Clarke Corp. acquired 100% of the equity of Transaction Holdings Inc. (“Transaction Holdings”) for total cash consideration of $8.2. Transaction Holdings produces personal and business checks, payment coupon books and promotional checks and provides direct marketing services to financial institutions as well as individual consumers and small businesses. Transaction Holdings’ results of operations have been included in the Company’s operations since the date of its acquisition. The allocation of the purchase price is complete and resulted in identified intangible assets of $9.0, goodwill of $2.8 and net deferred tax liabilities of $2.8.

Acquisition of Data Management

In February 2008, Scantron purchased all of the limited liability membership interests of Data Management I LLC (“Data Management”) for $218.7 in cash after giving effect to working capital adjustments of $1.6 (the “Data Management Acquisition”). Data Management’s results of operations have been included in the Company’s operations since the date of the Data Management Acquisition. Fees and expenses of $4.6 related to the Data Management Acquisition were capitalized in the purchase price. The capitalized fees and expenses include $2.0 paid to Holdings for its services related to sourcing, analyzing, negotiating and executing the Data Management Acquisition (see Note 20). The acquisition combined complementary products and services of Scantron and Data Management, resulting in an expanded offering of products and services to their respective customers. The Company financed the Data Management Acquisition and related fees and expenses with Harland Clarke Holdings’ cash on hand.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the Data Management Acquisition date:


Accounts receivable			$	15.9
Inventories				7.5
Property, plant and equipment				25.5
Goodwill				116.2
Other intangible assets:
Customer relationships	$	65.4
Trademarks and tradenames		2.4
Patented technology and software		7.5

Total other intangible assets				75.3
Other assets				0.6

Total assets acquired				241.0
Deferred revenues				7.6
Other liabilities				10.1

Net assets acquired			$	223.3

The above purchase price allocation is complete. Goodwill in the amount of approximately $114.5 and intangible assets in the amount of approximately $75.3 related to Data Management are deductible for tax purposes. The principal factor affecting the purchase price, which resulted in the recognition of goodwill, was

F-18

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

the fair value of the going-concern element of Data Management, which included the assembled workforce and synergies that were expected to be achieved.

As a result of the Data Management Acquisition, the Company adopted formal plans to terminate certain employee functions and exit duplicative facilities. The Company recorded $2.5 of severance and severance-related costs for the termination of certain Data Management employees in the above purchase price allocation. See Note 18 for additional disclosures regarding restructuring.

As part of the application of purchase accounting, inventory of Data Management was increased by $0.4 due to a fair value adjustment. The amount of the inventory fair value adjustment was expensed as additional non-cash cost of products sold as the related inventory was sold during 2008.

Also as part of the application of purchase accounting, deferred revenue of Data Management was decreased by $1.4 due to a fair value adjustment. This non-cash fair value adjustment resulted in lower revenue being recognized over the related earnings period (of which $0.2, $0.2 and $1.0 was reflected as reduced revenues during 2010, 2009 and 2008, respectively).

Acquisition of Wei Feng Enterprises Limited

In July 2007, Mafco Worldwide purchased the remaining 50% of the outstanding shares of Wei Feng Enterprises Limited (“Wei Feng”) for $1.5 ($0.5 of which was paid to the seller at closing and $1.0 of which was to be paid to the seller upon the issuance of a specific environmental permit for Wei Feng’s Zhangjiagang, China factory), plus up to an additional $1.9 over six years based on an earnout provision.

Wei Feng manufactures licorice derivatives which are sold to third-party customers and to Mafco Worldwide. Wei Feng purchases licorice extracts from Mafco Worldwide, as well as from third-party suppliers. As a result of this transaction, Wei Feng became a wholly owned, indirect subsidiary of Mafco Worldwide, and the Company has been consolidating the accounts of Wei Feng since the date of acquisition of the remaining interest. Mafco Worldwide had a 50% ownership in Wei Feng through the 2007 closing, which the Company accounted for using the equity method.

In May 2008, the purchase agreement was amended to provide for the following: (a) a cash payment to the seller of $0.8 made in May 2008 and another cash payment of $0.2 to be made to the seller upon achieving certain performance conditions at the Zhangjiagang, China factory ($0.1 of which was paid in December 2008) and (b) elimination of the earnout provision. This amendment, which reduced the total consideration paid for the remaining shares of Wei Feng, resulted in an extraordinary gain of $0.7 which is equal to the value of the acquired assets in excess of the total consideration paid, after first reducing the value of the long-lived assets acquired to zero.


4.	Inventories

Inventories consist of the following:


	December 31,
	2010		2009

Finished goods	$	32.2	$	36.0
Work-in-progress		8.7		11.3
Raw materials		89.1		92.1

	$	130.0	$	139.4

F-19

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)


5.	Property, Plant and Equipment

Property, plant and equipment consist of the following:


	December 31,
	2010			2009

Machinery and equipment	$	126.7		$	137.0
Computer software and hardware		153.0			134.0
Leasehold improvements		26.3			28.5
Buildings and improvements		48.4			48.5
Furniture, fixtures and transportation equipment		18.0			15.7
Land		11.1			12.1
Construction-in-progress		15.1			14.1

		398.6			389.9
Accumulated depreciation		(241.5	)		(214.3	)

	$	157.1		$	175.6

Depreciation expense was $50.6, $59.6 and $68.4 for the years ended December 31, 2010, 2009 and 2008, respectively, and includes the depreciation of the Company’s capital leases. Capitalized lease equipment was $11.6 and $10.6 at December 31, 2010 and 2009, respectively, and the related accumulated depreciation was $7.7 and $5.9 at December 31, 2010 and 2009, respectively.

Construction-in-progress mainly consists of investments in Harland Clarke’s information technology infrastructure, contact centers, production bindery and delivery systems. During 2010, a non-cash impairment charge of $1.7 was recorded related to the abandonment of a development project.


6.	Assets Held For Sale

At December 31, 2010, assets held for sale consist of the following Harland Clarke segment facilities:

During 2010, the Company closed its information technology facility in Atlanta, GA and relocated those operations into an existing facility. The other listed Atlanta facilities were closed as part of the Company’s plan to exit duplicative facilities related to an acquisition. Subsequent to the classification of the Atlanta facilities as assets held for sale, there have been significant changes in the real estate market. During 2010, non-cash impairment charges of $0.9 were recorded to adjust the carrying values of the facilities to reflect an updated estimate of the fair values less costs to sell based on updated broker opinions of value. The Company has made appropriate changes to its marketing plan and believes these facilities will be sold within twelve months. In January 2010, the Company sold its Syracuse facility, which was closed in 2009, for its carrying value of $1.1. In June 2010, the Company sold its Greensboro facility, which was closed in 2009, for $1.3 and realized a gain of $0.3, which is included in restructuring costs in the accompanying consolidated statements of income.

In 2008, the Company recorded $0.5 in non-cash impairment charges related to print facilities held for sale. One of the facilities was subsequently sold for its carrying value of $2.8. In 2008, the Company also recorded a $0.2 non-cash impairment charge related to the operations support facility.

F-20

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

The impairment charges recorded in 2010 and 2008 are included in asset impairment charges in the accompanying consolidated statements of income.

Assets held for sale are included in prepaid expenses and other current assets on the accompanying consolidated balance sheets and consist of the following:


	December 31,
	2010		2009

Land	$	1.5	$	1.4
Buildings and improvements		1.9		3.5

	$	3.4	$	4.9


7.	Goodwill and Other Intangible Assets

The change in carrying amount of goodwill by business segment for the years ended December 31, 2010 and 2009 is as follows:


				Harland
	Harland			Financial					Licorice
	Clarke			Solutions			Scantron		Products			Total

Balance as of December 31, 2008	$	772.3		$	425.0		$	268.2	$	43.6		$	1,509.1
2009 acquisitions		7.2			—			—		—			7.2
Adjustments to goodwill		(0.1	)		—			0.3		—			0.2
Effect of exchange rate changes		—			0.2			0.1		0.5			0.8

Balance as of December 31, 2009		779.4			425.2			268.6		44.1			1,517.3
2010 acquisitions		—			27.5			26.6		—			54.1
Effect of exchange rate changes		—			(0.5	)		—		(1.1	)		(1.6	)

Balance as of December 31, 2010	$	779.4		$	452.2		$	295.2	$	43.0		$	1,569.8

Useful lives, gross carrying amounts and accumulated amortization for other intangible assets are as follows:


			Gross Carrying Amount				Accumulated Amortization
	Useful Life		December 31,		December 31,		December 31,		December 31,
	(in years)		2010		2009		2010		2009

Amortized intangible assets:
Customer relationships		3-20	$	1,243.7	$	1,234.6	$	350.7	$	261.5
Trademarks and tradenames		2-25		155.0		154.5		12.3		3.4
Software and other		2-10		71.9		65.1		37.4		28.2
Patents and patents pending		3-20		21.9		20.0		5.7		4.0

				1,492.5		1,474.2		406.1		297.1

Indefinite-lived intangible assets:
Product formulations				109.9		109.8		—		—
Tradename				11.0		11.0		—		—

Total other intangible assets			$	1,613.4	$	1,595.0	$	406.1	$	297.1

Amortization expense was $109.0, $104.3 and $98.1 for the years ended December 31, 2010, 2009 and 2008, respectively.

F-21

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

The weighted average amortization period for all amortizable intangible assets recorded in connection with the Spectrum K12 acquisition was 7.5 years. The weighted average amortization period for each major class of amortizable intangible assets recorded in connection with the Spectrum K12 acquisition was as follows: customer relationships — 9.0 years, trademarks and tradenames — 3.0 years and software — 5.8 years.

The weighted average amortization period for all amortizable intangible assets recorded in connection with the Parsam acquisition was 6.4 years. The weighted average amortization period for each major class of amortizable intangible assets recorded in connection with the Parsam acquisition was as follows: customer relationships — 7.0 years, trademarks and tradenames — 5.0 years and software — 5.0 years.

Estimated annual aggregate amortization expense for intangible assets through December 31, 2015 is as follows:


2011	$	103.8
2012		98.3
2013		88.4
2014		80.1
2015		74.3

As a result of the 2009 annual impairment test for indefinite-lived tradenames, the Company determined the fair value of the Harland Clarke tradename was less than its carrying value due to declines in revenues from check unit volumes that are projected to decline at rates that are higher than recent years and also due to the continuing economic downturn. As a result of this impairment, the useful life of the Harland Clarke tradename was reassessed and determined to no longer be indefinite. Based on an analysis of future cash flows attributable to the Harland Clarke tradename, the Company determined the economic life for the Harland Clarke tradename is 25 years. A non-cash impairment charge of $44.2 ($33.4 for the Harland Clarke segment, $10.6 for the Harland Financial Solutions segment and $0.2 for the Scantron segment) was recorded in the fourth quarter of 2009 based on the fair value of the Harland Clarke tradename being less than its carrying value and the reclassification of the useful life from an indefinite life to a life of 25 years. This impairment charge was included in asset impairment charges in the accompanying consolidated statements of income for 2009. The charge did not affect consolidated cash flows, current liquidity, capital resources or covenants under existing credit facilities. The remaining balance of $145.8 for the Harland Clarke tradename was reclassified from indefinite-lived tradenames to amortized tradenames in the table of intangible assets above. The Company began to amortize this intangible asset on an undiscounted cash flow basis in the fourth quarter of 2009 resulting in additional amortization expense of $1.3 in 2009 and $8.0 in 2010.

During 2008, the Company experienced further declines in customer revenues from Alcott Routon operations and assessed the customer relationship intangible asset for impairment. As a result, the Company calculated the estimated fair value and wrote off the customer relationship intangible asset, which was in excess of fair value. The associated non-cash impairment charge of $0.5 was included in asset impairment charges in the accompanying consolidated statements of income for 2008.

F-22

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)


8.	Income Taxes

Information pertaining to the Company’s income before income taxes and the applicable provision for income taxes is as follows:


	Year Ended December 31,
	2010			2009			2008

Income (loss) before income taxes:
Domestic	$	195.1		$	193.6		$	112.6
Foreign		1.0			(0.9	)		(3.6	)

Total income before income taxes	$	196.1		$	192.7		$	109.0

Provision for income taxes:
Current:
Federal	$	80.7		$	76.9		$	61.6
State and local		16.4			15.4			6.8
Foreign		1.3			1.2			1.4

		98.4			93.5			69.8
Deferred:
Federal		(20.6	)		(18.9	)		(25.6	)
State and local		(2.5	)		(2.4	)		(0.4	)
Foreign		(0.1	)		0.8			(1.8	)

		(23.2	)		(20.5	)		(27.8	)

Total provision for income taxes	$	75.2		$	73.0		$	42.0

F-23

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:


	December 31,
	2010			2009

Current:
Net operating loss carryforwards	$	0.2		$	0.3
Accrued expenses and other liabilities		28.3			27.6

Net current deferred tax asset		28.5			27.9
Valuation allowance		(10.1	)		(5.5	)

		18.4			22.4
Long-term:
Postretirement benefits obligations		4.4			9.7
Deferred compensation		4.3			0.5
Interest rate hedges liability		6.9			3.1
Net operating loss carryforwards		31.6			12.7
Other liabilities		2.1			14.9
Deferred gain on debt repurchase		(25.4	)		(24.9	)
Property, plant and equipment		(4.7	)		(6.9	)
Pension asset		(1.5	)		(1.8	)
Intangible assets		(440.6	)		(462.6	)

Net long-term deferred tax liability		(422.9	)		(455.3	)
Valuation allowance		(17.2	)		(7.3	)

		(440.1	)		(462.6	)

Net deferred tax liabilities	$	(421.7	)	$	(440.2	)

At December 31, 2010, the Company had $44.1 of domestic federal net operating loss (“NOL”) carryforwards which expire between 2021 and 2029. The federal NOL carryforwards relate to acquisitions and therefore are subject to annual limitations under Internal Revenue Code Section 382, which generally restricts the amount of a corporation’s taxable income that can be offset by a taxpayer’s NOL carryforwards in taxable years after a change in ownership has occurred.

The Company had domestic state net operating loss carryforwards totaling $11.4 (tax effected), with $0.3 expiring in 2011-2019, and the remainder expiring beyond 2019. In addition, the Company had foreign net operating loss carryforwards of $16.0 for Ireland, which have no expiration dates.

The Company has established a valuation allowance for certain federal, state and foreign net operating loss and tax credit carryforwards. Management believes that, based on a number of factors, the available objective evidence creates uncertainty regarding the utilization of these carryforwards. At December 31, 2010, there was a valuation allowance of $27.3 for such items, a net increase of $14.5 from the prior year. The increase was primarily due to a valuation allowance of approximately $12.5 established in connection with the Spectrum K12 acquisition, a $1.6 increase in state net operating losses, a decrease of $0.6 related to marketable securities and an increase of approximately $1.0 in federal loss carryovers.

F-24

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

The provision for income taxes varies from the current statutory federal income tax rate as follows:


	Year Ended December 31,
	2010			2009			2008

Tax provision at statutory rate	$	68.7		$	67.5		$	38.2
State and local taxes		8.2			7.2			5.1
Foreign losses with no benefit		1.0			1.7			—
Permanent differences		(1.8	)		(0.9	)		(0.2	)
Effect of change in uncertain tax positions		(1.3	)		(3.5	)		(0.7	)
Extraterritorial benefit recorded		—			—			(1.4	)
Other		0.4			1.0			1.0

	$	75.2		$	73.0		$	42.0

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


	2010			2009			2008

Balance at January 1	$	13.7		$	18.7		$	20.1
Additions based on tax positions related to the current year		—			—			—
Additions for tax positions for prior years		0.6			1.7			—
Reductions for tax positions for prior years		(2.2	)		(6.7	)		(1.4	)
Settlements		—			—			—

Balance at December 31	$	12.1		$	13.7		$	18.7

Of the amounts reflected in the table above at December 31, 2010 and 2009, there were $4.6 and $5.3 of tax benefits that, if recognized in 2010 and 2009, respectively, would have reduced the Company’s annual effective tax rate. The Company had accrued interest and penalties of approximately $6.0 and $6.9 as of December 31, 2010 and 2009, respectively. The Company records both accrued interest and penalties related to income tax matters, which is not significant, in the provision for income taxes in the accompanying consolidated statements of income. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months.

In connection with the 2005 acquisition of Clarke American Corp., Honeywell International Inc. (“Honeywell”) agreed to indemnify the Company for certain income tax liabilities that arose prior to this acquisition.

The Company is subject to taxation in the United States and various state and foreign jurisdictions. The statute of limitations for the Company’s federal and state tax returns for the tax years 2007 through 2009 generally remain open. In addition, open tax years related to foreign jurisdictions remain subject to examination but are not considered material.

The Internal Revenue Service previously commenced examinations of Novar USA Inc., a predecessor of Harland Clarke Holdings, for the tax year 2005. The Internal Revenue Service recently completed examinations of Harland for the tax years 2005 through May 1, 2007 and for Harland’s amended tax returns filed for claims of research and development credits relating to tax years 2002 through 2005. In connection with completion of the audits, Harland resolved its research and development credit claims with the Internal Revenue Service. This resulted in a $5.9 reduction of the accrual for the Company’s uncertain tax positions, of which $3.4 (inclusive of interest) was recorded as a benefit in the tax provision for the year ended December 31, 2009.

F-25

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)


9.	Authorized Capital Stock

M & F Worldwide’s authorized capital stock consists of 250,000,000 shares of common stock, par value $0.01 per share, and 250,020,000 shares of preferred stock, par value $0.01 per share. The preferred stock is issuable in one or more series or classes, any or all of which may have such voting powers, full or limited, or no voting powers, and such designations, preferences and related participating, optional or other special rights and qualifications, limitations or restrictions thereof, as set forth in M & F Worldwide’s Certificate of Incorporation or any amendment thereto, or in the resolution providing for the issuance of such stock adopted by M & F Worldwide’s Board of Directors, which is expressly authorized to set such terms for any such issue.

At December 31, 2010 and 2009, there were 23,875,831 shares of common stock issued and 4,541,900 shares were held in treasury. There were 20,000 shares of Series A Preferred Stock outstanding at December 31, 2010 and 2009, all of which were held in treasury.


10.	Stock Plans

The Company established four stock plans, in 1995, 1997, 2000 and 2003 (the “Stock Plans”), which provide for the grant of awards covering up to 5.5 million shares of M & F Worldwide common stock. As of December 31, 2010, options to purchase a total of approximately 3.1 million shares of M & F Worldwide common stock have been granted pursuant to the Stock Plans. As of December 31, 2010, 200,000 shares of M & F Worldwide restricted common stock have been granted pursuant to the Stock Plans. The Company did not grant any options or restricted stock in 2010, 2009 and 2008 and there were no options outstanding during these years.

In addition, non-employee directors are eligible to participate in the Company’s Outside Directors Deferred Compensation Plan. This plan enables such directors to forego cash fees otherwise payable to them in respect to their service as a director and to have such fees credited in the form of stock units, which will be payable in the form of stock or cash, as elected by the director, when the director terminates service as a director, or at such other time as the director elects. As of December 31, 2010 and 2009, the Company recorded a liability of $3.1 and $4.4, respectively, related to deferred directors’ compensation. Deferred directors’ compensation is recorded as a component of selling, general and administrative expenses in the accompanying consolidated statements of income. As of December 31, 2010 and 2009, there were 134,801 and 111,803 stock units outstanding, respectively.

On May 30, 2007, the Company issued 200,000 shares of restricted common stock to Mr. Ronald O. Perelman under the Company’s 2003 Stock Incentive Plan (the “Restricted Stock”). Mr. Perelman is the Chairman of the Company’s board of directors and is the sole shareholder of Holdings. The Restricted Stock vested in equal installments on each of the three anniversaries of the issuance date. The Company recorded non-cash compensation expense related to the Restricted Stock using the straight-line method over the vesting period. The unvested Restricted Stock was revalued at the end of each reporting period based on the quoted market price of the Company’s common stock. The Company expensed $0.6, $2.1 and $0.9 related to the Restricted Stock in 2010, 2009 and 2008, respectively.


11.	Defined Benefit Pension and Other Postretirement Benefit Plans

The Company uses December 31 as a measurement date for all plans.

Mafco Worldwide

Certain current and former employees of Mafco Worldwide are covered under various defined benefit retirement plans. Plans covering Mafco Worldwide’s salaried employees generally provide pension benefits based on years of service and compensation. Plans covering Mafco Worldwide’s union members generally

F-26

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

provide stated benefits for each year of credited service. The Company’s funding policy is to contribute annually the statutory required amount as actuarially determined.

The following table reconciles the funded status of Mafco Worldwide’s funded defined benefit pension plans as of December 31, 2010 and 2009.


	December 31,
	2010			2009

Accumulated Benefit Obligation	$	12.7		$	10.7

Change in Projected Benefit Obligation:
Projected benefit obligation at beginning of year	$	12.7		$	11.4
Service cost		0.5			0.4
Interest cost		0.8			0.7
Actuarial loss (gain)		1.3			0.5
Benefits paid		(0.5	)		(0.3	)

Projected benefit obligation at end of year		14.8			12.7

Change in Plan Assets:
Fair value of assets at beginning of year		20.6			20.1
Actual returns on plan assets		1.4			0.5
Company contributions		0.4			0.3
Benefits paid		(0.5	)		(0.3	)

Fair value of assets at end of year		21.9			20.6

Net pension asset	$	7.1		$	7.9

Amounts recognized in the consolidated balance sheets for Mafco Worldwide’s funded defined benefit pension plans consist of the following:


	December 31,
	2010			2009

Pension asset	$	10.3		$	10.5
Other liabilities		(3.2	)		(2.6	)

	$	7.1		$	7.9

Net amounts recognized in accumulated other comprehensive loss at December 31, 2010, which have not yet been recognized as a component of net periodic pension expense for Mafco Worldwide’s funded defined benefit pension plans, are as follows:


Prior service cost	$	0.8
Net actuarial loss		12.6

	$	13.4

The total prior service cost and actuarial loss included in accumulated other comprehensive loss and expected to be recognized as an increase to net periodic pension expense during the year ending December 31, 2011 for Mafco Worldwide’s funded pension plans is $0.1 and $0.9, respectively.

F-27

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

The components of net periodic pension (expense)/income for Mafco Worldwide’s funded defined benefit plans are as follows:


	Year Ended December 31,
	2010			2009			2008

Service cost	$	(0.5	)	$	(0.4	)	$	(0.4	)
Interest cost		(0.8	)		(0.7	)		(0.7	)
Expected return on plan assets		1.1			1.6			2.2
Amortization of prior service cost		(0.1	)		(0.1	)		(0.1	)
Amortization of net actuarial loss		(0.9	)		(0.8	)		(0.1	)

Net periodic pension (expense) income	$	(1.2	)	$	(0.4	)	$	0.9

Contributions

Mafco Worldwide currently expects to contribute approximately $0.5 to its funded defined benefit pension plans in 2011.

Benefit Payments

The projected benefit payments for the funded defined benefits plans are as follows:


2011	$	0.3
2012		0.7
2013		0.6
2014		0.5
2015		0.7
2016-2020		4.8

In addition to the amounts shown above, Mafco Worldwide has an unfunded supplemental benefit plan to provide salaried employees with additional retirement benefits due to limitations established by United States income tax regulations. The projected benefit obligation for these plans was $4.6 and $3.8 at December 31, 2010 and 2009, respectively. The projected benefit obligation reflected on the consolidated balance sheet at December 31, 2010 includes a current liability of $0.2 and a non-current liability of $4.4. Net loss recognized in accumulated other comprehensive loss at December 31, 2010, which has not yet been recognized as a component of net periodic pension cost for Mafco Worldwide’s unfunded plans was $1.7. The net loss included in accumulated other comprehensive loss and expected to be recognized in net periodic cost during the year ending December 31, 2011 is $0.1. The net periodic pension cost recognized for these plans was $0.4, $0.3 and $0.3 for 2010, 2009 and 2008, respectively. Benefit payments are projected to be $0.2 per year in 2011 through 2015 and a total of $1.6 for 2016 to 2020.

F-28

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

Assumptions

The following assumptions were used to determine the benefit obligation at year end and net periodic benefit cost during the year:


	December 31,
	2010			2009

Weighted-average assumptions used to determine benefit obligation at year end:
Discount rate		5.25-5.50	%		5.75-6.00	%
Rate of compensation increase		3.50	%		3.50	%


	Year Ended December 31,
	2010			2009			2008

Weighted-average assumptions used to determine net periodic benefit cost:
Discount rate		5.75-6.00	%		6.25	%		6.25	%
Expected long term rate of return on plan assets		5.00-7.00	%		8.00	%		8.00	%
Rate of compensation increase		3.50	%		3.50	%		3.50	%

Mafco Worldwide bases the discount rate assumption on current investment yields of high quality fixed income investments during the retirement benefits maturity period. The rate of increase in future compensation assumptions reflects the Company’s long-term actual experience and future and near-term outlook.

Mafco Worldwide considers a number of factors to determine its expected rates of return on the assets in its plans, including, without limitation, historical performance of the plan assets, investment style, asset allocations and other third-party studies and surveys. Mafco Worldwide considered the plan portfolios’ asset allocation over a variety of time periods and compared them with third-party studies and reviewed performance of the capital markets in recent years and other factors and advice from various third parties, such as the pension plans’ advisors, investment managers and actuaries. While Mafco Worldwide considered recent performance and the historical performance of its plan assets, Mafco Worldwide’s assumptions are based primarily on its estimates of long-term, prospective rates of return. Differences between actual and expected asset returns are recognized in the net periodic benefit cost over the remaining service period of the active participating employees.

Investment Policies

The investment committee for the Mafco Worldwide’s plans has adopted (and revises from time to time) investment policies with the objective of meeting and exceeding over time, the expected long-term rate of return of plan assets assumptions, weighted against a reasonable risk level and considering the appropriate liquidity levels. In connection with this objective, the investment committee retains a professional investment consultant as an advisor. Based upon the investment consultant advice, in 2009 and 2010 the plans’ assets were mainly invested in mutual funds, common and collective funds, as well as corporate and government bonds to achieve Mafco Worldwide’s goals to enhance the expected returns of its investments together with their liquidity and protect the plans’ funded status.

The plans currently have the following target ranges for these asset classes as shown below. The target ranges may be different for each plan depending on the investment strategy being utilized for the respective plan. The ranges are intended to allow flexibility for allocating assets and rebalancing as needed depending on changes in market values and the investment environment. The strategy utilized for each plan is regularly

F-29

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

reviewed by the plans’ investment committee, which may decide to make adjustments to the allocations when allocations fall outside the asset class range.


	Target Ranges
	Replacement Plan	Union Plans

Asset classes:
Cash equivalents and other	0% - 15%	0% - 15%
Fixed income securities	65% - 100%	45% - 75%
Equity securities	0% - 15%	25% - 55%

Within the fixed income securities asset class, the investment policies provide for investments in a broad range of publicly traded debt securities, domestic and international Treasury issues, corporate debt securities, government agencies debt securities, mortgage-backed and asset-backed issues. Within the equity securities asset class, the investment policies provide for investments in a broad range of publicly traded securities ranging from small- to large-capitalization stocks and domestic and international stocks. Within the cash equivalents and other asset class, the investment policies provide for investments in cash and cash equivalents as well as private equity, hedge fund, real estate and other investments as approved by the plans’ investment committee.

Fair Value Measurement of Pension Plan Assets

As of December 31, 2010, the fair values of Mafco Worldwide’s pension plan investments for all plans using the three-tier fair value hierarchy described in Note 2 are as follows:


	Total		Level 1		Level 2		Level 3

Cash and cash equivalents	$	0.3	$	0.3	$	—	$	—
Mutual funds		1.9		1.9		—		—
Common and collective funds		5.7		—		5.7		—
Corporate bonds		5.5		—		5.5		—
Government bonds		8.3		8.0		0.3		—
Exchange traded funds		0.2		0.2		—		—

	$	21.9	$	10.4	$	11.5	$	—

As of December 31, 2009, the fair values of Mafco Worldwide’s pension plan investments for all plans using the three-tier fair value hierarchy described in Note 2 are as follows:


	Total			Level 1			Level 2		Level 3

Cash and cash equivalents⁽¹⁾	$	(0.6	)	$	(0.6	)	$	—	$	—
Mutual funds		1.7			1.7			—		—
Common and collective funds		5.0			—			5.0		—
Corporate bonds		5.1			—			5.1		—
Government bonds		9.2			9.2			—		—
Exchange traded funds		0.2			0.2			—		—

	$	20.6		$	10.5		$	10.1	$	—


⁽¹⁾		The negative amount for cash reflects securities trades where settlement was pending as of December 31, 2009.

F-30

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

Cash and cash equivalents are stated at cost, which approximates fair market value. Mutual funds are valued at their net asset value quoted in active markets. Common and collective funds are valued at net asset value as reported by the fund administrator. Within mutual funds and common and collective funds, the assets are invested in a broad range of publicly traded equity securities and publicly traded debt securities ranging from domestic and international Treasury issues, corporate debt securities, government agencies debt securities and mortgage-backed and asset-backed issues, in accordance with the plans’ investment policies. Corporate and government bonds are generally valued on the basis of evaluated bids furnished by a pricing service, which determines valuations for normal, institutional size-trading units of such securities using market information, transactions for comparable securities and various relationships between securities. Exchange traded funds, which are investment portfolios that hold a collection of marketable securities designed to track the performance of a specific index (like the S&P 500), are valued at the market price quoted on the particular stock exchange where they are traded.

Harland Clarke Holdings

Harland Clarke Holdings has deferred compensation agreements with certain former officers. The present value of the cash benefits payable under these agreements was $6.6 and $6.5 at December 31, 2010 and 2009, respectively. Accretion expense recognized for these agreements was not significant.

Harland Clarke Holdings also sponsors two unfunded postretirement defined benefit plans that cover certain former salaried and non-salaried employees. One plan provides healthcare benefits and the other provides life insurance benefits. The medical plan is contributory and contributions are adjusted annually based on actual claims experience. For retirees who retired prior to December 31, 2002 with twenty or more years of service at December 31, 2000, Harland Clarke Holdings contributes a portion of the cost of the medical plan. For all other retirees, Harland Clarke Holdings’ intent is that the retirees provide the majority of the actual cost of the medical plan. The life insurance plan is noncontributory for those employees that retired by December 31, 2002.

During 2010, Harland Clarke Holdings amended the medical plan for benefits to be provided after December 31, 2010 for retirees who retired prior to December 31, 2002 with twenty or more years of service at December 31, 2000. As a result of these amendments, Harland Clarke Holdings remeasured its accumulated postretirement benefit obligation (“APBO”) as of September 30, 2010. The remeasurement reflected a new discount rate of 5.00% and resulted in a $7.0 decrease in the APBO and the offsetting amount was recorded in other comprehensive income.

As of December 31, 2010 and 2009, the APBO was $10.1 and $18.9, respectively. For the years ended December 31, 2010, 2009 and 2008, the Company contributed $0.5, $1.2 and $1.5, respectively, to these plans. Harland Clarke Holdings expects to contribute $0.6 to these plans in 2011.

F-31

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

The following table presents the beginning and ending balances of the APBO, the changes in the APBO, and reconciles the plans’ status to the accrued postretirement healthcare and life insurance liability reflected on the accompanying consolidated balance sheets as of December 31, 2010 and 2009:


	2010			2009

APBO at beginning of year	$	18.9		$	17.5
Changes in APBO:
Interest cost		0.9			1.0
Benefits paid		(1.5	)		(2.4	)
Retiree contributions		0.9			1.1
Health benefits subsidy		0.1			0.1
Actuarial (gain) loss		(0.6	)		1.6
Plan amendment		(8.6	)		—

APBO at end of year	$	10.1		$	18.9

Included in accrued salaries, wages and employee benefits	$	0.6		$	1.2
Included in other liabilities		9.5			17.7

APBO at end of year	$	10.1		$	18.9

The following table presents the changes in the fair value of plan assets and the funded status for the periods presented:


	2010			2009

Fair value of plan assets at beginning of year	$	—		$	—
Employer contributions		0.5			1.2
Retiree contributions		0.9			1.1
Health benefits subsidy		0.1			0.1
Benefits paid		(1.5	)		(2.4	)

Fair value of plan assets at end of year	$	—		$	—

Funded status	$	(10.1	)	$	(18.9	)

As of December 31, 2010 and 2009, amounts recognized in accumulated other comprehensive (loss) income which have not yet been recognized as a component of net postretirement benefit cost consist of:


	2010			2009

Unrecognized prior service credits	$	(8.5	)	$	—
Unrecognized actuarial net loss		1.9			2.6

	$	(6.6	)	$	2.6

F-32

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

Net periodic postretirement benefit costs for the Harland Clarke Holdings postretirement benefit plans were as follows:


	Year Ended December 31,
	2010			2009		2008

Interest on accumulated postretirement benefit obligation	$	0.9		$	1.0	$	0.9
Amortization of prior service credits		(0.1	)		—		—
Amortization of net actuarial loss		0.1			—		—

Net postretirement benefit cost		0.9			1.0		0.9
Other changes in benefit obligations recognized in other comprehensive income:
Unrecognized actuarial net (gain) loss		(0.6	)		1.6		2.5
Amortization of net actuarial loss		(0.1	)		—		—
Prior service credits		(8.6	)		—		—
Amortization of prior service credits		0.1			—		—

Total recognized in net periodic benefit cost and other comprehensive income	$	(8.3	)	$	2.6	$	3.4

The weighted average discount rates used to determine benefit obligations as of December 31, 2010 and 2009 were 5.25% and 5.75%, respectively. The weighted average discount rates used to determine the net periodic postretirement benefit cost for 2010 and 2009 were 5.75% and 6.0%, respectively. The annual healthcare cost trend rates used for 2011 to determine benefit obligations at December 31, 2010 were assumed to be 9.0%. The estimated annual healthcare cost trend rates grade down gradually to 4.75% at 2018. Participant contributions are assumed to increase with healthcare cost trend rates.

The healthcare cost trend rate assumptions, which are net of participant contributions, could have a significant effect on amounts reported. A change in the assumed trend rate of 1 percentage point would have the following effects:


	1 Percentage		1 Percentage
	Point Increase		Point Decrease

Effect on total interest cost for 2010	$	—	$	—
Effect on postretirement benefit obligation at December 31, 2010		0.2		(0.2	)

The following reflects the estimated future benefit payments, net of estimated participant contributions:


2011	$	0.6
2012		0.6
2013		0.6
2014		0.6
2015		0.6
2016-2020		3.2

During 2009 and 2008, there were no reclassification adjustments or amortization of the actuarial (loss) gain. In 2011, amortization of accumulated actuarial net loss and prior service credits will result in a $0.4 reduction in net periodic postretirement benefit cost.

F-33

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)


12.	Defined Contribution Pension Plans

Mafco Worldwide has a defined contribution 401(k) plan covering its domestic salaried employees. Mafco Worldwide contributes 2% of an employee’s salary to this plan, which reduces the benefit received from the defined benefit plan. Harland Clarke Holdings, through its subsidiaries, sponsors certain defined contribution benefit plans whereby it generally matches employee contributions up to 4% of base wages. Contributions to these plans were $13.3, $14.6 and $16.0 in 2010, 2009 and 2008, respectively.


13.	Short-Term Borrowings

On June 13, 2008, M & F Worldwide entered into a Secured Loan Agreement with a financial institution, which provided for a loan in the amount of $27.2. The loan was secured by M & F Worldwide’s investments in auction-rate securities. The Secured Loan Agreement was amended in June 2010 to extend the maturity date from June 11, 2010 to June 10, 2011. The interest rate continued to be the federal funds rate plus 2.25%. M & F Worldwide was required to make mandatory prepayments in amounts equal to 70% of all proceeds received from the early termination, redemption, or prepayment of any pledged securities. During 2010, M & F Worldwide paid $22.2 of the principal in connection with the sale and redemption of such securities with a face value of $31.7 thereby fully repaying the loan. During 2009, M & F Worldwide also paid $4.1 of the principal in connection with the sale of such securities with a face value of $6.0.


14.	Long-Term Debt


	December 31,
	2010			2009

Harland Clarke Holdings $1,900.0 Senior Secured Credit Facilities	$	1,737.0		$	1,755.0
Harland Clarke Holdings Senior Floating Rate Notes due 2015		206.8			206.8
Harland Clarke Holdings 9.50% Senior Fixed Rate Notes due 2015		271.3			271.3
Mafco Worldwide $125.0 Senior Secured Credit Facilities		—			55.2
Mafco Worldwide $45.0 Senior Secured Credit Facility		31.0			—
Capital lease obligations and other indebtedness		4.6			5.7

		2,250.7			2,294.0
Less: current maturities		(19.4	)		(24.5	)

Long-term debt, net of current maturities	$	2,231.3		$	2,269.5

Harland Clarke Holdings $1,900.0 Senior Secured Credit Facilities

On April 4, 2007, Harland Clarke Holdings and substantially all of its subsidiaries as co-borrowers entered into a credit agreement (the “Credit Agreement”). The Credit Agreement provides for a $1,800.0 senior secured term loan (the “Term Loan”), which was fully drawn at closing on May 1, 2007 and matures on June 30, 2014. Harland Clarke Holdings is required to repay the Term Loan in equal quarterly installments in aggregate annual amounts equal to 1% of the original principal amount. In addition, the Credit Agreement requires that a portion of Harland Clarke Holdings’ excess cash flow be applied to prepay amounts borrowed, as further described below. The Credit Agreement also provides for a $100.0 revolving credit facility (the “Revolver”) that matures on June 28, 2013. The Revolver includes an up to $60.0 subfacility in the form of letters of credit and an up to $30.0 subfacility in the form of short-term swing line loans. The weighted average interest rate on borrowings outstanding under the Term Loan was 2.8% at December 31, 2010. As of December 31, 2010, there were no outstanding borrowings under the Revolver and there was $91.8 available for borrowing (giving effect to the issuance of $8.2 of letters of credit).

F-34

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

Under certain circumstances, Harland Clarke Holdings is permitted to incur additional term loan and/or revolving credit facility indebtedness in an aggregate principal amount of up to $250.0. In addition, the terms of the Credit Agreement and the 2015 Senior Notes (as defined below) allow Harland Clarke Holdings to incur substantial additional debt.

Loans under the Credit Agreement bear, at Harland Clarke Holdings’ option, interest at:


	•	A rate per annum equal to the higher of (a) the prime rate of Credit Suisse and (b) the Federal Funds rate plus 0.50%, in each case plus an applicable margin of 1.50% per annum for revolving loans and for term loans; or

	•	A rate per annum equal to a reserve-adjusted LIBOR rate, plus an applicable margin of 2.50% per annum for revolving loans and for term loans.

The Credit Agreement has a commitment fee of 0.50% for the unused portion of the Revolver and a weighted average commitment fee of 2.52% for issued letters of credit. Interest rate margins and commitment fees under the Revolver are subject to reduction in increments based upon Harland Clarke Holdings achieving certain consolidated leverage ratios.

Harland Clarke Holdings and each of its existing and future domestic subsidiaries, other than unrestricted subsidiaries and certain immaterial subsidiaries, are guarantors and may also be co-borrowers under the Credit Agreement. In addition, Harland Clarke Holdings’ direct parent, CA Acquisition Holdings, Inc., is a guarantor under the Credit Agreement. The senior secured credit facilities are secured by a perfected first priority security interest in substantially all of Harland Clarke Holdings’, each of the co-borrowers’ and the guarantors’ tangible and intangible assets and equity interests (other than voting stock in excess of 65.0% of the outstanding voting stock of each direct foreign subsidiary and certain other excluded property).

The Credit Agreement contains customary affirmative and negative covenants including, among other things, restrictions on indebtedness, liens, mergers and consolidations, sales of assets, loans, acquisitions, restricted payments, transactions with affiliates, dividends and other payment restrictions affecting subsidiaries and sale-leaseback transactions. The Credit Agreement requires Harland Clarke Holdings to maintain a maximum consolidated leverage ratio for the benefit of lenders under the Revolver only. Harland Clarke Holdings has the right to prepay the Term Loan at any time without premium or penalty, subject to certain breakage costs, and Harland Clarke Holdings may also reduce any unutilized portion of the Revolver at any time, in minimum principal amounts set forth in the Credit Agreement. Harland Clarke Holdings is required to prepay the Term Loan with 50% of excess cash flow (as defined in the Credit Agreement, commencing in 2009 with respect to fiscal year 2008, with certain reductions set forth in the Credit Agreement, based on achievement and maintenance of leverage ratios) and 100% of the net proceeds of certain issuances, offerings or placements of debt obligations of Harland Clarke Holdings or any of its subsidiaries (other than permitted debt). An excess cash flow payment of approximately $3.5 will be paid in 2011 with respect to 2010 and will be applied against other mandatory payments due in 2011 under the terms of the Credit Agreement. No such excess cash flow payment was required to be paid in 2010 with respect to 2009 and no such excess cash flow payment was required to be paid in 2009 with respect to 2008. Each such prepayment will be applied first to the next eight unpaid quarterly amortization installments on the term loans and second to the remaining amortization installments on the term loans on a pro rata basis.

The Credit Agreement also contains certain customary affirmative covenants and events of default. Such events of default include, but are not limited to: non-payment of amounts when due; violation of covenants; material inaccuracy of representations and warranties; cross default and cross acceleration with respect to other material debt; bankruptcy and other insolvency events; certain ERISA events; invalidity of guarantees or security documents; and material judgments. Some of these events of default allow for grace periods.

F-35

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

If a change of control (as defined in the Credit Agreement) occurs, Harland Clarke Holdings will be required to make an offer to prepay all outstanding term loans under the Credit Agreement at 101% of the outstanding principal amount thereof plus accrued and unpaid interest, and lenders holding a majority of the revolving credit commitments may elect to terminate the revolving credit commitments in full. Harland Clarke Holdings is also required to offer to prepay outstanding term loans at 100% of the principal amount to be prepaid, plus accrued and unpaid interest, with the proceeds of certain asset sales under certain circumstances.

Under the terms of the Credit Agreement, Harland Clarke Holdings was required to ensure that, until no earlier than May 1, 2009, at least 40% of the aggregate principal amount of its long-term indebtedness bore interest at a fixed rate, either by its terms or through entering into hedging agreements within 180 days of the effectiveness of the Credit Agreement. In order to comply with this requirement, Harland Clarke Holdings entered into interest rate derivative arrangements described in Note 15.

Harland Clarke Holdings Senior Notes due 2015

On May 1, 2007, Harland Clarke Holdings issued $305.0 aggregate principal amount of Senior Floating Rate Notes due 2015 (the “Floating Rate Notes”) and $310.0 aggregate principal amount of 9.50% Senior Fixed Rate Notes due 2015 (the “Fixed Rate Notes” and, together with the Floating Rate Notes, the “2015 Senior Notes”). The 2015 Senior Notes mature on May 15, 2015. The Fixed Rate Notes bear interest at a rate per annum of 9.50%, payable on May 15 and November 15 of each year. The Floating Rate Notes bear interest at a rate per annum equal to the Applicable LIBOR Rate (as defined in the indenture governing the 2015 Senior Notes (the “Indenture”)), subject to a floor of 1.25%, plus 4.75%, payable on February 15, May 15, August 15 and November 15 of each year. The interest rate on the Floating Rate Notes was 6.0% at December 31, 2010. The Senior Notes are unsecured and are therefore effectively subordinated to all of Harland Clarke Holdings’ senior secured indebtedness, including outstanding borrowings under the Credit Agreement. Harland Clarke Holdings and each of its existing subsidiaries, other than unrestricted subsidiaries and certain immaterial subsidiaries, are guarantors and may also be co-issuers under the 2015 Senior Notes.

The Indenture contains customary restrictive covenants, including, among other things, restrictions on Harland Clarke Holdings’ ability to incur additional debt, pay dividends and make distributions, make certain investments, repurchase stock, incur liens, enter into transactions with affiliates, enter into sale and lease back transactions, merge or consolidate and transfer or sell assets. Harland Clarke Holdings must offer to repurchase all of the 2015 Senior Notes upon the occurrence of a “change of control,” as defined in the Indenture, at a purchase price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest. Harland Clarke Holdings must also offer to repurchase the 2015 Senior Notes with the proceeds from certain sales of assets, if it does not apply those proceeds within a specified time period after the sale, at a purchase price equal to 100% of their aggregate principal amount, plus accrued and unpaid interest.

Gain on Early Extinguishment of Debt

During 2009, the Company extinguished debt with a total principal amount of $136.9 by purchasing Harland Clarke Holdings 2015 Senior Notes in individually negotiated transactions for an aggregate purchase price of $67.6, resulting in a gain of $65.0 after the write-off of $4.3 of unamortized deferred financing fees related to the extinguished debt. The Company did not purchase any Harland Clarke Holdings 2015 Senior Notes during 2010.

Mafco Worldwide $45.0 Senior Secured Credit Facility

On December 15, 2010, Mafco Worldwide entered into a credit agreement governing a $45.0, five-year revolving credit facility (the “Mafco Revolving Credit Agreement”). Approximately $30.0 was drawn on December 15, 2010 to prepay term borrowings under Mafco Worldwide’s former credit agreement and to pay

F-36

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

fees and expenses in connection with the refinancing. The indebtedness under the Mafco Revolving Credit Agreement is guaranteed by Mafco Worldwide’s domestic subsidiaries and its parent corporation, Flavors Holdings Inc. (collectively, the “Mafco Worldwide Guarantors”). Mafco Worldwide’s obligations under the Mafco Revolving Credit Agreement and the guarantees of the Mafco Worldwide Guarantors are secured by a first-priority security interest in substantially all of Mafco Worldwide’s and Mafco Worldwide Guarantors’ assets. Borrowings under the Mafco Revolving Credit Agreement bear interest, at Mafco Worldwide’s option, at either an adjusted Eurodollar rate plus an applicable margin ranging from 1.5% to 2.0% or an alternative base rate plus an applicable margin ranging from 0.5% to 1.0% depending on Mafco Worldwide’s consolidated leverage ratio at the end of each fiscal quarter. The weighted average interest rate on borrowings outstanding under the Mafco Worldwide credit facilities was 1.8% at December 31, 2010.

The Mafco Revolving Credit Agreement contains affirmative and negative covenants customary for such financing. The Mafco Revolving Credit Agreement also requires Mafco Worldwide to maintain a maximum total debt ratio and a minimum consolidated interest expense ratio as of the last day of each fiscal quarter. The Mafco Revolving Credit Agreement contains events of default customary for such financing, including but not limited to nonpayment of principal, interest, fees or other amounts when due; violation of covenants; failure of any representation or warranty to be true in all material respects when made or deemed made; cross default and cross acceleration to certain indebtedness; certain ERISA events; change of control; dissolution, insolvency and bankruptcy events; material judgments; actual or asserted invalidity of the guarantees or security documents; and violation of limitations on the activities of Flavors Holdings Inc. and of EVD Holding Inc. and Mafco Shanghai Corporation, subsidiaries of Mafco Worldwide. Some of these events of default allow for grace periods and materiality concepts.

The borrowings under the Mafco Revolving Credit Agreement are repayable in full on December 15, 2015. At December 31, 2010, there was $31.0 principal amount of borrowings outstanding under the Mafco Revolving Credit Agreement and there was $14.0 available for borrowing. There were no letters of credit issued by Mafco Worldwide as of December 31, 2010.

Mafco Worldwide Prior $125.0 Senior Secured Credit Facilities

On December 8, 2005, Mafco Worldwide entered into a credit agreement governing its $125.0 senior secured credit facilities which consisted of a $110.0 term loan drawn on December 8, 2005 and originally maturing on December 8, 2011 and a $15.0 revolving credit facility that matured in December 2010. The balance of the term loan of $30.0 was prepaid in connection with entering into the Mafco Revolving Credit Agreement on December 15, 2010 and unamortized deferred financing fees of $0.2 were expensed.

During 2010 and 2009, Mafco Worldwide made scheduled term loan payments and other prepayments totaling $25.2 and $10.5, respectively.

Capital Lease Obligations and Other Indebtedness

Subsidiaries of Harland Clarke Holdings have outstanding capital lease obligations and other indebtedness with principal balances totaling $4.6 and $5.7 at December 31, 2010 and 2009, respectively. These obligations have imputed interest rates ranging from 5.6% to 9.6% and have required payments, including interest, of $1.7 in 2011, $1.3 in 2012, $1.2 in 2013, $0.9 in 2014 and $0.1 in 2015. During 2010 and 2009, a subsidiary of Harland Clarke Holdings entered into capital leases and other indebtedness totaling $0.4 and $5.1, respectively, and, accordingly, such non-cash transaction amounts have been excluded from the consolidated statements of cash flows.

Mafco Worldwide’s French subsidiary has lines of credit renewable annually with two banks whereby it may borrow up to 1.5 million Euros (approximately $2.0 and $2.2, respectively) at December 31, 2010 and

F-37

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

2009, respectively for working capital purposes. The subsidiary had no borrowings at December 31, 2010 and 2009.

Annual Maturities

Annual maturities of long-term debt during the next five years are as follows:


2011	$	19.7
2012		19.3
2013		19.2
2014		1,683.9
2015		509.2


15.	Derivative Financial Instruments

Interest Rate Hedges

The Company uses hedge transactions, which are accounted for as cash flow hedges, to limit the Company’s risk on a portion of its variable-rate debt.

During February 2006, Harland Clarke Holdings entered into interest rate hedge transactions in the form of three-year interest rate swaps with a total notional amount of $150.0, which became effective on July 1, 2006. The hedges expired on June 30, 2009. The hedges swapped the underlying variable rate for a fixed rate of 4.992%.

During June 2007, Harland Clarke Holdings entered into additional interest rate derivative transactions in the form of a two-year interest rate swap with a notional amount of $255.0 and a three-year interest rate swap with a notional amount of $255.0, both of which became effective on June 29, 2007. The two-year hedge, which expired on June 30, 2009, swapped the underlying variable rate for a fixed rate of 5.323% and the three-year hedge, which expired on June 30, 2010, swapped the underlying variable rate for a fixed rate of 5.362%. During August 2007, Harland Clarke Holdings entered into an additional interest rate derivative transaction in the form of a two-year interest rate swap with a notional amount of $250.0, which became effective on September 28, 2007. The hedge, which expired on September 28, 2009, swapped the underlying variable rate for a fixed rate of 4.977%.

During June 2009, Harland Clarke Holdings entered into an interest rate derivative transaction in the form of a three-year interest rate swap with a notional amount of $350.0, which became effective on June 30, 2009. This hedge swaps the underlying variable rate for a fixed rate of 2.353%. During September 2009, Harland Clarke Holdings entered into an additional interest rate derivative transaction in the form of a three-year interest rate swap with a notional amount of $250.0, which became effective on September 30, 2009. This hedge swaps the underlying variable rate for a fixed rate of 2.140%.

During June 2010, Harland Clarke Holdings entered into an interest rate derivative transaction in the form of a three-year interest rate swap with a notional amount of $255.0, which became effective on June 30, 2010. This hedge swaps the underlying variable rate for a fixed rate of 1.264%.

The following table presents the fair values of these derivative instruments and the classification in the consolidated balance sheets:


Derivatives Designated
as Cash Flow		December 31,
Hedging Instruments:	Balance Sheet Classification	2010		2009

Interest rate swaps	Other current liabilities	$	—	$	6.3
	Other liabilities		17.8		7.9

F-38

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

Fair value of interest rate swaps is based on forward-looking interest rate curves as provided by the counterparty, adjusted for the Company’s credit risk.

These derivative instruments had no ineffective portions during 2010 and 2009. Accordingly, no amounts were required to be reclassified from accumulated other comprehensive loss to the consolidated statements of income due to ineffectiveness. The following presents the effect of these derivative instruments (effective portion) on other comprehensive income and amounts reclassified from accumulated other comprehensive loss into interest expense.

Year Ended December 31,

2010

2009

2010

2009

Loss Reclassified from

Accumulated Other

Derivatives Designated

Loss Recognized in

Comprehensive Loss

as Cash Flow

Other Comprehensive

into Interest

Hedging Instruments:

Income

Expense

Interest rate swaps

23.3

18.3

19.7

31.6

The Company expects to reclassify approximately $14.7 into net income as additional interest expense during the twelve months ending December 31, 2011.

The following table presents the balances and net changes in accumulated other comprehensive loss related to these derivative instruments, net of income taxes:


Balances and Net Changes:	2010			2009

Balance at the beginning of the period	$	8.6		$	16.6
Loss reclassified from accumulated other comprehensive loss into interest expense, net of taxes of $7.7 and $12.2		(12.0	)		(19.4	)
Net change in fair value of interest rate swaps, net of taxes of $9.0 and $6.9		14.3			11.4

Balance at end of period	$	10.9		$	8.6


16.	Fair Value Measurements

Nonrecurring Fair Value Measurements

The following table presents the Company’s nonfinancial assets that were measured at fair value on a nonrecurring basis during 2009:


	Fair Value at
	November 1,								Impairment
	2009		(Level 1)		(Level 2)		(Level 3)		Charges

Indefinite-lived trademarks and tradenames	$	156.8	$	—	$	—	$	156.8	$	44.2

Indefinite-lived trademarks and tradenames were measured for impairment during the fourth quarter of 2009 as part of the Company’s annual measurements for impairment testing and resulted in non-cash impairment charges totaling $44.2. The charges consisted of $33.4 related to the Harland Clarke segment, $10.6 related to the Harland Financial Solutions segment and $0.2 related to the Scantron segment. The impairments were primarily due to declines in revenues from check unit volumes that are projected to decline at rates that are higher than recent years and also due to the continuing economic downturn. See Note 2 for more information on the fair value measurement process for indefinite-lived trademarks and tradenames.

F-39

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

Recurring Fair Value Measurements

Fair values of financial instruments subject to recurring fair value measurements as of December 31, 2010 and 2009 are as follows:


	Balance at
	December 31,
	2010		(Level 1)		(Level 2)		(Level 3)

Corporate equity securities	$	13.1	$	13.1	$	—	$	—
Liability for interest rate swaps		17.8		—		17.8		—
Liability for contingent consideration related to business combinations		8.2		—		—		8.2


	Balance at
	December 31,
	2009		(Level 1)		(Level 2)		(Level 3)

ARS	$	29.4	$	—	$	—	$	29.4
United States treasury securities		24.6		24.6		—		—
Corporate equity securities		1.9		1.9		—		—
Liability for interest rate swaps		14.2		—		14.2		—
Liability for contingent consideration related to business combinations combinations		1.8		—		—		1.8

Fair value of interest rate swaps is based on forward-looking interest rate curves as provided by the counterparty, adjusted for the Company’s credit risk. Fair value of corporate equity securities and United States treasury securities are based on quoted market prices. Fair value of the liability for contingent consideration related to business combinations is estimated utilizing a discounted cash flow analysis. The analysis considers, among other things, estimates of future revenues and the timing of expected future contingent consideration payments. The liability for contingent consideration that is considered to be incentive compensation is recorded as compensation expense as earned.

The following table presents the Company’s liability for contingent consideration related to business combinations measured at fair value on a recurring basis using significant unobservable inputs (Level 3):


	December 31,			December 31,
	2010			2009

Balance at beginning of period	$	1.8		$	—
Transfers to Level 3		—			—
Businesses acquired		6.8			1.8
Compensation expense recorded in selling, general and administrative expenses		0.5			—
Gain recorded in selling, general and administrative expenses		(0.2	)		—
Payment on contingent consideration arrangement		(0.7	)		—

Balance at end of period	$	8.2		$	1.8

The fair value of the ARS as of December 31, 2009 was estimated utilizing discounted cash flow analyses. The analyses consider, among other items, the collateral underlying the securities, the creditworthiness of the counterparty, the timing of expected future principal and interest payments as well as forecasted probabilities of default, auction failure and a successful auction at par or repurchase at par for each period. Since the fourth quarter of 2009, the Company recorded any fluctuations in fair value related to these securities in earnings.

F-40

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

The following table presents the Company’s marketable securities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):


	2010			2009

Balance at beginning of period	$	29.4		$	33.6
Transfers to Level 3		—			—
Realized (loss) gain recorded in other (expense) income, net		(1.0	)		1.1
Sale and redemption of securities		(28.4	)		(5.3	)

Balance at end of period	$	—		$	29.4

Fair Value of Financial Instruments

Most of the Company’s clients are in the financial services and educational industries. The Company performs ongoing credit evaluations of its clients and maintains allowances for potential credit losses. The Company does not generally require collateral. Actual losses and allowances have been within management’s expectations.

The carrying amounts for cash and cash equivalents, trade accounts receivable, accounts payable, short-term debt and accrued liabilities approximate fair value. The estimated fair value of long-term debt is determined by Level 2 inputs and is based primarily on quoted market prices for the same or similar issues as of the measurement date. The estimated fair value of long-term debt at December 31, 2010 and 2009 was approximately $2,040.2 and $1,966.1, respectively. The carrying value of long-term debt at December 31, 2010 and 2009 was $2,250.7 and $2,294.0, respectively.


17.	Marketable Securities

The Company’s marketable securities are classified as available-for-sale and are reported at their fair values, which are as follows:


			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value

Balance at December 31, 2010:
Corporate equity securities	$	0.3	$	12.9	$	(0.1	)	$	13.1
Balance at December 31, 2009:
ARS	$	29.4	$	—	$	—		$	29.4
United States treasury securities		24.6		—		—			24.6
Corporate equity securities		0.3		1.7		(0.1	)		1.9

Total marketable securities	$	54.3	$	1.7	$	(0.1	)	$	55.9

During 2010, the Company sold its investment in United States treasury securities, which were to mature in 2012, for $24.7 in cash and recognized a gain of $0.1. During 2010, the Company sold ARS with a face value of $29.0 for total proceeds of $25.7 and ARS issues were redeemed by the issuers at par value of $2.7 (see Note 16). During 2009, the Company sold ARS with a face value of $6.0 for total proceeds of $5.3.

F-41

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

The following presents the gross unrealized losses and fair values of the Company’s investments in individual securities that have been in a continuous unrealized loss position deemed to be temporary for less than 12 months and for more than 12 months, aggregated by category:


	Less Than 12 Months				More Than 12 Months
			Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses

At December 31, 2010:
Corporate equity securities	$	—	$	—	$	0.1	$	0.1
At December 31, 2009:
Corporate equity securities	$	—	$	—	$	0.1	$	0.1

The Company has determined that the gross unrealized losses on its corporate equity securities at December 31, 2010 are temporary in nature. Accordingly, the Company does not consider such investments to be other-than-temporarily impaired at December 31, 2010.


18.	Restructuring

Harland Clarke and Corporate

During 2007, as a result of the acquisition of John H. Harland Company, the Company adopted a plan to restructure its business. The plan focused on improving operating margin through consolidating facilities and reducing duplicative expenses, such as selling, general and administrative, executive and shared services expenses. The Company’s plan primarily included workforce rationalization, facility closures, consolidation of certain redundant outsourcing and the reduction of consulting and other professional services. The Company also adopted plans during 2008, 2009 and 2010 to realize additional cost savings in the Harland Clarke segment by further consolidating printing plants, contact centers and selling, general and administrative functions. Due to these actions, the Company recorded impairment charges of $1.0 to adjust the carrying value of an owned facility to its estimated fair value in 2008 and $0.6 to adjust the carrying value of other property, plant and equipment in 2010. These impairment charges are included in asset impairment charges in the accompanying consolidated statements of income for 2008 and 2010, respectively. The Company also recorded restructuring liabilities in connection with the Transaction Holdings Acquisition of $1.5 in 2008. The liabilities were reduced by $1.1 and $0.2 in 2009 and 2010, respectively, of which, $0.6 is reflected as 2009 non-cash utilization in the table below.

F-42

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

The following table details the components of the Company’s restructuring accruals under its plans related to the Harland Clarke segment and Corporate for 2010, 2009 and 2008:


			Established in
			Acquisition
	Beginning		Purchase							Non-cash			Ending
	Balance		Accounting		Expensed		Paid in Cash			Utilization			Balance

Year Ended December 31, 2010:
Severance and severance-related	$	2.5	$	—	$	5.1	$	(6.1	)	$	—		$	1.5
Facilities closures and other costs		2.5		—		7.2		(2.5	)		(2.7	)		4.5

Total	$	5.0	$	—	$	12.3	$	(8.6	)	$	(2.7	)	$	6.0

Year Ended December 31, 2009:
Severance and severance-related	$	7.4	$	—	$	18.1	$	(23.0	)	$	—		$	2.5
Facilities closures and other costs		2.3		—		7.6		(2.8	)		(4.6	)		2.5

Total	$	9.7	$	—	$	25.7	$	(25.8	)	$	(4.6	)	$	5.0

Year Ended December 31, 2008:
Severance and severance-related	$	8.5	$	1.8	$	7.0	$	(9.9	)	$	—		$	7.4
Facilities closures and other costs		2.9		0.8		1.3		(1.7	)		(1.0	)		2.3

Total	$	11.4	$	2.6	$	8.3	$	(11.6	)	$	(1.0	)	$	9.7

The non-cash utilization of $1.0, $4.6 and $2.7 in 2008, 2009 and 2010, respectively, in the table above includes adjustments to the carrying value of other property, plant and equipment. The Company expects to incur in future periods an additional $2.0 for costs related to these plans. Ongoing lease commitments related to these plans continue through 2017.

Harland Financial Solutions

During 2007, as a result of the acquisition of John H. Harland Company, the Company adopted a plan to restructure the Harland Financial Solutions segment, focused on improving operating margins primarily through consolidating facilities and rationalizing the workforce.

During the second quarter of 2008, the Company implemented and completed a plan to restructure certain selling, general and administrative functions within the Harland Financial Solutions segment. The plan focused on improving operating margins through reducing selling, general and administrative expenses by leveraging the Company’s shared services capabilities. During the first quarter of 2009, the Company initiated a multi-year plan to reorganize certain operations and sales and support functions within the Harland Financial Solutions segment. The plan, which is expected to be completed by the end of 2011, focuses on moving from a product-centric organization to a functional organization in order to enhance customer support.

F-43

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

The following table details the Company’s restructuring accruals related to the Harland Financial Solutions segment for 2010, 2009 and 2008:


			Established in
			Acquisition
	Beginning		Purchase					Paid in			Non-cash		Ending
	Balance		Accounting			Expensed		Cash			Utilization		Balance

Year Ended December 31, 2010:
Severance and severance-related	$	1.0	$	—		$	0.7	$	(1.6	)	$	—	$	0.1
Facilities and other costs		0.1		—			2.1		(0.1	)		0.1		2.2

Total	$	1.1	$	—		$	2.8	$	(1.7	)	$	0.1	$	2.3

Year Ended December 31, 2009:
Severance and severance-related	$	1.4	$	—		$	3.3	$	(3.7	)	$	—	$	1.0
Facilities and other costs		0.7		—			0.5		(1.1	)		—		0.1

Total	$	2.1	$	—		$	3.8	$	(4.8	)	$	—	$	1.1

Year Ended December 31, 2008:
Severance and severance-related	$	0.7	$	(0.1	)	$	3.9	$	(3.1	)	$	—	$	1.4
Facilities and other costs		1.7		(0.4	)		—		(0.6	)		—		0.7

Total	$	2.4	$	(0.5	)	$	3.9	$	(3.7	)	$	—	$	2.1

The Company currently does not expect to incur significant additional costs related to these plans, which is subject to refinement as the reorganization progresses.

Scantron

As a result of the Data Management Acquisition, the Company adopted plans to restructure the Scantron segment in 2008. These plans focused on improving operating margins through consolidating manufacturing and printing operations and reducing duplicative selling, general and administrative expenses through workforce rationalization, consolidation of certain redundant outsourcing and the reduction of consulting and other professional services. The Company completed substantially all of the planned employee terminations and consolidation of printing and manufacturing operations related to the acquisition as of March 31, 2009.

The Company also adopted plans during 2009 and 2010 to realize additional cost savings in the Scantron segment by further consolidation of operations and elimination of certain selling, general and administrative expenses.

F-44

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

The following table details the components of the Company’s restructuring accruals related to the Scantron segment for 2010, 2009 and 2008:


			Established in
			Acquisition
	Beginning		Purchase				Paid in			Non-cash			Ending
	Balance		Accounting		Expensed		Cash			Utilization			Balance

Year Ended December 31, 2010:
Severance and severance-related	$	0.5	$	—	$	2.5	$	(2.9	)	$	—		$	0.1
Facilities and other costs		—		—		4.7		(1.2	)		0.2			3.7

Total	$	0.5	$	—	$	7.2	$	(4.1	)	$	0.2		$	3.8

Year Ended December 31, 2009:
Severance and severance-related	$	1.0	$	—	$	2.7	$	(3.0	)	$	(0.2	)	$	0.5
Facilities and other costs		—		—		0.3		—			(0.3	)		—

Total	$	1.0	$	—	$	3.0	$	(3.0	)	$	(0.5	)	$	0.5

Year Ended December 31, 2008:
Severance and severance-related	$	—	$	2.5	$	2.3	$	(3.8	)	$	—		$	1.0
Facilities and other costs		—		—		0.1		(0.1	)		—			—

Total	$	—	$	2.5	$	2.4	$	(3.9	)	$	—		$	1.0

Restructuring accruals for all of the segments’ plans are reflected in other current liabilities and other liabilities in the accompanying consolidated balance sheets. The Company expects to pay the remaining severance, facilities and other costs related to the segments’ restructuring plans through 2017.


19.	Commitments and Contingencies

Lease and Purchase Commitments

The Company leases property, equipment and vehicles under operating leases that expire at various dates through 2020. Certain leases contain renewal options for one- to five-year periods. Rental payments are typically fixed over the initial term of the lease and usually contain escalation factors for the renewal term. At December 31, 2010, future minimum lease payments under non-cancelable operating leases with terms of one year or more are as follows:


2011	$	27.4
2012		23.9
2013		18.6
2014		15.2
2015		8.6
Thereafter		19.6

Minimum annual rental payments in the above table have not been reduced by minimum sublease rentals of $0.2.

Total operating lease expense, excluding operating lease expense included in restructuring costs, was $23.2, $24.2 and $24.8 for the years ended December 31, 2010, 2009 and 2008, respectively.

At December 31, 2010, the Company had obligations to purchase approximately $22.3 of raw materials, net of funds advanced against certain of these purchase commitments.

F-45

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

Non-Operating Contingent Claims, Indemnification and Insurance Matters

F-46

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

number of future asbestos-related claimants or the amount of future defense and settlement costs associated with present or future asbestos-related claims.

See Note 25 regarding recent developments with regard to the Transfer Agreement and Transfer Lawsuit.

F-47

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

Aerospace sale certain claims for allegedly defective pricing that the Government made with respect to certain of these products. In the first quarter of 2009, Pneumo Abex resolved the final remaining pricing matter that it managed for a payment of $0.1, resulting in a gain of $0.9 due to the release of a reserve previously accrued for this claim.

Honeywell Indemnification

Certain of the intermediate holding companies of the predecessor of Harland Clarke Holdings had issued guarantees on behalf of operating companies formerly owned by these intermediate holding companies, which operating companies are not part of Harland Clarke Holdings’ businesses. In the stock purchase agreement executed in connection with the 2005 acquisition of Clarke American Corp. by the Company, Honeywell agreed to use its commercially reasonable efforts to assume, replace or terminate such guarantees and indemnify M & F Worldwide and its affiliates, including Harland Clarke Holdings and its subsidiaries, with respect to all liabilities arising under such guarantees. See Note 8 for certain tax matters indemnified by Honeywell.

Other


20.	Transactions with Related Parties

Management Services Agreement

MacAndrews & Forbes LLC (formerly MacAndrews & Forbes Inc.), a wholly owned subsidiary of Holdings, provides the services of the Company’s Chief Executive Officer and Chief Financial Officer, as well as other management, advisory, transactional, corporate finance, legal, risk management, tax and accounting services pursuant to the terms of a management services agreement (the “Management Services Agreement”). Under the terms of the Management Services Agreement, the Company pays MacAndrews & Forbes LLC an annual fee of $10.0 for these services. The Management Services Agreement also contains customary indemnities covering MacAndrews & Forbes LLC and its affiliates and personnel.

F-48

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

Agreement will also terminate in the event that MacAndrews & Forbes LLC or its affiliates no longer in the aggregate retain beneficial ownership of 10% or more of the outstanding common stock of the Company. Neither party provided notice in 2010, therefore MacAndrews & Forbes LLC will continue to provide these services in 2011 under the terms of the existing agreement.

Restricted Stock

See Note 10 regarding the issuance of restricted stock to a director in May 2007.

Notes Receivable

In 2008, Harland Clarke Holdings acquired the senior secured credit facility and outstanding note of Delphax Technologies, Inc. (“Delphax”), the supplier of Imaggia printing machines and related supplies and service for the Harland Clarke segment. The senior secured credit facility is comprised of a revolving credit facility of up to $14.0, subject to borrowing limitations set forth therein, that matures in September 2011. The senior secured credit facility is collateralized by a perfected security interest in substantially all of Delphax’s assets. The revolving facility has a borrowing base calculated based on Delphax’s eligible accounts receivable and inventory. The senior secured credit facility has an interest rate equal to the sum of Wells Fargo N.A. prime rate plus 2.5%, with accrued interest payable quarterly. The note had an original principal amount of $7.0, matures in September 2012 and originally bore interest at an annual rate of 12%, payable quarterly either in cash or in a combination of cash and up to 25% Delphax stock. Contemporaneous with its acquisition of the senior secured credit facility and note, Harland Clarke Holdings also acquired 250,000 shares of Delphax common stock from the previous holder of the Delphax note. In January 2010, the note was restated to reduce the interest rate to 9%, payable solely in cash, effective October 1, 2009, and to require the repayment of $3.0 of principal in 2010.

During 2010, Harland Clarke Holdings received $3.0 in payments on the note, bringing the principal balance of the note and the senior secured credit facility to $4.0 and $0.0, respectively, at December 31, 2010. During 2009, Harland Clarke Holdings received $15.0 in payments and released $9.8 in draws on the revolver, bringing the principal balance of the note and the senior secured credit facility to $7.0 and $0.0, respectively, at December 31, 2009. The outstanding balance on the note is included in other assets in the accompanying consolidated balance sheets. Interest income of $0.4, $0.8 and $0.4 was recorded in 2010, 2009 and 2008, respectively.

Other

As discussed in Note 3, the Company paid $2.0 to Holdings in February 2008 for services related to sourcing, analyzing, negotiating and executing the Data Management Acquisition.

The Company participates in Holdings’ directors and officers insurance program, which covers the Company as well as Holdings and Holdings’ other affiliates. The limits of coverage are available on aggregate losses to any or all of the participating companies and their respective directors and officers. The Company reimburses Holdings for its allocable portion of the premiums for such coverage, which the Company believes is more favorable than premiums the Company could secure were it to secure its own coverage. In December 2008, the Company elected to participate in third party financing arrangements, together with Holdings and certain of Holdings affiliates, to finance a portion of premium payments. The financing arrangements require the Company to make future fixed payments totaling $0.2 through June 2011 at an interest rate of 7.5%.

At December 31, 2010, the Company recorded prepaid expenses of $1.1 and other current liabilities of $0.2 relating to the directors and officers insurance programs and financing arrangements. At December 31, 2009, the Company recorded prepaid expenses and other assets of $1.2 and $0.8 and other current liabilities

F-49

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

and other liabilities of $0.7 and $0.2, respectively, relating to the directors and officers insurance programs and financing arrangements. The Company paid $1.1, $0.8 and $0.6 to Holdings in 2010, 2009 and 2008, respectively, under the insurance programs, including amounts due under the financing arrangements.


21.	Significant Customers

Harland Clarke Holdings’ top 20 clients accounted for approximately 30%, 29% and 30% of the Company’s consolidated net revenues in 2010, 2009 and 2008, respectively, with sales to Bank of America and Wells Fargo representing a significant portion of such revenues in the Harland Clarke segment.


22.	Business Segment Information


	•	Harland Clarke segment — Provides checks and related products, direct marketing services and customized business and home products to financial, retail and software providers as well as consumers and small businesses. This segment operates in the United States and Puerto Rico.

	•	Harland Financial Solutions segment — Provides technology products and services to financial services clients worldwide. This segment operates primarily in the United States, Israel, Ireland and India.

	•	Scantron segment — Provides data management solutions and related services to educational, commercial, healthcare and governmental entities worldwide. This segment operates in the United States and Canada.

	•	Licorice Products segment — Produces licorice products used primarily by the tobacco and food industries. This segment operates in the United States, France and the People’s Republic of China.

F-50

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

Selected summarized financial information for 2010, 2009 and 2008 is as follows:


			Harland
	Harland		Financial				Licorice		Corporate
	Clarke⁽¹⁾		Solutions⁽²⁾		Scantron⁽³⁾		Products		and Other⁽⁴⁾			Total

Product revenues, net:
2010	$	1,156.6	$	72.0	$	116.2	$	111.4	$	—		$	1,456.2
2009		1,216.8		73.0		123.2		101.8		—			1,514.8
2008		1,280.5		79.9		126.5		111.6		—			1,598.5
Service revenues, net:
2010	$	34.3	$	210.7	$	81.4	$	—	$	—		$	326.4
2009		9.2		205.9		84.2		—		—			299.3
2008		9.6		213.8		84.3		—		—			307.7
Intersegment revenues:
2010	$	0.3	$	—	$	6.1	$	—	$	(6.4	)	$	—
2009		—		—		0.6		—		(0.6	)		—
2008		0.3		—		0.5		—		(0.8	)		—
Operating income (loss):⁽⁵⁾
2010	$	238.0	$	48.6	$	25.3	$	28.4	$	(26.7	)	$	313.6
2009		195.8		32.8		34.5		32.1		(29.0	)		266.2
2008		217.1		34.1		28.4		39.4		(26.0	)		293.0
Depreciation and amortization (excluding amortization of deferred financing fees):
2010	$	103.2	$	28.5	$	26.2	$	1.7	$	—		$	159.6
2009		109.3		26.9		25.9		1.8		—			163.9
2008		112.5		28.7		23.3		2.0		—			166.5
Non-cash asset impairment charges:
2010	$	3.7	$	—	$	—	$	—	$	—		$	3.7
2009		33.6		10.6		0.2		—		—			44.4
2008		2.4		—		—		—		—			2.4
Capital expenditures (excluding capital leases):
2010	$	24.0	$	8.3	$	6.3	$	1.3	$	—		$	39.9
2009		28.3		6.5		7.4		1.6		—			43.8
2008		32.2		4.0		12.0		1.2		—			49.4
Total assets:
December 31, 2010	$	987.8	$	342.0	$	311.6	$	273.6	$	1,854.1		$	3,769.1
December 31, 2009		1,070.3		327.0		290.3		278.6		1,719.8			3,686.0


⁽¹⁾		Includes results of the acquired Transaction Holdings, Protocol IMS and SubscriberMail businesses from the date of acquisition.

⁽²⁾		Includes results of the acquired Parsam business from the date of acquisition.

⁽³⁾		Includes results of the acquired Data Management and Spectrum K12 businesses from the date of acquisition.

⁽⁴⁾		Total assets include goodwill of $1,569.8 and $1,517.3 as of December 31, 2010 and 2009, respectively, which is not assigned to the operating segments.

⁽⁵⁾		Includes restructuring costs of $22.3, $32.5 and $14.6 for 2010, 2009 and 2008, respectively (see Note 18) and non-cash impairment charges of $3.7, $44.4 and $2.4 for 2010, 2009 and 2008, respectively.

F-51

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

Selected summarized geographic information at December 31, 2010 and 2009 is as follows:


	December 31,
	2010		2009

Long-lived assets:
North America	$	1,787.6	$	1,738.5
Foreign		31.8		33.0
Corporate		49.1		33.2

Total	$	1,868.5	$	1,804.7


23.	Unaudited Quarterly Financial Information

The following is a summary of unaudited quarterly financial information for 2010 and 2009:


	2010
	First		Second		Third		Fourth

Net revenues	$	457.2	$	451.3	$	439.9	$	434.2
Gross profit		192.8		192.6		183.1		185.6
Net income		33.6		29.8		30.2		27.3
Income per common share:
Basic	$	1.74	$	1.54	$	1.57	$	1.41

Diluted	$	1.73	$	1.53	$	1.55	$	1.40


	2009
	First		Second		Third		Fourth

Net revenues	$	464.3	$	451.9	$	450.7	$	447.2
Gross profit		189.2		188.7		192.1		188.7
Net income		51.3		29.1		36.5		2.8
Income per common share:
Basic	$	2.65	$	1.51	$	1.89	$	0.15

Diluted	$	2.64	$	1.50	$	1.88	$	0.14

Earnings per share calculations for each quarter are based on the weighted average number of shares outstanding for each period, and the sum of the quarterly amounts may not necessarily equal the annual earnings per share amounts.

F-52

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)


24.	Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:


	Year Ended December 31,
	2010		2009		2008

Net income before extraordinary gain	$	120.9	$	119.7	$	67.0
Extraordinary gain		—		—		0.7

Net income	$	120.9	$	119.7	$	67.7

Weighted-average shares outstanding (in millions):
Basic		19.3		19.3		20.1
Dilutive impact of stock units		0.1		0.1		—

Diluted		19.4		19.4		20.1
Earnings per common share before extraordinary gain:
Basic	$	6.26	$	6.20	$	3.30
Diluted	$	6.22	$	6.17	$	3.30
Extraordinary gain per share:
Basic	$	—	$	—	$	0.04
Diluted	$	—	$	—	$	0.04
Earnings per share:
Basic	$	6.26	$	6.20	$	3.34
Diluted	$	6.22	$	6.17	$	3.34


25.	Subsequent Events

Acquisition

On December 15, 2010, Scantron entered into a securities purchase agreement with KUE Digital International LLC pursuant to which Scantron would purchase all of the outstanding capital stock or membership interests of KUE Digital Inc., KUED Sub I LLC and KUED Sub II LLC (collectively referred to as “GlobalScholar”) for $140.0 in cash, subject to post-closing adjustments, and a contingent payment of up to $20.0 in cash, which would be dependent upon the achievement of certain revenue targets during calendar year 2011. GlobalScholar’s instructional management platform supports all aspects of managing education at K-12 schools, including student information systems; performance-based scheduler; gradebook; learning management system; longitudinal data collection, analysis and reporting; teacher development and performance tracking; and online communication and tutoring portals. GlobalScholar’s instructional management platform complements Scantron’s testing and assessment, response to intervention, student achievement management and special education software solutions thereby expanding Scantron’s web-based education solutions. Scantron completed the acquisition of GlobalScholar on January 3, 2011 for $135.4 in cash, net of cash acquired and after giving effect to preliminary working capital adjustments, and subject to post-closing adjustments. The Company financed the acquisition and related fees and expenses with Harland Clarke Holdings’ cash on hand. Due to the timing of the acquisition, preliminary accounting for the business combination is not complete. Financial results for GlobalScholar will be included in the Company’s results of operations beginning in the first quarter of 2011.

F-53

M & F Worldwide Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions, except per share data)

Settlement of Lawsuit

Pursuant to the Settlement Agreement, the direct owner of Pneumo Abex will transfer all of the membership interests in Pneumo Abex to a Delaware statutory trust (the “Settlement Trust”), and the Settlement Trust will become the sole owner and new managing member of Pneumo Abex. The Company will also contribute a total of $15.0 to Pneumo Abex, half of which is being paid to liquidate an existing indemnification obligation of Mafco Worldwide to Pneumo Abex relating to a reorganization of Pneumo Abex and Mafco Worldwide in 2004. In addition, the Company will pay $5.0 into the Settlement Trust. Under the Settlement Agreement, the Settlement Trust will also receive a capital contribution from the Friction Guarantor, consisting of a cash contribution of $250.0 payable at closing and a note in the amount of $57.5 payable over four years that is guaranteed by certain parent entities of the Friction Guarantor, subject to certain adjustments.

Following the closing under the Settlement Agreement:


	•	Pneumo Abex, owned by the Settlement Trust, will continue to resolve asbestos-related claims asserted against it in the tort system,

	•	The Settlement Trust will indemnify Pneumo Abex with respect to the defense and resolution of the asbestos-related claims formerly subject to the Mutual Guaranty,

	•	The Friction Guarantor’s obligation to indemnify Pneumo Abex pursuant to the Mutual Guaranty will terminate,

	•	The Company will be indemnified by the Settlement Trust against any liability for the matters formerly subject to the Mutual Guaranty, and

	•	All other insurance and indemnification rights of Pneumo Abex owing from third parties will remain assets of Pneumo Abex.

F-54

Schedule I – Condensed Financial Information of Registrant
Balance Sheets (Parent Only)
(in millions, except share and per share data)


	December 31,
	2010			2009

ASSETS
Current assets:
Cash and cash equivalents	$	87.5		$	57.8
Prepaid expenses and other current assets		1.0			1.1

Total current assets		88.5			58.9
Investment in subsidiaries		552.6			447.8
Receivable from subsidiaries		1.8			1.2
Deferred tax assets		0.9			3.9
Marketable securities		—			29.4
Other assets		0.8			1.4

Total assets	$	644.6		$	542.6


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	2.1		$	5.3
Short-term borrowings		—			22.2

Total current liabilities		2.1			27.5
Other liabilities		—			1.1
Stockholders’ equity:
Common stock, par value $0.01; 250,000,000 shares authorized; 23,875,831 shares issued at December 31, 2010 and 2009		0.2			0.2
Additional paid-in capital		76.0			75.4
Treasury stock at cost; 4,541,900 shares at December 31, 2010 and 2009		(106.6	)		(106.6	)
Retained earnings		677.6			556.7
Accumulated other comprehensive loss, net of taxes		(4.7	)		(11.7	)

Total stockholders’ equity		642.5			514.0

Total liabilities and stockholders’ equity	$	644.6		$	542.6

F-55

Schedule I – Condensed Financial Information of Registrant
Statements of Income (Parent Only)
(in millions)


	Year Ended December 31,
	2010			2009			2008

General and administrative expenses	$	11.5		$	16.2		$	11.2

Operating loss		(11.5	)		(16.2	)		(11.2	)
Interest, investment and other (expense) income, net		(1.1	)		(2.5	)		1.3

Loss from operations before income taxes		(12.6	)		(18.7	)		(9.9	)
Benefit for income taxes		(3.0	)		(6.5	)		(4.5	)

Loss from operations		(9.6	)		(12.2	)		(5.4	)
Equity in income of subsidiaries		130.5			131.9			73.1

Net income	$	120.9		$	119.7		$	67.7

F-56

Schedule I – Condensed Financial Information of Registrant
Statements of Cash Flows (Parent Only)
(in millions)


	Year Ended December 31,
	2010			2009			2008

Operating activities
Net income	$	120.9		$	119.7		$	67.7
Adjustments to reconcile net income to total cash used in operating activities:
Equity in income of subsidiaries		(130.5	)		(131.9	)		(73.1	)
Restricted stock amortization		0.6			2.1			0.9
Realized and unrealized loss on marketable securities		1.0			2.7			—
Tax benefits from stock options exercised		—			—			(14.6	)
Changes in assets and liabilities:
Receivable from/payables to subsidiaries		(0.6	)		(3.7	)		(1.2	)
Other, net		(0.2	)		8.3			2.3

Cash used in operating activities		(8.8	)		(2.8	)		(18.0	)

Investing activities
Sales and redemption of marketable securities		28.4			5.3			2.4
Dividends from Harland Clarke Holdings		31.2			41.3			65.0
Dividends from Mafco Worldwide		1.5			1.5			1.5

Cash provided by investing activities		61.1			48.1			68.9

Financing activities
Tax benefits from stock options exercised		—			—			14.6
Purchases of treasury stock		—			—			(91.8	)
Proceeds from short-term borrowings		—			—			27.2
Repayments of short-term borrowings		(22.2	)		(4.1	)		(0.9	)
Insurance premium financing payment		(0.4	)		(0.3	)		(0.1	)

Cash used in financing activities		(22.6	)		(4.4	)		(51.0	)

Net increase (decrease) in cash and cash equivalents		29.7			40.9			(0.1	)
Cash and cash equivalents at beginning of period		57.8			16.9			17.0

Cash and cash equivalents at end of period	$	87.5		$	57.8		$	16.9

F-57

Schedule II – Valuation and Qualifying Accounts and Reserves
(in millions)

The following is a summary of the valuation and qualifying accounts and reserves for the years ended December 31, 2010, 2009 and 2008.


	Beginning		Amounts		Balance		Ending
Allowance for Doubtful Accounts and Sales Returns and Allowance Reserves	Balance		Reserved		Written Off		Balance

December 31, 2010	$	3.3	$	4.0	$	4.2	$	3.1
December 31, 2009	$	2.9	$	7.7	$	7.3	$	3.3
December 31, 2008	$	2.6	$	8.0	$	7.7	$	2.9

F-58

EX-4.21 2 y04589exv4w21.htm EX-4.21 exv4w21

Exhibit 4.21

$45,000,000 REVOLVING CREDIT FACILITY

CREDIT AGREEMENT

by and among

MAFCO WORLDWIDE CORPORATION,

THE LENDERS PARTY HERETO

and

PNC BANK, NATIONAL ASSOCIATION, as Administrative Agent

PNC CAPITAL MARKETS LLC, as Lead Arranger

Dated as of December 15, 2010

TABLE OF CONTENTS


	Page
1. CERTAIN DEFINITIONS		1
1.1 Certain Definitions		1
1.2 Construction		24
1.3 Accounting Principles		25

2. REVOLVING CREDIT AND SWING LOAN FACILITIES		25
2.1 Revolving Credit Commitments		25
2.1.1 Revolving Credit Loans		25
2.1.2 Swing Loan Commitment		25
2.2 Nature of Lenders’ Obligations with Respect to Revolving Credit Loans		26
2.3 Commitment Fees		26
2.4 Revolving Credit Loan Requests; Swing Loan Requests		26
2.4.1 Revolving Credit Loan Requests		26
2.4.2 Swing Loan Requests		27
2.5 Making Revolving Credit Loans and Swing Loans; Presumptions by the Administrative Agent; Repayment of Revolving Credit Loans; Borrowings to Repay Swing Loans		27
2.5.1 Making Revolving Credit Loans		27
2.5.2 Presumptions by the Administrative Agent		28
2.5.3 Making Swing Loans		28
2.5.4 Repayment of Revolving Credit Loans		28
2.5.5 Borrowings to Repay Swing Loans		28
2.6 Notes		29
2.7 Use of Proceeds		29
2.8 Letter of Credit Subfacility		29
2.8.1 Issuance of Letters of Credit		29
2.8.2 Letter of Credit Fees		30
2.8.3 Disbursements, Reimbursement		30
2.8.4 Repayment of Participation Advances		31
2.8.5 Documentation		32
2.8.6 Determinations to Honor Drawing Requests		32
2.8.7 Nature of Participation and Reimbursement Obligations		32
2.8.8 Indemnity		34
2.8.9 Liability for Acts and Omissions		34
2.8.10 Issuing Lender Reporting Requirements		35
2.8.11 Reduction of Revolving Credit Commitment		35
2.8.12 Commercial Letters of Credit		36
2.8.13 Defaulting Lenders		36

3. INTEREST RATES		38
3.1 Interest Rate Options		38
3.1.1 Revolving Credit Interest Rate Options; Swing Line Interest Rate		39


	Page
3.1.2 Rate Quotations		39
3.2 Interest Periods		39
3.2.1 Amount of Borrowing Tranche		39
3.2.2 Renewals		39
3.3 Interest After Default		40
3.3.1 Interest Rate		40
3.3.2 Letter of Credit Fees and Other Obligations		40
3.3.3 Acknowledgment; Payable on Demand		40
3.4 LIBOR Rate Unascertainable; Illegality; Increased Costs; Deposits Not Available		40
3.4.1 Unascertainable		40
3.4.2 Illegality; Increased Costs; Deposits Not Available		40
3.4.3 Administrative Agent’s and Lender’s Rights		41
3.5 Selection of Interest Rate Options		41

4. PAYMENTS		42
4.1 Payments		42
4.2 Pro Rata Treatment of Lenders		42
4.3 Sharing of Payments by Lenders		42
4.4 Presumptions by Administrative Agent		43
4.5 Interest Payment Dates		44
4.6 Voluntary Prepayments		44
4.6.1 Right to Prepay		44
4.6.2 Replacement of a Lender		45
4.7 Increased Costs		45
4.7.1 Increased Costs Generally		45
4.7.2 Capital Requirements		46
4.7.3 Certificates for Reimbursement; Repayment of Outstanding Loans; Borrowing of New Loans		46
4.7.4 Delay in Requests		47
4.8 Taxes		47
4.8.1 Payments Free of Taxes		47
4.8.2 Payment of Other Taxes by the Borrower		47
4.8.3 Indemnification by the Borrower		47
4.8.4 Evidence of Payments		48
4.8.5 Status of Lenders		48
4.8.6 Treatment of Certain Refunds		49
4.9 Indemnity		50
4.10 Settlement Date Procedures		50

5. REPRESENTATIONS AND WARRANTIES		51
5.1 Representations and Warranties		51
5.1.1 Financial Condition		51
5.1.2 No Change		52
5.1.3 Existence; Compliance with Law		52
5.1.4 Power; Authorization; Enforceable Obligations		52


	Page
5.1.5 No Legal Bar		52
5.1.6 Litigation		52
5.1.7 No Default		53
5.1.8 Ownership of Property; Liens		53
5.1.9 Intellectual Property		53
5.1.10 Taxes		53
5.1.11 Federal Regulations		53
5.1.12 Labor Matters		53
5.1.13 Investment Company Act; Other Regulations		54
5.1.14 Subsidiaries		54
5.1.15 Environmental Matters		54
5.1.16 Accuracy of Information, etc.		55
5.1.17 Security Documents		55
5.1.18 Solvency		56
5.1.19 ERISA Compliance		56

6. CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT		56
6.1 First Loans and Letters of Credit		57
6.1.1 Deliveries		57
6.2 Each Loan or Letter of Credit		58

7. COVENANTS		59
7.1 Affirmative Covenants		59
7.1.1 Financial Statements		59
7.1.2 Certificates; Other Information		60
7.1.3 Payment of Obligations		60
7.1.4 Maintenance of Existence; Compliance		61
7.1.5 Maintenance of Property; Insurance		61
7.1.6 Inspection of Property; Books and Records; Discussions		61
7.1.7 Notices		61
7.1.8 Environmental Laws		62
7.1.9 Additional Collateral, etc.		62
7.1.10 Intentionally Omitted		64
7.1.11 Further Assurances		64
7.1.12 Anti-Terrorism Laws		64
7.1.13 Operating Accounts		64
7.2 Negative Covenants		65
7.2.1 Financial Covenants		65
7.2.2 Limitation on Liens		65
7.2.3 Limitation on Guarantee Obligations		67
7.2.4 Limitation on Fundamental Changes		68
7.2.5 Limitation on Sale of Assets		68
7.2.6 Limitation on Restricted Payments		69
7.2.7 Limitation on Investments, Loans, Advances and Acquisitions		70
7.2.8 Sale and Leaseback		71
7.2.9 Limitation on Transactions with Affiliates		71

iii


	Page
7.2.10 Indebtedness		72
7.2.11 Limitation on Modifications of Tax Agreement and Mafco Assignment and Assumption Agreement		73
7.2.12 Hedge Agreements		73
7.2.13 Changes in Fiscal Periods		73
7.2.14 Limitation on Negative Pledge Clauses		73
7.2.15 Limitation on Lines of Business		73
7.2.16 Limitation on Restrictions on Subsidiary Distributions		73

8. DEFAULT		74
8.1 Events of Default		74
8.2 Consequences of Event of Default		76
8.2.1 Events of Default Other Than Bankruptcy, Insolvency or Reorganization Proceedings		76
8.2.2 Bankruptcy, Insolvency or Reorganization Proceedings		77
8.2.3 Set-off		77
8.2.4 Application of Proceeds		77
8.3 Right to Cure		78

9. THE ADMINISTRATIVE AGENT		79
9.1 Appointment and Authority		79
9.2 Rights as a Lender		79
9.3 Exculpatory Provisions		79
9.4 Reliance by Administrative Agent		80
9.5 Delegation of Duties		80
9.6 Resignation of Administrative Agent		80
9.7 Non-Reliance on Administrative Agent and Other Lenders		81
9.8 No Other Duties, etc.		82
9.9 Administrative Agent’s Fee		82
9.10 Release Collateral and Guarantors and Authorization Therefor		82
9.11 No Reliance on Administrative Agent’s Customer Identification Program		82

10. MISCELLANEOUS		82
10.1 Modifications, Amendments or Waivers		82
10.1.1 Increase of Commitment		83
10.1.2 Extension of Payment; Reduction of Principal Interest or Fees; Modification of Terms of Payment		83
10.1.3 Release of Collateral or Guarantor		83
10.1.4 Miscellaneous		83
10.2 No Implied Waivers; Cumulative Remedies		83
10.3 Expenses; Indemnity; Damage Waiver		84
10.3.1 Costs and Expenses		84
10.3.2 Indemnification by the Borrower		84
10.3.3 Reimbursement by Lenders		85
10.3.4 Waiver of Consequential Damages, Etc		85
10.3.5 Payments		85


	Page
10.4 Holidays		85
10.5 Notices; Effectiveness; Electronic Communication		86
10.5.1 Notices Generally		86
10.5.2 Electronic Communications		86
10.5.3 Change of Address, Etc.		86
10.6 Severability		87
10.7 Duration; Survival		87
10.8 Successors and Assigns		87
10.8.1 Successors and Assigns Generally		87
10.8.2 Assignments by Lenders		87
10.8.3 Register		89
10.8.4 Participations		89
10.8.5 Limitations upon Participant Rights Successors and Assigns Generally		89
10.8.6 Certain Pledges; Successors and Assigns Generally		90
10.9 Confidentiality		90
10.9.1 General		90
10.9.2 Sharing Information With Affiliates of the Lenders		90
10.10 Counterparts; Integration; Effectiveness		90
10.10.1 Counterparts; Integration; Effectiveness		90
10.11 CHOICE OF LAW; SUBMISSION TO JURISDICTION; WAIVER OF VENUE; SERVICE OF PROCESS; WAIVER OF JURY TRIAL		91
10.11.1 Governing Law		91
10.11.2 SUBMISSION TO JURISDICTION		91
10.11.3 WAIVER OF VENUE		92
10.11.4 SERVICE OF PROCESS		92
10.11.5 WAIVER OF JURY TRIAL		92
10.12 USA Patriot Act Notice		92

LIST OF SCHEDULES AND EXHIBITS


SCHEDULES

Schedule 1.1(A)	-	Pricing Grid
Schedule 1.1(B)	-	Commitment of Lenders and Addresses for Notices
Schedule 5.1.4		Power; Authority; Enforceable Obligations
Schedule 5.1.14		Subsidiaries
Schedule 7.2.2(xii)		Permitted Liens
Schedule 7.2.10(iii)		Existing Indebtedness

EXHIBITS

Exhibit 1.1(A)	-	Assignment and Assumption Agreement
Exhibit 1.1(G)(2)		Guaranty and Collateral Agreement
Exhibit 1.1(M)		Mafco Assignment and Assumption Agreement
Exhibit 1.1(N)(1)	-	Revolving Credit Note
Exhibit 1.1(N)(2)	-	Swing Loan Note
Exhibit 2.4.1		Loan Request
Exhibit 2.4.2	-	Swing Loan Request

CREDIT AGREEMENT

THIS CREDIT AGREEMENT (as hereafter amended, supplemented or otherwise modified from time to time, this “Agreement”) is dated as of December 15, 2010 and is made by and among MAFCO WORLDWIDE CORPORATION, a Delaware corporation (the “Borrower”), the LENDERS (as hereinafter defined), and PNC BANK, NATIONAL ASSOCIATION, in its capacity as administrative agent for the Lenders under this Agreement (hereinafter referred to in such capacity, together with its successors and assigns, as the “Administrative Agent”).

The Borrower has requested the Lenders to provide a revolving credit facility to the Borrower in an aggregate principal amount not to exceed $45,000,000. In consideration of their mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, the parties hereto covenant and agree as follows:

1. CERTAIN DEFINITIONS

1.1 Certain Definitions. In addition to words and terms defined elsewhere in this Agreement, the following words and terms shall have the following meanings, respectively, unless the context hereof clearly requires otherwise:

“Acquired Person” shall have the meaning specified in the definition of “Permitted Acquisition”.

“Adjusted Ratable Share” shall mean, with respect to any Non-Defaulting Lender, the quotient (expressed as a percentage) of such Non-Defaulting Lender’s Ratable Share divided by the aggregate Ratable Shares of all Non-Defaulting Lenders.

“Administrative Agent” shall have the meaning set forth in the preamble hereto.

“Administrative Agent’s Fee” shall have the meaning specified in Section 9.9.

“Administrative Agent’s Letter” shall have the meaning specified in Section 9.9.

“Affiliate” as to any Person shall mean any other Person which directly or indirectly controls, is controlled by, or is under common control with such Person; provided that for purposes of Section 7.2.9 only, “Affiliate” shall also include any other Person (i) which beneficially owns or holds 10% or more of any class of the voting or other equity interests of such Person, or (ii) 10% or more of any class of voting interests or other equity interests of which is beneficially owned or held, directly or indirectly, by such Person.

“Agreement” shall have the meaning set forth in the preamble hereto.

“Anti-Terrorism Laws” shall mean any Laws relating to terrorism or money laundering, including Executive Order No. 13224, the USA Patriot Act, the Laws comprising or implementing the Bank Secrecy Act, and the Laws administered by the United States Treasury Department’s Office of Foreign Asset Control (as any of the foregoing Laws may from time to time be amended, renewed, extended, or replaced).

“Applicable Commitment Fee Rate” shall mean the percentage rate per annum based on the Consolidated Leverage Ratio then in effect according to the pricing grid on Schedule 1.1(A) below the heading “Commitment Fee.”

“Applicable Letter of Credit Fee Rate” shall mean the percentage rate per annum based on the Consolidated Leverage Ratio then in effect according to the pricing grid on Schedule 1.1(A) below the heading “Letter of Credit Fee.”

“Applicable Margin” shall mean, as applicable:

(A) the percentage spread to be added to the Base Rate applicable to Revolving Credit Loans under the Base Rate Option based on the Consolidated Leverage Ratio then in effect according to the pricing grid on Schedule 1.1(A) below the heading “Revolving Credit Base Rate Spread,” or

(B) the percentage spread to be added to the LIBOR Rate applicable to Revolving Credit Loans under the LIBOR Rate Option based on the Consolidated Leverage Ratio then in effect according to the pricing grid on Schedule 1.1(A) below the heading “Revolving Credit LIBOR Rate Spread.”

“Approved Fund” shall mean any fund that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

“Assignment and Assumption Agreement” shall mean an assignment and assumption agreement entered into by a Lender and an assignee permitted under Section 10.8, in substantially the form of Exhibit 1.1(A).

“Authorized Officer” shall mean, with respect to any Loan Party, the Chief Executive Officer, President, Chief Financial Officer, Senior Vice President- Finance, Treasurer or Assistant Treasurer of such Loan Party or such other individuals, designated by written notice to the Administrative Agent from the Borrower, authorized to execute notices, reports and other documents on behalf of the Loan Parties required hereunder. The Borrower may amend such list of individuals from time to time by giving written notice of such amendment to the Administrative Agent.

“Base Rate” shall mean, for any day, a fluctuating per annum rate of interest equal to the highest of (a) the Federal Funds Open Rate plus 50 basis points (0.5%) and (b) the Prime Rate, and (c) the Daily LIBOR Rate, plus 100 basis points (1.0%). Any change in the Base Rate (or any component thereof) shall take effect at the opening of business on the day such change occurs.

“Base Rate Option” shall mean the option of the Borrower to have Loans bear interest at the rate and under the terms set forth in Section 3.1.1 (i).

“Board” shall mean the Board of Governors of the Federal Reserve System of the United States (or any successor).

- 2 -

“Borrower” shall have the meaning set forth in the preamble hereto.

“Borrowing Date” shall mean, with respect to any Loan, the date for the making thereof or the renewal or conversion thereof at or to the same or a different Interest Rate Option, which shall be a Business Day.

“Borrowing Tranche” shall mean specified portions of Revolving Credit Loans outstanding as follows: (i) any Revolving Credit Loans to which a LIBOR Rate Option applies which become subject to the same Interest Rate Option under the same Loan Request by the Borrower and which have the same Interest Period shall constitute one Borrowing Tranche, and (ii) all Revolving Credit Loans to which a Base Rate Option applies shall constitute one Borrowing Tranche.

“Business” shall have the meaning specified in Section 5.1.15(ii).

“Business Day” shall mean any day other than a Saturday or Sunday or a legal holiday on which commercial banks are authorized or required to be closed for business in Pittsburgh, Pennsylvania and if the applicable Business Day relates to any Loan to which the LIBOR Rate Option applies, such day must also be a day on which dealings are carried on in the London interbank market.

“Capital Expenditures” shall mean for any period, with respect to any Person, (a) the aggregate of all expenditures by such Person and its Subsidiaries during such period that, in conformity with GAAP, are or are required to be included as additions during such period to property, plant and equipment reflected in the consolidated balance sheet of such Person and its Subsidiaries; provided that the term “Capital Expenditures” shall not include expenditures made in connection with the replacement, substitution, restoration or repair of assets to the extent financed with (i) insurance proceeds paid on account of the loss of or damage to the assets being replaced, restored or repaired or (ii) awards of compensation arising from the taking by eminent domain or condemnation of the assets being replaced; and (b) such portion of principal payments on Capital Lease Obligations made by such Person and its Subsidiaries during such period as is attributable to additions to property, plant and equipment that have not otherwise been reflected in the consolidated balance sheet of such Person and its Subsidiaries.

“Capital Lease Obligations” shall mean as to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP.

“Capital Stock” shall mean any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.

“Cash Equivalents” shall mean (i) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the United States of

- 3 -

America or any agency thereof, (ii) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition and overnight bank deposits of any Lender or of any commercial bank having capital and surplus in excess of $500,000,000, (iii) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (ii) of this definition having a term of not more than 30 days with respect to securities issued or fully guaranteed or insured by the United States of America, (iv) commercial paper of a domestic issuer rated at least A-1 by S&P or P-1 by Moody’s, (v) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America or by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody’s, (vi) securities with maturities of one year or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (ii) of this definition or (vii) shares of money market, mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (i) through (vi) of this definition.

“Cash Management Agreement” shall have the meaning specified in Section 2.4.2.

“Change of Control” shall mean if any time (i) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), excluding the Sponsor Group, shall become, or obtain rights (whether by means of warrants, options or otherwise) to become, the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of more than the greater of (x) 35% of the outstanding common stock of M & F Worldwide, and (y) the amount of outstanding common stock of M & F Worldwide then beneficially owned by the Sponsor Group and each of its beneficial owners; (ii) the board of directors of M & F Worldwide shall cease to consist of a majority of Continuing Directors; or (iii) M & F Worldwide shall cease to own and control, of record and beneficially, directly or indirectly, 100% of each class of outstanding Capital Stock of the Borrower free and clear of all Liens (except Liens created by the Guarantee and Collateral Agreement).

“Change in Law” shall mean the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any Law, (b) any change in any Law or in the administration, interpretation or application thereof by any Official Body or (c) the making or issuance of any request, guideline or directive (whether or not having the force of Law) by any Official Body; provided, however, that notwithstanding anything herein to the contrary, the Dodd-Frank Wall Street Reform and Consumer Protection Act and each request, rule, guideline or directive thereunder or issued in connection therewith shall be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

“CIP Regulations” shall have the meaning specified in Section 9.11.

“Closing Date” shall mean the Business Day on which the first Loan shall be made, which shall be December 15, 2010.

- 4 -

“Code” shall mean the Internal Revenue Code of 1986, as the same may be amended or supplemented from time to time, and any successor statute of similar import, and the rules and regulations thereunder, as from time to time in effect.

“Collateral” shall mean all property of the Loan Parties, now owned or hereafter acquired, upon which a Lien is purported to be created by any Security Document.

“Commitment” shall mean as to any Lender the aggregate of its Revolving Credit Commitment and, in the case of PNC, its Swing Loan Commitment, and “Commitments” shall mean the aggregate of the Revolving Credit Commitments and Swing Loan Commitment of all of the Lenders.

“Commitment Fee” shall have the meaning specified in Section 2.3.

“Compliance Certificate” shall have the meaning specified in Section 7.1.2(ii).

“Consolidated Current Assets” shall mean, at any date, all amounts (other than cash and Cash Equivalents) that would, in conformity with GAAP, be set forth opposite the caption “total current assets” (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries at such date.

“Consolidated Current Liabilities” shall mean, at any date, all amounts that would, in conformity with GAAP, be set forth opposite the caption “total current liabilities” (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries at such date, but excluding (i) the current portion of any Funded Debt of the Borrower and its Subsidiaries and (ii) without duplication of clause (i) above, all Indebtedness consisting of Revolving Credit Loans or Swing Loans to the extent otherwise included therein.

“Consolidated EBITDA” shall mean for any fiscal period of the Borrower, the Consolidated Net Income or Consolidated Net Loss, as the case may be, for such fiscal period, (a) after restoring thereto (i) extraordinary or non-recurring non-cash charges,(ii) losses resulting from Dispositions other than in the ordinary course of business, (iii) depreciation and amortization (including write-offs or write-downs of amortizable and depreciable items), (iv) Consolidated Interest Expense, (v) “provision for taxes” (or any like caption) on a consolidated statement of earnings of the Borrower and its Subsidiaries for such fiscal period, (vi) any losses in respect of currency fluctuations, (vii) fifty percent (50%) of any severance costs or charges, provided that the restoration permitted by this clause (vii) shall not exceed $2,500,000 in the aggregate during the term of this Agreement and (viii) any fees, expenses or charges related to the negotiation, execution and closing of this Agreement and the other Loan Documents and any amendment, modification or waiver of the Loan Documents and (b) deducting therefrom (i) extraordinary or non-recurring income or gains (which shall include, whether or not so includable in accordance with GAAP, any item of gain resulting from Dispositions other than in the ordinary course of business whether or not extraordinary or non-recurring), (ii) the portion of net income of the Borrower and its Subsidiaries allocable to interests in unconsolidated Persons to the extent that cash dividends or distributions in respect of such portion of net income have not actually been received by the Borrower or any Subsidiary Guarantor, (iii) any gains in respect of currency fluctuations, (iv) any other non-cash income and

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(v) any cash payments made during such period in respect of items described in clause (a)(i) above subsequent to the fiscal quarter in which the relevant non-cash charges were reflected as a charge in the statement of Consolidated Net Income; provided any such restorations or deductions shall only be restored or deducted to the extent included in the determination of Consolidated Net Income or Consolidated Net Loss. For the purposes of calculating Consolidated EBITDA for any period of four consecutive fiscal quarters (each, a “Reference Period”) pursuant to any determination of the Consolidated Leverage Ratio, (i) if at any time during such Reference Period the Borrower or any Subsidiary shall have made any Material Disposition, the Consolidated EBITDA for such Reference Period shall be reduced by an amount equal to the Consolidated EBITDA (if positive) attributable to the property that is the subject of such Material Disposition for such Reference Period or increased by an amount equal to the Consolidated EBITDA (if negative) attributable thereto for such Reference Period and (ii) if during such Reference Period the Borrower or any Subsidiary shall have made a Material Acquisition, Consolidated EBITDA for such Reference Period shall be calculated after giving pro forma effect thereto (including pro forma adjustments for cost savings to the extent approved in writing by the Administrative Agent) as if such Material Acquisition occurred on the first day of such Reference Period. As used in this definition, “Material Acquisition” means any acquisition of property or series of related acquisitions of property that (x) constitutes assets comprising all or substantially all of an operating unit of a business or constitutes all or substantially all of the common stock of a Person and (y) involves the payment of consideration by the Borrower and its Subsidiaries in excess of $2,000,000; and “Material Disposition” means any Disposition of property or series of related Dispositions of property that yields gross proceeds to the Borrower or any of its Subsidiaries in excess of $2,000,000.

“Consolidated Interest Coverage Ratio” shall mean at the last day of any fiscal quarter, the ratio of (a) (i) Consolidated EBITDA for the period of four consecutive fiscal quarters ending on such date less (ii) Capital Expenditures for the period of four consecutive fiscal quarters ending on such date to (b) Consolidated Interest Expense for the period of four consecutive fiscal quarters ending on such date.

“Consolidated Interest Expense” shall mean for any fiscal period of the Borrower, the amount that, in conformity with GAAP, would be set forth opposite the caption “interest expense” (or any like caption) on a consolidated statement of earnings of the Borrower and its Subsidiaries for such fiscal period, less, to the extent otherwise included in the calculation of Consolidated Interest Expense, amortization of deferred financing fees and debt issuance costs, relating to the negotiation, execution and closing of this Agreement and the other Loan Documents and any amendment, modification or waiver of the Loan Documents, in each case during such fiscal period.

“Consolidated Leverage Ratio” shall mean at the last day of any fiscal quarter, the ratio of (a) Total Debt (after giving effect to all prepayments and borrowings made on such day) on such day to (b) Consolidated EBITDA for the period of four consecutive fiscal quarters ending on such day.

“Consolidated Net Income” or “Consolidated Net Loss” shall mean for any fiscal period of the Borrower, the amount which, in conformity with GAAP, would be set forth opposite the caption “net income” (or any like caption) or “net loss” (or any like caption), as the

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case may be, on a consolidated statement of earnings of the Borrower and its Subsidiaries for such fiscal period.

“Consolidated Working Capital” shall mean, at any date, the excess of Consolidated Current Assets on such date over Consolidated Current Liabilities on such date.

“Continuing Directors” shall mean the directors of M & F Worldwide on the Closing Date, and each other director if, in each case, such other director’s nomination for election to the board of directors of M & F Worldwide is approved by at least a majority of the then Continuing Directors.

“Contractual Obligation” shall mean, as to any Person, any provision of any material security issued by such Person or of any material agreement, instrument or other understanding to which such Person is a party or by which it or any of its material property is bound.

“Customs” shall have the meaning set forth in Section 2.8.12.

“Daily LIBOR Rate” shall mean, for any day, the rate per annum determined by the Administrative Agent by dividing (i) the Published Rate by (ii) a number equal to 1.00 minus the LIBOR Reserve Percentage on such day.

“Defaulting Lender” shall mean any Lender that (i) has failed to fund any portion of the Loans, participations with respect to Letters of Credit, or participations in Swing Loans required to be funded by it hereunder within one Business Day of the date required to be funded by it hereunder unless such failure has been cured and all interest accruing as a result of such failure has been fully paid in accordance with the terms hereof, (ii) has otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within one Business Day of the date when due, unless the subject of a good faith dispute or unless such failure has been cured and all interest accruing as a result of such failure has been fully paid in accordance with the terms hereof, (iii) has failed at any time to comply with the provisions of Section 4.3 with respect to purchasing participations from the other Lenders, whereby such Lender’s share of any payment received, whether by setoff or otherwise, is in excess of its Ratable Share of such payments due and payable to all of the Lenders, or (iv) has since the date of this Agreement been deemed insolvent by an Official Body or become the subject of an Insolvency Proceeding, or has a parent company that since the date of this Agreement been deemed insolvent by an Official Body or become the subject of an Insolvency Proceeding.

“Disposition” with respect to any property, any sale, lease, sale and leaseback, assignment, conveyance, transfer or other disposition thereof. The terms “Dispose” and “Disposed of” shall have the correlative meanings.

“Disqualified Capital Stock” shall mean Capital Stock that (i) matures or is mandatorily redeemable or subject to mandatory repurchase or redemption or repurchase at the option of the holders hereof, in each case, in whole or in part and whether upon the occurrence of any event, pursuant to a sinking fund obligation, on a fixed date or otherwise, prior to the date that is 180 days after the Expiration Date or (ii) is convertible or exchangeable, automatically or

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at the option of any holder thereof, into Disqualified Capital Stock; provided that any Capital Stock that would fall within the definition of “Disqualified Capital Stock” solely because the holders thereof have the right to require the issuer thereof to redeem such Capital Stock upon the occurrence of a change of control will not constitute Disqualified Capital Stock if the terms of such Capital Stock provide that the issuer may only redeem such Capital Stock if, and to the extent, that Payment in Full of the Obligations shall have occurred.

“Dollar”, “Dollars”, “U.S. Dollars” and the symbol $ shall mean lawful money of the United States of America.

“Domestic Subsidiary” shall mean any Subsidiary of the Borrower organized under the laws of any jurisdiction within the United States.

“Drawing Date” shall have the meaning specified in Section 2.8.3.1.

“Environmental Laws” shall mean any and all applicable and binding foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Official Body or other Laws (including common law) regulating, relating to or imposing liability or standards of conduct concerning exposure of Materials of Environmental Concern or protection of the environment or health or safety matters related to the exposure to Materials of Environmental Concern, as now or may at any time hereafter be in effect.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended or supplemented from time to time, and any successor statute of similar import, and the rules and regulations thereunder, as from time to time in effect.

“ERISA Affiliate” shall mean, at any time, any trade or business (whether or not incorporated) under common control with the Borrower and are treated as a single employer under Section 414 of the Code.

“ERISA Event” shall mean (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate.

“Event of Default” shall mean any of the events described in Section 8.1 and referred to therein as an “Event of Default.”

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“Excess Cash Flow” shall mean for any period, the excess, if any, of (a) the sum, without duplication, of (1) Consolidated Net Income for such period, (2) the amount of all non-cash charges (including depreciation and amortization) deducted in arriving at such Consolidated Net Income, (3) the aggregate net amount of loss on the Disposition of property by the Borrower and its Subsidiaries during such period (other than sales of inventory in the ordinary course of business) and (4) decreases in Consolidated Working Capital over (b) the sum, without duplication, of (1) the amount of all non-cash credits included in arriving at such Consolidated Net Income, (2) the aggregate amount actually paid by the Borrower and its Subsidiaries in cash during such period on account of Capital Expenditures (excluding the principal amount of Indebtedness incurred in connection with such expenditures), (3) the aggregate amount of all regularly scheduled principal payments of Funded Debt of the Borrower and its Subsidiaries made during such period (other than in respect of any revolving credit facility to the extent there is not an equivalent permanent reduction in commitments thereunder), (4) increases in Consolidated Working Capital, (5) the aggregate net amount of gain on the Disposition of property by the Borrower and its Subsidiaries during such period (other than sales of inventory in the ordinary course of business), to the extent included in arriving at such Consolidated Net Income, (6) the aggregate amount of Restricted Payments made pursuant to Sections 7.2.6(i), (ii), (iii) and (vi) and (7) the aggregate amount of cash consideration paid during such fiscal year by the Borrower and its consolidated Subsidiaries to make Permitted Acquisitions.

“Excluded Taxes” shall mean, with respect to the Administrative Agent, any Lender, the Issuing Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however denominated) and franchise taxes (in lieu of net income taxes), in each case imposed on it as a result of a present or former connection between any such recipient and the jurisdiction of the Official Body imposing such tax (other than any such connection arising solely from such recipient’s having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Loan Document), (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower is located, (c) in the case of a Foreign Lender, any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new lending office), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 4.8.1, (d) any withholding taxes (including backup withholding taxes) that are attributable to such recipient’s failure or inability (other than as a result of a Change in Law) to (i) comply with Section 4.8.5 or (ii) certify (where prescribed by applicable Law or upon reasonable request by the Borrower or the Administrative Agent) that such recipient is not subject to backup withholding tax, and (e) any withholding tax imposed on a Foreign Lender as a result of such Foreign Lender’s failure to comply with FATCA.

“Executive Order No. 13224” shall mean the Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.

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“Existing Credit Agreement” shall mean the Credit Agreement, dated as of December 8, 2005 among Holdings, the Borrower, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, as heretofore amended.

“Expiration Date” shall mean December 15, 2015.

“FATCA” shall mean Section 1471 through 1474 of the Code and any regulations or official interpretations thereof.

“Federal Funds Effective Rate” for any day shall mean the rate per annum (based on a year of 360 days and actual days elapsed and rounded upward to the nearest 1/100 of 1%) announced by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted average of the rates on overnight federal funds transactions arranged by federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank (or any successor) in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the “Federal Funds Effective Rate” as of the date of this Agreement; provided, if such Federal Reserve Bank (or its successor) does not announce such rate on any day, the “Federal Funds Effective Rate” for such day shall be the Federal Funds Effective Rate for the last day on which such rate was announced.

“Federal Funds Open Rate” for any day shall mean the rate per annum (based on a year of 360 days and actual days elapsed) which is the daily federal funds open rate as quoted by ICAP North America, Inc. (or any successor) as set forth on the Bloomberg Screen BTMM for that day opposite the caption “OPEN” (or on such other substitute Bloomberg Screen that displays such rate), or as set forth on such other recognized electronic source used for the purpose of displaying such rate as selected by the Administrative Agent (for purposes of this definition, an “Alternate Source”) (or if such rate for such day does not appear on the Bloomberg Screen BTMM (or any substitute screen) or on any Alternate Source, or if there shall at any time, for any reason, no longer exist a Bloomberg Screen BTMM (or any substitute screen) or any Alternate Source, a comparable replacement rate determined by the Administrative Agent at such time (which determination shall be conclusive absent manifest error); provided however, that if such day is not a Business Day, the Federal Funds Open Rate for such day shall be the “open” rate on the immediately preceding Business Day. If and when the Federal Funds Open Rate changes, the rate of interest hereunder will change automatically without notice to the Borrower, effective on the date of any such change.

“Financial Covenants” shall have the meaning specified in Section 8.3.

“Foreign Lender” shall mean any Lender that is organized under the Laws of a jurisdiction other than that in which the Borrower is resident for tax purposes. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

“Foreign Subsidiary” shall mean any Subsidiary of the Borrower that is not a Domestic Subsidiary.

“Fully Secured” shall mean, with respect to any Undrawn L/C Obligations as of any date, that, on or before such date, such Undrawn L/C Obligations shall have been secured by

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(i) the grant to the Issuing Lender by the Borrower of a first priority, perfected security interest in, and Lien on, (a) cash or Cash Equivalents in an amount at least equal to the excess, if any, of the amount of such Undrawn L/C Obligations over the amount of the aggregate Commitments of all of the Lenders on such date, or (b) other collateral security which is acceptable to the Issuing Lender or (ii) delivery to the Issuing Lender of letters of credit in a face amount at least equal to the excess, if any, of the amount of such Undrawn L/C Obligations over the amount of the aggregate Commitments of all of the Lenders on such date and otherwise in form and substance, and from a letter of credit issuer, reasonably satisfactory to the Issuing Lender.

“Funded Debt” shall mean as to any Person, all Indebtedness of such Person that matures more than one year from the date of its creation or matures within one year from such date but is renewable or extendible, at the option of such Person, to a date more than one year from such date or arises under a revolving credit or similar agreement that obligates the lender or lenders to extend credit during a period of more than one year from such date, including all current maturities and current sinking fund payments in respect of such Indebtedness whether or not required to be paid within one year from the date of its creation and, in the case of the Borrower, Indebtedness in respect of the Loans.

“GAAP” shall mean generally accepted accounting principles as are in effect from time to time, subject to the provisions of Section 1.3, and applied on a consistent basis both as to classification of items and amounts; provided, that if the Borrower reasonably determines that it is required to prepare and maintain its financial statements in accordance with International Financial Reporting Standards, “GAAP” shall, upon prior written notice to the Administrative Agent pursuant to Section 7.1.7 hereof, mean International Financial Reporting Standards as are in effect from time to time, subject to the provisions of Section 1.3.

“Group Members” shall mean the collective reference to Holdings, the Borrower and their respective Subsidiaries.

“Guarantee and Collateral Agreement” shall mean the Guarantee and Collateral Agreement in substantially the form of Exhibit 1.1(G)(2) executed and delivered by the Borrower and each of the Guarantors.

“Guarantee Obligation” shall mean as to any Person (the “guaranteeing person”), any obligation of (a) the guaranteeing person or (b) another Person (including any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the “primary obligations”) of any other third Person (the “primary obligor”) in any manner, whether directly or indirectly, including any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided,

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however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person’s maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith.

“Guarantor” shall mean each of the parties to this Agreement which is designated as a “Guarantor” on the signature page of the Guarantee and Collateral Agreement and each other Person which joins the Guarantee and Collateral Agreement as a Guarantor after the date hereof.

“Guaranty” of any Person shall mean any obligation of such Person guaranteeing or in effect guaranteeing any liability or obligation of any other Person in any manner, whether directly or indirectly, including any agreement to indemnify or hold harmless any other Person, any performance bond or other suretyship arrangement and any other form of assurance against loss, in each case except endorsement of negotiable or other instruments for deposit or collection in the ordinary course of business.

“Hedge Agreements” shall mean all interest rate swaps, caps or collar agreements or similar arrangements dealing with interest rates or currency exchange rates or the exchange of nominal interest obligations, either generally or under specific contingencies.

“Holdings” shall mean Flavor Holdings, Inc., a Delaware corporation.

“ICC” shall have the meaning specified in Section 10.11.1.

“Immaterial Foreign Subsidiary” shall mean any Foreign Subsidiary whose (i) assets, (ii) revenues and (iii) earnings before interest, taxes, depreciation and amortization (excluding intercompany receivables and revenues that would be eliminated upon consolidation in accordance with GAAP), at the time of determination (determined, in the case of clauses (ii) and (iii), in respect of the most recent period of four consecutive fiscal quarters of the Borrower for which the relevant financial information is available), in each case do not exceed $1,000,000.

“Indebtedness” of any Person at any date, without duplication, (i) all indebtedness of such Person for borrowed money, (ii) all obligations of such Person for the deferred purchase price of services or property, which purchase price (a) is due twelve months or more from the date of incurrence of the obligation in respect thereof or (b) customarily or actually is evidenced by a note or other written instrument (other than current trade payables incurred in the ordinary course of such Person’s business, (iii) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (iv) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the

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event of default are limited to repossession or sale of such property), (v) all Capital Lease Obligations of such Person, (vi) all obligations of such Person, contingent or otherwise, as an account party or applicant under or in respect of acceptances, letters of credit, surety bonds or similar arrangements, (vii) the liquidation value of all Disqualified Capital Stock of such Person, (viii) all Guarantee Obligations of such Person in respect of obligations of the kind referred to in clauses (i) through (vii) above, (ix) all obligations of the kind referred to in clauses (i) through (viii) above secured by any Lien on property (including accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation, and (x) for the purposes of Sections 7.2.10 and 8.1.5 only, all obligations of such Person in respect of Hedge Agreements. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness expressly provide that such Person is not liable therefor. Notwithstanding the foregoing, the term “Indebtedness” shall only include contingent post-closing purchase price adjustments and/or earn-outs payable to a seller in connection with any Permitted Acquisition to the extent such post-closing purchase price adjustments and/or earn-outs are reflected as liabilities on such Person’s balance sheet in accordance with GAAP.

“Indemnified Taxes” shall mean Taxes other than Excluded Taxes.

“Indemnitee” shall have the meaning specified in Section 10.3.2.

“Information” shall mean all information received from the Loan Parties or any of their Subsidiaries relating to the Loan Parties or any of such Subsidiaries or any of their respective businesses, other than any such information that is available to the Administrative Agent, any Lender or the Issuing Lender on a non-confidential basis prior to disclosure by the Loan Parties or any of their Subsidiaries.

“Insolvency” shall mean respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA.

“Insolvency Proceeding” shall mean, with respect to any Person, (i) a case, action or proceeding with respect to such Person (a) before any court or any other Official Body under any bankruptcy, insolvency, reorganization or other similar Law now or hereafter in effect, or (b) for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator (or similar official) of any Loan Party or otherwise relating to the liquidation, dissolution, winding-up or relief of such Person, or (ii) any general assignment for the benefit of creditors, composition, marshaling of assets for creditors, or other, similar arrangement in respect of such Person’s creditors generally or any substantial portion of its creditors; undertaken under any Law.

“Intellectual Property” shall mean the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, technology, know-how and processes, and all rights to sue at law

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or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.

“Interest Period” shall mean the period of time selected by the Borrower in connection with (and to apply to) any election permitted hereunder by the Borrower to have Revolving Credit Loans bear interest under the LIBOR Rate Option. Subject to the last sentence of this definition, such period shall be one, two, three or six Months. Such Interest Period shall commence on the effective date of such LIBOR Rate Option, which shall be (i) the Borrowing Date if the Borrower is requesting new Loans, or (ii) the date of renewal of or conversion to the LIBOR Rate Option if the Borrower is renewing or converting to the LIBOR Rate Option applicable to outstanding Loans. Notwithstanding the second sentence hereof: (A) any Interest Period which would otherwise end on a date which is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, and (B) the Borrower shall not select, convert to or renew an Interest Period for any portion of the Loans that would end after the Expiration Date.

“Interest Rate Option” shall mean any LIBOR Rate Option or Base Rate Option.

“IRS” shall mean the Internal Revenue Service.

“ISP98” shall have the meaning specified in Section 10.11.1.

“Issuing Lender” shall mean PNC, in its individual capacity as issuer of Letters of Credit hereunder, and any other Lender that becomes the Issuing Lender in accordance with the last paragraph of Section 9.6.

“Law” shall mean any law (including common law), constitution, statute, treaty, regulation, rule, ordinance, opinion, release, ruling, order, injunction, writ, decree, judgment, authorization or approval of, or award by or settlement agreement with, any Official Body.

“Lender Provided Hedge Agreements” shall mean a Hedge Agreement entered into with any Lender or its Affiliate and with respect to which the Administrative Agent confirms: (i) is documented in a standard International Swap Dealer Association Agreement, and (ii) provides for the method of calculating the reimbursable amount of the provider’s credit exposure in a reasonable and customary manner.

“Lenders” shall mean the financial institutions named on Schedule 1.1(B) and their respective successors and assigns as permitted hereunder, each of which is referred to herein as a Lender. For the purpose of any Loan Document which provides for the granting of a security interest or other Lien to the Lenders or to the Administrative Agent for the benefit of the Lenders as security for the Obligations, “Lenders” shall include any Affiliate of a Lender to which Obligations in respect of Lender-Provided Hedge Agreements, Other Lender Provided Financial Services Products or indemnification obligations under the Loan Documents are owed.

“Letter of Credit” shall have the meaning specified in Section 2.8.1 .

“Letter of Credit Borrowing” shall have the meaning specified in Section 2.8.3.

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“Letter of Credit Collateral Account” shall have the meaning specified in Section 2.8.13(c)(iii)(D).

“Letter of Credit Fee” shall have the meaning specified in Section 2.8.2 .

“Letter of Credit Obligation” shall mean, as of any date of determination, the aggregate amount available to be drawn under all outstanding Letters of Credit on such date plus the aggregate Reimbursement Obligations and Letter of Credit Borrowings on such date.

“Letter of Credit Sublimit” shall have the meaning specified in Section 2.8.1 .

“LIBOR Rate” shall mean, with respect to the Loans comprising any Borrowing Tranche to which the LIBOR Rate Option applies for any Interest Period, the interest rate per annum determined by the Administrative Agent by dividing (the resulting quotient rounded upwards, if necessary, to the nearest 1/100th of 1% per annum) (i) the rate which appears on the Bloomberg Page BBAM1 (or on such other substitute Bloomberg page that displays rates at which US dollar deposits are offered by leading banks in the London interbank deposit market), or the rate which is quoted by another source selected by the Administrative Agent which has been approved by the British Bankers’ Association as an authorized information vendor for the purpose of displaying rates at which US dollar deposits are offered by leading banks in the London interbank deposit market (for purposes of this definition, an “Alternate Source”), at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period as the London interbank offered rate for U.S. Dollars for an amount comparable to such Borrowing Tranche and having a borrowing date and a maturity comparable to such Interest Period (or if there shall at any time, for any reason, no longer exist a Bloomberg Page BBAM1 (or any substitute page) or any Alternate Source, a comparable replacement rate determined by the Administrative Agent at such time (which determination shall be conclusive absent manifest error)), by (ii) a number equal to 1.00 minus the LIBOR Reserve Percentage. LIBOR may also be expressed by the following formula:

London interbank offered rates quoted by Bloomberg

LIBOR Rate = or appropriate successor as shown on Bloomberg Page BBAM1

1.00 - LIBOR Reserve Percentage

The LIBOR Rate shall be adjusted with respect to any Loan to which the LIBOR Rate Option applies that is outstanding on the effective date of any change in the LIBOR Reserve Percentage as of such effective date. The Administrative Agent shall give prompt notice to the Borrower of the LIBOR Rate as determined or adjusted in accordance herewith, which determination shall be conclusive absent manifest error.

“LIBOR Rate Option” shall mean the option of the Borrower to have Loans bear interest at the rate and under the terms set forth in Section 3.1.1 (ii).

“LIBOR Reserve Percentage” shall mean as of any day the maximum percentage in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirements (including supplemental, marginal and

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emergency reserve requirements) with respect to eurocurrency funding (currently referred to as “Eurocurrency Liabilities”) maintained by a member bank of the Federal Reserve System.

“Lien” means, with respect to any asset, (i) any mortgage, deed of trust, lien, pledge, hypothecation, charge, security interest or other encumbrance on, in or of such asset, (ii) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing, but excluding any operating lease) relating to such asset and (iii) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. “Lien” shall not include any license of any Intellectual Property.

“Loan Documents” shall mean this Agreement, the Administrative Agent’s Letter, the Notes, the Security Documents, the Perfection Certificate, the Cash Management Agreement and any other instruments, certificates or documents delivered in connection herewith or therewith, in each case as amended, supplemented or modified from time to time.

“Loan Parties” shall mean the Borrower and the Guarantors.

“Loan Request” shall have the meaning specified in Section 2.4.1.

“Loans” shall mean collectively and “Loan” shall mean separately all Revolving Credit Loans and Swing Loans or any Revolving Credit Loan or Swing Loan.

“M & F Worldwide” shall mean M & F Worldwide Corp., a Delaware corporation.

“Mafco Assignment and Assumption Agreement” shall mean that certain Assignment and Assumption Agreement, dated as of October 29, 2004, between Pneumo Abex Corporation, as assignor, and the Borrower, as assignee, as attached hereto as Exhibit 1.1(m) hereto, as the same may be amended, supplemented or otherwise modified to the extent permitted by Section 7.2.11.

“Material Adverse Effect” shall mean a material adverse effect on (i) the business, property, operations or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole or (ii) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights or remedies of the Administrative Agent or the Lenders hereunder or thereunder.

“Materials of Environmental Concern” shall mean any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.

“Month” with respect to an Interest Period under the LIBOR Rate Option, shall mean the interval between the days in consecutive calendar months numerically corresponding to the first day of such Interest Period. If any LIBOR Rate Interest Period begins on a day of a calendar month for which there is no numerically corresponding day in the month in which such

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Interest Period is to end, the final month of such Interest Period shall be deemed to end on the last Business Day of such final month.

“Moody’s” shall mean Moody’s Investors Service, Inc. or any successor.

“Multiemployer Plan” shall mean any employee benefit plan which is a “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA and to which the Borrower or any ERISA Affiliate is then making or accruing an obligation to make contributions or, within the preceding five Plan years, has made or had an obligation to make such contributions.

“Non-Consenting Lender” shall have the meaning specified in Section 10.1.4.

“Non-Defaulting Lender” shall mean, at any time, any Lender that is not a Defaulting Lender at such time.

“Notes” shall mean, collectively, the Revolving Credit Notes and the Swing Loan Note.

“Obligations” shall mean the unpaid principal of and interest on (including interest accruing after the maturity of the Loans, Reimbursement Obligations and Letter of Credit Borrowings and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans and all other obligations and liabilities of the Borrower to the Administrative Agent or to any Lender (or, in the case of Lender-Provided Hedge Agreements and Other Lender Provided Financial Services Products, any Lender Affiliate), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document, the Letters of Credit, any Lender-Provided Hedge Agreements, Other Lender Provided Financial Services Products or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including all fees, charges and disbursements of counsel to the Administrative Agent or to any Lender that are required to be paid by the Borrower pursuant hereto) or otherwise.

“Official Body” shall mean the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

“Order” shall have the meaning specified in Section 2.8.9.

“Other Lender Provided Financial Service Product” shall mean agreements or other arrangements under which any Lender or Affiliate of a Lender provides any of the following products or services to any of the Loan Parties: (a) credit cards, (b) credit card processing services, (c) debit cards, (d) purchase cards, (e) ACH transactions, (f) cash

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management, including controlled disbursement, accounts or services, or (g) foreign currency exchange.

“Other Taxes” shall mean all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.

“Participant” has the meaning specified in Section 10.8.4 .

“Participation Advance” shall have the meaning specified in Section 2.8.3.

“Payment Date” shall mean the first day of each calendar quarter after the date hereof and on the Expiration Date or upon acceleration of the Loans.

“Payment in Full” shall mean, with respect to:

(i) the Payment Obligations as of any date, that on or before such date, (a) the principal of and interest accrued to such date on such Payment Obligations shall have been paid in full in cash (other than the Undrawn L/C Obligations), (b) all Undrawn L/C Obligations shall have been Fully Secured, (c) all fees, expenses and other amounts then due and payable which constitute Payment Obligations (other than the Undrawn L/C Obligations) shall have been paid in full in cash and (d) the Commitments shall have expired or irrevocably been terminated; and

(ii) the Obligations (and the Borrower Obligations (as defined in the Guarantee and Collateral Agreement)) as of any date, that, on or before such date, (a) there shall have been Payment in Full of the Payment Obligations (as provided in clause (i) above) and (b) the Lender Provided Hedge Agreements shall have been terminated or all obligations thereunder (other than for fees, expenses and indemnities) shall have been cash collateralized and all fees, expenses and indemnity payments then due and payable thereunder shall have been paid in full in cash.

“Payment Obligations” shall mean (i) all principal, interest, fees, charges, expenses, attorneys’ fees and disbursements, indemnities, reimbursement obligations and any other amounts payable by any Loan Party under any Loan Document (including, without limitation, the Letter of Credit Obligations and interest accruing at the then applicable rate provided for herein after the maturity of the Loans to the extent any Loans are then outstanding and interest accruing at the then applicable rate provided for herein after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding relating to the Borrower whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) and (ii) any amount in respect of any of the foregoing that the Administrative Agent or any Lender, in its sole discretion, may elect to pay or advance under this Agreement on behalf of such Loan Party after the occurrence and during the continuance of a Potential Default or an Event of Default.

“PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA or any successor.

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“Pension Plan” shall mean any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by Borrower or any ERISA Affiliate or to which the Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any times during the immediately preceding five plan years.

“Perfection Certificate” shall mean that certain Perfection Certificate delivered by the Loan Parties pursuant to Section 6.1.1(i).

“Permitted Acquisition” shall mean the purchase or other acquisition by the Borrower or any other Subsidiary of Capital Stock in, or all or substantially all the assets of (or all or substantially all the assets constituting a business unit, division, product line or line of business of), any Person if:

(i) in the case of any purchase or other acquisition of Capital Stock in a Person, such Person will be a Wholly Owned Subsidiary (including as a result of a merger or consolidation between any Subsidiary and such Person) or (ii) in the case of any purchase or other acquisition of other assets, such assets will be owned by the Borrower or a Subsidiary thereof; provided that

(a) such purchase or acquisition was not preceded by, or consummated pursuant to, an unsolicited tender offer or proxy contest initiated by or on behalf of Holdings, the Borrower or any other Subsidiary,

(b) all transactions related thereto are consummated in accordance with applicable Law in all material respects,

(c) the business of such Person and its Subsidiaries (collectively, the “Acquired Person”), or such assets, as the case may be, constitute a business of the type conducted by the Borrower and its Subsidiaries on the date hereof and/or businesses reasonably related thereto,

(d) with respect to each such purchase or other acquisition, the Borrower has complied with the provisions of Section 7.1.9 to the extent applicable,

(e) at the time of and immediately after giving effect to any such purchase or other acquisition, (I) no Potential Default shall have occurred and be continuing, (II) Holdings and the Borrower shall be in compliance with the covenants set forth in Sections 7.2.1(i) and (ii) as of the last day of the most recently ended fiscal quarter for which financial statements shall have been delivered (or are required to be delivered) on a pro forma basis and (III) Holdings and the Borrower shall have delivered to the Administrative Agent a certificate of an Authorized Officer of each of Holdings and the Borrower, in a form reasonably satisfactory to the Administrative Agent, certifying that all the requirements set forth in this definition have been satisfied with respect to such purchase or other

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acquisition, together with reasonably detailed calculations demonstrating satisfaction of the requirement set forth in clause (e)(II) above.

“Permitted Cure Securities” shall mean (i) common Capital Stock of Holdings or (ii) other Capital Stock of Holdings that is not Disqualified Capital Stock and upon which all dividends or distributions, if any, are payable in additional shares of such Capital Stock.

“Permitted Exceptions” shall have the meaning specified in Section 7.2.2.

“Permitted Transferees” shall mean with respect to any Person that is a natural person (and any Permitted Transferee of such Person), (a) such Person’s immediate family, including his or her spouse, ex-spouse, children, step-children and their respective lineal descendants and (b) any trust or other legal entity the beneficiary of which is such Person’s immediate family, including his or her spouse, ex-spouse, children, step-children or their respective lineal descendants and which is controlled by such Person.

“Person” shall mean any individual, corporation, partnership, limited liability company, association, joint-stock company, trust, unincorporated organization, joint venture, government or political subdivision or agency thereof, or any other entity.

“Plan” shall mean at any time an employee pension benefit plan (including a multiple employer plan described in Section 413(c) of the Code, but not a Multiemployer Plan) which is covered by Title IV of ERISA or is subject to the minimum funding standards under Sections 412 and 430 of the Code and Sections 302 and 303 of ERISA and either (i) is maintained by the Borrower or any ERISA Affiliate for employees of the Borrower or any ERISA Affiliate or (ii) has at any time within the preceding five years been maintained by the Borrower or any ERISA Affiliate for employees of the Borrower or any ERISA Affiliate.

“PNC” shall mean PNC Bank, National Association, its successors and assigns.

“Potential Default” shall mean the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied.

“Prime Rate” shall mean the interest rate per annum announced from time to time by the Administrative Agent at its Principal Office as its then prime rate, which rate may not be the lowest or most favorable rate then being charged commercial borrowers or others by the Administrative Agent. Any change in the Prime Rate shall take effect at the opening of business on the day such change is announced.

“Principal Office” shall mean the main banking office of the Administrative Agent in Pittsburgh, Pennsylvania.

“Pro Forma Balance Sheet” shall have the meaning specified in Section 5.1.1(i).

“Projections” shall have the meaning specified in Section 7.1.2(iii).

“Properties” shall have the meaning specified in Section 5.1.15(i).

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“Published Rate” shall mean the rate of interest published each Business Day in The Wall Street Journal “Money Rates” listing under the caption “London Interbank Offered Rates” for a one month period (or, if no such rate is published therein for any reason, then the Published Rate shall be the rate at which U.S. dollar deposits are offered by leading banks in the London interbank deposit market for a one month period as published in another publication selected by the Administrative Agent); provided that, with respect to any day that is not a Business Day, the “Published Rate” shall be the Published Rate on the immediately preceding Business Day.

“Ratable Share” shall mean the proportion that a Lender’s Commitment (excluding the Swing Loan Commitment) bears to the Commitments (excluding the Swing Loan Commitment) of all of the Lenders. If the Commitments have terminated or expired, the Ratable Shares shall be determined based upon the Commitments (excluding the Swing Loan Commitment) most recently in effect, giving effect to any assignments.

“Regulation U” shall mean Regulation U of the Board as in effect from time to time.

“Reimbursement Obligation” shall have the meaning specified in Section 2.8.3.1.

“Related Parties” shall mean, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents and advisors of such Person and of such Person’s Affiliates.

“Reorganization” shall mean, with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA.

“Reportable Events” shall mean any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .27, .28, .29, .30, .31, .32, .34, or .35 of PBGC Reg. § 4043.

“Required Lenders” shall mean Lenders, excluding any Defaulting Lenders, having at least 50.1% of the sum of the aggregate amount of the Revolving Credit Commitments of the Lenders (excluding any Defaulting Lender) or, after the termination of the Revolving Credit Commitments, at least 50.1% of the sum of the aggregate outstanding principal amount of the Revolving Credit Loans and the Ratable Shares of the Lenders (excluding any Defaulting Lender) of the Letter of Credit Obligations and the principal amount of the Swing Loans then outstanding; provided that, at any time that there is at least two (2) Non-Defaulting Lenders, it shall take at least two Non-Defaulting Lenders to constitute Required Lenders.

“Required Share” shall have the meaning assigned to such term in Section 4.10.

“Requirement of Law” shall mean as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of any arbitrator or a court or any Official Body in each case applicable to or binding upon such Person or any of its property or to which such Person or its property is bound.

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“Restricted Payment” shall mean (i) any payment by Holdings, the Borrower or any of its Subsidiaries of a dividend (other than a dividend payable solely in the same class of Capital Stock of the Borrower or Holdings, as the case may be) on, or any payment on account of the purchase, redemption or retirement of, or any other distribution on, any shares of any class of Capital Stock of Holdings or the Borrower (including any such payment or distribution in cash or in property or obligations of Holdings, the Borrower or any of its Subsidiaries), (ii) any loan or advance by Holdings, the Borrower or any of its Subsidiaries to any Affiliate of Holdings or the Borrower or (iii) the payment by Holdings, the Borrower or any of its Subsidiaries of any management or administrative fee to any Affiliate of Holdings or the Borrower.

“Revolving Credit Commitment” shall mean, as to any Lender at any time, the amount initially set forth opposite its name on Schedule 1.1(B) in the column labeled “Amount of Commitment for Revolving Credit Loans,” as such Commitment is thereafter assigned or modified and “Revolving Credit Commitments” shall mean the aggregate Revolving Credit Commitments of all of the Lenders.

“Revolving Credit Loans” shall mean collectively and “Revolving Credit Loan” shall mean separately all Revolving Credit Loans or any Revolving Credit Loan made by the Lenders or one of the Lenders to the Borrower pursuant to Section 2.1 or 2.8.3.

“Revolving Credit Notes” shall mean, collectively, the promissory notes substantially in the form of Exhibit 1.1(N)(1) evidencing the Revolving Credit Loans, together with all amendments, extensions, renewals, replacements, refinancings or refundings thereof in whole or in part.

“Revolving Facility Usage” shall mean at any time the sum of the outstanding principal amount of the Revolving Credit Loans, the outstanding principal amount of the Swing Loans, and the Letter of Credit Obligations.

“SEC” shall mean the Securities and Exchange Commission, any successor thereto and any analogous Official Body.

“Security Documents” shall mean the collective reference to the Guarantee and Collateral Agreement and all other security documents hereafter delivered to the Administrative Agent granting a Lien on any property of any Person to secure the obligations and liabilities of any Loan Party under any Loan Document.

“Settlement Date” shall mean the Business Day on which the Administrative Agent elects to effect settlement pursuant Section 4.10.

“Solvent” shall mean when used with respect to any Person, means that, as of any date of determination, (i) the amount of the “present fair saleable value” of the assets of such Person will, as of such date, exceed the amount of all “liabilities of such Person, contingent or otherwise”, as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (ii) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (iii) such Person will not have, as of such date, an unreasonably small amount of capital

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with which to conduct its business, and (iv) such Person will be able to pay its debts as they mature. For purposes of this definition, (a) “debt” means liability on a “claim”, and (b) “claim” means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured.

“Specified Capital Contribution” shall have the meaning specified in Section 8.3.

“Sponsor Group” shall mean the collective reference to (i) MacAndrews & Forbes Holdings Inc. and its direct and indirect Subsidiaries and Affiliates, (ii) Ronald O. Perelman, (iii) any of the directors or executive officers of MacAndrews & Forbes Holdings Inc. and (iv) any of their respective Permitted Transferees.

“Standard & Poor’s” shall mean Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc.

“Subsidiary” of any Person at any time shall mean any corporation, trust, partnership, any limited liability company or other business entity of which more than 50% of the outstanding voting securities or other interests normally entitled to vote for the election of one or more directors or trustees (regardless of any contingency which does or may suspend or dilute the voting rights) is at such time owned directly or indirectly by such Person or one or more of such Person’s Subsidiaries. Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.

“Swing Loan Commitment” shall mean PNC’s commitment to make Swing Loans to the Borrower pursuant to Section 2.1.2 hereof in an aggregate principal amount up to $5,000,000.

“Swing Line Collateral Account” shall have the meaning specified in Section 2.8.13(c)(iii).

“Swing Loan Lender” shall mean PNC in its capacity as the lender of Swing Loans.

“Swing Loan Note” shall mean the Swing Loan Note of the Borrower in the form of Exhibit 1.1(N)(2) evidencing the Swing Loans, together with all amendments, extensions, renewals, replacements, refinancings or refundings thereof in whole or in part.

“Swing Loan Request” shall mean a request for Swing Loans made in accordance with Section 2.4.2 hereof.

“Swing Loans” shall mean collectively and Swing Loan shall mean separately all Swing Loans or any Swing Loan made by PNC to the Borrower pursuant to Section 2.1.2 hereof.

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“Tax Agreement” shall mean the Tax Sharing Agreement, dated as of December 15, 2005, by and among M & F Worldwide, Harland-Clarke Holdings Corp. (formerly known as Clarke American Corp.) and PCT International Holdings Inc. and their respective Subsidiaries and any entities which become parties thereto pursuant to the terms thereof.

“Taxes” shall mean all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Official Body, including any interest, additions to tax or penalties applicable thereto.

“Total Debt” shall mean at any time, the sum (without duplication) of (i) the aggregate principal amount of all outstanding Indebtedness of the Borrower and its Subsidiaries and (ii) all outstanding Guarantee Obligations of the Borrower and its Subsidiaries in respect of Indebtedness of Persons other than the Borrower or any of its Subsidiaries (including, without limitation, all obligations of the Borrower and its Subsidiaries, contingent or otherwise, as an account party or applicant under or in respect of acceptances, letters of credit, surety bonds or similar arrangements).

“UCC” shall mean the Uniform Commercial Code as from time to time in effect in the State of New York.

“UCP” shall have the meaning specified in Section 10.11.1.

“Undrawn L/C Obligations” shall mean the portion, if any, of the Payment Obligations consisting of the contingent obligation of the Borrower to reimburse the Issuing Lender in respect of the then undrawn and unexpired portions of the Letters of Credit issued by the Issuing Lender pursuant to Section 2.8.

“USA Patriot Act” shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.

“Wholly Owned Subsidiary” shall mean as to any Person, any other Person all of the Capital Stock of which (other than directors’ qualifying shares required by law) is owned by such Person directly and/or through other Wholly Owned Subsidiaries.

1.2 Construction. Unless the context of this Agreement otherwise clearly requires, the following rules of construction shall apply to this Agreement and each of the other Loan Documents: (i) references to the plural include the singular, the plural, the part and the whole and the words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation”; (ii) the words “hereof,” “herein,” “hereunder,” “hereto” and similar terms in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document as a whole; (iii) article, section, subsection, clause, schedule and exhibit references are to this Agreement or other Loan Document, as the case may be, unless otherwise specified; (iv) reference to any Person includes such Person’s successors and assigns; (v) reference to any agreement, including this Agreement and any other Loan Document together with the schedules and exhibits hereto or thereto, document or instrument means such agreement, document or instrument as amended, modified, replaced, substituted for, superseded or restated; (vi) relative

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to the determination of any period of time, “from” means “from and including,” “to” means “to but excluding,” and “through” means “through and including”; (vii) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights, (viii) section headings herein and in each other Loan Document are included for convenience and shall not affect the interpretation of this Agreement or such Loan Document, and (ix) unless otherwise specified, all references herein to times of day shall be references to Eastern Time.

1.3 Accounting Principles. Except as otherwise expressly provided herein, all terms of an accounting or financial nature used herein shall be construed in accordance with GAAP as in effect from time to time; provided that if the Borrower, by notice to the Administrative Agent, shall request an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent or the Required Lenders, by notice to the Borrower, shall request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then (i) the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such provision to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Borrower and the Required Lenders) and (ii) such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith, and the Borrower shall provide to the Administrative Agent, when it delivers its financial statements pursuant to any provision hereof, such reconciliation statements as shall be reasonably requested by the Administrative Agent.

2. REVOLVING CREDIT AND SWING LOAN FACILITIES

2.1 Revolving Credit Commitments.

2.1.1 Revolving Credit Loans. Subject to the terms and conditions hereof and relying upon the representations and warranties herein set forth, each Lender severally agrees to make Revolving Credit Loans to the Borrower at any time or from time to time on or after the date hereof to the Expiration Date; provided that after giving effect to each such Loan (i) the aggregate principal amount of Revolving Credit Loans from such Lender shall not exceed such Lender’s Revolving Credit Commitment minus the aggregate amount of such Lender’s Ratable Share of the Letter of Credit Obligations and the principal amount of the Swing Loans then outstanding and (ii) the Revolving Facility Usage shall not exceed the Revolving Credit Commitments. Within such limits of time and amount and subject to the other provisions of this Agreement, the Borrower may borrow, repay and reborrow pursuant to this Section 2.1.

2.1.2 Swing Loan Commitment. Subject to the terms and conditions hereof and relying upon the representations and warranties herein set forth, and in order to facilitate loans and repayments between Settlement Dates, PNC may, at its option, cancelable at any time for any reason whatsoever, make swing loans (the “Swing Loans”) to the Borrower at any time or from time to time after the date hereof to, but not including, the Expiration Date, in an aggregate principal amount up to but not in excess of the Swing Loan Commitment; provided that after

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giving effect to such Loan, the Revolving Facility Usage shall not exceed the Revolving Credit Commitments. Within such limits of time and amount and subject to the other provisions of this Agreement, the Borrower may borrow, repay and reborrow pursuant to this Section 2.1.2 .

2.2 Nature of Lenders’ Obligations with Respect to Revolving Credit Loans. Each Lender shall be obligated to participate in each request for Revolving Credit Loans pursuant to Section 2.4 in accordance with its Ratable Share. The aggregate principal amount of each Lender’s Revolving Credit Loans outstanding hereunder to the Borrower at any time shall never exceed its Revolving Credit Commitment minus its Ratable Share of the sum of (i) the principal amount of the Swing Loans then outstanding and (ii) the Letter of Credit Obligations at such time. The obligations of each Lender hereunder are several. The failure of any Lender to perform its obligations hereunder shall not affect the obligation of the Borrower to any other party nor shall any other party be liable for the failure of such Lender to perform its obligations hereunder. The Lenders shall have no obligation to make Revolving Credit Loans hereunder on or after the Expiration Date.

2.3 Commitment Fees. Accruing from the date hereof until the Expiration Date, the Borrower agrees to pay to the Administrative Agent for the account of each Lender according to its Ratable Share, a nonrefundable commitment fee (the “Commitment Fee”) equal to the Applicable Commitment Fee Rate (computed on the basis of a year of 360 days and actual days elapsed) multiplied by the average daily difference between the amount of (i) the Revolving Credit Commitments (for purposes of this computation, PNC’s Swing Loans shall be deemed to be borrowed amounts under its Revolving Credit Commitment) and (ii) the Revolving Facility Usage. All Commitment Fees shall be payable in arrears on each Payment Date.

2.4 Revolving Credit Loan Requests; Swing Loan Requests.

2.4.1 Revolving Credit Loan Requests. The Borrower may from time to time prior to the Expiration Date request the Lenders to make Revolving Credit Loans, or renew or convert the Interest Rate Option applicable to existing Revolving Credit Loans pursuant to Section 3.2, by delivering to the Administrative Agent, not later than 10:00 a.m., (i) three (3) Business Days prior to the proposed Borrowing Date with respect to the making of Revolving Credit Loans to which the LIBOR Rate Option applies or the conversion to or the renewal of the LIBOR Rate Option for any Loans; and (ii) the same Business Day of the proposed Borrowing Date with respect to the making of a Revolving Credit Loan to which the Base Rate Option applies or the last day of the preceding Interest Period with respect to the conversion to the Base Rate Option for any Loan, of a duly completed request therefor substantially in the form of Exhibit 2.4.1 or a request by telephone immediately confirmed in writing by letter, facsimile or telex in such form (each, a “Loan Request”), it being understood that the Administrative Agent may rely on the authority of any individual making such a telephonic request without the necessity of receipt of such written confirmation. Any Revolving Credit Loans made on the Closing Date shall be Loans to which the Base Rate Option applies. Each Loan Request shall be irrevocable and shall specify the aggregate amount of the proposed Loans comprising each Borrowing Tranche, and, if applicable, the Interest Period, which amounts shall be in (x) integral multiples of $100,000 and not less than $1,000,000 for each Borrowing Tranche under the LIBOR Rate Option, and (y) integral multiples of $1,000,000 and not less than $100,000 for each Borrowing Tranche under the Base Rate Option (or, if the then aggregate amount available

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for borrowing under the Revolving Credit Commitments is less than $1,000,000, such lesser amount).

2.4.2 Swing Loan Requests. The Borrower may from time to time prior to the Expiration Date request PNC to make Swing Loans by delivery to PNC not later than 12:00 noon on the proposed Borrowing Date of a duly completed request therefor substantially in the form of Exhibit 2.4.2 hereto or a request by telephone immediately confirmed in writing by letter, facsimile or telex (each, a “Swing Loan Request”), it being understood that the Administrative Agent may rely on the authority of any individual making such a telephonic request without the necessity of receipt of such written confirmation. Each Swing Loan Request shall be irrevocable and shall specify the proposed Borrowing Date and the principal amount of such Swing Loan, which shall be in integral multiples of $100,000 and not less than $100,000. In addition to making Swing Loans pursuant to the provisions specified herein, without the requirement for a specific request from the Borrower, PNC may make Swing Loans to the Borrower in accordance with the provisions of any agreements between the Borrower and PNC relating to the Borrower’s deposit, sweep and other accounts at PNC and related arrangements and agreements regarding the management and investment of the Borrower’s cash assets that are satisfactory to the Administrative Agent and PNC (individually and collectively, the “Cash Management Agreement”) to the extent of the daily aggregate net negative balance in the Borrower’s accounts which are subject to the provisions of the Cash Management Agreement. Swing Loans made in accordance with the provisions of the Cash Management Agreement shall (i) be subject to the limitations as to aggregate amount of Swing Loans set forth herein, (ii) not be subject to the limitations as to individual amount set forth herein, (iii) be payable by the Borrower, both as to principal and interest, at the times set forth in the Cash Management Agreement (but in no event later than the Expiration Date), (iv) not be made at any time after the Required Lenders shall have notified PNC (with a copy to the Administrative Agent) in writing that, as a result of one or more events or circumstances described in such notice, one or more of the conditions precedent set forth in Section 6.2(i) or (ii) would not be satisfied if such Swing Loan were then made (unless PNC shall be satisfied in its sole discretion that the events and circumstances described in such notice shall have been cured or otherwise shall have ceased to exist), and (v) if not repaid by the Borrower in accordance with the provisions of the Cash Management Agreement, shall be subject to each Lender’s obligations hereunder with respect to Swing Loans, including without limitation under Section 2.5.5. If the Cash Management Agreement is in effect, Swing Loans shall only be made pursuant to the Cash Management Agreement.

2.5 Making Revolving Credit Loans and Swing Loans; Presumptions by the Administrative Agent; Repayment of Revolving Credit Loans; Borrowings to Repay Swing Loans.

2.5.1 Making Revolving Credit Loans. The Administrative Agent shall, promptly after receipt by it of a Loan Request pursuant to Section 2.4, notify the Lenders of its receipt of such Loan Request specifying the information provided by the Borrower and the apportionment among the Lenders of the requested Revolving Credit Loans as determined by the Administrative Agent in accordance with Section 2.2. Each Lender shall remit the principal amount of each Revolving Credit Loan to the Administrative Agent such that the Administrative Agent is able to, and the Administrative Agent shall, to the extent the Lenders have made funds available to it for such purpose and subject to Section 6.2, fund such Revolving Credit Loans to

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the Borrower in U.S. Dollars and immediately available funds at the Principal Office prior to 2:00 p.m., on the applicable Borrowing Date; provided that if any Lender fails to remit such funds to the Administrative Agent in a timely manner, the Administrative Agent may elect in its sole discretion to fund with its own funds the Revolving Credit Loans of such Lender on such Borrowing Date, and such Lender shall be subject to the repayment obligation in Section 2.5.2 .

2.5.2 Presumptions by the Administrative Agent. Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Loan that such Lender will not make available to the Administrative Agent such Lender’s share of such Loan, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.5.1 and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Loan available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of a payment to be made by such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation and (ii) in the case of a payment to be made by the Borrower, the interest rate applicable to Loans under the Base Rate Option. If such Lender pays its share of the applicable Loan to the Administrative Agent, then the amount so paid shall constitute such Lender’s Loan. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent.

2.5.3 Making Swing Loans. So long as PNC elects to make Swing Loans, PNC shall, after receipt by it of a Swing Loan Request pursuant to Section 2.4.2 , fund such Swing Loan to the Borrower in U.S. Dollars and immediately available funds at the Principal Office prior to 4:00 o’clock p.m. on the Borrowing Date.

2.5.4 Repayment of Revolving Credit Loans. The Borrower shall repay the Revolving Credit Loans together with all outstanding interest thereon on the Expiration Date.

2.5.5 Borrowings to Repay Swing Loans. PNC may, at its option, exercisable at any time for any reason whatsoever, demand repayment of the Swing Loans, and each Lender shall make a Revolving Credit Loan in an amount equal to (or otherwise acquire a participation interest in the Swing Loans in an amount equal to) such Lender’s Ratable Share of the aggregate principal amount of the outstanding Swing Loans, plus, if PNC so requests, accrued interest thereon. Revolving Credit Loans made pursuant to the preceding sentence shall bear interest at the Base Rate Option and shall be deemed to have been properly requested in accordance with Section 2.4.1 without regard to any of the requirements of that provision, including whether a Potential Default or Event of Default exists (including under Section 8.1.6). PNC shall provide notice to the Lenders (which may be telephonic or written notice by letter, facsimile or telex) that such Revolving Credit Loans are to be made under this Section 2.5.5 and of the apportionment among the Lenders, and the Lenders shall be unconditionally obligated to fund such Revolving Credit Loans (whether or not the conditions specified in Section 2.4.1 are then satisfied) by the

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time PNC so requests, which shall not be earlier than 3:00 p.m. on the Business Day next after the date the Lenders receive such notice from PNC.

2.6 Notes. The Obligation of the Borrower to repay the aggregate unpaid principal amount of the Revolving Credit Loans and Swing Loans made to it by each Lender, together with interest thereon, shall be evidenced by a Revolving Credit Note and a Swing Loan Note, dated the Closing Date payable to the order of such Lender in a face amount equal to the Revolving Credit Commitment or Swing Loan Commitment, as applicable, of such Lender.

2.7 Use of Proceeds. The proceeds of the Loans shall be used (i) for financing advances to fund raw material collections and raw material collection operations, (ii) to make Restricted Payments, (iii) to refinance the Indebtedness under the Existing Credit Agreement, (iv) for Permitted Acquisitions, (v) for investments in joint venture operations, (vi) for acquisitions of manufacturing technology, licenses and other intellectual property, (vii) to pay certain fees and expenses incurred in connection with the consummation of the transactions contemplated hereby and (viii) for working capital and general corporate purposes of the Borrower and its Subsidiaries, in each case, subject to the terms and conditions hereof.

2.8 Letter of Credit Subfacility.

2.8.1 Issuance of Letters of Credit. The Borrower may at any time prior to the Expiration Date request the issuance of a letter of credit hereunder (each a “Letter of Credit”) on behalf of itself, another Loan Party or its Subsidiaries, or the amendment or extension of an existing Letter of Credit, by delivering or having such other Loan Party deliver to the Issuing Lender (with a copy to the Administrative Agent) a completed application and agreement for letters of credit, or request for such amendment or extension, as applicable, in such form as the Issuing Lender may specify from time to time by no later than 10:00 a.m. at least five (5) Business Days, or such shorter period as may be agreed to by the Issuing Lender, in advance of the proposed date of issuance. Each Letter of Credit shall be a standby letter of credit or a commercial letter of credit. Promptly after receipt of any letter of credit application, the Issuing Lender shall confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit application and if not, such Issuing Lender will provide Administrative Agent with a copy thereof. Unless the Issuing Lender has received notice from any Lender, the Administrative Agent or any Loan Party, at least one day prior to the requested date of issuance, amendment or extension of the applicable Letter of Credit, that one or more applicable conditions in Section 6.2 is not satisfied, then, subject to the terms and conditions hereof and in reliance on the agreements of the other Lenders set forth in this Section 2.8, the Issuing Lender will issue a Letter of Credit or agree to such amendment or extension, provided that each Letter of Credit shall (A) have a maximum maturity of twelve (12) months from the date of issuance, and (B) in no event expire later than five (5) Business Days prior to the Expiration Date and provided further that in no event shall (i) the Letter of Credit Obligations exceed, at any one time, $5,000,000 (the “Letter of Credit Sublimit”) or (ii) the Revolving Facility Usage exceed, at any one time, the Revolving Credit Commitments. Notwithstanding the foregoing, any Letter of Credit may contain customary automatic renewal provisions agreed upon by the Borrower and the Issuing Lender pursuant to which the expiration date of such Letter of Credit shall automatically be extended for a period of up to 12 months (but not to a date later than the date set forth in clause (B) above), subject to a right on the part of the

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Issuing Lender to prevent any such renewal from occurring by giving notice to the beneficiary in advance of any such renewal; provided that (I) the initial expiration date (or any subsequent expiration date) of each such Letter of Credit is not later than five (5) Business Days prior to the Expiration Date, and (II) renewal of such Letter(s) of Credit, at the Issuing Bank’s discretion, shall be available upon written request from the Borrower to the Issuing Bank at least thirty (30) days (or such other time period as agreed by the Borrower and the Issuing Bank) before the date upon which notice of renewal is otherwise required. Each request by the Borrower for the issuance, amendment or extension of a Letter of Credit shall be deemed to be a representation by the Borrower that it shall be in compliance with the preceding sentence and with Section 6.2 after giving effect to the requested issuance, amendment or extension of such Letter of Credit. Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to the beneficiary thereof, the applicable Issuing Lender will also deliver to the Borrower and the Administrative Agent a true and complete copy of such Letter of Credit or amendment.

2.8.2 Letter of Credit Fees. The Borrower shall pay (i) to the Administrative Agent for the ratable account of the Lenders a fee (the “Letter of Credit Fee”) equal to the Applicable Letter of Credit Fee Rate, and (ii) to the Issuing Lender for its own account a fronting fee equal to 0.25% per annum (in each case computed on the basis of a year of 360 days and actual days elapsed), which fees shall be computed on the daily average undrawn face amount of each Letter of Credit and shall be payable quarterly in arrears on each Payment Date following issuance of each Letter of Credit. The Borrower shall also pay to the Issuing Lender for the Issuing Lender’s sole account the Issuing Lender’s then in effect customary fees and administrative expenses payable with respect to the Letters of Credit as the Issuing Lender may generally charge or incur from time to time in connection with the issuance, maintenance, amendment (if any), assignment or transfer (if any), negotiation, and administration of Letters of Credit.

2.8.3 Disbursements, Reimbursement. Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Issuing Lender a participation in such Letter of Credit and each drawing thereunder in an amount equal to such Lender’s Ratable Share of the maximum amount available to be drawn under such Letter of Credit and the amount of such drawing, respectively.

2.8.3.1 In the event of any request for a drawing under a Letter of Credit by the beneficiary or transferee thereof, the Issuing Lender will promptly notify the Borrower and the Administrative Agent thereof. Provided that it shall have received such notice, the Borrower shall reimburse (such obligation to reimburse the Issuing Lender shall sometimes be referred to as a “Reimbursement Obligation”) the Issuing Lender prior to 12:00 noon on each date that an amount is paid by the Issuing Lender under any Letter of Credit (each such date, a “Drawing Date”) by paying to the Administrative Agent for the account of the Issuing Lender an amount equal to the amount so paid by the Issuing Lender. In the event the Borrower fails to reimburse the Issuing Lender (through the Administrative Agent) for the full amount of any drawing under any Letter of Credit by 12:00 noon on the Drawing Date, the Administrative Agent will promptly notify each Lender thereof, and the Borrower shall be deemed to have requested that Revolving Credit Loans be made by the Lenders under the Base Rate Option in an aggregate principal amount equal to such unreimbursed amount to be disbursed on such Drawing Date, subject to the amount of the unutilized portion of the Revolving Credit Commitment then

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in effect and subject to the conditions set forth in Section 6.2 other than any notice requirements. Any notice given by the Administrative Agent or Issuing Lender pursuant to this Section 2.8.3.1 may be oral if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

2.8.3.2 Each Lender shall upon any notice pursuant to Section 2.8.3.1 make available to the Administrative Agent for the account of the Issuing Lender an amount in immediately available funds equal to its Ratable Share of the amount of the drawing, whereupon the participating Lenders shall (subject to this Section 2.8.3) each be deemed to have made a Revolving Credit Loan under the Base Rate Option to the Borrower in that amount. If any Lender so notified fails to make available to the Administrative Agent for the account of the Issuing Lender the amount of such Lender’s Ratable Share of such amount by no later than 2:00 p.m. on the Drawing Date, then interest shall accrue on such Lender’s obligation to make such payment, from the Drawing Date to the date on which such Lender makes such payment (i) at a rate per annum equal to the Federal Funds Effective Rate during the first three (3) days following the Drawing Date and (ii) at a rate per annum equal to the rate applicable to Loans under the Revolving Credit Base Rate Option on and after the fourth day following the Drawing Date. The Administrative Agent and the Issuing Lender will promptly give notice (as described in Section 2.8.3.1 above) of the occurrence of the Drawing Date, but failure of the Administrative Agent or the Issuing Lender to give any such notice on the Drawing Date or in sufficient time to enable any Lender to effect such payment on such date shall not relieve such Lender from its obligation under this Section 2.8.3.2.

2.8.3.3 With respect to any unreimbursed drawing that is not converted into Revolving Credit Loans under the Base Rate Option to the Borrower in whole or in part as contemplated by Section 2.8.3.1, because of the Borrower’s failure to satisfy the conditions set forth in Section 6.2 (other than any notice requirements), or for any other reason, the Borrower shall be deemed to have incurred from the Issuing Lender a borrowing (each a “Letter of Credit Borrowing”) in the amount of such drawing. Such Letter of Credit Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the rate per annum applicable to the Loans under the Base Rate Option. Each Lender’s payment to the Administrative Agent for the account of the Issuing Lender pursuant to Section 2.8.3 shall be deemed to be a payment in respect of its participation in such Letter of Credit Borrowing (each a “Participation Advance”) from such Lender in satisfaction of its participation obligation under this Section 2.8.3.

2.8.4 Repayment of Participation Advances.

2.8.4.1 Upon (and only upon) receipt by the Administrative Agent for the account of the Issuing Lender of immediately available funds from the Borrower (i) in reimbursement of any payment made by the Issuing Lender under the Letter of Credit with respect to which any Lender has made a Participation Advance to the Administrative Agent, or (ii) in payment of interest on such a payment made by the Issuing Lender under such a Letter of Credit, the Administrative Agent on behalf of the Issuing Lender will pay to each Lender, in the same funds as those received by the Administrative Agent, the amount of such Lender’s Ratable Share of such funds, except the Administrative Agent shall retain for the account of the Issuing

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Lender the amount of the Ratable Share of such funds of any Lender that did not make a Participation Advance in respect of such payment by the Issuing Lender.

2.8.4.2 If the Administrative Agent is required at any time to return to any Loan Party, or to a trustee, receiver, liquidator, custodian, or any official in any Insolvency Proceeding, any portion of any payment made by any Loan Party to the Administrative Agent for the account of the Issuing Lender pursuant to this Section in reimbursement of a payment made under the Letter of Credit or interest or fee thereon, each Lender shall, on demand of the Administrative Agent, forthwith return to the Administrative Agent for the account of the Issuing Lender the amount of its Ratable Share of any amounts so returned by the Administrative Agent plus interest thereon from the date such demand is made to the date such amounts are returned by such Lender to the Administrative Agent, at a rate per annum equal to the Federal Funds Effective Rate in effect from time to time.

2.8.5 Documentation. Each Loan Party agrees to be bound by the terms of the Issuing Lender’s application and agreement for letters of credit and the Issuing Lender’s written regulations and customary practices relating to letters of credit, though such interpretation may be different from such Loan Party’s own. In the event of a conflict between such application or agreement and this Agreement, this Agreement shall govern. It is understood and agreed that, except in the case of gross negligence or willful misconduct, the Issuing Lender shall not be liable for any error, negligence and/or mistakes, whether of omission or commission, in following any Loan Party’s instructions or those contained in the Letters of Credit or any modifications, amendments or supplements thereto.

2.8.6 Determinations to Honor Drawing Requests. In determining whether to honor any request for drawing under any Letter of Credit by the beneficiary thereof, the Issuing Lender shall be responsible only to determine that the documents and certificates required to be delivered under such Letter of Credit have been delivered and that they comply on their face with the requirements of such Letter of Credit.

2.8.7 Nature of Participation and Reimbursement Obligations. Each Lender’s obligation in accordance with this Agreement to make the Revolving Credit Loans or Participation Advances, as contemplated by Section 2.8.3, as a result of a drawing under a Letter of Credit, and the obligation of the Borrower to reimburse the Issuing Lender upon a draw under a Letter of Credit, shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Section 2.8 under all circumstances, including the following circumstances:

(i) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Issuing Lender or any of its Affiliates, the Borrower or any other Person for any reason whatsoever, or which any Loan Party may have against the Issuing Lender or any of its Affiliates, any Lender or any other Person for any reason whatsoever;

(ii) the failure of any Loan Party or any other Person to comply, in connection with a Letter of Credit Borrowing, with the conditions set forth in Sections 2.1, 2.4, 2.5 or 6.2 or as otherwise set forth in this Agreement for the making of a Revolving Credit Loan, it being acknowledged that such conditions are not required for the making of a Letter of Credit

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Borrowing and the obligation of the Lenders to make Participation Advances under Section 2.8.3;

(iii) any lack of validity or enforceability of any Letter of Credit;

(iv) any claim of breach of warranty that might be made by any Loan Party or any Lender against any beneficiary of a Letter of Credit, or the existence of any claim, set-off, recoupment, counterclaim, crossclaim, defense or other right which any Loan Party or any Lender may have at any time against a beneficiary, successor beneficiary any transferee or assignee of any Letter of Credit or the proceeds thereof (or any Persons for whom any such transferee may be acting), the Issuing Lender or its Affiliates or any Lender or any other Person, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between any Loan Party or Subsidiaries of a Loan Party and the beneficiary for which any Letter of Credit was procured);

(v) the lack of power or authority of any signer of (or any defect in or forgery of any signature or endorsement on) or the form of or lack of validity, sufficiency, accuracy, enforceability or genuineness of any draft, demand, instrument, certificate or other document presented under or in connection with any Letter of Credit, or any fraud or alleged fraud in connection with any Letter of Credit, or the transport of any property or provision of services relating to a Letter of Credit, in each case even if the Issuing Lender or any of its Affiliates has been notified thereof;

(vi) payment by the Issuing Lender or any of its Affiliates under any Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit;

(vii) the solvency of, or any acts or omissions by, any beneficiary of any Letter of Credit, or any other Person having a role in any transaction or obligation relating to a Letter of Credit, or the existence, nature, quality, quantity, condition, value or other characteristic of any property or services relating to a Letter of Credit;

(viii) any failure by the Issuing Lender or any of its Affiliates to issue any Letter of Credit in the form requested by any Loan Party, unless the Issuing Lender has received written notice from such Loan Party of such failure within three Business Days after the Issuing Lender shall have furnished such Loan Party and the Administrative Agent a copy of such Letter of Credit and such error is material and no drawing has been made thereon prior to receipt of such notice;

(ix) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of any Loan Party or Subsidiaries of a Loan Party;

(x) any breach of this Agreement or any other Loan Document by any party thereto;

(xi) the occurrence or continuance of an Insolvency Proceeding with respect to any Loan Party;

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(xii) the fact that an Event of Default or a Potential Default shall have occurred and be continuing;

(xiii) the fact that the Expiration Date shall have passed or this Agreement or the Commitments hereunder shall have been terminated; and

(xiv) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing.

2.8.8 Indemnity. The Borrower hereby agrees to protect, indemnify, pay and save harmless the Issuing Lender from and against any and all claims, demands, liabilities, damages, Indemnified Taxes, penalties, interest, judgments, losses, costs, charges and expenses (including reasonable and documented out-of-pocket fees, expenses and disbursements of counsel) which the Issuing Lender may incur or be subject to as a consequence, direct or indirect, of the issuance of any Letter of Credit, other than as a result of (A) the gross negligence or willful misconduct of the Issuing Lender as determined by a final non-appealable judgment of a court of competent jurisdiction or (B) the wrongful dishonor by the Issuing Lender or any of Issuing Lender’s Affiliates of a proper demand for payment made under any Letter of Credit, except if such dishonor resulted from any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Official Body.

2.8.9 Liability for Acts and Omissions. As between any Loan Party and the Issuing Lender, or the Issuing Lender’s Affiliates, such Loan Party assumes all risks of the acts and omissions of, or misuse of the Letters of Credit by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, the Issuing Lender shall not be responsible for any of the following, including any losses or damages to any Loan Party or other Person or property relating therefrom: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for an issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged (even if the Issuing Lender or its Affiliates shall have been notified thereof); (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) the failure of the beneficiary of any such Letter of Credit, or any other party to which such Letter of Credit may be transferred, to comply fully with any conditions required in order to draw upon such Letter of Credit or any other claim of any Loan Party against any beneficiary of such Letter of Credit, or any such transferee, or any dispute between or among any Loan Party and any beneficiary of any Letter of Credit or any such transferee; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of the Issuing Lender or its Affiliates, as applicable, including any act or omission of any Official Body, and none of the above shall affect or impair, or prevent the vesting of, any of the Issuing Lender’s or its Affiliates rights or powers hereunder. Nothing

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in the preceding sentence shall relieve the Issuing Lender from liability for the Issuing Lender’s gross negligence or willful misconduct in connection with actions or omissions described in such clauses (i) through (viii) of such sentence. In no event shall the Issuing Lender or its Affiliates be liable to any Loan Party for any indirect, consequential, incidental, punitive, exemplary or special damages or expenses (including without limitation attorneys’ fees), or for any damages resulting from any change in the value of any property relating to a Letter of Credit.

Without limiting the generality of the foregoing, the Issuing Lender and each of its Affiliates (i) may rely on any oral or other communication believed in good faith by the Issuing Lender or such Affiliate to have been authorized or given by or on behalf of the applicant for a Letter of Credit, (ii) may honor any presentation if the documents presented appear on their face substantially to comply with the terms and conditions of the relevant Letter of Credit; (iii) may honor a previously dishonored presentation under a Letter of Credit, whether such dishonor was pursuant to a court order, to settle or compromise any claim of wrongful dishonor, or otherwise, and shall be entitled to reimbursement to the same extent as if such presentation had initially been honored, together with any interest paid by the Issuing Lender or its Affiliate; (iv) may honor any drawing that is payable upon presentation of a statement advising negotiation or payment, upon receipt of such statement (even if such statement indicates that a draft or other document is being delivered separately), and shall not be liable for any failure of any such draft or other document to arrive, or to conform in any way with the relevant Letter of Credit; (v) may pay any paying or negotiating bank claiming that it rightfully honored under the laws or practices of the place where such bank is located; and (vi) may settle or adjust any claim or demand made on the Issuing Lender or its Affiliate in any way related to any order issued at the applicant’s request to an air carrier, a letter of guarantee or of indemnity issued to a carrier or any similar document (each an “Order”) and honor any drawing in connection with any Letter of Credit that is the subject of such Order, notwithstanding that any drafts or other documents presented in connection with such Letter of Credit fail to conform in any way with such Letter of Credit.

In furtherance and extension and not in limitation of the specific provisions set forth above, any action taken or omitted by the Issuing Lender or its Affiliates under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in good faith, shall not put the Issuing Lender or its Affiliates under any resulting liability to the Borrower or any Lender.

2.8.10 Issuing Lender Reporting Requirements. Each Issuing Lender shall, on the first Business Day of each month, provide to Administrative Agent and Borrower a schedule of the Letters of Credit issued by it, in form and substance satisfactory to Administrative Agent, showing the date of issuance of each Letter of Credit, the account party, the original face amount (if any), and the expiration date of any Letter of Credit outstanding at any time during the preceding month, and any other information relating to such Letter of Credit that the Administrative Agent may request.

2.8.11 Reduction of Revolving Credit Commitment. The Borrower shall have the right at any time after the Closing Date upon five (5) days’ prior written notice to the Administrative Agent to permanently reduce (ratably among the Lenders in proportion to their Ratable Shares) the Revolving Credit Commitments, in a minimum amount of $2,000,000 and whole multiples of $100,000, or to terminate completely the Revolving Credit Commitments,

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without penalty or premium; provided that any such reduction or termination shall be accompanied by prepayment of the Revolving Credit Loans, Swing Loans, Reimbursement Obligations, Letter of Credit Borrowings and/or cash collateral with respect to any outstanding Letters of Credit, as the case may be, together with accrued and unpaid Commitment Fees, and the full amount of interest accrued on the principal sum to be prepaid (and all amounts referred to in Section 4.9 hereof) to the extent necessary to cause the aggregate Revolving Facility Usage after giving effect to such prepayments to be equal to or less than the Revolving Credit Commitments as so reduced or terminated. Any notice to reduce the Revolving Credit Commitments under this Section 2.8.11 shall be irrevocable; provided that a notice of termination of the Revolving Credit Commitments in full delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities or debt or equity issuances, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied.

2.8.12 Commercial Letters of Credit. In connection with all Letters of Credit issued or caused to be issued by the Issuing Lender under this Agreement, the Borrower hereby appoints PNC, or its designee, as its attorney, with full power and authority if and solely for so long as an Event of Default shall have occurred and be continuing (i) to sign and/or endorse the Borrower’s name upon any warehouse or other receipts, letter of credit applications and acceptances, (ii) to sign the Borrower’s name on bills of lading, (iii) to clear inventory through the United States of America Customs Department (“Customs”) in the name of the Borrower or PNC or PNC’s designee, and to sign and deliver to Customs officials powers of attorney in the name of the Borrower for such purpose and (iv) to complete in the Borrower’s name or PNC’s, or in the name of PNC’s designee, any order, sale or transaction, obtain the necessary documents in connection therewith, and collect the proceeds thereof. Neither PNC nor its attorneys will be liable for any acts or omissions or for any error of judgment or mistakes of fact or law, except for PNC’s or its attorney’s gross negligence or willful misconduct. This power, being coupled with an interest, is irrevocable as long as any Letters of Credit remain outstanding.

2.8.13 Defaulting Lenders. Notwithstanding any provision of this Agreement to the contrary (including Sections 2.3 and 2.8.2), if any Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender:

(i) such Defaulting Lender shall no longer be entitled to receive its Ratable Share of Commitment Fees or Letter of Credit Fees otherwise payable pursuant to Sections 2.3 or 2.8.2 hereof, and thereafter, so long as any Lender is a Defaulting Lender, the fees payable to the Non-Defaulting Lenders pursuant to Section 2.3 shall be based on their Adjusted Ratable Shares; provided that (a) if a Letter of Credit Collateral Account is maintained pursuant to Section 2.8.13(iii)(D) and fully cash collateralized pursuant to Section 2.8.13(iii), the Borrower shall not be required to pay any fees pursuant to Section 2.8.2 with respect to the unallocated portion of such Defaulting Lender’s Ratable Share of all Letter of Credit Obligations, and (b) if any Defaulting Lender’s Ratable Share of the Letter of Credit Obligations is neither reallocated nor fully cash collateralized pursuant to Section 2.8.13(iii), then without prejudice to any rights or remedies of the Issuing Lender or any Lender hereunder, all fees payable under Section 2.8.2 with respect thereto shall be payable to the Issuing Lender until such Defaulting Lender’s Ratable Share of the Letter of Credit Obligations is reallocated and/or cash collateralized to the extent required pursuant to Section 2.8.13(iii);

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(ii) [Intentionally Omitted];

(iii) if any outstanding Swing Loans or Letters of Credit exist at the time a Lender becomes a Defaulting Lender, then:

(A) such Defaulting Lender’s pro rata portion of such Swing Loans shall be reallocated among the Non-Defaulting Lenders in accordance with their respective Adjusted Ratable Shares but only to the extent (I) the sum of (a) the aggregate principal amount of all outstanding Revolving Credit Loans of all Non-Defaulting Lenders then outstanding plus (b) all Non-Defaulting Lenders’ Adjusted Ratable Shares of (x) the aggregate principal amount of all outstanding Swing Loans then outstanding plus (y) the Letter of Credit Obligations at such time does not exceed the aggregate amount of the Revolving Credit Commitments of all Non-Defaulting Lenders at such time and (II) the conditions set forth in Section 6.2(i) and (ii) are satisfied at such time;

(B) such Defaulting Lender’s participation interests in such outstanding Letters of Credit shall be reallocated among the Non-Defaulting Lenders in accordance with their respective Adjusted Ratable Shares but only to the extent (I) the sum of (a) the aggregate principal amount of all outstanding Revolving Credit Loans of all Non-Defaulting Lenders then outstanding plus (b) all Non-Defaulting Lenders’ Adjusted Ratable Shares of (x) the aggregate principal amount of all outstanding Swing Loans then outstanding plus (y) the Letter of Credit Obligations at such time does not exceed the aggregate amount of the Revolving Credit Commitments of all Non-Defaulting Lenders at such time and (II) the conditions set forth in Section 6.2(i) and (ii) are satisfied at such time;

(C) to the extent that all or any part of such Defaulting Lender’s pro rata portion of Swing Loans cannot be reallocated pursuant to Section 2.8.13(iii)(A), then the Borrower shall (I) within 15 days following notice from the Administrative Agent until such Defaulting Lender ceases to be a Defaulting Lender under this Agreement, establish and, thereafter, maintain a special collateral account (the “Swing Line Collateral Account”) with the Administrative Agent, in the name of the Borrower but under the sole dominion and control of the Administrative Agent, (II) grant to the Administrative Agent for the benefit of the Swing Loan Lender and the other Lenders, solely as security for repayment of the unallocated portion of such Defaulting Lender’s Ratable Share of outstanding Swing Loans, a security interest in and to the Swing Line Collateral Account and any funds that may thereafter be deposited therein and (III) maintain in the Swing Line Collateral Account an amount equal to the unallocated portion of such Defaulting Lender’s Ratable Share of outstanding Swing Loans; and

(D) to the extent that all or any part of such Defaulting Lender’s participations in outstanding Letters of Credit cannot be reallocated pursuant to Section 2.8.13(iii)(B), then the Borrower shall (I) within 15 days following notice from the Administrative Agent until such Defaulting Lender ceases to be a Defaulting Lender under this Agreement, establish and, thereafter, maintain a special collateral account (the “Letter of Credit Collateral Account”) with the Administrative Agent in the name of the Borrower but under the sole dominion and control of the Administrative Agent, (II) grant to the Administrative Agent for the benefit of the Issuing Lender and the other Lenders, as security for the unallocated portion of such Defaulting Lender’s Ratable Share of all Letter of Credit Obligations, a security interest in

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the Letter of Credit Collateral Account and any funds that may be deposited therein and (III) maintain in the Letter of Credit Collateral Account an amount equal to the unallocated portion of such Defaulting Lender’s Ratable Share of all Letter of Credit Obligations, regardless of whether any Letters of Credit have then been drawn.

(iv) (A) the Swing Loan Lender shall not be required to, but in its sole discretion may from time to time elect to, fund any Swing Loan and (B) the Issuing Lender shall not be required to, but in its sole discretion may from time to time elect to, issue, amend or increase any Letter of Credit, unless in each case it is satisfied in its sole discretion that the related exposure will be 100% covered by the Non-Defaulting Lenders and/or cash collateral will be provided by the Borrower in accordance with Section 2.8.13(iii).

(v) any amount payable to a Defaulting Lender hereunder (whether on account of principal, interest, fees or otherwise) shall, in lieu of being distributed to such Defaulting Lender, be retained by the Administrative Agent in a segregated non-interest bearing account and, to the fullest extent permitted by law, be applied at such time or times as may be determined by the Administrative Agent (A) first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder, (B) second, pro rata, to the payment of any amounts owing by such Defaulting Lender to the Issuing Lender and the Swing Loan Lender under this Agreement, and (C) after the termination of the Revolving Credit Commitments and payment in full of all obligations of the Borrower hereunder, to pay amounts owing under this Agreement to such Defaulting Lender or as a court of competent jurisdiction may otherwise direct.

(vi) In the event that the Borrower, the Administrative Agent, the Issuing Lender and the Swing Lender each agrees that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then the Swing Loans and the Letter of Credit participations of the Revolving Credit Lenders shall be readjusted to reflect the inclusion of such Lender’s Ratable Share and on such date such Lender shall purchase at par such of the Revolving Credit Loans of the other Lenders as the Administrative Agent shall determine may be necessary in order for such Lender to hold such Revolving Credit Loans in accordance with its Ratable Share, subject to the provisions of Section 4.9.

3. INTEREST RATES

3.1 Interest Rate Options. The Borrower shall pay interest in respect of the outstanding unpaid principal amount of the Loans as selected by it from the Base Rate Option or LIBOR Rate Option set forth below applicable to the Loans, it being understood that, subject to the provisions of this Agreement, the Borrower may select different Interest Rate Options and different Interest Periods to apply simultaneously to the Loans comprising different Borrowing Tranches and may convert to or renew one or more Interest Rate Options with respect to all or any portion of the Loans comprising any Borrowing Tranche; provided, that there shall not be at any one time outstanding more than seven (7) Borrowing Tranches in the aggregate among all of the Loans; and provided, further, that if an Event of Default exists and is continuing and the Administrative Agent, either in its sole discretion or at the request of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no Loan may be requested, and no outstanding Loan may be converted to or continued, under the LIBOR Rate

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Option and (ii) unless repaid, each Borrowing Tranche under the LIBOR Rate Option shall be converted to the Base Rate Option at the end of the Interest Period applicable thereto. If at any time the designated rate applicable to any Loan made by any Lender exceeds such Lender’s highest lawful rate, the rate of interest on such Lender’s Loan shall be limited to such Lender’s highest lawful rate.

3.1.1 Revolving Credit Interest Rate Options; Swing Line Interest Rate. The Borrower shall have the right to select from the following Interest Rate Options applicable to the Revolving Credit Loans:

(i) Revolving Credit Base Rate Option: A fluctuating rate per annum (computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed) equal to the Base Rate plus the Applicable Margin for Loans bearing interest at the Base Rate Option, such interest rate to change automatically from time to time effective as of the effective date of each change in the Base Rate; or

(ii) Revolving Credit LIBOR Rate Option: A rate per annum (computed on the basis of a year of 360 days and actual days elapsed) equal to the LIBOR Rate plus the Applicable Margin for Loans bearing interest at the LIBOR Rate Option.

Subject to Section 3.3, either the Base Rate Option or such other rate mutually agreed upon by the Borrower and PNC shall apply to each Swing Loan.

3.1.2 Rate Quotations. The Borrower may call the Administrative Agent on or before the date on which a Loan Request is to be delivered to receive an indication of the rates then in effect, but it is acknowledged that such projection shall not be binding on the Administrative Agent or the Lenders nor affect the rate of interest which thereafter is actually in effect when the election is made.

3.2 Interest Periods. At any time when the Borrower shall select, convert to or renew a LIBOR Rate Option, the Borrower shall notify the Administrative Agent thereof at least three (3) Business Days prior to the effective date of such LIBOR Rate Option by delivering a Loan Request. The notice shall specify an Interest Period during which such Interest Rate Option shall apply. Notwithstanding the preceding sentence, the following provisions shall apply to any selection of, renewal of, or conversion to a LIBOR Rate Option:

3.2.1 Amount of Borrowing Tranche. Each Borrowing Tranche of Loans under the LIBOR Rate Option shall be in integral multiples of $100,000 and not less than $1,000,000 (or, if the then aggregate amount available for borrowing under the Revolving Credit Commitments is less than $1,000,000, such lesser amount); and

3.2.2 Renewals. In the case of the renewal of a LIBOR Rate Option at the end of an Interest Period, the first day of the new Interest Period shall be the last day of the preceding Interest Period, without duplication in payment of interest for such day.

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3.3 Interest After Default.

3.3.1 Interest Rate. To the extent permitted by law, if any principal of or interest on any Loan is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to 2% per annum plus the rate otherwise applicable to such Loan as provided in Section 3.1.1. In addition, at any time that an Event of Default shall have occurred and be continuing, at the discretion of the Administrative Agent or at the written request of the Required Lenders and whether or not any principal or interest of any Loan has not been paid when due, all Loans shall bear interest, after as well as before judgment, at a rate per annum equal to 2% per annum plus the rate otherwise applicable to such Loans as provided in Section 3.1.1.

3.3.2 Letter of Credit Fees and Other Obligations. To the extent permitted by the Law, at any time that an Event of Default shall have occurred and be continuing, at the discretion of the Administrative Agent or at the written request of the Required Lenders to the Administrative Agent, (i) the Letter of Credit Fee otherwise applicable pursuant to Section 2.8.2 , shall be increased by 2.0% per annum and (ii) each other Obligation hereunder if not paid when due shall bear interest at a rate per annum equal to the sum of the rate of interest applicable under the Base Rate Option plus an additional 2% per annum from the time such Obligation becomes due and payable and until it is paid in full.

3.3.3 Acknowledgment; Payable on Demand. The Borrower acknowledges that the increase in rates referred to in this Section 3.3 reflects, among other things, the fact that such Loans or other amounts have become a substantially greater risk given their default status and that the Lenders are entitled to additional compensation for such risk. Under the circumstances described in this Section, interest on the Loans and the other amount referred to above shall be payable by the Borrower upon demand by the Administrative Agent.

3.4 LIBOR Rate Unascertainable; Illegality; Increased Costs; Deposits Not Available.

3.4.1 Unascertainable. If on any date on which a LIBOR Rate would otherwise be determined, the Administrative Agent shall have determined that:

(i) adequate and reasonable means do not exist for ascertaining such LIBOR Rate; or

(ii) a contingency has occurred which materially and adversely affects the London interbank eurodollar market relating to the LIBOR Rate;

the Administrative Agent shall have the rights specified in Section 3.4.3.

3.4.2 Illegality; Increased Costs; Deposits Not Available. If at any time any Lender shall have determined that:

(i) the making, maintenance or funding of any Loan to which a LIBOR Rate Option applies has been made impracticable or unlawful by compliance by such Lender in good faith with any Law or any interpretation or application thereof by any Official Body or with any request or directive of any such Official Body (whether or not having the force of Law), or

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(ii) such LIBOR Rate Option will not adequately and fairly reflect the cost to such Lender of the establishment or maintenance of any such Loan, or

(iii) after making all reasonable efforts, deposits of the relevant amount in Dollars for the relevant Interest Period for a Loan, or to banks generally, to which a LIBOR Rate Option applies, respectively, are not available to such Lender with respect to such Loan, or to banks generally, in the interbank eurodollar market,

then the Administrative Agent shall have the rights specified in Section 3.4.3.

3.4.3 Administrative Agent’s and Lender’s Rights. In the case of any event specified in Section 3.4.1 above, the Administrative Agent shall promptly so notify the Lenders and the Borrower thereof, and in the case of an event specified in Section 3.4.2 above, such Lender shall promptly so notify the Administrative Agent and endorse a certificate to such notice as to the specific circumstances of such notice, and the Administrative Agent shall promptly send copies of such notice and certificate to the other Lenders and the Borrower. Upon such date as shall be specified in such notice (which shall not be earlier than the date such notice is given), the obligation of (A) the Lenders, in the case of such notice given by the Administrative Agent, or (B) such Lender, in the case of such notice given by such Lender, to allow the Borrower to select, convert to or renew a LIBOR Rate Option shall be suspended until the Administrative Agent shall have later notified the Borrower, or such Lender shall have later notified the Administrative Agent, of the Administrative Agent’s or such Lender’s, as the case may be, determination that the circumstances giving rise to such previous determination no longer exist. If at any time the Administrative Agent makes a determination under Section 3.4.1 and the Borrower has previously notified the Administrative Agent of its selection of, conversion to or renewal of a LIBOR Rate Option and such Interest Rate Option has not yet gone into effect, such notification shall be deemed to provide for selection of, conversion to or renewal of the Base Rate Option otherwise available with respect to such Loans. If any Lender notifies the Administrative Agent of a determination under Section 3.4.2 , the Borrower shall, subject to the Borrower’s indemnification Obligations under Section 4.9, as to any Loan of the Lender to which a LIBOR Rate Option applies, on the date specified in such notice either convert such Loan to the Base Rate Option otherwise available with respect to such Loan or prepay such Loan in accordance with Section 4.6. Absent due notice from the Borrower of conversion or prepayment, such Loan shall automatically be converted to the Base Rate Option otherwise available with respect to such Loan upon such specified date.

3.5 Selection of Interest Rate Options. If the Borrower fails to deliver a timely Loan Request with respect to any Borrowing Tranche of Loans under the LIBOR Rate Option at the expiration of an existing Interest Period applicable to such Borrowing Tranche in accordance with the provisions of Section 3.2, the Borrower shall be deemed to have converted such Borrowing Tranche to the Base Rate Option, commencing upon the last day of the existing Interest Period. If the Borrower delivers a timely Loan Request with respect to Loans under the LIBOR Rate Option but does not specify an Interest Period, then the Borrower shall have been deemed to have selected an Interest Period of one Month’s duration.

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4. PAYMENTS

4.1 Payments. All payments and prepayments to be made in respect of principal, interest, Commitment Fees, Letter of Credit Fees, Administrative Agent’s Fee or other fees or amounts due from the Borrower hereunder shall be payable prior to 11:00 a.m. on the date when due without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by the Borrower, and without set-off, counterclaim or other deduction of any nature, and an action therefor shall immediately accrue. Such payments shall be made to the Administrative Agent at the Principal Office for the account of PNC with respect to the Swing Loans and for the ratable accounts of the Lenders with respect to the Revolving Credit Loans in U.S. Dollars and in immediately available funds, and the Administrative Agent shall promptly distribute such amounts to the Lenders in immediately available funds; provided that in the event payments are received by 11:00 a.m. by the Administrative Agent with respect to the Loans and such payments are not distributed to the Lenders on the same day received by the Administrative Agent, the Administrative Agent shall pay the Lenders the Federal Funds Effective Rate with respect to the amount of such payments for each day held by the Administrative Agent and not distributed to the Lenders. The Administrative Agent’s and each Lender’s statement of account, ledger or other relevant record shall, in the absence of manifest error, be conclusive as the statement of the amount of principal of and interest on the Loans and other amounts owing under this Agreement and shall be deemed an “account stated.”

4.2 Pro Rata Treatment of Lenders. Each borrowing of Revolving Credit Loans shall be allocated to each Lender according to its Ratable Share, and each selection of, conversion to or renewal of any Interest Rate Option and each payment or prepayment by the Borrower with respect to principal, interest, Commitment Fees, Facility Fees, Letter of Credit Fees, or other fees (except for the Administrative Agent’s Fee and the Issuing Lender’s fronting fee) or amounts due from the Borrower hereunder to the Lenders with respect to the Commitments and Loans, shall (except as otherwise may be provided with respect to a Defaulting Lender and except as provided in Section 3.4.3 in the case of an event specified in Section 3.4.2, 4.7 or 4.8) be payable ratably among the Lenders entitled to such payment in accordance with the amount of principal, interest, Commitment Fees, Letter of Credit Fees, and other fees or amounts then due or payable such Lenders as set forth in this Agreement. Notwithstanding any of the foregoing, each borrowing or payment or prepayment by the Borrower of principal, interest, fees or other amounts from the Borrower with respect to Swing Loans shall be made by or to PNC according to Section 2.5.5.

4.3 Sharing of Payments by Lenders. If any Lender shall, by exercising any right of setoff, counterclaim or banker’s lien, by receipt of voluntary payment, by realization upon security, or by any other non-pro rata source, obtain payment in respect of any principal of or interest on any of its Loans or other obligations hereunder resulting in such Lender’s receiving payment of a proportion of the aggregate amount of its Loans and accrued interest thereon or other such obligations greater than the pro-rata share of the amount such Lender is entitled thereto, then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Loans and such other obligations of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with

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the aggregate amount of principal of and accrued interest on their respective Loans and other amounts owing them, provided that:

(i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, together with interest or other amounts, if any, required by Law (including court order) to be paid by the Lender or the holder making such purchase; and

(ii) the provisions of this Section 4.3 shall not be construed to apply to (x) any payment made by the Loan Parties pursuant to and in accordance with the express terms of the Loan Documents or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or Participation Advances to any assignee or participant, other than to the Borrower or any Subsidiary thereof (as to which the provisions of this Section 4.3 shall apply).

Each Loan Party consents to the foregoing and agrees, to the extent it may effectively do so under applicable Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against each Loan Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of each Loan Party in the amount of such participation.

Any Lender that fails at any time to comply with the provisions of this Section 4.3 (a “Breaching Lender”) shall be deemed to have assigned any and all payments due to it from the Borrower, whether on account of or relating to outstanding Loans, Letters of Credit, interest, fees or otherwise, to the remaining Lenders (other than Defaulting Lenders) for application to, and reduction of, their respective Ratable Share of all outstanding Loans and other unpaid Obligations of any of the Loan Parties. The Breaching Lender hereby authorizes the Administrative Agent to distribute such payments to such remaining Lenders (other than Defaulting Lenders) in proportion to their respective Ratable Share of all outstanding Loans and other unpaid Obligations of any of the Loan Parties to which such Lenders are entitled. A Breaching Lender shall be deemed to have satisfied the provisions of this Section 4.3 when and if, as a result of application of the assigned payments to all outstanding Loans and other unpaid Obligations of any of the Loan Parties to the Non-Defaulting Lenders, the Non-Defaulting Lenders’ (other than Defaulting Lenders) respective Ratable Share of all outstanding Loans and unpaid Obligations have returned to those in effect immediately prior to such violation of this Section 4.3.

4.4 Presumptions by Administrative Agent. Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Lender hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Lender, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Lender, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or the Issuing Lender, with

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interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

4.5 Interest Payment Dates. Interest on Loans to which the Base Rate Option applies shall be due and payable in arrears on each Payment Date. Interest on Loans to which the LIBOR Rate Option applies shall be due and payable on the last day of each Interest Period for those Loans and, if such Interest Period is longer than three (3) Months, also on the 90th day of such Interest Period. Interest on the principal amount of each Loan or other monetary Obligation shall be due and payable on demand after such principal amount or other monetary Obligation becomes due and payable (whether on the stated Expiration Date, upon acceleration or otherwise).

4.6 Voluntary Prepayments.

4.6.1 Right to Prepay. The Borrower shall have the right at its option from time to time to prepay the Loans in whole or part without premium or penalty (except as provided in Section 4.9). Whenever the Borrower desires to prepay any part of the Loans, it shall provide a prepayment notice to the Administrative Agent by 1:00 p.m. at least (A) one (1) Business Day prior to the date of prepayment of the Revolving Credit Loans to which the Base Rate Option applies and (B) three (3) Business Days prior to the prepayment of the Revolving Credit Loans to which the LIBOR Rate Option applies or no later than 1:00 p.m. on the date of prepayment of Swing Loans, setting forth the following information:

(w) the date, which shall be a Business Day, on which the proposed prepayment is to be made;

(x) a statement indicating the application of the prepayment between the Revolving Credit Loans and Swing Loans;

(y) a statement indicating the application of the prepayment between Loans to which the Base Rate Option applies and Loans to which the LIBOR Rate Option applies; and

(z) the total principal amount of such prepayment, which shall not be less than the lesser of (i) the Revolving Facility Usage or (ii) $100,000 for any Swing Loan or $1,000,000 for any Revolving Credit Loan.

All prepayment notices shall be irrevocable; provided that a notice of prepayment delivered by the Borrower in conjunction with a notice of termination of the Revolving Credit Commitments in full delivered pursuant to Section 2.8.11 may state that such notice is conditioned upon the effectiveness of other credit facilities or debt or equity issuances, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. The principal amount of the Loans for which a prepayment notice is given, together with accrued and unpaid interest on such principal amount shall be due and payable on the date specified in such prepayment notice

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as the date on which the proposed prepayment is to be made; provided that, any prepayment of Loans to which the Base Rate Option applies shall not require a payment of accrued and unpaid interest thereon so long as the Revolving Credit Commitments are in effect. Except as provided in Section 3.4.3 , if the Borrower prepays a Loan but fails to specify the applicable Borrowing Tranche which the Borrower is prepaying, the prepayment shall be applied (i) first to Loans to which the Base Rate Option applies, then to Loans to which the LIBOR Rate Option applies. Any prepayment hereunder shall be subject to the Borrower’s obligation to indemnify the Lenders under Section 4.9.

4.6.2 Replacement of a Lender. In the event any Lender (i) gives notice under Section 3.4, (ii) requests compensation under Section 4.7, or requires the Borrower to pay any additional amount to any Lender or any Official Body for the account of any Lender pursuant to Section 4.8, (iii) is a Defaulting Lender, (iv) becomes subject to the control of an Official Body (other than normal and customary supervision), or (v) is a Non-Consenting Lender referred to in Section 10.1, then in any such event the Borrower may, at its sole expense, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 10.8), all of its interests, rights and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:

(i) the Borrower shall have paid to the Administrative Agent the assignment fee specified in Section 10.8;

(ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and Participation Advances, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 4.9) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);

(iii) in the case of any such assignment resulting from a claim for compensation under Section 4.7.1 or payments required to be made pursuant to Section 4.8, such assignment will result in a reduction in such compensation or payments thereafter; and

(iv) such assignment does not conflict with applicable Law.

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

4.7 Increased Costs.

4.7.1 Increased Costs Generally. If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement reflected in the LIBOR Rate) or the Issuing Lender;

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(ii) subject any Lender or the Issuing Lender to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit or any Loan under the LIBOR Rate Option made by it, or change the basis of taxation of payments to such Lender or the Issuing Lender in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 4.8 and the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender or the Issuing Lender); or

(iii) impose on any Lender, the Issuing Lender or the London interbank market any other condition, cost or expense affecting this Agreement or any Loan under the LIBOR Rate Option made by such Lender or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Loan under the LIBOR Rate Option (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender or the Issuing Lender of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender or the Issuing Lender hereunder (whether of principal, interest or any other amount), then, upon request of such Lender or the Issuing Lender, the Borrower will pay to such Lender or the Issuing Lender, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Lender, as the case may be, for such additional costs incurred or reduction suffered.

4.7.2 Capital Requirements. If any Lender or the Issuing Lender determines that any Change in Law affecting such Lender or the Issuing Lender or any lending office of such Lender or such Lender’s or the Issuing Lender’s holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or the Issuing Lender’s capital or on the capital of such Lender’s or the Issuing Lender’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Lender, to a level below that which such Lender or the Issuing Lender or such Lender’s or the Issuing Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the Issuing Lender’s policies and the policies of such Lender’s or the Issuing Lender’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or the Issuing Lender, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Lender or such Lender’s or the Issuing Lender’s holding company for any such reduction suffered.

4.7.3 Certificates for Reimbursement; Repayment of Outstanding Loans; Borrowing of New Loans. A certificate of a Lender or the Issuing Lender setting forth the amount or amounts necessary to compensate such Lender or the Issuing Lender or its holding company, as the case may be, as specified in Sections 4.7.1 or 4.7.2 and delivered to the Borrower shall be conclusive absent manifest error. The Borrower shall pay such Lender or the Issuing Lender, as the case may be, the amount shown as due on any such certificate within ten (10) days after receipt thereof.

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4.7.4 Delay in Requests. Failure or delay on the part of any Lender or the Issuing Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or the Issuing Lender’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender or the Issuing Lender pursuant to this Section for any increased costs incurred or reductions suffered unless such Lender or Issuing Lender gives notice to the Borrower that it is obligated to pay an amount under this Section within six (6) months after the later of (i) the date that such Lender or the Issuing Lender, as the case may be, incurs such increased costs or reductions or (ii) such Lender or the Issuing Lender has actual knowledge of its incurrence of such increased costs or reductions (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the six (6) month period referred to above shall be extended to include the period of retroactive effect thereof).

Notwithstanding any other provision of this Section 4.7, neither any Lender nor the Issuing Lender shall demand compensation for any increased costs or reduction referred to in this Section 4.7 if it shall not be the general policy or practice of such Lender or the Issuing Lender, as the case may be, to demand such compensation in similar circumstances under comparable provisions of other credit agreements, if any (it being understood that this sentence shall not in any way limit the discretion of any Lender or the Issuing Lender to waive the right to demand such compensation in any given case).

4.8 Taxes.

4.8.1 Payments Free of Taxes. Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall be made free and clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required by applicable Law to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, Lender or Issuing Lender, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall timely pay the full amount deducted to the relevant Official Body in accordance with applicable Law.

4.8.2 Payment of Other Taxes by the Borrower. Without limiting the provisions of Section 4.8.1 above, the Borrower shall timely pay any Other Taxes to the relevant Official Body in accordance with applicable Law.

4.8.3 Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Lender, within ten (10) days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent, such Lender or the Issuing Lender, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Official Body. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or the Issuing Lender (with a copy to the

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Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Lender, shall be conclusive absent manifest error.

4.8.4 Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to an Official Body, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Official Body evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

4.8.5 Status of Lenders. Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the Law of the jurisdiction in which the Borrower is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable Law or reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable Law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, each Foreign Lender shall deliver such forms promptly upon the obsolescence, expiration or invalidity of such form previously delivered by such Foreign Lender. Notwithstanding the submission of such documentation claiming a reduced rate of or exemption from U.S. withholding tax, the Administrative Agent shall be entitled to withhold United States federal income taxes at the full statutory withholding rate then in effect if in its reasonable judgment it is required to do so under the due diligence requirements imposed upon a withholding agent under §1.1441-7(b) of the United States Income Tax Regulations. The Administrative Agent is indemnified under §1.1461-1(e) of the United States Income Tax Regulations against any claims and demands of any Lender or assignee or participant of a Lender for the amount of any tax it deducts and withholds in accordance with regulations under § 1441 of the Internal Revenue Code. In addition, any Lender, if requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable Law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements or to determine the amount of backup withholding tax to deduct and withhold from such payment. Each Foreign Lender shall promptly notify the Administrative Agent and the Borrower at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the U.S. taxing authority for such purpose).

Without limiting the generality of the foregoing, in the event that the Borrower is resident for tax purposes in the United States of America, any Foreign Lender shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:

(i) two (2) duly completed valid originals of IRS Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States of America is a party,

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(ii) two (2) duly completed valid originals of IRS Form W-8ECI,

(iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower within the meaning of section 871(h)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code and (y) two duly completed valid originals of IRS Form W-8BEN,

(iv) any other form prescribed by applicable Law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable Law to permit the Borrower to determine the withholding or deduction required to be made, or

(v) to the extent that any Lender is not a Foreign Lender, such Lender shall submit to the Administrative Agent and, upon a written request therefor from the Borrower, to the Borrower two (2) originals of an IRS Form W-9 or any other form prescribed by applicable Law demonstrating that such Lender is not a Foreign Lender.

If a payment made to a Lender under any Loan Document would be subject to U.S. Federal withholding tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent, at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent, such documentation prescribed by applicable law (including any notice described in Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower or the Administrative Agent, as the case may be, to comply with its obligations under FATCA, to determine that such Lender has or has not complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.

4.8.6 Treatment of Certain Refunds. If the Administrative Agent, a Lender or the Issuing Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section, it shall, within 30 days from the date of such receipt, pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund); net of all out-of-pocket expenses of the Administrative Agent, such Lender or the Issuing Lender, as the case may be, and without interest (other than any interest paid by the relevant Official Body with respect to such refund), provided that the Borrower, upon the request of the Administrative Agent, such Lender or the Issuing Lender, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Official Body) to the Administrative Agent, such Lender or the Issuing Lender in the event the Administrative Agent, such Lender or the Issuing Lender is required to repay such refund to such Official Body. This Section shall not be construed to require the Administrative Agent, any Lender or the Issuing Lender to make

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available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person.

4.9 Indemnity. In addition to the compensation or payments required by Section 4.7 or Section 4.8, the Borrower shall indemnify each Lender against all liabilities, losses or expenses (including loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan, from fees payable to terminate the deposits from which such funds were obtained) which such Lender sustains or incurs as a consequence of any:

(i) payment, prepayment, conversion or renewal of any Loan to which a LIBOR Rate Option applies on a day other than the last day of the corresponding Interest Period (whether or not such payment or prepayment is mandatory, voluntary or automatic and whether or not such payment or prepayment is then due); or

(ii) the failure to borrow, convert, continue, pay or prepay any Loan (for a reason other than the failure of such Lender to make a Loan in accordance with the terms hereof) on the date specified in any notice delivered pursuant hereto.

If any Lender sustains or incurs any such loss or expense, it shall from time to time notify the Borrower of the amount determined in good faith by such Lender (which determination may include such assumptions, allocations of costs and expenses and averaging or attribution methods as such Lender shall deem reasonable) to be necessary to indemnify such Lender for such loss or expense. Such notice shall set forth in reasonable detail the basis for such determination. Such amount shall be due and payable by the Borrower to such Lender ten (10) Business Days after such notice is given.

4.10 Settlement Date Procedures. In order to minimize the transfer of funds between the Lenders and the Administrative Agent, the Borrower may borrow, repay and reborrow Swing Loans and PNC may make Swing Loans as provided in Section 2.1.2 hereof during the period between Settlement Dates. The Administrative Agent shall notify each Lender of its Ratable Share of the total of the Revolving Credit Loans and the Swing Loans (each a “Required Share”). On such Settlement Date, each Lender shall pay to the Administrative Agent the amount equal to the difference between its Required Share and its Revolving Credit Loans, and the Administrative Agent shall pay to each Lender its Ratable Share of all payments made by the Borrower to the Administrative Agent with respect to the Revolving Credit Loans. The Administrative Agent shall also effect settlement in accordance with the foregoing sentence on the proposed Borrowing Dates for Revolving Credit Loans and may at its option effect settlement on any other Business Day. These settlement procedures are established solely as a matter of administrative convenience, and nothing contained in this Section 4.10 shall relieve the Lenders of their obligations to fund Revolving Credit Loans on dates other than a Settlement Date pursuant to Section 2.1.2 . The Administrative Agent may at any time at its option for any reason whatsoever require each Lender to pay immediately to the Administrative Agent such Lender’s Ratable Share of the outstanding Revolving Credit Loans and each Lender may at any time require the Administrative Agent to pay immediately to such Lender its Ratable Share of all payments made by the Borrower to the Administrative Agent with respect to the Revolving Credit Loans.

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5. REPRESENTATIONS AND WARRANTIES

5.1 Representations and Warranties. The Borrower represents and warrants to the Administrative Agent and each of the Lenders as follows:

5.1.1 Financial Condition.

(i) The unaudited pro forma consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at September 30, 2010 (including the notes thereto) (the “Pro Forma Balance Sheet”), copies of which have heretofore been furnished to each Lender, has been prepared giving effect (as if such events had occurred on such date) to (a) the Loans to be made on the Closing Date and the use of proceeds thereof and (b) the payment of fees and expenses in connection with the foregoing. The Pro Forma Balance Sheet has been prepared based on the best information available to the Borrower as of the date of delivery thereof, and presents fairly on a pro forma basis the estimated financial position of Borrower and its consolidated Subsidiaries as at September 30, 2010, assuming that the events specified in the preceding sentence had actually occurred at such date.

(ii) The audited consolidated balance sheets of the Borrower as at December 31, 2009, and the related consolidated statements of income and of cash flows for the fiscal years ended on such dates, reported on by and accompanied by an unqualified report from Ernst & Young LLP, present fairly in all material respects the consolidated financial condition of the Borrower as at such date, and the consolidated results of its operations and its consolidated cash flows for the respective fiscal years then ended. Such audited financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by the aforementioned firm of accountants and disclosed therein).

(iii) The unaudited consolidated balance sheet of the Borrower as at September 30, 2010, and the related unaudited consolidated statements of income and cash flows for the nine-month period ended on such date, present fairly in all material respects the consolidated financial condition of the Borrower as at such date, and the consolidated results of its operations and its consolidated cash flows for the nine-month period then ended. All such unaudited financial statements have been prepared in accordance with GAAP applied consistently throughout the periods involved (subject to normal year-end audit adjustments and the absence of footnotes).

5.1.1.2 Neither the Borrower nor any of its Subsidiaries has any material Guarantee Obligations, contingent liabilities or liabilities for taxes, or any long-term material leases or unusual forward or long-term commitments, including any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives, that are not reflected in the most recent financial statements referred to in Sections 5.1.1(ii) or (iii) and are not permitted to be incurred under this Agreement. During the period from September 30, 2010 to and including the date hereof there has been no Disposition by any Group Member of any material part of its business or property.

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5.1.2 No Change. Since September 30, 2010, there has been no development or event that has had or could reasonably be expected to have a Material Adverse Effect.

5.1.3 Existence; Compliance with Law. Each Group Member (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization (except no representation is made as to the good standing of any Subsidiary organized under the laws of a jurisdiction in which there is no concept of good standing), (b) has the power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that the failure to so qualify would not, in the aggregate, be reasonably likely to have a Material Adverse Effect, and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

5.1.4 Power; Authorization; Enforceable Obligations. Each Loan Party has the power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party and, in the case of the Borrower, to obtain extensions of credit hereunder. Each Loan Party has taken all necessary organizational action to authorize the execution, delivery and performance of the Loan Documents to which it is a party and, in the case of the Borrower, to authorize the extensions of credit on the terms and conditions of this Agreement. No consent or authorization of, filing with, notice to or other act by or in respect of, any Official Body or any other Person is required in connection with the extensions of credit hereunder or with the execution, delivery, performance, validity or enforceability of this Agreement or any of the Loan Documents, except (i) consents, authorizations, filings and notices described in Schedule 5.1.4, which consents, authorizations, filings and notices have been obtained or made and are in full force and effect and (ii) the filings referred to in Section 5.1.17. Each Loan Document has been duly executed and delivered on behalf of each Loan Party party thereto. This Agreement constitutes, and each other Loan Document upon execution will constitute, a legal, valid and binding obligation of each Loan Party party thereto, enforceable against each such Loan Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).

5.1.5 No Legal Bar. The execution, delivery and performance of this Agreement and the other Loan Documents, the issuance of Letters of Credit, the borrowings hereunder and the use of the proceeds thereof will not violate any material Requirement of Law or any Contractual Obligation of any Group Member and will not result in, or require, the creation or imposition of any Lien on any of their respective material properties or revenues pursuant to any Requirement of Law or any such Contractual Obligation (other than the Liens created by the Security Documents).

5.1.6 Litigation. No litigation, investigation or proceeding of or before any arbitrator or Official Body is pending or, to the knowledge of the Borrower, threatened by or against any Group Member or against any of their respective properties or revenues (a) with

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respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (b) that could reasonably be expected to have a Material Adverse Effect.

5.1.7 No Default. No Group Member is in default under or with respect to any of its Contractual Obligations in any respect that could reasonably be expected to have a Material Adverse Effect. No Potential Default or Event of Default has occurred and is continuing.

5.1.8 Ownership of Property; Liens. Each Group Member has title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other property, and none of such property is subject to any Lien except as permitted by Section 7.2.7.

5.1.9 Intellectual Property. Each Group Member owns, or is licensed to use, all Intellectual Property necessary for the conduct of its business as currently conducted that is material to the business, condition (financial or otherwise), operations, performance, properties or prospects of the Group Members taken as a whole. No material claim has been asserted and is pending by any Person challenging or questioning the use of any Intellectual Property or the validity or effectiveness of any Intellectual Property that is material to the business, condition (financial or otherwise), operations, performance, properties or prospects of the Group Members taken as a whole, nor does the Borrower know of any valid basis for any such claim. The use of Intellectual Property by each Group Member does not infringe on the rights of any Person, except to the extent of any infringements which would not, in the aggregate, be reasonably likely to have a Material Adverse Effect.

5.1.10 Taxes. Each Group Member has filed or caused to be filed all Federal, state and other material tax returns that are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Official Body (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the relevant Group Member); no tax Lien has been filed with respect to any Group Member that is not permitted under Section 7.2.2., and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge.

5.1.11 Federal Regulations. No part of the proceeds of any Loans, and no other extensions of credit hereunder, will be used for any purpose that violates the provisions of the Regulations of the Board. If requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1, as applicable, referred to in Regulation U.

5.1.12 Labor Matters. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect: (a) there are no strikes or other labor disputes against any Group Member pending or, to the knowledge of the Borrower, threatened; (b) hours worked by and payment made to employees of each Group Member have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law dealing with such matters; and (c) all payments due from any Group Member on account of employee health and

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welfare insurance have been paid or accrued as a liability on the books of the relevant Group Member.

5.1.13 Investment Company Act; Other Regulations. No Loan Party is an “investment company”, or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended. No Loan Party is subject to regulation under any Requirement of Law (other than Regulation X of the Board) that limits its ability to incur Indebtedness.

5.1.14 Subsidiaries. Except as disclosed to the Administrative Agent by the Borrower in writing from time to time after the Closing Date, (a) Schedule 5.1.14 sets forth the name and jurisdiction of incorporation of each Subsidiary and, as to each such Subsidiary, the percentage of each class of Capital Stock owned by any Loan Party and (b) there are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments (other than stock options granted to employees or directors and directors’ qualifying shares) of any nature relating to any Capital Stock of the Borrower or any Subsidiary, except as created by the Loan Documents.

5.1.15 Environmental Matters. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect:

(i) the facilities and properties owned, leased or operated by any Group Member (the “Properties”) do not contain, and have not previously contained, any Materials of Environmental Concern in amounts or concentrations or under circumstances that constitute or constituted a violation of, or could give rise to liability under, any Environmental Law;

(ii) no Group Member has received or is aware of any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the business operated by any Group Member (the “Business”), nor does the Borrower have knowledge or reason to believe that any such notice will be received or is being threatened;

(iii) Materials of Environmental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location that could give rise to liability under, any Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could give rise to liability under, any applicable Environmental Law;

(iv) no judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened, under any Environmental Law to which any Group Member is or will be named as a party with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business;

(v) there has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of any Group Member in connection with the Properties or otherwise in connection with the

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Business, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws;

(vi) the Properties and all operations at the Properties are in compliance, and have in the last five years been in compliance, with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any Environmental Law with respect to the Properties or the Business; and

(vii) no Group Member has assumed any liability of any other Person under Environmental Laws.

5.1.16 Accuracy of Information, etc. No written statement or information contained in this Agreement, any other Loan Document or any other schedule, exhibit, report, document, certificate or other written statement furnished by or on behalf of any Loan Party to the Administrative Agent or the Lenders, or any of them, for use in connection with the transactions contemplated by this Agreement or the other Loan Documents (excluding any projections, pro forma financial information and information of a general economic or industry nature), as such information, schedule, exhibit, report, document, certificate or other written statement has been amended, supplemented or superseded by any other written information, schedule, exhibit, report, document, certificate or other written statement later delivered to the same parties receiving such written information, schedule, exhibit, report, document, certificate or other written statement prior to the date on which this representation is made or deemed made, contained as of the date such written statement, information, schedule, exhibit, report, document, certificate or other written statement was so furnished, any untrue statement of a material fact or omitted to state a material fact necessary to make the statements contained herein or therein, when taken as a whole and in light of the circumstances when made, not materially misleading, provided that in the case of written information, schedules, exhibits, reports, documents, certificates, or other written statements made, delivered or prepared by Persons other than the Borrower, its Subsidiaries and their agents, such representation and warranty is subject to the qualification that it is true and correct only to the knowledge of the Borrower and its Subsidiaries. The projections and pro forma financial information contained in the materials referenced above are based upon good faith estimates and assumptions believed by management of the Borrower to be reasonable at the time made, it being recognized by the Lenders that such financial information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such financial information may differ from the projected results set forth therein by a material amount. There is no fact known to any Loan Party that could reasonably be expected to have a Material Adverse Effect that has not been expressly disclosed herein, in the other Loan Documents, in any other written information, schedules, exhibits, reports, documents, certificates and written statements furnished to the Administrative Agent and the Lenders for use in connection with the transactions contemplated hereby and by the other Loan Documents or in the section entitled “Risks Related to Mafco Worldwide’s Business and Industry” set forth in the Report on (i) Form 10-K of M&F Worldwide for the fiscal year ended December 31, 2009 and (ii) Form 10-Q of M&F Worldwide for the fiscal quarters ended March 31, 2010, June 30 2010 and September 30, 2010.

5.1.17 Security Documents. The Guarantee and Collateral Agreement is effective to create in favor of the Administrative Agent, for the benefit of the Lenders, a legal,

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valid and enforceable security interest in the Collateral described therein and proceeds thereof. In the case of the Pledged Stock described in the Guarantee and Collateral Agreement that constitutes “certificated securities” (as defined in the UCC), when stock certificates representing such Pledged Stock are delivered to the Administrative Agent, together with undated stock powers covering such certificates duly executed in blank by the applicable Loan Party (and, in the case of any Pledged Stock that is issued by a foreign issuer, the applicable provisions of foreign Law are complied with), and in the case of the other Collateral described in the Guarantee and Collateral Agreement, when financing statements and other filings specified on Schedule 5.1.17 in appropriate form are filed in the offices specified on Schedule 5.1.17 and the other actions specified on Schedule 5.1.17 have been duly taken, the Guarantee and Collateral Agreement shall constitute a perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral and the proceeds thereof, as security for the Obligations (as defined in the Guarantee and Collateral Agreement), in each case prior and superior in right to any other Person (except, in the case of Collateral other than Pledged Stock that constitutes certificated securities, Liens permitted by Section 7.2.2).

5.1.18 Solvency. The Loan Parties, taken as a whole, are, and after giving effect to the incurrence of all Indebtedness and obligations being incurred in connection herewith will be and will continue to be, Solvent.

5.1.19 ERISA Compliance. Neither a Reportable Event nor the failure to satisfy the minimum funding standard as described in Section 412 of the Code or Section 302 of ERISA has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan that resulted, or could reasonably be expected to result, in any unpaid liability, and each Plan (other than any Multiemployer Plan or any multiemployer health or welfare plan) has complied (in form and in operation) in all material respects with the applicable provisions of ERISA and the Code, except as such Reportable Event, or such failure to satisfy or comply, could not reasonably be expected to have a Material Adverse Effect. No Lien in favor of the PBGC or a Plan has arisen during such five-year period. The present value of all accrued benefits under each Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits (and also allocable, in the case of a multiple employer Plan, to the Borrower or its ERISA Affiliates) by a material amount. Neither the Borrower nor any ERISA Affiliate has had a complete or partial withdrawal from any Multiemployer Plan that has resulted, or could reasonably be expected to result, in a material liability under ERISA, and neither the Borrower nor any ERISA Affiliate would become subject to any material liability under ERISA if the Borrower or any such ERISA Affiliate were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made.

6. CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT

The obligation of each Lender to make Loans and of the Issuing Lender to issue Letters of Credit hereunder is subject to the performance by each of the Loan Parties of its Obligations to be performed hereunder at or prior to the making of any such Loans or issuance of such Letters of Credit and to the satisfaction of the following further conditions:

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6.1 First Loans and Letters of Credit.

6.1.1 Deliveries. On the Closing Date, the Administrative Agent shall have received each of the following in form and substance satisfactory to the Administrative Agent:

(i) (a) this Agreement, executed and delivered by the Administrative Agent, the Lenders and the Borrower, (b) the Notes executed and delivered by the Borrower, (c) the Guarantee and Collateral Agreement, executed and delivered by the Borrower, Holdings and each other Guarantor, (d) an Acknowledgement and Consent in the form attached to the Guarantee and Collateral Agreement, executed and delivered by each Issuer (as defined therein), if any, that is not a Loan Party and (e) the completed Perfection Certificate executed and delivered by the Borrower and the other Loan Parties;

(ii) (a) the Pro Forma Balance Sheet, (b) audited consolidated financial statements of the Borrower for the fiscal year ending December 31, 2009, (c) unaudited consolidated financial statements of the Borrower for each fiscal quarter ended after the latest fiscal year referred to in clause (b) above through the fiscal quarter ended September 30, 2010 and thereafter, as such financial statements are available, and unaudited consolidated financial statements for the same period of the prior fiscal year and (d) to the extent available to management prior to the Closing Date, monthly financial data generated by the Borrower’s internal accounting systems for use by senior and financial management for each month after the latest fiscal quarter for which financial statements have been received pursuant to clause (b) above;

(iii) evidence that all governmental and third party approvals necessary in connection with the continuing operations of the Group Members and the transactions contemplated hereby shall have been obtained and be in full force and effect;

(iv) results of a recent lien search in each jurisdiction where a Loan Party is organized and where a Loan Party maintains its chief executive office, and such searches shall reveal no liens on any of the assets of the Loan Parties except for liens permitted by Section 7.2.2 or discharged on or prior to the Closing Date pursuant to documentation reasonably satisfactory to the Administrative Agent;

(v) received all fees required to be paid to the Administrative Agent and the Lenders, and all expenses required to be reimbursed for which invoices have been presented (including the reasonable fees and expenses of legal counsel), on or before the Closing Date;

(vi) evidence reasonably satisfactory to it that the Existing Credit Agreement has been terminated and all amounts then due and payable thereunder have been satisfied in full and all Liens securing the Indebtedness thereunder have been released;

(vii) executed legal opinions from Paul, Weiss Rifkind, Wharton & Garrison LLP, counsel to the Borrower and the other Loan Parties in each case covering such matters incident to the transactions contemplated by this Agreement as the Administrative Agent may reasonably require;

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(viii) (a) the certificates representing the certificated shares of Capital Stock pledged pursuant to the Guarantee and Collateral Agreement, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof and (b) each promissory note (if any) pledged to the Administrative Agent pursuant to the Guarantee and Collateral Agreement endorsed (without recourse) in blank (or accompanied by an executed transfer form in blank) by the pledgor thereof;

(ix) each document (including any Uniform Commercial Code financing statement) required by the Security Documents or under law or reasonably requested by the Administrative Agent to be filed, registered or recorded in order to create in favor of the Administrative Agent, for the benefit of the Lenders, a perfected Lien on the Collateral described therein, prior and superior in right to any other Person (other than with respect to Liens expressly permitted by Section 7.2.2), shall be in proper form for filing, registration or recordation;

(x) insurance certificates satisfying the requirements of Section 5.2(b) of the Guarantee and Collateral Agreement;

(xi) a certificate of each of the Loan Parties signed by an Authorized Officer, dated the Closing Date stating that (a) all representations and warranties of the Loan Parties set forth in this Agreement are true and correct (x) in the case of representations and warranties qualified by materiality, in all respects and (y) otherwise, in all material respects, (b) the Loan Parties are in compliance with each of the covenants and conditions hereunder, (c) no Event of Default or Potential Default exists, and (d) no Material Adverse Effect has occurred since September 30, 2010;

(xii) a certificate dated the Closing Date and signed by the Secretary or an Assistant Secretary of each of the Loan Parties, certifying as appropriate as to: (a) all corporate action taken by each Loan Party in connection with this Agreement and the other Loan Documents; (b) the names of the Authorized Officers of such Loan Party authorized to sign the Loan Documents and their true signatures; and (c) copies of its organizational documents as in effect on the Closing Date certified by the appropriate state official where such documents are filed in a state office together with certificates from the appropriate state officials as to the continued existence and good standing of each Loan Party in the state where organized;

(xiii) a solvency certificate from the chief financial officer of Holdings and the Borrower, in form and substance reasonably acceptable to the Administrative Agent;

(xiv) a pro forma compliance certificate in a form reasonably acceptable to the Administrative Agent; and

(xv) such other documents in connection with such transactions as the Administrative Agent or said counsel may reasonably request.

6.2 Each Loan or Letter of Credit. At the time of making any Loans or issuing, extending or increasing any Letters of Credit and after giving effect to the proposed extensions of credit: (i) the representations, warranties of each Loan Party set forth in the Loan Document shall be true and correct (x) in the case of representations and warranties qualified by materiality, in all respects and (y) otherwise, in all material respects, in each case on and as of such date as if

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made on and as of such date (except to the extent that such representations and warranties relate to an earlier date in which case such representations and warranties that expressly relate to an earlier date are true and correct, in the case of such representations and warranties qualified by materiality, in all respects, and otherwise in all material respects, as of such earlier date), (ii) no Event of Default or Potential Default shall have occurred and be continuing, and (iii) the Borrower shall have delivered to the Administrative Agent a duly executed and completed Loan Request or to the Issuing Lender an application for a Letter of Credit, as the case may be.

Each borrowing by and issuance of a Letter of Credit on behalf of the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date of such extension of credit that the conditions contained in this Section 6.2 have been satisfied.

7. COVENANTS

The Borrower covenants and agrees that until Payment In Full, the Borrower shall, and shall cause Holdings and each of the Borrower’s and Holdings’ Subsidiaries to:

7.1 Affirmative Covenants.

7.1.1 Financial Statements. Furnish to each Lender, through the Administrative Agent:

(i) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the audited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such year and the related audited consolidated statements of income and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a “going concern” or like qualification or exception, or qualification arising out of the scope of the audit, by Ernst & Young LLP or other independent certified public accountants of nationally recognized standing; and

(ii) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the Borrower, the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and of cash flows for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by an Authorized Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments).

All such financial statements shall (a) be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein) and (b) reflect, whether as a line item, in a footnote or otherwise, the adjustments to Consolidated EBITDA described in clauses (a)(i) through (viii) and (b)(i) through (v), as applicable, of that definition, for the applicable period.

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7.1.2 Certificates; Other Information. Furnish to each Lender, through the Administrative Agent (or, in the case of clause (iv), to the relevant Lender):

(i) [intentionally omitted];

(ii) concurrently with the delivery of any financial statements pursuant to Section 7.1.1, (a) a certificate of an Authorized Officer stating that such Authorized Officer has obtained no knowledge of any Potential Default or Event of Default that occurred during such period except as specified in such certificate, (b) a compliance certificate containing all information and calculations necessary for determining compliance by the Borrower with Section 7.2.1 as of the last day of the fiscal quarter or fiscal year of the Borrower, as the case may be (each, a “Compliance Certificate”), and (c) to the extent not previously disclosed to the Administrative Agent, a listing of any Intellectual Property registered, issued or subject to a pending application for registration or issuance and acquired by any Loan Party since the date of the most recent list delivered pursuant to this clause (or, in the case of the first such list so delivered, since the Closing Date);

(iii) as soon as available, and in any event no later than 60 days after the end of each fiscal year of the Borrower, a detailed consolidated budget for the following fiscal year (including a projected consolidated balance sheet of the Borrower and its Subsidiaries as of the end of the following fiscal year, the related consolidated statements of projected cash flow and projected income and a description of the underlying assumptions applicable thereto), and, as soon as available, significant revisions, if any, of such budget and projections with respect to such fiscal year (collectively, the “Projections”), which Projections shall in each case be accompanied by a certificate of an Authorized Officer stating that such Projections are based on reasonable estimates, information and assumptions and that such Authorized Officer has no reason to believe that such Projections are incorrect or misleading in any material respect;

(iv) within five days after the same are sent, copies of all financial statements and reports that Holdings or the Borrower sends to the holders of any class of its debt securities or public equity securities and, within five days after the same are filed, copies of all financial statements and reports that Holdings or the Borrower may make to, or file with, the SEC;

(v) concurrently with the delivery of the financial statements (a) under Section 7.1.1(i), to the extent applicable, notice of any material change in GAAP or in the application thereof, in each case, with respect to the consolidated financial statements of the Borrower, that has occurred since the date of the consolidated balance sheet of the Borrower most recently delivered pursuant to Section 7.1.1(i), and (b) under Section 7.1.1(i) or (ii), any change by the Borrower to International Financial Reporting Standards; and

(vi) promptly, such additional available financial and other information with regard to any Group Member as any Lender may from time to time reasonably request.

7.1.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations (excluding Indebtedness) of whatever nature, including obligations in respect of Taxes, except where the amount or validity thereof is currently being contested in good faith by appropriate

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proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the relevant Group Member; provided, however, notwithstanding the foregoing, in the case of obligations in respect of Taxes, the Borrower and each other Group Member shall pay, discharge or otherwise satisfy any such Tax obligations (i) upon the commencement of enforcement or foreclosure proceedings with respect to any Lien securing any such Tax obligations and (ii) where the failure to make such payment or the failure to discharge or otherwise satisfy any such Tax obligations pending resolution of any contest of such Tax obligations could reasonably be expected to result in a Material Adverse Effect. Notwithstanding anything to the contrary in the foregoing sentence, the Borrower shall not be in default under this Section 7.1.3 unless the aggregate amount of non-contested obligations which the Group Members have so failed to pay, discharge or satisfy before they become delinquent and which remain delinquent at the time of determination is more than $3,000,000 in the aggregate.

7.1.4 Maintenance of Existence; Compliance. (i)(a) Preserve, renew and keep in full force and effect its organizational existence and (b) take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business, except, in each case, as otherwise permitted by Section 7.2.4 and Section 7.2.5 and except, in the case of clause (b) above, to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (ii) comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

7.1.5 Maintenance of Property; Insurance. (i) Keep all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted, except where the failure to do so would not, in the aggregate, be reasonably likely to have a Material Adverse Effect, and (ii) maintain with financially sound and reputable insurance companies insurance on all its property in at least such amounts and against at least such risks (but including in any event public liability, product liability and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business (taking into account the availability of such insurance in certain geographic regions where such property may be located).

7.1.6 Inspection of Property; Books and Records; Discussions. (i) Keep proper books of records and accounts in which full, true and correct entries in conformity with GAAP and in all material respects with all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities and (ii) permit representatives of (a) the Administrative Agent and (b) any Lender in coordination with the Administrative Agent to visit and inspect any of its properties and examine and make abstracts from any of its books and records it may reasonably request at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Group Members with officers and employees of the Group Members and, after reasonable notice to the Borrower, with their independent certified public accountants with the participation, if requested by a Group Member, of such Group Member.

7.1.7 Notices. Promptly give notice to the Administrative Agent and each Lender of:

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(i) the occurrence of any Potential Default or Event of Default, including any Change in Control;

(ii) any (a) default or event of default under any Contractual Obligation of any Group Member or (b) litigation, investigation or proceeding that may exist at any time between any Group Member and any Official Body, that in either case, could reasonably be expected to have a Material Adverse Effect;

(iii) any litigation or proceeding affecting any Group Member (a) in which it could be reasonably expected, in the good faith opinion of such Group Member, to result in such Group Member incurring a liability of $3,000,000 or more and not covered by insurance, (b) in which injunctive or similar relief is sought which could reasonably be expected to have a Material Adverse Effect or (c) which relates to any Loan Document;

(iv) (a) the occurrence of any ERISA Event, a failure to make any required contribution to a Plan or a Multiemployer Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or (b) the institution of proceedings or the taking, or expected taking, of any other action by the PBGC or the Borrower or any ERISA Affiliate or any Multiemployer Plan with respect to the withdrawal (including any partial withdrawal) from, or the termination, Reorganization or Insolvency of, any Plan; and

(v) any development or event that has had or could reasonably be expected to have a Material Adverse Effect.

Each notice pursuant to this Section 7.1.7 shall be accompanied by a statement of an Authorized Officer setting forth details of the occurrence referred to therein and stating what action the relevant Group Member proposes to take with respect thereto.

7.1.8 Environmental Laws. (i) Comply with, and ensure compliance by all tenants and subtenants, if any, with, all applicable Environmental Laws, and obtain and comply with and maintain, and ensure that all tenants and subtenants obtain and comply with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws, except in each case to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

(ii) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply with all lawful orders and directives of all Official Bodies regarding Environmental Laws, except (a) to the extent that the failure to perform any of the obligations contained in this Section 7.1.8(ii) could not reasonably be expected to have a Material Adverse Effect or (b) to the extent that such obligations are being contested in good faith by appropriate proceedings and the pendency of such proceedings could not reasonably be expected to have a Material Adverse Effect.

7.1.9 Additional Collateral, etc. (i) With respect to any property acquired after the Closing Date by any Loan Party that constitutes Collateral (as defined in the Guarantee and Collateral Agreement) as to which the Administrative Agent, for the benefit of the Lenders, does

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not have a perfected Lien, promptly (a) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement or such other documents as the Administrative Agent deems necessary or reasonably advisable to grant to the Administrative Agent, for the benefit of the Lenders, a security interest in such property as required by the Guarantee and Collateral Agreement and (b) take all actions deemed necessary or reasonably advisable by the Administrative Agent to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in such Collateral to the extent contemplated by the Guarantee and Collateral Agreement, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by Law or as may be requested by the Administrative Agent.

(ii) With respect to any new Subsidiary (other than a Foreign Subsidiary) created or acquired after the Closing Date as a direct Subsidiary of any Loan Party, promptly (a) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement as the Administrative Agent deems necessary or reasonably advisable to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in the Capital Stock of such new Subsidiary that is owned by any Loan Party, (b) deliver to the Administrative Agent the certificates, if any, representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the relevant Loan Party, (c) cause such new Subsidiary (I) to become a party to the Guarantee and Collateral Agreement, (II) to take such actions necessary or reasonably advisable to grant to the Administrative Agent for the benefit of the Lenders a perfected first priority security interest in the Collateral described in the Guarantee and Collateral Agreement with respect to such new Subsidiary to the extent contemplated by the Guarantee and Collateral Agreement, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be requested by the Administrative Agent and (III) to deliver to the Administrative Agent a certificate of such Subsidiary, substantially in the form of the certificate delivered pursuant to Section 6.1.1(viii), with appropriate insertions and attachments, and (d) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance (but generally within the scope of the legal opinion delivered pursuant to Section 6.1.1(vii), and from counsel, reasonably satisfactory to the Administrative Agent.

(iii) With respect to (x) any new Foreign Subsidiary (other than any Immaterial Foreign Subsidiary) created or acquired after the Closing Date as a direct Subsidiary of any Loan Party or (y) any Immaterial Foreign Subsidiary that is a direct Subsidiary of a Loan Party and ceases to be an Immaterial Foreign Subsidiary after the Closing Date, promptly (a) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement as the Administrative Agent deems necessary or reasonably advisable to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in the Capital Stock of such Subsidiary that is owned by any such Loan Party (provided that in no event shall more than 66% of the total outstanding voting Capital Stock of any such Subsidiary be required to be so pledged), (b) deliver to the Administrative Agent the certificates, if any, representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the relevant Group Member, and take such other action as the Administrative Agent may deem necessary or reasonably advisable to perfect the

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Administrative Agent’s security interest therein, and (c) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent.

(iv) Notwithstanding the foregoing, this Section 7.1.9 shall not require the creation or perfection of pledges of or security interests in, or the obtaining of legal opinions or other deliverables with respect to, particular assets of the Loan Parties, or the provision of any Guaranty by any Subsidiary, if, and for so long as the Administrative Agent, in consultation with the Borrower, determines that the cost of creating or perfecting such pledges or security interests in such assets, or obtaining such legal opinions or other deliverables in respect of such assets, or providing such Guarantees (taking into account any adverse tax consequences to the Borrower and its Subsidiaries (including the imposition of withholding or other material taxes)), shall be excessive in view of the benefits to be obtained by the Lenders therefrom. The Administrative Agent may grant extensions of time for the creation and perfection of security interests in or the obtaining of legal opinions or other deliverables with respect to particular assets or the provision of any Guaranty by any Subsidiary (including extensions beyond the Closing Date or in connection with assets acquired, or Subsidiaries formed or acquired, after the Closing Date) where it determines that such action cannot be accomplished without undue effort or expense by the time or times at which it would otherwise be required to be accomplished by this Agreement or the Security Documents.

7.1.10 Intentionally Omitted

7.1.11 Further Assurances. Each Loan Party shall, from time to time, at its expense, faithfully preserve and protect the Administrative Agent’s Lien on and first priority security interest in the Collateral whether now owned or hereafter acquired as a continuing first priority perfected Lien to the extent contemplated by the Guarantee and Collateral Agreement, subject only to Permitted Exceptions, and shall do such other acts and things as the Administrative Agent in its discretion may deem necessary or reasonably advisable from time to time in order to preserve, perfect and protect the Liens granted under the Loan Documents and to exercise and enforce its rights and remedies thereunder with respect to the Collateral.

7.1.12 Anti-Terrorism Laws. None of the Loan Parties is or shall be (i) a Person with whom any Lender is restricted from doing business under Executive Order No. 13224 or any other Anti-Terrorism Law, (ii) engaged in any business involved in making or receiving any contribution of funds, goods or services to or for the benefit of such a Person or in any transaction that evades or avoids, or has the purpose of evading or avoiding, the prohibitions set forth in any Anti-Terrorism Law, or (iii) otherwise in violation of any Anti-Terrorism Law. The Loan Parties shall provide to the Lenders any certifications or information that a Lender requests to confirm compliance by the Loan Parties with Anti-Terrorism Laws.

7.1.13 Operating Accounts. Each of the Loan Parties shall maintain their principal deposit accounts with PNC so long as PNC is the Administrative Agent and, if PNC ceases to be the Administrative Agent, use commercially reasonable efforts to enter into control agreement(s) with respect to their primary deposit accounts (such control agreements to be in a form and substance reasonably acceptable to the successor Administrative Agent), for the benefit

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of the Administrative Agent and the other Secured Parties (as defined in the Guarantee and Collateral Agreement).

7.2 Negative Covenants. The Borrower covenants and agrees that until Payment in Full, the Borrower shall not, and shall not permit Holdings or any of the Borrower’s or Holdings’ Subsidiaries to, directly or indirectly:

7.2.1 Financial Covenants.

(i) Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio as of the last day of any fiscal quarter, commencing with the fiscal quarter ending December 31, 2010, to exceed 2.25 to 1.0.

(ii) Consolidated Interest Coverage Ratio. Permit the Consolidated Interest Coverage Ratio as of the last day of any fiscal quarter, commencing with the fiscal quarter ending December 31, 2010, to be less than 5.5 to 1.0.

(iii) Capital Expenditures: Make or commit to make any Capital Expenditure, except Capital Expenditures of the Borrower and its Subsidiaries in the ordinary course of business not exceeding $3,500,000 in the aggregate in any fiscal year commencing with the fiscal year ending December 31, 2010; provided, that the amount of Capital Expenditures permitted for any fiscal year, commencing with the fiscal year ending December 31, 2011, shall be increased by an amount equal to the excess, if any, of (a) the unused permitted Capital Expenditures for the immediately preceding fiscal year to the extent not in excess of $500,000 over (b) an amount equal to the amount of unused permitted Capital Expenditures, if any, carried forward to such preceding year.

7.2.2 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of their properties, assets (including shares of Capital Stock) or revenues, whether now owned or hereafter acquired, except for the following (collectively, “Permitted Exceptions”):

(i) Liens for taxes not yet due or which are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of the Borrower or any of its Subsidiaries, as the case may be, in accordance with GAAP;

(ii) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or which are being contested in good faith and by appropriate proceedings;

(iii) pledges or deposits in connection with workmen’s compensation, unemployment insurance and other social security legislation;

(iv) deposits to secure the performance of bids, trade contracts (other than for borrowed money), government contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred and statutory or contractual bankers’ Liens on monies held in bank accounts in the ordinary course of business;

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(v) easements, servitudes, covenants, conditions, reservations, licenses, agreements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business and encumbrances consisting of zoning restrictions, easements, licenses, survey defects, restrictions on the use of property or minor defects or irregularities in title thereto which, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries;

(vi) Liens created pursuant to the Security Documents;

(vii) Liens in favor of the United States for amounts paid by the Borrower or any of its Subsidiaries as progress payments under government contracts entered into by them;

(viii) any interest or title of a lessor under any lease entered into by the Borrower or any other Subsidiary in the ordinary course of its business and covering only the assets so leased;

(ix) attachment, judgment or other similar Liens arising in connection with court or arbitration proceedings, provided that the same are discharged, or that execution or enforcement thereof is stayed pending appeal, within 30 days or (in the case of any execution or enforcement pending appeal) such lesser time during which such appeal may be taken;

(x) Liens granted in the ordinary course of business of the Borrower or any of its Subsidiaries in favor of issuers of documentary or trade letters of credit for the account of the Borrower or such Subsidiary which support the purchase and/or importation of inventory of the Borrower and its Subsidiaries, which Liens secure the reimbursement obligations of the Borrower or such Subsidiary on account of such letters of credit; provided that each such Lien is limited to (i) the assets acquired or shipped with the support of such letter of credit and (ii) any assets of the Borrower or such Subsidiary which are in the care, custody or control of such issuer in the ordinary course of business;

(xi) possessory Liens in favor of brokers and dealers arising in connection with the acquisition or disposition of investments of the type permitted by Section 7.2.7(i)(b); provided that such Liens (i) attach only to such investments and (ii) secure only obligations incurred in the ordinary course and arising in connection with the acquisition or disposition of such investments and not any obligation in connection with margin financing;

(xii) Liens set forth in Schedule 7.2.2(xii);

(xiii) Liens on the assets of any Foreign Subsidiary securing Indebtedness of such Foreign Subsidiary permitted by Section 7.2.10(vi) or other obligations of such Foreign Subsidiary;

(xiv) Liens securing Indebtedness incurred pursuant to Section 7.2.10(vii) to purchase or finance the purchase of real or personal property or to refinance, refund, renew or extend any such Indebtedness; provided that (i) such Liens shall be created substantially simultaneously with the purchase of such property or such refinancing, refunding, renewal or extension, (ii) such Liens do not at any time encumber any property other than the property

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financed by such Indebtedness, (iii) the amount of Indebtedness secured by such Lien is not increased and (iv) the principal amount of Indebtedness secured by any such Lien shall at no time exceed 100% of the purchase price of such property;

(xv) Liens on the property of a Person which becomes a Subsidiary after the date hereof securing Indebtedness of such Subsidiary permitted under Section 7.2.10(viii) (provided that (i) such Liens existed at the time such Person became a Subsidiary and were not incurred in anticipation thereof or secure refinancing Indebtedness permitted under Section 7.2.10(viii), (ii) immediately after giving effect to the acquisition of such Person, no Potential Default or Event of Default shall have occurred and be continuing, (iii) any such Lien is not spread to cover any other property (or other categories of property) of such Person after the time such Person becomes a Subsidiary and (iv) the amount of the Indebtedness secured thereby is not increased;

(xvi) Intellectual Property licensing agreements entered into in the ordinary course of business;

(xvii) Liens in favor of customs and revenue authorities to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;

(xviii) any extension, renewal or replacement of the foregoing; provided that the Liens permitted by this paragraph shall not extend to or cover any additional Indebtedness or property (other than a substitution of like property); and

(xix) other Liens that do not, individually or in the aggregate, secure obligations in excess of $1,500,000 outstanding at any time; provided, that such any such Lien on any Collateral shall not be senior to the Administrative Agent’s Liens thereon.

7.2.3 Limitation on Guarantee Obligations. Agree to, or assume or incur, or otherwise in any way be or become responsible or liable, directly or indirectly, with respect to, any Guarantee Obligation other than:

(i) Guarantee Obligations pursuant to the Guarantee and Collateral Agreement;

(ii) Guarantee Obligations of any Subsidiary of the Borrower in the nature of a guarantee of Indebtedness or other obligations of the Borrower or any other Wholly Owned Subsidiary of the Borrower (including, without limitation, any Wholly Owned Subsidiary incurring such Guarantee Obligations);

(iii) Guarantee Obligations of any Person which becomes a Subsidiary after the date hereof, provided that (i) such Guarantee Obligations existed at the time such Person became a Subsidiary and were not created in anticipation thereof; (ii) immediately after giving effect to the acquisition of such Person, no Potential Default or Event of Default shall have occurred or be continuing and (iii) the amount thereof does not result in a violation of Section 7.2.7(vii);

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(iv) Guarantee Obligations of the Borrower in the nature of guarantees of Indebtedness or other obligations of any of its Wholly Owned Subsidiaries to the extent such Indebtedness or other obligations, as the case may be, is not prohibited by this Agreement;

(v) Guarantee Obligations pursuant to the indemnification provisions of the Assignment and Assumption Agreement; and

(vi) Guarantee Obligations permitted pursuant to Section 7.2.7(vi).

7.2.4 Limitation on Fundamental Changes. Enter into any transaction in the nature of merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), Dispose of, in one transaction or a series of related transactions, all or substantially all of the business or assets of the Borrower, or enter into any such transaction or series of related transactions with regard to a group of Subsidiaries which, if merged into a single Subsidiary, would constitute a substantial part of the business or assets of the Borrower, or acquire by purchase or otherwise all or substantially all the business or assets of, or Capital Stock or other evidences of beneficial ownership of, any Person, except that:

(i) any Subsidiary of the Borrower (i) may be merged or consolidated with or into, or its assets liquidated and distributed to, the Borrower, provided that the Borrower shall be the continuing or surviving corporation or (ii) may be merged or consolidated with or into, or its assets liquidated and distributed to, any one or more Wholly Owned Subsidiaries of the Borrower; provided that no Domestic Subsidiary may be merged or consolidated with or into a Foreign Subsidiary unless a Domestic Subsidiary is the continuing or surviving entity and no Domestic Subsidiary may have its assets liquidated and distributed to any Foreign Subsidiary;

(ii) any Subsidiary of the Borrower may Dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or a Wholly Owned Subsidiary of the Borrower and, in the event such Subsidiary shall so Dispose of all of its assets, such Subsidiary may liquidate, wind up or dissolve; provided that no Domestic Subsidiary may Dispose of any of its assets to any Foreign Subsidiary other than in the ordinary course of business;

(iii) the Borrower and its Subsidiaries may make acquisitions, investments and purchases permitted by Section 7.2.7; and

(iv) any Foreign Subsidiary that does not have any property may liquidate, wind up or dissolve.

7.2.5 Limitation on Sale of Assets. Dispose of any of its assets (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, or, in the case of any of the Subsidiaries of the Borrower, issue any shares of Capital Stock (other than any director’s qualifying shares), to any Person other than the Borrower or any of its Subsidiaries, except:

(i) as permitted by Sections 7.2.2, 7.2.4, 7.2.6 or 7.2.7;

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(ii) the sale or other disposition (including abandonment) of any property (including Intellectual Property rights) which has become uneconomic, obsolete or worn out and which is disposed of in the ordinary course of business;

(iii) the sale of inventory in the ordinary course of business;

(iv) Intellectual Property licensing agreements entered into in the ordinary course of business;

(v) Dispositions of Cash and Cash Equivalents in the ordinary course of business;

(vi) any transfer of property or assets that represents a surrender or a waiver of a contract right or a settlement, surrender or release of a contract or tort claim;

(vii) the lease or sublease of any real property interest that is not useful in the business of the Borrower or any Subsidiary;

(viii) Dispositions of investments in joint ventures to the extent required by, or made pursuant to, customary buy/sell arrangements between joint venture parties; and

(ix) Dispositions of property not having a value, together with all other Dispositions pursuant to this clause (ix), in excess of $5,000,000 during the term of this Agreement.

7.2.6 Limitation on Restricted Payments. Make any Restricted Payment, except that the following Restricted Payments may be made:

(i) Restricted Payments to Holdings in amounts equal to the amounts required for Holdings to pay franchise and similar taxes and other fees required to maintain its corporate existence;

(ii) Restricted Payments necessary for M & F Worldwide and PCT International Holdings Inc. to pay (i) franchise and similar taxes, (ii) other fees required to maintain its corporate existence, and (iii) other out-of-pocket expenses incurred in the ordinary course of business resulting from M & F Worldwide’s status as a publicly held corporation in an amount not exceeding in the aggregate $2,000,000 during any fiscal year;

(iii) Restricted Payments as required by the Tax Agreement;

(iv) Restricted Payments by any Subsidiary to its parent company so long as such parent company is the Borrower or a Wholly Owned Subsidiary;

(v) Restricted Payments in the form of distributions by the Borrower and Holdings of intercompany advances made by the Borrower to M & F Worldwide after the date hereof pursuant to Section 7.2.6(ii);

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(vi) so long as no Potential Default or Event of Default shall have occurred and be continuing, other Restricted Payments not to exceed $500,000 in the aggregate in any fiscal year; and

(vii) after delivery to the Lenders of the Borrower’s annual audited financial statements pursuant to Section 5.1.1 for any fiscal year and a certificate signed by an Authorized Officer of the Borrower detailing the calculation of Excess Cash Flow for the immediately preceding fiscal year, and so long as no Potential Default or Event of Default shall have occurred and be continuing, additional Restricted Payments in an aggregate amount equal to the difference between (a) fifty percent (50%) of Excess Cash Flow for such immediately preceding fiscal year and (b) without duplication of any deductions in the determination of Excess Cash Flow, the aggregate amount of advances to or investments in suppliers made by the Borrower and its Subsidiaries in such immediately preceding fiscal year net of any repayments by suppliers of such investments or advances in such immediately preceding fiscal year.

7.2.7 Limitation on Investments, Loans, Advances and Acquisitions. Make or commit to make any advance, loan, extension of credit or capital contribution to, or purchase any Capital Stock, bonds, notes, debentures or other securities of, or any assets constituting a business unit of, or make any other investment in, any Person (other than the Borrower or any of its Subsidiaries), except:

(i) investments by the Borrower and its Subsidiaries in accounts, contract rights and chattel paper (as defined in the Uniform Commercial Code), put and call foreign exchange options and foreign exchange forwards and futures to the extent necessary to hedge foreign exchange exposures and notes receivable, arising or acquired in the ordinary course of business and in Hedge Agreements and;

(ii) investments in Cash Equivalents;

(iii) investments by Foreign Subsidiaries in investments of a type similar to Cash Equivalents made outside of the United States;

(iv) extensions of trade credit in the ordinary course of business;

(v) the Borrower and its Subsidiaries may acquire and own investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers and customers or in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising out of the ordinary course of business; provided that the Borrower and its Subsidiaries have paid no new consideration (other than forgiveness of Indebtedness or other obligations) therefor;

(vi) (a)(1) advances, loans and other extensions of credit (including by way of Guaranty) to suppliers for financing raw material collections and raw material collection operations, reduced by the value of goods actually received by the Borrower and its Subsidiaries (net of any payments by a Group Member for such goods), (2) investments in joint venture operations reduced by the fair market value of any assets actually received by the Borrower and its Subsidiaries from such joint venture operations (net of any payments by a Group Member for such assets), and (3) acquisitions of manufacturing technology, licenses and other intellectual

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property, in each such case in the ordinary course of business, and in an aggregate amount not exceeding in $30,000,000 at any time outstanding for all such advances, loans, extensions of credit, investments and acquisitions made under this Section 7.2.7(vi)(a), and (b) advances, loans, extensions of credit (including by way of Guaranty), capital contributions and other investments in other Persons not to exceed in the aggregate, when added to the outstanding amount of Guarantee Obligations incurred pursuant to Section 7.2.3(iii), $5,000,000 in the aggregate outstanding at any time (and such investments to be measured by their fair market value at the time of the investment). For the sake of clarity, it is understood that with respect to clause (a) or (b) above all calculations of the aggregate amount of the advances, loans, extensions of credit (including by way of Guaranty), capital contributions and other investments outstanding at such time shall be reduced by (I) any cash refunds or repayments of such advances, loans or extensions of credit and (II) any cash distributions made on account of such capital contributions and investments;

(vii) investments pursuant to the contribution and indemnification provisions of the Mafco Assignment and Assumption Agreement;

(viii) loans and advances to officers, directors and employees in the ordinary course of business (including, without limitation, for travel, entertainment and relocation expenses) not to exceed $1,000,000 in the aggregate at any time outstanding;

(ix) Permitted Acquisitions; and

(x) Restricted Payments permitted by Section 7.2.6.

7.2.8 Sale and Leaseback. Enter into any arrangement with any Person whereby the Borrower shall sell or transfer any property, real or personal, whether now owned or hereafter acquired, and thereafter rent or lease such property.

7.2.9 Limitation on Transactions with Affiliates. Enter into any transaction (including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service) with any Affiliate of the Borrower (other than the Borrower or any Wholly Owned Subsidiary of the Borrower) other than, to the extent not otherwise prohibited by this Agreement, (i) transactions that are in the ordinary course of business and are upon terms no less favorable to the Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm’s length transaction with a Person not an Affiliate, (ii) transactions contemplated by the Tax Agreement, (iii) Restricted Payments permitted by Section 7.2.6, (iv) any transaction with a joint venture between the Borrower or any of its Subsidiaries, on the one hand, and a third party that is not directly or indirectly controlled by an Affiliate of the Borrower, on the other hand, (v) arrangements with officers, directors, representatives, consultants and employees of Holdings, the Borrower and their Subsidiaries relating to their employment and benefits as such, (vi) any transaction pursuant to which an Affiliate of the Borrower will provide to the Borrower and its Subsidiaries at their request and at the cost of such Affiliate certain allocated services, including services to be purchased from third party providers, such as legal and accounting services, tax, consulting, financial advisory, corporate governance, insurance coverage and other services and (vii) payments by the Borrower or a Subsidiary of the Borrower to an Affiliate of the Borrower for any financial advisory, financing, underwriting or placement

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services or in respect of other investment banking activities, including in connection with acquisitions or divestitures, which payments are approved by a majority of the members of the Board of Directors of the Borrower in good faith.

7.2.10 Indebtedness. Create, incur or suffer to exist any Indebtedness except:

(i) Indebtedness to the Lenders hereunder and under the other Loan Documents;

(ii) Indebtedness in respect of Hedge Agreements permitted by Section 7.2.12;

(iii) Indebtedness outstanding on the date hereof and listed in Schedule 7.2.10(iii), any refinancings, refundings, renewals or extensions thereof that do not increase the principal amount thereof and other Indebtedness outstanding on the date hereof in an aggregate principal amount not to exceed $250,000;

(iv) Indebtedness of (a) Subsidiaries to the Borrower or to other Subsidiaries and (b) the Borrower to any of its Subsidiaries;

(v) Indebtedness of the Borrower and its Subsidiaries secured by Liens permitted by Section 7.2.2(xiv) or (xv) hereof;

(vi) Indebtedness of Foreign Subsidiaries in an aggregate principal amount not to exceed $7,500,000 at any time outstanding;

(vii) Indebtedness (including, without limitation, Capital Lease Obligations) secured by a Lien permitted by Section 7.2.2(xiv), and any refinancings, refundings, renewals or extensions thereof which in any case does not increase the principal amount thereof, in an aggregate principal amount not to exceed $3,000,000 at any time outstanding;

(viii) Indebtedness of any Person that becomes a Subsidiary (or of any Person not previously a Subsidiary that is merged or consolidated with or into a Subsidiary in a transaction permitted hereunder) after the date hereof, or Indebtedness of any Person that is assumed by any Subsidiary in connection with an acquisition of assets by such Subsidiary in a Permitted Acquisition, and any Indebtedness of such Person that refinances, refunds, renews or extends such Indebtedness so long as the principal amount of the original Indebtedness is not increased by any such refinancings, refundings, renewals or extensions; provided that (A) any such original Indebtedness exists at the time such Person becomes a Subsidiary (or is so merged or consolidated) or such assets are acquired and is not created in contemplation of or in connection with such Person becoming a Subsidiary (or such merger or consolidation) or such assets being acquired, (B) the aggregate principal amount of Indebtedness permitted by this clause (viii) shall not exceed $3,000,000 at any time outstanding and (C) neither Holdings, the Borrower nor any Subsidiary of the Borrower (other than such Person or the Subsidiary with which such Person is merged or consolidated or that so assumes such Person’s Indebtedness) shall Guaranty or otherwise become liable for the payment of such Indebtedness;

(ix) earn-outs and post-closing purchase price adjustments in connection with Permitted Acquisitions consummated after the Closing Date;

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(x) Indebtedness incurred under a purchase card facility provided by PNC, the aggregate principal amount under which does not exceed $500,000 at any time outstanding; and

(xi) additional unsecured Indebtedness of the Borrower or any of its Subsidiaries in an aggregate principal amount (for the Borrower and all Subsidiaries) not to exceed $4,000,000 at any one time outstanding.

7.2.11 Limitation on Modifications of Tax Agreement and Mafco Assignment and Assumption Agreement. Modify or waive any provision of the Tax Agreement or the Mafco Assignment and Assumption Agreement, to the extent such amendment, modification or waiver would be reasonably likely to have a material adverse effect on the interests of the Lenders hereunder and under the other Loan Documents.

7.2.12 Hedge Agreements. Enter into any Hedge Agreement, except (i) Hedge Agreements entered into to hedge or mitigate risks to which the Borrower or any Subsidiary has actual exposure (other than those in respect of Capital Stock) and (ii) Hedge Agreements entered into in order to effectively cap, collar or exchange interest rates (from fixed to floating rates, from one floating rate to another floating rate or otherwise) with respect to any interest-bearing liability or investment of the Borrower or any Subsidiary.

7.2.13 Changes in Fiscal Periods. Permit the fiscal year of the Borrower to end on a day other than December 31 or change the Borrower’s method of determining fiscal quarters.

7.2.14 Limitation on Negative Pledge Clauses. Enter into with any Person any agreement, other than this Agreement, which prohibits or limits the ability of the Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired; provided that any of the Borrower and its Subsidiaries may enter into any such agreement to the extent that (i) such agreement is in connection with a Lien permitted by Section 7.2.2 or a sale of assets permitted by Section 7.2.5 and any such prohibitions or limitations apply only to the Property encumbered by such Lien or subject to such sale, (ii) such agreement is a contract, license or lease which includes customary provisions prohibiting or restricting the granting of Liens on the rights contained therein and (iii) such agreement relates to a joint venture permitted hereunder so long as any such prohibition or limitation applies only to the property of such joint venture.

7.2.15 Limitation on Lines of Business. Principally engage in any business or activity other than the business conducted by the Borrower and its Subsidiaries on the Closing Date and businesses and activities reasonably related thereto.

7.2.16 Limitation on Restrictions on Subsidiary Distributions. Enter into or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary of the Borrower to (i) pay dividends or make any other distributions in respect of any Capital Stock of such Subsidiary held by, or pay any Indebtedness owed to, the Borrower or any other Subsidiary of the Borrower, (ii) make loans or advances to the Borrower or any other Subsidiary of the Borrower or (iii) transfer any of its assets to the Borrower or any other Subsidiary of the Borrower, except for such encumbrances or restrictions existing under or by

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reason of (a) any restrictions existing under the Loan Documents, (b) any restrictions with respect to a Subsidiary imposed pursuant to an agreement which has been entered into in connection with the disposition of all or substantially all of the Capital Stock or assets of such Subsidiary, (c) any restrictions with respect to the Borrower or any of its Subsidiaries imposed pursuant to an agreement which has been entered into in connection with a Lien permitted by Section 7.2.2 or a sale of assets permitted by Section 7.2.5 and any such prohibitions or limitations apply only to the Property encumbered by such Lien or subject to such sale, (d) customary provisions contained in a contract, license or lease prohibiting or restricting the assignment, subleasing or sublicensing thereof, and (e) any restrictions with respect to a joint venture permitted hereunder so long as such restriction applies only to the property of such joint venture.

8. DEFAULT

8.1 Events of Default. An Event of Default shall mean the occurrence or existence of any one or more of the following events or conditions (whatever the reason therefor and whether voluntary, involuntary or effected by operation of Law):

8.1.1. the Borrower shall fail to pay any principal of any Loan, Letter of Credit Borrowing or Reimbursement Obligation when due in accordance with the terms hereof; or the Borrower shall fail to pay any interest on any Loan, Letter of Credit Borrowing or Reimbursement Obligation, or any other amount payable hereunder or under any other Loan Document, within five days after any such interest or other amount becomes due in accordance with the terms hereof; or

8.1.2. any representation or warranty made or deemed made by any Loan Party herein or in any other Loan Document or that is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been inaccurate in any material respect on or as of the date made or deemed made; or

8.1.3. any Loan Party shall default in the observance or performance of any agreement contained in clause (a) or (b) of Section 7.1.4(i) (with respect to Holdings and the Borrower only), Section 7.1.7(i) or Section 7.2 of this Agreement or Sections 5.5 and 5.7(b) of the Guarantee and Collateral Agreement; or

8.1.4. any Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in Sections 8.1.1 through 8.1.3 of this Section), and such default shall continue unremedied for a period of 30 days after the earlier of (i) notice to the Borrower from the Administrative Agent or the Required Lenders and (ii) an Authorized Officer of any Loan Party becoming aware of such default; or

8.1.5. any Group Member shall (i) default in making any payment of any principal of any Indebtedness (including any Guarantee Obligation, but excluding the Loans or any Guarantee Obligations in respect thereof) on the scheduled or original due date with respect thereto; or (ii) default in making any payment of any interest on any such Indebtedness beyond

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the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created; or (iii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to cause, with the giving of notice if required (and after giving effect to any applicable cure period), such Indebtedness to become due prior to its stated maturity or (in the case of any such Indebtedness constituting a Guarantee Obligation) to become payable; provided, that a default, event or condition described in clause (i), (ii) or (iii) of this Section 8.1.5 shall not at any time constitute an Event of Default unless, at such time, one or more defaults, events or conditions of the type described in clauses (i), (ii) and (iii) of this Section 8.1.5 shall have occurred and be continuing with respect to Indebtedness the outstanding principal amount of which exceeds in the aggregate $3,000,000, provided that clause (iii) of this Section 8.1.5 shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of, or casualty or condemnation event with respect to, the property or assets securing such Indebtedness, provided such Indebtedness is paid when due; or

8.1.6. (i) any Group Member shall commence any case, proceeding or other action (a) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (b) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or any Group Member shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against any Group Member any case, proceeding or other action of a nature referred to in clause (i) above that (a) results in the entry of an order for relief or any such adjudication or appointment or (b) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against any Group Member any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief that shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) any Group Member shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) any Group Member shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or

8.1.7. (i) any Person shall engage in any “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) there exists a failure to satisfy the minimum funding standard (as described in Section 412 of the Code and Section 302 of ERISA), whether or not waived, with respect to any Plan or Multiemployer Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower or any ERISA Affiliate, (iii) any ERISA Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Plan, which ERISA Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, likely to result in the termination of such Plan for

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purposes of Title IV of ERISA, (iv) any Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower or any ERISA Affiliate shall, or is reasonably expected to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect;

8.1.8. one or more judgments or decrees shall be entered against any Group Member in an aggregate outstanding amount (not covered by insurance) of $3,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 30 days from the entry thereof; or

8.1.9. any of the Security Documents shall cease, for any reason (other than as a result of any act on the part of the Administrative Agent or any Lender), to be in full force and effect, or any Loan Party or any Affiliate of any Loan Party shall so assert, or any Lien created by any of the Security Documents shall cease (other than as a result of any act on the part of the Administrative Agent or any Lender) to be enforceable and of the same effect and priority purported to be created thereby with respect to any material Collateral; or

8.1.10. the guarantee contained in Section 2 of the Guarantee and Collateral Agreement shall cease, for any reason, to be in full force and effect or any Loan Party or any Affiliate of any Loan Party shall so assert; or

8.1.11. (i) Holdings shall fail to own, beneficially and of record, and control all of the issued and outstanding Capital Stock of the Borrower or (ii) any Change of Control shall occur; or

8.1.12. Holdings shall (i) conduct, transact or otherwise engage in, or commit to conduct, transact or otherwise engage in, any business or operations other than those incidental to its ownership of the Capital Stock of the Borrower, (ii) incur, create, assume or suffer to exist any Indebtedness or other liabilities or financial obligations, except (w) liabilities with respect to intercompany advances permitted by Section 7.2.6(i) and under the Tax Sharing Agreement, (x) nonconsensual obligations imposed by operation of law, (y) pursuant to the Loan Documents to which it is a party and (z) obligations with respect to its Capital Stock, or (iii) own, lease, manage or otherwise operate any properties or assets (including cash (other than cash received by Holdings in connection with dividends made by the Borrower in accordance with Section 7.2.6 pending application in the manner contemplated by said Section) and Cash Equivalents) other than the ownership of shares of Capital Stock of the Borrower.

8.2 Consequences of Event of Default.

8.2.1 Events of Default Other Than Bankruptcy, Insolvency or Reorganization Proceedings. If an Event of Default specified under Sections 8.1.1 through 8.1.5, clauses (iii) and (iv) of Section 8.1.6 or Sections 8.1.7 through 8.1.13 or clauses (i) and (ii) of Section 8.1.6 (with respect to any Group Member that is not a Loan Party) shall occur and be continuing, the Lenders and the Administrative Agent shall be under no further obligation to make Loans and the Issuing Lender shall be under no obligation to issue Letters of Credit and the Administrative

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Agent may, and upon the request of the Required Lenders, shall (i) by written notice to the Borrower, declare the unpaid principal amount of the Notes then outstanding and all interest accrued thereon, any unpaid fees and all other Indebtedness of the Borrower to the Lenders hereunder and thereunder to be forthwith due and payable, and the same shall thereupon become and be immediately due and payable to the Administrative Agent for the benefit of each Lender without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, and (ii) require the Borrower to, and the Borrower shall thereupon, deposit in a non-interest-bearing account with the Administrative Agent, as cash collateral for its Obligations under the Loan Documents, an amount equal to the maximum amount currently or at any time thereafter available to be drawn on all outstanding Letters of Credit, and the Borrower hereby pledges to the Administrative Agent and the Lenders, and grants to the Administrative Agent and the Lenders a security interest in, all such cash as security for such Obligations; and

8.2.2 Bankruptcy, Insolvency or Reorganization Proceedings. If an Event of Default specified under clauses (i) and (ii) of Section 8.1.6 shall occur with respect to any Loan Party, the Lenders shall be under no further obligations to make Loans hereunder and the Issuing Lender shall be under no obligation to issue Letters of Credit and the unpaid principal amount of the Loans then outstanding and all interest accrued thereon, any unpaid fees and all other Obligations shall be immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived; and

8.2.3 Set-off. If an Event of Default shall have occurred and be continuing, each Lender, the Issuing Lender, and each of their respective Affiliates and any participant of such Lender or Affiliate which has agreed in writing to be bound by the provisions of Section 4.3 is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender, the Issuing Lender or any such Affiliate or participant to or for the credit or the account of any Loan Party against any and all of the Obligations of such Loan Party now or hereafter existing under this Agreement or any other Loan Document to such Lender, the Issuing Lender, Affiliate or participant, irrespective of whether or not such Lender, Issuing Lender, Affiliate or participant shall have made any demand under this Agreement or any other Loan Document and although such Obligations of the Borrower or such Loan Party may be contingent or unmatured or are owed to a branch or office of such Lender or the Issuing Lender different from the branch or office holding such deposit or obligated on such Indebtedness. The rights of each Lender, the Issuing Lender and their respective Affiliates and participants under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, the Issuing Lender or their respective Affiliates and participants may have. Each Lender and the Issuing Lender agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application; and

8.2.4 Application of Proceeds. From and after the date on which the Administrative Agent has taken any action pursuant to this Section 8.2 and until all Obligations of the Loan Parties have been Paid in Full, any and all proceeds received by the Administrative Agent from any sale or other disposition of the Collateral, or any part thereof, or the exercise of any other remedy by the Administrative Agent, shall be applied as follows:

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(i) first, to reimburse the Administrative Agent for out-of-pocket costs, expenses and disbursements, including reasonable attorneys’ and paralegals’ fees and legal expenses, incurred by the Administrative Agent in connection with realizing on the Collateral or collection of any Obligations of any of the Loan Parties under any of the Loan Documents, including advances made by the Administrative Agent for the reasonable maintenance, preservation, protection or enforcement of, or realization upon, the Collateral, including advances for taxes, insurance, repairs and the like and reasonable expenses incurred to sell or otherwise realize on, or prepare for sale or other realization on, any of the Collateral;

(ii) second, to the repayment of all Obligations then due and unpaid of the Loan Parties to the Lenders or their Affiliates incurred under this Agreement or any of the other Loan Documents or agreements evidencing any Lender Provided Hedge Agreements or Other Lender Provided Financial Services Obligations, whether of principal, interest, fees, expenses or otherwise and to cash collateralize the Letter of Credit Obligations, in such manner as the Administrative Agent may determine in its discretion; and

(iii) the balance, if any, as required by Law.

8.3 Right to Cure. Notwithstanding anything to the contrary contained in Section 8.1, for purposes of determining whether an Event of Default has occurred under the financial covenants set forth in Sections 7.2.1(i) and (ii) (the “Financial Covenants”) at the end of any fiscal quarter, Holdings may issue Permitted Cure Securities for cash or otherwise receive cash contributions and contribute the proceeds thereof to the Borrower (as cash contributions to the capital of the Borrower or in exchange for additional common Capital Stock) after the end of any fiscal quarter and on or prior to the day that is ten (10) days after the day on which financial statements are required to be delivered for such fiscal quarter pursuant to Section 7.1.1(i) or 7.1.1(ii), as the case may be, will, at the written request of the Borrower to the Administrative Agent, be included as an addition to Consolidated EBITDA for such fiscal quarter solely for the purposes of determining compliance with the Financial Covenants at the end of such fiscal quarter and any subsequent periods that include such fiscal quarter (any such cash amounts so included in the calculation of Consolidated EBITDA, a “Specified Capital Contribution”), provided that (i) in each four consecutive fiscal quarter period, there shall be a period of at least two fiscal quarters in respect of which no Specified Capital Contribution is made, (ii) there shall be no more than four fiscal quarters during the term of this Agreement in respect of which a Specified Capital Contribution shall be made, (iii) the amount of any Specified Capital Contribution shall be no greater than the amount required to cause the Borrower to be in compliance with the Financial Covenants and (iv) all Specified Capital Contributions and the use of proceeds therefrom shall be disregarded for all other purposes under the Loan Documents (including for calculations relating to pricing). If, after a Specified Contribution is made and the recalculation of the Financial Covenants as specified above in connection therewith, the Borrower shall then be in compliance with the Financial Covenants for the applicable fiscal quarter, then the Borrower shall be deemed to have complied with the Financial Covenants as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date of determination, and the applicable Potential Default or Event of Default under Section 8.1.3 that had occurred shall be deemed cured.

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9. THE ADMINISTRATIVE AGENT

9.1 Appointment and Authority. Each of the Lenders and the Issuing Lender hereby irrevocably appoints PNC to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Section 9 are solely for the benefit of the Administrative Agent, the Lenders and the Issuing Lender, and neither the Borrower nor any other Loan Party shall have rights as a third party beneficiary of any of such provisions.

9.2 Rights as a Lender. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.

9.3 Exculpatory Provisions. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, the Administrative Agent:

(i) shall not be subject to any fiduciary or other implied duties, regardless of whether a Potential Default or Event of Default has occurred and is continuing;

(ii) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents); provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable Law; and

(iii) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.

The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 10.1 and 8.2) in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall

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be deemed not to have knowledge of any Potential Default or Event of Default unless and until notice describing such Potential Default or Event of Default is given to the Administrative Agent by the Borrower, a Lender or the Issuing Lender.

The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (a) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (b) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (c) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Potential Default or Event of Default, (d) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (e) the satisfaction of any condition set forth in Section 6 or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

9.4 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the Issuing Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender or the Issuing Lender unless the Administrative Agent shall have received notice to the contrary from such Lender or the Issuing Lender prior to the making of such Loan or the issuance of such Letter of Credit. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

9.5 Delegation of Duties. The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Section 9 shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

9.6 Resignation of Administrative Agent. The Administrative Agent may at any time resign upon at least thirty (30) days’ prior notice given to the Lenders, the Issuing Lender and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, with approval from the Borrower (so long as no Event of Default has occurred and is continuing), to appoint a successor, such approval not to be unreasonably withheld or delayed. If

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no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within twenty (20) days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may on behalf of the Lenders and the Issuing Lender, appoint a successor Administrative Agent; provided that if the Administrative Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then, on the date of effectiveness of such resignation stated in such notice, (i) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Administrative Agent on behalf of the Lenders or the Issuing Lender under any of the Loan Documents, the retiring Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed) and (ii) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender and the Issuing Lender directly, until such time as the Required Lenders appoint a successor Administrative Agent as provided for above in this Section 9.6. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent, and the retiring Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring Administrative Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Section 9 and Section 10.3 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent.

If PNC resigns as Administrative Agent under this Section 9.6, PNC shall also resign as an Issuing Lender. Upon the appointment of a successor Administrative Agent hereunder, such successor shall (i) succeed to all of the rights, powers, privileges and duties of PNC as the retiring Issuing Lender and Administrative Agent and PNC shall be discharged from all of its respective duties and obligations as Issuing Lender and Administrative Agent under the Loan Documents, and (ii) issue letters of credit in substitution for the Letters of Credit issued by PNC, if any, outstanding at the time of such succession or make other arrangement satisfactory to PNC to effectively assume the obligations of PNC with respect to such Letters of Credit.

9.7 Non-Reliance on Administrative Agent and Other Lenders. Each Lender and the Issuing Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender and the Issuing Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.

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9.8 No Other Duties, etc. Anything herein to the contrary notwithstanding, none of the Lead Arranger listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent, a Lender or the Issuing Lender hereunder.

9.9 Administrative Agent’s Fee. The Borrower shall pay to the Administrative Agent a nonrefundable fee (the “Administrative Agent’s Fee”) under the terms of a letter dated November 8, 2010 (the “Administrative Agent’s Letter”) between the Borrower and Administrative Agent, as amended from time to time.

9.10 Release Collateral and Guarantors and Authorization Therefor. The Lenders and Issuing Lenders authorize the Administrative Agent to release (i) the Liens created by the Loan Documents on any Collateral consisting of assets or equity interests sold or otherwise Disposed of in a sale or other Disposition permitted under Section 7.2.4 or 7.2.5 or, subject to the requirements of Section 10.1.3, with the consent of the Required Lenders in writing, and, upon the consummation of any such sale or other Disposition (other than to a Loan Party or a Subsidiary thereof) and so long as no Event of Default has occurred and is continuing at the time such sale or other Disposition is consummated, such Liens shall be automatically released without further action of any party, (ii) all Collateral and the Liens created by the Loan Documents thereon upon Payment in Full of the Obligations and any of the “Obligations” as defined in the Guarantee and Collateral Agreement, upon which occurrence all such Liens shall be automatically released without further action of any party, and (iii) any Guarantor from its obligations under the Guaranty and Collateral Agreement if the ownership interests in such Guarantor are sold or otherwise disposed of or transferred to Persons other than Loan Parties or Subsidiaries of the Loan Parties in a transaction permitted under Section 7.2.4 or 7.2.5. At the request and sole expense of the Borrower, the Administration Agent shall deliver to Holdings, the Borrower or a Subsidiary thereof any Collateral so released that is held by the Administrative Agent and execute and deliver to Holdings, the Borrower or such Subsidiary such documents as it shall reasonably request to evidence such release or termination.

9.11 No Reliance on Administrative Agent’s Customer Identification Program. Each Lender acknowledges and agrees that neither such Lender, nor any of its Affiliates, participants or assignees, may rely on the Administrative Agent to carry out such Lender’s, Affiliate’s, participant’s or assignee’s customer identification program, or other obligations required or imposed under or pursuant to the USA Patriot Act or the regulations thereunder, including the regulations contained in 31 CFR 103.121 (as hereafter amended or replaced, the “CIP Regulations”), or any other Anti-Terrorism Law, including any programs involving any of the following items relating to or in connection with any of the Loan Parties, their Affiliates or their agents, the Loan Documents or the transactions hereunder or contemplated hereby: (i) any identity verification procedures, (ii) any recordkeeping, (iii) comparisons with government lists, (iv) customer notices or (v) other procedures required under the CIP Regulations or such other Laws.

10. MISCELLANEOUS

10.1 Modifications, Amendments or Waivers. With the written consent of the Required Lenders, the Administrative Agent, acting on behalf of all the Lenders, and the

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Borrower, on behalf of the Loan Parties, may from time to time enter into written agreements amending or changing any provision of this Agreement or any other Loan Document or the rights of the Lenders or the Loan Parties hereunder or thereunder, or may grant written waivers or consents hereunder or thereunder. Any such agreement, waiver or consent made with such written consent shall be effective to bind all the Lenders and the Loan Parties; provided, that no such agreement, waiver or consent may be made which will:

10.1.1 Increase of Commitment. Increase the amount of the Revolving Credit Commitment of any Lender hereunder without the consent of such Lender;

10.1.2 Extension of Payment; Reduction of Principal Interest or Fees; Modification of Terms of Payment. Whether or not any Loans are outstanding, extend the Expiration Date or the time for payment of principal or interest of any Loan (excluding the due date of any mandatory prepayment of a Loan), the Commitment Fee or any other fee payable to any Lender, or reduce the principal amount of or the rate of interest borne by any Loan or reduce the Commitment Fee or any other fee payable to any Lender, without the consent of each Lender directly affected thereby;

10.1.3 Release of Collateral or Guarantor. Except in connection with sales of assets permitted by Section 7.2.4 or 7.2.5 or upon Payment in Full of the Obligations, release all or substantially all of the Collateral or any Guarantor from its Obligations under the Guaranty and Collateral Agreement without the consent of all Lenders (other than Defaulting Lenders); or

10.1.4 Miscellaneous. Amend Section 4.2, 4.3 or 9.3 or this Section 10.1, alter any provision requiring all Lenders to authorize the taking of any action or reduce any percentage specified in the definition of Required Lenders, in each case without the consent of all of the Lenders (other than Defaulting Lenders);

provided that no agreement, waiver or consent which would modify the interests, rights or obligations of the Administrative Agent or the Issuing Lender may be made without the written consent of such Administrative Agent or Issuing Lender, as applicable, and provided, further that, if in connection with any proposed waiver, amendment or modification referred to in Sections 10.1.1 through 10.1.4 above, the consent of the Required Lenders is obtained but the consent of one or more of such other Lenders whose consent is required is not obtained (each a “Non-Consenting Lender”), then the Borrower shall have the right to replace any such Non-Consenting Lender with one or more replacement Lenders pursuant to Section 4.6.2 .

10.2 No Implied Waivers; Cumulative Remedies. No course of dealing and no delay or failure of the Administrative Agent or any Lender in exercising any right, power, remedy or privilege under this Agreement or any other Loan Document shall affect any other or future exercise thereof or operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any further exercise thereof or of any other right, power, remedy or privilege. The rights and remedies of the Administrative Agent and the Lenders under this Agreement and any other Loan Documents are cumulative and not exclusive of any rights or remedies which they would otherwise have.

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10.3 Expenses; Indemnity; Damage Waiver.

10.3.1 Costs and Expenses. The Borrower agrees (i) to pay or reimburse the Administrative Agent for all its reasonable and documented out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including the reasonable and documented fees and disbursements of counsel to the Administrative Agent and filing and recording fees and expenses, with statements with respect to the foregoing to be submitted to the Borrower prior to the Closing Date (in the case of amounts to be paid on the Closing Date) and from time to time thereafter on a quarterly basis or such other periodic basis as a the Administrative Agent shall reasonably deem appropriate but not including any fees and disbursements of counsel to the Lenders (other than the Administrative Agent), (ii) to pay or reimburse each Lender and the Administrative Agent for all its reasonable costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents, including the reasonable disbursements of counsel to each Lender and of counsel to Administrative Agent, (iii) to pay, indemnify, and hold each Lender and the Administrative Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any that may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of (or any proposed amendment or supplement to or modification or waiver of), this Agreement, the other Loan Documents and any such other documents, (iv) to pay all out-of-pocket expenses incurred by the Issuing Lender in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder, and (v) all reasonable out-of-pocket expenses incurred by the Administrative Agent (including the reasonable fees, charges and disbursements of any counsel for the Administrative Agent), in connection with any workout, restructuring or negotiations in respect of the Loans or Letters of Credit or other Obligations.

10.3.2 Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent (and any sub-agent thereof), each Lender and the Issuing Lender, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), and shall indemnify and hold harmless each Indemnitee from all fees and time charges and disbursements for attorneys who may be employees of any Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any third party or by the Borrower or any other Loan Party arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance or nonperformance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the Issuing Lender to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly

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comply with the terms of such Letter of Credit), (iii) breach of representations, warranties or covenants of the Borrower under the Loan Documents, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, including any such items or losses relating to or arising under Environmental Laws or pertaining to environmental matters, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower or any other Loan Party, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by the Borrower or any other Loan Party against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if the Borrower or such Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction.

10.3.3 Reimbursement by Lenders. To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under Sections 10.3.1 or 10.3.2 to be paid by it to the Administrative Agent (or any sub-agent thereof), the Issuing Lender or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent), the Issuing Lender or such Related Party, as the case may be, such Lender’s Ratable Share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent) or the Issuing Lender in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent) or Issuing Lender in connection with such capacity.

10.3.4 Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable Law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof. No Indemnitee referred to in Section 10.3.2 shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.

10.3.5 Payments. All amounts due under this Section shall be payable not later than ten (10) days after demand therefor.

10.4 Holidays. Whenever payment of a Loan to be made or taken hereunder shall be due on a day which is not a Business Day such payment shall be due on the next Business Day (except as provided in Section 3.2) and such extension of time shall be included in computing interest and fees, except that the Loans shall be due on the Business Day preceding the

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Expiration Date if the Expiration Date is not a Business Day. Whenever any payment or action to be made or taken hereunder (other than payment of the Loans) shall be stated to be due on a day which is not a Business Day, such payment or action shall be made or taken on the next following Business Day, and such extension of time shall not be included in computing interest or fees, if any, in connection with such payment or action.

10.5 Notices; Effectiveness; Electronic Communication.

10.5.1 Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in Section 10.5.2 ), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier (i) if to a Lender, to it at its address set forth in its administrative questionnaire, or (ii) if to any other Person, to it at its address set forth on Schedule 1.1(B).

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices delivered through electronic communications to the extent provided in Section 10.5.2 , shall be effective as provided in such Section.

10.5.2 Electronic Communications. Notices and other communications to the Lenders and the Issuing Lender hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices to any Lender or the Issuing Lender if such Lender or the Issuing Lender, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications. Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement); provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

10.5.3 Change of Address, Etc. Any party hereto may change its address, e-mail address or telecopier number for notices and other communications hereunder by notice to the other parties hereto.

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10.6 Severability. The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction.

10.7 Duration; Survival. All representations and warranties of the Loan Parties contained herein or made in connection herewith shall survive the execution and delivery of this Agreement, the completion of the transactions hereunder and Payment In Full. All covenants and agreements of the Borrower contained herein relating to the payment of principal, interest, premiums, additional compensation or expenses and indemnification, including those set forth in the Notes, Section 4 and Section 10.3, shall survive Payment In Full. All other covenants and agreements of the Loan Parties shall continue in full force and effect from and after the date hereof and until Payment In Full.

10.8 Successors and Assigns.

10.8.1 Successors and Assigns Generally. The provisions of this Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns permitted hereby, except that neither the Borrower nor any other Loan Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of Section 10.8.2 , (ii) by way of participation in accordance with the provisions of Section 10.8.4 , or (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 10.8.6 (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in Section 10.8.4 and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

10.8.2 Assignments by Lenders. Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that any such assignment shall be subject to the following conditions:

(i) Minimum Amounts.

(A) in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and

(B) in any case not described in clause (i)(A) of this Section 10.8.2 , the aggregate amount of the Commitment (which for this purpose includes Loans outstanding

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thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption Agreement with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption Agreement, as of the Trade Date) shall not be less than $5,000,000, unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed).

(ii) Proportionate Amounts. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loan or the Commitment assigned.

(iii) Required Consents. No consent shall be required for any assignment except for the consent of the Administrative Agent and the Issuing Lender (which consents shall not be unreasonably withheld or delayed) and the consent of the Borrower (such consent of the Borrower not to be unreasonably withheld or delayed), provided, that, the consent of the Borrower shall not be required if (x) an Event of Default has occurred and is continuing at the time of such assignment or (y) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund; provided, further, that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within five (5) Business Days after having received notice thereof.

(iv) Assignment and Assumption Agreement. The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption Agreement, together with a processing and recordation fee of $3,500, and the assignee, if it is not a Lender, shall deliver to the Administrative Agent an administrative questionnaire provided by the Administrative Agent.

(v) No Assignment to Borrower. No such assignment shall be made to the Borrower or any of the Borrower’s Affiliates or Subsidiaries.

(vi) No Assignment to Natural Persons. No such assignment shall be made to a natural person.

Subject to acceptance and recording thereof by the Administrative Agent pursuant to Section 10.8.3, from and after the effective date specified in each Assignment and Assumption Agreement, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption Agreement, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption Agreement, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption Agreement covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.4, 4.7, and 10.3 with respect to facts and circumstances occurring prior to the effective date of such assignment; provided, that no assignee (including an assignee that is already a Lender hereunder at the time of the assignment) shall be entitled to receive any greater amount pursuant to Section 4.8 than that to which the assignor would have been entitled to receive had

- 88 -

no such assignment occurred. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 10.8.2 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 10.8.4 .

10.8.3 Register. The Administrative Agent, shall maintain a record of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans owing to, each Lender pursuant to the terms hereof from time to time. Such register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is in such register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. Any assignment of any Loan, whether or not evidenced by a note, shall be effective for purposes of this Agreement only upon appropriate entries with respect thereto being made in the register (and each Note shall expressly so provide). Such register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

10.8.4 Participations. Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural person or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent and the Lenders, Issuing Lender shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.

Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver with respect to Sections 10.1.1 , 10.1.2 , or 10.1.3 ). Subject to Section 10.8.5 , the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.4 and 4.7 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 10.8.2 . To the extent permitted by Law, each Participant also shall be entitled to the benefits of Section 8.2.3 as though it were a Lender; provided such Participant agrees to be subject to Section 4.3 as though it were a Lender.

10.8.5 Limitations upon Participant Rights Successors and Assigns Generally. A Participant shall not be entitled to receive any greater payment under Sections 4.7, 4.8 or 10.3 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 4.8 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 4.8.5 as though it were a Lender.

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10.8.6 Certain Pledges; Successors and Assigns Generally. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

10.9 Confidentiality.

10.9.1 General. Each of the Administrative Agent, the Lenders and the Issuing Lender agrees to maintain the confidentiality of the Information, except that Information may be disclosed (i) to its Affiliates and to its and its Affiliates’ respective partners, directors, officers, employees, agents, advisors and other representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (ii) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (iii) to the extent required by applicable Laws or regulations or by any subpoena or similar legal process, (iv) to any other party hereto, (v) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (vi) subject to an agreement containing provisions substantially the same as those of this Section, to (A) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (B) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (vii) with the consent of the Borrower or (viii) to the extent such Information (Y) becomes publicly available other than as a result of a breach of this Section or (Z) becomes available to the Administrative Agent, any Lender, the Issuing Lender or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower or the other Loan Parties. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

10.9.2 Sharing Information With Affiliates of the Lenders. Each Loan Party acknowledges that from time to time financial advisory, investment banking and other services may be offered or provided to the Borrower or one or more of its Affiliates (in connection with this Agreement or otherwise) by any Lender or by one or more Subsidiaries or Affiliates of such Lender and each of the Loan Parties hereby authorizes each Lender to share any information delivered to such Lender by such Loan Party and its Subsidiaries pursuant to this Agreement to any such Subsidiary or Affiliate subject to the provisions of Section 10.9.1.

10.10 Counterparts; Integration; Effectiveness.

10.10.1 Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single

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contract. This Agreement and the other Loan Documents, and any separate letter agreements with respect to fees payable to the Administrative Agent, constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof including any prior confidentiality agreements and commitments. Except as provided in Section 6, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or e-mail shall be effective as delivery of a manually executed counterpart of this Agreement.

10.11 CHOICE OF LAW; SUBMISSION TO JURISDICTION; WAIVER OF VENUE; SERVICE OF PROCESS; WAIVER OF JURY TRIAL.

10.11.1 Governing Law. This Agreement shall be deemed to be a contract under the Laws of the State of New York without regard to its conflict of laws principles. Each standby Letter of Credit issued under this Agreement shall be subject either to the rules of the Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce (the “ICC”) at the time of issuance (“UCP”) or the rules of the International Standby Practices (ICC Publication Number 590) (“ISP98”), as determined by the Issuing Lender, and each trade Letter of Credit shall be subject to UCP, and in each case to the extent not inconsistent therewith, the Laws of the State of New York without regard to is conflict of laws principles.

10.11.2 SUBMISSION TO JURISDICTION. THE BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN MANHATTAN COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, ANY LENDER OR THE ISSUING LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR ANY OTHER LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

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10.11.3 WAIVER OF VENUE. THE BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN THIS SECTION 10.11. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT AND AGREES NOT ASSERT ANY SUCH DEFENSE.

10.11.4 SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.5 . NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

10.11.5 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, ADMINISTRATIVE AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

10.12 USA Patriot Act Notice. Each Lender that is subject to the USA Patriot Act and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies Loan Parties that pursuant to the requirements of the USA Patriot Act, it is required to obtain, verify and record information that identifies the Loan Parties, which information includes the name and address of Loan Parties and other information that will allow such Lender or Administrative Agent, as applicable, to identify the Loan Parties in accordance with the USA Patriot Act.

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IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed this Agreement as of the day and year first above written.


		MAFCO WORLDWIDE CORPORATION

		By:

		Name:

		Title:


		PNC BANK, NATIONAL ASSOCIATION, as a Lender, Issuing Lender and Administrative Agent

		By:

		Name:

		Title:


		UNION BANK, N.A., as a Lender

		By:

		Name:

		Title:

SCHEDULE 1.1(A)

PRICING GRID—
VARIABLE PRICING AND FEES BASED ON LEVERAGE RATIO

Consolidated

Commitment

Letter of

Revolving Credit

Revolving Credit
LIBOR Rate

Level

Leverage Ratio

Fee

Credit Fee

Base Rate Spread

Spread

Less than 1.50 to 1.0

0.125

1.50

0.50

1.50

Greater than or equal to 1.50 to 1.0 but
less than 2.0 to 1.0

0.140

1.75

0.75

1.75

III

Greater than or equal to 2.0 to 1.0

0.155

2.0

1.00

2.0

For purposes of determining the Applicable Margin, the Applicable Commitment Fee Rate and the Applicable Letter of Credit Fee Rate:

(a) Until three (3) Business Days after the delivery of the Compliance Certificate for the fiscal year ending December 31, 2010, the Applicable Margin, the Applicable Commitment Fee Rate and the Applicable Letter of Credit Fee Rate shall be set at Level I.

(b) The Applicable Margin, the Applicable Commitment Fee Rate and the Applicable Letter of Credit Fee Rate shall be recomputed as of the end of each fiscal quarter ending after the Closing Date based on the Consolidated Leverage Ratio as of such quarter end. Any increase or decrease in the Applicable Margin, the Applicable Commitment Fee Rate or the Applicable Letter of Credit Fee Rate computed as of a quarter end shall be effective three (3) Business Days after the date that the Compliance Certificate evidencing such computation is delivered under Section 7.1.2(ii). If a Compliance Certificate is not delivered when due in accordance with such Section 7.1.2(ii) and the Administrative Agent or the Required Lenders so elect,, then the rates in Level III shall apply as of the first Business Day after the date on which such Compliance Certificate was required to have been delivered and shall remain in effect until three (3) Business Days after the date that such Compliance Certificate is delivered.

(c) If, as a result of any restatement of or other adjustment to the financial statements of the Borrower or for any other reason, the Borrower or the Lenders determine that (i) the Consolidated Leverage Ratio as calculated by the Borrower as of any applicable date was

SCHEDULE 1.1(A) - 1

inaccurate and (ii) a proper calculation of the Consolidated Leverage Ratio would have resulted in higher pricing for such period, the Borrower shall immediately and retroactively be obligated to pay to the Administrative Agent for the account of the applicable Lenders, promptly on demand by the Administrative Agent (or, after the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States, automatically and without further action by the Administrative Agent, any Lender or the Issuing Lender), an amount equal to the excess of the amount of interest and fees that should have been paid for such period over the amount of interest and fees actually paid for such period. This paragraph shall not limit the rights of the Administrative Agent, any Lender or the Issuing Lender, as the case may be, under Section 2.8 or 3.3 or 8. The Borrower’s obligations under this paragraph shall survive the termination of the Commitments and the repayment of all other Obligations hereunder.

SCHEDULE 1.1(A) - 2

SCHEDULE 1.1(B)

COMMITMENTS OF LENDERS AND ADDRESSES FOR NOTICES

Page 1 of 2

Part 1 — Commitments of Lenders and Addresses for Notices to Lenders


	Amount of
	Commitment for
	Revolving Credit
Lender	Loans		Ratable Share
Name: PNC Bank, National Association Address: 1950 East Route 70, 3^rd Floor, Cherry Hill, New Jersey 08003 Attention: William Cornelius Telephone: (856) 489-2713 Telecopy: (856) 489-2785	$	25,000,000		56	%

Name: Union Bank, N.A. Address: 445 S. Figueroa St., 16^th Floor Los Angeles, CA 90071 Attention: Megan Webtser Telephone: (213) 236-7517 Telecopy: (213) 236-7636	$	20,000,000		44	%

Total	$	45,000,000		100	%

SCHEDULE 1.1(B) - 1

SCHEDULE 1.1(B)

COMMITMENTS OF LENDERS AND ADDRESSES FOR NOTICES

Page 2 of 2


Part 2 — Addresses for Notices to the Borrower:

ADMINISTRATIVE AGENT

Name: PNC Bank, National Association
Address: 1950 East Route 70, 3^rd Floor
Cherry Hill, New Jersey 08003
Attention: William Cornelius
Telephone:		(856) 489-2713
Telecopy:		(856) 489-1847

With a Copy To:

Agency Services, PNC Bank, National Association
Mail Stop: P7-PFSC-04-I
Address: 500 First Avenue
Pittsburgh, PA 15219
Attention:		Agency Services
Telephone:		412 762 6442
Telecopy:		412 762 8672

BORROWER:

Name:		Mafco Worldwide Corporation
Address:		300 Jefferson Avenue
		Camden, New Jersey 08104
Attention:		Lynn Seeholzer, Treasurer
Telephone		(856) 968-4067
Telecopy:		(856) 225-1418

EX-21.1 3 y04589exv21w1.htm EX-21.1 exv21w1

Exhibit 21.1

SUBSIDIARIES

DOMESTIC SUBSIDIARIES OF THE COMPANY:


		STATE OF
NAME OF SUBSIDIARY		INCORPORATION
PCT International Holdings Inc.		Delaware
Flavors Holdings Inc.		Delaware
Mafco Worldwide Corporation		Delaware
Mafco Shanghai Corporation		Delaware
EVD Holdings Inc.		Delaware
Pneumo Abex LLC		Delaware
Concord Pacific Corporation		Maine
Pneumo Abex Lessee Corp.		Delaware
CA Acquisition Holdings Inc.		Delaware
Harland Clarke Holdings Corp.		Delaware
Harland Clarke Corp.		Delaware
Checks In The Mail, Inc.		Delaware
HFS Scantron Holdings Corp.		New York
Scantron Corporation		Delaware
Harland Financial Solutions, Inc.		Oregon
HFS Research & Development, Inc.		Delaware
John H. Harland Company of Puerto Rico		Georgia
Centralia Holdings Corporation		Georgia
Create-It!, Inc.		Illinois
SubscriberMail, LLC		Illinois
Parsam Technologies, LLC		Tennessee
Harland Financial Solutions India, LLC		Delaware
Spectrum K12 School Solutions, Inc.		Delaware

FOREIGN SUBSIDIARIES OF THE COMPANY:


NAME OF SUBSIDIARY		JURISDICTION
EVD Holdings S.A.		France
Extraits Vegetaux Et Derives, S.A.		France
Wei Feng Enterprises Ltd.		British Virgin Islands
Xianyang Concord Natural Products Co. Ltd.		People’s Republic of China
Zhangjiagang Free Trade Zone MAFCO Liantai Biotech Co., Ltd.		People’s Republic of China
Scantron Canada, Ltd.		Canada
Harland Israel Ltd.		Israel
Harland Financial Solutions Worldwide Limited		Ireland
SRC Software Private Ltd.		India

EX-23.1 4 y04589exv23w1.htm EX-23.1 exv23w1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 33-99740, Form S-8 No. 33-40365, Form S-8 No. 333-39162 and Form S-8 No. 333-155575) pertaining to the Power Control Technologies Inc. 1995 Stock Option Plan, the M & F Worldwide Corp. 1997 Stock Option Plan, and the M & F Worldwide Corp. 2000 Stock Option Plan, and the M & F Worldwide Corp. Outside Directors Deferred Compensation Plan of M & F Worldwide Corp. of our reports dated March 4, 2011, with respect to the consolidated financial statements and schedules of M & F Worldwide Corp. and the effectiveness of internal control over financial reporting of M & F Worldwide Corp., included in this Annual Report (Form 10-K) for the year ended December 31, 2010.

/s/ Ernst & Young LLP

New York, New York
March 4, 2011

EX-31.1 5 y04589exv31w1.htm EX-31.1 exv31w1

Exhibit 31.1

M & F Worldwide Corp. and Subsidiaries
Certification of Principal Executive Officer
Pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a)

I, Barry F. Schwartz, certify that:

	1.		I have reviewed this Annual Report on Form 10-K of M & F Worldwide Corp.;

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.		The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a.		designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b.		designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c.		evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d.		disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a.		all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b.		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

EX-31.2 6 y04589exv31w2.htm EX-31.2 exv31w2

Exhibit 31.2

M & F Worldwide Corp. and Subsidiaries
Certification of Principal Financial Officer
Pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a)

I, Paul G. Savas, certify that:

	1.		I have reviewed this Annual Report on Form 10-K of M & F Worldwide Corp.;

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.		The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a.		designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b.		designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c.		evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d.		disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	a.		all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b.		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

EX-32.1 7 y04589exv32w1.htm EX-32.1 exv32w1

Exhibit 32.1

Certification of Principal Executive Officer pursuant to
18 U.S.C. Section 1350,
as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 10-K of M & F Worldwide Corp. (the “Company”) for the period ended December 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Barry F. Schwartz, as Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ Barry F. Schwartz Barry F. Schwartz
Chief Executive Officer
(Principal Executive Officer)
March 4, 2011

EX-32.2 8 y04589exv32w2.htm EX-32.2 exv32w2

Exhibit 32.2

Certification of Principal Financial Officer pursuant to
18 U.S.C. Section 1350,
as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 10-K of M & F Worldwide Corp. (the “Company”) for the period ended December 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Paul G. Savas, as Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ Paul G. Savas Paul G. Savas
Chief Financial Officer
(Principal Financial Officer)
March 4, 2011

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